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WORLD BUSINESS NEWSPAPER

TUESDAY 22 SEPTEMBER 2015

ASIA

Avoiding schism

End of the rice age

Mint condition

What the church can teach the


Big Four ANDREW HILL , PAGE 10

Falling prices and demand hobble Japans


once all-powerful industry BIG READ, PAGE 7

A new group of nations eclipses


the Brics SPECIAL REPORT

Volkswagen emission test cheating


rocks Europes car manufacturers
3 VW shares drop 20% with investigations set to widen 3 Industry faces Libor moment
ANDY SHARMAN LONDON
JEEVAN VASAGAR BERLIN

The European car industry was shaken


yesterday after Volkswagens share
price fell almost 20 per cent over its
admission that it cheated on US emissions tests, triggering calls for a broader
inquiry into the sector.
More than 13bn was wiped off VWs
market capitalisation, triggering a
wider fall in carmakers shares, after
Martin Winterkorn, the groups chief
executive, apologised and ordered an
external investigation into the affair.
The German government called for an
urgent probe into whether VW and
other carmakers had also manipulated
emissions tests in Germany. Sigmar
Gabriel, Germanys vice-chancellor,
said it was a bad episode for the car
industry.
The worlds second-biggest carmaker
was ordered on Friday to recall nearly
half a million cars in the US after it
admitted to the US regulator, the Environmental Protection Agency, that it
had fitted defeat devices to bypass
environmental standards.
The EPS and California Air Resources
Board have now begun procuring other
manufacturers vehicles to test for similar devices, while Berlin plans to examine whether emissions data have been
manipulated.
The news prompted a fall in carmakers shares with Daimler, BMW, Renault
and PSA Peugeot Citron each being
sold off amid investor concerns over the
potential scale of the cost to the broader
industry. VW faces billions of dollars in
fines and warranty costs, possible criminal charges for executives and class-action lawsuits from US drivers.
Stuart Pearson, analyst at Exane BNP
Paribas, said VW was unlikely to have
been the only company to game the system globally. The artificial gaming of
emissions tests threatens to become the
car industrys Libor moment.
The European Commission said it was
taking the matter very seriously and

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165.7

162.4

Sep 18 open

A tweet by Democratic presidential frontrunner


Hillary Clinton pledging to challenge outrageous
price rises in the drugs industry knocked $15bn off
the value of US biotech stocks. PAGE 13

i Sweden unease over migration grows


The popularity of the anti-immigration Sweden
Democrats has risen even as the countrys openness
to refugees has received praise and despite its
exclusion from discussions over the crisis. PAGE 2

i China set to tighten reins on state groups

131.4

Beijing has dashed hopes it will start to relinquish


some control of its state-owned enterprises at a
time when China is set to post its weakest annual
growth rate in a quarter of a century. PAGE 4

Sep 21 close

Source: Thomson Reuters Eikon Photo: EPA

was in contact with both Volkswagen


and the EPA. One top 10 shareholder in
VW said it could be very costly to VWs
reputation.
There is scope for a whole array of

Inside

Martin Winterkorn, left, faces


questions over his future
ANALYSIS, PAGE 15

VW has been caught displaying


its contempt for government
LEX, PAGE 12

What carmaker stands accused


of is closer to outright deceit
EDITORIAL COMMENT, PAGE 8

The world economy is locked on a


course towards an emerging markets
crisis and a renewed slowdown in the
US, despite the Federal Reserves decision last week to hold off on a rise in
rates, according to one of 2015s most
successful hedge fund managers.
John Burbank, whose Passport Capital
has placed a number of lucrative bets
against commodities and emerging
markets this year, forecast that the Fed
would be forced into a fourth round of
quantitative easing to shore up the
economy.
In an interview with the Financial
Times, Mr Burbank said years of QE had
caused a misallocation of capital across
the world, while the end of QE last year
triggered a dollar rally with conse-

lawsuits in a variety of jurisdictions. The


other question to ask is: is this an industry-wide problem? Will other car groups
admit to similar cheating?
Jochen Flasbarth, junior minister
in Germanys environment ministry,
said: We are facing a case of blatant
consumer deception and environmental damage. I expect VW to reveal,
without any gaps, how and to what
extent these manipulations have taken
place.
Campaign groups have long suspected
carmakers of using defeat devices and
have uncovered examples of vehicles
with far worse fuel economy performance on the road than advertised, and

far higher emissions of nitrogen oxides


than claimed.
The software algorithms in defeat
devices form, they say, part of wider
trickery used to circumvent lab tests
widely considered hopelessly outdated.
Fitch Ratings warned that VW, which
has a credit rating of A, could be downgraded if the scandal spreads.
Max Warburton, analyst at Bernstein
said the case would also have consequences for the broader car industry.
European carmakers, including
Fiat Chrysler, sell a far higher proportion of diesel-engined vehicles in
the US than domestic or Asian manufacturers.

quences that were only beginning to be


realised.
The wrong people got the capital
emerging markets countries and corporates and a lot of cyclical companies like
mining and energy, particularly shale
companies and this is now a major
problem for the credit markets, he said.
Mr Burbank was speaking days after
the Fed decided against raising US interest rates from near-zero levels, warning
of global economic and financial developments and the damage these could
do to US growth and inflation.
One of the most worrying for economists is the declining fortunes of emerging markets, which have deteriorated
sharply this year following a significant
slowdown in the Chinese economy,
recessions in Russia and Brazil and
widespread outflows of capital.
Developing world currencies have

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tumbled on average to their lowest levels since 2002.


Emerging market gross domestic
product growth rates are set to fall to 3.6
per cent this year on average, their lowest level since the 2008-09 financial crisis, according to estimates from Oxford
Economics. Such signs of distress, coupled with a potential tightening in US
monetary policy, have persuaded investors to flee developing world asset
classes.
Mr Burbank said investors were not
recognising the risks, and Passport was
not pulling out of its bearish bets. I
think we are on the precipice of a liquidation in emerging markets, and this
feels the way that the fourth quarter of
1997 felt.
Additional reporting by Joe Leahy
in So Paulo
Markets page 21

World Markets
6HS

3 9

Indias minister of finance has hinted at consensus


between the government and the countrys reserve
bank about the lowering of interest rates, amid
concerns over the banks independence. PAGE 6

In an environment of weak oil prices and resultant


lower revenues, the basic fiscal role of sovereign
wealth funds is under pressure and being exposed
as one where the rules can be unclear. PAGE 20

6 3

Printed in London, Liverpool, Glasgow, Dublin,


Frankfurt, Brussels, Milan, Madrid, New York,
Chicago, San Francisco, Washington DC, Tokyo,
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i Indian rates question puts Delhi in focus

i Wealth funds face oil price pressures

STOCK MARKETS

THE FINANCIAL TIMES LTD 2015


No: 38,965

PAGE 13; ANALYSIS & INSIDE BUSINESS, PAGE 14

i Clinton tweet dents US biotech shares

Sep 18 close

Subscribe In print and online


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Swiss insurer Zurich has abandoned plans to buy


the UKs RSA group, as it seeks to address losses
from its Chinese and US non-life businesses.

Chinese president Xi Jinping should expect


to encounter an America itching to
take a more confrontational
approach to cyber theft of trade
secrets and Beijings efforts to assert
more control in the South China Sea
during his US visit. PAGE 4; MARKETS, PAGE 22

Share price ()

STEPHEN FOLEY NEW YORK


JAMES KYNGE LONDON

Report i PAGE 6; Comment i PAGE 9

i Zurich drops plans to acquire RSA

i Xi set to encounter bristling US

Volkswagen

Alert on emerging markets crisis and


US slowdown despite Fed rate decision
Russia military role in Syria
stirs fears of escalation

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Datawatch
Education levels

Syrians seeking
refuge in Europe
may be more
5
10
15 qualified for jobs
than people coming
from countries such
as Ethiopia and
Afghanistan.
However, their time
spent in education
still lags behind
that of people from
the countries they
seek refuge in
* For latest year available

Number of years of schooling*


0
Ethiopia
Afghanistan
Pakistan
Iraq
Syria
Turkey
Iran
Serbia
Italy
Greece
France
Germany
UK
Source: UN

Tuesday 22 September 2015

FINANCIAL TIMES

INTERNATIONAL
GLOBAL INSIGHT

Migrant crisis

BRUSSELS

Greece faces border control challenge


EU summit will seek
tougher action to help
relocate victims of war
PETER SPIEGEL AND DUNCAN ROBINSON
BRUSSELS
JAMES POLITI ROME

Greeces new government will come


under intense pressure tomorrow to
request wide-ranging EU aid to manage
an influx of refugees, a move some officials see as the first step towards ceding
control of its borders to EU authorities.
The push will be made when Alexis
Tsipras attends a high-stakes summit in
Brussels, two days after being sworn in
for a second term as prime minister. It is
being sought by central and eastern
European countries demanding better
control of Greeces borders in return for
supporting a plan to relocate 160,000
refugees across the EU.

What people are telling us is we are


ready to relocate [migrants], but we
need a rock-solid system of registering
them when they arrive, said one senior
EU official involved in the talks.
Greece, with its sprawling islands and
cash-strapped government, has become
the entry point for tens of thousands of
migrants to the EU from Turkey and has
failed to cope.
However, any move to transfer de
facto control of Greeces borders to
Brussels could run into political resistance in Athens, where unpopular international bailouts have already aroused
resentment of outsiders trampling on its
sovereignty. It is also unclear whether
the EU institutions would have the
capacity to take on the task.
Under Mr Tsiprass previous government, migration policy was almost an
afterthought amid constant brinkmanship over the countrys fiscal crisis. But

EU officials are hopeful that Athens will


keep the interim governments acting
immigration minister, Yiannis Mouzalas an experienced hand at international crises who has worked closely
with EU authorities to try to re-establish
order in Greeces islands, where the
number of migrants has begun to overtake the number of local residents.
Finding a way to shore up the EUs
external borders has become a priority
for Donald Tusk, the European Council
president, who is chairing tomorrows
summit. But officials said Mr Tusk was
reluctant to be seen as forcing EU border guards and migration processing on
Athens, and will instead ask leaders to
debate whether member states are no
longer able to protect the EUs borders
on their own.
Mr Tusks public suggestion that the
EU no longer controls its borders caused
some irritation in Italy, the other front-

line country facing a migration crisis.


Some in Rome saw it as implicitly blaming Greece and Italy for the migration
crisis.
Following a tense EU summit on
migration in June, Italy agreed to set up
five hotspots at Italian ports receiving
migrants, with EU officials helping Italian authorities identify and process
immigrants.
But an Italian official said: Its not
with two more people in Lampedusa
that you resolve the problem.
Greeces interim government issued a
plea for European help during a meeting
of EU interior ministers last week. But
the interim government in Athens did
not have the authority to reach a
detailed agreement with Brussels on the
scale and breadth of the assistance programme, which will now be left to Mr
Tsipras to weigh.

We need a
rock-solid
system of
registering
them when
they arrive
EU official

Gideon Rachman page 9

Thomas de Maizire

Germanys minister for refugees struggles with influx


STEFAN WAGSTYL BERLIN

Interior minister Thomas de Maizire


has the toughest job in German politics:
responding to the huge numbers of refugees flowing into the nation.
While Chancellor Angela Merkel has
grandly proclaimed that Germany will
welcome more asylum seekers than
ever before, it is Mr de Maizires unenviable task to balance his bosss generosity with the harsh reality of securing
housing, money and public support for
what could be 1m refugees this year.
And he is struggling.
Once seen as a possible successor to
Ms Merkel, the 61-year-old Mr de Maizire is fighting off calls for his resignation. He faces pressure not only from
Germanys Social Democrats, coalition
partners to the conservative CDU/CSU
bloc to which he belongs, but also from
fellow conservatives and hard-pressed
regional officials.
Then there are Berlins EU partners,
who resent Mr de Maizires hardline
attempts to force other states to take a
bigger share of the refugee burden.
Angela Merkel wont get rid of him,
says Andreas Busch, politics professor
at Gttingen University. But hes cutting a very unhappy figure right now.
Hes an excellent administrator who
would prefer to be out of the limelight.
Mr de Maizire spent years in bureaucratic posts before unexpectedly emerging as Ms Merkels chief of staff in her
first government in 2005. Four years
later, seemingly keen to raise his profile,
he asked to move into the ministerial
front rank, serving as interior minister
and then defence minister before
returning to the interior ministry.
Now he is in the line of fire because his
ministry is responsible for migration
policy. Regional officials, complaining
that they are being overwhelmed,
blame Mr de Maizire for failing to foresee the crisis and then reacting too
slowly when it materialised.
He has echoed Ms Merkel in declaring
the country prepared, saying in August:
This is a challenge for us all. We all
need to make an effort. But the burden
is not too heavy for Germany. We will
take care of it. But he recently insisted
there were limits: We will not be able to
take in all of the worlds refugees as well

Arrivals board:
a refugee at
Hamburgs main
railway station.
Below: Thomas
de Maizire
Adam Berry/Getty

as those who want to be able to improve


their economic future in Europe.
The tensions were evident last week
when Manfred Schmidt, the head of
Germanys migration office, a separate
unit supervised by the interior ministry,
unexpectedly resigned. He did so soon
after admitting mistakes had been
made with forecasts that had originally
predicted 300,000 asylum seekers for
2015, up from 202,000 last year.
Political opponents accuse Mr de
Maizire of sacrificing Mr Schmidt to
protect his own reputation, a charge
the ministry roundly denies.
The migration offices staff is
belatedly being raised from 350
in January to a planned 1,000
by the years end, with more
pledged for 2016. Ralf Stegner, an SPD vice-chairman,
has said Mr de Maizire must
now produce results, notably
a cut in the ballooning delays to
process asylum applications.

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He has boldly gone further, proposing


in an interview with Spiegel magazine
that the EU should fix an overall refugee
quota and, when the ceiling is reached,
send asylum seekers back to their
home regions Africans to Africa, for
example.
The SPD has rejected this as unconstitutional and contrary to Ms Merkels
policy. But de Maizire declined to
retreat, saying unlimited asylum rights
for arrivals in Germany were compatible with more restricted rights for those
coming to the EUs external borders.
Mr de Maizire has survived earlier
setbacks. His first interior ministry spell
ended with a failed bid to merge the
criminal investigation office, Germanys
Federal Bureau of Investigation, with
the federal police. His time at defence
was overshadowed by problems with
troubled equipment procurement programmes. Mr Busch says: He is conscientious. He is not political. He tries to do
his best in any situation.

Emergency gives
Turkey bargaining
power with wary EU

is face was stern, his mood dour, but nobody


could accuse Recep Tayyip Erdogan, Turkeys president, of lacking a sense of humour.
Standing beside Donald Tusk, the European Council president beset by EU feuding
over migration, Mr Erdogan suggested the unthinkable.
We fully support migrant quotas, he said, adding that
naturally the EU sharing system should include Turkey
and its 2m Syrian refugees.
With some relish, Mr Erdogan had delivered a home
truth to a bloc barely able to divvy up 40,000 people without months of rancour. The EU thinks it is facing a tide of
refugees, yet seen from Ankara that tide is but a trickle
spilling from its sea. They just laugh in our face, said one
senior EU official. How is your 40,000 going?
For Turkey-EU relations, the crisis is having a revealing
and potentially transformative power. On paper Mr
Erdogan is supposedly the supplicant, the aspirant EU
member due to be ticked off for his autocratic bad habits.
In reality, membership is a mirage. And now Europe is
becoming demandeur, beating a path to Ankara in search of
solutions to its latest crisis.
Where Mr Tusk ventured, others follow. Angela Merkel
German chancellor, has called. Her foreign minister has
been and others will soon follow. Next month, weeks
before Turkeys pivotal election, Mr Erdogan will be feted
in Brussels. Expect a re-run of his lecture about Europes
migrant cemetery in the Mediterranean. Hell be pissing in our back garden, said another EU official.
All this just as Turkey enters an acute period of instability. A Kurdish separatist uprising is flaring up. Violence is
spreading. Mr Erdogans
authoritarian streak is If Turkey is to
ablaze.
become the EUs
Long gone are the days
when EU officials would refugee buffer zone,
waltz into Turkish minis- it will naturally
tries to rewrite laws. Diplomats now fear any lev- have demands
erage left will be devoted
to stemming migration. The danger is the EU loses sight
of a bigger prize: a stable 75m-strong democracy on its
border.
If post-election Turkey takes a bad turn, who dares cross
Mr Erdogan? Ambassadors in Brussels mutter darkly
about what caused the sevenfold rise in migration via Turkey. To some, Mr Erdogan is the sultan with his hand on
the tap; Europe has never felt as vulnerable to his whims.
It is a stand-off with no winners, said Henri Barkey of the
Woodrow Wilson Center think-tank. Turkey can do a lot
of damage to western interests as well as to itself.
The EU is now scrambling to provide money. Johannes
Hahn, the enlargement commissioner, is trying to scrape
together up to 1bn. It is welcome, but overdue. To date
about $200m has been granted for refugees in Turkey,
compared with the $6bn Turkey spent itself.
If Turkey is to become the EUs refugee buffer zone,
Ankara will naturally have demands. Mr Erdogan faces a
political dilemma over granting Syrians work rights in
Turkey a crucial step to reducing the allure of the EU.
Extra EU funds could ease the pain. But Turkeys wishlist
will be more than money. For starters Ankara wants visa
liberalisation essentially free travel within the Schengen
area. It is a totemic matter of pride. Turkey is the only EU
accession country refused visa privileges.
In theory, the bargain has been struck already. Under an
EU-Turkey road map agreed in 2013, visa liberalisation
comes as soon as 2017 in return for a readmission agreement, the holy grail of migration policy allowing the EU to
return asylum seekers travelling via Turkey. The hitch is
some countries intended the road map to go nowhere. A
hardcore within the EU are implacably opposed and
stuffed the process with near-impossible conditions.
Even with the impetus of this crisis, some European politicians will be unable to stomach 75m Turks carrying a free
pass to Europe. The anti-Muslim strain of politics poisoning the quota debate the internal refugee crisis is set to
hobble the blocs search for an external solution as well.
alex.barker@ft.com

Asylum seekers. Residency rights

Shunned Sweden Democrats test rivals open policy


Anti-immigration party tops
polls as mainstream groups
welcome those fleeing Syria

30 global locations www.efginternational.com

FINANCIAL TIMES

Meanwhile, on the EU front, several


eastern European states, which have
challenged plans for distributing refugees through compulsory quotas, are
angry with Mr de Maizire for threatening to link the scheme to EU financial
support. He will face their ire again
today at an EU justice ministers meeting that precedes an emergency summit
of EU leaders tomorrow.
As the descendant of French Huguenots who fled to Germany, he is arguably
an example of European success at integrating refugees. He values public service his father was the general inspector of the army and a cousin, Lothar de
Mazire, was the first (and last) freelyelected prime minister of communist
East Germany shortly before it merged
with West Germany in 1990.
Mr de Maizire is sticking to his guns.
He argues that the EU response to the
crisis must be based on a common asylum policy and shared responsibility for
external borders.

Alex
Barker

RICHARD MILNE STOCKHOLM

When Swedens centre-left government


invited party leaders to discuss Europes
migrant crisis this month, it asked everyone but the head of the party topping
the polls.
Sweden has won plenty of praise for
its openness to refugees, taking in more
per head than any other European
country. But it is also home to the Sweden Democrats party, one of the biggest
anti-immigration groups in Europe,
which is polling at up to 27 per cent.
In Hasselby Strand, the Stockholm
suburb in which the party received the
highest percentage of votes in last years
elections, it is not hard to find sympathisers. Elisabeth, a retired teacher,
says: I dont like what the other parties
say. The Sweden Democrats are the only
ones who tell the truth.
Her friend Anneli interrupts: Im not

inhuman. I dont like to see suffering.


But things are difficult here. My son
hasnt got a job.
Sweden, a country of 9.8m people,
took in 80,000 asylum seekers last year
and is set to welcome a similar number
this year. Many are from Syria, owing to
a policy that offers those fleeing the wartorn country near automatic residency.
The seven other parties in Swedens
parliament shun the Sweden Democrats,
saying the party is rooted in the neo-Nazi
movement. But the Sweden Democrats
have surged in the polls from 5.7 per cent
in 2010 to 12.9 per cent at last years elections and a poll by Sentio Research this
monthputthepartyat26.5percent.
Nicholas Aylott of Sodertorn University says consensus among the other
parties on immigration has left the field
open for the Sweden Democrats. The
degree to which the other parties loathe
the Sweden Democrats is amazing. But
the debate is now taking place on the
fringes, he says.
Paula Bieler, a Sweden Democrat MP
and the partys spokesperson for integration, revels in the antagonism. This
is dividing the country. People are now

seeing that what we have said for a long


time isnt that weird, she says.
The party went into the last elections
promising to cut immigration by 90 per
cent, saying there was a choice between
accepting more immigrants and maintaining high welfare standards. Ms Bieler
says the goal is to implement appropriate
Migrants arrive in
Stockholm from
Malmo, where
most residents in
one housing estate
were born abroad

policies, pointing to Denmark and its


recent crackdown on immigration led by
theDanishPeoplesparty.
Its impossible to have all this immigration and give a proper welcome. We
have this absurd situation where its
gone so far that people arrive here and
its not as good as they expect. We have
segregation in our cities, we have violence, she says.
This summer was marked by a
number of attacks in Swedish cities,
some involving hand grenades, in

Malmo, the southern port that attracts


many immigrants. The Sweden Democrats stronghold is next to a Malmo
housing estate in which 95 per cent of
residents were born abroad.
It is a similar story in Stockholm
where just down the road from Hasselby
Strand is a Syrian community centre.
Asked whether he would recommend
Sweden to fellow Syrians, a teenager
who did not want to give his name says:
Im not sure. Some say its better to go
to Germany. Sweden is nice but many of
us dont have jobs.
Three of the four opposition centreright parties have hinted at a tougher
stand on aspects of immigration. But Ms
Bieler says: Their tactics are not working. I think we will see a change.
The Sweden Democrats party has
troubles of its own. A bitter feud is pitting the youth organisation and several
senior members against the party leadership. The risks, however, are greater
for the establishment parties. If the Sweden Democrats poll 25 per cent in the
next elections in 2018, the traditional
right and left blocs would be unable to
gainaworkingmajority.

Tuesday 22 September 2015

FINANCIAL TIMES

INTERNATIONAL

Syriza victory
fails to allay
fears over Greek
bailout reforms
Many EU officials are doubtful the
overhauled government can deliver
HENRY FOY ATHENS
PETER SPIEGEL BRUSSELS

Even as he basked in victory on Sunday


evening, Alexis Tsipras was careful to
stress that his emphatic re-election did
not mean an end to Greeces financial
hardship.
We have difficulties ahead, Mr
Tsipras told a flag-waving crowd from
his leftwing Syriza party. Recovery
cannot come through magic but
through lots of work, stubbornness and
struggle.
But his message of realism appeared
to sail over the heads of some of the jubilant supporters chanting his name.
Even though Mr Tsipras buckled under
pressure from fellow EU leaders in July
to sign an 86bn bailout with tough
terms attached, many Syriza voters are
still hoping for defiance.
Nothing is set in stone, said Maria
Mavrofrydi, a Syriza Youth member and
election campaigner. You can see
tonight how much the people of Greece
want him to resist.
When Mr Tsipras dissolved his government and called snap elections in
August, many in the troika of Greek
bailout monitors imagined a hopeful
scenario: the poll would produce a mandate from voters to form a national
unity government that could plough
ahead with the unpleasant work of
implementing the rescue programme.
Instead, Sunday nights victory has
strengthened Mr Tsiprass hold on
Greek politics and restored his swagger.

He will return as prime minister having only lost a handful of parliamentary


seats from his ruling coalition. He has
also managed to cast off the most radical
elements of Syriza, which failed to make
it into parliament after breaking away
to form their own far-left party. He will
not need to reach out to mainstream,
pro-EU parties in parliament to govern,
as many in Brussels had hoped.
Syriza officials say they are banking
on impressing the troika with their
reform efforts over the next month in
the hope that it will earn them some
form of relief on the countrys huge
debt.
Anthimos Thomopoulos, chief executive of Piraeus Bank, the countrys largest, was hopeful.
Essentially we are where we were
some five years ago in terms of the
things that need to be done, Mr
Thomopoulos said. Except now we
have an enthusiastic, dynamic prime
minister with a popular mandate to do
it. And that is positive.
Privately, though, many EU officials
remain unconvinced that even an overhauled Syriza-led government can
deliver what he has promised.
Part of that is timeworn cynicism
after watching successive governments
of all political stripes fall short on the
reform agenda as the country has
lurched form one crisis to the next.
Mr Tsipras has done little to allay
their concerns. Although the new Greek
parliament will be filled with parties

Front page:
newspapers in
Athens
yesterday with
the results of
Sundays general
election
Michalis Karagiannis/Reuters

that back the current programme


only neo-Nazi Golden Dawn and the
communist KKE, with 33 seats between
them, are overtly anti-bailout his
decision to again ally himself with the
eurosceptic Independent Greeks (Anel)
party raises the possibility of internal
resistance to reforms.
Anel remains a party known for its
anti-memorandum rhetoric and flair

Greek election result

Number of seats (Sept 2015)


New Democracy 75

Golden Dawn 18
Pasok 17

Syriza 145

KKE 15
To Potami 11
Anel 10
Union of
Centrists 9

FT graphic Source: Thomson Reuters

for populism, oversimplification and


conspiracy theorising, said Mujtaba
Rahman, head of European analysis at
the Eurasia Group risk consultancy.
But more worrying than politics is
competence: can this government actually produce people that are capable of
implementing the bailout? That
remains an open question.
Yesterday morning Martin Schulz,
head of the European Parliament, said
he thought it bizarre that Syriza had
decided to continue working with this
strange, far-right party.
Anels rightwing views could also dash
the possibility of Mr Tsipras boosting his
wafer-thin four-seat parliamentary
majority with MPs from other centrist
parties, a cause championed by Brussels. The centre-left Pasok party has
already offered outside support.
And while his new government has
been stripped of radical leftwingers
such as Yanis Varoufakis, the ex-finance
minister that many in Brussels blamed
for Syrizas yearlong obstinacy, and the

Now we
have an
enthusiastic
dynamic
prime
minister
with a
popular
mandate
Anthimos
Thomopoulos,
Piraeus Bank

partys Left Platform of anti-bailout dissenters, its fragility is another cause for
concern.
Syriza, which has already fractured
once this year, bringing down Mr
Tsiprass premiership, is still far from
united and is riddled with mistrust.
For all his electoral success, the prime
minister is increasingly seen as aloof by
party faithful, who accuse him of failing
to seek consensus before agreeing to the
bailout.
The internal Group of 53 faction, now
the ideological leftwing of the party, is
still smarting from being cut out of certain decisions surrounding the bailout,
and may seek to slow the pace of reform.
Pockets of resistance to the MoU
(bailout) also remain within Syriza,
said Mr Rahman.
As the government progresses with
difficult fiscal and bank reforms needed
to conclude the first review by the end of
the year, the risk of defections . . . will
grow.
Editorial Comment page 8

Tuesday 22 September 2015

FINANCIAL TIMES

INTERNATIONAL
Socialist direction

Party mouthpiece

Beijing calls for tighter grip on state groups

Peoples Daily
labels Asias
richest man
immoral for
moving assets

Investors dismayed by
edict as planned overhaul
of SEO sector falters
JAMIL ANDERLINI BEIJING

Chinas Communist party must tighten


its grip on state-owned enterprises in
order to maintain the socialist direction of their development, the countrys leadership said, an edict that chafes
with reforms aimed at improving efficiency and profitability in the lumbering sector.
A planned overhaul of the sector,
which accounts for two-fifths of economic output, according to Goldman
Sachs, has already disappointed investors. Many in the Chinese and international business community have been

hoping Beijing would start to relinquish


some control.
This is seen by some as especially
urgent since the economy is on track to
post its weakest annual growth rate in a
quarter of a century this year and the
government has been struggling to identify sources of new economic vitality.
However, any such hopes were
dashed by Beijings latest pronouncement on the purpose of its economic
reforms. This follows last weeks unveiling of long-awaited SOE reforms which
are mostly about defending the status
quo, merely pledging to modernise and
enhance state assets management and
allow some further share sales.
State-owned enterprise reform has
now reached the critical deepwater zone
and Communist party leadership can
only be strengthened, it cannot be

weakened, the General Office of the


Communist partys Central Committee
said in a policy document.
Within state enterprises it is essential
to give full play to the party leading
groups core leadership role, the party
committees core political role, the
grassroots party organisations role as a
fighting force and the party members
positions as pioneers and role models.
The party exercises control over
state-owned enterprises by reserving
the right to appoint all senior managers
above a certain rank and by operating
party cells that function as a parallel
power structure within all state companies.
The chairmen and chief executives of
most large SOEs are often concurrently
the heads of their companies party
committees. When they are not they are

almost always outranked by whoever


does head the committee.
The latest statement from the authorities stressed the need to strengthen the
partys control over key appointments
at state enterprises.
According to official statistics, China
has about 150,000 state-owned enterprises, which employ more than 30m
people across the country.
Those companies control more than
$16tn in assets, equivalent to roughly
150 per cent of Chinas gross domestic
product.
Most traditional industries, from aviation to finance to petrochemicals, are
completely dominated by a handful of
state giants that enjoy virtual monopolies in their sectors.
But with economic growth slowing to
its lowest pace in a quarter century and

weakness concentrated in traditionally


state-dominated sectors such as heavy
industry, construction and manufacturing, these lumbering state-owned giants
have fared badly.
Official figures show state-owned corporate profits fell 2.3 per cent in the first
seven months of this year compared
with the same period last year.
Given Chinas enormous debt load
more than 280 per cent of GDP by the
end of last year, according to McKinsey
estimates and the growing problem of
servicing interest payments, some analysts have suggested China could privatise some state assets to improve efficiency.
But the latest edict explicitly rules out
the idea of allowing mixed ownership
to be followed by wholesale privatisation.

Politics. US visit

Obama under pressure to toughen stance on China


Xi likely to encounter nation
demanding confrontation over
commercial and security issues

Protocol
For the Chinese,
one of the most
important aspects
of the trip is that
it is a state visit,
with a 21-gun
salute and a
formal state
dinner. Beijing
sees this as a sign
that China is
being treated with
respect and as
one of the worlds
great powers.

GEOFF DYER WASHINGTON


JAMIL ANDERLINI BEIJING

When Xi Jinping begins a week-long


visit to the US in Seattle today, the Chinese president will be accorded all the
pomp and ceremony of an important
world leader. In between Washington
state and Washington DC, he will meet a
large slice of the American corporate
elite and receive a 21-gun salute and a
state dinner at the White House.
But underneath the surface, Mr Xi
will encounter an America that is itching to be more confrontational towards
China over commercial and security
issues. From the Pentagon to the justice
department, Barack Obamas administration has been preparing tougher
steps to take against China over cyber
theft of trade secrets and over its efforts
to assert more control in the South
China Sea. The White House has so far
held off approving the measures, in part
for fear they might poison Mr Xis visit,
but is holding them open as a threat.
The larger challenge around this
visit is that if this type of Chinese behaviour continues and we are only able to
get Band-aid cures, at what point do we
then begin to impose costs? says
Michael Green, a former Asia director at
the White House National Security
Council. Even if the Obama administration does not ultimately take harsher
steps, he says, Beijings actions are
imprinting how the next administration thinks about China.
Obama is a weak president so he will
have to be tough on Xi this time, says
Xiao Lian, chair of the American economy research centre at the China Academy of Social Sciences. The US military
and intelligence communities are all
much more against Obama being soft on
China than in the past.
In the weeks ahead of Mr Xis visit, the
administration debated whether to
impose sanctions on Chinese individuals and companies over cyber theft. The
US president complained to Mr Xi
about the issue at a 2013 meeting they
held in California, but US officials say
there has been no reduction in Chinese efforts to get hold of valuable
secrets from US businesses.
China has clearly overstepped
the boundaries of norms that are
acceptable and the US has a
pretty clear norm, which is that
you dont steal intellectual property,
trade secrets, and business know-how
for commercial purposes, says Penny
Pritzker, US commerce secretary.
During Mr Xis trip, the administration hopes to show it has made headway

Talking
points
On the
diplomatic
agenda

Cyber crime

South China Sea

Bilateral investment treaty

One of the sharpest areas of contention


will be US accusations about Chinese
cyber theft of trade secrets. The Obama
administration has threatened to impose
sanctions on Chinese companies involved.
The governments have also been talking
about an agreement not to use cyber
attacks against vital infrastructure in
peacetime.

The US will also complain about Chinas


development of airfields and other potential
military facilities on reclaimed islands in the
South China Sea. Beijing shows little sign of
acceding to US demands to stop its islandbuilding.

The US and Chinese governments


would like to use the visit to make
progress on a treaty that will make it easier
to invest in each others economies.
However, both governments face political
opposition at home.

on cyber talks. The governments have


been discussing a no first-use agreement
on infrastructure attacks adopting
elements being more broadly negotiated at the UN. They could also revive
dialogue over cyber issues.
But the US insists the threat to impose
cyber sanctions remains. The sanctions are there in the background,
says David Dollar, a former US Treasury official in China. If the end result
of that is there is no change in Chinese behaviour, then you might
very well see sanctions of the Chinese companies.
The administration has debated
how to respond to Chinese efforts
to reclaim land in the South China
Sea and to turn the islands into
military bases. US analysts
believe China has four potential
airfields in the region. The Pentagon has

been pushing for permission to sail


ships and fly planes within the 12-mile
limits of some of the reclaimed land, in
order to show the US does not recognise
them as real islands with legal jurisdiction over part of the surrounding
waters. But the White House has so far
declined to authorise such exercises.
There should be no mistake: the
United States will fly, sail and operate
wherever international law allows, US
defence secretary Ashton Carter said
last week. After all, turning an underwater rock into an airfield simply does
not afford the rights of sovereignty.
The tensions within the administration were on display last week when
Admiral Harry Harris, the head of US
Pacific Command, was testifying in Congress. Under questioning from senators,
Adm Harris admitted: I believe that we
should be allowed to exercise freedom

Xi Jinping,
then Chinas
vice-president,
meets Barack
Obama at the
White House in
February 2012
Susan Walsh/AP

of navigation and maritime flight in the


South China Sea against those islands.
He said he was still awaiting directions.
The administration has credibility
challenges in the South China Sea, says
Patrick Cronin, an Asia expert at the
Center for a New American Security, a
Washington think-tank, because it
demanded all nations in the South
China Sea stop reclaiming land,
although it realised China would not.
According to all indications, Xis
China still aspires to have this preponderance within . . . the entire South
China Sea, says Shi Yinhong, director of
the Center for American Studies at Renmin University in Beijing.
These step-by-step small gains
might make the US finally say enough is
enough. These tactical and gradual
schemes could mobilise the US and its
allies to respond forcefully.

JAMIL ANDERLINI BEIJING

The Peoples Daily, official mouthpiece


of the Chinese Communist party, has
criticised Asias richest man for divesting some of his assets in China, describing it as immoral, ungrateful and ultimately self-defeating.
Li Ka-shing, the 87-year-old Hong Kong
property, telecoms and port tycoon
worth nearly $33bn, has been alternately lambasted and defended in Chinese media and the internet in recent
weeks for deals that shifted his business
empire away towards Europe.
Concerning the controversy over
[Mr Lis] divestments from the mainland, the war of words continues: is it a
normal business operation or an act of
immoral misconduct? A legal adjustment or a helpless evacuation? the
newspaper asked in an editorial posted
on Chinese social media.
Li Ka-shings choices do appear particularly brazen. In the eyes of ordinary
people we shared comfort and prosperity together in the good times but when
the hard times come he abandons us
this has really left some people speechless.
The article questioned Mr Lis patriotLi Ka-shing:
many on Chinese
internet interpret
his business moves
as a sign of
pessimism

ism and said he would ultimately be the


biggest loser as Chinas economy continues to grow in the future.
It is a sharp turn of events for a man
known in Hong Kong as superman
because of his investing prowess and
whose rise from an impoverished 15year-old plastics salesman to Asias richest man has long been a source of pride
and inspiration in China.
But the newspaper, which is often
used to present the partys official line,
also rejected calls for the government to
block Mr Lis sales of prime real estate
and other assets in China.
Li Ka-shing has earned money in the
mainland and even if it is morally legitimate to stop him from moving his capital out now because of special privileges
he received in the past, it is not logical
and not in accordance with the spirit of
rule by law, the paper said.
The editorial appeared to be partly
intended as a defensive move by the
party in response to the vitriolic debate
that has spread across the internet after
a government-affiliated think-tank
published an even more incendiary article attacking Mr Li a week ago.
Critics have accused the pro-Beijing
tycoon of earning his fortune through
connections to top officials.
Mr Li has long been a defender of
Communist party rule in the mainland
and in Hong Kong, where he spends
most of his time, and he is known to
have been particularly close to former
president Jiang Zemin. Mr Li could not
be reached for comment.
Many on the Chinese internet have
interpreted his business moves as a sign
of pessimism as the countrys economic
growth has slowed to its weakest pace in
25 years and is struggling under a mountain of debt.
For several years, Mr Li has been selling assets in greater China and shifting
his business empire towards Europe.
This year he bought British telecoms
group O2, having earlier acquired the
UKs Eversholt Rail Group. At the same
time, Chinese media estimate his companies have divested about Rmb100bn
($16bn) of assets in mainland China and
Hong Kong in the past three years.
Additional reporting by Gloria Cheung

Religious tolerance

Islam and fears over Muslim jihadis stir debate among Republican presidential hopefuls
DEMETRI SEVASTOPULO WASHINGTON

Muslims have replaced Hispanics as


the focus of verbal attacks on the US
campaign trail with Donald Trump
shifting his anti-immigrant focus to
people of the Islamic faith.
The bombastic real estate tycoon, who
continues to lead the Republican presidential field, has come under intense
fire since he refused to correct a man at a
campaign rally who declared that President Barack Obama, who is Christian,
was a Muslim, and asked: When can we
get rid of them?
Ben Carson, the retired neurosurgeon
who is one of the closest rivals to Mr
Trump, fanned the flames on Sunday by
saying a Muslim should not be

president. Asked if he thought Islam


was consistent with the US constitution,
he told CNN that he did not. I would not
advocate that we put a Muslim in charge
of this nation. I absolutely would not
agree with that, he said.
Since Mr Trump unveiled his presidential bid, he has propelled his campaign with attacks on the 11m mostly
Hispanic illegal immigrants in the US.
But his refusal to correct the antiMuslim questioner reminded people of
his effort during the 2012 presidential
campaign to suggest that Mr Obama was
a Muslim who was not born in the US.
His persistence prompted Mr Obama to
release his full birth certificate in an
effort to halt what the president
described as silliness.

While few informed people believe


Mr Obama is Muslim, the new rhetoric
comes as some Republican presidential
hopefuls try to boost their support
among the conservative base by focusing on radical Islam and suggesting by
extension that Muslims deserve more
scrutiny than people of other religions.
Critics say such rhetoric moves the US
away from its founding principle that all
people are equal. It also harkens back to
the anti-Catholic sentiment that existed
in America decades ago and that some
people thought would prevent John F
Kennedy, a Roman Catholic, from winning the 1960 presidential election.
The debate also comes as some Americans grow concerned about the possibility that their communities will be

forced to house Muslim refugees from


Syria. John Kerry, secretary of state, on
Sunday said that the US would boost the
annual number of refugees it accepts
from 70,000 to 100,000 by 2017 with
Syrians expected to take most of the

Donald Trump: did not correct claim


that Barack Obama was a Muslim

increased allocation. Several hundred


people gathered in Duncan, South Carolina, on Sunday to protest about any
resettlement of refugees, according to
one woman who attended. A flyer for
the meeting that was being handed out
in nearby Spartanburg as most of the
Republican presidential contenders
spoke at a Heritage Foundation event,
said dozens of terrorist sympathisers
have already been resettled in Minnesota, Maine, Ohio, and Virginia.
Mr Obama also waded into the debate
about the treatment of Muslims last
week after a young Muslim boy named
Ahmed Mohamed was arrested for
bringing a home-made alarm clock to
school to impress his teacher.
Josh Earnest, the White House press

secretary, described the situation as an


example of pernicious stereotypes.
Mr Obama went further by inviting the
boy to the White House via Twitter:
Cool clock, Ahmed. Want to bring it to
the White House? We should inspire
more kids like you to like science. Its
what makes America great.
Mr Trump on Sunday refused to row
back his stance by insisting that while
Muslims are such fabulous people, the
US needed to abandon political correctness and tackle a severe problem, in
an apparent but unclear reference to
radical Islam.
Some of his party rivals in the White
House race, including Jeb Bush, Lindsey
Graham and Chris Christie, criticised
Mr Trump over his remarks.

Tuesday 22 September 2015

FINANCIAL TIMES

Tuesday 22 September 2015

FINANCIAL TIMES

INTERNATIONAL
India

Russia

Delhi urges rate cut amid talks


on central bank independence

Moscow steps up Syrian


involvement with 2,000
earmarked for air base

Finance minister hints at


compromise over
monetary policy voting

KATHRIN HILLE MOSCOW


JOHN REED JERUSALEM

Russia is to deploy 2,000 military personnel to its new air base near the Syrian port city of Latakia, signalling for
the first time the scale of Moscows
involvement in the conflict-torn country.

DAVID PILLING HONG KONG

Indias finance minister urged the


Reserve Bank of India to lower interest
rates even as the two finalise delicate
discussions over the future of the central banks independence.
Fears that the RBI could come under
institutional pressure to toe the line
have been raised by a proposal to establish a seven-member Monetary Policy
Committee in which Delhi would have a
controlling majority.
However, Arun Jaitley, in an interview with the Financial Times, hinted
that a compromise had been reached
and that the government might not have
the deciding vote after all.
The government and the bank are on
the same page as far as this is concerned, he said, adding that Indias proposals were in line with many other
countries. Raghuram Rajan, RBI governor, has also sought to play down concern that proposed changes could
threaten the banks independence.
Some analysts say a compromise is
under way in which the committee
would consist of six members with the
casting vote going to the bank governor.
Mr Jaitley refused to confirm details,
saying parliament must be informed
first. Speaking 10 days before the next
meeting of the RBI, a confident-sounding Mr Jaitley said: Common sense says
the rates should come down.
He said while he would not normally
comment on central bank policy, it was
obvious that inflation was very much
under control. India was better pre-

If oil is selling at half the


normal price, commodity
prices are low . . . inflation
is the least of our worries
pared than most emerging economies to
weather the turbulence caused by
uncertainty over the US Federal
Reserves on-again, off-again policy
stance. If oil is selling at half the normal
price, commodity prices are low, and we
have stocks and stocks of food grain,
then inflation is the least of our worries.
As the worlds third-biggest importer
of crude oil, India is a big beneficiary of
low petroleum prices.
The finance minister also pointed to
what he said was Indias improving fundamentals. He highlighted a fiscal deficit that he said was on track to narrow
from last years 4 per cent of gross
domestic product and a current
account deficit of 1.2 per cent.
Growth, he said, was running
at 7-7.5 per cent, a strong performance given adverse international conditions in which
investors have scampered
from emerging markets.
Still, the minister said, if
Indias interest rates were

lowered, the economy could grow faster.


Mr Rajan has kept rates relatively
high at 7.25 per cent despite pressure
from the government to cut. The governor is committed to keeping inflation, as
measured by consumer prices, at 6 per
cent or below, although analysts say a
50-basis-point cut is likely in coming
months.
Mr Jaitley fended off criticism that
Narendra Modis government had failed
to implement reforms, saying it had
achieved a lot in opening up sectors
such as defence and insurance.
The facts speak otherwise, he said of
suggestions that policies had stalled.
Theres been a series of changes and
reforms. He pointed to devolution of
power to the states, increased spending
on Indias ramshackle railways and
greater transparency in the allocation
of resources from coal to spectrum.
Its on track, directional and going
on very strongly, he said of the governments reform effort.

Carry trade:
a farm labourer
in Amritsar.
Arun Jaitley,
finance minister,
left, says stocks
of grain are high
Roberto Schmidt/AFP/Getty

Mr Jaitley said the administration


would push through a national goods
and services tax, seen by many as vital
to improve business efficiency, after the
opposition Congress party halted its
progress in the upper house.
States would establish their own policies on land sales, and he denied that the
failure to pass national land reform was
hampering Mr Modis ambitious industrialisation and job-creation plans.
The finance minister also promised
fresh measures to improve economic
efficiency, emphasising new laws on
arbitration and bankruptcy.
Foreign direct investment in India
was up 49 per cent this year, he said,
although he acknowledged that domestic businesses were not investing.
That was because they had overstretched themselves and were still
working through spare capacity, not
because they lacked confidence in
Indias economy.
Notebook page 8

South Africa. ArcelorMittal

ANC scraps enmity with steel group as recession looms


Government imposes tariffs to
help untransformed industry
in effort to support jobs
ANDREW ENGLAND JOHANNESBURG

For years, South Africas steel producers


and the government have been enemies,
with ArcelorMittals subsidiary the
prime target of angry policymakers.
Since taking over the former statecontrolled behemoth Iscor a legacy of
the colonial and apartheid eras in
2004, ArcelorMittal South Africa
(Amsa) has enjoyed a near monopoly in
Africas most industrialised nation.
But to the ruling African National
Congress the company has epitomised
what it views as untransformed corporates that refuse to support the countrys economic development goals.
As a result, the ANC has regularly
threatened to create a state-backed steel
producer to counter Amsas market
dominance. The government and others
have also lodged complaints against
Amsa with the competition authorities.
Now, however, it is the government
that is riding to Amsas rescue as South
Africas economic woes and Chinas
slowdown conspire to threaten the sustainability of an industry that employs
tens of thousands of workers.
It is a dramatic turnround that provides insights into the myriad chal-

lenges that face South Africa as it seeks


to avoid slipping into recession. The
countrys vital mining and manufacturing sectors are in a dire state their output contracted by 6.8 per cent and 6.3
per cent respectively in the second
quarter as they battle electricity constraints, weak demand and rising costs.
Paul OFlaherty, Amsas chief executive, says the industry is already in
recession. He forecasts that South
Africas steel consumption this year will
be 4.7m tonnes at best, which would be
its lowest level since 2009. At the same
time, Chinas slowdown has created a
surplus in global steel markets and led
to China dumping cheap steel in
South Africa, he says.
The government has heeded Amsas
plea for help and agreed to impose 10
per cent import tariffs on a range of steel
products. Amsa hopes other products
will also fall under the new tariff regime.

In addition, it is pushing for antidumping tariffs to counter cheap Chinese imports.


The imports are killing us, Mr OFlaherty says.
The company has agreed to negotiate
a fair price in effect a reduced price
for its steel. In the past Amsa which
one industry official described as
bloated and stuck in the past was unable to agree on such a move. Instead it
has sold steel at import price parity as it
catered for about 70 per cent of domestic consumption. The ANC has been
calling for a reduced price for years in
the belief that it would support local
manufacturing and create jobs.
Mr OFlaherty, who was appointed in
July last year, acknowledges that the
industry is still dominated by whites
and that Amsa needs to be more efficient. You have a steel industry that is
perceived to have acted very badly, and

Tough journey: an ArcelorMittal plant in South Africa

a steel industry, quite frankly, that is


totally untransformed, he says. So
were in a position now where were saying we are sorry. But why destroy what
youve got?
The details of how a fair price will be
calculated are being thrashed out while
discussions on the tariffs began in earnest in July. Those discussions also
included union leaders who are desperate to save jobs.
Mr OFlaherty says about 75 per cent
of the thousands of households in the
Vaal Triangle, south of Johannesburg
where Amsa has its main plants, and a
similar number in Newcastle, an industrial town in KwaZulu-Natal, depend on
the steel producer.
Its a tough journey, but I think we
are in the right space, says Mr OFlaherty. We can ride out the storm.
But even if the industry recovers, it
will not deflect from the structural
problems facing the economy and the
tariffs could increase the price of some
steel products for end users. The economy contracted by 1.3 per cent in the
second quarter, with issues such as
infrastructure bottlenecks, an inflexible
labour market and poor education
blamed for stymieing potential.
A survey this month conducted by
Rand Merchant Bank and the Bureau
for Economic Research revealed that
business confidence hit its lowest level
in four years in the third quarter, highlighting the risk of recession.

The deployment forms the first phase


of the mission there, according to an
adviser on Syria policy in Moscow. The
force will include fighter aircraft crews,
engineers and troops to secure the facility, said another person briefed in the
matter.
The two people declined to confirm
whether Moscow had sent surface-toair missiles and fighter jets as alleged by
Washington over the weekend. But Russian and western military experts said
surface-to-air missiles were an integral
part of the defences of any air base.
The comments are unlikely to allay
fears in the US-led coalition fighting the
Islamic State of Iraq and the Levant, Isis,
that Russias military involvement in
Syria could escalate the countrys
bloody civil war or risk incidents
between Russian and other forces active
in the country.
A Russian official yesterday dismissed as disingenuous comments by
US secretary of state John Kerry that the
presence of Russian air-to-air combat
capacity and surface-to-air missiles in
Syria raises serious questions because
the capabilities are of little military use
against jihadi groups such as Isis, which
is Moscows stated reason for its
increased intervention in the Syrian
conflict.
You know as well as we do that anyone building an air base will put in such
air defences, so theres no reason to use
this to cast doubt on our initiative to
fight the Islamic State [Isis], he said.
Three western defence officials
agreed that the Russian deployment tallied with the numbers needed to establish a forward air base similar to those
built by western militaries in Afghanistan.
Fears that Russias ramped up military presence could further complicate

the balance of forces in Syria prompted


Israels prime minister Benjamin Netanyahu to travel to Moscow for a meeting
with President Vladimir Putin yesterday.
Mr Netanyahu later told Israeli media
that he and Mr Putin had agreed on a
mechanism to co-ordinate the two
countries military actions in Syria and
prevent Israeli and Russian troops from
accidentally exchanging fire.
Israel and Russia share a common
interest to ensure stability in the Middle
East, Mr Netanyahu said.
Israel has warned repeatedly about
the transfer of what it calls gamechanging weapons to Hizbollah, the
Iran-backed militant group that supports Moscows ally, Syrian president

Israel and Russia share a


common interest to ensure
stability in the Middle East
Benjamin Netanyahu
Bashar al-Assad, and has shelled Israel
in the past. Israel has targeted suspected
weapons convoys or caches inside Syria
in several unacknowledged air strikes
since 2013.
Mr Putin condemned attacks against
Israel but claimed that they were carried out by internal elements, rather
than the Syrian army, which he
described as incapable of opening a new
front. Our main goal is to defend the
Syrian state, Mr Putin said.
In a sign of the risks, Moscow accused
Syrian rebel forces of shelling its
embassy in Damascus and demanded
that their western and regional allies
take steps to rein them in.
The foreign ministry said the shell,
which landed close to the embassy
building on Sunday and caused no casualties, came from Jobar, which is held by
anti-Assad fighters who were not allied
with Isis and had external sponsors.
We expect a clear position with
regard to this terrorist act from all members of the international community,
including regional players, it said.
Gideon Rachman page 9

UK politics

Former Conservative ally


throws book at Cameron
JIM PICKARD LONDON

A billionaire former Conservative


donor and party treasurer has denied
taking revenge on UK Prime Minister
David Cameron after writing a
biography filled with embarrassing
allegations.
The Daily Mail tabloid newspaper published an initial extract from Call Me
Dave yesterday under the headline
Drugs, debauchery and the book that
lays Dave bare. The coverage, splashed
across the front and six inside pages,
centred on claims of drug-taking and
lurid exploits during Mr Camerons time
at Oxford university.
The claims appeared in a warts and
all book on the prime minister cowritten by Lord Ashcroft, former deputy chairman of the Conservative party
who fell out with Mr Cameron after failing to secure a top job in his government
in 2010.
The book claims that Mr Cameron
knew about Lord Ashcrofts nondomicile tax status in 2009, a year
before it became public knowledge.
It also suggests that cocaine was taken
during parties at Mr Camerons house
although not necessarily with his
knowledge and that he had smoked
marijuana. The book accuses Mr Cameron of being involved, during his student days, with a debauched Oxford
dining club named the Piers Gaveston
Society, in honour of a supposed lover of
Edward II in the early 1300s. It was during a Gaveston initiation that a particularly lurid ritual was said to have
occurred, involving Mr Cameron and
the head of a dead pig. However, one ally
said yesterday the prime minister had
never belonged to the society.
Downing Street was tight-lipped. Im
not going to dignify this book by offering
any comment or reaction to it, a
spokesperson said.
George Osborne, chancellor, also
refused to comment when asked about
the extracts during his visit to China.
Lord Ashcroft has insisted that his
book, co-written with Isabel Oakeshott,
former political editor of The Sunday
Times, was objective and not about settling scores. But he conceded in an
opinion piece for the Mail that his relationship with the prime minister
became strained over what he saw as a

derisory job offer as a junior whip in the


Foreign Office. After putting my neck
on the line for nearly 10 years . . . and
after ploughing some 8m into the
party, I regarded it as a declinable offer,
he said. It would have been better if
Cameron had offered me nothing at all.
A 2007 biography of Mr Cameron suggested that he was suspended from Eton
for smoking marijuana. On that occasion Mr Osborne said: Its not been
denied by David but hes also said that
we are not in the business of saying that
politicians cant have a private life
before they come into politics.
Many will see the book as an act of
revenge by the peer, who has been edged
out of Mr Camerons inner circle.
An ally of Mr Cameron said he used to
pull faces while on the phone to the peer,
whose presence he found increasingly
unwelcome.
Lord Ashcroft used to be deputy
chairman of the Tory party, responsible

Im not going to dignify


this book by offering any
comment or reaction to it
Downing St spokesperson
for target seats and opinion research.
The peers money was seen as a key factor as the party wrested back seats from
Labour in the 2010 general election.
Five years ago the Conservative peer
was at the centre of a scandal after the
party admitted that he did not pay UK
tax on earnings outside Britain.
Lord Ashcroft had promised William
Hague in 2000, when the latter was Tory
leader, that he would take up permanent residence in the UK. It later
emerged that the peer was declaring
only his British income, not his overseas
income, to the exchequer.
The book says Mr Cameron had
known about Lord Ashcrofts tax status
for a year. But when the story broke, his
spokesman said Mr Cameron had only
known for about a month.
Lord Ashcroft has since tried to retain
influence in UK politics by setting himself up as a pollster, funding sophisticated surveys. However, they were
found to be some way off the mark in
predicting results for Mays general
election.

Tuesday 22 September 2015

FINANCIAL TIMES

FT BIG READ. JAPAN


As the nation ages, its consumption of rice a symbol of self-sufficiency and postwar resilience is
falling fast. Can the country afford the subsidies that have kept politically powerful farmers in business?
By Leo Lewis

2.5m

Hectares of rice paddy


in Japan, just over 1m of
which lies fallow as
demand for rice and
sake falls

he basin of the NP-WU10 is


hand-moulded in an iron
foundry for exquisitely
even heating. The lid is
platinum-coated to generate the perfect levels of amino acids. A
digital sensor selects from 121 possible
micro-adjustments until steamed perfection is achieved.
For a rice-worshipping nation, where
the gleaming Japonica grains are both
food and religious offering, and where
rice production is politically sacrosanct,
Zojirushis $1,500 rice cooker is the high
altar. Or at least, it should be. The problem for the Osaka-based company,
whose engineers, designers and ricetasters have been developing the NPWU10 for many years, is that Japans
daily rice consumption is falling hard.
Japans rice crisis starts with its older,
smaller stomachs. As the population
ages, appetites are shrinking. Diets
among younger Japanese favour wheat
and the country is eating about 20 per
cent less rice than it did two decades ago.
Other sources of demand are also vanishing: Japan drinks about a third as
much (rice-based) sake as it did in 1970
and consumption of fish the traditional accompaniment to rice is down
30 per cent since 2005. In desperation,
the agriculture, forestry and fisheries
ministry has been forced to find ways of
promoting a grain whose very name in
Japanese gohan means meal.
After hitting a peak of 2,670 in 2006,
Japans average daily calorie intake has
been on the decline, falling to 2,415 last
year, says a spokesman from the rice
department of the ministry.
The difference is that people are not
eating as much because the population
is getting older, he says. I think that
peak of 2,670 was the limit of what Japanese people will eat.
The industry has watched helplessly
as Japanese-grown rice has become
cheaper than its Californian-grown
equivalent for the first time since 1953.
The price may recover in the short

End of the
rice age

gramme that has used hefty subsidies to


encourage an ever greater proportion of
Japans 2.5m hectares of rice paddy to lie
fallow. In 1971, some 541,000 hectares
were out of use. Today, the total stands
at just over 1m hectares.
Even at that level of paddy fields out
of use, JA is finding that it is still too
small to maintain the desired price
because demand is continuously declining. Also, rice farmers are reaching the
limit of how much area they want to set
aside: for emotional reasons, they want
to keep on farming rice and are too old
to learn the completely different skills
of growing barley or wheat, says Mr
Yamashita.
Does JA fundamentally want rice
farmers to farm less? Yes. There are
some terrible distortions here. Its madness, but that is the basis they are working on. They dont care about actual rice
farming, adds Mr Yamashita.
There are other price support efforts
in play. The agriculture ministry and JA
favour a system that incentivises farmers to produce rice as animal feed rather
than for human consumption. Japanese

Taste for change Appetites are


shrinking among Japans ageing
population, while younger age groups
favour wheat products in their diet

20%

Fall in consumption of rice


in Japan in the past
two decades. Consumption
of fish is down 30%

Industry bulwark The powerful JAZenchu union claims 4.6m members


from 3.94m farming households but its
numbers are widely disputed
Reform moment Analysts say a lack of
credible opposition to the government
gives it a chance to take on vested
interests in the agricultural sector

term, but the fundamentals suggest it is


the start of a long-term trend. This
inflection point, say Japans leading rice
experts, demands a wholesale revision
of the way the nation thinks about its
staple.

A farmer works in a paddy field


in Satsumasendai, Kagoshima
prefecture Issei Kato/Reuters

tion precisely how a rice industry this


rickety holds the nation in its thrall. As
we are now starting to see very clearly,
without its protections, Japanese
domestic rice policy does not actually
work at all, says Tokyo Universitys
Masayoshi Honma.
For some, particularly the JA which
has a 50 per cent stranglehold on Japans
Y2tn rice industry, falling prices and
falling demand are nothing short of disaster. JA owes much of its wealth to the
2-3 per cent commissions it levies on
every rice trade, and much of its political power to the 4.6m farming households it counts as members.
The problem, admitted a Kanagawabased JA member who gave her family
name as Hayashi, represents an irresistible challenge to the historic power and
wealth of the Japanese rice industry.
Rice is the heart of Japan, even if we eat

Agricultural arrow
According to some, the politics and protectionism behind Japans relationship
with rice defining features of the way
the ruling Liberal Democratic party has
maintained power and the country has
been governed since the second world
war are already in flux. The public
may see Prime Minister Shinzo Abes
new national security law, passed last
week after the biggest protests Japan has
seen since the 1960s, as his most radical
bid at reform. But the changes he may
have in store for agriculture could be far
more profound, analysts say.
Earlier this year, Mr Abes party
forced the JA-Zenchu union to waive its
right to supervise and audit farming
groups a move intended to dilute the
power of the union. The idea, considered to be among the reforms that make
up the third arrow of Abenomics,
could give greater autonomy to co-operatives. The government has also relaxed
some of the limits on corporate farm
ownership and created ways to merge
small holdings into larger ones. Mr Abe
may seek to expand the policy.
JAs control over the distribution of
Japans crops gives it a stranglehold on
farming. Breaking that is likely to
remain a priority for the prime minister.
Despite its enduring status as the sole
symbol of Japans self-sufficiency in
food, and the rescuer of a nation from
postwar hunger, the rice industry has
fewer defenders than in the past. The
demographics of the rice industry,
whose average age is 70, are working
against it. About 64 per cent of Japans
farmers grow a crop that represents just
21 per cent of the countrys agricultural
output by value, says the Canon Institute for Global Studies.
Japanese consumers may be wealthy
enough to shun imports that have been
20-30 per cent cheaper. But former agriculture ministry sources say even they
have begun to notice the absurdity of a
system which funnels billions of their
taxes into subsidies that cause more
fields to lie empty and inflate prices.
The beef and wheat lobbies, say government insiders, now wield more influence at the top levels of government. It
has finally become acceptable to ques-

less of it. But that feeling alone may not


be enough any more. The farmers are
old, the prices are falling and the battles
are going to get harder to fight. Would
you tell your children to become rice
farmers in this situation?

An industry exposed
For others, not least Mr Abe, the falling
rice price helps uncover the long-term
manipulations by the industry lobby. It
may also offer a chance for Japan to
approach global trade, especially ongoing negotiations on the Trans Pacific
Partnership (TPP), with lighter baggage
than in the past, diplomats say. If Californian rice remains more expensive
than domestic rice, as seems likely if
drought conditions persist in California,
Japanese rice farmers should be less
worried about imports.
The underlying economics of rice is in

Food for thought


Domestic vs imported prices
(000/60kg unpolished rice)

Rice demand (m tonnes)

Sake consumption (m litres)


14

25

1800

Japanese

1600

20

1400

12
15

1200
1000

10
Californian
Chinese
2001

2005

10

600

2014

400

0
2010

800

1960

70

80

90

2000

13

1970

80

90

2000

10 13

Sources: Canon Institute for Global Studies; Ministry of Agriculture, Forestry and Fisheries; National Tax Agency

The weekend farmer


Machines allow agricultural
workers to diversify
If the pinnacle of rice consumption is
Zojirushis latest cooker, the secret of
much of Japans rice production is
another feat of engineering the
Yanmar RG8, a riding automated rice
planter. It is this machine, along with its
predecessors and rival products, that
has arguably done more than anything
else to transform Japanese rice
farming, narrow the urban-rural divide
and help maintain the vast membership
base of the JA-Zenchu union of
agricultural co-operatives.

The governments longstanding


support of prices has gone a long way
towards maintaining Japans very
inefficient rice farmers. But that was
not enough on its own, analysts say.
Operated by a single farmer, Yanmars
machine can plant in the space of 15
minutes an area that would otherwise
take a person a full day of backbreaking labour.
In effect, it created the weekend
farmer. Japanese farmers have become
increasingly released from their fields
since the first automated planters were
introduced in the 1960s. That has
allowed them to take on other, more
lucrative jobs, meaning that the
average income from agriculture for a

typical Japanese farmers total income


is just 15 per cent, says Kazuhito
Yamashita of the Canon Institute for
Global Studies. The non-farming
portion of their pensions is about 60
per cent.
The comparative ease with which an
automatic rice planter can be operated
by elderly farmers or their city-dwelling
offspring allows them to plant their
crops in a two-day blitz. Tens of
thousands of households are able to
continue farming when once they might
simply have stopped. For JA, the
mechanisation has allowed more
Japanese to continue being registered
as active farmers, boosting their
numbers and their political muscle.

perilous shape. Japanese domestic rice cows and pigs would be consuming
prices have trended steadily lower since some of the most expensive feedstock in
2003. As Prof Honma and others point the world, but, in theory, their output
out, if the Japanese rice market had ever would not drag rice prices any lower.
been allowed to respond to supply and
The irony here, says Mr Yamashita, is
demand, domestic rice prices would that Japans government has talked
have fallen sooner and deeper than they enthusiastically about promoting Japaalready have.
nese rice as an export product an
The current difference between Japa- option that would be considerably easnese and Californian rice, as defined by ier if prices were allowed to continue
the average price of a 60kg bag, may falling to settle at a level where it is comonly amount to a few hundred yen. But petitive with Californian rice.
that difference, says Kazuhito YamashThere is also debate over how many
ita, a former agricultural ministry legitimate members JA has it claims
employee and research director at the 4.6m from 3.94m farming households.
Canon Institute for Global Studies, is sig- Mr Yamashita, Prof Honma and others
nificant.
say many of those members are retired,
It shows, he says, that despite JAs and many may be illegally claiming
long-term efforts to maintain high membership to secure tax exemptions
prices, keep inefficient farms afloat and and lucrative deals on the sale of farmensure the size of its membership, the land.
rice price is becoming immune to supThe difference between the real
port as the fundamentals desert it.
number of farming households and JA
A key gauge of the ferocity of Japans members is a real wonder, says Prof
rice protectionism, says Mr Yamashita, Honma. But JAs membership is the
is the high tariffs on imported rice. Two source of its political power. The distordecades ago, Japan grudgingly agreed to tions that have been created are defian import quota of 770,000 tonnes a nitely destructive.
year of rice. This opening of the marJAs power will begin to ebb as prices
ket, however, was mostly verbal: the continue to fall, he says, but the group
rice arrived from the US and China, but has mounted protests against the TPP.
barely any of it was ever released on to Earlier this year, JA mobilised some 10m
the market. With the total bill for this to sign a petition arguing that Japan
exercise now approaching $3bn since should not sacrifice the interests of its
1995, a lot of the rice degraded to the rice farmers during the TPP talks.
point where it was only usable as animal
But analysts say that it was musclefeed. The rest was sent abroad as aid.
flexing by a stumbling giant. In the past,
The true purpose of all this, says Mr says Koichi Nakano, a professor of poliYamashita, has been the growth of JAs tics at Sophia University in Tokyo, the
influence. Prices have been protected political influence of the JA was part of a
to ensure that millions of small rice three-way pact between itself, the ruling
farmers all commission-generating LDP and the Keidanren business lobby.
members of JA, with votes that can As farmers have retired and the power
swing elections are not forced to stop of the rural vote has declined, the pact
farming.
has now begun to fall apart.
Since the 1970s, Japan has
JA and the agricultural lobby have
effectively paid farmers
actually grown weaker as a direct
not to grow rice, the soresult of Mr Abes political strength
called set-aside pro- Proportion of farmers and the demise of the [opposition]
Democratic Party of Japan, says
who grow rice, but the
Y2tn industry represents Prof Nakano. To have political
just 21% of Japans
power, you have to have a credible
agricultural output threat that you will switch your vote
to another party, but they cannot use
that with Abe.
The effect, he adds, is that Mr Abe
may be in a stronger position than any
of his predecessors either to push
through further agricultural reforms or,
more immediately, sign up to a TPP deal
without a damaging backlash in the
rural ballot-boxes.

64%

Tuesday 22 September 2015

FINANCIAL TIMES

Letters

Email: letters.editor@ft.com or
Fax: +44 (0) 20 7873 5938
Include daytime telephone number and full address
Corrections: corrections@ft.com

Behind the disenchantment with Europes centre-left

TUESDAY 22 SEPTEMBER 2015

Tsipras has a long-shot


chance to achieve reform
The Greek election has given its prime minister a fresh mandate
You can say what you like about Alexis
Tsipras, but the man knows how to win
a vote. With his victory in Sundays
parliamentary poll, the head of
Greeces Syriza party has within nine
months won two general elections and
a national referendum.
His achievement is all the more
remarkable given an almost perfect
180 degree turn in policy since Syriza
first came to power in Januarys election. Mr Tsipras was carried into office
on a frothy stream of rhetoric about
opposing neoliberalism. He inveighed
against the iniquitous demands of the
troika of creditors running Greeces
bailout the European Commission,
the European Central Bank and the
International Monetary Fund.
Despite winning a subsequent referendum backing his defiant stand, Mr
Tsipras rapidly turned tail and
accepted a set of bailout conditions
even tougher than those he had invited
the electorate to reject. With his victory in Sundays election he can now at
least claim a mandate for pressing on
and trying to make the bailout work.
The odds are against him. Even
though Mr Tsipras has managed to
divest Syriza of some of its more
obstructionist elements, there remains
enough discontent within the party to
resist implementing the kind of structural changes needed to liberate the
Greek economy. Without such reforms
there will be no more debt restructuring from the eurozone creditors.
Still, Mr Tsiprass election is probably
one of the least bad outcomes possible.
The traditional parties have been sufficiently tainted by their association
with failed rescues in the past that Syriza has at least a chance of achieving
some realignment of Greek politics.
In particular, Mr Tsipras has an
opportunity to make good on some of
the more constructive promises that
Syriza made before it was first elected.

Greek politics does not fit into a rightleft spectrum typical of western
Europe. It is much more of a clientelist
system in which rent-seeking groups
are bought off with tax breaks, favourable regulation and guaranteed jobs.
One such group is Greeces wealthy
oligarch class, which includes shipowners and their generous tax privileges.
Early on, Syriza identified those oligarchs as targets for reform. In practice, it has done almost nothing to
move against them. The symbolism of
Mr Tsiprass decision to spend the summer staying at the villa of a wealthy
shipowner, commuting to work by helicopter, was all too clear.
If Mr Tsipras wants to carve out a legacy as a radical moderniser, rather
than a charismatic but ultimately ineffectual populist, he needs to reorient
Syrizas reforming enthusiasm towards
attacking rent-seeking throughout the
Greek economy. The latest iteration of
the Greek bailout is his blueprint: it
commits Athens to an array of policies
including ending tax breaks for the
shipping industry, tightening the definition of farmers to prevent the
abuse of agricultural subsidies and
compelling doctors and pharmacists to
use cheaper generic pharmaceuticals.
It would be a remarkable, and
frankly improbable, achievement but
the prize for Mr Tsipras if he succeeds
will be immense. Mr Tsiprass role in
the Greek crisis so far has been largely
destructive. He has spread uncertainty
and damaged the economy by capricious oppositionism and by calling an
ultimately pointless referendum.
With this election, he has a chance to
show he will be something other than
the latest of a long line of failed Greek
politicians. The coming few months
could be Mr Tsiprass final opportunity
to make a lasting contribution to
addressing his countrys deep-seated
problems. He should seize it.

Volkswagen makes a
monumental blunder
No one accidentally installs software designed to fool the regulator
The phrase cutting corners does not
do justice to the gravity of the charge.
What German carmaker Volkswagen
stands accused of is closer to outright
deceit. VW has admitted to fitting half
a million diesel cars with code that
tricked regulators into under-recording noxious emissions. Usually when a
company runs foul of environmental
law, the crime is an accident, stemming
from some combination of irresponsibility or inattention. But no one installs
software as clever as this by accident.
The toxic gas in question is nitrous
oxide, or Nox, a pollutant that causes
smog, respiratory illness and increased
death from heart and lung diseases.
Poisons like Nox and small particulate
matter account for tens of thousands of
early deaths a year. They are the classic
negative externality, imposing costs
outside of the production process.
Without firm and well-enforced regulatory standards, competition would
lead to ever more pollution.
As well as posing harsh questions of
its governance, VWs alleged misconduct draws uncomfortable attention to
the technological future of diesel.
Europes automobile industry has long
favoured diesel, in large part because of
environmental advantages in terms of
carbon emissions and fuel efficiency.
These have led countries such as Britain to skew their tax system in its
favour, so much so that over a third of
its car fleet now runs off the fuel, compared with just 7.4 per cent in 1994.
But in terms of emissions of Nox and
fine particulate matter, diesel engines
are dirtier, one reason that the world
beyond Europe has remained so averse
to their use. VWs misconduct appears
motivated by a strategic need to promote diesel as an all-round winner. Its
defeat software activated controls
over Nox emissions only when the software detected that the engine was
being tested. Otherwise, it could run

full throttle. Drivers were duped into


thinking that powerful performance
could coexist with a clear environmental conscience.
Europe accounts for three-quarters
of all diesel car sales, which gives its
carmakers a need to extend the market
and policymakers reason to cheerlead their efforts. It is noteworthy how
it took a US regulator to carry out the
detective work, despite growing evidence of a discrepancy between test
results and real-world emissions in diesel cars. The Environmental Protection
Agency has introduced high standards
for diesel cars to prevent the occurrence in America of what one campaigner has called a public health
catastrophe for Europe. At worst, VW
can be accused of pursuing a deliberate
strategy to thwart the EPA, in blithe
disregard for the effect on US health.
The gravity of such a charge is one
reason for such a violent market reaction to the EPAs revelations. Another is
how VW misled not just its customers
(an offence that earned Hyundai a
$100m fine last year) but the regulator
directly. VW now faces steep fines and
possible criminal charges, and a difficult time restoring its brand. Worst
may be the damage caused to the reputation of clean diesel.
Given the strategic implications, the
question is how VWs senior management could have allowed such a blunder. Somewhere within this organisation is a chain of command that led to
the production of software that fooled
regulators. Martin Winterkorn, VWs
chief executive, has apologised, but
must explain how someone claiming
an engineers eye for detail could miss
such a glaring design feature.
An external investigation to establish all the facts of the case is under
way. Investors, who saw VWs shares
fall 20 per cent yesterday, should also
be asking tough questions.

Sir, Wolfgang Mnchau suggests that


the failure of European centre-left
parties to win and retain power is
caused by their espousal of orthodox
macroeconomic policies also embraced
by the centre-right (Perplexing failure
of Europes centre-left, September 21).
This view is not supported by the
evidence.
Under Ed Milibands leadership the
British Labour party tacked left, but
post-election polling revealed that
many voters had turned to the
Conservatives precisely because they
no longer trusted Labour on the
economy. According to a poll released
last week, 37 per cent of Labour voters
say they are less likely to vote for the
party following leftwinger Jeremy
Corbyns election as leader. In France,
President Franois Hollandes pursuit
of a traditional leftwing agenda in his
first two years in office made him the

most unpopular French president since


polling began (he has now changed
course).
If social democratic parties are
indeed too centrist, then why arent
leftwing anti-austerity parties doing
even better across Europe? They often
poll well, but come election day many
voters still opt for the less radical
centre-left alternative or for the
right. In Greece Syriza was re-elected,
but only after ditching its leftwing
policies and accepting the terms of the
latest bailout, thus reassuring Greek
voters that the country would stay in
the euro.
I believe the publics disenchantment
with the centre-left, which Mr
Mnchau rightly identifies, has other
causes.
First, many centre-left politicians
still do not fully accept or understand
the free market as the basis of our

Registration was no
help in determining
US voters intentions
Sir, The letter from Joseph Colomer on
the Corbyn primary (September 18)
reminded me of a personal experience
during my time as hon sec of the
British American Parliamentary Group
(the largest in parliament).
After attending our annual
conference between the US Congress
and the UK parliament in Washington
DC, I spent a week on holiday in San
Francisco where there was an election
campaign in progress to elect a
member of the US House of
Representatives. I was invited to take
part in the Democrat campaign. For
this purpose, I was given a list of
registered Democrats to visit to
confirm their support for the
Democratic candidate, together with
questions and answers to help me deal
with queries. Imagine my
consternation on finding that at least
half the people on my list had little or
no interest in politics, let alone in
voting for a particular candidate. It
seems that being a registered Democrat
or Republican is not a helpful guide to
voting intention.
In the UK, by contrast, members of
political parties are usually ready to
vote for the candidate selected by their
party. There seems no point in
comparing and contrasting two very
different political systems.
Eric Deakins
London NW1, UK

Public sector has too much


capacity for disruption
Sir, Your editorial UK government
crosses the road to pick a fight
(September 15) misses the crucial
issue.
It is not the number of days lost
on strikes that the government seeks
to tackle. There is never a strike in
Asda, Shell, Rolls-Royce. In general
the private sector is rarely on strike.
The capacity to disrupt the lives of
people who work in the real economy
is disproportionately concentrated in
the hands of the few in the public
sector who impose a strike (with few
votes) on their members and the
country at large.
The cost to the economy of public
sector strikes is also large, and not

Where the
streets have no
( fixed) name

New Delhi
Notebook
by Victor Mallet

I keep voting against austerity but


austerity keeps voting itself back in
again
accounted for anywhere. But it is
the main reason for the lack of
productivity in the UK.
The UK government should be
praised and encouraged to limit
the ability of the public sector to
hold the real economy hostage to their
ever-expanding benefits and wages,
and their ever reducing work hours.
The aggressive unions at TFL are a
prime example. They strike on
everything, even when they defend
the indefensible. Absenteeism is rife
in the public sector.
A system of checks and balances that
severely restricts the power of the
public sector is necessary to protect the
millions of employees in the real
economy who are constantly disrupted
by the public sector.
Charles Elder
London EC2, UK

UN must ask why Russia


is fuelling the crisis in Syria
Sir, According to the Europa website,
the EU, US and UK have contributed
around $4bn, $3bn and $1bn
respectively to assist Syrian refugees.
The EU is being compelled to
accommodate the largest number.
Secretary of state John Kerry has just
announced that the US will admit more
refugees over the next two years than
previously announced. Russia has
contributed nothing.
Why is Russia intent on fuelling the

Abul Muzaffar Mohiuddin


Muhammad Aurangzeb, better known
simply as Aurangzeb Alamgir
(conqueror of the world), was not a
particularly nice guy. He ruled as sixth
Mughal emperor from 1658 and is
denigrated in modern India as a kind
of proto-Taliban leader for having
abandoned the tolerant ways of his
forebears.
The extent of his bigotry is
contested, but he demolished Hindu
temples, championed Islamic law,
banned music and alcohol and killed
rivals, including his brother. Yet there
is no denying the historical
importance of an iron-fisted
expansionist who ruled most of the
Indian subcontinent for nearly half a
century.
So it is easy to imagine the
astonishment among residents of
Delhi, once the Mughal capital, when
they woke up one morning to find that
the Hindu nationalist government had
abolished Aurangzeb Road near the
centre of New Delhi and ordered the
signs to be repainted with the name of
a less offensive Muslim, the recently
deceased missile engineer and Indian
president APJ Abdul Kalam.
I live two streets away and it was
evident that the change was done in
haste: the painters had left the
adjoining Aurangzeb Lane untouched,
while Kalams name appeared only in
English instead of the usual four
versions of English, Hindi, Punjabi
and Urdu. Lest there be any doubt
that the renaming was a political act,
Mahesh Sharma, the clodhopping

socio-economic model. This makes


them less credible and less competent
when it comes to fixing its many
failings, including those exposed by the
financial crisis.
Second, social democrats often still
regard the middle class with a degree of
suspicion, even though its phenomenal
growth in the second half of the last
century can be attributed largely to the
success of centre-left policies. As a
result, they are failing to cater for its
needs and aspirations.
Third, for too long the centre-left has
ignored some of societys major
challenges, including climate change,
the impact of non-western
immigration on European societies,
and the rising cost of the welfare state,
effectively outsourcing their solution to
other parties. In many cases this is now
being remedied, but for large groups of
voters it has come too late.

Finally, mainstream centre-left


parties have become the preserve of
career politicians (mea culpa, I used to
be one of them), ruling elites and
societal vested interests. To regain the
trust of voters they must embrace a
more open and democratic political
culture.
Mr Mnchau dismisses the success
of Italys Matteo Renzi as being due to
the fragmentation of the rightwing
opposition, but in fact Mr Renzi has
been successful precisely where other
centre-left parties have failed. Social
democrats must change to win back
power but exchanging one set of
orthodoxies for another is not the way
to do it.
Michiel van Hulten
La Hulpe, Belgium
Visiting Senior Fellow, London School of
Economics European Institute; Former
Chair, Dutch Labour party

crisis with military support to the


Assad regime and doing nothing to
ameliorate the human misery that has
resulted from its insistence on
protecting the Assads, who represent
the minority Alawite population of
Syria? Russia is a country with a
population density of less than 10 per
square km as compared to the EU with
120 per square km. How is Russia
qualified to remain a member of the
UN Security Council when it chooses to
ignore the human misery of the people
of Syria where it still seeks to be a
power player?
The role of Russia in the Syrian
refugee crisis is an important subject
for the United Nations General Body to
raise and debate.
Ralph Rau
Goa, India

Portuguese parties did


not promise so much

A physicist can enjoy


fashion and F1
Sir, As a mother of two teenage
daughters, one of whom numbered in
the 20 per cent cohort of girls awarded
an A level in physics this year, I agree
wholeheartedly with Anjana Ahuja in
taking issue with societal gender
stereotyping (How to make a girl
master of her universe, Comment,
September 8). However, my daughter,
whose other A levels were maths,
further maths and economics,
delighted in her Barbies and now has a
passion for fashion and Formula 1 in
equal measure!
As a feminist, I champion choice,
celebrate diversity of role models and
support equal opportunities for our
daughters and for our sons.
Ellen Miller Gavin
London SW1, UK

Edinburgh is a far cry


from Cape Town
Sir, I am glad Cape Town is a far safer
place today than it was 10 years ago as
ADH Leishman informs us (Letters,
September 15). But Edinburgh hardly
bears his comparison in the crime
stakes. The most recent figures I can
find indicate that Cape Town has more
than 50 homicides annually per
100,000 population. The equivalent
figure for Edinburgh is less than two.
Thankfully the crime rate is falling in
both cities.
Cllr Cameron Rose
City Chambers, Edinburgh, UK

culture minister, explained it on


television. I dont think Aurangzeb
was an ideal person, he said.
Aurangzeb Road has been named
after such a great man who, despite
being a Muslim, was a nationalist and
a humanist, APJ Abdul Kalam.
Despite being a Muslim? The gaffe
set Twitter and Facebook alight and
confirmed the worst suspicions of the
Muslim minority and critics of Prime
Minister Narendra Modi about the
ruling Bharatiya Janata partys
Hindutva (Hindu-ness) agenda.
Renaming streets is a thankless
business even when politics is not
involved. In my English home village
there used to be three thoroughfares:
The Street, Back Street and the Main
Road. The last two are now Swan Lane
and Poplar Road, presumably because
residents chafed at their unromantic
addresses. Thankfully, The Street
remains The Street.
In New Delhi, we still receive water
bills addressed to Rattendon Road
(Rattendon seems to have been the
son of a viceroy), although the street
has long been renamed after Amrita
Sher-Gil, the famous PunjabiHungarian painter.
But when governments add party
politics or religion to the process of
street-naming especially if they fail
to wait for enough time to pass for
posterity to distinguish between a
great leader and a jumped-up dictator
or minor politician they should
expect resistance. The inner and outer
circles of New Delhis colonial centre,
Connaught Place, were renamed Rajiv

Sir, Tony Barber makes some pertinent


comments on why Portugal fared
better than other bailed-out countries,
and Greece in particular (Portuguese
puzzle: the bailed-out country that
bucks the trend, FT.com, September
17). Our research identified different
degrees of clientelism as the main
reason Portugal displayed a high
degree of political stability while
Greece witnessed a dramatic period of
turmoil, the collapse of mainstream
parties and the emergence of protest
parties such as Syriza and Golden
Dawn.
Our findings showed that Greece
scored higher than Portugal in a
number of indicators of clientelism
(the distribution of spoils to
supporters, the mass organisation of
parties, and the connections between
parties and public sector unions). This
made it difficult for Greek parties to
implement austerity because their own
survival depended on their ability to
reward supporters with political spoils
(for example public sector jobs and tax
cuts), leading to their demise. In
contrast, clientelistic electoral
strategies were more difficult to carry
out in Portugal because of the long
period of stagnation that followed its
adoption of the euro.
In other words, mass clientelism led
Greek parties to systematically overpromise, and voters to over-expect,
which led to brutal sanctions and anger
when these promises had to be
betrayed. In contrast, Portuguese
parties did not promise as much, and
voters did not expect much from them
either.
Alexandre Afonso
Assistant Professor in Public Policy,
University of Leiden, The Netherlands
Sotirios Zartaloudis
Lecturer in Politics, Dept of Political
Science and International Studies,
University of Birmingham, UK
Yannis Papadopoulos
Professor, Institute of Political, Historical
and International Studies,
University of Lausanne, Switzerland
COMMENT ON FT.COM
Realitys revenge
The steep fall in Volkswagens shares reflects
the seriousness of what it is accused of doing
www.ft.com/johngapper

Chowk and Indira Chowk after


Congress party prime ministers from
the Gandhi family but residents still
call it all CP.
New Delhi has its share of roads
named after an eclectic mix of heroes
and villains, including Mother Teresa
and Everest conquerors Tenzing
Norgay and Edmund Hillary. There
are very few Americans (Mr Sharma
will not mind that, since hes antiwestern as well as suspicious of
Muslims) but plenty of tyrants and
politicians dating back to Indias time
in the nonaligned movement: Josip
Broz Tito, Archbishop Makarios and
Gamal Abdel Nasser.
It is not just streets, of course.
Congress devotees are enraged by the
Modi governments decision to
withdraw images of Indira and Rajiv
Gandhi from five-rupee postage
stamps. This right should not be
available to just one family, said Ravi
Shankar Prasad, minister for
communications and IT.
Still, there is something odd about
the sudden erasure of Aurangzeb
Road from central New Delhi (by one
count, over 170 others remain across
India). The Modi government itself
declared in April that street names
should remain intact because changes
confuse post offices and the public,
and deprive the people of a sense of
history. Aurangzeb liked to have his
enemies blinded, mutilated and torn
to pieces. But no one could accuse him
of failing to make Indian history.
victor.mallet@ft.com

Tuesday 22 September 2015

FINANCIAL TIMES

Comment
Corbyn is simply one more variable in the Brexit debate
POLITICS

Janan
Ganesh

ntil Britons finally vote on


whether to stay in the EU,
their political class will
scrutinise every passing
event for its impact on the
result. London-based diplomats, risk
planners in global companies with UK
operations, the markets: by the end,
they too will succumb to the fever of
over-analysis. If you are tempted to grab
a jewellers eyepiece and show the same
microscopic interest in procedural
ephemera, remember: you will never
get that time back.
As an act of mercy here is a list, far
from comprehensive, of things that will
not decide the outcome of the referendum. The election of Jeremy Corbyn as
leader of the Labour party; the personalities who front the Leave and Remain

campaigns; the financial resources of


each side; the wording of the question;
the purdah that forbids government
officials from campaigning to stay in;
the ground campaigns; the performance
of the economy; the neutrality or otherwise of the Conservative party machine;
and which side Londons coquettish
mayor Boris Johnson ultimately decides
to take.
And these are just the variables that
exercised Westminster over the summer, one or perhaps two years before
the referendum. Most will not make a
difference. If some make a difference, it
will be marginal. If one variable slightly
favours Leave, it will be muffled by
another that narrowly favours Remain.
Some of the variables will advantage
and disadvantage each side simultaneously, amounting to no net overall
impact for all the attention they garner.
Mr Corbyns leftwing euroscepticism
will turn some wavering comrades
against the EU but also tell moderate
voters that Leaving is for eccentrics. If
the economy is zooming along, people
will contemplate national independence with some phlegm, while wonder-

ing how EU membership can possibly be


holding Britain back. If the economy is
subdued, they will feel dissatisfied with
continuity and nervous about change at
the same time.
The point is that we can weigh all
these particulars against each other,
chasing our own tails and analysing our
way into a stupor, and still gain no
insight into the final result that our gut

It is hard to prove that a


particular course of action
would benefit a plurality of
voters more than stasis
instinct could not give us. We are back to
the spring, when people paid to exercise
political judgment thought Labours Ed
Miliband would become prime minister
on the back of television debates, social
media, passion, local activists and
other transient details that are now
mortifying to recall.
Neither are the polls much use anytime soon. Asking people how they will

vote in 2016 or 2017 is not much less


futile than pressing them for what they
plan to wear this weekend: they might
have a sketchy idea but their minds are
not tending to the subject.
Burn away all these contingent variables and moving parts, and you are left
with eternal human instincts. And one
above all loss aversion. Most referendums come down to the same two-part
question: is the status quo basically tolerable, and can we be confident that
change will leave us meaningfully better-off? The answers are most often
yes and no, so the status quo wins.
This is not because advocates of change
are wrong but because the evidential
burden on them is too great. It is hard to
prove that a particular course of action
would benefit a plurality of voters more
than stasis. And in rich, peaceful countries, most people can live with stasis.
Britain voted to stay in the EEC in
1975 for the same reason it voted to keep
its electoral model in 2011. Scots preserved the UK last year out of the same
sense of prudence that motivated Britons to shut out Mr Miliband this year.
Leavers believe they had a good sum-

mer because various particulars moved


in their favour the polls, Mr Corbyns
victory, the government line on purdah,
the ballot question, the prominence of
migration in the news. They should
remember what has not changed: the
scintilla of doubt in the breast of even
the most eurosceptic swing voter.
As the referendum approaches, major
employers will still warn against exit.
Governments in Asia and North America will still tell us not to expect economic or diplomatic favours if we leave.
The EU itself will still point out that
Switzerland and Norway, those templates for detachment, are not spared
much regulation from Brussels. The
trump card of doubt or negativity,
as Leavers know it will still be played.
Leavers spend too much time worrying
about technicalities and too little honing an argument that, in its present
form, cannot withstand the human
impulse to keep what we have. Britons
were not likely to vote to leave the EU
before the summer began. They are no
more likely now.
janan.ganesh@ft.com

We must
compromise
with evil in Syria
FOREIGN AFFAIRS

Gideon
Rachman

while back, I had a discussion with a prominent


member of the Syrian
opposition. Perhaps, I suggested tentatively, the rise
of Islamist extremism in Syria meant
that the Assad regime now represented
the lesser evil. The reply I received was
absolutely firm: There is nothing worse
than Assad. He is absolute evil.
It is easy to understand that point of
view. Most of the more than 220,000
people estimated to have died in the
Syrian war have been killed by the
Assad regime. The millions of refugees
outside the country have, in large part,
fled the regime. The Syrian government
has shown no compunction in killing
civilians and has used barrel bombs and
chemical weapons, disappearances and
torture. The Assad regime has also been
noticeably more eager to attack the Syrian moderates than the jihadis.
For these reasons, I have always
shrunk back from the idea that the
Assad regime could be any part of the
solution in Syria. But I have now
changed my mind.
There are many evil forces on the
loose in Syria including the Assad government, the jihadis of the Islamic State

of Iraq and the Levant (Isis) and groups


linked to al-Qaeda. But the biggest evil
of the lot is the civil war that continues
to leave death and destruction in its
wake. The overriding goal must be to
end the war and to persuade outside
forces to back a peace settlement, rather
than fuelling the conflict. A diplomatic
solution clearly has to involve the
regime and, almost certainly, President
Bashar al-Assad.
For many years, the wests preferred
outcome in Syria has been a victory by
the moderate Syrian opposition. But the
idea that the moderates can win a threecornered military fight with the Assad
regime and the jihadis and then hold on
to power in Syria is a fantasy.
There are liberal and democratic
forces in Syria. But they are not going to
win on the battlefield. Their only chance
of getting somewhere is if a political
process can be started. That means
establishing a ceasefire and working
towards UN-sponsored elections.
Some in the west will object that this
means getting around the negotiating
table with people who have committed
horrible acts of evil. True enough. But
we have done it before in the interests of
peace. The conflict in Cambodia was
ended by a UN-sponsored peace process
in 1991 in which the Khmer Rouge
responsible for the Cambodian genocide
took part.
As with Syria today, the various sides
in the Cambodian conflict had powerful
external backers including China,
Russia, the US, Vietnam and Thailand.
Ultimately, however, these foreign pow-

Kingsley
Moghalu

or too long, Nigerian leaders


have acted as though the only
decisions they had to make
concerned who should get
what. When Muhammadu
Buhari, the newly elected president,
announces his ministerial appointments at the end of the month, he
should make clear that his government
will follow a different course. He and his
colleagues have the power to improve
the fortunes of all Nigerias people.
Africas most populous country faces
huge challenges. Its economy, which is
also the continents largest, has been
battered by external shocks, which have
been amplified by its excessive reliance
on crude oil revenues. As oil prices have
fallen, several states became unable to
pay workers salaries and have had to be
bailed out by the federal government.
Unemployment is high, and growth is

faltering. After security, engineering a


turnround is the greatest challenge for
the Buhari administration.
In part, the countrys troubles reflect
its failure to save up for a rainy day
when oil prices were high. Foreign
reserves have been eroded and the
countrys currency, the naira, has been
devalued twice in the past year.
It also reflects the countrys excessive
reliance on volatile natural resources
markets. Yet efforts to diversify
Nigerias economy are hamstrung by the
parlous state of its infrastructure. Consider the electricity sector, which generates only one-tenth the amount of
power produced in South Africa, in a
country that has more than three times
as many people. Remedying this shortfall provides an opportunity for foreign
and domestic investments.
To make this happen quickly and
ensure sustainability, much of the
emphasis should be on off-grid renewable energy; Morocco provides the
model.
The Nigerian central bank has
recently taken measures to control the
depletion of foreign reserves, imposing

OPINION

Nick
Butler

here is, it seems, no limit to


the lengths to which George
Osborne, the UK chancellor, is prepared to go to
please China. The most
recent example is the latest chapter in
the saga of the proposed Hinkley Point
nuclear power plant in south-west England. Mr Osborne, on a visit to Beijing,
has offered the Chinese 2bn of government guarantees in return for their
investment in the much delayed
project.
The terms of the agreement have not
been published but under normal definitions that means that the Chinese
investment capital will be fully protected. The deal is not yet completed
and there is a sense of desperation in
Whitehall: the government wants to
have it signed before President Xi Jinpings visit to the UK next month.
But before we rush to sign, there
should be public disclosure of the full
offer to the Chinese on Hinkley Point,
and what other deals have been made at
the same time. We are told, for example,
that the Chinese will also build, own and
operate another new nuclear station at
Bradwell in Essex, south-east England.
Will they, for example, be required to
meet all existing UK nuclear safety and
labour standards or will the new stations be largely built in China using local
labour and assembled in the UK?
Another pressing issue that should be
clarified is whether the chancellor has
seen and read internal reports from EDF
and Areva, the two state-owned French
nuclear firms, on what has gone wrong
with the construction of the two EPR

There should be public


disclosure of the full offer to
the Chinese on Hinkley
Point power station
Daniel Pudles

ers, for all their rivalries, were prepared


to work together to end the war.
Ending the war in Syria will have to
involve a similar willingness to make
immoral compromises in the pursuit
of a moral end. These compromises will
have to be made by both external and
internal forces. There can be no total
victory for the Assad regime or the
opposition, or for their external supporters in Iran, Russia, Saudi Arabia and
the US.
The strongest objection to a peace
process is not that it is immoral, but
that it is unrealistic. Isiss total rejection
of the international system and dreams
of a worldwide caliphate makes the
group an unlikely negotiating partner.
For that reason, foreign powers
including the Russians, the US and the

The strongest objection to


a peace process is not
that it is immoral, but
that it is unrealistic

UK currently seem more inclined to


step up their military intervention in
Syria than to scale it back.
Yet a temporary intensification of the
war against Isis is not incompatible with
an international effort to reach a peace
settlement. If all parties, other than the
jihadis, sign up to a peace process it
would then be easier either to split, isolate or defeat Isis.
Later this week, Vladimir Putin, the
Russian president, is likely to propose a
common international front against Isis
in a major speech at the UN. Given the
parlous state of US-Russia relations, Mr
Putins proposal is likely to be treated
with great suspicion in the west. Yet, in
some ways, the Russians and the US are
already in a tacit alliance. The US Air
Force has been bombing Isis for more
than a year. And the Russians are not
feigning their hostility to Islamist terror,
which is clearly also a long-term threat
to Russia itself.
The sticking point remains the role of
Mr Assad. The Americans and Saudis
have long insisted that he has to go. The
Russians and Iranians insist that he has

to stay. The answer must surely be to


concentrate on the process, not the
man. The main outside forces should
work for a ceasefire between the Syrian
regime and the moderate rebels followed by an interim government and
UN-sponsored elections, which would
decide the fate of the current regime.
Establishing such a process is obviously fiendishly difficult. But there are
some promising signs. The Americans
have stopped insisting on the immediate removal of Mr Assad. And despite
their military build-up in Syria, the Russians must surely understand the longterm risks of boots on the ground in
Syria. They too need a diplomatic
option.
It would clearly be best if Mr Assad
stepped aside early on, as part of a Syrian peace process. But diplomacy cannot be held hostage by the question of
Mr Assads future. Too many people
have already died in Syria to make the
search for peace dependent on the fate
of one man, however evil.
gideon.rachman@ft.com

Replace Nigerias patrimony of oil with the politics of hope


OPINION

China should not


be the answer to
Britains nuclear
problems

strict controls on foreign exchange


transactions in order to prevent the currency from falling further. That has led
many in the financial markets to question central banks independence;
JPMorgan, the US investment bank,
removed the country from its Emerging
Markets Government Bond Index earlier this month, citing a lack of liquidity
in the foreign exchange market,

Leaders have concentrated


on rewarding their
supporters even as the
bounty has diminished
Yet the central bank must demonstrate that it is independent, not only
from the government, but also from
vested private sector interests including
investors. Although some observers
believe that JPMorgans action will force
foreign investors to sell billions of dollars worth of bond holdings, the extent
of the damage may be overstated.
(China and India have both sustained

years of impressive growth despite


never having been listed in JPMorgans
index.)
Even so, there is no doubt that Mr
Buhari believes the state should play a
big role in managing the economy. He
has so far proved reluctant, for example,
to abolish wasteful petroleum subsidies,
apparently believing that to do so would
hurt the poor. He is wrong about that.
The subsidies overwhelmingly benefit
the rich and the middle class. Mr Buhari
would achieve far more by doing away
with them, and targeting the resulting
savings at conditional cash transfers to
the indigent.
The real test of strategic economic
nationalism will be how long it takes
Nigeria to achieve a diversified industrial economy that can support the
value of its currency and reduce the
structural impact of dependence on
commodities. This is the crucial task
that faces Mr Buharis cabinet. For the
factors that weigh on Nigerias economic
prospects are largely political constraints, which create incentives for officials to pursue misguided policies.
Mr Buhari needs to devolve more

powers, responsibility and accountability to the constituent parts of Nigerias


federation. The federal system, which
concentrates too much power in the
capital Abuja, has proved dysfunctional
and remote from the people it is supposed to serve. Constitutional amendments are needed to create incentives
for economic activity.
Oil patrimony is the result of an unimaginative politics, which assumes that
government cannot do anything to
enlarge a countrys economy, and that
its only role is to divide the spoils. Politicians have therefore concentrated on
rewarding their supporters and as the
bounty has diminished, that debate has
become more and more bitter.
This politics of oil must be supplanted
by something more enlightened. The
buck stops with Mr Buhari, but he cannot bear the responsibility alone. He
and his government must set Nigeria
and its people on a new and more prosperous course.
The writer is a professor at The Fletcher
School at Tufts University and was a deputy
governor of the Central Bank of Nigeria

European pressurised reactors (the


reactor design that will be used at Hinkley) in France and Finland. Both
projects are billions over budget and
years behind schedule. Once he has read
the reports, he should make sure they
are published. If they are not to be made
public, we should be told why not.
There is still work to be done on
researching whether Hinkley Point, at
its current price of 24bn, is the only or
the cheapest way of meeting the UKs
energy needs and emissions targets in
the period after 2023, when it is scheduled to open. Energy prices have fallen
sharply since that price was agreed.
Civil servants have given Mr Osborne
their advice on these points. Will he
agree to publish it, in full? This is a key
issue which should be investigated by
the National Audit Office and the public
accounts committee, whether or not the
immediate deal goes ahead. We saw
recently in the case of the failed charity
Kids Company in which Downing
Street overruled a recommendation by
the civil service and ministers to redirect funds to other childrens charities
that civil service advice is not given
lightly. When ministers override this
advice, they should be required to
explain exactly why they are doing so.
The mystery in all this, given Mr
Osbornes apparent confidence in
nuclear technology, is why he is asking
for Chinese money at all. EDF, it seems,
will not itself invest more than half the
necessary money in its own project at
Hinkley Point, despite the high price
and extensive guarantees it has been
offered. All the parties seem to want
someone else to take the risk.
If Mr Osborne is really happy with the
plans for the power plant, why does he
not invest directly using the UKs governments ability to borrow long-term
money at very low rates? This would
reduce the costs and bring down the
bills facing British consumers over the
next 35 years. It is, however, also possible that his confidence about the Hinkley project is just a performance.
Whatever the truth behind the governments public nuclear policy, its
grovelling behaviour towards China on
this and other issues is extraordinary.
China is the worlds second-largest
economy and a great power in every
sense. Its leaders are among the worlds
most effective negotiators, and should
be respected, not patronised. To engage
them in a failing project is not the way to
build a strategic long-term relationship.
The writer is a visiting professor at Kings
College London. He writes an FT.com blog

10

Tuesday 22 September 2015

FINANCIAL TIMES

BUSINESS LIFE

The network
risk shared by
vicars and top
accountants

Andrew Hill
Onmanagement

As a former oil executive, Justin Welby,


the Archbishop of Canterbury, is not as
unlikely a management guru as he
might appear. The Church of England
he heads is certainly a living
experiment in network risk and how to
deal with it.
Mr Welby is trying to reconcile
schismatic forces within the worldwide
Anglican communion, which are
pulling in different directions over
social questions, such as whether to
endorse, encourage or oppose gay
marriage. To keep the communion
together, it emerged last week, he is
considering whether to reorganise it as
a looser grouping, allowing
conservative and liberal factions to
continue under the Anglican banner.
There are lessons here for another
group of networks that claim to be
united by a common mission and high
standards: the worlds big four
professional services groups.
If you allow your network a larger
degree of latitude, what happens to
control, identity and loyalty? But if you
try to stamp on dissent, how do you
keep the flexibility and autonomy that
members of such networks prize?
As big accountants rushed to merge
during the 1990s, such questions
ranked alongside: How many auditors
can dance on the head of a pin? But in
2002, when Arthur Andersen
disintegrated in the wake of the
scandal at Enron, the US practices
highest-profile client, it suddenly
became clear how vulnerable such a
network could be.
Recently, two rival groups have
started vying to use the Andersen

brand. When I wrote about how odd it


was that anyone should trade on such
notoriety, one former partner retorted
that, in fact, the Andersen name was
very highly thought of and coveted in
a number of countries. He is right:
Andersen staff, and some whole local
practices, found sanctuary with rivals.
But I think the ease with which the
Andersen diaspora resettled
underlined how delicate the original
firm was and points to the continued
fragility of the surviving big networks:
EY, PwC, Deloitte and KPMG.
Since Andersens demise, they have
all sought to shore up their federations
of local partnerships, mainly by trying
to draw their constituents closer rather
than untying them, Welby-style. EY,
which at one point had some 140
country managers reporting to one
chief operating officer, now has a global
executive committee setting priorities
for four regional groupings and laying
down approaches to strategy, quality
and, critically, risk management.
But progress on centralisation has
been slow. For instance, in 2005,
Deloittes then global chief executive
told the Financial Times he foresaw a
single global partnership within 10
years. A few regional practices have
integrated, but that lofty objective
looks distant, if it is even achievable.
Laura Empson, who studies
professional services firms at Cass
Business School, likens the Big Four to
the Anglicans, whereas Londons
magic circle law firms are more like
the Catholic Church with its commandand-control model. The difference is
about the locus of power, she says.

The global
structures
of the
Big Four
are more
fragile than
the Church
of Englands

The Catholic Church has an obvious


headquarters, and its got one supreme
leader, whose power comes from God.
Within the Anglican Church,
individual member organisations can
interpret the central power in different
ways. For good or ill, transgressions
usually do not lead to expulsion.
By contrast, one senior executive at a
big professional services partnership
concedes that his ultimate sanction is
still excommunication cutting a local
group off from use of the brand or
shared services. Otherwise, he told me,
managing such a network is a complex
mixture of carrot and stick.
If they were building a global
advisory group now, the Big Four
would not start from here. They justify
their federal structures by referring to
local rules and customs, and the need
to insulate partners from legal liability.
But lawsuits did not do Andersen in;
reputational damage did. A similar
blow to one big country practice could
still sink any of these global networks.
Churches can count on faith in God
as an ineffable unifying force. Even
that may not be enough to persuade
Anglicans to sing from the same hymn
sheet, despite Mr Welbys efforts. The
ties binding commercial networks are
more fragile. Their umbrella
organisations may sell a promise of
solidity and unity, but they are just
that: ostensibly waterproof shelters,
bright with corporate logos, that at any
moment could be blown inside out by a
violent gust of wind.
andrew.hill@ft.com
Twitter: @andrewtghill

The great-grandson of
Roches founder discusses
corporate governance and
pharmaceuticals M&A
with Andrew Ward

ndr Hoffmann runs his


affairs from a long, woodfloored office on the upper
storey of a grand villa overlooking Lake Geneva in
Morges, Switzerland. The snow-capped
summit of Mont Blanc glistens in the
distance, while the rigging of sailing
boats clanks rhythmically in the nearby
marina.
It is just the kind of setting that would
be expected of the scion of one of Switzerlands great business dynasties.
Mr Hoffmann, vice-chairman of
Roche, the pharmaceuticals group his
great-grandfather founded, knows this
picture of inherited wealth and power
rankles with some investors, not to
mention corporate governance experts.
I was born into those shares and
therefore in some circles Im considered
not to be an appropriate board member, he says, in a rare interview over
lunch of local cheese, ham and salad.
After years spent studiously avoiding
the spotlight, Mr Hoffmann wants to
answer these critics at a time when family control of companies has been facing
fresh scrutiny. Boardroom tensions at
Volkswagen in April led to the resignation of Ferdinand Pich as chairman of
the company his grandfather helped
create. Meanwhile, Samsung, the South
Korean conglomerate, has been at war
with US activist investors over efforts to
shore up family control.
Such controversies are less likely at
Roche, where the founding HoffmannOeri family installed professional
managers at an early stage and have
been relatively hands-off guardians in
the decades since. Yet, with half the
shareholder voting rights to their name,
the family maintains a firm grip.
When I was doing my MBA at Insead
[in 1990] the prevailing view was that
family owners should get out of the
way, he says. But this has changed as
people have come to recognise the benefits of stable ownership.
Viewed over the long term, shareholders have been given little reason to
question the stewardship of Mr Hoffmann and his relatives. Roche has been
one of the worlds best-performing
pharma companies in the past decade as
it seized leadership of the industrys
most valuable category: cancer drugs.
But sentiment has recently turned
more cautious as investors fret about
the companys ability to sustain its dominance of oncology when blockbusters
such as Avastin and Herceptin lose patent protection in years ahead. Shares in
Roche are up almost 90 per cent in the
past five years but down 3 per cent this
year, while the S&P pharmaceuticals
index is up 7 per cent.
Mr Hoffmann says he is confident of
the companys ability to renew its drugs
portfolio from what he describes as the
strongest research and development
pipeline in the industry. But he adds:
We are not complacent.
Many drug companies have been
seeking shortcuts to growth in a record
round of mergers and acquisitions dur-

Scion of a Swiss dynasty on


benefits of family ownership
People have
come to
recognise the
benefits of
stable
ownership:
Andr
Hoffmann by
Lake Geneva
Christian Brun/Keystone

Start-ups

The patient
capital
approach

ing the past year. Roche has been on the


peripheries of the action with deals such
as its $8.3bn takeover of InterMune of
the US. Mr Hoffmann is wary of more
transformational M&A. There have
not been many really large megadeals
that have added value, he says. Im not
sure that is the best solution for the
industry.
One potential megadeal touted in the
past was a tie-up between Roche and its
local rival Novartis. The companies
Europes two largest pharma groups by
revenues are 3km apart on opposite
banks of the river Rhine in Basel.
Novartis owns 33 per cent of the voting
shares in Roche as a result of an abortive
push by the former to engineer a merger
15 years ago. Mr Hoffmann does not
expect the idea to be revived.
Is Basel big enough for two major
pharmaceuticals companies? I believe
yes. The question will come back time
and time again but, at the moment, the

family is absolutely not interested in


entering into any strategic collaboration
[with Novartis]. He thinks Novartis
may sell its stake eventually as the
opportunity cost of tying up so much
capital burns a hole in their pocket.
But it is a non-issue for Roche. We
can go on like this for a long time.
Aged 57, Mr Hoffmann succeeded his
father, Luc, on the Roche board in 1996
and serves alongside his cousin Andreas
Oeri. He combines the job with chairmanship of the familys asset management company, Massellaz, and nonprofit roles including the vicepresidency of the World Wide Fund for
Nature, which his father co-founded.
Growing up in the wetlands of
Frances Camargue region, where the
Rhne meets the Mediterranean, Mr
Hoffmann inherited his fathers passion
for conservation. Business, on the other
hand, was something he says he had to
learn through stints as a banker in Lon-

As his familys senior representative on


the board of Roche, Andr Hoffmann is
responsible for safeguarding the legacy
of his great-grandfather, who cofounded the 119-year-old company. But
could he also help build a new force in
the healthcare industry?
The 57-year-old Swiss was an early
investor in the US start-up Inovalon,
which manages and analyses healthcare
data. It raised $600m in a Nasdaq initial
public offering in February and currently
has a valuation of $3.2bn. Mr Hoffmann
owns 14 per cent of the stock and sits on
the board. The Maryland-based
company aims to help care providers and
insurers make sense of the proliferating
volumes of medical data being
generated as health systems are
digitised.

Mr Hoffmann made his investment


after being introduced to its founder,
Keith Dunleavy, a medical doctor and
computer scientist, by a mutual
acquaintance 10 years ago. He says he
has tried to bring the same long-term
view to Inovalon as his family fosters
at Roche.
Mr Dunleavy says Mr Hoffmann has
been a valuable mentor. He is very good
at distilling enormous amounts of
information and helping guide towards a
decision. There are no connections with
Roche but drugmakers could benefit if
Inovalon can help make health systems
more efficient freeing resources to
spend on medicines. Healthcare is
moving from a world of volume to value
and quality, says Mr Dunleavy. In order
to make that shift, you need good data.

don and project manager at Nestl.


Some critics mutter about a lack of
pharmaceuticals experience on the
Roche board, particularly since Franz
Humer, a company veteran, stepped
down as chairman last year to be
replaced by Christoph Franz, former
chief executive of Lufthansa, the German airline.
Mr Hoffmann says he has built plenty
of industry expertise over the past two
decades and bristles at suggestions he is
a passive figurehead. I am an active
participant, he insists.
Family control of Roche is not quite as
solid as it once was after Mr Hoffmanns
cousin, Maja Oeri, withdrew from the
relatives collective voting pool in 2011.
This reduced the pools holding from 50
per cent to 45 per cent, but Ms Oeri has
said she does not expect to vote against
the family even if she is no longer formally bound to the group. Its a little
less robust than it was five years ago but
it still works, says Mr Hoffmann.
Dynastic power runs through both
sides of Mr Hoffmanns family. His
mother was an Austrian countess
descended from Russian nobility. This
heritage is reflected in the large painting
of Kirill Razumovsky, an 18th-century
Ukrainian statesman, which hangs over
his desk. Just as Catherine the Great
acted to abolish Razumovskys title of
Grand Hetman, Mr Hoffmann says the
family would act if things went wrong at
Roche.
The beauty of the structure is that we
call the shots in the long run by controlling the AGM. But we cant ignore shortterm investor sentiment because it
affects our cost of capital. Mr Hoffmann reports an excellent relationship
with Severin Schwan, Roches chief
executive. But he adds: If there was a
manager who wasnt good enough, they
would go quickly.

The fit executive

Three smartwatches that


perform for the serious athlete
CHARLES WALLACE

For athletic workouts to be


of practical use, you have to
know that your fitness level
is improving over time. And
the only way to know that is
to track the improvement.
I wrote in a recent column
why I thought that the
Apple Watch, although a
fantastic adjunct to my
iPhone, is not yet optimal as
a serious fitness watch. It is
not waterproof, for starters.
It also suffers from the same
limitations of all wrist-worn
fitness trackers, such as the
Fitbit, which use light shone
on your veins to measure
heart rate: they are wildly
inaccurate when you swing
your arms during a hard run.
For the past couple of
months, I have been testing
three smartwatches
designed specifically for the
serious athlete. They use a
traditional chest strap heart
rate monitor and are not
only waterproof, but can
measure swimming
performance, which is an
important requirement for
triathletes.
The watches I tested were
the Garmin Forerunner
920XT, the Polar V800, and
the Suunto Sport Ambit 3.
All three share several
similarities as well as having
a few individual quirks.
For one thing, they all
have GPS chips in the watch,
so you dont need to
exercise with a phone
strapped to your arm to
track your workout in terms
of distance and speed.
With the Garmin and
Suunto watches, that means
they feel fairly big, especially
if you have slender wrists.
The Polar is remarkably
compact and made of
stainless steel, so it looks
more like a standard
wristwatch than the other
two, which have brightly
coloured plastic bodies.
All three offer various
pods at extra cost that
you can attach to your
trainers or bikes pedals,
to take measurements such
as cadence when running
on an indoor treadmill, or
your pedalling cadence

or speed when on the bike.


They also have
customisable faces, so you
can display the particular
data you need. For example,
I frequently undertake highintensity interval training, as
recommended by the
Cardiac Exercise Research
Group in Trondheim,
Norway, so I like to keep
close tabs on my heart rate
percentage, time and
distance on one screen.
These watches can
handle some complicated
tasks. For example, they
can all determine your VO2
maximum (rate of oxygen
consumption), which is the
gold standard for measuring
aerobic fitness.
They also have a way of
figuring out whether you are
fully rested after your most
recent workouts or should
rest for a day, a topic I plan
to return to in my next
column.
Each watch has an
elaborate website where
you can see data for your
exercise, including heart
rate, pace and cadence
information. They link with
popular web services such
as Strava and MapMyRun if
you want to share your
results.
The biggest differences
are in measuring swims, and
your choice of watch might
depend on your aquatic
preferences. The Polar is
one of only a few watches
that can accurately display
your heart rate while
swimming, and the other
two are reasonably good
at tracking pool workouts,
such as counting laps (I
always lose count). The
Garmin can measure heart
rate, but does not display it
until after your swim.
Each of the three watches
was a fantastic companion
on workouts for running,
cycling and in the pool. Your
own choice would probably
depend on whether you use
the device for swimming and
your tolerance for weight on
your wrist.
fitexecutive@ft.com

Great place to meet

Tugu Kunstkring Paleis, Jakarta

Where Jalan Teuku Umar 1, Menteng

WiFi Yes

Plug sockets No

Espresso Rp38,000 ($2.65)

Open 7am-11pm

Privacy AAAAA

After a long day in meetings


and Jakartas famous traffic,
floor your clients with an
evening at the Tugu
Kunstkring Paleis, a
restaurant-cum-gallery set
up by a well-off collector
eager to share his
antiquities with the world.
The only drawback to
hosting guests in this old
colonial building is the
romantic charm, which may
seem better suited to a first
date than an evening of
tough negotiations.
Take the risk and order a
drink in the dimly lit bar
dedicated to 1950s novel
The World of Suzie Wong, a
love story set in the brothels
of postwar Hong Kong. The
room is filled with an eclectic
mix of oversized film
posters, an antique rickshaw
and bold red lampshades. If
the decor does not leave

you dizzy, the cocktails will.


The gallery upstairs hosts
small exhibitions and the
open balcony is a rare spot
of calm in Jakarta, with a
view over a small garden.
The restaurant itself is
quiet but if you want to go
unnoticed avoid the
Rijsttafel, an elaborate set
menu served by dancing
waiters who invariably bring
the dining room to a
standstill. For more privacy,
there are VIP rooms, with a
hefty minimum spend.
This is a place for fine
dining and lengthy
conversation, rather than a
quick coffee while you pore
over a laptop. And with
generous ordering and some
alcohol, brace yourself for
a bill of Rp500,000 ($35)
per person.
Avantika Chilkoti

Tuesday 22 September 2015

11

FINANCIAL TIMES

ARTS

Exhilarating drama,
irresistible Jane
THEATRE

Jane Eyre

National Theatre (Lyttelton), London

aaaae

Sarah Hemming
Its a girl. These are not the words that
open Charlotte Bronts great novel, but
they do open Sally Cooksons inspired
reworking for stage. Its a move both
bold and true: for the condition of being
female boxes Jane in throughout her
life. Her desire for freedom, her irrepressible intelligence and fearless honesty drive this witty, impassioned,
spring-heeled staging that takes liberties with the text, but keeps faith with
its spirit and its irresistible heroine.
By retaining a period feel (bonnets,
top hats, corsets) but playing out on
Michael Vales stylised set of ladders
and platforms, it escapes the sometimes deadening hand of costume
drama, expresses the novels continuing appeal to all rebellious souls
and embeds some of the storys psychological undercurrents in the very look
of the staging. Fire and ice recur
throughout the novel: here the lighting
blushes red or freezes blue as we experience, with Jane, feelings that surge
through her.
That this is a beloved, much shared
story is expressed in the ensemble telling, with a wonderfully versatile group
of actors bustling about to switch character (including a droll dog from Craig
Edwards) and to propel the story forward through dynamic physical
sequences and live music.
We bundle through Janes experiences her miserable childhood with
her cruel aunt, the deprivations of
Lowood school and her period as governess at Thornfield Hall, where she
meets Mr Rochester (the marvellously
sonorous and moody Felix Hayes). One

DA N C E

Romeo and Juliet

Royal Opera House, London

aaaaa

Clement Crisp

hurdle of page-to-stage transition the


fact that we cannot listen in to Janes
mind is handled by a small group
of actors sometimes voicing her
conflicting thoughts.
Through it all moves Madeleine
Worrall as Jane: a superb, unaffected
performance that conveys her feistiness, her integrity and her vulnerability. And she is haunted from the outset
by Melanie Marshalls scarlet-clad Bertha Mason, whose continued hovering
presence provides a dark shadow to the
central theme of freedom and perhaps
partly embodies Janes subconscious.
She speaks only through (often anachronistic) song: Gnarls Barkleys
Crazy, delivered with hair-raising
purity, reaches into the pain of her illness and confined state.
There are losses. You miss Bronts
brilliant evocation of place. And
because the show, first seen at Bristol
Old Vic (co-producers), has been
trimmed down, some episodes are
taken at such a gallop that they become
mawkish or empty, while some key
moments race past or lose tension. But
still, this intelligent, exhilaratingly theatrical response is like meeting an old
friend and seeing them afresh.

Inspired:
Madeleine
Worrall as
Jane Eyre.
Below right:
Steven McRae
and Sarah Lamb
in Romeo and
Juliet

To January 10, nationaltheatre.org.uk

Manuel Harlan
Alice Pennefather

C L A S S I CAL M U S I C

London Symphony Orchestra


Barbican, London

aaaae

Richard Fairman
When he received the award for
Lifetime Achievement at the Gramophone Awards last week Bernard
Haitink said ruefully that he had never
felt so old. Other conductors in their
eighties have kept working Pierre

Monteux, on becoming principal conductor of the London Symphony


Orchestra at the age of 86, insisted on a
25-year contract with the option of
renewal for another 25 years but few
have seemed so unchanged.
Haitink at 86 has his own association
with the LSO in the Indian summer
of his career. A pair of concerts with
him have just opened the LSOs 2015/16
season, and conductor and orchestra
are soon to depart for a five-concert
tour of Japan.
Their programme on Sunday featured Beethoven and Mahler, composers Haitink has also conducted at the
BBC Proms in recent years. It is quite a
shock to return to the Barbican after
two months away at the BBC Proms in
the Royal Albert Hall how thick and
heavy symphony orchestras sound in
this acoustic but aside from that
dampener on proceedings the performances were a model of the restraint and
wisdom that has always marked
Haitinks musicianship.
A change in the programme brought
Murray Perahia to play Beethovens

Hitchcock casts his shadow over a powerful opera


OPERA

Notorious

Gothenburg Opera, Sweden

aaaee

Guy Dammann
The idiosyncrasies of operatic dramaturgy have often led to a reliance on
well-known stories when composing
new works. This new Gothenburg Opera
commission, by Hans Gefors and librettist Kerstin Perski, is based on Alfred
Hitchcocks 1946 thriller Notorious. The
film is already markedly operatic, both
in its clever use of the postwar context to
fuel the fires of the love triangle between
an American agent (Cary Grant), the
beautiful daughter of an exposed Nazi

spy (Ingrid Bergman) and her old flame


(Claude Rains), and in its exploitation of
Bergmans dazzling charisma.
Gefors and his stage and music directors Keith Warner and Patrik Ringborg
struck gold in booking Swedish soprano
Nina Stemme, and have shaped the
Bergman role of Alicia around her ability to alter the colour and focus of a room
with her singing. Gefors has used this
power skilfully, in long, ringing phrases,
but also in glittering orchestral writing
that hangs off the magnetic quality of
Stemmes voice. The music is outstanding throughout, both agile and colossal,
redolent perhaps of Bernard Herrmanns score to Vertigo, not in style but
in its ability to transform our perception
of time and physical possibility.
This is, of course, crucial to the
portrayal of Alicia, a powerful woman

Magnetic: Nina Stemme with John Lundgren in Notorious

THEATRE

Martyr

Unicorn Theatre, London

aaaee

Ian Shuttleworth
Marius von Mayenburgs most recent
plays have examined major social issues
directly rather than through semidetached fables. In Stck Plastik, it was
casual middle-class exploitation of
domestic labour. Here, in a 2012 piece
now given its British premiere in a coproduction between the Unicorn and the
Actors Touring Company, the topics are
fundamentalismandtolerance.
Both Germany and Britain are experiencing rising levels of anti-Islamism;
however, von Mayenburg makes a point
of showing our own conduct to us. When
teenager Benjamin refuses to participate
in swimming lessons at school, it is

Mats Bcker

because he has embraced a particularly


authoritarian form of Christian fundamentalism. Suppressed issues surrounding sexuality surface as Benjamin resists
with difficulty the come-ons of a female
classmate and fails to spot the subtext of
a male ones attachmenttohim.
Principally, however, he sets himself
up as spokesman for the Lord against
school counsellor and biology teacher
Erica White: because she teaches sex
education and evolution (to which he
responds in class by, respectively,
stripping naked and wearing a gorilla
mask); because the Bible says a woman
should not be in authority over a man;
and because her name suggests she
might be Jewish. Natalie RadmallQuirkes Erica faces further problems of
her own in the form of the sleazy, cowardly hypocrisy of the headmaster and
the well-meaning incomprehension of
her boyfriend. All this before we even
get to Benjaminsplanstomurder her.
This, I suspect, is where British and

imprisoned in personae over which she


has no control. But whereas Bergman
had Grant and Raines, Stemme does not.
And herein lies the problem. Though
John Lundgrens agent Devlin and
Michael Weiniuss old flame Sebastian
are compelling enough, the operas creators have sought to counterweight their
heroine by bolstering the other characters and contexts and in doing so they
upset the delicate balance of the whole.
Devlin becomes altogether darker,
driven by a violent sympathy for the victims of war, while Sebastians relationship to his mother superbly played by
Katarina Karnus is rather overcooked. At the same time, the staging
mythologises the cinematic context,
casting Alicias father as Hitchcock and
then retaining the latters silhouette as a
violent directorial force throughout.
This move was perhaps irresistible,
and David Fieldings sets make clever
use of projected stills from the film, but
when Alicia is thronged on her putative
deathbed by a chanting chorus of Hitchcock murderers and their victims, the
iconography becomes overbearing.
Superbly performed, Notorious is a
new opera of significant power. But one
misses Hitchcocks parsimonious chiaroscuro, and the operas submerging of
the romantic dimension in the psychoanalytical, political and cinematic contexts constitutes a fatal flaw.
Indeed, that an operatic adaptation
should so thoroughly eclipse what is, in
effect, the films most operatic feature,
does seem rather villainous.
en.opera.se

German readings of the play may


diverge. Faced as she is with the scowling
remorselessness of Daniel OKeefes Benjamin and her colleagues desire for an
easylife,itiseasyforBritonswhosesecularism is sometimes more overtly antagonistic to see Erica purely as a victim.
However, her patience and forbearance
break, too, showing us that intolerance
ofintoleranceisstillitselfintolerant.
Ramin Gray of ATC has demonstrated
in his past von Mayenburg productions
that he can make manifest the complexity of the material with unadorned staging. Here, basic plywood flooring
unfolds vertically towards the end of the
piece; for the most part, it provides simply delineated playing areas while the
rest of the company sit upstage reading,
textingorpickingataguitar.Perhapsitis
precisely this low-key presentation
which militates against the play leaving a
lastingmark.
atctheatre.com

Piano Concerto No. 4. A handful of


uncharacteristically splashy moments
aside, this was a performance of a fine
classical strength and proportion. It is
interesting to compare Perahia to Maria
Joo Pires, another regular Haitink collaborator: where Pires is all shades of
light, Perahia found darkness and truculence in this concerto, Beethoven with
his warts, or some at least.
Haitinks way with Mahler remains as
unpretentious as ever. A relaxed songfulness pervaded his performance of
the Symphony No. 4. The music all
seemed of a piece, the symphony
viewed as a whole rather than many
small contrasting elements (some conductors change gear round every corner). The slow movement maintained
an aura of still, open-air purity, at least
until clumsily raucous trumpets upset
the atmosphere near the end. The
finale, rather on the slow side, was
visionary in a wholly modest way and
Anna Lucia Richter the perfect soprano
soloist, unfussy, gleaming.
barbican.org.uk

Fifty years ago the Royal Ballet gave the


first performance of Kenneth MacMillans Romeo and Juliet, with Margot Fonteyn and Rudolf Nureyev as the supposedly teenaged lovers. We had to wait for
the second performance, led by Lynn
Seymour and Christopher Gable, young,
radiant, truly to see the ballet MacMillan
created on them, so unsuitable was the
firstnightscasting.
Half a century and 466 performances
on, as the Royal Ballets season opened
on Saturday night, I still sensed the
ardour, the luscious dynamics of those
original artists their bodies still live in
the dance cleaned of some tedious
encrustations. I salute the staging in this
present incarnation: well lit; danced by
the company with admirable fervour;
played by its principals with a grand
enthusiasm and no little subtlety; rising
splendidly to its heights in the Prokofiev
scoreunderKoenKesselsbaton.
Juliet was Sarah Lamb, exquisitely
drawn in dance and riven by the girls
emotions, her movement precise in its
emotional impulse and contours. Her
Romeo, showing every moment with a
clarity that cut brightly into the air and
the drama, was Steven McRae, playing
the role with an ardent bravura. The production was strongly cast: I greatly
admire Alexander Campbells alert and
subtly detailed Mercutio, Tristan Dyers
clear-cut Benvolio, Gary Aviss arrogant,
dark-hued Tybalt, as I do Bennet GartsidescommandingEscalusandthegrace
and storms of Elizabeth McGorians Lady
Capulet. Romeo has not
looked so vivid or so
true for years. To the
company, to Koen
Kessels and the orchestra, admirationandmuchgratitude.
Readers may note that the
Royal Opera House has announced
that, because of injury, Natalia
Osipova has withdrawn from all her
scheduled performances in the current
bookingperiod.
To December 2. Changes to casting at
roh.org.uk

12

FINANCIAL TIMES

Tuesday 22 September 2015

Noxious admissions
VWs share prices fell a fifth on news that US regulators have detected
manipulation in engine emmisions tests. The impact could be far worse
if the issue extends to Europe, the groups largest market

Volkswagen Group results Fiscal year 2014

Twitter: @FTLex Email: lex@ft.com

North America

Dialog/Atmel:
sailing into the wind
Container ships, commodities,
computer chips the industry matters
little, so long as it is cyclical and needs
lots of capital. Logic dictates that deals
should be done in the lower part of the
cycle, when assets are cheap. In
practice, deals are done near the top, at
Panglossian prices. Anyone who flouts
this perverse convention risks
shareholders wrath. Dialog
Semiconductor demonstrated this
yesterday. A jittery market marked its
shares down 19 per cent after it
announced it would pay $4.6bn in cash
and shares for the chipmaker Atmel.
The procyclicality of chip mergers is
extreme. In 2000 and 2006, there were
$53bn and $70bn in deals, many times
the levels of a few years before,
Dealogics data show. Each frenzy was
closely followed by 70 per cent declines
in the Philadelphia semiconductor
index, the industry yardstick. So the
fact that there have been $96bn in semi
deals this year is, inevitably, a bit hard
on the nerves. Indeed, the last big deal
announced Intels purchase of Altera
precisely coincides with the June
peak in the Philly index. It has fallen
nearly a fifth since.
Still, the Dialog slapdown calls for a
specific explanation. The $10.42 per
share headline price based on
Dialogs undisturbed price is a stout
42 per cent premium. Had the offer
been made in late June, it would have
carried no premium at all. Thats the
power of buying against the cycle.
The issue, instead, is where the deals
touted benefits come from. Dialog
specialises in chips controlling power
use in mobile devices, and has a
sideline in Bluetooth communication.
Atmel makes microprocessors, onechip computers that control devices
from dishwashers to cars, and has a
specialisation in WiFi-enabled secure
communication among machines. The
pitch is that the combination will be a
one-stop shop for the internet of
things. (This phrase, familiar to chip
investors, refers to a happy future in
which a great many semis are sold.)
This vision may be spot on. As
concerns the share price in the near
future, though, that matters not a bit.
In a down cycle, investors require
concrete cost savings, not a pitch about
one and one making three. The $150m

1010

1010

slama ad

LOW

Delhi

Kolkat

17

33

mbai

Ya

1010
Colombo

0.9m 28bn 0.7%

Forecasts by

Low single
digit

Hon Hai:
the point of Sharp

It is hard to be profitable supplying to


Apple, no matter how superior ones
technology. Japans Sharp, maker of
device displays, knows this better than
most. Its Igzo screen technology, good
enough to make it into some Apple
products, should have ensured its
survival even as it exited other failing
divisions. Instead, the LCD technology,
too, seems set for a new home.
Yesterday, reports intensified that
Sharp will spin off its display
technology business. Display is the
companys largest revenue generator
but also its largest lossmaker. Despite
its stronger technology, it has lost out
to rivals with cheaper production and
struggled as competition in China has
worsened.
Taiwans Hon Hai is a mooted
investor. It would be a plausible choice
of white knight. A big Apple contractor
analysts estimate that the US-based
company accounts for two-fifths of
Hon Hais top line the Taiwanese
assembler already has an LCD joint
venture with Sharp. Hon Hai has also
flirted with taking a stake in Sharps
equity on more than one occasion.
It could make a sensible marriage.
Hon Hai has $7bn of net cash that
could be used to invest in production
capacity, where Sharp has not had the
resources to do so. Hon Hai could also
improve its thin assembly margins by
providing more of its own components
a strategy it already appears to be
pursuing. Last week, the company
swapped shares with compatriot
semiconductor packager, Siliconware
Precision (SPIL), saying it wants to
collaborate in smartphones, among
other products.
Despite the possible logic of vertical
integration, the SPIL deal may not be a
good illustration: the timing of the
share swap suggests it was designed
more to thwart a proposed acquisition
of SPIL by Taiwan-listed competitor
Advanced Semiconductor. Hon Hai has
been disappointingly vague about the

Unit
sales































JOTTER PAD





Rev
Est profit
growth margin



Mid to high
single digit

Unit
sales

Revenues

Rev
Est profit
growth margin

4.1m 38bn 8.8%


Rev
Est profit
growth margin

Revenues

Asia Pacific
Double
digit

0.8m 14bn -21% Losses


FT graphic Sources: Companies; FT research; Bernstein; Morgan Stanley; Barclays

Martin Winterkorn, chief executive


of Volkswagen, is deeply sorry to
have broken customers trust.
Investors are sorry too: VW shares
fell nearly a fifth yesterday, reducing
its market capitalisation by more
than 13bn (5bn on the liquid
preferred shares and 8bn on the
tightly held common stock). The US
Environmental Protection Agency
found a clever bit of software in VW
and Audis two-litre diesels that make
cars cleaner in emission tests than on
the roads. The fine could be as much
as $18bn (if the full fine of $37,500 is
levied for each of the 0.5m diesel cars
VW sold in the US since 2009). No
wonder the market did not like it.
The fine is not the end of it. There
are the costs to add up for recalls,

benefits of its tie-up with SPIL. It will


need to be a lot more specific if it is
planning to put money into Sharp.

Russian gold:
rouble relief
For most miners, gold is a miserable
business to be in. Average gold prices
are uncomfortably close to production
costs. One bright spot is Russia: miners
there incur about three-quarters of
their production costs in roubles.
The Russian currency has fallen
40 per cent against the dollar this year,
sustaining margins despite weaker gold
prices. So owning a Russia-focused gold
miner, preferably one whose shares
trade on an international stock

Todays temperatures

Abu Dhabi
Amsterdam
Athens
Bangkok
HIGH
25
Barcelona
eoul
eij
26
Beijing
LOW Berlin
okyo
Brussels
27
Budapest
1010
Sha hai
Buenos Aires
Chicago
1010
Copenhagen
aipei
Dallas
31
ong Kong
Delhi
oi
1000
Dubai
Dublin
LOW
32
Edinburgh
M
k
B
Frankfurt
Geneva
i Minh City
Ho
Hamburg
Hong Kong
Brunei
uala
1 L mpu
Istanbul
2
Jakarta
Si apore
Johannesburg
Karachi
12
3
Kuala Lumpur
Kuwait
3
Lisbon
London
Los Angeles
Wind speed Luxembourg
in KPH Madrid

Revenues

South America

Sun
Shower
Thunder
Thunder
Sun
Thunder
Cloudy
Shower
Sun
Cloudy
Sun
Rain
Fair
Fair
Sun
Fair
Cloudy
Shower
Shower
Shower
Fair
Fair
Sun
Sun
Sun
Thunder
Sun
Sun
Rain
Rain
Rain
Sun

41
16
24
34
26
25
19
15
22
16
26
15
34
34
39
15
16
14
18
15
31
27
34
26
37
31
43
22
15
28
13
29

Malta
Manila
Melbourne
Mexico City
Montreal
Moscow
Mumbai
Munich
Nairobi
New York
Oslo
Paris
Perth
Prague
Rio
Rome
San Francisco
Seoul
Shanghai
Singapore
Stockholm
Sydney
Taipei
Tokyo
Toronto
Vancouver
Venice
Vienna
Washington
Wellington
Yangon
Zurich

Sun
Thunder
Shower
Fair
Sun
Sun
Cloudy
Shower
Fair
Cloudy
Shower
Shower
Sun
Fair
Sun
Sun
Sun
Sun
Fair
Shower
Shower
Shower
Rain
Sun
Sun
Fair
Sun
Sun
Cloudy
Rain
Thunder
Shower

CROSSWORD
No. 15,042 Set by JASON


US housing:
lording over

Europe*
Unit
sales

1000

HIGH

Rev
Est profit
growth margin

Revenues

4.4m 123bn 5%

1010

1020

Unit
sales

in annual cost savings Dialog foresees


is, evidently, not enough.
Dialogs management must have
expected resistance. They showed
courage in acting anyway. Now comes
the painful: wait for the upturn.

ACROSS
1 Don or postgrads official
record (3,5)
6 Start to buy pure spread (6)
9 Alice married one of these
breaking sugar daddys heart
(6)
10 Finished Scripture and gym?
Im off (8)
11 Often trite image that is
indicative of a big ego! (4)
12 Scattered queue tear along
this? (6,4)
14 Furious old bird (8)
16 Fine lubricant is something to
battle with pointlessly (4)
18 In short, like some crosswords
before long (4)
19 Dogged son was in debt
beforehand (8)
21 Take the plunge and hike to
Barking with tent (3,3,4)
22 Artist concerned with being
thin on the ground (4)
24 Dash up to cafe for what suits
you (3,2,3)
26 Without basis claim supporters
overcome by beer (6)

27 Peculiar scene with a meeting


across the divide? (6)
28 Trucks back round trendy place
of craftwork? (8)
DOWN
2 Run out Ozzie pick-up here? (5)
3 Flower suitable as a lovers
giftt, Id suggest (6-2-3)
4 Hand in whats due to be
settled (8)
5 An eternity to pray and hymn,
you may say (1,5,2,7)
6 Ill make tea in British pot (6)
7 Jacks a celeb needing no
introduction (3)
8 Dear divorcee is thoughtful (9)
13 Biography of a motor
manufacturer in easy street?
(4,2,5)
15 Dicky led outing in line (9)
17 Smoked beef in one market clot
picked up (8)
20 Box up whats essential for 24?
(6)
23 Moore is one well received and
taken on board (5)
25 Have bumfluff shaved from the
beginning (3)

Solution to Saturdays prize puzzle on Saturday October 3


Solution to yesterdays prize puzzle on Monday October 5
Winners names will be printed in Weekend FT

28
32
12
24
22
20
31
17
28
23
12
16
26
19
33
25
21
30
27
31
14
16
31
27
22
16
22
20
24
11
32
17

* Includes the rest of world

customer compensation and potential


lawsuits. VW was the standard bearer
for clean diesel in the US, so
reputational damage must be totted up
too. Including recalls and
compensation, Bernstein estimates a
low-end $2bn fine would take 4 off
the share price, while a top-of-therange $18bn fine would cost 35 per
share. So yesterdays price fall, of 30,
looks steep but not wildly irrational.
This reckoning includes only the US
a smallish slice of VWs sales, at
13 per cent of the total last year. If all
the diesel engines sold globally have
the same issue, the costs could be
much bigger. While differing regional
engine regulations make the worldwide
impact unclear, other regulators are
sure to retest. VW is not alone. Other

manufacturers cars perform one way


in the real world and another when
tested. But regulators cannot help but
see VWs software as a particular
affront.
This scandal is not the only
emissions problem for VW or
European carmakers generally. Even
as emissions rules are getting stricter,
the low-emission cars that would
make the manufacturers fleets
compliant are unappealing. They are
expensive, and low oil prices
lengthen the payback period. To sell
enough of them to hit emissions
targets, the industry will need
government subsidies. Yet Europes
largest carmaker has just been
caught displaying its contempt for
government. More apologies to come.

exchange, looks a neat contrarian


trade. But it is easier said than done.
The case of Polyus Gold shows why.
The companys shares were admitted
to the London market in 2012. Its halfyear results showed it making
impressive margins of almost 60 per
cent (before interest, tax, depreciation
and amortisation); since then the
rouble has shed another 7.5 per cent, or
twice the decline in the gold price. No
wonder major shareholder Said
Kerimov wants to take Polyus private.
The mooted take-out price of $2.97 a
share undervalues the company. The
independent directors may yet
negotiate a higher price, but the
Kerimovs control 40 per cent of the
equity. If they can secure threequarters of the other 60 per cent, they
can delist the shares. Whether they do

may depend upon several other major


holders, whom a Russian newspaper
has suggested are business associates of
the Kerimovs (the company was
unavailable for comment).
Alternatives are thin on the ground.
Polymetal is smaller and also
prospering, but its debt is almost twice
last years adjusted ebitda and although
its free float is larger than that of
Polyus, it also has major shareholders
based in Russia. So too does Highland
Gold, smaller and traded on the less
regulated Alternative Investment
Market. The miner with the most
conventional-looking shareholder
register is Petropavlovsk, which is still
in financial rehab after a near-death
experience this year. That helps
explains why this contrarian trade
remains a lonely one.

Be careful selecting paint colours for


the wall and shrubs for the garden
when the landlord is a cut-throat
investor such as Steve Schwarzman
(Blackstone), Barry Sternlicht
(Starwood) or Tom Barrick (Colony
Capital). These three, among a handful
of other institutional investors, believe
they can crack the rental market for
single-family (SFR) homes.
Typically, large investors have
preferred multifamily apartment
buildings to buy and bundle together as
they are easier to manage. But the lure
of home ownership has faded since the
financial crisis. So institutional
investors have since been grabbing
thousands of houses so they can take
advantage of rising rents.
Two of these large rental property
managers Starwood Waypoint and
Colony American Homes yesterday
merged in an all-share deal. The
combined company will own 30,000
homes and have a net asset value of
$3.4bn. Starwood Waypoint is one of
four listed single-family home
landlords. Through the transaction,
Colonys previously privately owned
portfolio will become public. The
largest SFR player is Blackstones
Invitation Homes, which is private.
Since the financial crisis, home
ownership rates have dipped as down
payment and credit requirements have
pushed would-be borrowers out of the
buying market. That surge in the pool
of renters has sent rents upward.
The easy part for the SFR players has
been to buy properties. The housing
crash created a bounty of distressed
and foreclosed properties to snatch.
KBW estimates that large institutions
have spent $20bn buying more than
100,000 properties.
The trickier part is attracting goodquality renters and maintaining homes.
Over the past year, shares in the four
listed companies have traded flat,
roughly in line with the market. But
Starwood yesterday rallied a tenth on
the transaction. Financiers can default
to dealmaking while they sort out the
finer points of unclogging toilets.
Lex on the web
For notes on todays breaking
stories go to www.ft.com/lex

Tuesday 22 September 2015

Rates delay The Fed must


better explain its trade-offs
GEORGE MAGNUS, PAGE 22

13

London Stock
Exchange

Volkswagen

Lululemon

Euro/Dollar

Greek stocks
(ATG)

FTSE
Eurofirst 300

2-year US
Treasury

Brent
crude

2.17
2,444

18.6%
132.20

1.87%
$53.90

0.9%
$1.1206

0.6%
693.54

1%
1,411.37

4bp
0.71%

2.2%
$48.49

Zurich drops 5.6bn bid for RSA

Short
View

3 Move triggers sell-off in UK insurers shares 3 Swiss group warns on Chinese losses
RALPH ATKINS ZRICH
DAN DOMBEY LONDON

Zurich Insurance has abandoned plans


to buy the UKs RSA group, saying it
wanted to focus instead on rectifying a
series of hits to its general insurance
business.
The Swiss insurer last month proposed a 5.6bn offer for RSA. But yesterday Zurich Insurance unexpectedly
announced it was dropping the bid and
issued a warning about losses from Chinese and US non-life businesses.
Its decision, which took people close
to RSA by surprise, triggered a sell-off in
the UK insurers shares. RSA shares fell
22 per cent to 399p while Zurichs shares
were 2.3 per cent lower at SFr256.
Zurich Insurance revealed that

Kristof Terryn, who takes over as head


of its general insurance operations next
month, would launch a review of the
business after it incurred losses which
are expected to reach about $275m on a
series of explosions in August at a container storage station in the Port of Tianjin, China. We feel obliged to solve
issues in our own portfolio before we
make an M&A transaction, said Martin
Senn, chief executive.
In addition, Zurich Insurance warned
that a review of its reserve positions
relating mainly to US car insurance policies would have a negative impact of
$300m on the third-quarter results.
Mr Terryns predecessor was Mike
Kerner, an American executive who this
month said he would step down to

spend more time with his family. Overall, Zurich Insurance expected its general insurance business to report an
operating loss of about $200m for the
third quarter.
In the light of the deterioration in the
general insurance performance, we
have terminated the discussions about a
possible offer for RSA, said Zurich.
The Swiss insurers explanations were
partially plausible, said Stefan Schrmann, an analyst at Vontobel in Zrich.
But clearly Zurich was aware of a cautious view by the market about the
deal.
Zurich Insurance said results of its
due diligence investigation into RSA had
been in line with its expectations. We
had not found anything that would have

Clearly
Zurich was
aware of
a cautious
view by the
market about
the deal

prevented us from proceeding with the


transaction, the company said. But it
wanted to focus management on taking
action to prevent a repeat of the problems exposed in its general insurance
operations.
Some Zurich Insurance shareholders
had questioned the price it had
appeared willing to pay for RSA, which
was pitched at a premium of about a
quarter more than RSAs pre-bid market
value. The Swiss groups decision to
drop its bid for RSA led for the past 18
months by Stephen Hester, the former
Royal Bank of Scotland chief throws
the future of the UK insurer into
uncertainty.
Accident prone page 14
Awkward questions for Hester page 14

Ubers impact
Taxi loans group eyes
move to go private
Uber, the ride-hailing service, may be on
the cusp of new big disruption: driving a
Nasdaq-listed New York taxi finance
company out of the public markets,
writes Ben McLannahan.
Medallion Financial trades under the
symbol TAXI in New York, with big
investors including BlackRock and
Morgan Stanley backing its business
supplying loans to yellow-cab drivers to
buy licences, or medallions. Since
peaking at a market capitalisation of
almost $400m in 2013, Medallion has
lost more than half of its value even as
profits have continued to climb.
Andrew Murstein, chief executive,
blamed a misunderstanding that the
rise of Uber would squeeze licensed
drivers, triggering big losses within
Medallions $309m portfolio of loans.
The damage has been so great that
Medallion is considering taking itself
private. Weve been thinking a lot about
it, said Mr Murstein, grandson of the
Medallion founder.
The fall in Medallion shares is
mirrored by a fall in the price of
medallions, the pieces of tin that give the
owner the right to pick up passengers on
the streets of New York, in secondary
markets. They change hands for about
$700,000, down a third from 2013.

Jennifer
Hughes
There is a joke among Hong Kong investors that the further away from Beijing a commentator may be, the more
certain the opinion on China.
By that measure, Argentines should be the most definite
in their views. But those in New York and London cannot
be far behind, and they are almost unanimous in their negativity. Their view was only reinforced by the Federal
Reserves apparent reference to Chinas slowdown in its
decision not to raise interest rates last week. A growing
number also refuse to trust Chinese data and prefer their
own estimates resulting in still-lower numbers.
That Chinas economy is slowing and its data-collection
in need of improvement is not disputed. Its previous overreliance on industry is clear and its data analysis is still that
of an emerging market. In particular, its consumer data are
poor compared with simpler measures of factory output
and power generation.
However, on some of the consumer-related numbers,
China does not look quite so dire. In August, retail sales
were up 11 per cent year-on-year, and airline passenger
numbers rose by a tenth. Cinema box-office receipts were
45 per cent higher. At the same time, the number of big cities recording rising house prices hit a 12-month peak. Sales
of 4G mobile phone contracts are rising almost 200 per
cent, according to Bernstein a rate only ever bettered by
South Korea, the world leader in mobile internet adoption.
Those numbers do not suggest that growth is a long way
below the reported, if doubted, 7 per cent nor that consumers are worried about it. While the 4G adoption rate
will have been boosted by the fact that China Mobiles 3G
standard is barely usable, those faster smartphones will
only increase ecommerce further muddying old indicators such as new store counts, which do not capture the
online-to-offline market.
None of this is to say that Chinas economy is not slowing, only that like the proverbial elephant whose form
the blind men tried to extrapolate solely from the bit they
were holding it does not look the same from all points.
Investors seeking to understand China better should
perhaps do so from closer range and remember that not
every data set necessarily points down.

Consumer metrics in China


Annual % change
Airline
passengers

4G mobile
subscriptions

20

1500

15

1000

10

500

5
0

Jan

2015

Source: Alliance Bernstein

jennifer.hughes@ft.com
Dreamstime

Clintons pledge to tackle outrageous


drug prices knocks $15bn off biotechs
DAVID CROW NEW YORK

Yahoo faces tough choices


over Alibaba spin-off
Yahoos planned spin-off of its 15 per
cent stake in Alibaba, the Chinese
internet giant, hangs in the balance
after doubts were raised over the tax
implications. Options for Yahoo now
range from putting the move on hold
to abandoning it altogether.
Alibaba the albatross iPAGE 16

Hillary Clinton, the Democratic presidential frontrunner, knocked $15bn


from the value of US biotech stocks yesterday by pledging to take on outrageous price-gouging in the pharmaceuticals industry.
Price-gouging like this in the speciality
drug market is outrageous. Tomorrow
Ill lay out a plan to take it on, Mrs Clinton wrote in a tweet, referring to a company that hiked the price of a medicine
for a form of parasitic infection from
$13.50 to $750 overnight.
The tweet sent the Nasdaq biotech
index down by almost 5 per cent in early
New York trading. Shares in Valeant, a
Canadian pharmaceutical group that

has a reputation for implementing steep


price hikes, fell by 6.31 per cent.
In August, Bernie Sanders, the Vermont senator who is running against
Mrs Clinton for the Democratic nomination, wrote to Valeant, asking why it had
sharply raised the price of two heart
drugs after acquiring them last year.
On the day it secured the rights to the
drug, Valeant hiked the price of a vial of
Isuprel more than sixfold to $1,346.62
while tripling the price of Nitropress to
$805.61. Shares in Biogen, which makes
a multiple sclerosis drug that costs
roughly $55,000 a year, fell by almost 5
per cent, while Alexion, which makes a
drug for rare blood disorders that costs
roughly $500,000 per patient, fell by
3.89 per cent. Gilead, often seen as the

poster child for high drug prices because


of its $1,000-a-day hepatitis C pills, fell
by 2.7 per cent.
Mrs Clintons tweet referred to the
case of Daraprim, a 62-year-old drug for
a life-threatening parasitic infection. It
was bought in August by privately held
Turing Pharmaceuticals, which raised
the price by more than 5,000 per cent.
Turing said it was bringing the drugs
price in line with other medicines for
rare diseases. The tweet followed comments made by Mrs Clinton at the weekend on Face the Nation, a Sunday talk
show, where she applauded President
Barack Obamas signature healthcare
reform, the Affordable Healthcare Act,
for lots of positives but said there were
still issues that need to be addressed.

Companies / Sectors / People


Companies
AO World......................................................21
AQR................................................................20
Advanced Semiconductor..................12
Aggreko.........................................................21
Alexion...........................................................13
Alibaba...........................................................16
Amlin...............................................................14
Apple...............................................................12
Atmel...............................................................12
Audi.................................................................15
Aviva...............................................................14
Axel Springer.............................................16
BMW................................................................15
Biogen............................................................13
BlackRock..............................................13,20
Daimler...........................................................15
De Beers.......................................................17
Deutsche Brse........................................17
Deutsche Telekom.................................14
Dialog Semiconductor..........................12

Dimensional Fund Advisors.............20


Exor.................................................................14
Ferrexpo........................................................21
Ford..................................................................15
Franklin Templeton..............................20
Friends Life.................................................14
GSAM.............................................................20
Gilead..............................................................13
Glencore...............................................1,21,22
Gogo................................................................14
Goldman Sachs........................................20
Guggenheim..............................................20
Highland Gold...........................................12
Hon Hai.........................................................12
Honda.............................................................15
Hyundai.........................................................15
Imagination Technologies..................21
Inmarsat........................................................14
Jaunt...............................................................16
Just Retirement........................................14
Kia.....................................................................15

The Financial Times Limited 2015

Legg Mason...............................................20
Lennar............................................................21
Lufthansa.....................................................14
Lululemon....................................................21
Micron Technology................................21
Mitsui Sumitomo.....................................14
Morgan Stanley........................................13
O2.......................................................................4
OppenheimerFunds...............................20
Panasonic.....................................................14
Partner Re...................................................14
Passport Capital.........................................1
Petropavlovsk............................................12
Phoenix Group..........................................14
Piraeus Bank................................................3
Polymetal......................................................12
Polyus Gold.................................................12
ProSiebenSat.1...........................................16
QS Investors..............................................20
RSA Group.......................................13,14,21
Research Affiliates.................................20

Rio Tinto.......................................................17

Automobiles................................................15

Roche..............................................................10

Banks..............................................................21

Rotork.............................................................21

Financial Services...................................20

Sharp...............................................................12

Financials............................................1,17,20

Shire.................................................................21

Insurance.................................................1314

Sky....................................................................16

Mining.............................................................17

Smith & Nephew......................................21

Telecoms......................................................14

State Street................................................20

People

Uber.................................................................13

Ashcroft, Lord.............................................6

VTL.................................................................20

Bieler, Paula..................................................2

Valeant...........................................................13

Bush, Jeb........................................................4

Vanguard.....................................................20

Cameron, David..........................................6

Vesuvius........................................................21

Carson, Ben...................................................4

Volkswagen.............................................8,15

Chauhan, Ashish......................................17

Walt Disney.................................................16

Christie, Chris..............................................4

WisdomTree..............................................20

Graham, Lindsey........................................4

Yahoo.............................................................16

Hague, William............................................6

Yanmar............................................................7

Hester, Stephen........................................13

Zurich Insurance................................13,14

Huber, Berthold........................................15

Sectors

Jaitley, Arun.................................................6

Ka-shing, Li...................................................4
Kerimov, Said.............................................12
Kerner, Mike...............................................13
Kerry, John....................................................4
Modi, Narendra...........................................6
Mondale, Leo.............................................14
Murstein, Andrew....................................13
Obama, Barack...........................................4
Osborne, George........................................6
Ptsch, Hans Dieter...............................15
Rajan, Raghuram.......................................6
Sanders, Bernie.....................................4,13
Schulz, Martin..............................................3
Tayyip Erdogan, Recep.........................2
Terryn, Kristof...........................................13
Thomopoulos, Anthimos.......................3
Trump, Donald............................................4
Tsipras, Alexis.............................................3
Tusk, Donald................................................2
Winterkorn, Martin.................................15
Yellen, Janet..............................................22

Week 39

Jul

Rising numbers of
airline passengers
and 4G mobile
phone subscribers
suggest that
Chinas economic
slowdown does
not look the same
from all points

14

Tuesday 22 September 2015

FINANCIAL TIMES

COMPANIES
INSIDE BUSINESS

Insurance

FINANCE

Zurich defensive as RSA pursuit ends


Mis-steps pile pressure on
chief amid questions over
collapse of 5.6bn deal

Glitch in insurance
M&A comes as deals
look less attractive

RALPH ATKINS ZRICH


PATRICK JENKINS, ARASH MASSOUDI
AND OLIVER RALPH LONDON

Its head of general insurance quits, a few


weeks later big losses are revealed in the
division. A large-scale takeover of a UK
rival is scuppered.
Zurich Insurance was left looking, at
best, accident prone by yesterdays collapse of its planned deal to buy the UKs
RSA Group and warnings about losses in
non-life businesses. Instead of bravely
leading consolidation among European
insurers, the Swiss group found itself on
the defensive, addressing questions
about the management of its own businesses.
The immediate fallout for investors
was limited. The risks involved in a
5.6bn takeover of RSA have been sidestepped, and the forced strategic
rethink increases the likelihood of a
share buyback programme to deploy

In spreadsheet land, the


economics just about
added up. But the reality
would have been different
more than $3bn in excess capital.
But the mis-steps pile the pressure on
to Martin Senn, Zurichs chief executive
for more than five years. The big deal is
off, and the way it was done was not
good, said Stefan Schrmann, analyst
at Vontobel in Zrich. Their reputation
did suffer and the pressure on management will increase it appears tougher
to reach their targets.
Zurich, which was advised by Morgan
Stanley and Evercore, blamed its decision to drop the RSA takeover on an
urgent need to focus on problems in
non-life businesses. Losses on explosions at the Port of Tianjin in China
would reach a bigger-than-expected
$275m, it said. In addition, a review of its
reserve positions relating mainly to US
auto insurance policies would have a
negative affect of $300m on the thirdquarter results.

On September 4, Zurich had


announced Mike Kerner, an American,
had quit as chief executive of general
insurance, citing personal reasons
he wanted to spend more time with his
family who had remained in the US.
In turn, concerns over persistent
weaknesses in general insurance fuelled
board room nervousness about a large
takeover deal. Much of RSA would have
had to be integrated into general insurance. Worse, yesterdays revelations
about losses would have increased significantly the cost of an equity offering
to fund an all-cash bid for RSA. Shares in
Zurich slumped 2.8 per cent to SFr254,
hitting their lowest level in a year.
Some analysts said Zurich was using
the need for higher reserves in the US
an industry-wide phenomenon as an
excuse to extricate itself from a deal that
was proving increasingly unpopular. In

spreadsheet land, the economics just


about added up, said one analyst. But
the reality would have been very different. All the big shareholders opposed it.
It just wasnt tenable.
Others took a more charitable view. I
dont think the wheels are coming off,
said James Shuck, insurance analyst at
UBS. Management have sensibly
decided that to have a big, disruptive
acquisition at a time when they are not
making progress in core businesses, is
not going to appeal to investors.
Mr Senn could complain the bad publicity over the affair was harsh. Zurich
only confirmed it was eyeing RSA after
news of its plans leaked. General insurance is also having a streak of misfortune. As well as the explosions in China,
the company was hit earlier this year by
a large fire at Clandon Park, a stately
home in the UK which it insured.

Investors were
largely relieved
Zurich would no
longer be paying
over the odds
for a mid-tier
British insurer
Adrian Moser/Bloomberg
News

Despite the profit warning, investors


were largely relieved on hearing yesterdays announcement that Zurich would
no longer be paying over the odds for a
mid-tier British insurer with little global
relevance. Mr Senn suggested Zurich
could announce the return of up to $3bn
of excess capital to investors by next
February. Longer term, however, analysts questioned the companys outlook.
The problem for Zurich is that once the
$3bn has been paid out, there is little
prospect of a higher dividend, said
Andrew Crean, insurance analyst at
Autonomous Research.
The combination of a U-turn on RSA
and the downbeat organic outlook may
mark a power shift in Zurichs upper
echelons. Analysts said Mr Senn had lost
credibility over the affair, paving the
way for George Quinn, finance director,
to take over from him next year.

Withdrawal. Aftermath

Awkward questions for Hester after suitor walks away


RSA chief may focus on cost
savings and profitability in
wake of dropped offer
EMMA DUNKLEY AND OLIVER RALPH
LONDON

Zurich Insurances U-turn on acquiring


RSA Group has raised questions over
the UK insurers future as a standalone
business and whether chief executive
Stephen Hester will stay at the
company.
The former Royal Bank of Scotland
boss was expected to leave RSA following a successful takeover by Zurich.
However, yesterday some analysts were
debating whether Mr Hester would stay
on and finish the job of turning around
the FTSE 100 insurer after successfully
executing the bulk of his restructuring
plans or move on.
Barrie Cornes, an analyst at Panmure
Gordon, said: It wouldve been a great
deal for Stephen Hester to have got
away.
Hes come in, cleaned up the business, so now there are only three core
divisions Canada, Scandinavia and
the UK. Had he been able to get a cash
bid at 550p, that wouldve been fantastic.
However, he argues the outlook for
RSA is not rosy. The trading environ-

Oliver
Ralph

ment is tough, while too much money is


moving around the general insurance
system. The earnings outlook for RSA
is not great, he adds.
The opportunity for future bidders is
also restricted by Zurichs abandoned
bid, he argues.
RSA noted that Zurichs decision to
withdraw was not a result of its due diligence exercise, which was in line with
expectations. But it would be a ballsy
move for another company to take it on
if there was a future problem in the business that was not spotted in the due diligence phase, Mr Cornes says.
RSAs large pension scheme and deficit could also restrict the pool of potential future bidders for the group, he
adds.
A lot of the glory stuff has been done
the disposals, sorting out the debt
that is the stuff Hester relishes in, says
Eamon Flanagan of Shore Capital.
However, he says it would still be a
bit of a surprise if Mr Hester walked
away.

A lot of the glory stuff has


been done the disposals,
sorting out the debt the
stuff Hester relishes in

Analysts believe his role now is to


focus on cost savings and improvements
to the operational side of the business.
They need to improve the core things
for an insurer costs, claims handling,
pricing and risk selection. It is all to do
with margins, says Sami Taipalus, analyst at Berenberg. They have underperformed competitors in their core markets on profitability.
Since being appointed chief executive
in February 2014, Mr Hester has set
about shoring up the balance sheet. The
process started with a 775m rights
issue last year, which was followed by
disposals in Hong Kong, Singapore,
China, Thailand and India.
With the balance sheet repaired and
margins restored, many investors will
be hoping that Mr Hester can set about
improving RSAs dividend. For the first
half of this year, the company paid out
3.5p per share, or 17 per cent of its net
profits.
Over the next three or four years,
we should be going up to 70 to 80
per cent, says Mr Taipalus.
With the bulk of restructuring
completed following the recent
exit from Latin America with
the sale of the unit to Grupo
Sura for 403m, Mr Hester
faces a more mundane but
nonetheless tough task ahead.
Mr Cornes believes it will

Stephen Hester:
RSA chief had
been widely
expected to step
down in the
event of a
takeover by
Zurich

take a very long time for Mr Hester to


reach the 550p price, and will have to
continue to refine the three core businesses, reduce costs, and await an
improvement in the underwriting cycle.
RSA yesterday said Mr Hester
remained committed to the companys
strategy and improving the strategic
focus and operational performance of
the business.
Whether Mr Hester stays or departs
acquisition speculation will hang
around RSA for some time to come.
With Zurichs withdrawal other rivals
could be waiting for their chance. Analysts think that large insurance groups
from Europe, North America or Asia
could be interested in making an
approach for the UK company.
Allianz could come in. From their
perspective, there is no need to rush;
they can let the story stabilise. Its
something thats possible,
says Mr Flanagan of Shore
Capital.
Zurich targeted RSA
strategically for Canada
and Scandinavia, and
the potential for cost
savings in the UK, he
notes. Allianz is one of
very few that could tick all
those boxes that Zurich did;
others would struggle to get
550p, he adds.

as this when it all ended? Was yesterday


the moment when everyone realised that
insurance dealmaking had gone too far,
and that it was time for a cold shower and a
rethink? Zurich has abandoned its
planned 5.6bn offer for UK rival RSA, citing problems in
its existing general insurance business. Shares in both
companies dropped in response.
Zurich shareholders might well have cause to be relieved
about the end of the Swiss insurers pursuit. The group is
aiming for a return on equity of 10 per cent on its investments. At the mooted 550p per share level, the deal would
only just have made it past that target. Any hiccups in integration, and the deal could have ended up looking like an
expensive mistake.
The collapse of the putative takeover was a rare glitch in
the world of insurance M&A. Barely a week has gone by
without some sort of deal being announced or proposed,
and the trend has accelerated over the summer. This
month alone, there have been discussions between Phoenix Group and Guardian Financial Services, and the
3.5bn proposed acquisition of Amlin (a Lloyds of London
specialist) by Japans Mitsui Sumitomo. According to data
provider Dealogic, the total value of insurance deals has
reached $100bn so far this year compared with $73bn
for the whole of 2014 and $47bn in 2013.
It is tempting to bunch all of these deals some completed, some agreed and
some still being negotiated
It is tempting to
under one banner, and conclude that there is a single bunch all of these
theme driving them. Temptdeals under one
ing, but wrong, as there are
big differences among them. banner; tempting
Take the life assurance
but wrong
sector. Last Decembers
5bn UK acquisition of
Friends Life by Aviva was driven by a desire to improve
cash generation. More recently, changes in the UK annuities market helped prompt the proposed merger between
Just Retirement and Partnership. The Phoenix/Guardian
talks are an effort to consolidate life assurers that are no
longer open to new business. There is little to unify those
three deals.
Life assurance dealmaking is in any case relatively
muted. The non-life part of the sector has been far busier.
As well as Mitsui/Amlin, there have been deals (or potential deals) involving Ace and Chubb; Brit and Fairfax; XL
and Catlin; and HCC Insurance and Tokio Marine.
Here, at least there is a common thread. One is the need
to find profit growth. Low interest rates have put property
and casualty profitability under pressure in two ways. One
is that low returns elsewhere have pushed capital into
insurance. That new capital, combined with relatively few
large weather catastrophes, has been pushing prices down.
According to Standard & Poors rates for property reinsurance in the US fell between 5 per cent and 20 per cent in the
July 2015 renewals. The
other is that low interest
Deals after the
rates push down returns on
the bonds the insurers hold.
M&A boom start
In a report this year, Fitch
to look expensive
forecast that for the US property and casualty business, or strategically
return on surplus (an indusunsound
try measure of profitability
similar to return on equity)
would fall from 8.1 per cent in 2014 to 6.5 per cent this year.
Faced with such declines, all that insurers can do is cut
costs, hence the rush to consolidate.
The other trend pushing insurers to combine is a desire
to diversify. The clearest example of this has been outbound activity from Japan.
As if to underline the importance of diversification, last
week Standard & Poors lowered its ratings on 10 Japanese
insurers. The move was based on a downgrade to the Japanese sovereign rating because both their business franchises and assets are highly concentrated in Japan, the
insurers were affected.
Meanwhile Exor, the investment vehicle of Italys
Agnelli family, sees its $6.9bn acquisition of Partner Re as a
way to balance its exposure to industrial assets.
None of the trends low interest rates, pricing pressure,
regulatory change and the need to diversify will disappear any time soon. But the wave of dealmaking is not
cheap for the buyers. The Mitsui offer for Amlin, for example, has come in at 16 times forecast earnings. Over the
past 10 years, the insurer has rarely traded above 11.
By the later stages of an M&A boom, all the obvious deals
have been done. Deals that come after that start to look
either expensive or strategically unsound, and the risk of a
Zurich/RSA style collapse is higher. Do not assume that all
heady days will be good ones.
oliver.ralph@ft.com

Telecoms

Inmarsat and Deutsche Telekom link up to provide 4G broadband on European airlines


DANIEL DOMBEY LONDON

Fast 4G internet connections are coming to airline passengers in Europe and


beyond, delivering a blow to those who
still relish being cocooned in an aircraft
largely incommunicado.
Inmarsat, the FTSE 100 satellite company, and Deutsche Telekom yesterday
announced a partnership to allow millions of European airline passengers to
use their smartphones and other
devices in the air as they do on the
ground.
Inmarsat said that market pressure

had pushed the industry to solve the


hideously complicated technical and
regulatory problems of providing faster
and better connections aboard aircraft.
The goal is to carry the broadband
experience people have become accustomed to on the ground to the aircraft,
said Leo Mondale, Inmarsats head of
aviation, adding that Deutsche Telekom
would also take on part of the capital
investment.
The partnership will pool Inmarsats
European satellite and Deutsche Telekoms network to provide coverage
throughout the EUs 28 member states.

This way it would be able to provide


access via satellite at high altitudes and,
drawing on Deutsche Telekoms network.
Inmarsat is also in the final stages of
putting in place a separate three satellite
system to provide global high speed coverage, the final satellite of which it
launched last month. The system will be
initially trialled next year by Lufthansa
which will later also test the European
network ahead of a broader rollout
envisioned for 2017.
Mr Mondale said that while Inmarsat
did not intend to engage in a speed

war, it would provide 4G style speeds


to passengers with data transferring to
aircraft as a whole in tens of megabits
per second, although passengers individual experiences would depend on
how much demand there was.
The satellite group says the speeds
offered by its partnership with Deutsche
Leo Mondale: goal
is to have level of
broadband on
aircraft that people
are used to to on
the ground

Telekom will be far faster than those


provided by Gogo, a company that uses
a cellular network across the US to provide services to more than 2,400 commercial and 6,800 business aircraft.
But Gogo last month received final
approval from the USs Federal Aviation
Administration to begin in-flight testing
of its own second generation satellite
connectivity system and expects to
begin commercial service this year.
Gogo says it has signed up seven commercial airlines to the system, which it
expects to provide peak speeds of more
than 70 megabits per second to the air-

craft, and plans to begin installing the


system to some 500 aircraft next year.
For some passengers, airborne broadband has already arrived. Panasonic
offers what it labels the only global,
broadband in-flight connectivity service available in the world today, which
allows users to access the internet and
watch video on a seat-back screen or
their own devices.
But Inmarsat depicts its own planned
global service as more seamless, based
on a single network of satellites rather
than a patchwork and providing more
reliable speeds as a result.

Tuesday 22 September 2015

15

FINANCIAL TIMES

COMPANIES

VW woes cast
doubts over
chief s place in
driving seat

Rocky road

EU regime
Failure to act raises
uncomfortable question

Winterkorn in spotlight as investors


seek clarity on emissions test problem
CHRIS BRYANT FRANKFURT
ANDY SHARMAN LONDON

Allegations by a US regulator that


Volkswagen breached environmental
legislation by cheating in diesel vehicles
emissions tests threaten to plunge the
German carmaker into its biggest crisis
in a generation.
There is no way to put an optimistic
spin on this this is really serious, says
Max Warburton, analyst at Bernstein
Research.
VWs shares fell 18.6 per cent yesterday the third largest decline ever as
analysts struggled to put a price on the
US scandal. Europes largest carmaker
could face a multibillion-dollar fine,
plus the cost of recalling and refitting
482,000 vehicles. There is also the possibility of lawsuits over the affair.
Questions are being raised about the
future of Martin Winterkorn, VW chief
executive, as investors seek clarity on
whether the companys problems are
confined to the US, or could have
occurred in other regions. The German
government yesterday suggested it
would investigate the matter.
Investors also want to know if other
carmakers have been engaged in similar
practices to VW the share prices of
several automobile manufacturers fell
yesterday. There is a growing sense of
distrust about carmakers statements
on the performance of their cars, partly
because some have been fined for misleading comments on fuel efficiency.
The US Environmental Protection
Agency said on Friday that VW installed
defeat device software on its diesel
cars that meant they would activate
emissions control systems for testing,
but thereafter the vehicles could release
nitrogen oxides at up to 40 times the
permitted level.
Defeat devices are illegal in Europe
and the US, and Germanys other leading carmakers sought to distance themselves from the scandal. BMW and
Daimler said the accusations made by
the EPA did not apply to them, and their
shares recovered some of the earlier
falls yesterday, although both stocks
still closed down.
Perhaps the most serious risk to VW is
damage to its brand defined by perceived virtues such as trust, engineering
excellence and fuel economy.
The investigation by the EPA represents the biggest scandal at VW since it
emerged in 2005 that company cash
was used to pay for prostitutes and holidays for labour representatives.
The allegations by the EPA would be
damaging for any company but they
could not have happened at a worse
moment for VW.
Its shares have underperformed in
recent months, weighed down by VWs
exposure to the economic slowdown in
China, one of its important markets.

Q&A

Concerns raised over


diesel emissions tests
What have US regulators accused
Volkswagen of doing?
The Environmental Protection Agencys
complaint says Volkswagen has
admitted that some of its dieselpowered vehicles in the US feature a
defeat device. Essentially the car
detects when an emissions test is under
way and changes the way it operates to
improve its results.

VW is also still reeling from a leadership battle that forced the resignation of
Ferdinand Pich, its patriarch and
chairman, in April.
Mr Winterkorn emerged the victor in
that tussle, and earlier this month VW
tried to draw a line under the episode by
announcing it intended to extend his
contract until 2018. Now, his tenure
could be at risk.
Mr Winterkorn is an accomplished
engineer and prides himself on knowing
every tiny detail of VWs cars.
The alleged cheating identified by the
EPA dates back to the 2009, two years
after he took the top manager role at
VW. Important vehicle engineering
decisions are usually taken at VWs
headquarters in Germany.
Either Winterkorn knew about [the
cheating] and should resign, or he didnt
know, and should resign anyway, says
Ferdinand Dudenhffer, automotive
expert at the University of DuisburgEssen.
This is bad stuff. It smells of lack of
control, hubris and denial, says Arndt
Ellinghorst, analyst at Evercore ISI.

Share price and index (rebased, $ terms)


100
95
90
85
Other carmakers*

Either Winterkorn knew


about [the cheating] and
should resign, or he didnt
and should resign anyway

70
Volkswagen
Apr

2015

10 to 40 times permitted levels when the


controls are turned off. In past cases
involving defeat devices, carmakers have
used them to enhance fuel economy.
So this has happened before?
The EPA in 1998 fined various makers of
diesel engines for including defeat
devices in the software monitoring the
emissions of heavy truck engines. In
those cases, emissions were found to be
as much as three times permitted limits.
Earlier in the 1990s, both the USs Ford
and Japans Honda paid fines for
installing software that caused their
vehicles to emit more pollutants than
they otherwise would have done. More

What does it do the rest of the time?


According to the EPA, when the device
senses a test is under way, it switches
on a series of emissions controls. But
under all other circumstances the
controls are turned off.

Some VW vehicles are said to have a


defeat device for emissions tests

65

Sep

A big player in the small US diesel car market

Volkswagens market share in the US


%

% share
Other carmakers

100

3.2

80

3.0
2.8
2.6

40

2.4

20
Volkswagen
2010

11

12

Sources: Bloomberg; Hybridcars.com

This latest saga may help catalyse further management changes at VW.
The EPA disclosed on Friday that VW
admitted certain diesel cars contained
defeat devices, and on Sunday, Mr Winterkorn said he was deeply sorry the
company had broken the trust of customers and the public.
He said he had ordered an external
investigation, adding: We do not and
will not tolerate violations of any kind of
our internal rules or of the law. VW
declined to comment further yesterday,
saying its investigation was continuing.
Following Mr Pichs departure, VW
no longer has a strong chairman that
could swiftly force management
changes. VWs supervisory board,
which decides on the hiring and firing of
top management, is being temporarily
led by Berthold Huber, a trade unionist.
Hans Dieter Ptsch, VW finance
director, is preparing to take on the
chairmans job but not until an extraordinary general meeting in November.
The EPA case seems likely to further
harm VWs sales in the US. VW broke
ground on a new US plant in Chattanooga, Tennessee, in 2009, which
became emblematic of its desire to
finally crack the US market after an earlier attempt in the 1970s foundered.
Initially, VW won new US customers

80
75

60

How does that work?


The EPA has given few details but it
says the software senses whether a test
is under way based on various inputs.
These including the steering wheels
position, the vehicle speed, duration of
engines operation and the air pressure.

Why does that matter?


The EPA says emissions of nitrogen
dioxide and other harmful pollutants are

Volkswagen under a cloud

13

2.2

0
14

15

2.0
2011

12

*Includes Toyota, GM, Ford, Daimler, Fiat Chrysler, BMW, Honda, Peugeot and Renault

with clever advertising of its competitively priced sedan cars.


However, VWs sales have fallen in the
US since 2013, after the group failed to
renew existing models or meet demand
for pickups and sport utility vehicles.
Jonathan Browning, head of VW in
the US, quit in 2013 for personal reasons, having taken the role in 2010. He
was replaced by Michael Horn, a longserving VW executive.
As well as hurting VW, the US scandal
could have a broad, damaging effect on
all carmakers sales of diesel vehicles.
Stuart Pearson, analyst at Exane BNP
Paribas, says the affair is only the latest
setback for diesel, which is coming
under growing pressure from regulators
concerned about harmful emissions of
nitrogen oxides.
Diesel is a marginal fuel technology in
the US, but accounts for more than 50
per cent of sales by all carmakers in
western Europe. Were similar accusations to be proven in Europe, the implications would be much greater, both in
reputational terms but also in volume
terms, says Kristina Church, analyst at
Barclays.
Additional reporting by Robert Wright in
New York
See Lex
recently, in 2014, two Korean carmakers
Hyundai and Kia paid fines to the
EPA for overstating their fuel economy.
What can happen to VW?
The EPA has the power to fine a
company up to $37,500 for a noncompliant vehicle. That figure which has
led to speculation that the company
could be penalised up to $18bn for the
482,000 vehicles involved. However, in
past EPA rulings, fines per vehicle tend
to get smaller after the first 10 vehicles,
in a complex formula. While the fines
and other costs are likely to be
substantial, it is hard to predict exactly
what they will be.
Although diesel cars accounted for
just 4 per cent of the US market last
year, VW and Audi its premium brand
sell far higher proportions of diesel
vehicles in the US than most other
manufacturers, branding them clean
diesel. Analysts are concerned that the
case could also have an impact on sales.
Is it only a US or VW problem?
The German government has
announced plans to examine whether
emissions data has been manipulated,
and both the EPA and California Air
Resources Board which was key to
raising concerns about the issue have
now begun procuring other
manufacturers vehicles to test for
similar devices. The California body said
on Friday it acted after some testing
outfits in Europe conducted tests that
got its attention. Robert Wright

13

14

15

The sight of a US regulator alleging


that VW, a European carmaker, has
cheated during pollution measuring
tests raises an uncomfortable
question for EU authorities.
Why did the Environmental
Protection Agency act when
Americans drive so few diesel cars
compared with Europeans?
Diesel vehicles accounted for less
than 4 per cent of US car market
sales last year, compared with more
than 50 per cent in most of Europe,
where governments have
encouraged their use.
European environmental
campaigners said the answer lies in
an EU enforcement system that is
far less robust than its US
counterpart.
Its not fit for purpose, said
Greg Archer of Transport &
Environment, a Brussels-based
campaign group for greener
transport.
He said that the EPA acted after
another environmental group, the
International Council on Clean
Transportation, tested diesel
vehicles in 2013 and 2014 and
found some VW cars were emitting
far more nitrogen oxides than
standards permitted. This couldnt
have happened in the EU easily
because there is no equivalent
body to the US EPA, he said.
Instead, Brussels sets emissions
standards that are enforced by the
28 EU member states, making it
hard for potential breaches to be
uniformly investigated.
The system also allows
carmakers to shop around
different countries for approval,
claimed Mr Archer. The agencies in
each country that oversee testing
may also be reluctant to investigate
problems because many are paid
by carmakers under cost-recovery
procedures, he added.
The Transport & Environment
group said the EU needs to set up
an independent authority, funded
by a 20 levy on every vehicle sold,
to make sure potential problems
are properly investigated.
Pilita Clark

16

Tuesday 22 September 2015

FINANCIAL TIMES

COMPANIES

Technology. Spin-off problem

Technology

Disney invests
in virtual reality
start-up Jaunt
European, Chinese and
US media groups join
in $65m fundraising
TIM BRADSHAW SAN FRANCISCO

Media investors from Hollywood to


Europe and China are backing virtual
reality start-up Jaunt to help them figure out how to create 3D, 360-degree
videos for headsets such as Facebooks
Oculus Rift.
Walt Disney is among the companies
leading a $65m investment in the Silicon
Valley-based provider of technology for
producing and distributing virtual reality content.
Jaunt did not disclose a valuation for
the company, but based on similar fundraisings it is likely to be in the hundreds
of millions of dollars.
The round is among the biggest yet for
a virtual reality software company as
developers and media groups prepare
for the launch of headsets from Facebooks Oculus and Sony PlayStation in
the coming months.
Alongside Disney, Jaunts new investors include China Media Capital, the
state-backed investment fund, and Evolution Media Partners, a joint venture
between talent agency CAA, TPG
Growth and Participant Media, the Hollywood producer behind Lincoln and An
Inconvenient Truth.
European media companies ProSiebenSat.1, Axel Springer and Sky, a previous investor, also participated in the
round.
Jaunts fundraising comes ahead of
the Oculus Connect event in Los Angeles
this week, where developers will showcase their apps for the Oculus Rift headset. It follows the launch of virtual-reality camera rigs by GoPro and Nokia,
amid a wider search in Silicon Valley for

the next big technological trend after


smartphones. Founded in 2013, Jaunt
has worked with musicians including
Sir Paul McCartney and Jack White, as
well as the makers of The Hobbit films
and fashion magazine Elle, to create
short films aimed at smartphone-based
virtual-reality systems such as Google
Cardboard and Samsungs Gear VR.
While many virtual reality developers
are focused on gaming and digital animation-based content, Jaunts expertise
is in live-action video. Disney-owned
broadcaster ABC has already worked
with the start-up to produce a virtualreality news report from Syria.
Jaunts appeal to media companies
looking to make their first foray into virtual reality is what it calls its end to end
solution, including a rig of multiple
cameras and microphones for capturing
content. This can then be put through
its software to create high-quality 360degree videos.
Alongside its technological expertise,
in April Jaunt hired three former Lucasfilm executives to launch its studios
arm, based in Hollywood, to work
directly with filmmakers and artists.
Rick Hess, founder of Evolution
Media Partners, called Jaunt a pioneer
and said it would give the company
access to its network of brands and artists. Jaunts expertise provides a
groundbreaking medium for exploring
these new avenues.
Hanno Fichtner, chief digital strategy
officer of ProSiebenSat.1, said: Virtual
reality will trigger an entertainment
revolution similar to what our core
media of TV did. After previously raising funds from Google Ventures, Highland Capital, Redpoint Ventures and SV
Angel, the round takes Jaunts total
funding above $100m.
Additional reporting by Henry Mance
in London

Yahoos 15 per cent stake was once its prize asset, but a year after Alibaba listed in New York, it has become a prize problem Krisztian Bocsi/Bloomberg

Alibaba the albatross around Yahoos neck


Tech group has bewildering
array of choices over its stake
in China ecommerce venture
HANNAH KUCHLER SAN FRANCISCO
JAMES FONTANELLA-KHAN NEW YORK

The biggest decision facing the Yahoo


board is not about the direction of its
own business but how it will dispose of
shares in another company.
Yahoos 15 per cent stake in Alibaba
was once its prize asset, luring investors
eager to buy into the Chinese ecommerce group before it was public. A year
after Alibaba listed in New York, it has
become a prize problem.

In the past two weeks, Yahoo had its


hopes to spin off the Alibaba shares in a
tax-efficient and investor-pleasing
manner dashed, as the US Internal Revenue Service first denied its request for a
letter of approval and then issued a
notice saying it was concerned that
deals of the type Yahoo is contemplating
could be becoming less justifiable.
The spin-off scheduled for the
fourth quarter now hangs in the balance, as the board said in a filing that it
would consider all options. Yahoos core
business may be languishing, with some
key senior staff leaving last week, but it
has to focus on this one big choice.
Here are some of their options.
Press ahead. Yahoo has said it
stands by the advice from its lawyers,
which say the spin-off would be legal
and minimise its tax burden. The IRS
has not ruled out approving the deal, it
just has not issued a private letter ruling
that it would give Yahoo a guarantee to
press ahead. Scott Kessler, an analyst
from S&P Capital IQ, said the IRS decision was not positive but also not a
certain negative.
Brian Wieser, an analyst at Pivotal
Research, said Yahoo had to hope that
as well as having lawyers who understand the letter of the law, they also had
somebody with their ear to the ground
on how policy was being interpreted and
changed.
Robert Willens, who runs a tax advisory firm, said the opinion of Yahoos
lawyers was unequivocal. He added
that it may have noted that the notice
issued by the IRS did not say it was preparing regulation, or that the regulation
would be dated from the issue of the
notice, as it has done in other cases.
Further comfort for Yahoo came over
the weekend when Robert Wellen, an
associate chief counsel for the IRS, told

Bloomberg BNA that any change in the


rule applying to tax-free spin-offs would
not be retroactive.
Put everything on hold. Waiting is
probably the safest option but it could
also be expensive, as investors could
punish the Yahoo stock for not giving
them clarity on how they will get their
Alibaba payday.
Shares in Alibaba have dropped
almost 40 per cent since the start of the
year, when Yahoo proposed the spin-off.
This means that both the value of the
stake at about $24.8bn from last
weeks stock price has fallen significantly, as has the value of the tax bill. If
one believes that Alibaba stock will
rebound, it could make sense to wait
and see. However, if Alibabas stock

Legal Notices

Business For Sale

Flipping the spin-off


might be the best way to
minimise risk in case the
spin-off ends up taxed
price continues to come under pressure,
Yahoo could feel the need to sell it or
spin it off.
Spin off Yahoos core business.
Some analysts and tax experts believe
that it could make sense for Yahoo to
spin off its core business into a new
entity, while leaving the Alibaba stake as
the original company. Flipping the
spin-off element might be the best way
to minimise the risk in case the spin-off
ends up being taxed, said one senior
lawyer. Given that Yahoos core business is significantly smaller than the
value of the Alibaba stake they would
face a much smaller tax bill for that.
Under the current structure, Yahoo
risks a tax bill that could be as high as

Property

Notice to Advertisers
Calls to the Financial Times Advertising Department
may be monitored.
Acceptance of any advertisement for publication will be
subject to the then current terms and conditions of
insertion of advertisements in FT publications.
A copy of the terms and conditions of insertion of
advertisements in FT publications can be obtained from
+44 (0)20 7873 3000, or viewed at
www.FT.com/advertising

$9bn, although the actual bill would


depend on the value of the stock price of
Alibaba at the time it is taxed. Meanwhile, the tax exposure on spinning out
Yahoos core business would be closer to
$1.5bn, said two lawyers.
However, some suggested that there
might be other reasons in the companys
structure that led Yahoo not to go down
this route in previous years. Mr Willens
said it can sometimes be hard to transfer
assets, especially intangible intellectual
property, permits, licences and leases to
a new spin-off company, making it a
potential pain in the neck.
Sell debt that swaps for Alibaba
equity. Yahoo could defer the tax paid
on Alibaba stock by issuing bonds that
convert into Alibaba stock at maturity.
This would follow the example of Comcast, the US cable group, which in 1999
issued bonds that later converted into
stock in Sprint, the telecoms company.
However Mr Willens said this was
not nearly as good as a spin-off
because Yahoo still has to pay tax when
it transfers the stock.
Keep the stake, buy back even
more stock. If Yahoo risks a shareholder
rebellion by abandoning a plan to spin
off Alibaba, it could always quell it by
buying back lots of stock.
Robert Peck, an analyst at SunTrust
Robinson Humphrey, said Yahoo could
find funds to support up to $4bn of buybacks, more than 10 per cent of its share
count, while still investing in search,
acquisitions and keeping a cash balance.
To do this, it would have to combine
its cash on the balance sheet and projected free cash flow with savings and
extra earnings of $750m which Mr Peck
said it could get from switching search
providers and reducing headcount by
2,000 employees. Then, it would have to
borrow $2bn more.

Tuesday 22 September 2015

17

FINANCIAL TIMES

COMPANIES
Mining

Diamond groups
look for China
to regain sparkle
De Beers and Rio Tinto
say recovery of crucial
market will lift prices
JENNIFER HUGHES HONG KONG

Two of the worlds biggest diamond


miners have dismissed fears of a crisis in
the industry and forecast that global
markets will soon recover from the
indigestion caused by Chinas slowdown.
Diamond prices have fallen this year
as dealers have struggled to sell their
existing inventory into softening markets such as China, while also facing
more difficult financing conditions. This
has led to pressure on miners to drop
their prices further, in support.
But both Stephen Lussier, head of De
Beers Forevermark brand, and Alan
Davies, head of Rio Tintos diamonds &
minerals unit, have cited Chinas stillrising wealth as the basis for their longer-term confidence in stronger demand.
They expect an improvement by 2017 at
the latest.
Last year, consumer sales rose 3 per
cent but rough sales were up about 12
per cent in anticipation of stronger
growth into China than was realised,
Mr Lussier told the Financial Times. He
described the recent price pressures as
industry indigestion.
De Beers has already cut its guidance
on expected production twice this year
and last month it lowered rough diamond prices by as much as 10 per cent at
an auction.
It also promised to raise its marketing
spend in an effort to boost demand into
the crucial holiday season.
Mr Davies said demand in China and
India had fallen about 6 per cent this
year, but noted that overall growth
worldwide stood at 2 per cent driven

mainly by the US, which is still responsible for more than a third of the $80bn
market.
Without much new supply and without any demographic changes from
here, the market conditions are in place
for a favourable long-term outlook, Mr
Davies argued.
Some dealers and polishers had been
caught out by unexpectedly sharp slowdown in new store openings on the Chinese mainland after enjoying years of
strong demand.
According to De Beers, diamond jewellery sales in China over the past five
years rose at a compound annual rate of
14 per cent, compared with a 5 per cent
growth rate in the US.
China has become such a big part of
the industry, Mr Davies said.
A small change in demand there has
a bigger effect that at any point in the
past.
Tighter financing conditions have
taken their toll, with banks under
greater regulatory pressure and increasingly wary of lending to the relatively
opaque diamond businesses.
Average prices for top quality 1 carat
stones have dropped about 13 per cent
in the past year, according to the Rapaport group, whose diamond pricing is
widely used in the industry.
Martin Rapaport, chairman of the
group, said prices of rough stones might
need to fall a further 20 per cent to
restore profitability for the mid-market.
He called on the big miners to take
the lead.
Theyre going to need to sell to someone so theyre going to have to adjust
their pricing, Mr Rapaport said.
There has to be a healthy price
differential between rough and polished
to ensure reasonable level of profitability and activity when China does
come back.

Interview. Ashish Chauhan, CEO Bombay Stock Exchange

The Bombay Stock Exchange,


founded in 1875, has placed
flotation at the heart of a wider
push to make up ground on its
rival Dhiraj Singh

Advocate nudging and pushing for listing


Chief pushes for approval to
list as India is thrust into
worlds top 10 equity markets
JAMES CRABTREE MUMBAI

The chief executive of the Bombay


Stock Exchange has urged regulators to
allow Asias oldest bourse to push ahead
with long-delayed flotation plans and
also called for higher foreign investment
limits in Indias domestic exchanges.
The issue has become increasingly
pressing in recent months following
complaints from a number of international investors who had bought stakes
in the two main Indian exchanges, only
to find hopes of selling them via a listing
dashed by regulatory delays.
In theory, the Securities and
Exchange Board of India, the markets
regulator, has backed the idea of floating
the countrys two main exchanges the
BSE and the National Stock Exchange,

its larger competitor a move that


would bring India into line with other
global economies, where major bourses
are listed. But since the BSE applied for
permission to float in 2013, its application has been stuck in limbo, forcing it to
mothball plans to raise $1bn through an
initial public offering.
We still want to do it, BSE chief executive Ashish Chauhan told the Financial
Times. As soon as we get that approval,
we would be able to float within a few
months.
Exchanges are keen to tap international investors, who have flocked to
India and helped fuel a robust stock
market rally after the election last year
of Narendra Modi as prime minister.
That has propelled the country into the
worlds top 10 biggest equity markets,
with a current total market capitalisation of about $1.44tn.
Mr Chauhan said he continues to
nudge and push regulators to support
his flotation plan. It is basically a fear,
probably, of the unknown that

exchanges are getting listed for the first


time. So, rightfully, they want to think it
over and create a solid framework so
that public trust is maintained.
The BSE, founded in 1875, has placed
flotation at the heart of a wider push to
make up ground on the NSE; its younger
rival, which enjoys a dominant market
share in equity trading of about 85 per
cent.
Since taking over in 2012, Mr Chauhan has focused on fixing the BSEs reputation for subpar technology and weak
governance, while expanding its business in newer markets such as currency
trading.
Boosting foreign investment limits in domestic
exchanges from the current 5 per cent to 15 per
cent would help to
improve performance, Mr
Ashish Chauhan:
framework

Chauhan said, while also attracting


fresh capital, potentially from Germanys Deutsche Brse, which owns 5
per cent of the exchange.
There are interested organisations,
Mr Chauhan said of potential investors.
The way we look at it is that if there is a
larger stake, they [the foreign investors]
have an interest in helping the exchange
connect to the rest of the world, and
come up to the best standards.
However, Mr Chauhan admitted that
India still needed to do more to shed a
global reputation for weak market governance, despite recent tough new laws
targeting securities fraud and insider
trading.
We need to improve, because if that
perception exists it needs to be
changed, he said. We need to
improve our surveillance on people
who are able to come to know about
[inside] information, from
the investors own people, to the brokers people, to the exchanges.

18

Tuesday 22 September 2015

FINANCIAL TIMES

MARKET DATA
WORLD MARKETS AT A GLANCE

FT.COM/MARKETSDATA

Change during previous days trading (%)


S&P 500

Nasdaq Composite

0.54%

Dow Jones Ind

0.30%

FTSE 100

0.68%

FTSE Eurofirst 300

0.08%

Nikkei

Hang Seng

-1.96%

0.99%

-0.75%

FTSE All World $

$ per

$ per

-0.26%

-1.582%

-0.641%

Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS
EUROPE
Index

Aug 22 - Sep 21
S&P 500

All World

New York

2,035.73
1,968.65
Day 0.54%

Month -3.32%

Day 0.68%

New York

IPC

Nasdaq Composite

4,841.88

All World

13,737.00

Year -2.10%

4,877.49

Index

Aug 22 - Sep 21
S&P/TSX COMP

Toronto

Aug 22 - Sep 21
FTSE 100

13,739.21

6,403.45

Year -9.99%

Day 0.08%

Mexico City
43,593.76

43,036.59

per

-0.959%

0.475%

All World

London

Month -1.09%

Year -10.49%

FTSE Eurofirst 300

All World

Month -0.74%

Year 5.71%

Dow Jones Industrial

New York

16,990.69

16,495.79

Day 0.68%
Country

Month -2.95%

Year -4.57%
Latest

Year -4.77%

Bovespa

Day 0.99%

So Paulo
47,201.21

Month -0.97%

Year 0.84%

CAC 40

All World

4,630.99

4,585.50

45,719.64
Month 3.16%

Latest

Previous

Day 1.09%
Country

Month -4.14%
Index

Year 2.79%
23135.37
32553.28
21514.90
4594.31
18432.27
1247.85
1491.91
2063.64
4257.27
5713.99
562.98
487.44
1442.57
1669.45
43565.05
9200.22
427.32
661.79
5712.05
30410.39
624.26
32760.95

10555.28
5194.30
5170.50
2869.70
2240.83
3418.37
5721.12
47264.08
803.73
13646.90
435.10
18538.51
8448.34
9246.86
3245.08
302.62
3097.89
1755.83
1041.06
1264.14
1717.24

Index

Year -18.39%

FTSE Italia All-Share


23372.93
CSE M&P Gen
75.11
74.88
Italy
FTSE Italia Mid Cap
32700.48
PX
983.60
983.45
OMXC Copenahgen 20
960.27
940.87
FTSE MIB
21755.42
EGX 30
7267.52
7266.42
Japan
2nd Section
4563.14
OMX Tallinn
883.31
887.17
Nikkei 225
18070.21
Austria
OMX Helsinki General
7961.62
7873.41
S&P Topix 150
1219.93
Belgium
CAC 40
4585.50
4535.85
Topix
1462.38
SBF 120
3600.28
3564.02
Jordan
Amman SE
2053.98
Brazil
Germany
M-DAX
19640.35
19512.23
Kenya
NSE 20
4236.26
Canada
TecDAX
1746.97
1760.33
Kuwait
KSX Market Index
5744.28
XETRA Dax
9948.51
9916.16
Latvia
OMX Riga
567.78
Chile
Greece
Athens Gen
693.54
697.57
Lithuania
OMX Vilnius
486.47
China
FTSE/ASE 20
204.07
204.80
Luxembourg
LuxX
1426.54
Hong Kong
Hang Seng
21756.93
21920.83
Malaysia
FTSE Bursa KLCI
1639.47
HS China Enterprise
9899.37
10028.38
Mexico
IPC
43593.76
HSCC Red Chip
4012.10
4048.53
Morocco
MASI
9063.19
Hungary
Bux
21238.83
21119.26
Netherlands
AEX
432.80
India
BSE Sensex
26192.98
26218.91
AEX All Share
669.24
S&P CNX 500
6647.15
6636.95
New Zealand
NZX 50
5683.52
Colombia
Indonesia
Jakarta Comp
4376.08
4380.32
Nigeria
SE All Share
30332.68
Croatia
Ireland
ISEQ Overall
6503.93
6467.17
Norway
Oslo All Share
626.63
Israel
Tel Aviv 100
13.92
13.93
Pakistan
KSE 100
32826.24
(c) Closed. (u) Unavaliable. Correction. Subject to official recalculation. For more index coverage please see www.ft.com/worldindices. A fuller version of this table is available on the ft.com research data archive.
10459.99
5096.40
5066.20
2795.20
2244.93
3446.42
5793.15
47201.21
808.60
13739.21
415.31
18552.35
8567.00
9379.26
3306.42
310.81
3156.54
1818.41
1043.32
1248.58
1714.83

Month -1.81%

stock
traded m's
Apple
19.5
Facebook Class A
12.4
Hospira
11.8
Netflix
8.0
Amazon.com
6.5
Tesla Motors
5.7
Bank Of America
4.0
Dow Chemical
3.9
Jpmorgan Chase & Co.
3.8
Biogen Common Stock
3.8

close
price
114.30
95.69
89.95
101.84
546.50
268.88
15.66
44.12
61.51
302.13

Day's
change
0.85
1.29
-0.01
-0.78
6.24
8.26
0.10
0.81
0.57
-12.54

BIGGEST MOVERS

Cyprus
Czech Republic
Denmark
Egypt
Estonia
Finland
France

All World

Seoul

1,876.07

Day -1.96%

Madrid

Month -12.37%

Year 13.73%

Hang Seng

Day -1.57%

Hong Kong

Month -6.90%

Day -0.75%

Milan

Month -4.40%

2,882.27

Year -10.49%

Shanghai Composite

Day 0.09%

Shanghai

Month -4.24%

Year 11.76%

BSE Sensex

Mumbai

27,607.82

3,507.74

21,755.42

21,746.17

Singapore

3,009.78
21,756.93

Year -10.41%

FTSE MIB

Year -4.34%

FTSE Straits Times

22,757.47

Day 0.10%

Month 2.62%

26,192.98

Day 1.12%
Country

Month 0.04%
Index

Philippines
Poland
Portugal

Manila Comp
Wig
PSI 20
PSI General
BET Index
Micex Index
RTX
TADAWUL All Share Index
FTSE Straits Times
SAX
SBI TOP
FTSE/JSE All Share
FTSE/JSE Res 20
FTSE/JSE Top 40
Kospi
Kospi 200
IBEX 35
CSE All Share
OMX Stockholm 30
OMX Stockholm AS
SMI Index

Romania
Russia
Saudi-Arabia
Singapore
Slovakia
Slovenia
South Africa
South Korea
Spain
Sri Lanka
Sweden
Switzerland

Year 3.73%
Latest

Day 1.89%

Previous

7092.41
51437.66
5134.58
2349.25
7170.96
1700.47
808.69
7365.98
2882.27
266.56
653.84
50737.14
35474.71
45379.92
1964.68
236.72
9856.80
7104.37
1465.23
488.85
8782.27

Country

7131.91
51303.79
5075.14
2324.32
7113.40
1710.84
816.56
7470.19
2879.59
264.71
658.31
51044.58
35972.29
45616.07
1995.95
241.12
9847.20
7107.87
1453.11
484.72
8739.22

Taiwan
Thailand
Turkey
UAE
UK

USA

Venezuela
Vietnam

Month -13.86%
Index

Year 35.51%
Latest

Weighted Pr
Bangkok SET
BIST 100
Abu Dhabi General Index
FT 30
FTSE 100
FTSE 4Good UK
FTSE All Share
FTSE techMARK 100
DJ Composite
DJ Industrial
DJ Transport
DJ Utilities
Nasdaq 100
Nasdaq Cmp
NYSE Comp
S&P 500
Wilshire 5000
IBC
VNI

Day -0.10%

Previous

8307.04
1392.73
75099.03
4505.32
2735.00
6108.71
5578.88
3365.51
3761.17
5910.26
16495.79
8120.68
567.11
4340.90
4841.88
10079.67
1968.65
20793.27
13263.35
572.12

Country

8462.14
1390.32
74980.56
4479.05
2748.20
6104.11
5573.55
3365.68
3763.99
5866.85
16384.58
8036.37
564.99
4323.86
4827.23
10031.60
1958.03
20678.74
13536.73
566.25

Month -5.12%
Index
DJ Global Titans ($)
Euro Stoxx 50 (Eur)
Euronext 100 ID
FTSE 4Good Global ($)
FTSE All World
FTSE E300
FTSE Eurotop 100
FTSE Global 100 ($)
FTSE Gold Min ($)
FTSE Latibex Top (Eur)
FTSE Multinationals ($)
FTSE World ($)
FTSEurofirst 100 (Eur)
FTSEurofirst 80 (Eur)
MSCI ACWI Fr ($)
MSCI All World ($)
MSCI Europe (Eur)
MSCI Pacific ($)
S&P Euro (Eur)
S&P Europe 350 (Eur)
S&P Global 1200 ($)
Stoxx 50 (Eur)

Cross-Border

Year -3.31%
Latest

Previous

222.65
3189.90
884.58
5274.22
259.33
1411.37
2803.32
1252.75
899.12
2526.50
1442.85
459.39
3965.09
4264.77
394.04
1630.69
1370.58
2203.70
1416.73
1447.46
1797.90
3067.81

222.12
3157.30
875.91
5280.99
260.01
1397.57
2773.83
1253.18
877.58
2531.10
1463.31
460.52
3923.42
4230.24
398.77
1652.88
1397.08
2227.51
1406.99
1435.04
1795.50
3022.88

UK MARKET WINNERS AND LOSERS

LONDON
ACTIVE STOCKS

stock
traded m's
Sabmiller
153.3
Glencore
133.1
Rsa Insurance
132.3
Sky
125.9
Hsbc Holdings
123.1
Astrazeneca
102.9
Lloyds Banking
95.8
Bp
94.6
Royal Dutch Shell
93.6
British American Tobacco
88.6

close
price
3575.50
119.00
403.30
1020.00
495.10
4379.00
74.23
333.55
1577.50
3558.50

Day's
change
-2.93
-7.00
-104.10
-4.60
5.99
22.83
1.52
0.82
-4.50
17.09

BIGGEST MOVERS

Close
price

Day's
change

Day's
chng%

808.00
1435.00
1550.00
1490.00
1223.00

41.50
55.00
40.00
37.00
28.49

5.41
3.99
2.65
2.55
2.37

403.30
101.10
71.60
139.70
175.10

-104.10
-9.90
-6.50
-11.00
-11.50

-20.43
-8.92
-8.32
-7.30
-6.16

Ups
Paypal Holdings Common Stock
Marathon Oil
Tesla Motors
Owens Illinois
Cabot Oil & Gas

Close
price

Day's
change

Day's
chng%

34.17
16.35
268.88
22.10
24.13

1.25
0.51
8.26
0.67
0.64

3.80
3.22
3.17
3.13
2.72

Ups
Nmc Health
Kier
Synergy Health
Genus
Hargreaves Lansdown

Downs
Mallkrodt
Chesapeake Energy
Lam Research
Biogen Common Stock
Biomarin Pharmaceuticals

75.54
8.57
68.27
302.13
125.83

-6.56
-0.39
-2.95
-12.54
-4.82

-7.99
-4.35
-4.14
-3.99
-3.69

Downs
Rsa Insurance
Petra Diamonds
Premier Oil
Kaz Minerals
Rotork

Based on the constituents of the S&P500 and the Nasdaq 100 index

Index

1,964.68
18,070.21

Year NaN%

Ibex 35

STOCK MARKET: BIGGEST MOVERS


AMERICA
ACTIVE STOCKS

2.87%

3,156.54

Day -0.13%
Country

-0.72%

Aug 22 - Sep 21
Kospi

Tokyo

9,948.51

Day 0.33%

Paris

Previous

Merval
All Ordinaries
S&P/ASX 200
S&P/ASX 200 Res
ATX
BEL 20
BEL Mid
Bovespa
S&P/TSX 60
S&P/TSX Comp
S&P/TSX Met & Min
IGPA Gen
FTSE A200
FTSE B35
Shanghai A
Shanghai B
Shanghai Comp
Shenzhen A
Shenzhen B
COLCAP
CROBEX

Previous

Month 3.36%

Latest

Argentina
Australia

Index

Day 0.07%

Gold $

20,033.52

10,271.70

1,411.37

Index

Aug 19 - Sep 18
Nikkei 225

Frankfurt

10,124.52

Europe

1,427.13

Index

Aug 22 - Sep 21
Xetra Dax

9,856.80
Day 0.30%

Oil Brent $ Sep

ASIA
Index

6,104.11
Month 1.98%

per $

EURO MARKETS
ACTIVE STOCKS

stock
traded m's
Volkswagen Ag Vzo O.n.
2233.7
Daimler Ag Na O.n.
557.1
Nestle N
415.7
Santander
409.5
Telefonica
373.1
Intesa Sanpaolo
364.4
Bbva
335.0
Novartis N
333.4
Roche Gs
307.5
Bay.motoren Werke Ag St
307.4

close
price
162.40
72.28
67.50
5.05
11.30
3.08
7.72
85.79
236.46
85.71

Day's
change
0.00
0.00
0.00
0.00
-0.01
0.00
0.02
0.00
0.00
0.00

stock
traded m's
Toyota Motor
738.5
Mitsubishi Ufj Fin,.
722.9
Mizuho Fin,.
719.0
Sumitomo Mitsui Fin,.
590.7
Nippon Telegraph And Telephone
450.2
Softbank .
426.2
Kddi
422.8
Mitsui & Co.,
312.1
Thb Dai-ichi Life Insurance ,
303.9
Nissan Motor Co.,
279.5

close
price
7234.00
744.00
233.40
4699.50
4333.00
6270.00
2747.50
1509.50
1882.00
1140.00

Day's
change
-104.00
-24.30
-4.40
-154.50
-57.50
26.00
115.50
-44.00
-125.00
-28.00

BIGGEST MOVERS

Close
price

Day's
change

Day's
chng%

BIGGEST MOVERS

109.75
59.51
14.51
63.45
56.09

3.50
1.70
0.40
1.67
1.46

71.65
15.19
5.81
18.14
1.76

-2.35
-0.39
-0.12
-0.33
-0.03

Ups
Essilor Intl.
Akzo Nobel
Eni
Thales
Danone
Downs
Renault
Peugeot
Arcelormittal
Gas Natural
B. Sabadell

Based on the constituents of the FTSE 350 index

TOKYO
ACTIVE STOCKS

Close
price

Day's
change

Day's
chng%

3.29
2.94
2.83
2.70
2.67

Ups
Kddi
Pioneer
Seven & I Holdings Co.,
Jtekt
Mitsubishi Motors

2747.50
281.00
5158.00
1839.00
982.00

115.50
10.00
92.00
19.00
8.00

4.39
3.69
1.82
1.04
0.82

-3.18
-2.54
-2.02
-1.79
-1.62

Downs
Nksj Holdings,.
Thb Dai-ichi Life Insurance ,
Jfe Holdings,.
Ms&ad Insurance Holdings,.
T&d Holdings, .

3526.50
1882.00
1781.00
3308.00
1433.00

-239.50
-125.00
-101.50
-179.00
-75.50

-6.36
-6.23
-5.39
-5.13
-5.00

Based on the constituents of the FTSEurofirst 300 Eurozone index

Based on the constituents of the Nikkei 225 index

Sep 21
price(p)

%Chg
week

%Chg
ytd

7.0
-12.8
2.5
0.9
21.5
-2.8
25.9
12.6
13.0
-25.3
0.3
18.3

FTSE 250
Winners
Spire Healthcare
Centamin
Ocado
Allied Minds
Genus
Udg Healthcare
Entertainment One
Ao World
Onesavings Bank
Nmc Health
Drax
Hunting

364.80
65.05
346.80
515.00
1490.00
532.50
294.40
162.90
400.40
808.00
278.00
427.50

19.8
14.1
9.8
9.0
9.0
8.3
8.2
8.1
7.5
6.4
6.0
5.9

11.5
10.4
-13.3
42.5
19.1
39.1
-8.7
-18.6
86.7
75.7
-39.6
-19.6

FTSE SmallCap
Winners
Xaar
Soco Int
Standard Life Eur Private Equity Trust
Oxford Biomedica
Wanton
Town Centre Securities
Findel
Energy Assets
Blackrock Commodities ome Investment Trust
Vitec (the)
Standard Life Uk Smaller Companies Trust
Development Securities

-6.8
-60.2
32.1
-24.2
-24.5
-20.5
-25.8
2.5
-16.3
-7.2
25.2
-3.2

Losers
Premier Farnell
Rotork
Premier Oil
Fisher (james) & Sons
Petra Diamonds
Kaz Minerals
Evraz
Elementis
Galliford Try
Enterprise Inns
Interserve
Redrow

104.75
175.10
71.60
956.50
101.10
139.70
65.25
216.00
1675.00
108.50
564.50
467.60

-23.5
-16.4
-13.5
-12.1
-10.3
-8.5
-7.9
-7.1
-6.9
-6.2
-6.0
-5.5

-40.5
-24.7
-57.2
-19.6
-47.9
-45.8
-57.8
-17.5
30.1
-5.3
1.3
58.2

Losers
Ferrexpo
Aquarius Platinum Ld
Imagination
Kenmare Resources
Brammer
Braemar Shipping Services
Centaur Media
Ashley (laura) Holdings
Raven Russia Ltd
The Eur Investment Trust
Jpmorgan Eur Investment Trust
Charles Taylor

FTSE 100
Winners
Sabmiller
Randgold Resources Ld
British American Tobacco
Associated British Foods
Hargreaves Lansdown
United Utilities
Hikma Pharmaceuticals
Reckitt Benckiser
Coca-cola Hbc Ag
Aberdeen Asset Management
Unilever
Imperial Tobacco

Sep 21
price(p)

%Chg
week

%Chg
ytd

3575.50
3820.00
3558.50
3175.00
1223.00
890.00
2490.00
5839.00
1388.00
323.00
2628.00
3354.00

22.6
5.4
4.8
4.3
4.2
4.0
3.7
3.5
3.4
3.4
3.4
3.1

Losers
Rsa Insurance
Glencore
Mondi
Rio Tinto
Antofagasta
Rolls-royce Holdings
Johnson Matthey
Kingfisher
Ashtead
Bae Systems
Inmarsat
Vodafone

403.30
119.00
1387.00
2274.50
565.50
696.50
2522.00
347.60
964.50
438.10
999.50
217.40

-20.4
-7.0
-6.2
-5.1
-4.2
-3.6
-3.1
-3.1
-2.9
-2.8
-2.7
-2.6

Sep 21
price(p)

%Chg
week

%Chg
ytd

14190.29
43317.21
8264.90
24073.01
6730.62
15894.73
12405.02
7013.74
5578.37
15787.24
3284.77
1472.38

9.8
3.9
3.8
2.4
2.2
1.7
1.5
1.5
1.4
1.0
0.9
0.8

0.5
6.8
1.6
-2.2
0.0
-3.1
-2.3
7.4
-8.8
23.5
7.6
17.8

Losers
Industrial Metals
642.63
Forestry & Paper
14939.87
Nonlife Insurance
2306.24
Industrial Engineering
7348.61
Mining
9493.38
Chemicals
10151.51
Industrial Transportation
2702.57
Aerospace & Defense
4208.14
Fixed Line Telecommunication 4731.46
Construction & Materials
4961.85
Mobile Telecommunications
4981.88
Electronic & Electrical Equip.
4005.86

-7.8
-6.2
-4.0
-3.6
-2.7
-2.6
-2.5
-2.4
-2.0
-1.5
-1.5
-1.1

-57.7
32.1
19.2
-16.8
-33.4
-10.2
-4.3
-11.4
3.6
20.3
-0.5
-0.6

Sep 21
price(p)

%Chg
week

%Chg
ytd

543.50
158.00
216.00
9.00
209.25
316.25
181.25
555.00
66.00
619.00
342.50
267.50

6.8
6.8
6.5
6.5
5.7
5.5
5.4
5.2
5.2
4.7
4.4
4.3

41.0
-47.9
-1.4
71.4
23.0
16.3
-19.2
23.3
-26.2
4.3
23.3
20.5

Industry Sectors
Winners
Beverages
Tobacco
Food Producers
Personal Goods
Health Care Equip.& Services
Oil Equipment & Services
Pharmaceuticals & Biotech.
Media
Gas Water & Multiutilities
Household Goods
Real Estate Investment Trusts
Software & Computer Services

29.75
7.15
223.00
2.18
275.50
435.50
77.00
26.63
40.50
705.50
230.00
243.00

-48.0
-14.3
-12.3
-10.7
-8.9
-7.4
-7.2
-5.3
-5.3
-5.2
-5.1
-5.1

-43.9
-51.5
-2.6
-32.7
-19.3
6.7
18.5
-9.7
-14.7
-7.5
1.2
-2.8

Based on last week's performance. Price at suspension.

CURRENCIES
Sep 21
Argentina
Australia
Bahrain
Bolivia
Brazil
Canada
Chile
China
Colombia
Costa Rica
Czech Republic
Denmark
Egypt
Hong Kong
Hungary
India

Currency
Argentine Peso
Australian Dollar
Bahrainin Dinar
Bolivian Boliviano
Brazilian Real
Canadian Dollar
Chilean Peso
Chinese Yuan
Colombian Peso
Costa Rican Colon
Czech Koruna
Danish Krone
Egyptian Pound
Hong Kong Dollar
Hungarian Forint
Indian Rupee

DOLLAR
Closing
Mid
9.3854
1.4006
0.3771
6.9000
3.9848
1.3249
683.0400
6.3691
2993.9500
532.3000
24.1675
6.6644
7.8333
7.7500
277.1416
65.7338

Day's
Change
0.0073
0.0168
-0.0002
0.0826
0.0152
6.9900
0.0048
12.7000
-0.0500
0.3739
0.1057
0.0205
0.0000
4.7324
-0.0312

EURO
POUND
Closing
Day's
Closing
Day's
Mid
Change
Mid
Change
10.5069
-0.1625
14.5361
-0.0855
1.5679
-0.0064
2.1692
0.0117
0.4221
-0.0071
0.5840
-0.0042
7.7245
-0.1256
10.6867
-0.0713
4.4610
0.0214
6.1717
0.0876
1.4832
-0.0068
2.0520
0.0100
764.6598
-4.4791 1057.8943
3.8390
7.1302
-0.1105
9.8645
-0.0583
3351.7119 -40.0421 4637.0382
-11.1433
595.9071
-9.7450 824.4277
-5.5795
27.0554
-0.0145
37.4307
0.3332
7.4607
-0.0011
10.3218
0.0958
8.7693
-0.1192
12.1322
-0.0490
8.6761
-0.1410
12.0033
-0.0800
310.2586
0.3399 429.2377
4.5140
73.5886
-1.2319 101.8086
-0.7281

Sep 21
Indonesia
Israel
Japan
..One Month
..Three Month
..One Year
Kenya
Kuwait
Malaysia
Mexico
New Zealand
Nigeria
Norway
Pakistan
Peru
Philippines

Currency
Indonesian Rupiah
Israeli Shekel
Japanese Yen

Kenyan Shilling
Kuwaiti Dinar
Malaysian Ringgit
Mexican Peson
New Zealand Dollar
Nigerian Naira
Norwegian Krone
Pakistani Rupee
Peruvian Nuevo Sol
Philippine Peso

DOLLAR
Closing
Mid
14457.5000
3.9360
120.5250
120.5249
120.5248
120.5238
105.3500
0.3023
4.2665
16.6683
1.5833
199.2500
8.2166
104.3450
3.1910
46.4700

Day's
Change
82.5000
0.0345
0.5700
0.5697
0.5695
0.5676
0.2000
0.0008
0.0595
0.1650
0.0242
0.2300
0.1010
-0.0100
0.0525

EURO
POUND
Closing
Day's
Closing
Day's
Mid
Change
Mid
Change
16185.1058 -169.2740 22391.8529
-20.7770
4.4063
-0.0324
6.0961
0.0131
134.9271
-1.5451 186.6695
-0.3570
134.9270
-1.5453 186.6692
-0.3574
134.9271
-1.5452 186.6690
-0.3579
134.9269
-1.5455 186.6692
-0.3593
117.9388
-1.6899 163.1664
-0.7770
0.3384
-0.0046
0.4682
-0.0020
4.7763
-0.0100
6.6080
0.0487
18.6600
-0.1156
25.8158
0.0850
1.7725
-0.0013
2.4522
0.0214
223.0594
-3.3648 308.5990
-1.7007
9.1984
-0.0346
12.7259
0.0726
116.8137
-1.9105 161.6098
-1.0940
3.5723
-0.0581
4.9422
-0.0330
52.0229
-0.7860
71.9729
-0.3984

Sep 21
Currency
Poland
Polish Zloty
Romania
Romanian Leu
Russia
Russian Ruble
Saudi Arabia
Saudi Riyal
Singapore
Singapore Dollar
South African Rand
South Africa
South Korea
South Korean Won
Sweden
Swedish Krona
Switzerland
Swiss Franc
Taiwan
New Taiwan Dollar
Thailand
Thai Baht
Tunisia
Tunisian Dinar
Turkey
Turkish Lira
United Arab Emirates
UAE Dirham
United Kingdom
Pound Sterling
..One Month

DOLLAR
Closing
Mid
3.7431
3.9469
66.2173
3.7504
1.4103
13.4823
1174.7000
8.3515
0.9720
32.5255
35.8000
1.9651
3.0011
3.6723
0.6457
0.6456

Day's
Change
0.0500
0.0590
0.4623
0.0154
0.2234
11.8500
0.1545
0.0115
0.1630
0.2850
0.0212
0.0141
-0.0004
0.0043
0.0043

EURO
Closing
Mid
4.1903
4.4185
74.1299
4.1986
1.5788
15.0933
1315.0707
9.3495
1.0881
36.4121
40.0779
2.1999
3.3597
4.1112
0.7228
0.7228

POUND
Day's
Closing
Day's
Change
Mid
Change
-0.0112
5.7972
0.0393
-0.0047
6.1129
0.0512
-0.6793 102.5575
0.0363
-0.0683
5.8086
-0.0388
-0.0082
2.1843
0.0094
0.0087
20.8813
0.2089
-7.8983 1819.3786
6.3347
0.0238
12.9349
0.1546
-0.0046
1.5054
0.0079
-0.4065
50.3756
-0.0820
-0.3273
55.4471
0.0743
-0.0116
3.0436
0.0127
-0.0386
4.6480
-0.0091
-0.0672
5.6877
-0.0385
-0.0069
-0.0069
-

Sep 21
..Three Month
..One Year
United States
..One Month
..Three Month
..One Year
Venezuela
Vietnam
European Union
..One Month
..Three Month
..One Year

Currency

United States Dollar

Venezuelan Bolivar Fuerte


Vietnamese Dong
Euro

DOLLAR
Closing
Mid
0.6456
0.6455
6.3013
22470.0000
0.8933
0.8932
0.8931
0.8923

Day's
Change
0.0043
0.0043
0.0113
-5.0000
0.0143
0.0143
0.0143
0.0143

EURO
POUND
Closing
Day's
Closing
Day's
Mid
Change
Mid
Change
0.7227
-0.0069
0.7221
-0.0069
1.1195
-0.0182
1.5488
-0.0103
1.1194
-0.4396
1.5488
-0.0103
1.1193
-0.4396
1.5487
-0.0103
1.1185
-0.4397
1.5486
-0.0103
7.0542
-0.1019
9.7594
-0.0476
25155.0811 -414.6771 34801.6134
-240.1213
1.3835
0.0130
1.3834
0.0130
1.3833
0.0130
1.3828
0.0130

Rates are derived from WM Reuters Spot Rates and MorningStar (latest rates at time of production). Some values are rounded. Currency redenominated by 1000. The exchange rates printed in this table are also available at www.FT.com/marketsdata

UK SERIES

FTSE ACTUARIES SHARE INDICES

www.ft.com/equities

Produced in conjunction with the Institute and Faculty of Actuaries

Strlg Day's
Euro
Strlg
Strlg
Year
Div
Sep 21 chge%
Index
Sep 18
Sep 17
ago yield% Cover
FTSE 100 (100)
6108.71
0.08 6599.55 6104.11 6186.99 6773.63 3.97 1.44
FTSE 250 (250)
16893.31 -0.34 18250.71 16950.73 17043.45 15744.61 2.51 2.14
FTSE 250 ex Inv Co (211)
18413.92 -0.36 19893.50 18479.58 18589.91 17007.57 2.53 2.23
FTSE 350 (350)
3413.87
0.00 3688.18 3413.82 3455.23 3678.66 3.71 1.52
FTSE 350 ex Investment Trusts (311) 3391.91
0.01 3664.45 3391.68 3433.60 3661.47 3.74 1.52
FTSE 350 Higher Yield (107)
3115.16 -0.07 3365.47 3117.23 3158.44 3681.69 5.52 1.18
FTSE 350 Lower Yield (243)
3388.96
0.07 3661.27 3386.57 3423.86 3315.32 1.86 2.57
FTSE SmallCap (294)
4551.50 -0.17 4917.22 4559.47 4579.09 4419.22 2.80 1.72
FTSE SmallCap ex Inv Co (158)
4170.94 -0.21 4506.08 4179.52 4191.33 3904.00 2.71 2.47
FTSE All-Share (644)
3365.51 -0.01 3635.94 3365.68 3405.53 3613.37 3.67 1.53
FTSE All-Share ex Inv Co (469)
3329.64
0.00 3597.18 3329.57 3370.05 3584.27 3.72 1.54
FTSE All-Share ex Multinationals (579) 1170.23
0.03 1047.84 1169.85 1179.33 1109.11 2.70 2.05
FTSE Fledgling (107)
7787.39
0.01 8413.12 7786.39 7776.36 6968.27 2.38 0.80
FTSE Fledgling ex Inv Co (55)
11004.06 -0.02 11888.25 11006.38 10995.22 8602.63 2.36 0.54
FTSE All-Small (401)
3159.58 -0.16 3413.45 3164.79 3177.49 3055.84 2.78 1.67
FTSE All-Small ex Inv Co Index (213) 3117.75 -0.20 3368.26 3123.92 3132.22 2895.17 2.70 2.40
FTSE AIM All-Share Index (837)
739.82 -0.31
799.27
742.09
740.73
759.77 1.42 1.12
FTSE Sector Indices
Oil & Gas (18)
6034.15
Oil & Gas Producers (11)
5696.23
Oil Equipment Services & Distribution (7)16525.33
Basic Materials (31)
3341.13
10873.11
Chemicals (8)
Forestry & Paper (1)
16302.15
Industrial Metals & Mining (2)
680.36
Mining (20)
9098.48
Industrials (117)
4274.95
Construction & Materials (13)
5171.06
Aerospace & Defense (9)
4378.08
General Industrials (6)
3507.38
Electronic & Electrical Equipment (11) 5177.77
Industrial Engineering (14)
7847.98
Industrial Transportation (8)
4044.07
Support Services (56)
6408.94
17151.38
Consumer Goods (40)
Automobiles & Parts (1)
6399.18
Beverages (6)
14228.33
Food Producers (10)
8331.54
Household Goods & Home Construction (13)13200.99
Leisure Goods (2)
5598.36
Personal Goods (6)
20959.32
Tobacco (2)
43317.29
Health Care (20)
9100.73
Health Care Equipment & Services (8) 6881.13
Pharmaceuticals & Biotechnology (12)12313.63
Consumer Services (98)
4764.99
Food & Drug Retailers (7)
2819.21
General Retailers (33)
2993.78
Media (23)
7109.81
Travel & Leisure (35)
8253.90
Telecommunications (7)
3757.39
Fixed Line Telecommunications (5) 4800.26
Mobile Telecommunications (2)
4974.34
Utilities (8)
7919.31
Electricity (3)
8397.25
Gas Water & Multiutilities (5)
7372.39
Financials (284)
4469.47
Banks (9)
3795.94
Nonlife Insurance (10)
2660.62
Life Insurance/Assurance (11)
7357.74
Index- Real Estate Investment & Services (22) 3142.80
Real Estate Investment Trusts (25) 2972.52
General Financial (32)
7799.81
Equity Investment Instruments (175) 7403.60
Non Financials (360)
3891.63
Technology (21)
1321.90
Software & Computer Services (14) 1648.22
Technology Hardware & Equipment (7) 1494.12

-0.12
-0.13
0.03
-2.03
-0.12
0.51
-8.10
-2.45
-0.28
-0.28
-0.20
-0.45
-1.10
-1.71
0.27
-0.03
0.17
-0.55
-0.13
0.98
0.58
-0.26
0.14
0.05
0.54
1.47
0.45
0.11
1.11
-0.13
0.45
-0.31
0.10
-0.32
0.36
0.36
1.12
0.16
0.17
0.69
-4.43
0.57
-0.34
0.15
0.24
-0.19
-0.07
-0.45
-0.05
-0.81

6519.00
6153.93
17853.17
3609.60
11746.78
17612.05
735.02
9829.56
4618.45
5586.56
4729.87
3789.20
5593.81
8478.58
4369.01
6923.91
18529.52
6913.36
15371.59
9000.99
14261.71
6048.19
22643.43
46797.90
9831.99
7434.04
13303.05
5147.87
3045.73
3234.33
7681.10
8917.11
4059.31
5185.97
5374.03
8555.64
9071.98
7964.77
4828.60
4100.95
2874.40
7948.95
3395.33
3211.37
8426.53
7998.49
4204.33
1428.12
1780.65
1614.17

6041.67
5703.71
16520.82
3410.39
10885.66
16219.87
740.32
9327.25
4287.02
5185.49
4386.68
3523.38
5235.17
7984.87
4033.14
6410.94
17122.11
6434.43
14247.52
8250.92
13125.19
5612.81
20929.26
43296.92
9051.50
6781.22
12258.11
4759.65
2788.22
2997.75
7077.77
8279.24
3753.77
4815.56
4956.60
7890.52
8304.32
7360.32
4461.87
3770.06
2784.01
7315.94
3153.48
2968.10
7780.82
7417.36
3894.26
1327.93
1649.05
1506.29

6256.82
5909.76
16909.99
3471.02
11092.61
16548.97
818.50
9486.22
4342.51
5263.36
4449.35
3564.18
5251.68
8128.83
4086.12
6489.91
17267.91
6697.63
14363.31
8346.54
13265.69
5527.88
21094.98
43540.36
9001.22
6794.88
12180.93
4781.33
2804.32
3012.26
7090.37
8331.66
3762.20
4859.29
4946.35
7914.20
8339.51
7379.97
4531.91
3861.51
2794.77
7493.94
3141.84
2958.19
7873.68
7445.15
3935.05
1330.17
1654.00
1507.13

8871.29
8393.91
23060.57
5206.50
10871.63
12599.78
1467.14
15387.21
4377.97
4143.42
5146.59
3386.93
4856.60
10471.74
4155.18
6303.98
16045.74
8039.51
14379.60
7606.84
10137.25
5054.41
21103.53
41249.15
9550.42
6058.14
13127.58
4313.44
2991.02
2670.38
6488.45
7105.96
3481.58
4545.10
4544.43
8782.04
9684.85
8086.89
4660.56
4552.71
2184.33
7496.63
2607.58
2582.36
6725.02
7411.15
4219.95
1151.55
1255.99
1432.65

P/E
ratio
17.54
18.61
17.72
17.72
17.57
15.38
20.97
20.83
14.92
17.82
17.50
18.11
52.71
78.30
21.51
15.46
62.72

X/D
adj
203.92
345.34
380.29
106.16
106.40
140.30
60.52
95.49
86.22
103.41
103.70
25.96
129.44
157.30
65.61
63.51
6.06

Total
Return
4752.20
11688.84
12992.51
5354.11
2739.03
4994.65
3574.15
6194.29
5964.59
5339.41
2733.27
1981.43
13946.24
19146.61
5521.42
5648.86
792.39

6.28 1.16 13.68 283.94 4986.46


6.35 1.16 13.62 270.00 4866.41
4.65 1.40 15.39 642.59 12048.48
6.03 1.35 12.26 197.88 3275.55
2.51 2.43 16.42 230.16 9342.03
2.21 3.37 13.40 360.52 16934.23
1.69 -18.64 -3.17
11.18
593.74
6.85 1.27 11.50 615.70 4670.83
2.59 1.20 32.23
83.82 4217.74
2.45 -0.78 -52.58 110.11 5272.25
2.58 0.96 40.41
77.52 4489.71
3.21 1.66 18.83
68.53 3765.33
2.24 2.02 22.11
86.03 4553.17
3.09 1.61 20.05 207.97 9147.88
4.05 1.14 21.69 128.90 3369.20
2.39 1.52 27.60 117.92 6386.92
2.97 1.88 17.93 464.44 12043.25
3.12 1.53 20.93 199.75 5884.94
2.47 1.78 22.74 345.28 9668.20
1.94 1.55 33.24
93.65 6918.33
2.08 2.66 18.04 217.78 8932.76
4.04 1.26 19.60 182.47 4693.26
3.11 3.01 10.71 484.64 13422.94
4.12 1.35 17.92 1786.68 26280.04
3.80 0.64 40.82 293.01 6595.51
1.43 2.43 28.89
62.30 5798.78
4.04 0.58 42.55 424.60 7927.38
2.32 1.72 25.05
87.11 4276.02
2.51 -0.94 -42.60
42.92 3212.10
2.22 2.30 19.62
49.51 3255.00
2.76 1.69 21.45 159.32 4169.13
1.95 2.36 21.75 138.20 7490.41
4.30 1.89 12.33 108.88 3884.45
3.16 1.82 17.34 101.81 4123.54
5.01 1.91 10.44 168.70 4577.12
5.22 1.35 14.23 305.26 8332.02
6.04 1.43 11.58 493.70 11155.78
5.00 1.32 15.16 243.90 7766.00
3.43 1.96 14.87 137.45 3880.91
4.04 1.31 18.97 145.16 2599.33
2.84 2.06 17.08
75.75 4471.46
3.71 1.76 15.28 260.50 6725.68
1.82 6.25
8.79
47.23 8041.71
2.78 6.74
5.34
68.57 3490.37
2.94 2.23 15.23 167.85 8412.05
2.63 1.16 32.75 148.25 3866.22
3.76 1.39 19.18 119.56 5410.03
1.46 2.07 33.12
18.14 1651.17
1.94 1.70 30.28
32.11 2157.35
1.03 2.70 36.11
13.22 1713.91

8.00
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00 High/day Low/day
Hourly movements
FTSE 100
6086.75 6111.43 6137.99 6131.78 6135.58 6167.19 6142.82 6114.87 6130.63 6168.60 6086.75
FTSE 250
16879.00 16885.00 16933.27 16935.14 16938.78 17009.40 16980.16 16899.91 16930.50 17009.62 16877.34
FTSE SmallCap
4556.81 4554.81 4558.65 4558.35 4559.41 4561.01 4559.58 4552.73 4552.60 4562.08 4551.15
FTSE All-Share
3355.59 3366.51 3379.85 3377.19 3379.00 3395.24 3383.58 3368.45 3376.38 3395.51 3355.59
Time of FTSE 100 Day's high:11:59:30 Day's Low07:03:00 FTSE 100 2010/11 High: 7103.98(27/04/2015) Low: 5898.87(24/08/2015)
Time of FTSE All-Share Day's high:11:59:00 Day's Low07:03:00 FTSE 100 2010/11 High: 3834.45(27/04/2015) Low: 3245.99(24/08/2015)
Further information is available on http://www.ftse.com FTSE International Limited. 2013. All Rights reserved. FTSE is a trade mark of the
London Stock Exchange Group companies and is used by FTSE International Limited under licence. Sector P/E ratios greater than 80 are not shown.
For changes to FTSE Fledgling Index constituents please refer to www.ftse.com/indexchanges. Values are negative.

UK RIGHTS OFFERS
Amount
Latest
Issue
paid
renun.
price
up
date
High
Low
Stock
There are currently no rights offers by any companies listed on the LSE.

FT 30 INDEX

FTSE SECTORS: LEADERS & LAGGARDS

Sep 21 Sep 18 Sep 17 Sep 16 Sep 15 Yr Ago


High
Low Year to date percentage changes
FT 30
2735.00 2748.20 2780.80 2795.70 2764.70
0.00 3110.40 2575.90 Forestry & Paper
31.43
FT 30 Div Yield
1.80
1.80
1.79
1.78
1.81
0.00
3.93
2.74 Nonlife Insurance
25.25
P/E Ratio net
24.77
24.73
24.99
25.09
24.70
0.00
19.44
14.26 Household Goods & Ho
22.89
FT 30 since compilation: 4198.4 high: 19/07/1999; low49.4 26/06/1940Base Date: 1/7/35
Construct & Material
20.75
FT 30 hourly changes
Software & Comp Serv
20.72
8
9
10
11
12
13
14
15
16 High
Low Real Est Invest & Se
18.14
2748.2 2730.4 2739.8 2741.9 2742.5 2757.8 2749.5 2738.5 2744.6 2758 2725.2 Leisure Goods
11.89
FT30 constituents and recent additions/deletions can be found at www.ft.com/ft30
Real Est Invest & Tr
7.88
Technology
7.61
Financial Services
6.76
Media
6.70
6.52
Sep 18 Sep 17 Mnth Ago
Sep 21 Sep 18 Mnth Ago Tobacco
Consumer Goods
5.85
Australia
90.38
89.92
93.78 Sweden
79.34
79.09
77.72 FTSE 250 Index
5.38
Canada
89.32
88.85
89.67 Switzerland
158.99 158.27 159.61 Travel & Leisure
5.11
Denmark
106.24 106.26 105.82 UK
92.54
92.56
94.02 FTSE SmallCap Index
4.43
Japan
126.10 125.45 122.65 USA
102.46 103.14 104.53 Consumer Services
4.13
New Zealand
107.34 106.57 111.49 Euro
87.57
87.50
86.28
Norway
87.18
87.20
88.21
Source: Bank of England. New Sterling ERI base Jan 2005 = 100. Other indices base average 1990 = 100.
Index rebased 1/2/95. for further information about ERIs see www.bankofengland.co.uk

FX: EFFECTIVE INDICES

General Retailers
Fixed Line Telecomms
Electronic & Elec Eq
Support Services
Telecommunications
Food Producers
Beverages
Industrials
Health Care Eq & Srv
Tech Hardware & Eq
Mobile Telecomms
Equity Invest Instr
Personal Goods
Health Care
Oil Equipment & Serv
Pharmace & Biotech
Industrial Transport
Financials

+or-

Life Insurance
FTSE All{HY-}Share Index
NON FINANCIALS Index
Food & Drug Retailer
FTSE 100 Index
Gas Water & Multi
Chemicals
Utilities
Aerospace & Defense
Banks
Industrial Eng
Electricity
Oil & Gas
Automobiles & Parts
Oil & Gas Producers
Basic Materials
Mining
Industrial Metals &

-4.45
-4.73
-5.01
-5.71
-7.04
-9.19
-9.77
-10.49
-11.16
-12.72
-13.49
-15.05
-19.94
-20.41
-20.54
-27.99
-31.77
-52.46

FTSE GLOBAL EQUITY INDEX SERIES


Sep 21
Regions & countries
FTSE Global All Cap
FTSE Global All Cap
FTSE Global Large Cap
FTSE Global Mid Cap
FTSE Global Small Cap
FTSE All-World
FTSE World
FTSE Global All Cap ex UNITED KINGDOM In
FTSE Global All Cap ex USA
FTSE Global All Cap ex JAPAN
FTSE Developed
FTSE Developed All Cap
FTSE Developed Large Cap
FTSE Developed Europe Large Cap
FTSE Developed Europe Mid Cap
FTSE Dev Europe Small Cap
FTSE North America Large Cap
FTSE North America Mid Cap
FTSE North America Small Cap
FTSE North America
FTSE Developed ex North America
FTSE Japan Large Cap
FTSE Japan Mid Cap
FTSE Global wi JAPAN Small Cap
FTSE Japan
FTSE Asia Pacific Large Cap ex Japan
FTSE Asia Pacific Mid Cap ex Japan
FTSE Asia Pacific Small Cap ex Japan
FTSE Asia Pacific Ex Japan
FTSE Emerging All Cap
FTSE Emerging Large Cap
FTSE Emerging Mid Cap
FTSE Emerging Small Cap
FTSE Emerging Europe
FTSE Latin America All Cap
FTSE Middle East and Africa All Cap
FTSE Global wi UNITED KINGDOM All Cap In
FTSE Global wi USA All Cap
FTSE Europe All Cap
FTSE Eurobloc All Cap
FTSE RAFI All World 3000
FTSE RAFI US 1000
FTSE EDHEC-Risk Efficient All-World
FTSE EDHEC-Risk Efficient Developed Europe

No of
stocks
7593
6959
1362
1661
4570
3023
2527
7266
5630
6338
2088
5644
885
205
310
717
319
397
1480
716
1372
174
305
776
479
490
441
1371
931
1949
477
458
1014
97
243
213
327
1963
1384
634
3014
1004
3023
515

US $
indices
445.96
457.95
392.26
599.42
634.34
260.01
460.52
456.83
421.43
455.66
418.36
440.33
386.09
337.32
511.58
731.43
420.42
642.39
659.60
282.59
225.90
312.66
456.92
490.24
129.38
541.56
738.07
489.87
429.14
594.86
565.32
739.56
605.89
295.06
656.38
705.66
340.12
486.29
388.14
360.49
5424.02
8565.03
312.56
280.29

Day
%
-1.1
-1.1
-1.2
-1.1
-0.8
-1.2
-1.3
-1.2
-0.6
-1.1
-1.3
-1.3
-1.3
-1.5
-0.7
-0.2
-1.6
-1.6
-1.4
-1.6
-0.9
-1.3
-1.2
-0.7
-1.3
1.0
1.0
1.6
1.0
0.3
0.2
0.4
0.8
-0.5
-1.5
-0.1
-0.8
-1.6
-1.2
-1.8
-1.4
-1.8
-0.9
-0.6

Mth
%
-6.0
-6.0
-6.2
-5.5
-4.8
-6.1
-6.2
-5.9
-5.4
-5.6
-6.4
-6.2
-6.5
-6.3
-4.5
-2.9
-6.6
-5.9
-5.3
-6.5
-6.2
-9.3
-9.8
-8.3
-9.4
-2.6
-1.6
-2.4
-2.5
-3.3
-3.6
-2.3
-2.8
-0.1
-6.5
-4.6
-6.5
-6.5
-5.5
-5.6
-6.6
-7.0
-5.3
-4.2

YTD
Total
%
retn
-5.1 606.64
-5.4 611.90
-5.9 545.64
-2.9 779.23
-2.8 800.48
-5.4 373.12
-5.2 887.17
-5.1 612.87
-5.8 608.11
-5.8 625.46
-4.6 573.19
-4.2 596.83
-5.1 536.03
-4.6 529.13
2.3 730.46
6.2 1017.07
-5.5 550.01
-5.3 789.13
-4.2 788.01
-5.4 378.96
-3.2 349.59
2.5 387.39
7.5 548.17
4.6 606.84
3.5 180.22
-12.0 805.60
-8.4 1059.31
-8.3 693.70
-11.6 678.54
-13.7 845.33
-13.6 808.15
-14.1 1046.43
-14.4 830.47
-5.3 429.67
-27.2 961.37
-8.3 1045.32
-5.3 533.78
-4.5 619.63
-2.5 590.56
-2.2 555.01
-7.9 6784.64
-7.8 10751.69
-2.2 417.82
0.6 407.57

YTD Gr Div Sep 21


No of
US $
Day
Mth
YTD
Total
YTD Gr Div
% Yield Sectors
stocks indices
%
%
%
retn
% Yield
-3.3
2.6 Oil & Gas
164 318.91
-2.2
-2.2 -19.9 482.52 -17.8
4.3
-3.7
2.5 Oil & Gas Producers
115 290.00
-2.2
-2.2 -20.0 446.52 -17.8
4.4
-4.0
2.8 Oil Equipment & Services
40 332.91
-2.2
-2.2 -19.7 459.35 -17.8
4.0
-1.5
2.0 Basic Materials
273 366.41
-1.4
-1.4 -15.9 534.03 -13.9
3.3
-1.4
2.0 Chemicals
124 577.15
-1.7
-1.7
-7.5 843.49
-5.8
2.6
-3.6
2.6 Forestry & Paper
17 197.22
-1.2
-1.2
-5.3 314.34
-3.1
3.1
-3.4
2.6 Industrial Metals & Mining
71 291.05
-2.0
-2.0 -29.4 424.32 -28.1
3.2
-3.4
2.5 Mining
61 406.54
0.0
0.0 -28.6 594.66 -25.6
5.7
-3.6
3.1 Industrials
532 293.01
-1.5
-1.5
-6.9 404.95
-5.4
2.3
-4.0
2.6 Construction & Materials
110 431.36
-0.9
-0.9
0.0 625.23
1.8
2.2
-2.8
2.6 Aerospace & Defense
29 487.47
-1.4
-1.4
-1.9 667.92
-0.4
2.2
-2.5
2.5 General Industrials
56 199.76
-2.0
-2.0
-8.2 296.58
-6.2
2.9
-3.3
2.7 Electronic & Electrical Equipment
69 305.68
-1.9
-1.9
-6.0 390.23
-4.7
2.0
-1.8
3.7 Industrial Engineering
102 539.76
-1.8
-1.8 -12.7 732.41 -11.3
2.5
4.4
2.6 Industrial Transportation
95 515.41
-1.5
-1.5 -13.7 710.47 -12.4
2.4
8.3
2.4 Support Services
71 268.68
-1.1
-1.1
-1.4 356.77
-0.1
2.0
-4.0
2.3 Consumer Goods
406 401.77
-0.9
-0.9
-0.8 567.73
1.0
2.5
-4.2
1.7 Automobiles & Parts
98 370.74
-1.3
-1.3
-4.9 502.56
-3.3
2.4
-3.2
1.7 Beverages
48 533.45
-0.7
-0.7
-0.8 764.81
1.1
2.6
-4.0
2.2 Food Producers
102 547.88
-0.7
-0.7
-0.7 798.62
1.1
2.3
-1.0
3.1 Household Goods & Home Construction
44 381.62
-1.0
-1.0
-3.7 536.41
-2.0
2.5
3.5
1.9 Leisure Goods
26 130.13
0.3
0.3
3.3 166.04
4.0
1.3
8.5
1.5 Personal Goods
76 587.38
-0.9
-0.9
0.7 792.75
2.3
2.0
5.7
1.7 Tobacco
12 1151.59
-0.8
-0.8
7.3 2222.58
10.6
4.1
158 458.93
-0.9
-0.9
5.7 636.78
7.2
1.9
4.5
1.9 Health Care
-9.7
3.3 Health Care Equipment & Services
58 634.72
-1.0
-1.0
7.5 725.59
8.2
1.0
-6.4
2.8 Pharmaceuticals & Biotechnology
100 351.07
-0.8
-0.8
5.1 505.99
6.9
2.1
-6.3
2.8 Consumer Services
384 381.04
-1.1
-1.1
1.8 493.16
3.2
1.7
-9.3
3.3 Food & Drug Retailers
53 302.31
-1.1
-1.1
0.5 407.08
1.9
1.9
-11.5
3.2 General Retailers
120 509.27
-1.2
-1.2
6.5 643.58
7.8
1.6
-11.3
3.3 Media
90 290.90
-0.8
-0.8
-3.3 377.06
-2.0
1.9
-12.1
2.9 Travel & Leisure
121 366.86
-1.2
-1.2
1.9 479.28
3.2
1.7
-12.2
3.1 Telecommunication
94 159.35
-0.2
-0.2
-4.6 277.49
-1.7
4.2
-2.2
4.4 Fixed Line Telecommuniations
44 130.51
-0.8
-0.8
-4.7 248.01
-1.5
4.8
-25.7
3.6 Mobile Telecommunications
50 172.98
0.6
0.6
-4.4 273.93
-1.9
3.6
163 236.07
-0.6
-0.6 -11.7 428.57
-9.1
4.1
-6.3
2.9 Utilities
113 258.04
-0.6
-0.6
-9.0 464.05
-6.4
3.8
-2.6
3.8 Electricity
50 249.84
-0.7
-0.7 -16.0 464.11 -13.5
4.6
-3.1
2.1 Gas Water & Multiutilities
667 198.59
-1.3
-1.3
-8.0 306.56
-5.9
3.1
0.1
3.4 Financials
241 180.81
-1.5
-1.5 -10.1 297.12
-7.8
3.5
0.3
3.2 Banks
69 203.45
-1.9
-1.9
-5.0 282.28
-3.1
2.5
-5.9
3.2 Nonlife Insurance
49 194.47
-1.3
-1.3
-7.9 293.85
-5.8
2.9
-6.2
2.6 Life Insurance
137 217.56
-1.5
-1.5
-6.1 288.29
-4.7
2.0
-0.6
2.3 Financial Services
182 164.04
-1.1
-1.1
-4.7 194.89
-3.4
1.8
2.8
2.8 Technology
Software & Computer Services
79 277.97
-1.0
-1.0
2.4 318.14
3.3
1.1
Technology Hardware & Equipment
103 125.15
-1.2
-1.2 -10.6 152.74
-9.1
2.5
The FTSE Global Equity Series, launched in 2003, contains the FTSE Global Small Cap Indices and broader FTSE Global All Cap Indices (large/mid/small cap) as well as the enhanced FTSE All-World index Series (large/
mid cap) - please see www.ftse.com/geis. The trade names Fundamental Index and RAFI are registered trademarks and the patented and patent-pending proprietary intellectual property of Research Affiliates, LLC
(US Patent Nos. 7,620,577; 7,747,502; 7,778,905; 7,792,719; Patent Pending Publ. Nos. US-2006-0149645-A1, US-2007-0055598-A1, US-2008-0288416-A1, US-2010- 0063942-A1, WO 2005/076812, WO 2007/078399 A2,
WO 2008/118372, EPN 1733352, and HK1099110). EDHEC is a trade mark of EDHEC Business School As of January 2nd 2006, FTSE is basing its sector indices on the Industrial Classification Benchmark - please see
www.ftse.com/icb. For constituent changes and other information about FTSE, please see www.ftse.com. FTSE International Limited. 2013. All Rights reserved. FTSE is a trade mark of the London Stock Exchange
Group companies and is used by FTSE International Limited under licence.

UK COMPANY RESULTS
closing
Price p

3.86
3.80
2.36
1.19
0.64
0.51
0.40
-0.38
-0.46
-0.94
-1.18
-1.33
-2.42
-2.55
-2.73
-2.77
-2.84
-3.88

FTSE 100 SUMMARY

Company
21st Century Technology
Allergy Therapeutics
Belgravium Technologies
Castleton Technology
CDialogues
CEPS
DP Poland
Dunedin Income Growth Inv Trust
DX (Group)
Finsbury Food Group
French Connection Group
Nasstar
New Star Investment Trust
Sainsbury (J)

FTSE 100

Closing Day's
Price Change FTSE 100

3I Group PLC
Aberdeen Asset Management PLC
Admiral Group PLC
Anglo American PLC
Antofagasta PLC
Arm Holdings PLC
Ashtead Group PLC
Associated British Foods PLC
Astrazeneca PLC
Aviva PLC
Babcock International Group PLC
Bae Systems PLC
Barclays PLC
Barratt Developments PLC
Bg Group PLC
Bhp Billiton PLC
BP PLC
British American Tobacco PLC
British Land Company PLC
Bt Group PLC
Bunzl PLC
Burberry Group PLC
Capita PLC
Carnival PLC
Centrica PLC
Coca-Cola Hbc AG
Compass Group PLC
Crh PLC
Diageo PLC
Direct Line Insurance Group PLC
Dixons Carphone PLC
Easyjet PLC
Experian PLC
Fresnillo PLC
G4S PLC
Gkn PLC
Glaxosmithkline PLC
Glencore PLC
Hammerson PLC
Hargreaves Lansdown PLC
Hikma Pharmaceuticals PLC
HSBC Holdings PLC
Imperial Tobacco Group PLC
Inmarsat PLC
Intercontinental Hotels Group PLC
International Consolidated Airlines Group S.A.
Intertek Group PLC
Intu Properties PLC
Itv PLC
Johnson Matthey PLC
Kingfisher PLC

471.30
323.00
1526
694.90
565.50
952.00
964.50
3175
4379
456.00
908.00
438.10
254.90
651.50
990.40
1076
333.55
3558.5
814.50
413.50
1746
1361
1190
3506
226.20
1388
1029
1862
1768.5
365.00
419.30
1749
1058
597.00
237.70
272.30
1289.5
119.00
608.00
1223
2490
495.10
3354
999.50
2328
594.50
2433
316.50
248.90
2522
347.60

4.50
-8.20
7.00
-25.10
-14.00
-8.50
-16.50
36.00
9.00
3.30
-3.50
-2.30
1.65
-0.50
5.00
-22.00
0.10
-12.50
2.00
-1.50
7.00
-17.00
-3.00
46.00
-2.20
14.00
-3.00
-11.00
4.00
1.00
-3.30
6.00
3.00
-13.00
0.60
-1.50
4.50
-7.00
22.00
45.00
4.45
29.00
11.00
-20.00
-6.00
-8.00
-0.50
2.20
-24.00
-3.50

Closing Day's
Price Change

Land Securities Group PLC


Legal & General Group PLC
Lloyds Banking Group PLC
London Stock Exchange Group PLC
Marks And Spencer Group PLC
Meggitt PLC
Merlin Entertainments PLC
Mondi PLC
Morrison (Wm) Supermarkets PLC
National Grid PLC
Next PLC
Old Mutual PLC
Pearson PLC
Persimmon PLC
Prudential PLC
Randgold Resources LD
Reckitt Benckiser Group PLC
RELX PLC
Rio Tinto PLC
Rolls-Royce Holdings PLC
Royal Bank Of Scotland Group PLC
Royal Dutch Shell PLC
Royal Dutch Shell PLC
Royal Mail PLC
Rsa Insurance Group PLC
Sabmiller PLC
Sage Group PLC
Sainsbury (J) PLC
Schroders PLC
Severn Trent PLC
Shire PLC
Sky PLC
Smith & Nephew PLC
Smiths Group PLC
Sports Direct International PLC
Sse PLC
St. James's Place PLC
Standard Chartered PLC
Standard Life PLC
Taylor Wimpey PLC
Tesco PLC
Travis Perkins PLC
Tui AG
Unilever PLC
United Utilities Group PLC
Vodafone Group PLC
Weir Group PLC
Whitbread PLC
Wolseley PLC
Wpp PLC

1237
248.00
74.23
2444
492.90
474.30
374.90
1387
159.30
855.10
7605
192.50
1130
2085
1380
3820
5839
1068
2274.5
696.50
319.50
1577.5
1596
462.00
403.30
3575.5
513.50
231.60
2875
2106
4795
1020
1165
1062
757.50
1446
878.00
692.10
397.80
201.70
176.50
2038
1211
2628
890.00
217.40
1235
4651
4223
1366

2.60
1.52
52.00
1.80
-3.50
-0.60
7.00
2.70
3.90
45.00
-0.30
7.00
8.00
11.00
-43.00
43.00
3.00
-25.00
4.50
0.60
-4.50
-3.00
2.30
-106.20
-24.50
0.50
3.30
14.00
8.00
50.00
-3.00
21.00
-2.50
18.00
5.50
-30.60
-2.10
2.80
1.85
7.00
-14.00
12.00
7.00
0.65
-10.00
-7.00
87.00
11.00

UK STOCK MARKET TRADING DATA


Sep 21
Sep 18
Sep 17
Sep 16
Sep 15
Yr Ago
SEAQ Bargains
5092.00
5229.00
5229.00
4522.00
5462.00
5184.00
Order Book Turnover (m)
35.56
41.24
41.24
34.97
32.35
34.85
Order Book Bargains
746453.00 1024512.00 1024512.00 763694.00 855767.00 764720.00
Order Book Shares Traded (m)
1201.00
2326.00
2326.00
1292.00
1331.00
1242.00
Total Equity Turnover (m)
2114.02
2342.69
1614.68
Total Mkt Bargains
870264.00
- 979541.00 861027.00
Total Shares Traded (m)
3172.00
3961.00
3431.00
Excluding intra-market and overseas turnover. *UK only total at 6pm. UK plus intra-market turnover. (u) Unavaliable.
(c) Market closed.

All data provided by Morningstar unless otherwise noted. All elements listed are indicative and believed
accurate at the time of publication. No offer is made by Morningstar or the FT. The FT does not warrant nor
guarantee that the information is reliable or complete. The FT does not accept responsibility and will not be
liable for any loss arising from the reliance on or use of the listed information.
For all queries e-mail ft.reader.enquiries@morningstar.com

Data provided by Morningstar | www.morningstar.co.uk

UK RECENT EQUITY ISSUES


Int
Pre
Int
Pre
Int
Int
Int
Int
Pre
Pre
Int
Int
Pre
Int

Turnover
5.512
4.715
41.955
43.23
4.568
4.431
6.053
4.048
5.312
8.834
9.202
1.942
1.744
297.5
256.166
75.8
6.628

312
175.708
84
5.006

12667

12684

Pre-tax
0.008L
0.35L
1.084
0.654
0.214
0.05L
1.251L
3.058L
1.29
1.389
0.312
0.295
1.927L
1.074L
26.866
9.984L
55.7L
24.8
6.576
8.482
3.9L
7.9L
1.218L
0.421L
2.984
3.971
433
290L

Figures in m. Earnings shown basic. Figures in light text are for corresponding period year earlier.
For more information on dividend payments visit www.ft.com/marketsdata

EPS(p)
0.38L
0.02
0.005L
0.24L
0.217
1.76
1.16L
7.73
9.9
5.8
7.9L
0.1L
0.49
18L

0.02L
0.16
0.22
4.24
0.227
3.27
2.09L
7.76
70.2L
6.7
4L
0.3L
0.11
17.9

Div(p)
1.753
4
1.67
5

2.575
2
0.75
5.5556

Pay day
Oct 30
Nov 16
Dec 10
Jan 2

Total
4.3
6
2.5
17.3

5.95
4
1
17.456

Issue
date
08/11

Issue
price(p)
120.00

Sector
AIM

Stock
code
GLOO

Stock
Gloo Networks PLC

Placing price. *Intoduction. When issued. Annual report/prospectus available at www.ft.com/ir


For a full explanation of all the other symbols please refer to London Share Service notes.

Close
price(p)
126.00

+/-1.00

High
127.00

Low
120.00

Mkt
Cap (m)
3225.6

Tuesday 22 September 2015

19

FINANCIAL TIMES

MARKET DATA
FT500: THE WORLD'S LARGEST COMPANIES
Stock
Australia (A$)
ANZ
BHPBilltn
CmwBkAu
CSL
NatAusBk
Telstra
Wesfarmers
Westpc
Woolworths
Belgium ()
AnBshInBv
KBC Grp
Brazil (R$)
Ambev
Bradesco
Cielo
ItauHldFin
Petrobras
Vale
Canada (C$)
BCE
BkMontrl
BkNvaS
Brookfield
CanadPcR
CanImp
CanNatRs
CanNatRy
Enbridge
GtWesLif
ImpOil
Manulife
Potash
RylBkC
Suncor En
ThmReut
TntoDom
TrnCan
ValeantPh
China (HK$)
AgricBkCh
Bk China
BkofComm
BOE Tech
Ch Coms Cons
Ch Evrbrght
Ch Rail Cons
Ch Rail Gp
ChConstBk
China Vanke
ChinaCitic
ChinaLife
ChinaMBank
ChinaMob
ChinaPcIns
ChMinsheng
ChMrchSecs RMB
Chna Utd Coms RMB
ChShenEgy
ChShpbldng RMB
ChStConEng RMB
ChUncHK
CNNC Intl RMB
CSR
Daqin RMB
Gree Elec Apl
GuosenSec
HaitongSecs
Hngzh HikVDT
Hunng Pwr
IM Baotou Stl RMB
In&CmBkCh
IndstrlBk RMB
Kweichow RMB
Midea
New Ch Life Ins
PetroChina
PingAnIns
PngAnBnk RMB
Pwr Cons Corp RMB
SaicMtr RMB
ShenwanHong
ShgPdgBk RMB
Sinopec Corp
Sinopec Oil RMB
Denmark (kr)
DanskeBk
MollerMrsk
NovoB

52 Week
High
Low

Price Day Chg

Yld

P/E MCap m

27.72
23.85
73.62
90.20
30.47
5.56
38.66
30.85
24.50

-0.68
-0.61
-2.21
-0.37
-0.59
-0.09
-0.54
-0.90
-0.32

37.25
35.87
96.69
102.43
39.71
6.74
46.95
40.07
36.00

26.41 10.24 9.50 56910.94


22.41 9.99 9.49 54691.57
71.26 8.51 13.13 87072.88
71.04 1.64 22.36 29943.33
29.15 10.22 11.50 57124.82
5.23 8.17 15.29 48533.9
38.06 8.07 16.91 31019.21
29.20 9.41 11.85 70131.62
24.11 7.35 13.57 22156.9

98.61
57.69

0.31
0.34

119.65
66.00

78.75
36.53

19.44
25.14
37.74
25.91
8.93
20.28

-0.03
-0.49
0.30
0.02
0.37

20.29
33.23
46.27
32.66
21.15
29.07

54.63
0.36
71.36
1.15
58.78
0.68
41.29
0.46
199.10
5.28
95.13
1.10
27.37
0.42
76.80
2.09
52.59
1.48
32.35 -0.06
43.08
1.03
20.77
0.35
31.65 -0.61
72.73
0.32
34.70
0.65
53.34
0.59
52.38
0.72
45.32
1.34
301.52 -17.61

60.20
85.57
72.97
48.64
247.56
107.32
45.05
88.89
66.14
37.70
55.76
24.20
47.10
83.87
42.98
54.47
57.89
63.86
347.84

46.43
64.01
52.60
32.21
172.01
83.10
25.01
68.81
47.43
29.30
40.55
18.91
31.44
68.05
30.89
39.45
47.75
41.95
125.50

3.06
3.53
5.61
1.78
10.30
3.43
11.94
7.54
5.53
4.75
28.20
18.50
93.10
29.95
7.52
16.42
6.25
12.50
10.74
6.30
10.06
9.70
10.36
9.29
0.22
12.02
3.87
4.73
14.38
199.30
1.93
34.25
5.71
40.05
10.82
8.11
17.32
0.20
14.97
5.13
9.72

-0.02
-0.01
-0.08
-0.08
-0.06
0.12
0.39
-0.05
-0.04
-0.65
-0.46
0.95
-0.90
-0.14
0.12
0.06
-0.26
0.39
0.07
-0.14
0.54
-0.26
0.09
0.00
-0.24
0.05
-0.02
-0.13
-0.13
-0.01
-0.35
-0.15
-0.35
0.01
0.23
0.02
-0.01
-0.06
-0.12
0.88

4.55
5.68
8.61
4.78
17.00
5.65
17.70
12.30
7.98
7.40
41.00
26.85
118.00
47.10
11.88
40.00
10.74
24.40
20.19
12.52
16.00
14.38
20.70
15.15
0.45
27.90
7.50
7.10
21.42
290.00
2.68
56.55
11.04
62.90
17.50
20.00
29.18
0.49
19.17
7.79
14.23

2.87 7.43 4.52 12136.92


3.25 6.73 4.94 38088.27
5.20 6.01 5.12 25344.04
1.12 2.21 24.47
45.70
5.45 2.38 9.03 5884.24
3.22 12.95 4.42 3039.97
6.92 2.91 10.44 3198.82
4.03 2.37 12.16 4093.37
5.02 6.80 4.89 171547.37
4.36 4.38 9121.28
21.00 1.75 14.30 27076.13
13.12 4.53 6.48 10958.85
85.00 3.36 14.01 245963.07
24.80 2.05 14.24 10725.12
6.70 3.07 4.81 6727.79
10.81 2.57 9.63 12382.73
3.36 1.09 32.91 20800.22
12.20 7.29 7.48 5481.54
5.70 - 162.99 30281.79
3.18 2.76 7.96 29575.31
9.68 2.48 16.05 31084.75
4.07 27.35 23705.84
6.80 21.75 5843.11
7.33 5.23 9.57 21684.7
0.13 -2.34
313.95
10.00 2.60 6.40 5288.11
2.52 0.33-282.24 9565.17
4.30 6.76 4.93 52972.14
9.99 7.25 5.51 36530.02
145.50 14.76 39308.58
1.65 5.14 9.36
53.55
26.20 0.77 9.24 4570.06
5.61 5.70 13.17 15545.04
28.53 0.38 5.71 38486.92
8.32 1.63 6.89 20053.08
2.92 1.25 15.94 4202.02
14.00 7.01 6.61 29982.71
0.17 -2.56
63.07
9.40 5.11 5.72 35074.64
4.72 4.84 12.59 16888.11
3.73 - 276.01
686.75

211.70
10670
378.50

4.60
80.00
11.00

218.00
16450
415.00

139.20
10530
244.50

Stock

14.99 10.79 19.23 76679.02


23.03 4.91 6.65 15926.14
30.18 3.26 14.50 17868.7
23.83 2.24 5.22 19812.5
7.88 -3.83 16678.69
14.77 11.89 -9.97 16373.37
34997.92
34595.66
53585.22
30592.61
24010.99
28527.02
22606.83
46125.65
34005.99
24352.3
27560.24
30902.69
19945.64
79223.59
37865.53
31467.56
73295.21
24250.29
77648.05

2.55 33.73 32039.86


2.68 8.33 34357.99
1.29 32.19 117142.79

FT 500: TOP 20
Week
change change %
2.75
39.5
642.00
21.9
1.14
10.6
4.01
9.5
2.70
8.6
0.81
8.5
6.75
8.2
23.79
8.1
3.20
8.0
5.45
7.7
2.00
7.6
5.02
7.3
0.65
6.7
15.15
6.6
3.88
6.6
1.85
6.5
1.45
6.4
6.15
6.4
3350.00
6.4
53.90
6.4

Month
change %
0.93
18.99
6.80
-6.87
9.25
3.21
4.94
3.78
7.65
4.27
7.43
4.82
13.60
-9.35
3.31
4.36
3.23
-1.94
-9.22
-3.92

INTEREST RATES: OFFICIAL


Rate
Fed Funds
Prime
Discount
Repo
Repo
O'night Call
Libor Target

Current
0.00-0.14
3.25
0.75
0.05
0.50
0.00-0.03
0.00-0.25

Sep 21 (Libor: Sep 18)


US$ Libor
Euro Libor
Libor
Swiss Fr Libor
Yen Libor
Euro Euribor
Sterling CDs
US$ CDs
Euro CDs

P/E MCap m

2.14
2.36
4.24
2.74
2.01
3.09
2.62
7.93
0.91
0.91
5.77
0.89
1.76
2.22
4.16
1.90
2.60
1.69
3.12
1.47
3.51
2.87
6.16
4.21
3.22
9.12

16.12 48500.78
20.30 40577.15
10.72 60053.26
9.82 74902.87
11.86 33700.25
9.03 32775.31
37.78
41126
7.91
35232
39.10 26555.06
39.10 26555.06
46.56 46717.29
37.43 38350.84
29.21 94115.01
12.64 86538.77
-54.45 22146.29
37.95 41916.12
23.52 27532.82
7.90 23720.42
-21.56 32507.64
24.91 131404.55
28.24 26503.72
18.90
35226
10.25 37021.98
31.20 110330.73
13.15 25075.35
12.42 39562.15
86.32 32903.46

115.05
63.00
96.83
74.59
136.85
55.10
22.66
10.07
21.55
7.41
50.75
36.00
66.70
141.80
141.10
50.08
80.17
126.70

4.83
3.96
1.87
3.37
1.71
3.37
2.89
3.06
1.77
1.04
0.66
1.61
2.11
4.35
1.85
4.00
3.52

9.67
12.88
28.48
10.55
15.04
9.64
21.85
38.99
15.97
-5.87
23.76
30.85
20.16
26.36
9.44
23.12
11.78
6.21

39.10
23.15
19.80
50.10
11.64
14.28
97.50
7.60
123.20
162.00
29.95
25.10
93.25
104.50

1.03
4.61
2.26
1.47
2.30
3.48
6.67
3.79
2.10
2.94
7.05
3.17
0.27

19.39 66378.58
9.92 32604.87
6.70 30472.15
12.96 30179.99
6.91 54126.22
6.95 4503.71
4.14 51545.05
7.37 48276.4
10.57 35868.41
32.43 28800.08
13.11 26527.87
15.38 28944.56
9.68 38974.46
39.15 162301.28

332.50
842.10
707.15
975.00
247.70
932.65
294.00
1401
221.25
796.45
220.15
748.00
2345

0.99
0.77
1.49
1.20
3.61
3.43
1.71
0.95
4.24
1.12
1.45
0.17
1.55

24.61
26.46
42.41
21.57
12.16
19.43
27.71
25.17
10.18
10.82
10.47
30.45
24.61

11000

1.30 16.37 20762.48

186.40

2.03 22.01 61824.29


3.27 79.62
7.62-670.69
3.61 12.72
1.58 27.76
1.15 39.74
2.06 15.54

52 Week
High
Low

Price Day Chg

Yld

P/E MCap m

Japan ()
AstellasPh
1650 -17.00
2047
1482 1.77 25.84 30561.53
Bridgestne
4247.5 -80.00
5182
3328 2.75 11.30 28791.23
Canon
3600 -78.00
4539
3172 4.32 17.79 40027.91
CntJpRwy
18715 -870.00 24800 13320 0.62 13.63 32139.47
Denso
5635 -77.00
6548 4500.5 1.90 17.18 41529.97
EastJpRwy
10150 -275.00 12815
7623 1.15 21.23 33211.41
Fanuc
20200 -585.00 28575 17635 3.06 19.08 34679.94
FastRetail
46160-1245.00 61970 35655 0.70 39.84 40818.31
Fuji Hvy Ind
4386 -39.00 4827.5
3050 1.51 11.99 28624.48
Hitachi
641.70 -9.90 939.90 620.00 1.67 11.44 25856.66
HondaMtr
3799 -54.50
4499
3239 2.25 13.05 57368.32
JapanTob
4009.5 -161.50
4848
3101 2.62 16.90 66850.06
KDDI
2747.5 115.50
3375
2041 2.00 46.14 61633.29
Keyence
55710 -940.00 70100 42660 0.38 26.56 28237.88
MitsbCp
2127.5 -81.00
2837 1942.5 2.74 9.72 28201.32
MitsubEst
2419 -59.50
2975 2151.5 0.56 48.56 28038.61
MitsubishiEle
1169 -29.00
1718
1103 2.43 10.18 20925.17
MitsuiFud
3186 -62.00
3879 2854.5 0.76 26.99 26332.2
MitUFJFin
744.00 -24.30 936.80 546.20 2.35 6.92 87879.91
Mizuho Fin
233.40 -4.40 280.40 178.10 3.38 7.06 48295.69
Murata Mfg
16645 -740.00 22220 10800 1.14 20.00 31257.66
NipponTT
4333 -57.50
5066 3001.5 2.02 16.94 82119.28
Nissan Mt
1140 -28.00
1350 917.40 2.81 9.87 42962.89
Nomura
733.00 -21.70 909.20 576.20 1.72 10.26 23358.23
Nppn Stl
237.00 -10.80 350.50 227.10 2.26 9.32 18775.88
NTTDCMo
2200 -17.00 2873.5 1612.5 2.87 20.32 74933.92
Panasonic
1326.5 -29.00 1853.5
1130 1.06 56.19 27126.63
Seven & I
5158 92.00
5998 3794.5 1.40 26.28 38116.53
ShnEtsuCh
6387 -204.00
8529
6059 1.52 20.99 23007.51
Softbank
6270 26.00
8760
6001 0.62 9.34 62758.04
Sony
3115 -109.50
3970
1782 0.78 -52.20 32777.12
SumitomoF
4699.5 -154.50
5770
3823 2.90 10.16 55398.73
Takeda Ph
5642 -64.00
6657 4337.5 3.10 -29.51 37163.75
TokioMarine
4416 -174.50
5504
3102 2.09 13.91 27887.36
Toyota
7234 -104.00
8783
5710 2.69 10.52 206125.59
Mexico (Mex$)
AmerMvl
14.99
0.12 17.53 13.48 1.83 38230.18
FEMSA UBD 149.37 -0.77 154.14 116.20 0.77 28.23 32065.74
WalMrtMex
41.50
0.17 41.90 28.26 1.34 31.58 43527.53
Netherlands ()
Altice
23.85 -0.18 143.20 20.61 - -136.03 20010.98
ASML Hld
80.60
1.13 104.85 68.29 0.85 26.49 39100.14
Heineken
73.68
0.70 77.77 54.03 1.30 26.07 47511.22
ING
12.99
0.23 16.00
9.68 28.13 56248.51
Unilever
35.91
0.52 42.75 28.75 3.16 21.63 68933.87
Norway (Kr)
DNB
115.30
0.30 143.00 100.90 3.39 8.25 22856.23
Statoil
122.00
0.80 181.70 113.90 6.07 -9.62
47345
Telenor
162.40
0.70 186.10 128.90 2.41 22.62 29676.12
Qatar (QR)
QatarNtBk
185.00 -0.50 237.00 159.90 4.02 11.90 35546.08
Russia (RUB)
Gzprm neft
139.15 -0.35 166.94 113.73 6.06 7.11 49747.99
Lukoil
2318 -85.80 3297.7
1913 3.04 11.89 29774.8
MmcNrlskNckl
11028 -72.00 12247
6766 12.57 13.25 26354.63
Novatek
622.40 -9.40 646.30 390.12 9.78 30.20 28539.33
Rosneft
250.30 -5.70 294.20 183.95 6.10 7.02 40060.9
Sberbank
75.98
0.48 80.98 47.21 5.15 24769.73
Surgutneftegas
34.13 -0.08 39.80 21.82 2.06 1.26 18411.39
Saudi Arabia (SR)
AlRajhiBnk
55.37 -0.21 73.50 48.40 3.47 13.64 23991.11
Natnlcombnk
52.81 -0.85 72.75 48.80 12.27 28086.75
SaudiBasic
76.79 -0.66 136.50 70.25 6.89 9.48 61425.45
SaudiTelec
62.25
0.25 76.50 52.75 5.97 11.61 33196.46
Singapore (S$)
DBS
17.24 -0.09 21.50 17.20 3.47 18.66 30591.53
JardnMt US$
47.00 67.88 45.02 2.98 10.27 32837.57
JardnStr US$
27.00 -0.01 37.03 26.11 0.98 9.72 30242.77
OCBC
9.01
0.01 10.92
8.63 4.12 8.55 25876.37
SingTel
3.75 -0.05
4.57
3.58 4.62 14.93 42394.13
UOB
19.16 -0.20 25.05 18.51 3.77 9.45 21768.18
South Africa (R)
Firstrand
52.14 -0.45 58.47 40.27 3.86 12.49 21693.63
MTN Grp
175.85 -4.51 257.93 161.10 7.74 9.64 24070.92
Naspers N
1723.51 -19.45 2029.97 1130.01 0.29 42.89 53619.96
South Korea (KRW)
HyundMobis 207500-2500.00 271500 185500 1.50 10.04 16875.78
KoreaElePwr
47400 -100.00 53100 38750 1.0996492.04 25903.72
SK Hynix
34800 -950.00 51700 30300 0.89 5.23 21566.75
SmsungEl
1150000-40000.00 1510000 1033000 1.85 8.49 126593.64
Spain ()
BBVA
7.72
0.02
9.91
7.21 1.02 11.88 54521.27
BcoSantdr
5.05
0.00
7.91
4.95 11.60 10.74 80986.47
CaixaBnk
3.63 -0.03
5.00
3.51 1.08 23.37 23434.53
Iberdrola
5.92
0.00
6.49
5.11 2.57 15.44 42004.13
Inditex
30.28
0.39 32.54 19.29 1.30 35.14 105631.78
Repsol
10.72 -0.09 19.39 10.65 14.88 16489.99
Telefonica
11.30 -0.01 14.31 10.76 3.47 17.76 61535.33

2.27 15.24 24906.95


4.30 15.09 27819.27

39.64
87.17
16.43
43.14
126.10
9.82
49.84
16.47
76.65
76.65
16.08
229.00
117.05
121.40
21.87
10.20
82.23
49.50
43.66
69.58
29.51
52.03
31.85
36.92
180.70
39.65
17.32

3.36
12.98
14.40
2.00
34.74
4.82

Stock

71190.41
70238.55
109379
56879.74
41590.48
85334.52
39297.06
82668.67
32399.47
17349.65
25288.58
39708.72
22880.39
30471.75
32303.56
79946.44
81397.27
44168

21424.07
40319.21
26028.63
28961.19
24675.23
38409.47
38357.15
21948.53
31100.23
43260.31
28229.26
32946.13
76015.94

41939.63
58626.39
28426.89
56091.28
33120.39
38210.88

Last
0.14
3.25
0.75
0.15
0.50
0.03
0.00-0.75

Mnth Ago
0.00-0.25
3.25
0.75
0.05
0.50
0.00-0.10
0.00-0.25

Year Ago
0.00-0.25
3.25
0.75
0.25
0.50
0.00-0.10
0.00-0.25

Day
0.000
0.000
0.000

Change
Week
0.003
0.000
0.000

Month
0.000
0.000
0.000
0.000
0.000
0.001
0.000
0.000
0.000

One
month
0.19580
-0.11500
0.50756
-0.79400
0.02929
-0.10200
0.51000
0.18000
-0.13500

Three
month
0.31920
-0.04000
0.58625
-0.72700
0.07786
-0.03700
0.60000
0.30000
-0.06500

Six
month
0.52640
0.02357
0.75125
-0.67100
0.12014
0.03600
0.78500
0.49000
-0.00500

One
year
0.82455
0.13957
1.05213
-0.55900
0.23114
0.15400

Short
7 Days
One
Three
Six
One
Sep 21
term
notice
month
month
month
year
Euro
-0.25 -0.10 -0.20 -0.10 -0.21 -0.06 -0.15 0.00 -0.08 0.07 0.07 0.22
Sterling
0.40 0.55 0.40 0.55 0.46 0.56 0.55 0.65 0.71 0.86 1.03 1.18
Swiss Franc
Canadian Dollar
US Dollar
0.12 0.22 0.12 0.22 0.15 0.25 0.25 0.35 0.50 0.60 0.80 0.90
Japanese Yen
-0.10 0.00 -0.15 -0.05 -0.35 -0.10 -0.20 0.00 -0.15 0.05 -0.05 0.15
Libor rates come from ICE (see www.theice.com) and are fixed at 11am UK time. Other data sources: US $, Euro & CDs:
Tullett Prebon; SDR, US Discount: IMF; EONIA: ECB; Swiss Libor: SNB; EURONIA, RONIA & SONIA: WMBA.

COMMODITIES
Energy
Price*
Crude Oil
Oct
46.21
Brent Crude Oil
48.39
RBOB Gasoline
Sep
1.40
Heating Oil
Sep
1.51
Natural Gas
Sep
2.57
Ethanol
Uranium
Sep
36.75
Carbon Emissions
Diesel
Sep
121.25
Unleaded
Oct
Base Metals ( LME 3 Months)
Aluminium
1620.00
Aluminium Alloy
1715.00
Copper
5284.50
Lead
1685.00
Nickel
9890.00
Tin
15120.00
Zinc
1663.50
Precious Metals (PM London Fix)
Gold
1133.25
Silver (US cents)
1518.00
Platinum
972.00
Palladium
602.00
Bulk Commodities
Iron Ore (Platts)
57.70
Iron Ore (The Steel Index)
57.10
GlobalCOAL RB Index
49.75
Baltic Dry Index
978.00

www.ft.com/commodities

Change
1.29
0.79
0.04
0.02
-0.04
0.00
0.00
-1.00
5.00
51.50
1.50
190.00
-50.00
-14.50
-8.25
-8.00
-16.00
-9.00
0.00
0.00
-0.50
18.00

Agricultural & Cattle Futures


Corn
Wheat
Soybeans
Soybeans Meal
Cocoa (ICE Liffe)X
Cocoa (ICE US)
Coffee(Robusta)X
Coffee (Arabica)
White SugarX
Sugar 11
Cotton
Orange Juice
Palm Oil
Live Cattle
Feeder Cattle
Lean Hogs

S&P GSCI Spt


DJ UBS Spot
R/J CRB TR
Rogers RICIX TR
M Lynch MLCX Ex. Rtn
UBS Bberg CMCI TR
LEBA EUA Carbon
LEBA CER Carbon
LEBA UK Power

Oct
Nov
Oct
Oct
Oct
Oct

Price*
375.25
484.50
870.50
308.90
2216.00
3316.00
1533.00
117.35
341.40
11.11
59.60
122.40
495.75
135.93
185.30
71.20

Change
-2.25
-3.00
2.00
-0.50
8.00
11.00
-23.00
-0.85
-2.00
0.11
0.07
0.60
-4.50
0.00
-2.75
0.00

Sep 18
362.65
88.30
196.68
2284.71
261.64
13.43
7.51
0.51
1401.00

% Chg
Month
2.08
-1.01
0.81
-2.78
-0.22
-0.27
6.25
181.89

% Chg
Year
-37.81
-26.08
-29.75
-36.25
-30.99
30.84
325.00
-64.79

Dec
Dec
Nov
Oct
Dec
Dec
Sep
Dec

Sources: NYMEX, ECX/ICE, CBOT, X ICE Liffe, ICE Futures, CME, LME/London Metal Exchange.* Latest prices, $
unless otherwise stated.

Stock

Price Day Chg

52 Week
High
Low

Sweden (SKr)
AtlasCpcoB
188.90
1.70 270.00 165.20
Ericsson
78.75
0.45 120.00 77.45
H&M
316.60
4.00 368.50 269.60
Investor
297.40
3.30 363.40 219.30
Nordea Bk
97.80
1.65 115.50 82.40
SEB
94.90
0.35 111.50 82.30
SvnskaHn
127.50
1.30 426.00 114.10
Swedbank
195.10
2.20 223.90 166.20
TeliaSonera
46.46 -0.41 55.85 44.37
Volvo
85.70 -0.20 120.50 71.00
Switzerland (SFr)
ABB
17.67
0.16 22.31 16.75
CredSuisse
25.04
0.01 28.94 18.57
Nestle
74.00
0.55 77.00 64.15
Novartis
94.25
0.90 103.20 78.60
Richemont
75.70 -0.35 92.25 66.40
Roche
258.60
1.30 295.80 238.80
Swiss Re
84.85
1.10 96.95 69.25
Swisscom
487.00 -0.40 587.50 483.40
Syngent
330.60 -1.40 435.20 273.20
UBS
18.79
0.12 22.57 13.58
Zurich Fin
254.80 -7.30 334.60 254.10
Taiwan (NT$)
Chunghwa Telecom
97.50 -1.00 99.80 90.00
HonHaiPrc
84.20 -1.30 102.50 77.90
TaiwanSem
129.50 -2.00 155.00 112.50
Thailand (THB)
PTT Explor
256.00
3.00 398.00 240.00
United Arab Emirates (Dhs)
Emirtestele
14.10 -0.15 15.85
9.41
United Kingdom (p)
AscBrFd
3175 36.00
3293
2407
AstraZen
4379
9.00 4931.68
3746
Aviva
456.00
3.30 578.68 446.00
Barclays
254.90
1.65 289.90 204.05
BG
990.40
5.00
1420 780.55
BP
333.55
0.10 499.25 252.55
BrAmTob
3558.5 -12.50
3894 3231.5
BSkyB
850.50 -12.00 954.00 782.50
BT
413.50 -1.50 481.75 351.90
Compass
1029 -3.00 1223.36 924.41
Diageo
1768.5
4.00
2055 1592.5
GlaxoSmh
1289.5
4.50
1645 1247.5
Glencore
119.00 -7.00 361.10 118.10
HSBC
495.10
4.45 674.57 478.35
ImpTob
3354 29.00
3413 2482.72
LlydsBkg
74.23
1.52 89.35 70.90
Natl Grid
855.10
3.90 965.00 806.40
Prudential
1380 11.00 1761.5
1287
RBS
319.50
0.60 414.00 300.30
ReckittB
5839 43.00
6300
4895
RELX
1068
3.00
1199 921.50
RioTinto
2274.5 -25.00
3280 2107.78
RollsRoyce
696.50
4.50
1061 684.50
RylDShlA
1577.5 -4.50 2420.5 1542.5
SABMill
3575.5 -24.50 3787.5
2773
Shire
4795 50.00
5870 3448.28
StandCh
692.10 -30.60
1242 690.20
Tesco
176.50
1.85 252.52 155.40
Vodafone
217.40
0.65 258.00 179.10
WPP
1366 11.00
1616
1091
United States of America ($)
3M
140.18
0.56 170.50 130.60
AbbottLb
43.28 -0.05 51.74 39.28
Abbvie
60.84 -0.38 71.60 52.06
Accenture
98.37
0.84 105.37 73.98
Ace
101.37
1.45 117.89 96.00
Actavis
298.98 -2.94 317.72 201.91
Adobe
82.58
1.33 87.25 58.51
AEP
55.50
0.02 65.38 51.58
Aetna
118.29
2.14 134.40 71.81
Aflac
57.66
0.51 65.10 51.41
AirProd
134.89
0.29 158.20 118.20
Alexion
161.93 -4.65 208.88 150.06
Allstate
58.55
0.98 72.87 54.12
Altria
54.48
0.43 56.70 44.59
Amazon
546.50
6.24 580.57 284.00
AmerAir
43.62
0.13 56.20 28.10
AmerExpr
76.84
0.89 94.89 71.71
AmerIntGrp
58.13
0.35 64.93 48.56
AmerTower
90.44 -0.06 105.20 87.95
Amgen
149.54 -1.05 181.81 127.67
Anadarko
66.28
0.81 106.58 58.10
Aon Cp
90.31
1.00 107.08 78.26
Apple
114.30
0.85 134.54 92.00
ArcherDan
43.53
0.30 53.91 41.63
AT&T
32.54 -0.01 36.45 30.97
AutomData
79.97
0.96 90.23 64.29
Avago Tech 127.41 -0.18 150.50 68.75

Yld

P/E MCap m

1.57
4.28
3.06
3.00
5.81
4.96
3.24
5.77
6.40
3.47

17.74
25.31
24.47
4.36
11.14
10.67
16.59
13.42
14.51
22.12

8826.19
31164.13
62742.34
27319.23
47211.65
24658.28
28575.94
25823.25
24088.43
16652.35

2.86
2.82
2.77
1.67
3.17
5.10
4.63
3.31
4.09
-

16.47 42079.74
10.76 42207.23
16.84 242738.28
24.51 259574.68
29.46 40653.7
24.32 186916.37
36.13 32360.58
14.67 25954.27
19.46
31613
14.46 74406.89
10.44 39426.07

4.82 19.36 23254.11


1.89 8.66 41402.46
6.01 10.60 103241.55
3.57 16.05 20424.94
4.70 14.83 33387.89
1.07 44.49 38930.17
4.08 73.83 85712.67
3.97 11.93 28573.63
2.55 118.17 66255.57
1.84 -49.95 52425.07
7.75 -15.14 94584.09
4.16 16.52 102743.81
3.76 9.03 23005.52
2.76 15.58 53606.09
2.63 19.98 26260.24
3.03 18.69 68857.82
6.20 6.48 97195.52
9.62-276.74 26530.66
6.56 11.17 150002.09
3.82 16.79 49717.86
1.01 40.34 82149.99
4.94 16.02 49577.91
2.68 14.05 54952.76
- -22.28 32034.22
2.38 24.81 64294.85
2.34 100.50 34167.99
6.00 22.63 48985.16
3.32 -51.22 19834.25
7.69 11.69 96309.46
1.98 26.08 89617.25
0.29 14.52 43966.87
7.98 15.40 27301.31
6.40 -2.51 22243.4
5.09 10.14 89388.07
2.80 14.12 27356.81
2.64 18.58 87576.81
2.09 27.92 64506.31
2.98 47.92 100707.01
2.10 21.90 78458.03
3.18 11.58 32824.11
- -34.92 117333.1
- 113.15 41095.55
3.71 15.84 27226.06
0.79 18.21 41246.32
2.63 9.83 24833.82
2.31 28.68 28998.98
56.16 36621.22
1.95 10.00 23442.83
3.76 21.40 106818.67
- -1372.60 255603.63
0.90 7.65 29304.81
1.70 13.60 76933.6
0.85 11.60 75213.65
1.74 55.20 38279.24
1.84 20.12 113388.76
1.60 -13.57 33671.05
1.14 20.94 25290.68
1.66 13.42 651821.12
2.35 12.20 26507.75
5.66 32.71 200153.54
2.40 28.10 37250.84
1.13 34.03 35083.78

52 Week
High
Low

Yld

P/E MCap m

54.92
1.45 70.45 44.11
15.66
0.10 18.48 14.60
36.25 43.44 34.50
35.73
0.43 41.90 34.50
139.13
0.80 154.98 112.15
195945 3745 229374 190007
302.13 -12.54 480.18 265.00
39.30
0.44 45.45 35.06
311.09
2.22 382.84 275.00
136.14
0.05 158.83 115.14
63.05 -1.29 70.54 47.55
52.69
0.27 57.70 34.50
74.66
1.10 92.10 67.73
83.98
0.35 91.91 71.72
52.52
0.45 54.05 33.11
72.22
0.36 107.12 70.23
43.02
0.31 63.95 40.75
120.73 -1.89 140.72 83.16
28.96
0.51 35.72 23.35
78.55
0.81 125.70 69.58
141.64
0.02 170.68 85.75
25.57
0.03 30.31 22.49
50.68
0.39 60.95 46.60
91.30
0.90 100.87 75.94
39.14
0.16 44.87 36.56
62.50
0.67 69.35 42.94
63.15
0.46 71.56 50.84
58.02
0.60 64.99 49.33
48.80
0.44 81.00 41.10
17.66
0.04 25.16 15.42
142.91
1.10 156.85 117.03
77.90
0.49 89.44 74.45
28.44
0.28 37.99 24.47
100.27
1.24 113.65 77.40
86.45
0.24 92.92 70.12
78.91 -0.63 98.23 76.76
77.53 -0.12 90.57 58.23
47.27
0.60 51.06 30.12
93.55
1.36 95.51 82.04
52.89
0.63 66.75 50.92
103.25
0.41 122.08 78.54
69.13
0.13 80.89 65.53
44.12
0.81 54.33 35.11
69.78
0.33 89.97 67.27
48.21
0.68 76.61 47.37
53.22
0.29 73.82 49.21
26.00 -0.02 29.35 19.50
113.27
0.72 118.46 97.78
24.36
0.27 30.92 22.66
45.24
0.13 65.94 44.03
76.73
0.47 105.90 68.15
72.77
0.66 82.53 60.44
30.78 -0.14 38.93 29.55
84.07
0.15 94.61 68.06
73.46
0.78 97.56 66.55
95.69
1.29 99.24 70.32
145.81
0.51 185.19 130.01
14.35
0.07 16.77 10.44
38.58
0.07 59.43 38.25
139.66
0.42 153.76 114.73
24.96
0.16 28.68 19.37
56.96
0.39 59.87 47.43
30.78
0.27 39.00 24.62
107.81 -0.63 123.37 85.95
183.25
2.31 218.77 171.26
663.93
3.01 713.33 490.91
37.80
0.42 66.99 30.93
82.54
0.06 95.49 43.91
26.59
0.05 41.10 24.85
24.19
0.23 31.60 20.72
115.95
0.83 123.80 86.35
97.89 -0.15 107.41 82.89
188.79
0.90 219.79 121.04
146.21
1.70 195.00 140.62
84.57 -0.21 100.14 78.79
203.71 -5.17 242.37 145.12
231.74
3.48 246.39 193.42
29.12
0.10 37.90 24.87
86.06
0.57 109.21 77.96
93.26 -0.13 109.49 81.79
40.67
0.17 54.52 38.48
61.51
0.57 70.61 50.07
108.23
0.38 119.01 99.57
30.64
0.26 44.71 28.50
88.19 -0.11 91.32 53.33
36.67 -0.06 39.43 25.42
92.40
0.47 95.78 64.47
44.89 -0.37 65.83 40.00
48.88
0.18 58.66 39.95
88.64
0.15 92.85 60.58
204.56
1.25 213.34 166.28
69.33
1.14 76.25 49.85

1.22
1.26
5.65
2.73
1.66
1.70
2.60
2.37
2.30
0.97
1.71
1.66
1.93
3.82
1.37
0.82
5.37
0.03
3.11
0.16
2.09
3.20
2.28
1.61
5.89
2.45
1.04
3.55
2.29
1.23
0.54
3.02
1.27
0.75
1.86
1.73
3.55
3.64
4.49
3.88
3.85
1.10
1.86
4.01
0.81
2.85
3.97
3.75
0.59
3.77
1.46
1.85
3.59
2.98
4.03
0.39
1.29
1.80
2.45
1.81
2.01
0.59
3.10
2.26
0.87
3.15
1.15
3.01
2.42
2.63
3.13
5.79
2.45
0.96
1.80
5.05
2.20
2.81
1.39

93.59 23938.66
16.95 163459.39
11.66 19775.79
13.11 26207.26
35.11 29252.69
18.21 159059.33
20.76 71051.68
15.91 43485.04
15.94 50905.25
18.78 92506.47
59.89 105136.05
30.21 29453.71
10.72 40497.74
23.62 27616.01
28.21 31127.98
12.55 43522.12
18.78 19118.45
46.41 95441.91
30.79 38100.47
12.31 147810.25
17.82 36471.64
14.76 129417.27
12.34 152538.96
26.21 30837.13
23.31 170259.14
25.58 38095.58
25.75 56843.31
17.41 123648.62
36.76 60186.61
8.93 21650.01
27.01 62807.18
52.19 26000.06
14.40 28098.19
24.48 111749.53
24.17 59087.54
12.20 25895.6
17.53 22045.55
21.20 37598.48
16.82 47176.52
11.11 23023.37
21.79 174271.33
24.00 41085.47
13.18 51095.46
21.09 48031.7
14.62 43622.24
11.69 24880.35
11.03 31673.93
28.30 33425.1
20.10 46886.33
12.76 29725.74
30.81 42137.93
31.11 26494.27
11.55 26516.29
28.07 56808.71
13.27 306287.7
99.29 216234.19
38.09 41173.75
15.78 55921.75
10.52 23678.03
16.40 45071.43
49.23 251956.39
28.43 34156.29
11.53
48688
11.56 158222.55
11.02 79323.61
33.52 192464.19
22.48 32305.24
17.17 34269.95
10.92 47814.8
37.22 23886.44
22.79 148892.81
17.82 76526.72
22.68 27981.62
9.89 143217.06
17.27 30960.11
63.23 29476.84
24.13 25604.62
12.54 138436.48
59.80 23724.06
16.68 258246.85
15.19
26601
11.27 227468.12
62.14 39425.49
43.65 67160.95
45.49 52233.16
19.44 17811.04
24.16 26830.99
15.37 35797.58
-30.75 12342.59
46.73 98261.03
18.45 63522.57
23.60 64665.89

Stock

Price Day Chg

BakerHu
BankAm
Baxter
BB & T
BectonDick
BerkshHat
Biogen
BkNYMeln
BlackRock
Boeing
BrisMySq
Broadcom
CapOne
CardinalHlth
Carnival
Caterpillar
CBS
Celgene
CharlesSch
ChevrnTx
Cigna
Cisco
Citigroup
CME Grp
Coca-Cola
Cognizant
ColgtPlm
Comcast
ConocPhil
Corning
Costco
CrownCstl
CSX
CVS
Danaher
Deere
Delphi
Delta
DirectTV
DiscFinServ
Disney
DominRes
DowChem
DukeEner
DuPont
Eaton
eBay
Ecolab
EMC
Emerson
EOG Res
EquityResTP
Exelon
ExpScripts
ExxonMb
Facebook
Fedex
FordMtr
Franklin
GenDyn
GenElectric
GenMills
GenMotors
GileadSci
GoldmSchs
Google
Halliburton
HCA Hold
Hew-Pack
HiltonWwde
HomeDep
Honywell
HumanaInc
IBM
IllinoisTool
Illumina
Intcntl Exch
Intel
Intuit
John&John
JohnsonCn
JPMrgnCh
Kimb-Clark
KinderM
Kraft
Kroger
L Brands
LasVegasSd
LibertyGbl
Lilly (E)
Lockheed
Lowes

BONDS: HIGH YIELD & EMERGING MARKET

Close
Prev
price
price
DirectTV
93.55
92.19
Firstrand
52.14
52.59
MTN Grp
175.85
180.36
Naspers N
1723.51
1742.96
VertexPharm
120.89
124.16
NTTDCMo
2200.00
2217.00
E.ON
7.72
7.72
KDDI
2747.50
2632.00
Glencore
119.00
126.00
IM Baotou Stl
3.87
3.82
RioTinto
2274.50
2299.50
UBS
18.67
18.67
HiltonWwde
24.19
23.96
Citic Secs
15.32
15.66
NipponTT
4333.00
4390.50
TokioMarine
4416.00
4590.50
Biogen
302.13
314.67
Siemens
81.32
81.32
Ericsson
78.30
78.30
CharlesSch
28.96
28.45
Based on the FT Global 500 companies in local currency

Day
Week
change change %
change change %
1.36
1.48
-0.45
-0.86
-5117.86
-99.0
-4.51
-2.50 -17092.15
-99.0
-19.45
-1.12 -166740.49
-99.0
-3.27
-2.63
-13.96
-10.4
-17.00
-0.77
-242.50
-9.9
0.00
0.00
-0.85
-9.9
115.50
4.39
-272.00
-9.0
-7.00
-5.56
-8.90
-7.0
0.05
1.31
-0.24
-5.8
-25.00
-1.09
-123.00
-5.1
0.00
0.00
-1.00
-5.1
0.23
0.96
-1.28
-5.0
-0.34
-2.17
-0.80
-5.0
-57.50
-1.31
-225.50
-4.9
-174.50
-3.80
-213.00
-4.6
-12.54
-3.99
-14.10
-4.5
0.00
0.00
-3.74
-4.4
0.00
0.00
-3.45
-4.2
0.51
1.79
-1.27
-4.2

Month
change %
0.42
0.86
-3.38
6.41
-3.51
-19.94
-9.61
-15.14
-24.94
-14.57
-1.75
-6.55
-1.33
-21.92
-12.81
-18.12
2.07
-2.97
-5.35
-6.50

BOND INDICES
Since
16-12-2008
16-12-2008
18-02-2010
10-09-2014
05-03-2009
05-10-2010
03-08-2011

INTEREST RATES: MARKET


Over
night
0.13750
-0.18000
0.48125

5.65
34.77

Yld

FT 500: BOTTOM 20
Day
change change %
0.88
9.95
-24.50
-0.68
0.12
1.02
0.14
0.30
-0.35
-1.01
-0.06
-0.58
0.15
0.17
0.00
0.00
1.31
3.13
0.00
0.00
-0.65
-2.25
0.70
0.96
-0.26
-2.45
3.25
1.34
-1.29
-2.00
0.39
1.31
0.10
0.42
-0.78
-0.76
-940.00
-1.66
-5.25
-0.58

Close
Prev
price
price
Sinopec Oil
9.72
8.84
SABMill
3575.50
3600.00
Ch Rail Cons
11.94
11.82
Williams Cos
46.28
46.14
New Ch Life Ins
34.25
34.60
Ch Coms Cons
10.30
10.36
Lilly (E)
88.64
88.49
ValeantPh
319.13
319.13
T-MobileUS
43.15
41.84
Richemont
76.05
76.05
ChinaLife
28.20
28.85
Heineken
73.68
72.98
CSR
10.36
10.62
SBI NewA
245.25
242.00
BrisMySq
63.05
64.34
Inditex
30.28
29.89
Ch OSLnd&Inv
23.95
23.85
Netflix
101.84
102.62
Keyence
55710.00 56650.00
SunPhrmInds
899.95
905.20
Based on the FT Global 500 companies in local currency

Sep 21
US
US
US
Euro
UK
Japan
Switzeland

52 Week
High
Low

Finland ()
Nokia
6.19 -0.11
7.87
SampoA
44.47
0.70 49.40
France ()
Airbus Grpe
55.00
0.58 67.88
AirLiquide
105.35
2.05 123.95
AXA
21.94
0.40 25.24
BNP Parib
53.69
0.71 61.00
ChristianDior 165.65
1.30 195.35
Cred Agr
11.10
0.09 14.49
Danone
56.09
1.46 67.74
EDF
16.92
0.04 26.12
Essilor Intl
109.75
3.50 121.10
Esslr Intl
109.75
3.50 121.10
GDF Suez
17.56
0.67 20.57
Hermes Intl
324.50
3.10 365.55
LOreal
150.20
3.45 181.30
LVMH
152.15
1.50 176.60
Nmrcble-SFR
45.14
0.22 60.01
Orange
14.14
0.16 16.45
PernodRic
92.66
1.29 117.75
Renault
71.65 -2.35 100.25
Safran
69.63
0.03 71.35
Sanofi
89.43
1.55 101.10
Sant Gbn
41.26
0.41 44.84
Schneider
53.55
0.69 75.29
SocGen
41.03
0.59 48.77
Total
40.82
0.05 51.74
UnibailR
227.10
4.10 262.00
Vinci
59.03
0.88 60.35
Vivendi
21.49
0.04 24.83
Germany ()
Allianz
139.15
2.15 170.15
BASF
68.31
0.99 97.22
Bayer
118.15
3.10 146.45
BMW
84.40 -1.31 123.75
Continental
185.75 -6.45 234.25
Daimler
71.25 -1.03 96.07
Deut Bank
25.45
0.26 33.42
Deut Tlkm
16.03
0.29 17.63
DeutsPost
23.90
0.22 31.19
E.ON
7.75
0.03 15.46
Fresenius Med
72.61
2.38 82.32
Fresenius SE
65.09
0.83 66.56
HenkelKgaA
78.67
1.26 99.44
Linde
146.55
2.50 195.55
MuenchRkv
166.85
2.55 206.50
SAP
58.13
0.57 70.81
Siemens
82.53
1.21 106.35
Volkswgn
133.70 -27.65 254.50
Hong Kong (HK$)
AIA
42.70 -0.50 58.20
BOC Hold
23.90 -0.25 33.70
Ch OSLnd&Inv
23.95
0.10 34.05
ChngKng
60.60 -1.85 77.55
Citic Ltd
14.42 -0.12 16.40
Citic Secs
15.32 -0.34 40.50
CK Hutchison 103.50 -0.10 174.90
CNOOC
8.38 -0.30 14.22
HangSeng
145.40
0.40 162.10
HK Exc&Clr 186.40 -1.10 311.40
MTR
35.15 40.00
SandsCh
27.80 -0.70 49.30
SHK Props
105.00 -0.70 137.60
Tencent
133.80 -1.50 171.00
India (Rs)
Bhartiartl
352.30 -4.60 452.45
HDFC Bk
1052.95
3.20
1128
Hind Unilevr 790.70 -7.15 981.00
HsngDevFin
1207.3
0.25 1402.3
ICICI Bk
279.30
1.45 393.40
Infosys
1104.65
0.20
2336
ITC
314.25 -3.75 409.95
L&T
1550.25
9.65 1893.8
OilNatGas
238.95 -0.25 429.00
RelianceIn
878.10 -17.30 1067.85
SBI NewA
245.25
3.25 336.00
SunPhrmInds 899.95 -5.25 1200.8
Tata Cons
2551.05 -0.20 2839.7
Indonesia (Rp)
Bk Cent Asia
12175 -100.00 15600
Israel (ILS)
TevaPha
250.10 -1.50 275.90
Italy ()
Enel
3.98
0.10
4.50
ENI
14.41
0.30 19.34
Generali
16.31
0.25 19.21
IntSPaolo
3.16
0.08
3.65
Luxottica
61.20
2.55 67.80
Unicred
5.72
0.01
6.61

3.09 19.42 177539.3


11.32 26981.8

4.85 17.78
4.53 10.87
5.78 11.03
1.41 9.64
0.73 20.62
4.44 10.53
3.47 18.15
1.53 18.22
3.24 212.24
4.09 11.45
1.21 16.32
3.20 13.01
5.90 13.43
4.22 10.99
3.37 34.66
3.25 16.79
3.78 12.44
4.72 17.17
95.76

Price Day Chg

Bid
yield

Mth's Spread
chge
vs
yield
US

Sep 21
High Yield US$
Windstream Services, LLC

S*

F*

Bid
price

11/17

7.88

BB-

B2

BB

104.88

5.46

-0.01

-0.83

4.77

High Yield Euro


Kazkommerts Intl BV

02/17

6.88

Caa1

97.50

0.00

0.00

Emerging US$
Peru
Mexico
Brazil
Russia
Peru
Brazil
Turkey
Poland
Colombia
Turkey

05/16
09/16
01/18
07/18
03/19
01/21
03/21
04/21
07/21
04/26

8.38
11.40
8.00
11.00
7.13
7.88
5.63
5.13
4.38
4.25

BBB+
BBB+
BB+
BB+
BBB+
BB+
ABBB
-

A3
A3
Baa3
Ba1
A3
Baa3
Baa3
A2
Baa2
Baa3

BBB+
BBB+
BBB
BBBBBB+
BBB
BBBABBB
BBB-

121.00
110.15
106.90
120.36
116.98
99.34
106.05
112.45
103.56
93.08

1.23
0.92
4.79
3.43
2.10
5.01
4.43
2.72
3.72
5.17

0.00
-0.06
0.55
-0.01
0.00
0.07
-0.01
0.00
-0.01
0.00

0.00
0.29
0.37
-0.54
-0.30
0.40
-0.19
-0.10
-0.17
-0.23

0.53
0.22
4.09
2.74
0.61
3.52
2.93
1.23
2.23
2.98

Emerging Euro
Brazil
02/15
7.38
BBBBaa2
BBB 111.75
0.73
0.00
0.00
0.09
Mexico
07/17
4.25
BBB+
A3
BBB+ 111.13
1.50
0.00
0.00
0.80
Mexico
02/20
5.50
BBB+
BBB+ 109.30
3.20
0.00
0.01
1.71
Bulgaria
09/25
5.75
BB+
BBB- 113.67
4.12
0.00
0.22
1.92
Data provided by SIX Financial Information & Tullett Prebon Information. US $ denominated bonds NY close; all other
London close. *S - Standard & Poors, M - Moodys, F - Fitch.

VOLATILITY INDICES
Index

Day's
change

Month's
change

Year
change

Return
1 month

Return
1 year

Markit IBoxx
ABF Pan-Asia unhedged
Corporates( )
Corporates($)
Corporates()
Eurozone Sov()
Gilts( )
Global Inflation-Lkd
Markit iBoxx Non-Gilts
Overall ($)
Overall( )
Overall()
Treasuries ($)

171.38
293.94
250.14
210.28
223.41
288.86
247.55
294.58
225.31
287.88
219.25
216.81

0.44
0.71
0.60
0.35
0.77
0.87
0.77
0.69
0.51
0.81
0.60
0.50

0.64
0.49
0.48
0.01
0.93
0.59
0.78
0.47
0.14
0.56
0.62
-0.05

-3.87
0.14
-0.14
-1.14
0.78
1.13
-1.31
0.37
0.51
0.90
0.34
0.81

0.17
-0.18
0.48
-0.75
-0.06
0.72
-0.48
-0.03
0.14
0.49
-0.20
-0.05

-4.14
5.40
-0.14
0.56
4.48
9.46
-1.06
5.74
0.51
8.28
3.29
0.81

FTSE
Sterling Corporate ()
Euro Corporate ()
Euro Emerging Mkts ()
Eurozone Govt Bond

110.51
106.06
824.26
112.99

-0.31
-0.16
13.15
-0.26

-1.22
-1.23
-1.11
-0.53

0.34
-2.35
-12.70
1.13

Index

Day's
change

Week's
change

Month's
change

Series
high

Series
low

308.12
76.10
60.09
84.10

0.00
-

-3.59
-

-4.59
-

310.70
77.19
69.98
85.18

308.12
76.10
48.09
84.10

CREDIT INDICES
Markit iTraxx
Crossover 5Y
Europe 5Y
Japan 5Y
Senior Financials 5Y

Markit CDX
Emerging Markets 5Y
352.30
0.41
2.14
10.13
396.59
278.35
Nth Amer High Yld 5Y
387.97
-5.20
-12.68
6.32
426.92
337.73
Nth Amer Inv Grade 5Y
79.78
-1.16
-2.18
3.24
87.98
60.22
Nth AmerHiVol 5Y
0.00
0.00
0.00
0.00
100.00
100.00
Websites: markit.com, ftse.com. All indices shown are unhedged. Currencies are shown in brackets after the index names.

BONDS: INDEX-LINKED
Price
Month
Value
No of
Yield
Sep 18
Sep 18
Prev
return
stock
Market
stocks
Can 4.25%' 21
129.74
-0.472
-0.397
0.74
5.18
71066.31
7
Fr 2.25%' 20
114.03
-0.594
-0.534
0.65
20.31 206487.20
14
Swe 0.25%' 22
107.91
-0.789
-0.704
0.45
30.88 217433.90
6
UK 2.5%' 16
UK 2.5%' 24
342.12
-0.855
-0.782
1.11
6.82 483767.52
25
UK 2%' 35
234.79
-0.836
-0.796
1.36
9.08 483767.52
25
US 0.625%' 21
101.86
0.303
0.343
0.28
35.84 1084194.65
36
US 3.625%' 28
133.48
0.817
0.343
-0.18
16.78 1084194.65
36
Representative stocks from each major market Source: Merill Lynch Global Bond Indices Local currencies. Total market
value. In line with market convention, for UK Gilts inflation factor is applied to price, for other markets it is applied to par
amount.

BONDS: TEN YEAR GOVT SPREADS


Spread Spread
Bid
vs
vs
Yield Bund T-Bonds
Australia
2.80
2.11
0.61 Italy
Austria
0.96
0.27 -1.23 Japan
Belgium
0.99
0.30 -1.20 Netherlands
Canada
1.67
0.98 -0.53 Norway
Denmark
0.96
0.27 -1.23 Portugal
Finland
0.94
0.25 -1.25 Spain
France
1.05
0.37 -1.14 Switzerland
Germany
0.69
0.00 -1.51 United Kingdom
Greece
8.10
7.41
5.90 United States
Ireland
1.27
0.58 -0.93
Data provided by SIX Financial Information & Tullett Prebon Information

Spread Spread
Bid
vs
vs
Yield Bund T-Bonds
1.89
0.33
0.85
1.66
2.57
1.99
0.03
1.89
2.19

1.21
-0.36
0.16
0.97
1.89
1.31
-0.66
1.20
1.51

-0.30
-1.86
-1.34
-0.54
0.38
-0.20
-2.17
-0.31
0.00

Lyondell
Marathon Ptl
Marsh&M
MasterCard
McDonald's
McGraw Hill
McKesson
Medtronic
Merck
Metlife
Microsoft
Mnstr Bvrg
MondelezInt
Monsanto
MorganStly
MylanNV
Netflix
News Corp A
NextEraE
Nike
NorfolkS
Northrop
NXP
Occid Pet
Oracle
Pepsico
Perrigo
Pfizer
Phillips66
PhilMorris
PNCFin
PPG Inds
Praxair
Prec Cast
Priceline
ProctGmbl
Prudntl
PublStor
Qualcomm
Raytheon
Regen Pharm
ReynoldsAm
Salesforce
Schlmbrg
Shrwin-Will
SimonProp
SouthCpr
Starbucks
StateSt
Stryker
Sychrony Fin
Target
TE Connect
Telsa Mtrs
TexasInstr
TheTrvelers
ThrmoFshr
TimeWrnr
TimeWrnrC
TJX Cos
T-MobileUS
UnionPac
UPS B
USBancorp
UtdHlthcre
UtdTech
ValeroEngy
Verizon
VertexPharm
VF Cp
Viacom
Visa Inc
Walgreen
WalMartSto
Wellpoint
WellsFargo
Williams Cos
Yahoo
Yum!Brnds
Venezuela ()
Bco de Vnzla
Bco Provncl
Mrcntl Srvcs

Yld

P/E MCap m

86.98
46.72
53.63
93.40
97.67
93.12
202.91
70.54
51.53
46.88
44.16
134.72
42.96
87.78
33.29
48.41
101.84
26.50
97.88
116.09
79.95
170.48
89.66
67.19
36.73
93.67
175.86
32.70
79.99
81.99
88.87
93.80
105.52
229.24
1309.99
70.45
76.95
209.05
54.44
104.87
541.57
42.51
71.64
73.32
248.02
185.35
27.21
57.38
69.83
99.77
30.79
77.93
61.42
268.88
47.44
100.91
125.93
69.46
190.30
71.72
43.15
88.94
99.34
41.47
122.71
91.79
60.45
44.68
120.89
71.45
44.99
70.83
87.69
63.57
128.71
51.55
46.28
31.36
79.75

1.29
0.63
0.54
1.25
0.62
0.90
-0.82
0.21
-0.60
0.36
0.68
0.12
0.11
-0.32
0.26
-1.18
-0.78
0.19
0.59
1.04
1.00
1.50
-0.42
0.35
0.35
0.62
-2.71
-0.15
1.40
0.77
1.44
0.61
0.39
0.49
15.52
0.51
1.12
2.08
-0.02
0.32
-8.79
0.67
0.24
0.78
1.37
1.35
0.08
0.54
0.83
0.55
0.23
1.31
0.07
8.26
-0.36
1.25
0.15
-0.18
0.79
0.36
1.31
1.16
1.02
0.30
0.24
0.72
0.54
0.11
-3.27
0.83
-0.69
1.04
1.20
0.23
0.94
0.51
0.14
0.62
-0.40

115.40
60.38
59.99
99.18
101.88
109.13
243.61
79.50
63.62
58.23
50.05
155.83
48.58
126.00
41.04
76.69
129.29
39.27
112.64
117.72
117.64
176.83
114.00
95.15
46.71
100.76
215.73
36.46
86.38
90.25
100.52
118.95
134.06
249.12
1395
93.89
94.30
217.99
78.53
113.36
605.93
44.14
78.46
105.18
294.35
206.31
33.31
59.32
81.26
105.34
36.40
85.81
73.73
286.65
59.99
110.49
141.25
91.34
194.22
76.93
43.43
124.52
114.40
46.26
126.21
124.45
71.50
51.73
143.45
77.83
81.23
76.92
97.30
90.97
129.96
58.77
61.38
52.62
95.90

70.06
37.32
48.66
69.64
87.50
73.96
160.10
55.54
45.69
44.49
39.72
88.93
31.83
87.68
30.40
44.80
45.08
22.81
90.33
79.27
72.10
118.24
53.81
64.83
35.14
76.48
142.38
27.51
57.33
75.27
76.69
85.78
100.99
186.17
990.69
65.02
74.05
162.34
52.59
92.96
320.06
28.14
51.04
68.01
202.01
162.43
23.41
35.39
64.21
77.87
23.76
58.72
51.03
181.40
41.47
90.83
107.33
66.82
128.78
58.58
24.26
79.31
93.64
38.10
80.72
87.17
42.53
38.06
96.43
61.75
36.32
48.80
58.39
61.50
81.84
46.44
40.07
29.00
65.81

3.26 10.13 40521.78


2.11 8.27 25049.25
2.06 20.30 28423.5
0.62 29.09 103569.77
3.39 23.01 93618.15
1.33-156.05 25375.2
0.47 24.83 47156.94
1.82 32.96 99716.38
3.42 15.29 145141.2
2.99 8.05 52359.38
2.70 30.35 353150.85
50.22 27684.75
1.38 34.37 69223.37
2.20 16.10 41066.52
1.33 17.12 65028.2
23.75 23795.84
- 232.80 43384.29
1.02 6.85 32354.91
3.01 15.20 44251.91
0.94 30.91 78700.45
2.86 13.93 24095.88
1.68 17.52 31945.74
48.01 22572.04
4.27 -21.33 51326.06
1.48 17.16 159264.11
2.80 21.99 137600.59
0.26 195.04 25724.7
3.25 23.57 201672.27
2.54 10.45 43007.39
4.80 17.43 127017.73
2.16 12.34 45643.62
1.43 23.51 25393.67
2.55 20.87 30228.48
0.05 22.62 31519.95
29.62 66418.58
3.63 23.38 191093.19
2.91 13.71 34704.45
2.78 37.08 36158.82
3.15 15.14 85528.39
2.39 15.33 31833.08
- 138.47 55097.45
3.10 15.97 30375.55
- -458.97 47282.4
2.42 22.10 92782.72
0.97 25.56 23117.64
2.92 39.20 57692.18
1.59 17.96 21686.76
1.05 32.84 85163.4
1.75 16.78 28498.54
1.32 41.54 37569.21
12.00 25671.62
2.65 17.34 48973.57
1.92 13.65 24714.46
- -65.94 34185.98
2.74 17.04 48691.74
2.21 9.33 31402.2
0.47 26.13 50181.55
1.89 16.73 56650.29
1.94 27.86
53850
1.02 22.10 48365.88
- 129.59 35161.84
2.33 15.52 77172.49
2.78 23.53 69383.85
2.35 13.46 73028.84
1.30 19.83 117011.66
2.64 13.37 81747.97
2.20 7.03 30050.41
4.85 18.92 181655.09
- -39.93 29576.41
1.68 30.03 30412.12
3.04 10.65 15632.23
0.64 30.18 138216.76
1.56 22.19 95782.27
3.04 13.39 203801.72
1.64 12.65 34744.16
2.72 12.75 264624.67
4.89 17.21 34696.64
4.41 29522.02
1.98 39.65 34388.64

118.00
4000
-

5.00
-

143.95
4400
-

27.00
840.00
-

31878.65
31948.88
-

Closing prices and highs & lows are in traded currency (with variations for that
country indicated by stock), market capitalisation is in USD. Highs & lows are
based on intraday trading over a rolling 52 week period.
ex-dividend
ex-capital redistribution
# price at time of suspension

Sep 21
US$
Wachovia Corporation
Merrill Lynch & Co., Inc.
Korea Electric Power Corporation
Archer Daniels Midland Company
SouthTrust Bank
FleetBoston Financial Corp.
Euro
Goldman Sachs Group, Inc. (The)
Credit Agricole S.A.
B.A.T. Netherlands Fin B.V. (Re - British American Tobacco)
Philip Morris Intl, Inc.
Yen
Wal-Mart Stores, Inc.
Sterling
IPIC GMTN Limited
B.A.T. Intl Fin plc (Re - British American Tobacco)

Red
date Coupon

Ratings
M*

Bid
yield

Day's
chge
yield

Mth's Spread
chge
vs
yield
US

F*

Bid
price

08/26
09/26
08/27
12/27
12/27
01/28

6.82
6.22
6.75
6.75
6.57
6.88

A
BBB+
A+
A
A+
BBB+

A3
Baa3
Aa3
A2
Aa3
Baa3

A+
AAAA
A+
A-

126.04
114.53
99.20
120.88
118.89
118.78

4.56
4.58
6.97
4.56
4.59
4.89

0.00
0.00
0.00
0.00
0.00
0.00

0.30
0.10
-0.16
0.31
0.16
0.20

2.37
2.38
-

06/26
03/27
03/29
05/29

2.88
2.63
3.13
2.88

ABBB
AA

A3
Baa3
A3
A2

A
AAA

103.99
93.32
107.71
105.05

2.45
3.33
2.44
2.43

0.00
0.00
0.00
0.00

0.30
0.17
0.36
0.33

0.25
-

07/15

0.94

NR

WR

NR

100.00

0.31

0.00

0.00

03/26
09/26

6.88
4.00

AA
A-

Aa2
A3

AA
A-

124.80
106.73

3.94
3.26

-0.07
-0.09

0.17
0.03

1.74
1.07

S*

Data provided by SIX Financial Information. US $ denominated bonds NY close; all other London close. *S - Standard & Poors, M Moodys, F - Fitch.

GILTS: UK CASH MARKET

Sep 21
Day Chng
Prev
52 wk high
52 wk low
VIX
21.28
-1.00
22.28
53.29
10.88
VXD
20.30
-1.06
21.36
56.32
7.04
VXN
22.91
-0.69
23.60
46.72
11.15
VDAX
23.61
-1.03
24.64
29.94
CBOE. VIX: S&P 500 index Options Volatility, VXD: DJIA Index Options Volatility, VXN: NASDAQ Index Options Volatility.
Deutsche Borse. VDAX: DAX Index Options Volatility.

BONDS: BENCHMARK GOVERNMENT


Red
Bid
Date Coupon
Price
Australia
10/18
3.25 103.94
04/26
4.25 113.17
Austria
10/18
1.15 103.64
10/25
1.20 102.26
Belgium
06/18
0.75 101.71
06/25
0.80 98.22
Canada
11/17
0.25 99.44
06/26
1.50 98.36
Denmark
11/16
2.50 103.15
11/25
1.75 107.60
Finland
05/18
1.00 99.87
09/25
0.88 99.35
France
11/16
0.25 100.52
11/20
0.25 99.97
11/25
1.00 99.48
05/45
3.25 128.64
Germany
04/18
0.25 101.17
10/20
0.25 101.04
08/25
1.00 102.96
08/46
2.50 126.91
Greece
07/17
3.38 90.09
02/26
3.00 68.81
Ireland
10/17
5.50 111.74
03/25
5.40 136.65
Italy
05/18
0.25 99.84
05/20
0.70 99.58
12/25
2.00 101.06
09/46
3.25 106.92
Japan
09/17
0.10 100.17
09/20
0.10 100.20
09/25
0.40 100.64
09/45
1.40 100.53
Netherlands
04/17
0.50 101.14
07/25
0.25 94.36
New Zealand
12/17
6.00 107.72
Norway
05/17
4.25 105.87
03/25
1.75 100.82
Portugal
02/16
6.40 102.54
10/25
2.88 102.63
Spain
04/18
0.25 99.58
10/25
2.15 101.41
Sweden
01/18
0.88 99.79
05/25
2.50 116.14
Switzerland
10/16
2.00 102.80
05/26
1.25 113.02
United Kingdom
07/18
1.25 101.12
01/21
1.50 100.42
09/25
2.00 101.02
01/45
3.50 118.73
United States
07/17
0.63 99.87
08/20
1.38 99.45
08/25
2.00 98.28
08/45
2.88 97.56
Data provided by SIX Financial Information & Tullett Prebon Information

52 Week
High
Low

Price Day Chg

BONDS: GLOBAL INVESTMENT GRADE


Day's
chge
yield

Ratings
M*

Red
date Coupon

Stock

Bid Day chg Wk chg Month


Year
Yield
yield
yield chg yld chg yld
1.92
-0.02
0.00
0.16
-1.12
2.80
-0.02
0.01
0.15
-1.00
0.05
0.00
0.00
0.00
0.00
0.96
0.03
0.02
0.02
0.00
0.12
0.00
0.00
0.00
-0.29
0.99
0.03
0.00
0.02
0.00
0.52
0.03
0.04
0.18
0.00
1.67
0.06
0.05
0.26
0.00
-0.25
0.00
0.00
0.00
0.00
0.96
0.03
0.05
0.18
0.00
1.05
0.00
-0.04
0.01
0.00
0.94
0.02
0.02
0.00
0.00
-0.19
0.00
0.00
0.00
0.00
0.26
0.01
0.00
0.00
0.00
1.05
0.02
-0.01
0.00
0.00
1.97
0.04
-0.03
0.11
0.00
-0.21
0.00
0.00
0.00
0.00
0.04
0.00
0.02
0.04
0.00
0.69
0.02
0.03
0.10
0.00
1.42
0.04
0.00
0.18
0.00
9.57
-0.68
-1.88
-4.04
0.00
8.10
0.03
-0.44
-1.64
1.92
-0.16
0.00
0.00
0.00
0.00
1.27
0.01
0.00
-0.03
0.00
0.31
0.01
-0.01
-0.08
0.00
0.79
0.02
-0.02
-0.11
0.00
1.89
0.05
-0.04
0.00
0.00
2.93
0.04
-0.07
0.06
0.00
0.02
0.00
0.00
0.00
0.00
0.06
0.00
0.00
0.00
0.00
0.33
0.00
0.00
0.00
0.00
1.37
0.00
0.00
0.00
0.00
-0.23
0.00
0.00
0.00
0.00
0.85
0.02
0.01
0.05
0.00
2.42
-0.03
-0.03
-0.10
-1.54
0.67
0.02
0.03
0.14
0.00
1.66
0.04
0.11
0.37
0.00
-0.04
0.00
0.00
0.00
0.00
2.57
0.03
-0.08
-0.10
0.00
0.41
0.03
0.00
-0.01
0.00
1.99
0.04
-0.12
-0.05
0.00
0.97
0.00
-0.04
0.02
0.00
0.76
0.02
0.10
0.27
0.00
-0.64
0.00
0.00
0.00
0.00
0.03
0.00
0.00
0.00
-0.67
0.85
0.03
0.02
0.00
0.00
1.42
0.03
0.03
0.00
0.00
1.89
0.05
0.03
0.07
0.00
2.58
0.05
0.07
0.16
0.00
0.70
0.03
0.00
0.11
0.00
1.49
0.05
-0.02
0.00
0.00
2.19
0.06
0.01
0.18
0.00
3.00
0.06
0.04
0.26
0.00

Red
52 Week
Amnt
Change in Yield
Sep 21
Price
Yield
Day
Week
Month
Year
High
Low
m
Tr 2pc '16
100.50
0.49
-2.00
2.08
4.26
-30.99 101.97 100.50
0.32
Tr 1.75pc '17
101.63
0.52
6.12
6.12
0.00
-50.94 102.68 101.58
0.29
Tr 5pc '18
110.58
0.66
4.76
3.13
-1.49
-54.79 113.65 110.45
0.35
Tr 4.5pc '19
112.17
0.92
4.55
3.37
-4.17
-46.51 115.07 111.71
0.36
Tr 4.75pc '20
115.64
1.14
2.70
2.70
-5.00
-40.93 119.04 114.68
0.33
Tr 1.5pc '21
100.40
1.42
2.90
2.90
2.16
-32.06 142.92 100.01
0.04
Tr 4pc '22
115.62
1.46
3.55
3.55
-0.68
-33.64 119.85 112.69
0.38
Tr 5pc '25
128.16
1.76
2.92
2.33
0.00
-30.43 134.70 123.14
0.35
Tr 4.25pc '27
124.15
2.01
2.55
2.55
1.52
-26.37 131.90 117.44
0.31
Tr 4.25pc '32
126.50
2.33
2.19
2.64
3.56
-20.48 136.85 118.96
0.35
Tr 4.25pc '36
128.42
2.47
2.07
2.49
4.22
-19.02 140.37 119.89
0.28
Tr 4.5pc '42
138.16
2.55
2.00
2.82
4.94
-17.74 153.16 127.45
0.26
Tr 3.75pc '52
129.72
2.51
2.03
2.87
5.02
-19.55 145.21 115.33
0.22
Tr 4pc '60
140.85
2.48
2.06
2.90
5.98
-19.74 159.23 123.64
0.21
xd Ex dividend. Closing mid-prices are shown in pounds per 100 nominal of stock. Red yield: Gross redemption yield.
This table shows the gilts benchmarks & the non-rump undated stocks.

GILTS: UK FTSE ACTUARIES INDICES


Price Indices
Fixed Coupon
1 Up to 5 Years
2 5 - 10 Years
3 10 - 15 Years
4 5 - 15 Years
5 Over 15 Years
7 All stocks
Index Linked
1 Up to 5 Years
2 Over 5 years
3 5-15 years
4 Over 15 years
5 All stocks
Yield Indices
5 Yrs
10 Yrs
15 Yrs

Day's
chg %
-0.08
-0.29
-0.49
-0.33
-0.82
-0.45

Sep 21
98.27
178.91
207.26
185.41
296.69
171.93
Sep 21
310.44
572.79
430.86
706.13
530.46
Sep 21
1.22
1.91
2.31

Day's
chg %
-0.13
-1.41
-0.70
-1.70
-1.22
Sep 18
1.18
1.86
2.26

Yr ago
1.82
2.51
2.84

Total
Return
2360.25
3226.22
3789.62
3362.23
4270.36
3205.60

Month
chg %
0.31
-3.39
-0.64
-4.47
-2.85

Return
1 month
0.04
-0.18
-0.59
-0.27
-2.53
-1.10

Year's
chg %
-2.26
11.64
1.78
16.66
10.22

20 Yrs
45 Yrs

inflation 0%
Sep 21
Dur yrs Previous
Yr ago
Sep 21
Real yield
Up to 5 yrs
-0.72
2.62
-0.77
-1.10
-1.49
Over 5 yrs
-0.79
23.38
-0.85
-0.27
-0.83
5-15 yrs
-0.70
9.83
-0.77
-0.43
-0.83
Over 15 yrs
-0.81
29.00
-0.86
-0.25
-0.83
All stocks
-0.79
20.27
-0.85
-0.28
-0.84
See the FTSE website for more details: http://www.ftse.com/products/indices/gilts

Total
Return
2360.52
4220.99
3266.24
5109.31
3957.44
Sep 21
2.49
2.50

Return
1 year
2.62
6.32
9.19
7.13
12.96
7.67

Yield
0.99
1.63
2.00
1.73
2.48
2.22

Return
1 month
0.31
-3.34
-0.62
-4.40
-2.81

Return
1 year
-0.91
12.55
3.11
17.36
11.19

Sep 18
2.45
2.45

Yr ago
3.00
3.07

inflation 5%
Dur yrs Previous
2.64
-1.54
23.48
-0.89
9.85
-0.90
29.05
-0.89
20.43
-0.90

Yr ago
-1.94
-0.32
-0.57
-0.28
-0.34

All data provided by Morningstar unless otherwise noted. All elements listed are indicative and believed accurate
at the time of publication. No offer is made by Morningstar or the FT. The FT does not warrant nor guarantee
that the information is reliable or complete. The FT does not accept responsibility and will not be liable for any
loss arising from the reliance on or use of the listed information. For all queries e-mail
ft.reader.enquiries@morningstar.com

Data provided by Morningstar | www.morningstar.co.uk

20

Tuesday 22 September 2015

FINANCIAL TIMES

MARKETS & INVESTING


SMART MONEY

Equities

Stephen
Foley

Goldman joins smart beta ETF rush

Enticing bargains
beckon in closed-end
bond fund shares

he dovish statement by the Federal Reserve


last week provided momentary relief for battered investors in closed-end bond funds, a
$167bn investment sector in the US that has
suffered more than most in anticipation of rising interest rates.
The fear that rising rates will depress bond prices has
sent closed-end bond fund shares falling sharply below the
value of their underlying assets. These discounts are so
wide that CEF shares offer some of the most enticing bargains on the market.
According to figures from Morningstar, the average taxable bond fund is trading at an 11.2 per cent discount to the
value of its portfolio, compared with a 7.4 per cent gap a
year ago. When the Fed was ramping up quantitative easing three years ago, CEFs traded at a premium, as investors
anticipated rising bond prices and cherished the funds
outsized yields. Todays discounts are wider than at any
point in a decade, with the exception of the credit crisis.
Closed-end bond funds have always offered a leveraged
play on the direction of the bond market. They differ from
traditional open-end mutual funds not just because they
are publicly traded, but also because they are able to juice
returns with borrowing. In theory, they should trade near
the net asset value of their underlying portfolio, but the
relative illiquidity of their shares makes arbitrage impossible, and their value reflects supply and demand.
Supply has dwindled since the crisis, as CEFs have been
eclipsed by exchange-traded funds in investors affections,
but demand has dwindled even more so. What prospect for
a narrowing of these discounts?
On the one hand, by delaying its first rate rise the Federal
Reserve may have only pushed out the point at which
investors will take a second look at CEFs. Rising rates will
hurt CEFs in two ways, denting the value of their bond
portfolio and raising the
costs of running leverage
Raterisemageddon
within the funds, so investors may want to wait for has been priced in
clarity about the extent of
to fixed-income
those headwinds.
On the other hand, the CEF share prices
dovish tone of the Feds
latest statement at least
opens up the possibility that the next phase of US monetary policy may not be tightening at all, but renewed loosening in response to market turmoil and economic slowdown abroad. The average discount among taxable fixed
income funds (that is, not CEFs invested only in US municipal bonds) narrowed 56 basis points on Thursday, the biggest one-day move since June.
The bears argue that there are secular reasons for the
widening of discounts, so one ought not assume that they
will revert to the mean. The main case is that CEFs have
been eclipsed by the rise of the exchange traded fund a
cheaper, more tax efficient and more transparent product
for accessing the bond market. CEFs, as actively managed
vehicles, are out of fashion in a world that is shifting rapidly to passive fund management. Demand will not return
to previous levels and neither will average discounts.
But passive management is not as entrenched and not
always as wise in fixed income as it is in equities, and
ETFs are yet to prove themselves in a crisis, so it is premature to write off CEFs.
More importantly, spreads at current levels are likely
to attract activists. Under pressure from a dissident
shareholder, the $1.8bn AllianceBernstein Income fund
is already giving its shareholders a vote on whether to
convert to a traditional mutual fund, something that
would enable them to cash out at the NAV. Cases of shareholder self-help are likely to rise to correct the current
undervaluation.
One further reason to consider fixed income CEFs: the
much commented-upon illiquidity of the bond market.
With investment banks limited in the amount of bond
trading they can do, thanks to post-crisis regulation, there
are concerns that bond prices could overshoot to the
downside if rising rates trigger a sell-off. Unlike ETFs or
traditional mutual funds, CEFs do not have to deal with
redemption requests and could ride out the storm without
being forced into a fire sale of assets from their portfolio.
After three years of widening discounts, something like
raterisemageddon has been priced in to fixed-income CEF
share prices. Whether rates do start to rise, or whether the
Feds doves keep cooing, CEFs themselves look like a buy.
stephen.foley@ft.com

Flurry of launches, hires


and acquisitions ready
for industrys next phase
ROBIN WIGGLESWORTH
US MARKETS EDITOR

Trenches are being dug in the next big


battleground for the investment industry. The asset management arm of Goldman Sachs has launched its first
exchange traded fund, aiming to snag
some of the billions of dollars pouring
into the next generation of passive
investment products.
ETFs seek to give investors a cheap,
simple way of tracking an underlying
market or index, collecting the passive
beta of the broad market, as opposed
to the alpha generated by clever
stockpickers or bond kings.

But the latest phase of the passive


investment revolution is smart beta,
which tries to beat the market cheaply
by using more sophisticated indices
for example, those weighted by corporate fundamentals or indebtedness
rather than simple market cap which
Moodys described in a report as the
the next battleground for asset management dollars.
Should smart betas growth persist,
its impact on traditional active management could be significant, the rating
agencys analysts wrote, highlighting a
flurry of acquisitions, launches and
hires in the industry.
Goldman Sachs Asset Managements
first ETF will track the groups
own ActiveBeta index, which weights
equities according to their value,
earnings durability, volatility and
momentum, based on the observation

that shares that are rising tend to


climb further.
Our clients asked us to apply our
investment expertise to exchangetraded funds, Michael Crinieri, GSAMs
global head of ETF strategies, said.
GSAM said it managed or supervised
more than $1tn on behalf of investors.
Its first ETF has been launched with
$50m, and the investment arm plans to
launch more smart beta products in
the coming months.
Late last year it filed prospectuses
that indicated that it would launch six
ETFs tracking US large and small caps,
international and emerging market
equities, and the European and Japanese stock markets, as well as five
hedge-fund-tracking ETFs, according to
Ignites, a Financial Times publication.
There has been much activity in the
smart beta industry this year, as tradi-

$50m
Value of Goldman
Sachs Asset
Managements ETF
at launch

$1

tn
Value of assets
managed on
behalf of investors
by GSAM

tional asset managers jostle to enter and


existing participants beef up offerings.
OppenheimerFunds snapped up
smart beta ETF provider VTL
Associates this month, Legg Mason
bought QS Investors last year, and
Franklin Templeton has indicated that
it wants to launch smart beta
investment strategies.
Moodys said in its report that it
expected the winners from the smart
beta trend to be big asset managers with
entrenched positions in handling passive investments, such as BlackRock,
State Street and Vanguard, and smaller
but often more innovative providers
such as Guggenheim, WisdomTree,
Research Affiliates, AQR and
Dimensional Fund Advisors.
The rating agency argues that the next
generation of smart beta will be more
research-intensive.

Capital markets. Sovereign wealth funds

Neither diamonds nor oil are forever


Lower crude prices have left
Saudi Arabia at risk of running
down its net foreign assets

Actual Saudi revenues v


counterfactual assets in
Saudi sovereign wealth funds
$bn

Unlike men, the diamonds linger, Dame


Shirley Bassey sang. For more than 20
years, Botswana has maintained an
insurance policy just in case.
The country, a major producer,
invests export earnings through its Pula
sovereign wealth fund, turning finite
resources into permanent income.
Even though they are often seen as
mysterious participants in many markets, with powers to buy and sell vast
quantities of US Treasuries, or to invest
heavily in private equity, this is a basic
fiscal role for sovereign funds.
The general view for many is about
investment, and the return on investment, says Dr Khalid Alsweilem, the
former head of the Saudi Arabian Monetary Agencys investments portfolio.
But the importance of a sovereign
wealth fund is being a cornerstone of a
fiscal framework.
However, with oil prices and revenues going into many of these funds
threatening to stay lower for longer, this
role is coming under strain.
In one sign of the fiscal pressure some
oil producers funds are coming under,
Russias Reserve Fund, used to stabilise
the budget, could fall to $5bn in 2018
from $77bn last year, Bank of America
analysts forecast.
The Russian fund is at least designed
for stabilisation. The other problem
may be SWFs that focus on longer-term
investments also being asked to prop up
short-term fiscal policies.
The more money governments withdraw from long-term savings-oriented
SWFs . . . the more they are eating into
their capital base and tweaking risk-return objectives, adds Sven Behrendt,
managing director of GeoEconomica, a
political risk consultancy.
And as Dr Alsweilem, now a Harvard
Kennedy School fellow, has written in a
recent paper, Saudi Arabia, a country
whose production policies have been
key to the oil price drop, may rue not
having established an independent SWF
backed by firm fiscal rules.
The Saudi Arabian Monetary Agency
is not a fully-fledged SWF. Its responsibilities include monetary policy and
defending the Saudi riyals peg to the US
dollar.
Its roughly $750bn in assets at the end
of last year, accumulated during booms

1200

Savings fund*
Stabilisation fund*
Total revenue
(actual)

JOSEPH COTTERILL

1000
800
600
400
200
0

2005

08

10

12

14

* Assets under management

Russian reserve fund


$bn

100
Forecasts

80
60
40
20
0

2010

12

14

16

18

Sources: Belfer Center for Science and


International Affairs; Ministry of Finance;
BofA Merrill Lynch Global Research
Gareth Cattermole/Getty Images

The
importance
of a
sovereign
wealth fund
is being a
cornerstone
of a fiscal
framework

in crude prices, are thus more exposed


to oil market movements.
By contrast, three big producers
whose budgets this year could stomach
particularly low oil prices before they
stopped breaking even Norway at $40
per barrel, Kuwait at $54, and Abu
Dhabi at $55 all have large, savings-focused sovereign wealth funds, Dr Alsweilems paper notes. (The Saudi budget
would need $106.)
What if Saudi Arabia had set up a similar design 10 years ago? At the start of
2005 it had $300bn of reserves at its disposal.
Dr Alsweilems paper proposes a scenario. Put two-thirds of the $300bn in a
savings fund, which would be allotted
20 per cent of state revenues between
2005 and 2015, reinvesting them for a
nominal return of 8 per cent per year,
without the fund being tapped over the
period.
The remaining $100bn enters a fund

dedicated to stabilising fiscal policy. It


would hold a more liquid portfolio,
earning up to 5 per cent.
By the end of last year, Dr Alsweilem
calculates, the assets in the two funds
would have risen to $1.8tn, overshadowing those with which SAMA actually
began 2015. That may suggest the size of
the opportunity lost, but a similar exercise begun in 2015 also suggests the
scope still left to a Saudi SWF.
A $500bn savings fund set up today
(leaving the remainder to a stabilisation
fund), and receiving 15 per cent of revenues, could reach $2tn by 2035, the
paper argues.
If oil prices continue to struggle and
the Saudi government spends as much
as the International Monetary Fund in a
recent study believes it will over the
next half-decade, SAMA would have
less than $500bn net foreign assets by
2020 available for sponsoring a fund.
Now it is not too late. We can do it.

Actually now it is even more crucial, Dr


Alsweilem says, noting that the recent
creation of an independent economic
council in Saudi Arabia may help create
an independent SWF.
The obvious question is whether splitting SAMAs portfolio into two, given its
size, might create ructions in asset markets as investments were sorted into
longer-term holdings, such as equities,
and liquid ones like bonds.
The split will basically not change
the asset allocation . . . this is because
SAMA [investments] arent like central
bank reserves given we are really
more like a sovereign fund now, and
have been for the last 20 years, Dr Alsweilem says.
Thats the beauty we have in Saudi
Arabia this asset allocation issue will
not be a problem, and second, we have
the luxury of enough reserves still to
make this happen. We just need to act
quickly.

Capital markets

Capital markets

Hefty debt sales push up borrowing costs

European CLO issuance nears post-crisis high

GAVIN JACKSON AND JOE RENNISON

A flurry of European and US debt sales


this month has left companies facing a
higher price of funding as capital markets suffer indigestion.
Hefty debt sales pushed Moodys Baa
credit average yield above 5.40 per cent
last week, the highest level since 2013
and the measure remained elevated
yesterday at 5.31 per cent.
To attract investors to buy new debt
rather than the bonds available on the
secondary market, the new issue must
have a premium attached, which in turn
leads to a repricing of outstanding debt.
New issue supply has been challenging to digest, said Marc Tempelman,
Emea co-head of debt capital markets
for Bank of America Merril Lynch.
He added that investors were taking a
wait-and-see approach given the uncer-

tainty over when the Federal Reserve


will tighten interest rate policy and
against a backdrop of decreasing secondary market liquidity.
An extended period of volatility in the
summer months in Europe delayed the
pricing of some deals until September
and at the same time speculation that
the Fed would raise interest rates led
other borrowers to bring forward deals.
So far this month, investors in the US
have absorbed $60bn of new investment grade bonds, with companies in
Europe selling around 60bn, according to data from Thomson Reuters.
September looks on course to be the
heaviest month for supply so far this
year, said Citis Joseph Faith and Aritra
Banerjee in a recent note on European
investment grade.
The deluge of supply has hit investment performance and resulted in a

higher risk premium, or extra yield


between more risky corporate bonds
and those of safer government bonds.
The credit market has really been a
fairly miserable place to be for some
time now, said Owen Murfin, portfolio
manager on the BlackRock Global Bond
Portfolio Team. Investors have struggled to absorb the new supply into the
market, he said.
Corporate issuers have been rushing
to take advantage of cheap borrowing
costs while they last and more debt is
expected to be issued to help fund a
wave of mergers and acquisitions such
as the potential megamerger between
AB InBev and SABMiller.
Henry Peabody, at Eaton Vance, said:
Issuers likely see the delay in Fed liftoff as an extended window to bring
deals, and they will not look a gift horse
in the mouth.

THOMAS HALE AND JOE RENNISON

European issuance of collateralised


loan obligations is set to hit its highest
level since the financial crisis, with
investor demand running ahead of the
supply of new loans.
The total amount of broadly syndicated
CLOs sold in Europe will exceed 15bn
this year, said Moodys, the rating
agency, up from 13.7bn in 2014 and
almost nothing in 2012.
CLOs are a form of securitisation in
which cash flows from loans made to
indebted companies are bundled
together and sold to investors able to
tolerate a higher level of portfolio risk in
their search for returns.
The search for yield continues, and
CLOs offer quite a spread pick-up, said
Justyna Kochanska, an assistant vicepresident at Moodys.

While the market looks destined to


reach its highest level of issuance in several years, investors remain disappointed by a perceived lack of supply.
Moodys points out there is a perceived
shortfall in collateral obligations.
Earlier this year, expectations in the
market were for much stronger supply,
said Dominik Winnicki, an analyst at
Barclays. While demand for new CLO
formation seems to be there, the supply
of the loans disappointed.
New issuance in Europes CLO market
has also been disrupted by volatile markets this summer, which have stymied
primary activity across capital markets
for bank and corporate debt.
There was hope that the Fed [interest rate] decision last week would clear
the way for more issuance, because we
know there is a decent pipeline in loans
in Europe, Mr Winnicki added. We

havent seen this supply being realised


yet.
The European market for CLOs is still
dwarfed by the US. US CLO issuance is
lagging behind 2014s record of $124bn,
according to data from S&P Capital IQ,
with current issuance standing at just
under $75bn.
In the US, investor demand for CLOs
remains strong. But similarly to
Europe supply of underlying loans
has been choked.
US CLO managers and investors point
to the introduction of lending guidelines
that discourage highly levered deals as
the cause.
Leveraged loan supply in the US,
which is driven primarily by merger and
acquisition activity, stood at $310bn to
the end of August, according to the data,
down from almost $400bn at the same
time last year.

Tuesday 22 September 2015

21

FINANCIAL TIMES

MARKETS & INVESTING


Global overview

TRADING POST

Michael
Hunter
The Federal Reserves inaction last
week remains the driver of sentiment,
at least for now. But attention will soon
turn towards potential action at other
central banks, not least in Sweden,
where the Riksbank faces a further
test of its monetary policy mettle.
It has taken rates more deeply into
negative territory than any other
central bank in the developed world,
reversing a series of rate increases
made in 2010-11.
The about-face came as the effects
of the wider, global financial crisis
proved more stubborn than it
expected. There are warnings from
analysts that the Riksbank could have
further to go.
Our base case for the Riksbank is
another 10 basis points rate cut in
December combined with an extended
asset purchase programme, Arne
Lohmann Rasmussen, at Danske Bank,
said. The decision by the Fed to delay
rate hikes puts pressure on the
Riksbank. The krona has strengthened
markedly over the past month . . . It is
now clearly stronger than assumed by
the Riksbank.
Meanwhile, Denmark will make its
next rate call on Thursday. While its
currency, the krone, has weakened and
inflation remains robust by
Scandinavian standards, the run lower
in oil prices poses a direct threat to its
national economy.
We expect that the Norges Bank
will cut its benchmark rate by 25bp
[this week], said Danske. But it was
hard to predict.
More Scandinavian rate drama could
lie ahead.
michael.hunter@ft.com

Currencies against the euro

Rebased

Jan

Danish krone
Swedish krona

2015

Source: Thomson Reuters Datastream

Sep

104
102
100
98

Stocks claw back losses as dollar


extends rally amid oil rebound
Risk-on mood weighs on
government bonds while
gold snaps its three-day
run of gains and the
S&P 500 index hits 1,979
DAVE SHELLOCK

US and European stocks clawed back


some of the losses incurred in the wake
of the Federal Reserves inaction last
week, while the dollar extended Fridays
rally and oil prices staged a solid
rebound.
The broadly risk-on mood weighed
on government bonds on both sides of
the Atlantic, while gold snapped a threeday run of gains.
By midday in New York, the S&P 500
equity index was up 0.4 per cent at
1,965, having earlier hit 1,979. That compares with its close of 1,995 on Wednesday the day before the Fed spooked
global markets with cautious remarks
about the health of the global economy.
The CBOE Vix volatility index was
down 8 per cent and close to breaking
back below its long-term average of 20
a level widely viewed as signalling
heightened stress on Wall Street.
Across the Atlantic, the FTSE
Eurofirst 300 rose 1 per cent although
the Xetra Dax in Frankfurt lagged
behind with a gain of 0.3 per cent due
largely to an 18 per cent slide for
Volkswagen shares after the carmaker
admitted that it had rigged emissions
tests in the US.
The mood in Europe was helped to
some degree by a late rally for the
Shanghai Composite index, which
closed 1.9 per cent higher a second
successive gain.
Greek stocks, meanwhile, slipped 0.6
per cent after a choppy session following
a convincing victory for Alexis Tsipras
Syriza party in the countrys general
election.

Lululemon shares advanced yesterday


after analysts at Morgan Stanley
upgraded the yoga-wear maker, noting
the company was approaching a new
chapter in the story.
The analysts raised the stock to
overweight from equalweight and
lifted their price target to $68 from $56.
Lululemons 11 per cent growth in
total same-store sales, a key industry
metric, in the second quarter which
followed 6 per cent growth in the first
and 8 per cent growth in the fourth
suggests consumers are returning to
the brand, said Morgan Stanleys
Kimberly Greenberger.
Lacklustre comparable sales
following 2013s product recall after
the material for its yoga pants turned
out to be too sheer alongside
inconsistent execution and earnings

London
Takeover talk boosts
Smith & Nephew
Bryce Elder
Smith & Nephew was among
yesterdays gainers as takeover
speculation was given another airing.
S&N added 1.8 per cent to 11.65 on
talk of interest from Johnson & Johnson,
whose DePuy orthopaedic subsidiary
was pushed to number three in the
market for knee implants by Zimmers
purchase of Biomet.
At a medical technology conference

Brendan Smialowski/AFP/Getty Images

Wolfs Fed Verdict: FT.com/video


The Fed decision not to raise rates sparked a critical reaction.
The FTs Martin Wolf defends the decision to John Authers
There was a better performance from
the bond market, where the yield on
Greek debt due in July 2017 fell 50 basis
points to 10.31 per cent, according to
Bloomberg data. But analysts said the
election result was unlikely to have
much impact on the euro, given the currencys resilience to Greece-related
uncertainty over the summer, plus the
fact that it was Syriza who signed off on
the countrys latest bailout programme.
Rather, we expect various European
Central Bank speakers to have a larger
influence on the euro this week, said
Chris Turner, head of foreign exchange
strategy at ING.
Indeed, Peter Praet, the ECBs chief
economist, reiterated in a media inter-

volatility had been behind the analysts


scepticism in the past.
The stock also took a hit this month
after the company issued disappointing
current quarter forecasts.
Ms Greenberger, however, projected
20 per cent earnings a share growth for
the retailer in 2016 driven by gross
margin improvements and a 15 per cent
rise in sales growth.
Meanwhile, Lululemons long-term
sales growth was supported by
international expansion, an increase in
the mens business, larger format stores
and more ivivva stores the companys
brand aimed at girls, Ms Greenberger
added.
Shares of Lululemon, which have
declined nearly 3 per cent this year, rose
as much as 5 per cent to $55.77.
Lennar shares advanced after the

second-largest US homebuilder by
market valuation reported better than
expected third-quarter profits on the
back of new home sales.
The Miami-based company reported
profits of $223.3m or 96 cents a share in
the three months ended in August,
compared with $177.8m or 78 cents a
share in the year-ago period. Revenues
rose 24 per cent to $2.5bn.
Analysts had forecast earnings of 79
cents a share, on sales of $2.4bn.
The company said that orders of
homes climbed 10 per cent in the third
quarter to 6,495, while deliveries
increased 16 per cent to 6,318 homes.
Shares of Lennar rose 2 per cent to
$52.73.
Micron Technology shares gained 2
per cent to $15.82 after analysts at
Barclays initiated coverage on the stock
with an overweight rating and a price
target of $20.
Recent weak demand and pricing
trends in memory chips called Dram,
dynamic random-access memory, have
weighed on the stock.
Now analysts argue that the nearterm risk is already priced in and that
price trends should improve in 2016 as
demand from PCs and handsets picks
up.
US stocks began the week on the front
foot following the late sell-off last week
after the Federal Reserve left interest
rates unchanged.
At midday, the S&P 500 rose 0.6 per
cent to 1,970.15, the Dow Jones
Industrial Average gained 0.7 per cent to
16,499.90 and the Nasdaq Composite
climbed 0.4 per cent to 4,847.33.

last week, J&J finance director Dominic


Caruso said he would be surprised if the
company was still sitting on $34bn of
cash a year from now. Over the past
decade J&J has tended to make
acquisitions before its cash balance rose
above $14bn, he said.
A mixed wider market left the FTSE
100 barely changed, up 4.6 points at
6,108.71.
RSA led the FTSE fallers, down 20.8
per cent to 403.3p, after Zurich
Insurance abandoned a 550p per share
bid. If Zurich couldnt make it work, we
doubt that other western insurers can
either, said Deutsche Bank.
Miners were weak again, with
Glencore down 5.6 per cent to 119p,
another record low. A bearish forecast
on copper led Nomura to advise selling
the commodities trader.
Ferrexpo dropped a further 25.6 per
cent to 29.8p following the collapse last
week of its chief executives bank, where
the iron ore pellet maker had $174m
deposited. If some or all of the cash is
lost the company could breach its [bank
debt] covenant by end 2015, said Credit
Suisse.

Capital goods makers remained


under pressure after Caterpillar said
that August sales had shown no
improvement, with Asia-Pacific and
Latin America weakening as power
generation, transportation and oil end
markets all deteriorated. Aggreko hit a
five-year low in response, down 2 per
cent to 985p.
Last weeks profit warning continued
to weigh on Rotork, down 6.2 per cent to
175.1p, with JPMorgan Cazenove
downgrading the valve maker to
neutral.
Exane BNP Paribas made the same
move on Vesuvius, the crucible maker,
which lost 4.1 per cent to 364p.
Shire edged 1.1 per cent to 47.95 after
Barclays turned positive.
AO World lost 4.1 per cent to 162.9p
after the electricals website said it was
raising its marketing budget. The cost
means AO World will be lossmaking in
the current year, forecast JPMorgan.
Imagination Technologies was up 1.4
per cent to 223p. The chip designer
rallied amid suggestions that, following
a profit warning last week, it might be
targeted by a Chinese peer.

Share price ($)

Mamta Badkar

S&P 500 index


Change on day

70
65
60
55
50
Jan

2015

Sep

Source: Thomson Reuters Datastream


Day's
Indices
S & P 500

Close

change

1968.65

10.62

DJ Industrials

16495.79

111.21

Nasdaq Comp

4841.88

14.65

Russell 2000

1204.70

-8.35

21.28

-1.00

US 10 yr Treas Bd

2.19

0.06

US 2 yr Treas Bd

0.70

0.03

VIX

view that the bank stood ready to modify its quantitative easing programme
should economic turbulence merit fresh
action.
His remarks came hard on the heels of
weekend comments from John Williams, president of the San Francisco
Fed, who said last weeks decision by the
central bank to stand pat on interest
rates was a close call.
The prospect of further policy divergence between the eurozone and the US
helped drive the euro down 0.9 per cent
against the dollar to $1.1209. That move
helped push the dollar index which
measures the US currency against a basket of peers up 1 per cent to 95.82.
The firmer tone of the dollar and

equity markets helped push gold down


$6 to $1,132 an ounce following a $34
jump over the previous three sessions.
The Fed funds futures market now
prices in a 20 per cent chance of the Fed
raising rates at its October meeting, and
a 49 per cent probability of a December
move, according to Bloomberg calculations.
We continue to believe December is a
terrible time to start lift-off given
what will likely be heightened concerns
around year-end liquidity and even
worries about the debt ceiling, said
Tom Porcelli, chief US economist at RBC
Capital Markets.
He said the reality was that a rate rise
would depend on whether the Fed could
truly convince the market that it was
willing to start the normalisation process then.
Only by having the market fully
embrace the notion of a December hike,
can the Fed hope to avoid disrupting
markets during what is typically and
more so now a challenging environment from a liquidity standpoint.
But perhaps that is too practical. And
if they dont go by then, we will have to
give serious thought to just how far into
2016 the lift-off will begin.
US Treasury yields which move
inversely to prices rebounded after
the sharp falls seen over the final two
days of last week. The two-year note
yield was up 4bp at 0.71 per cent while
that on the 10-year was 8bp higher at
2.21 per cent.
German government bond prices also
slipped, with the 10-year Bund yield rising 2bp 0.68 per cent.
Industrial commodities had a better
day. Brent oil was up 2 per cent at $48.41
a barrel after sliding more than 3 per
cent on Friday.
Copper touched a two-week low of
$5,208 in London before rallying to
close 0.3 per cent higher at $5,269. But
zinc fell 1.8 per cent to $1,657 a tonne
and aluminium shed 0.5 per cent.

0.59%
2000
1950
1900
1850

Aug

Lululemon Athletica

Wall Street
Lululemon jumps on
new chapter hopes

Markets update

2015

Sep

US equities Trading on Wall Street


turned choppy after a strong start,
with biotech stocks down sharply after
presidential candidate Hillary Clinton
criticised price gouging in the sector

FTSE 100 index


Change on day

0.30%

6400
6200
6000

Aug

2015

Sep

5800

UK equities RSA Insurance tumbled


20 per cent after Zurich Insurance
Group abandoned its bid for the UK
company. Mining and commodity
stocks also lost ground

Eurofirst 300 index


Change on day

1.12%

1450
1400
1350

Aug

2015

Sep

1300

European equities Volkswagen led


carmakers lower as it fell 18.6 per cent
on news it had rigged emissions tests
in the US. The Xetra Dax lagged
behind with a gain of just 0.3 per cent

Shanghai Composite index


Change on day

Aug

2015

1.89%

3300
3200
3100
3000
2900
Sep

Chinese equities The Shanghai


Composite reversed an early fall, with
China Railway and XCMG Construction
Machinery rising more than 7 per cent

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22

Tuesday 22 September 2015

Renminbi. Volatility

INSIGHT

China devaluation looms large over Xis US visit

George
Magnus

Fed should start


making clear it faces
difficult trade-offs

n the past five years, 15 of the OECDs 36 member


countries have raised policy rates, some prematurely,
only to cut them again. Last weeks decision by the
Federal Reserve to hold the rate steady showed that it
has yet to find the confidence to be the 16th. Unlike its
peers, though, the Fed is sometimes uniquely conflicted,
having to balance both domestic and global factors.
While the domestic argument for an initial policy rate
change remains firm, the Fed acknowledged that global
developments centred around China and emerging markets, which had led to market and economic turbulence,
had swung opinion back again. But Augusts tremors were
not isolated or random, and force us to ask how long this
stand-off can go on, given that Chinas travails, for example, are not going to end anytime soon. And what if it did go
on? The US economic case for a gradual exit from zero
rates has been growing steadily, with decent employment
growth, unemployment at just over 5 per cent, and wage
and salary formation starting to build slowly. It is true that
some labour market indicators, such as the employmentto-population and labour force participation ratios, are at
a 35-year low, though some of this is structural.
That said, the so-called U6 unemployment rate (including people marginally attached to the labour force and
those working part-time for economic reasons) is at the
same level it was when the Fed initiated its last tightening
cycle in 2004. The core personal consumption deflator
then, moreover, was only 0.3 per cent higher than Augusts
1.4 per cent.
The international backHow long should
drop, though, is sensitive.
Twice before, Fed tightening China be cited
cycles and a robust US dollar
as a reason for
have been associated with
emerging market crises. US keeping rates
monetary policy in 1979-82
on hold?
proved too much for indebted
Latin America, and in 1994-95
it contributed to the Asian crisis. This time, a change in US
monetary policy would not so much trigger a China or
emerging markets crisis that has already started as accentuate it. As Janet Yellen suggested after last weeks Fed
meeting, that crisis could also affect the US in coming
months. It is easy to see why Fed officials backed away
from these risks. A paper by the Bank for International
Settlements pointed to strong spillovers into emerging
markets from US monetary policies that go far beyond
interest rate and exchange rate relationships.
During the past few years of easy money, the US dollars
special role as a funding and financing currency has contributed to balance sheet, asset price and domestic credit
excesses that are reversing, first with US dollar appreciation, and next, if or when US policy rates go up. The consequences for economic and investment growth in emerging
markets are clear.
This should not be a reason to desist from making a policy rate change if otherwise justified. It would not be painless, but many important emerging markets have experienced sharp currency depreciations, have lengthening
debt maturity profiles and still have relatively high levels
of reserves. China, at the heart of the emerging market
maelstrom, faces a multiyear period in which the investment share of GDP is likely to drop from an unprecedented
45 per cent to something closer to 35 per cent, in keeping
with the experience of Japan and other tiger economies.
The downswing is being driven by a structural real estate
overhang and chronic industrial overcapacity, not helped
by the continuing shortcomings of state enterprise
reforms. No one can foresee how this transition will be
managed, especially given a highly uncertain political and
policy backdrop, or what the cyclical or currency consequences might entail. This begs the question: how long
should the Fed cite China or emerging markets as a reason
for keeping rates on hold, especially if the domestic case
for not doing so becomes even more compelling? Seven
years of zero interest rates have contributed to mounting
financial distortions in emerging markets.
If the Fed continued with financial market stability as
the leitmotif of policymaking, a later but more disruptive
policy adjustment and greater instability are the all too
likely outcomes. The Fed should start telling markets
about the difficult trade-offs it faces.
George Magnus is a senior economic adviser at UBS and an
associate at Oxford universitys China Centre

More comment and data on ft.com


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Washington seeks exchange


rate stability but markets are
braced for further weakness
ROGER BLITZ LONDON
JENNIFER HUGHES HONG KONG

It is hard to say who was more surprised


by Chinas devaluation of the renminbi
last month: international markets, with
no inkling it was coming, or Chinese
officials, stunned by reaction overseas.
This week President Xi Jinpings first
state visit to Washington will at least
allow officials from both sides to have
it out.
The common view outside the mainland is that China bungled it, rocking
asset prices from government bonds to
iron ore as well as the currency world
with its unexpected promise of a market-based regime a pledge its subsequent heavy intervention implies is
dead, at least for now.
The biggest casualty came last week,
however, with the Federal Reserves
decision to hold, not raise, overnight
interest rates after the market turmoil
caused by Chinas move.
For Fed chair Janet Yellen, it rankled.
She highlighted global concerns, pointedly questioning the deftness with
which [Chinese] policymakers were
addressing those concerns.
Hence, what China does next with its
currency is critical to the dollars path,
market sentiment, the Feds rate deliberations and the US economy.
Stuart Oakley, global head of emerging market foreign exchange trading at
Nomura, says the renminbi will remain
stable for the duration of the state visit.
After that, the chance of another leg
of weakness for the [renminbi] rises
considerably, he said. The PBoC [Peoples Bank of China] will undoubtedly be
very mindful of how its own policy decisions on the [renminbi] will affect the
dollar on the broader level. I think they
will have no issue with seeing the dollar
stronger still from here.
To China bears, the PBoCs 1.9 per cent

Global concerns
Renminbi and stocks
Apr 2006: President
Hu Jintao relaxes some
capital controls and slightly
loosens exchange rate policy
ahead of meetings with
US President George W. Bush
Xi Jinping

Rmb
per $
6.0

Zinc for delivery in three


months on the London Metal
Exchange fell as much as $47
to $1,637 a tonne, the lowest
level since June 2010.
The industrial metal, used
to rustproof steel in everything from cars to building
materials, fell by its maximum daily limit of 5 per cent
in trading on the Shanghai
Futures Exchange.
Weighing on sentiment is a
build-up of the metals stocks
at LME warehouses in New
Orleans. These rose almost
60 per cent over the past
month, underlining the substantial amount of zinc that
can be quickly dumped into
the market.
The recent increase in
LME inventory, particularly
in New Orleans, appears to
have drawn the markets
attention to just how much
zinc is sloshing around, said
Leon Westgate, an analyst
at ICBC Standard Bank in
London.
Some traders believe the
increase in inventory in
New Orleans it has risen
nearly 175,000 tonnes in the
past five weeks has been
driven by Glencore liquidating stocks.
Earlier this month, the
Swiss-based company said it
would reduce its working
capital by $1.5bn over the
next year in an effort to generate cash, partly from liquidating some of its $23.6bn of
commodity holdings.
Glencore has never said
which commodities it may or
may not sell but it is one of
the worlds largest traders

6.5

7.0

7.5

8.0

8.5

1
2005

06

07

08

09

10

11

12

13

14

15

FT graphic Source: Thomson Reuters Datastream

I dont think
China had
any idea just
how many
people there
are out
there who
think their
economy is
collapsing
Chris Wood,
CLSA

Zinc at five-year low


amid inventory fears
Zinc fell to a five-year low
yesterday on fears about rising stocks and waning
demand in China.

Shanghai
Composite
(1,000)

Jan 2011: President Hu Jintao visits


Washington amid criticism from
US politicians that the PBoC
is manipulating its currency

Commodities

HENRY SANDERSON
AND NEIL HUME

Aug 2015: PBoC changes


exchange rate policy
and devalues the renminbi,
prompting warnings
from the G20 and the
US Treasury department

Jun 2013: Rising renminbi eases


traditional currency tensions
between the US and China as
President Barack Obama hosts
President Xi Jinping in California
for their first talks

and producers of zinc. Its


warehousing business,
Pacorini Metals, also dominates the storage market in
New Orleans.
Moreover, traders do not
believe Glencore would liquidate its copper stocks, due to
a recent decision to cut production this month at copper
mines in Democratic Republic of Congo and Zambia to
support the market.
But analysts cautioned
that the rise in stocks could
be explained by someone
shifting metal between warehouses in New Orleans, placing it in an LME warehouse to
deliver against a short speculative position.
Vivienne Lloyd, an analyst
at Macquarie, noted that so
much zinc had left the LME
warehousing system earlier
in the year that there was
always a chance it would
return, particularly if there
was a change in the futures
curve from contango
where prices for future delivery are higher than in the
spot market to backwardation the opposite market
structure. This would make
storing and selling metal forward unprofitable.
If you can push the
futures curve in a certain
direction it can cause vast
inflows, especially if there a
few parties holding large
physical positions outside
the LME system, said Ms
Lloyd, noting that the spread
between the cash market and
three-month LME price
briefly reached backwardation last month.
Warehouses monitored by
the LME make up only a fraction of the worlds logistics
and storage for metals, but
are used for physical delivery
against futures contracts as
well as storage.

devaluation of August 11 looked like a


desperate attempt to bolster flagging
exports by starting a currency war
under the fig leaf of introducing marketfriendly reforms to impress the International Monetary Fund.
Another interpretation is that Beijing
really was focused on the IMF and winning acceptance for the renminbi as a
reserve currency, and misjudged the
likely reaction. I dont think China had
any idea just how many people there are
out there who think their economy is
collapsing, said Chris Wood, global
strategist at CLSA, the brokerage.
He thinks further big moves this year
are unlikely as officials continue to focus
on moving from an investment-led to a
consumer-driven economy. A big
devaluation would be an admission

their economic shift had failed. Such an


outcome looms large across markets
and among US officials. Ms Yellens
remarks echo those of US Treasury Secretary Jack Lew, who this month said
China would be held accountable for
its exchange rate policy.
Marvin Barth, a former US Treasury
official and now Barclays European
head of FX strategy, interprets the message from the Treasury as you cant just
do these things when it benefits you.
At the G20 this month, finance ministers sought to tie China into a pledge to
refrain from competitive devaluations and avoid persistent exchange
rate misalignments.
Mr Barth said: The issue here, and
what the G20 told them, is that China
hadnt really thought this through. They

clearly were shocked by the market


reaction to this.
President Xi can expect to receive
similar forthright messages from the
Washington political establishment this
week, rekindling the type of US-Sino
tensions over currency policy familiar
to his predecessor, Hu Jintao.
Regardless of any diplomacy during
the visit, which begins on Friday, currency markets are still bracing for further renminbi weakness.
Washington and Ms Yellen want
China to settle on a stable and transparent currency policy. But after the PBoC
was estimated to have spent $120bn of
its reserves last month to support the
currency, there is real potential that
[the PBoC will conclude that] this intervention isnt worth it, said Mr Barth.

FT SPECIAL REPORT

The Mint Economies


www.ft.com/reports | @ftreports

Tuesday September 22 2015

Sweet flavour can still entice


Despite tough times,
the emerging markets
of Mexico, Indonesia,
Nigeria and Turkey can
still draw investors,
writes Gideon Rachman

here was a time when countries all over the world


aspired to be one of the
Brics. The acronym comprised Brazil, Russia, India,
China (later adding South Africa).
These countries seemed to embody the
economic dynamism and promise of the
worlds emerging markets.
So there was plenty of investor interest when, in 2014, Jim ONeill the
former chief economist at Goldman
Sachs and the man who had coined the
term Brics began to champion the
economic prospects of another group of
countries: the Mint economies.
For this select group of four Mexico,
Indonesia, Nigeria and Turkey it was
clearly a blessing to be marketed as the
next big thing.
Many investors thought the Mints
sounded simply delicious. This was
another group of four countries with the
characteristics that defined the original
Brics: large populations, strong growth
rates, rapidly emerging middle classes
and entrepreneurial cultures.
The past 18 months, however, have
been disillusioning for fans of both the
Brics and the Mints. Brazil, South Africa
and Russia are in the middle of
economic crises and China is growing at
its slowest pace for a generation.
The Mints also seem troubled. The
problems in each of the four countries
involved are quite specific. However, in
broad terms, they tend to include
political instability and slowing economic growth. Investors who were once
all too happy to ignore the structural
problems of these emerging markets
can now see little else.
Inevitably, the picture is mixed and
there is some good news out there as
well. Nigeria, in particular, can point to
its successful presidential election earlier this year. This saw the first peaceful
transition of power following an election from one head of state to another in
the 55 years since Nigerias declaration
of independence.
Better still, the new president,
Muhammadu Buhari, seems to be
genuinely committed to tackling the
endemic corruption that has held
Nigeria back for decades.
Nonetheless, in the short term, the
country faces several formidable economic and political challenges. The fall
in the oil price has slashed Nigerias
export earnings and government
revenues.
Nigeria must also cope with
Boko Haram, the extremist Islamist

insurgency that has claimed about


20,000 lives and created 1.5m refugees.
The new government seems to be taking
the fight to Boko Haram with renewed
energy, but it will be a long struggle.
Some of the problems facing Nigeria
are present in the other Mints. The falling oil price is a problem for both Mexico and Indonesia, both of which are
large exporters. Islamist militancy has
been a problem in Indonesia in the past,
although things are relatively quiet for
the moment.

The problems these four


countries face include
political instability and
slowing economic growth
Turkey, however, is suffering badly
from the conflict in neighbouring Syria.
The prolonged civil war there has created millions of refugees, some 2m of
whom are now in Turkey.
The old grievances between the Turkish state and the Kurdish militants of
the PKK have also flared again into violent conflict. And the general atmosphere of political uncertainty has been
further fostered by President Recep
Tayyip Erdogans decision to go for

fresh elections on November 1, as he


struggles to secure the parliamentary
majority he would need to change the
constitution and bolster the powers of
the presidency.
For a decade after 2003, when Mr
Erdogan came to power, Turkey
enjoyed strong and non-inflationary
economic growth. That boosted the
Turkish leaders reputation for competence and allowed investors to ignore
some of his more eccentric views such
as his oft-stated belief that there is an
international interest rate lobby that
is agitating for Turkey to have inappropriately high borrowing costs.
In the current economic environment, however, Turkey needs competent economic management that
inspires international confidence. Inflation is at about 8 per cent, unemployment is at 11.3 per cent, and the country
is running a large current-account deficit of about 6 per cent of GDP. It looks
vulnerable to capital flight.
Political leadership is also now an
issue in both Mexico and Indonesia.
When President Enrique Pea Nieto
first came to power in 2012, he was
hailed both at home and abroad as a
charismatic and dynamic leader.
Over the past year, however, the
Mexican leader has had what the Queen
of England might have described as an

Nigerias millennials plug


gap in skills and funding
Entrepreneurship

Energy executive returns to


her homeland to create a
start-up that could benefit
all, reports Maggie Fick
One characteristic the Mint economies
share is that they have younger populations than their more economically
developed counterparts around the
world.
As well as being an appealing target
for foreign companies looking for new
consumers for their products, Mexico,
Indonesia, Nigeria and Turkey are fertile breeding grounds for talented young
people who might have considered or
have careers in big national or international companies.
However, instead of being tempted by
what many consider safer careers,
members of these countries millennial
generation those born since the early
1980s seem to be determined to set up
their own businesses.
Nigeria-born Rolake Akinkugbe is
one example (and you can read about
other Mint country entrepreneurs on page
4). Given her expertise in Africas
energy sector, she could have picked

jobs in Nairobi, Dakar, Johannesburg or


Cairo, or stayed on in London, where she
had spent the better part of 17 years
studying and working.
Moving back home to Lagos last year,
however, was a chance for her to test her
feeling that her country is a land of
opportunity.
Last month, Ms Akinkugbe officially
added a side-gig to her day job as
head of energy and natural resources at
the Lagos-based investment bank FBN
Capital by founding what she says is
sub-Saharan Africas first curated offgrid energy investment platform.
Instead of giving up her work for FBN
Capital sourcing and structuring
funding for Nigerian energy companies
she is taking her knowledge of the
commercial and strategic aspects of the
sector and applying this to fill a gap in
the market.
The 35-year-old worked as the head of
energy, oil and gas research at the panAfrican lender Ecobank before she was
hired by FBN to lead the investment
banks relationships with companies
working in energy and natural
resources.
Having seen the obstacles that established companies and start-ups alike
often face when seeking funding to
grow, Ms Akinkugbe says her panAfrican incubator will work to link

Rolake Akinkugbe heads an incubator


whose name means light has come
promising sustainable energy projects
with the investments they need to get
off the ground. The incubator is called
InaTid, which means light has come
in the Yoruba language that is widely
spoken in south-west Nigeria. It will
source financial and technical expertise
for small, off-the-grid renewable energy
projects across the continent.
Ms Akinkugbe thinks that small
projects often less than 5 megawatts
using renewable solutions such as
biomass fuels can have a huge social
impact, given the poor access to
power supplies across sub-Saharan
Africa.
But the priority, she says, is to provide
funding to promising entrepreneurs
with commercially viable ideas. A lot of
these guys will tell you thats the main
reason their ideas are not able to be
implemented.
She hopes to change that by using her
continued on page 4

All at sea: a Pemex oil platform


complex at Campeche Bay, Mexico.
The falling oil price is a problem for
Mint nations Susana Gonzlez/Bloomberg

annus horribilis. His administration has


been hit by corruption scandals,
slowing growth, a stalling economy, and
public outrage over a mass killing
of students and the escape from
jail of one of the countrys leading
drug lords.
As a result, opinion polls suggest that
the president is now Mexicos least
popular for some 40 years.
One spark of hope, however, is that
stronger growth north of the border
might spur demand for Mexican goods.
The country may also continue to
benefit from rising labour costs in
China, which makes Mexico look like an
appealing base for manufacturers wanting to export to the US.
The troubles of the Chinese economy
are more of a threat to Indonesia. As a
country in the Asia-Pacific region and a
major exporter of commodities, Indonesia has benefited from many years of
strong Chinese growth.
With China slowing, Indonesia needs
imaginative and confident leadership.
So it is unfortunate that the current
president Joko Widodo is increasingly
being portrayed as ineffectual and diffident.
More broadly, all the Mints are now
suffering from the fact that investors
across the world are cooling on emerging markets.
But while classification as an emerging market might not be regarded as a
strong selling point at the moment, the
factors that have driven emergingmarket success over the past two generations have not disappeared.
In the medium term, therefore,
globalisation, expanding international
trade, relatively low labour costs and a
rising middle class are once again likely
to prove a potent combination.

Inside
Central bank needs to
price in political risk
Turkey, once described
as Europes Bric, has
lost its golden glow
Page 2

Is EM the only
acronym that matters?
How currencies have
been badly affected by
the dollar bull run
Page 2

State in need of
financial guidance
Nigerias post-election
optimism fades as fiscal
policy remains unclear
Page 3

The next generation


of entrepreneurs
Self-starters give an
insight into which
sectors will drive growth
Page 4

Four national stories


told in numbers
How the countries are
doing
against
each
other,
from
GDP to
levels of
fraud
Page 5

Tuesday 22 September 2015

FINANCIAL TIMES

The Mint Economies Politics

President plays
catch up on policy
as polls show a
big fall in support
Indonesia

The foremost concern


for many people is the
state of the economy,
writes Avantika Chilkoti
Indonesias president, Joko Widodo,
won over voters with his image as a man
of the people.
The former furniture salesman made
his name as the governor of Jakarta,
visiting poor neighbourhoods and
chatting to the public.
A year into his term, however, commentators say these very qualities are
holding him back, as Indonesias first
leader from outside the political and
military elite struggles to push through
much-needed economic reform.
Paul Rowland, a Jakarta-based political analyst, says: Just before he became
a candidate, and even afterwards, we
knew what we didnt know about him:
his macroeconomic thoughts, his trade
policy, where he was going to go with
foreign policy and defence.
It is natural for people to put on to a
blank canvas their own views of what
they hope [politicians views] will be.
The Indonesian public has been disappointed. Indonesia Survey Circle
found only 42.29 per cent of the public
were satisfied with the government in
January, down from 71.73 per cent in
August 2014, soon after his election.
Unaccustomed to politics at the
national level, Mr Widodo is criticised
for overlooking religious extremism
and for poor foreign policy, after he fasttracked the execution of foreigners convicted of drug trafficking.
Yet the foremost concern for many
Indonesians is the economy. GDP

growth year on year in Southeast Asias


largest economy fell below 5 per cent in
the past two quarters. With the economy currently growing at its slowest
pace since the global financial crisis, the
central bank would ideally be cutting
interest rates to support growth, wrote
Gareth Leather at Capital Economics in
a recent note.
But Bank Indonesia has been paralysed, as consumer price inflation ticked
up to 7.2 per cent in August, and the
rupiah has depreciated to levels last
seen during the Asian financial crisis in
the late 1990s.
Some say the president inherited a
blighted economy as commodity prices
had dropped sharply, while Indonesia
remains reliant on the sector for more
than half its exports.
Mr Widodo was initially praised for
pushing through controversial fuel
subsidy cuts, while redirecting funds to
productive spending, but budget
disbursement has since been poor.
The Eurasia Group, a consultancy,
estimates that Indonesias government
spent just 11 per cent of the $22bn allocated for infrastructure projects this
year in the first half.
If you have political authority, you

Jakarta is trying to start


afresh and push through
hard-hitting reforms
dont hear these things, says Achmad
Sukarsono, an analyst at the research
house.
He adds: But because he doesnt have
that political authority, we hear all of
this. Its not resistance, its not defiance
even its more like sluggishness.

Political uncertainty costs


G20 host its golden glow
Little political authority: Joko Widodo
In part, Mr Widodos power is being
eroded by Megawati Sukarnoputri, the
daughter of Indonesias first president
and chair of the ruling Indonesian
Democratic Party of Struggle (PDI-P),
who still wields power over decisionmaking.
The president faced tough criticism
this year after he nominated an ally of
the PDI-P matriarch, Budi Gunawan, as
head of the police, despite allegations of
corruption (which Mr Gunawan has
denied).
And Ms Sukarnoputris daughter was
given a cabinet post, as her mother
strives to maintain the family legacy.
[Mr Widodo] is making sure that he is
not a threat to the Sukarno family, Mr
Sukarsono says.
Yet, as concerns over a slowdown in
China and the prospect of a US rate rise
send tremors through emerging markets, Jakarta is making an attempt to
start afresh and push through hardhitting economic reforms.
As Indonesia celebrated 70 years of
independence in mid-August, the
president delivered a much-anticipated
cabinet reshuffle, bringing experienced
policymakers including a former
central bank governor and a trusted
former four-star general into top
posts.
The president has since unveiled the
first part of what promises to be a big
economic stimulus package, cutting red
tape and simplifying licensing and land
acquisition for large projects.
However, analysts say that it is still
too soon to feel optimistic about Mr
Widodos leadership.
There are changes, but I am not sure
about implementation, says Yohanes
Sulaiman, a Jakarta-based political
analyst. Thats been his biggest problem since the beginning.

Turkey Government
is putting off what it
knows will be painful
structural reforms,
writes Andrew Finkel

igh on the agenda when


leaders of the G20 nations
meet in the Turkish resort
of Antalya this November
will be discussion of
emerging market woes. They will find
no better illustration of the problem
than the plight of their host nation.
In 2011, when then Prime Minister
Recep Tayyip Erdogan volunteered to
host this years summit, Turkey was the
prime example of what then seemed an
inexorable global shift in power away
from mature economies.
The country had bounced back after
the 2008 financial crisis, growing at an
average of 9 per cent between 2010 and
2011. The ruling Justice and Development Party (AKP) won its third consecutive victory, polling nearly half the
popular vote. After a visit to Ankara,
David Cameron hailed Turkey not as a
Mint but Europes Bric.
High growth had been consumer-led,
fuelled by a current account deficit that
by 2011 stood at an unsustainable 10 per
cent of GDP. The government had to
take action. Growth this year, like last, is
expected to be just under 3 per cent.
Until now the government has relied on
strong fiscal discipline and a healthy
banking system to hold the line. But,
despite stronger than expected secondquarter growth figures (3.8 per cent),
the writing is still on the wall.
I am not the only economist who is
warning of the possibility of a technical
recession, said Seyfettin Gursel, who
heads the Bahcesehir University Economic and Social Research Centre.
The consumer confidence index is
down to levels last seen at the height of
the 2009 recession. Inflation is on the
rise, expected to be running at a rate of
8 per cent by the years end. Cheap oil,
which might be expected to benefit

Autocratic: Recep Tayyip Erdogan


Turkey, a commodity importer, is
instead destroying its large export
markets, including Russia.
The government knows it has to
make structural reforms that will
increase productivity, but it [is] afraid
to pay the political cost, Professor
Gursel says. He puts greater flexibility in
the labour market and improvements in
education high on the to-do list.
Unlike the football league, where
teams are relegated at the end of a bad
season, membership of the G20 is not
based on GDP alone. This is lucky for
Turkey, as the currency has lost 21.4 per
cent against a euro-dollar basket, which
means Switzerland and Saudi Arabia

The president and his close


circle have equated interest
rate rises with treason
have overtaken it in terms of dollar-denominated GDP.
Equally uncertain is how the country
will be run. An election in June failed to
produce a government and now the
county is scheduled to go to the polls
again deteriorating security in the

Kurdish south-east of the country permitting. Most commentators agree that


Mr Erdogan engineered the collapse of
coalition talks, preferring to spin the
wheel again rather than see his power
diluted. However, opinion polls have yet
to suggest the electorate has decided to
give him the majority he seeks.
The problem is less that Turkey might
enter a period of unstable coalitions
than that the informal alliance that once
made up Mr Erdogans AKP has
collapsed, according to Suat Kiniklioglu,
a former government MP who heads the
Ankara-based think-tank Center for
Strategic Communication.
What started in 2002 as a conservative-liberal alliance has now become a
vehicle under Mr Erdogans full control.
The party became him. He became the
party, Mr Kiniklioglu says.
As the economy stumbles, Mr
Erdogan has become more autocratic.
The US-based democracy watchdog
Freedom House has for the past two
years said the Turkish press is not
free. However, it is the lack of dissent
within the government itself that concerns many investors, as a number of
ministers seen as safe pairs of hands
withdrew at the last election.
Markets took some comfort from the
reappearance as a candidate in the
November elections of Ali Babacan,
former deputy prime minister with
responsibility for the economy, and a
defender of central bank independence.
This has been under threat as the
president and his close circle have
blamed high interest rates for sluggish
growth and publicly equated rate rises
with treason.
Under such pressure, Erdem Basci,
the banks governor, has been greatly
restricted in what he can do.
In January 2014, the central bank
increased its main interest rate from 4.5
per cent to 10 per cent to prop up a falling lira.
Selim Cakir, chief economist for Turkey at BNP Paribas, says: To arrest the
current sense of drift, either the Central
Bank has to price in political risk or the
politicians have to do something to
reduce risk in the first place.

Only one
acronym
matters
now: EM
Currencies

In foreign exchange markets,


these countries have had a
tough time says Roger Blitz
In the world of currencies, it no longer
matters whether you are a Mint or Bric,
or even a Civets economy (Colombia,
Indonesia, Vietnam, Egypt, Turkey and
South Africa). Only one acronym
matters: EM.
All year, emerging market currencies
have suffered. First, heightened expectations of the Federal Reserve raising
interest rates caused damage and,
although its decision to keep rates on
hold in September may give some relief
to EM currencies, analysts expect this to
be shortlived. The dollar went on a bull
run and drove capital flows out of EM.
Then, commodity prices fell. Finally,
concerns about Chinas economy, bubbling away all year in emerging markets,
tipped over into the developed world,
rattling global equity markets.
These factors may or may not be
related, but the upshot is that EM have
been a grim place to be in 2015 and their
currencies, save for a few isolated oases
of calm, have invariably been volatile
and are growing weaker.
As Win Thin of Brown Brothers Harriman puts it, all the Mint countries are
vulnerable to ongoing EM weakness.
Declines against the dollar this year
are par for the course. At the time of
writing, the Mexican peso had fallen

The Indonesian rupiah has fallen 13 per cent against the dollar Dimas Ardian/Bloomberg
11.3 per cent, the Turkish lira by more
than 22 per cent, the Indonesian rupiah
by 14 per cent. On the official exchange
rate, Nigerias naira had fallen by 7.5 per
cent. But Nigeria has resorted to a series
of measures to defend the naira following two devaluations, creating a black
market for the currency. The black market rate is much weaker, says Mr Thin.
Political risk is one reason why traders short certain currencies, which
explains some of the weakness in the
lira, the naira and the peso. The falling
oil price is another, and one that has
weighed particularly heavily on Nigeria.
Since late last year, there has been no
two-way FX market in Nigeria, says
Luis Costa, an EM strategist at Citigroup.
The central bank in Nigeria has been
reluctant to allow some depreciation of
the naira as a response to the abrupt
collapse in oil prices.
On the other hand, Turkey is an
energy importer and so benefits from
cheaper oil, while Mexico, the third-biggest oil producer in the Americas, is
hedged against oil price fluctuation.
Indonesia is dependent on commodity exports and is a net oil importer. Its
per capita income is low, though inflation is above target, and FX strategists
think it has reasonable democratic

traditions. Its problems include a large


current account deficit and a sputtering
economy that makes the central bank
reluctant to move on rates.
Mexico and Turkey offer better prospects for FX traders in the medium
term. According to Daniel Tenengauzer,
head of EM FX strategy at RBC Capital
Markets, Mexico presents good fiscal
and inflation credentials and a strong
per capita income.
Compared with other Mint economies, its economic fundamentals are a
lot more benign, says Mr Costa, though
the peso is hurt by Mexicos proximity to
the US and a possible Fed rate rise.
Turkeys lira looks like one to avoid in
the short term, not just because of
heightened tensions in the run-up to the
November elections, but because of its
balance of payments deficit and corporate dollar indebtedness.
But Bernd Berg, EM strategy director
at Socit Gnrale, says traders are
seeking to identify those EM currencies
likely to escape the worst of the storm.
Turkey and Mexico are expected to
outperform. They are less dependent on
volatility in global commodity prices
over the medium term and their economies are more isolated from this global
EM storm, he says.

Elizabeth Durno
Christina Madden
Sub-editors

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Contributors
Gideon Rachman
Chief foreign affairs commentator
Maggie Fick
West Africa correspondent
Andrew Finkel
Freelance journalist in Istanbul
Jude Webber
Mexico and Central America
correspondent

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Commissioning editor
Steven Bird
Designer
Andy Mears
Picture editor

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Tuesday 22 September 2015

FINANCIAL TIMES

The Mint Economies Politics

When it comes to
corruption, words
can be blown
away by the wind
Mexico

After the homes scandal, the


president seems to be losing
the battle for hearts and
minds, writes Jude Webber
Three things hold Mexico back, according to President Enrique Pea Nieto:
inequality, a tricky international economic environment and corruption.
That last factor has long been a
problem. As one influential politician
notoriously said,a politician who is
poor is a poor politician.
Mexico ranks 103rd out of 175 countries in Transparency Internationals
2014 Corruption Perceptions Index.
Among the three Mint nations that
improved their rankings compared with
2013, it made the smallest advance,
while Turkeys ranking worsened.
In his state of the nation speech in
August, Mr Pea Nieto acknowledged
that scandals over houses he, his wife
and his finance minister had bought
from favoured government contractors
had caused anger and indignation.
He apologised, but appears to have
missed the incredulity many felt when a
government probe exonerated them of
conflicts of interest. Indeed, the contractor at the centre of the scandal, Juan
Armando Hinojosa, was a guest at his
speech.
Mr Pea Nieto, halfway through his
six-year term, seems to be losing the
battle for hearts and minds. A Pew
Research Center study last month found
only 27 per cent of respondents
approved of his handling of corruption,
a plunge of 15 points from a year ago.
A recent survey, by pollsters Mitofsky,

asked people to identify Mexicos top


problem. While still behind security and
crisis, corruption saw the biggest yearon-year rise.
Marco Fernndez, a researcher at the
Wilson Centre, a think-tank says: Im
concerned that this supposed selfcriticism is not accompanied by concrete actions to correct the problem of
corruption and . . . transparency.
Words can be blown away by the wind.
In his speech, the president promised
to work with Congress on secondary
legislation to implement an integrated
approach to fighting graft through a socalled anti-corruption system.
Juan Pardinas, head of Imco, a thinktank, applauded the plan to implement
greater checks and balances, stiffer penalties and better co-ordination. But
experts say that is the work of a decade.
The government says, this is where
there is going to be a fantastic building,
says Mr Pardinas. All you see is a hole.
With the house sales, last years chilling disappearance of 43 students at the

Many were incredulous


when a government probe
exonerated Pea Nieto
hands of corrupt local police in the western state of Guerrero, and the suspicion
that bribes may have helped Mexicos
top drug lord, Joaqun El Chapo Guzmn, escape from jail, Mexicans are
impatient.
In next-door Guatemala, Otto Prez
Molina, the former president, was
forced to resign and was imprisoned to
face corruption charges in a move
spearheaded by a UN-backed commission. This prompted many on Twitter to

Concern grows over a lack


of economic direction
Public disquiet: Enrique Pea Nieto
ask if Mexico needed similar help.
Unlike Brazil or Guatemala, where
people power took the fight against corruption into the streets and gave it
momentum, last years big Mexican protests against the disappearance of the 43
and the house scandals have fizzled out.
Meanwhile, Mexicos problems
appear to be getting worse, according to
the Control of Corruption index, produced by the World Bank as one of its
global governance indicators.
Anne Van Praagh, managing director
at Moodys sovereign risk group, says:
Mexico underperforms its A3-rated
peers [indicating its securities are stable] in terms of government effectiveness and regulatory quality.
Corruption and political stability are
both weak links. Weve seen a downward trend in Mexicos scores [in the
ratings].
Among the Mint nations, Mexico is
the only country that appears be going
backwards in fighting corruption, compared with 2003. Economists estimate
corruption may be eating up as much as
2-10 per cent of GDP, and given that the
central bank is sketching a worst-case
scenario this year of about 1.7 per cent
growth, that is hard to swallow.
Ms Van Praagh says 30 per cent of sovereign defaults globally are related to
institutional or political weakness,
including corruption.
For us, corruption is an important
part of how we look at creditworthiness, she says.
Mexico already has investment-grade
status. That ought not to make it complacent, but as Ms Van Praagh says, the
risk for Mexico, an oil exporter, is that
an anti-corruption drive will bring
short-term economic pain in an operating environment that is already pretty
fragile because of low oil prices.

Nigeria Post-election
optimism fades as
fiscal policy plans
remain unclear,
writes Maggie Fick

obody, least of all Nigerias


new president, has said that
rooting out the rot in the
political system will be
easy.
When he took office in late May,
Muhammadu Buhari described Africas
biggest economy as being in a precarious state because of external factors
mainly falling oil prices that intensified internal problems: namely poor
management that enabled or encouraged mass theft of state revenues.
In his inauguration speech, the
former military ruler, aged 72, said
careful management would be needed
to bring the Nigerian economy out of the
deep trouble it was in. He also pledged
to take action to tackle the Boko Haram
insurgents who have terrorised the people of the impoverished north-eastern
region and neighbouring nations.
Almost four months later, the countrys economic woes have deepened,
while a rise in Boko Haram attacks has
forced 800,000 people from their
homes since June, according to UN figures published this month.
Mr Buhari has changed the militarys
top brass and sacked the leadership of
the state-run oil company, the Nigerian
National Petroleum Corporation, but he
is facing increasing criticism for not
articulating a vision for Nigerias economy. Change was not expected overnight, but the wave of optimism that
swept the country after Mr Buhari made
history by becoming the first opposition
candidate to defeat an incumbent has
faded. Nigerians and foreign investors
worriedly await signs of a plan, particularly as oil prices continue to fall.
Economic growth slowed sharply in
Seeking economic direction:
Muhammadu Buhari

the second quarter to less than half the


rate of a year ago.
The naira has lost more than 15 per
cent of its value against the dollar in the
past year. The central bank devalued
the currency in November and February and has introduced capital controls
and spent billions to avoid a third devaluation. Traders and analysts say this has
caused liquidity to dry up and most are
calling for a devaluation.
Many agree with Mr Buharis focus on
tackling institutionalised corruption
and understand that it takes time, says
Ayodeji Ebo, head of research at
Afrinvest in Lagos.
Its a challenge we have that cuts
across all sectors, Mr Ebo says, adding
that the presidents approach in terms of
restructuring various sectors to clean
up state institutions could yield fruit
once he appoints a cabinet.
Mr Buhari has promised to appoint
ministers this month and has said the
long wait was needed to ensure that the
individuals he selects as ministers are
capable of carrying out the root-andbranch reforms he has promised.
But because of the presidents relative
silence and the lack of a finance minister
or named economic policy team, the
only person seen to be dictating economy policy publicly since Mr Buhari
took over is the central bank governor,
Godwin Emefiele, who was appointed

by the previous administration. Mr


Emefieles view that the currency is
appropriately priced despite the
divide between official and black market rates and controversial measures
such as effectively blocking certain
imports, like rice has bewildered
economists.
If the currency is not devalued, market uncertainty and foreign outflows
could cause foreign reserves to drop
below the $30bn critical level needed to
cover four months of imports, such as
important food stuffs, says Mr Ebo.
Nigeria is digging itself into a deeper
hole as the days and weeks go by, says
Angus Downie, head of economic
research at Ecobank. And, with oil
prices unlikely to rise soon, Mr Downie
says the government cannot rely on
external forces to come to its aid.
This month, JPMorgan ejected
Nigeria from its influential emerging
markets bond index. The move triggered outflows, but some said the biggest implication of the exclusion was the
hit to confidence about the management of Nigerias economy. People will
start asking questions about do these
people know what they are doing? says
a Nigerian economic expert familiar
with the administrations thinking.
Some Nigeria watchers are optimistic.
Hes trying to do the right thing and
maybe its taking a bit longer than anyone expected, but hes still fighting for
the good cause, says Miguel Azevedo,
head of investment banking for Africa at
Citigroup.
Mr Azevedo says the president has
appointed people to take charge of the
shaky oil industry, citing the new head
of the state-run oil company,
Emmanuel Ibe Kachikwu, a former
ExxonMobil executive, as an example.
However, Nnamdi Obasi, senior
Nigeria analyst at the International
Crisis Group, says: Clearly, there is a
sense of anxiety and concern about economic direction, also because the
president himself doesnt
have any economic credentials whatsoever
and its not clear who
is advising him.

Tuesday 22 September 2015

FINANCIAL TIMES

The Mint Economies Young Entrepreneurs

Innovator was told to


forget Silicon Valley

High flyer quit


Harvard to get
travel start-up
off the ground

Mexico

An online payments system


is helping beat endemic
fraud, writes Jude Webber

Indonesia Would-be executive had to move fast to


seize his net opportunity, writes Avantika Chilkoti

t may be difficult to get into Harvard Business School but it is also


difficult to leave after just one
semester, which is exactly what
Ferry Unardi did.
Three years on, he is running one of
Indonesias best-known start-ups, the
online travel agent Traveloka.
Everybody knows internet time
works differently from normal time,
explains Mr Unardi, 27. When I arrived
at school, I underestimated the speed of
change. Tech start-ups are mushrooming across Indonesia, and Traveloka has
swiftly become a household name.
The website had 10m visitors a month
by the end of last year, its workforce has
grown to about 400 employees, and the
company has attracted investment
from Global Founders Capital, the venture fund set up by two of the Samwer
brothers, part of the super-ambitious
team behind Berlin-based start-up
conglomerate Rocket Internet.
Traveloka now has partnerships with
33 airlines and hotels across Southeast
Asia, taking between 10 and 15 per cent
commission from bookings.
I think travel products are the first
thing that people buy online, so if we are
growing then you can bet the other
ecommerce will follow, says Mr Unardi.
With a population of 250m and a
growing middle class, Indonesia offers a
large market for ecommerce. As of 2013,
there were 74.6m internet users in the
country, according to SP eCommerce,
part of Singapore Post. This figure is

expected to reach 102.8m by 2016.


Mr Unardi and his business partners,
Derianto Kusuma and Albert (who goes
by that one name) stand out in Jakarta,
where many start-ups are led by slick
former investment bankers and consultants. We are definitely engineers
through and through, the chief executive explains.
He met Mr Albert while studying
computer science at Purdue University
and Mr Kusuma was a fellow intern at
Microsoft. We always discussed the
development of the internet industry in
Indonesia and always thought about
coming back, Mr Unardi explains.
It was not until early 2012 that the trio
felt the Indonesian market was ripe,
with interested investors and a ready
consumer base. Traveloka raised seed
funding from East Ventures, a venture

Internet time works


differently; I underestimated
the speed of change
capital firm, and launched as a search
engine for the travel industry by the end
of the year.
The biggest challenge in the travel
industry is the availability of information, Mr Unardi explains.
The key to making it useful was to
organise the information, which I
thought that we, as software engineers,

Tech-led: Ferry Unardi, chief executive of website Traveloka


would be able to tackle. But users complained that booking was still complicated, prompting the group to relaunch
the site a year later.
They started taking bookings for airlines before expanding to take hotel reservations last year.
As with many start-ups up across
Southeast Asia, the idea was not new.
We definitely had a lot of companies
that we looked up to, Mr Unardi says,
and mentions Expedia and Priceline of
the US.
Now, the rate of creativity and innovation is so high that its inevitable
somebody has done it previously.
The company does not disclose revenues, but Mr Unardi says month-onmonth growth is now in double digits.
The biggest hurdles for the company
include working with small hotels that
manage bookings manually across the
region, and building partnerships with
established airlines.
Gaining trust was very challenging at
the beginning, especially for us, because
we are a start-up and these are pretty
sizeable companies, Mr Unardi says.
When Traveloka started out, he adds,

few Indonesian websites were well


designed or even reliable, and many
consumers were uncomfortable making
transactions online.
Indonesians are among the most riskaverse customers in Southeast Asia,
according to SP Ecommerce, with 80 per
cent of people comparing prices online
before buying in stores, compared with
a regional average of 60 per cent.
Scaling is very difficult, because it is
like building a skyscraper on top of
muddy and unstable ground, Mr
Unardi says. That takes a certain type
of ingenuity.
The young entrepreneur grew up in
West Sumatra, where he developed an
interest in technology through programming competitions at school. His
family initially struggled to understand
what Traveloka does.
But the chief executive points out that
Indonesias start-up scene is changing.
Thats the thing about programming
and software its fashionable now, he
says. Now, youre cool if you do this, so
its interesting to see what type of people
come in, and how they will take the
industry forward.

Hctor Crdenas thought he had it all


figured out. A young mechatronics engineering graduate from the University of
Waterloo in Canada, he was back in his
native Mexico with two university
friends and hungry to start a business.
The team raised $30,000 seed capital
from a Mexican venture capital fund to
set up a local equivalent of US-based
Yelp, which provides crowd-sourced
reviews of services.
There was just one problem: The
market didnt want what we thought it
did. Mr Crdenas and his colleagues
were considering their options when a
talk at a conference in Mexico City by
Vivek Wadhwa made them think again.
Mr Wadhwa is from the Singularity
University in California, which has the
goal of using technology to benefit the
world as well as make a profit. He said,
Forget Silicon Valley. Here there are
problems with water, payment, logistics
focus on solving those problems.
And so Conekta was born in a sparse
apartment, handling payment logistics
in a country where two-thirds of people
have no bank accounts and in which, Mr
Crdenas says, the culture is fraud.
The company now has 17 staff in an
open-plan office that looks as slick as
any in San Francisco. Conekta, which is
invisible to the consumer, has been
adopted by international brands including Coca-Cola and Tommy Hilfiger, as
well as Mexican brewer Modelo, taxi
app Yaxi, and Fondeadora, a crowdfunding platform. It is even used for tax
payments to local authorities. For those
without bank accounts, cash payments
can be made at convenience stores.
Conekta also helps companies combat
identity theft and disputed credit card
charges (chargebacks).
Mexico has the worlds highest rate
of bank card fraud, Mr Crdenas says.
Conekta uses artificial intelligence to
recognise suspicious transactions. One

bus company, for example, had an average chargeback rate of 8 per cent but
this fell to to 1.2 per cent after about
three months, the time it takes the software to understand fraud patterns.
Were on the verge of launching alliances with almost all the banks here for
us to be their [anti-fraud] software. The
banks realised we were doing it better
than them. Such statements may
sound cocky, but the 28-year-old chief
executive brims with a millennials
assurance: We are the technology.
Mr Crdenas grew up in the business
world, working from the age of 10 in his
fathers electronic sales business. He
and his friends were, by his own admission mirreyes (my kings the pampered children of the well-off elite).
Canada, where he moved when he was
18, not only taught him about technology but also the need to generate value.
Mexicans, he says, focus on making
money fast and avoiding risk because of
cultural pressure not to fail.
Conektas big-name backers include
investment companies Jaguar Ventures,
500 Startups and, through a syndicate

We focus on making money


and avoiding risk because
of pressure to succeed
run on AngelList, which puts entrepreneurs in touch with backers, other
individual investors. Conekta is now
working on a $5m series-A fundraising
in the US, selling preferred stock to
investors, which it hopes to close at the
start of next year.
Conekta could break even, but is
focused on growing. The number of
transactions being processed has grown
by 29,000 per cent since the company
started in 2012, and is increasing at an
average of more than 20 per cent a
month, Mr Crdenas says. He is hoping
to expand into South America, and
plans to go public in four to six years.
Mexico is full of people who want
start-ups, but no one knows what to do,
he says. You need a success story for
people to see something is viable.

Bus idea was just the


ticket for founders
Turkey

Engineers were the right age


to take a risk, and a journey,
reports Andrew Finkel
For two Turkish industrial engineering
students, Ali Yilmaz and Yigit Gurocak,
entrepreneurial inspiration struck
when they found themselves unable to
get home for the holidays.
We forgot to book bus tickets and
discovered there was no easy way of getting one online, said Mr Gurocak. The
pair transformed misfortune into
oBilet (which means that ticket), now
one of Turkeys leading travel apps.
Unable to raise seed capital from government development agencies, they
gave a PowerPoint presentation to their
families. In return, their loved ones gave
them 6,500 to fund a learning experience.
The pair registered the domain name
in 2012, spent a year preparing the
ground and began operations in 2013,
signing up the countrys 300 coach operators, for whom marketing tickets at
lower commission was a win-win.
The company is now Turkeys biggest
online coach booking service in terms of
sales, despite competition from travel

companies owned by some of the countrys most powerful firms. Last year,
oBilet booked about 1m inter-city coach
tickets, representing 10m in turnover.
With Turks making 200m journeys a
year, they believe there is room to grow.
The figures attracted two backers:
Earlybird, a venture capital firm that
runs its 95m Digital East Fund from
Istanbul; and the Turkish angel investor, Aslanoba Capital. Mr Yilmaz and Mr
Gurocak say they now have enough
working capital for five years and still
retain 70 per cent of the original shares.
They have taken on more staff and plan
to expand the business into the Balkans.
The success of oBilet would seem to be
a confirmation of Turkeys bustling
entrepreneurial culture. Small and
medium-sized enterprises account for
99.9 per cent of all businesses and produce 53 per cent of value added in the
whole economy, according to 2014
figures published by the European Commission.
Yet, while Turkish workers in Europe
are known for repatriating savings into
mom and pop stores or other family
businesses, such as taxi services or
cafs, graduates still come under pressure to seek a steady, well-paid job.
The ecosystem that nurtures entrepreneurial talent is still in its early
stages, said Cem Sertoglu, a partner in

One half of the sketch: Yigit Gurocak


Earlybird, which has a 20 per cent share
in oBilet. However, he says that things
are changing fast.
A primary reason is that the cost of
starting a business has plunged.
Another is that going into business for
yourself has become more attractive as
the economy slows and there are fewer
plum jobs. The founders of oBilet began
their business while at Ankaras Bilkent
University, joining a club devoted to
helping its members go into business.
But most of their friends ended up with
more conventional careers.
Its a bit of a sore point, Mr Gurocak
says. At least we proved founding our
own business is not just a dream.
We were at the right age to risk everything, says Mr Yilmaz, who turned
down a job with management consultants McKinsey, even though the company, impressed by his pluck, give him a
whole year to think about it.

Millennials plug gap in skills and funding


continued from page 1
experience in raising finance, and her
connections.
Ms Akinkugbe says: Im going to be
leveraging my network of investors to
tap funding for projects [that many] offgrid entrepreneurs are running.
She thinks her two client bases
energy companies with cash flow at
FNB, and small and medium enterprises at the incubator will complement each other.
Ms Akinkugbe says an entrepreneurial spirit can be found right across
the nation. The time will come [to]
make that decision to be a full-on
entrepreneur, but Im not yet at that
point.
I think you could speak to almost any
Nigerian today, and they would tell you
that they have one side-gig or the other
that theyre pursuing.

She believes this approach is partly


because of the recognition that our
society has a lot of problems that require
solutions.
Were people who like to debate,
were constantly talking about why
things dont work.
She adds that at some point, individu-

I will leverage my network


of investors to support the
off-grid entrepreneurs
als have to consider if there is something
they can do to take responsibility to find
a solution and knock heads together
to make things work better.
There are more than enough problems for crude-revenue-dependent

Nigeria, hit hard by the oil price crash


and investor uncertainty about the
economic plans of the new president,
Muhammadu Buhari.
Ms Akinkugbe says that the go-getter
attitude among Nigerians now mixes
with opportunity in terms of the sheer
demographics of her country.
If you come up with a product today,
and you sell it to 1m Nigerians, youve
made some pretty decent money.
Investors and the government are
interested in building a local entrepreneurial class that, with the right
policies and funding, could itself
be an engine for growth in the years
to come.
Her advice for young entrepreneurs is
to develop a personal brand and be consistent and diligent in their area of
expertise to gain respect, as she has
done in the energy sector.

Tuesday 22 September 2015

FINANCIAL TIMES

The Mint Economies

Extreme volatility
saps sentiment
Markets

Vulnerability leads investors


to seek safety elsewhere,
reports Elaine Moore

cute volatility has defined


emerging markets this
year, as investors have
come to terms with lower
oil prices, a possible US rate
rise and a slowdown in China.
The MSCI index of emerging market
equities has dropped by close to 15
per cent since June, led by a rout in
China. The turmoil has led some to ask if
the growth model for emerging markets
has collapsed, while concerns about a
global slowdown led the US Federal
Reserve to delay raising interest rates in
September.
For the Mint economies of Mexico,
Indonesia, Nigeria and Turkey, investor
sentiment remains broadly negative. In
spite of youthful populations, relatively
low levels of external debt, enviable economic growth rates and booming middle classes, countries that were former
outperformers against the S&P 500
have flipped their position.
Michael Ganske:
Nigeria has a lot of
issues . . . civil
unrest, corruption
and the fact that
its an oil economy

Fixed-income investors have also


seen a sell-off, as prices for government
debt issued in local and foreign currencies such as dollars and euros have
fallen. Since the start of the year, Turkeys benchmark 10-year government
borrowing costs have jumped by almost
1 percentage point to 5.18 per cent, while
Indonesias are up 50 basis points.
Charles Robertson, global chief economist at Renaissance Capital, says:
Like the Brics [Brazil, Russia, India,
China], the Mints problem is that while
they are expected to enjoy good growth
in the long term, their per capita GDP

remains low and they are vulnerable to


external shocks.
With analysts at banks, including BNP
Paribas, recommending that investors
avoid energy and commodity producers
as prices drop, even Turkey, an oil
importer, has seen an outflow of capital.
While the country will probably continue to grow thanks to its demographics, the conflict with Kurdish separatists
and failure to establish a coalition
government have unsettled investors.
Michael Ganske, who manages about
$4.5bn as head of emerging markets at
Rogge Global Partners, prefers Indonesia of the four countries.
The president of the worlds thirdbiggest democracy, Joko Widodo has
pledged to accelerate reforms. Some
people say hes not delivering, but its a
tough job to come to the leadership role
of a country this size, says Mr Ganske.
If you look at the underlying qualities, then Malaysia and Indonesia look
relatively solid. Low debt to GDP and
reform agendas, for example. Nigeria
has a lot of issues. Not just civil unrest
but corruption and the fact that its an
oil economy. Turkey has political issues,
even though it should benefit from
lower commodity prices.
This is why he concentrates on
current account dynamics. He does not
take the view that all emerging economies are bad. The most convincing
cases are Malaysia and Indonesia. The
next few months are more likely to offer
volatility than a wholesale sell-off.
For Nigeria, the situation could be
more difficult. It is struggling with a
weak currency and the continued
deadly attacks by Islamist group Boko
Haram, as well as the impact of falling
prices in its main export, oil.
Emily Fletcher, co-manager of BlackRock Frontiers Investment Trust, has
reduced investment in Nigeria from
about 10 per cent of her portfolio to less
than 5 per cent over the past year.
While there are good things to say
about Nigeria, including low levels of
external debt and a young population,
Ms Fletcher has concerns over currency
expectations: There are few emerging
markets that look like safe havens and
none of the Mints are considered such.

The Mint story in numbers


While the Brics reigned in 2007, the Mints may now be strong competitors ...
GDP growth estimates for 2015 Annual % change
GDP growth slowdown Difference 2015 and 2007, % points
8
6
4
2
0
-2
-4
-6
-8
-10
-12

Mint countries

Indonesia

Nigeria

8
6
4
2
0
-2
-4
-6
-8
-10
-12

Bric countries

Turkey

Mexico

India

China

Brazil

Russia

... and most of the Mint economies are getting richer ...
GDP per capita at purchasing power parity As % of US (2015-16=forecasts)
Mexico

Indonesia

1990

2000

10

16

Turkey

Nigeria

1990

2000

10

16

36
34
32
30
28
26

11
10
9
8
7
6

20
18
16
14
12

35
34
33
32
31

1990

2000

10

16

1990

2000

10

16

... their human capital is improving ...


Enrolment in tertiary education (% of population of the five-year age group after leaving secondary school)

5.2
1971

29.9
2013

31.5
2012

2.9
1971

79.3
2012

0.7
1975

5.1
1971

10.4
2005

... as are their infrastructures ...


Logistic performance Largest exports
index* (1=low, 5=high) product 2014
Petroleum oils
2.7
$36.2bn
2007
Motor vehicles
$32.4bn
3.1
Vehicle parts
2014
$22.9bn

2.8
2007
2.9
2014

Vegetable fats
$19.4bn
Natural gas
$17.7bn
Coal
$17.4bn

2.2
2007
2.6
2014

Petroleum oils
$79bn
Natural gas
$10.9bn
Propane and
butane
$1.6bn

Motor vehicles
$7.3bn
Iron/steel bars
$6.3bn
Articles of apparel
$5.9bn

2.9
2007
3.5
2014

... but there are still hurdles to overcome


People reporting paying bribes to the police in the last 12 months 2014

61%

75%

81%

23%

Ranking in ease of doing business 2014 (1=world best, 189= worst)


1

Mexico 39

Turkey 55

FT graphic Sources: IMF; World Bank; Unctad; Transparency International * Refers to quality of logistic infrastructure and services

Indonesia 114

Nigeria 170

189

FINANCIAL TIMES

Tuesday 22 September 2015