TUESDAY 12 APRIL 2016
Zero sum game
Are negative interest rates
backfiring? — ANALYSIS, PAGE 3
Lew urges IMF
to get tough on
exchange rate
manipulators
3 Call to name offending members
3 Comments ahead of US gathering
SHAWN DONNAN — WASHINGTON
US Treasury secretary Jack Lew has
called for the International Monetary
Fund to play a more aggressive role in
policing exchange rate fluctuations, glo-
bal imbalances and its members’ fail-
ures to live up to commitments to boost
ailing global demand.
In a speech aimed at reasserting US
leadership over the global financial sys-
tem, Mr Lew called for “new players”
such as the China-backed Asian Infra-
structure Investment Bank to live up to
the standards set by established institu-
tions such as the IMF and World Bank.
The call from the two institutions’ big-
gest shareholder came as finance minis-
ters and central bankers prepare to
descend on Washington for their spring
meeting this week. Growing concerns
about the fragile recovery in the world
economy mean that the IMF is widely
expected to cut its 3.4 per cent global
growth forecast today.
The comments amount to a call for
the IMF to be less diplomatic with its
members and more active in naming
those who engage in currency manipu-
lation to gain trade advantages and
other dubious economic policies.
Mr Lew told the Council on Foreign
Relations that the US had addressed
allies’ concerns that it was somehow
withdrawing from its leadership role by
moving last year to approve reforms
from 2010 to the IMF’s shareholding
structure. But it was now time to move
forward and “further modernise the
IMF”, he said. In particular, it needed to
Brussels set to scrutinise
Italian bank bailout plan
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Breaking the law
“intensify scrutiny of critical issues like
exchange rates, current account imbal-
ances and shortfalls in global aggregate
demand”, he said. He called for “greater
transparency” about members’ eco-
nomic data, especially as it relates to for-
eign reserves.
Mr Lew’s comments signal US anxiety
over the nature of some currency move-
ments and the management of current
account surpluses by other big econo-
mies such as China and Germany.
Globalisation and the US trade deficit
have long been politically sensitive top-
ics but have been central in this year’s
US presidential campaign. Critics such
as Donald Trump argue that they are
driven in part by currency manipula-
tion of rivals such as China.
The US is eager to see the IMF be more
frank in its reporting and increase the
frequency of publications such as its
annual “external sector report”, which
monitors the impact of current account
imbalances.
It also wants to see the IMF step up
work on securing greater transparency
of members’ management of central
bank reserves.
China last year began reporting data
to the IMF on its official reserves as part
of its bid for the renminbi to join the
elite basket of currencies used to deter-
mine the IMF’s special drawing rights.
But that step, while welcome, came
with continuing questions over Beijing’s
willingness to be fully transparent about
how it manages its reserves.
Intervention urged page 3
Editorial Comment page 8
Turkey presses Berlin to prosecute
German comic who insulted Erdogan
GUY CHAZAN — BERLIN
Turkey has asked Germany to prose-
cute one of the country’s most famous
comedians for insulting President
Recep Tayyip Erdogan, deepening the
diplomatic dispute between Berlin and
Ankara over press freedom.
The incident comes at an awkward time
for Angela Merkel, the chancellor, who
needs Mr Erdogan’s help to implement
last month’s EU-Turkey deal on solving
Europe’s migrant crisis but who is also at
pains to uphold Germany’s commit-
ment to free speech.
Turkey’s ambassador to Berlin sent a
diplomatic note to the German foreign
ministry on Sunday requesting a
criminal inquiry into comments by Jan
Böhmermann, host of the late-night
talk show Neo Magazin Royale.
Ms Merkel’s spokesman said the gov-
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WORLD BUSINESS NEWSPAPER
The start-ups aiming to slash the high
cost of legal advice — BIG READ, PAGE 7
Arm in arms Kerry opens way for
Obama with visit to Hiroshima
John Kerry, US secretary of
state, and his Japanese counter-
part Fumio Kishida reach out to
each other at a wreath-laying
ceremony in Hiroshima for the
victims of the atomic bombing
of the city in 1945.
The first such visit by a sitting
secretary of state may pave the
ernment would study the content of the
note but he stressed that for Ms Merkel,
freedom of speech was “non-negotia-
ble” and guaranteed by the German
constitution. “That is the case regard-
less of whether she personally thinks
something is tasteless or tasteful, felici-
tous or abhorrent,” he added.
The note comes days after German
prosecutors opened preliminary pro-
ceedings against Mr Böhmermann
under laws that make it a crime to insult
a foreign head of state. But under Ger-
man law, proceedings can go ahead only
if Turkey requests that Germany inves-
tigate the alleged crime and the German
government authorises the prosecution.
The furore was caused by a poem
broadcast on March 31 in which Mr Böh-
mermann described Mr Erdogan having
sex with goats and sheep, and said he
enjoys “kicking Kurds and beating up
World Markets
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Apr 11 prev
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0.30 ¥ per $ 107.815 108.415 ¥ per €
0.54 ¥ per £ 153.793 152.930 £ index
-0.07 € index 89.077 88.926 $ index
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ASIA
Fear factor
Be careful how you shout at
your staff — BUSINESS LIFE, PAGE 10
Briefing
i Goldman in $5bn mortgage settlement
The Wall St bank has finalised a $5.1bn settlement
with US authorities over mis-sold mortgage-backed
securities, in a deal that sheds new light on banks’
behaviour ahead of the financial crisis.— PAGE 13
i UK seeks blocking of Hutchison-O2 deal
The UK competition watchdog has piled pressure
on Brussels to block CK Hutchison’s £10.5bn
acquisition of British mobile group O2, arguing that
the proposed deal would harm consumers.— PAGE 17
i Paris and Berlin call for haven blacklist
France and Germany have called for a blacklist of
suspect territories in the toughest response to the
Panama Papers.— PAGE 4; EDITORIAL COMMENT, PAGE 8;
JANAN GANESH, PAGE 9; SOCGEN CHIEF, PAGE 14
i High hopes for cannabis users’ network
MassRoots, a social network for
cannabis users dubbed the “Facebook
for pot lovers”, is seeking a listing in
what would a first for a group
catering to both medical and
recreational enthusiasts.— PAGE 14
i Beijing seeks to unburden town halls
China’s premier is pushing for debt-for-equity
swaps and more aggressive measures to reduce the
burden on local governments as Beijing tries to
capitalise on improved growth outlooks.— PAGE 3
i Study points to limits of Trump’s appeal
An analysis for the Financial Times shows that Ted
Cruz, the Texas senator, clinched Wisconsin by
taking a greater share of counties with better
educated and more prosperous voters.— PAGE 6
i Feud engulfs Singapore’s first family
Singapore’s prime minister has been forced to issue
a denial after his sister accused him of abusing his
power over commemorations for the death of Lee
Kuan Yew, the city state’s founding father.— PAGE 2
Datawatch
Japan’s shrinking workforce Its shrinking
Japanese population and workforce is a
age structure (millions) 150 serious challenge
to Japan and will
Kimimasa Mayama/EPA
cause massive
pressure on public
100
way for a similar visit next become the first US president spending, the
month by President Barack to visit the site of the bombings, OECD has warned.
Elderly population
Obama when he attends this the first use of nuclear weapons Working-age population 50 The share of
year’s summit of G7 leaders in which 80,000 Japanese died. Children over-65s in the
hosted by Japan. “Everyone Mr Kerry and Mr Kishida population will hit
should visit Hiroshima and took part in a meeting of G7 0 40 per cent in
everyone means everyone,” foreign ministers to discuss 1950 60 70 80 902000 10 20 30 40 50 2050, the highest
said Mr Kerry, without specify- nuclear non-proliferation. Source: OECD Territorial Review of Japan 2016 in the world
ing whether Mr Obama would Kerry in symbolic visit page 2
Christians while watching child porn”.
Mr Böhmermann said he wanted to test
the limits of satire in Germany.
Ties are already strained over press
freedom.
Turkey last month summoned Ber-
lin’s ambassador over a satirical song on
German television that accused the
president of wasting millions on a vast
palace, jailing journalists and oppress-
ing Turkey’s Kurdish minority.
The dispute erupted days after the EU
and Turkey signed an agreement to
reduce the numbers of refugees coming
into Europe across the Aegean Sea, most
of whom have ended up in Germany.
Commentators have accused Ms Mer-
kel of kowtowing to Mr Erdogan, after
she described the Böhmermann poem
in a phone conversation with Ahmet
Davutoglu, the Turkish prime minister,
as “deliberately offensive”.
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123.372 123.674 Jpn Gov 10 yr 101.87 -0.08 0.00
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2 ★
G7 meeting
Kerry pays symbolic visit to Hiroshima
US secretary of state lays
wreath at cenotaph as a
gesture of reconciliation
ROBIN HARDING — HIROSHIMA
John Kerry has become the first sitting
US secretary of state to visit a memorial
to his country’s atomic bombing of Hiro-
shima, a gesture of reconciliation that
may prepare the ground for President
Barack Obama to visit next month.
Foreign ministers from the G7, with
Mr Kerry in the centre and Japanese
counterpart Fumio Kishida at his side,
laid wreaths on the victims’ cenotaph
shortly before midday yesterday in
Japan. Illustrating the delicate choreog-
raphy of sorrow but not regret, Mr Kerry
did not bow or lower his head.
Mr Kerry’s visit marks a break-
through in the political controversy that
Pedro Pablo Kuczynski
Veteran eyes victory in Peru’s presidential run-off
ANDRES SCHIPANI — LIMA
Pedro Pablo Kuczynski, the candidate
who is likely to face Keiko Fujimori in
the second round of Peru’s presidential
election, recalls when a senior Interna-
tional Monetary Fund official con-
ducted a short study on him.
“He said that every time I occupied a
public position, be it at the central bank
or a ministry, Peru’s economy grew,” Mr
Kuczynski, commonly known as PPK,
told the Financial Times.
It is not just his economic record but
also his long experience — at 77 he is
almost twice the age of his 40-year-old
opponent — that prompted roughly
24 per cent of Peruvians voters to rally
behind him on Sunday.
Although Ms Fujimori won far more
votes in the first round, almost 40 per
cent, Mr Kuczynski hopes her strong
negative poll ratings will count against
her in the run-off. Many Peruvians
recoil at the dark legacy of her auto-
cratic father, Alberto Fujimori, who in
1992 dissolved Congress and the judici-
ary and is now serving a lengthy prison
sentence for abuses.
Mr Kuczynski echoed many of his
supporters who think she may pose a
danger to democracy. “I believe that is
true,” he said.
“The outlook for June’s second round
is still very much up in the air,” Verisk-
Maplecroft, the risk consultancy, said in
a note yesterday. “While some surveys
show Kuczynski picking up enough
votes to defeat Fujimori, polls in Peru
tend to underestimate the vote in rural
areas, where she is stronger.”
Placing himself on the political spec-
trum between Ms Fujimori to the right
and the defeated young and “pink tide”
favourite Verónika Mendoza to the left,
he said: “Peru does not want extremism.
We are the centre. What means being at
the centre? Very simple: great economic
growth to finance social investments.”
That may spur hope among some
Peruvians who feel left out of the boom,
and are disappointed with a slowdown
in South America’s best-performing big
economy. For a decade Peru grew at
average rates of 6.4 per cent, but the end
of the commodities boom — it is the
world’s third-largest copper producer —
dragged the rate down to 3.3 per cent
last year.
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has kept US officials away from Hiro-
shima for seven decades, with the US
unwilling to apologise for the atomic
bombings as demanded by Japanese cit-
izen groups.
“It is a stunning display, a gut-wrench-
ing display — it tugs at all our sensibili-
ties as a human being,” Mr Kerry said.
But he said the reason for coming to
Hiroshima was “not to be stuck in the
past” but to apply its lessons in pursuit
of a world free from nuclear weapons.
The memorial, centred on the skeletal
remains of the Atomic Bomb Dome,
commemorates approximately 80,000
Japanese killed in the final days of the
second world war by the first use of an
atomic weapon.
Mr Kishida said he had listened as his
counterparts were “touched and moved
and truly impressed and shocked” by
seeing the reality of a nuclear bomb’s
effects. Hiroshima is Mr Kishida’s home
Pedro Pablo
Kuczynski
celebrates
getting through
to the second
round with his
wife Nancy on
Sunday —Esteban
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FINANCIAL TIMES Tuesday 12 April 2016
INTERNATIONAL
GLOBAL INSIGHT
SAO PAULO
Joe
Leahy
town and he represents a local constitu- ‘It is a While the symbolism of Mr Kerry’s
ency in parliament. visit is important, a trip by Mr Obama
stunning
The G7 meeting concluded with a
“Hiroshima declaration” aimed at shor-
ing up the global regime on nuclear non-
. . . gut-
after next month’s G7 summit would
outweigh it by far.
“Everyone should visit Hiroshima
Voters grow weary
proliferation, and a separate statement
on maritime security that expresses
wrenching
display —
and everyone means everyone,” said Mr
Kerry. He said he hoped the president
as Brazil’s ‘walking
concern about the situation in the East
China and South China seas.
China has urged Japan not to raise
it tugs at
would come one day but whether he
came next month would depend on
scheduling.
dead’ lose legitimacy
maritime disputes at the G7, but while
all our Mr Obama risks criticism at home if
the statement does not mention China sensibilities he appears to apologise for the atomic
P
by name it expresses “strong opposition as a human bombings in any way. However, his first rotests are common in Brazil these days. There
to any intimidating, coercive or provoc- big foreign policy speech as president, in are those demonstrating against President
ative unilateral actions that could alter being’ Prague in 2009, was about the pursuit of Dilma Rousseff, who generally sport the green
the status quo”. a world without nuclear weapons, and a and yellow of the country’s flag, and there are
It urges states to refrain from land rec- Hiroshima visit in 2016 would be a sym- those in favour of the leftist leader, whose sup-
lamation. China has continued to build bolic bookend. porters dress in the red of her Workers’ party, or PT.
artificial islands in the South China Sea. A visit by Mr Obama would also be But late last month on Avenida Paulista, an important
It also calls on countries to respect court regarded as an important victory for São Paulo thoroughfare, a new kind of demonstration was
decisions on disputes — especially Japanese prime minister Shinzo Abe, seen. Bearing banners declaring “Fora Todos” or “Out with
important given an upcoming case the showing that he has used his G7 presi- them all”, a group of young people called for the removal of
Philippines has brought against China. dency to achieve Japan’s own ends. Ms Rousseff and all of Congress through new elections.
The increasingly Byzantine nature of a battle to impeach
Ms Rousseff means more and more Brazilians are bound to
throw up their hands in confusion and disgust and join the
Fora Todos movement.
Indeed, the political scene in Brasília, while often com-
pared to the US television series House of Cards for its politi-
cal intrigue, is increasingly starting to resemble instead the
rival zombie TV series, The Walking Dead.
Through their involvement in corruption, or just their
cynical opportunism, Brazil’s main political actors are rap-
idly losing legitimacy in the eyes of a tired electorate.
Take the events of recent weeks as an example. Ms Rous-
seff — deeply unpopular, presiding over what is emerging
as Brazil’s worst recession in a century and with her party
accused of rampant corruption — is facing impeachment
for allegedly manipulating the public accounts to window-
dress the budget deficit, charges she denies.
In March, her main coalition partner, the centrist Brazil-
ian Democratic Movement party (PMDB) — the largest
grouping in Congress —
abandoned the govern-
ment in preparation for
More and more
impeachment. Its leader, Brazilians are
Michel Temer, is also the
vice-president so would
bound to throw
take over as president if up their hands
Ms Rousseff is impeached,
a process that could start
in disgust
asearlyasthismonth.
So far so good. Confusing the matter, however, is that the
PMDB is also up to its ears in corruption allegations, partic-
ularly in relation to a scheme at Petrobras, the state-run oil
company. PMDB heavyweight, lower house speaker Edu-
ardo Cunha, is under investigation for stashing money
from corruption in Swiss accounts — allegations he denies.
Meanwhile, another PMDB leader, Renan Calheiros, the
head of the Senate, is accused in another corruption case.
In spite of these allegations, both are presiding over the
impeachment — Mr Cunha in the lower house and Mr Cal-
heiros if it reaches the Senate, where the trial of the presi-
dent would be conducted. Their involvement robs
impeachment of some of its legitimacy as many analysts
believe they want to enter power to help protect them-
selves from the investigations.
After graduating from Oxford and attacked him for not having a “single a tions on the Peru-US free trade agree- Mr Temer, so far, has largely stayed out of the corruption
Princeton universities, the polyglot gram of Peruvian blood. He has Polish, ment, would have important roles in his investigations. But a Supreme Court judge ruled last
PPK, son of a Polish-German doctor, Jewish, French, but Peruvian zero.” Mr government. month that Congress should consider impeachment pro-
who ran a leper colony in the Peruvian Kuczynski always carried his Peruvian One of the top priorities for the next ceedings against him on similar grounds to Ms Rousseff. To
Amazon — a place visited by one-time passport with him to challenge his foes. Peruvian leader will be defusing popular muddy the waters further, a pro-opposition group coun-
medical student Ernesto “Che” Guevara “I am Peruvian, I was born in Peru, protests over mining projects that are tered with a petition to impeach the judge who ordered the
— before joining the World Bank as an but there are always detractors,” he critical for the economy. Mr Kuczynski impeachment of Mr Temer, alleging the judge breached
economist. explained. said he would also appoint Martín Viz- the separation of powers by telling Congress what to do.
He then returned to Peru and worked Others criticise him for being too old carra, a former regional president, as his With everyone being impeached or in danger of
at the central bank, before going into for the job. He once said he would not prime minister because he helped solve impeachment or implicated in corruption, the “Fora
exile during the dictatorship of General rest a minute if elected president “even a social dispute over Anglo-American’s Todos” movement is gaining ground. A popular previous
Juan Velasco. He worked at the IMF, if this means the last thing I’ll do in my large copper Quellaveco mine. “If we presidential candidate, Marina Silva, and newspaper
before becoming mining minister under life”. want to move forward with mining Folha de S.Paulo in an editorial have championed this line.
President Fernando Belaúnde at the start To the FT he laughed off questions investments we have to go and explain But while the idea of a clean slate is attractive, there is no
ofthebloodyShiningPathuprising. about his advanced years. “I am not to the people here what we want to do,” clear constitutional way of calling fresh elections unless
Later he became a Wall Street banker worried about my age. I am very well, I he says. Ms Rousseff and Mr Temer are both impeached, have their
and worked for Credit Suisse in London, don’t look 77.” “We also have to go and see big com- mandates annulled by the election tribunal, or resign.
he was finance minister and then prime Alfredo Thorne, a respected invest- panies, like Rio Tinto Zinc and MMG, With both showing no signs of willingly stepping aside, the
minister under President Alejandro ment banker who is his choice for and Xi Jinping [China’s president] and impasse is unlikely to be resolved quickly.
Toledo, as the Chinese-fuelled commod- finance minister, said: “I challenge you explain why we want to do what here.” In the meantime, Brasília’s “walking dead” politicians
ities boom that underpinned Peru’s to live for a week like he does. You won’t After President Ollanta Humala, are threatening to turn a country that was once among the
economy was starting to kick in. last.” regarded by many as an ineffective pres- most vibrant global growth stories into the zombie econ-
Some political critics have taken aim Observers believe close allies like Mr ident, Mr Kuczynski said: “What we can omy of the emerging world.
at his origins. Former president Alan Thorne and former trade minister Mer- show Peruvians that is new, is that I
García, who ran again on Sunday, once cedes Aráoz, who helped steer negotia- always delivered.” joe.leahy@ft.com
Patriarch’s commemoration
Singapore’s first family feud on Facebook over ‘dynasty’ claims
JEEVAN VASAGAR — SINGAPORE since been taken down. “If the power The proposed column contrasted the tics. Heng Swee Keat, the finance minis-
that be wants to establish a dynasty, tributes paid to Mao a year after he died ter, is tipped as the prime minister’s
A public feud has erupted in Singa-
LKY’s daughter will not allow with the 50th anniversary commemora- likely successor.
pore’s first family, with the prime min-
LKY’s name to be sullied by a dishonour- tion of Sir Winston Churchill’s funeral. Eugene Tan, a political analyst and
ister forced to issue a denial after his
able son.” In a response, Mr Lee said She wrote: “Papa was dead set against associate professor at Singapore Man-
NOVEMBER 7 2015
sister accused him of abusing his politi-
he was “deeply saddened” by her a personality cult and any hint of crony- agement University, said the charge that
cal power over anniversary commemo-
claims. ism. If he was forced to choose one form Mr Lee was attempting to manipulate
rations for the death of Lee Kuan Yew,
“The accusations are completely of commemoration, Papa would have the anniversary appeared unfounded.
the city state’s founding father.
untrue,” he said. “The idea that I should objected the less if the commemoration “I think the first anniversary is always
The spat, which has played out on Face- wish to establish a dynasty makes even resembled that held for Winston very special,” he said, “and the fairly
ROLLING IN THE DEEP
book, follows a weekend post in which less sense,” he continued. “Meritocracy Churchill.” spontaneous turnout by Singaporeans
21/10/2015 10:51
Lee Wei Ling accused Prime Minister is a fundamental value of our society, Observers of Singapore’s politics see does reflect the average Singaporean’s
Lee Hsien Loong of being a “dishonoura- and neither I, the [People’s Action little evidence that Mr Lee is attempting view that we ought to remember the
ble son” and of seeking to establish a party] nor the Singapore public would to establish a dynasty. None of his chil- pioneering generation.”
political dynasty. tolerate any such attempt.” dren has expressed an interest in poli- One indication of the late patriarch’s
The rift is a rare display of acrimony Lee Kuan Yew, who died a year ago own views about commemoration came
among the city state’s elite — censorship aged 91, is credited with transforming a in his will, in which he specified that his
laws impose tight controls on the press, tiny resource-poor postcolonial state family home should be demolished
while defamation actions have been into one of the world’s safest and most rather than turned into a memorial.
used to stifle critics, human rights prosperous nations. More than 450,000 The Straits Times said Dr Lee had
groups say. Singaporeans queued to file past his posted the proposed article online while
The legacy of the country’s revered body when it lay in state before last discussions were still taking place about
patriarch, who governed for more than year’s funeral. editorial changes, and accused the
three decades and was instrumental in In a further twist to the affair, Dr Lee prime minister’s sister of plagiarism.
Singapore’s economic transformation, has accused the Straits Times, the “Given the plagiarism it contained,
is a particularly sensitive matter. island’s most widely read English news- there was no question of our publishing
“HL has no qualms about abusing his paper, of censoring a column she wrote her version of the article,” Ivan Fernan-
power to [have] a commemoration just that compared the commemoration of dez, the editor who dealt with Dr Lee’s
one year after LKY died”, said Dr Lee, a her father to the veneration of Mao Lee Hsien Loong: accused by his column, wrote in an article published on
neurosurgeon, in comments that have Zedong in China. sister of being a ‘dishonourable son’ Saturday.
Tuesday 12 April 2016 ★ FINANCIAL TIMES 3

INTERNATIONAL

Criticism of negative rates mounts as Bundesbank

politicians urged to intervene more
Unconventional policy has helped lift economies but critics see it as reaching limit of its success
FT REPORTERS
In less than two years, negative interest
rates have gone from being a subject of
fireside speculation to a reality for
nearly a quarter of the global economy.
But as the world’s central bankers
gather in Washington against a back-
drop of lacklustre growth, there is a
developing consensus that what until
recently was a highly unconventional
policy has been a qualified success, but
is already reaching its limit.
In a blog on Sunday, one of the Inter-
national Monetary Fund’s top officials
concluded that while negative rates had
been helpful “there are limits on how far
and for how long negative policy rates
can go”.
The idea was that cutting rates below
zero would encourage banks to lend
more and deliver further stimulus to
stagnant economies.
That need is still there. The IMF is
widely expected to further revise down
its forecast for global growth this week,
as the combination of a slowdown in
China, the failure of cheap oil to boost
expansion and a slowing of productivity
growth has darkened the outlook for
advanced and emerging economies.
However, with criticism of negative
rates growing, central bankers are push-
ing more than ever for governments to
take up some of the strain and either
introduce more interventionist fiscal
policies or enact structural reforms. The
battle lines for this week’s meetings in
Washington have been drawn, with crit-
ics increasingly outspoken.
The banks
The big concern is that negative interest
rates will destroy banks’ profitability
and if passed on to retail investors
would force consumers to hoard cash.
Most bankers still cannot counte-
nance going down the nuclear route of
charging savers for deposits, but they
cite other options they can use to fend
off what they see as a very real threat to
their profits. “It’s more likely that if neg-
ative rates [persist] . . . you’ll see more
‘relationship fees’,” said one senior
banker. “I don’t think you’ll ever see a
statement with a charge for deposits.”
BlackRock’s Larry Fink was the latest
voice to warn yesterday that low rates
were preventing savers getting the
returns they needed, potentially forcing
consumers to save more rather than
spend and stimulate the economy.
A number of German politicians, led
by finance minister Wolfgang Schäuble,
have accused the European Central
Bank of robbing citizens of their retire-
‘There are
Share of world economy with negative
interest rates
% of global GDP of economies with a negative central bank
interest rate*
25
20
15
10
5 in China’s slowdown — and that it only
0 -2
2009 10 11 12 13 14 15 16
* Eurozone, Japan, Switzerland, Sweden, Denmark
Source: FT research
While everyone can cut rates, not all
currencies can weaken. Bank of Eng-
land governor Mark Carney has been
outspoken in his belief that if retail cus-
tomers are protected, negative rates
mainly target exchange rates. He argues
that while this might be an attractive
option for individual countries to boost
activity, if adopted by the world as a
whole it is a “zero sum game” and would
essentially export excess saving and
transport demand weakness elsewhere.
Advocates still see benefits
mant they can cut rates again if the
region’s economy deteriorates. Officials
here have also hit back at banks’ com-
plaints, saying lenders in the single cur-
rency area needed to rethink their busi-
ness models and stop using the central
bank as a scapegoat.
The Bank of Japan is convinced Janu-
ary’s move to rates of minus 0.1 per cent
is working, despite the fact the first few
months of the policy have been rough.
Its clearest success has been in pushing
down Japan’s already low yield curve,
with bond yields out to 10 years turning
negative. “The policy’s effects are show-
ing in falling benchmark lending rates
and mortgage rates,” BoJ governor
Haruhiko Kuroda said recently. “They
will eventually spread to the real econ-
omy and consumer prices, and people
will see the policy in a positive light.”
In Sweden the Riksbank has warned
that it could cut rates deeper into nega-
tive territory as it battles to improve the
inflation outlook despite scepticism of
what impact it will have given that rates
are already at minus 0.5 per cent and the
economy is booming.
Weakening currencies
A cheaper currency remains an impor-
tant tool for central banks in sparking
domestic demand. Lowering the value
Central bank rates of the currency should raise inflation by
Per cent increasing the cost of imports.
While the euro initially weakened,
6
Eurozone (ECB deposit rate) recent moves have had little impact
Japan (BoJ policy rate) since the US Federal Reserve signalled it
Sweden (deposit rate) 4 would slow the pace of its rate rises. The
Switzerland (3-month target rate) yen hit new highs last week, risking
Denmark (deposit rate) undermining the help Abenomics has
2 given to exports and company profits.
But the BoJ thinks the main reasons
0 for the yen’s rise lie elsewhere — notably
underlines the wisdom of easing policy.
Reporting by Emily Cadman, Claire Jones,
2008 09 10 11 12 13 14 15 16 Robin Harding, Laura Noonan and Richard
Milne
Editorial Comment page 8
A man walks
through Tokyo’s
banking district.
The Bank
of Japan is
convinced that
its move to
minus rates is
working, despite
the fact the first
few months of
the policy have
been rough
Thomas Peter /Reuters
Berlin average
bond yields
hit zero for
first time as
losses loom
THOMAS HALE — LONDON
The average yield across German gov-
ernment bonds, known as the Umlau-
frendite, fell to zero for the first time in
its history yesterday.
The measure, which is published once
daily by the Bundesbank, takes an aver-
age across the outstanding market. It
fell to zero from 0.01 per cent last Fri-
day. The new average, perched on the
precipice of negativity, reflects broader
shifts across European government
bond markets.
Negative bond yields — where inves-
tors hold securities that guarantee a loss
if held to maturity — have become a big
theme across the continent in an era of
central bank asset purchases.
Yields on German government bonds
have fallen this year on the back of fur-
ther interest rate cuts and asset pur-
chases from the European Central Bank.
German bonds with a maturity of up
to nine years are now trading at negative
yields, with the benchmark 10-year
bond edging closer to zero. It is currently
yielding 0.11 per cent.
The negative yields phenomenon has
also spread to other bond markets,
including covered bonds — a market for
bank funding developed in 18th century
Prussia.
Last month German bank Berlin Hyp
sold the first non-government bond that
came with a negative yield at issuance.
In secondary markets, some non-
government bonds are also trading at
negative yields. The ECB’s announce-
ment that it will begin buying invest-
ment-grade corporate bonds has driven
yields lower, and raised questions over
oddities that might emerge in that mar-
ket. Volatility across global markets in
the first quarter of the year has pushed
investors towards low-yielding, low-risk
asset classes, such as government debt.
Markets pages 20-22

ment income. The ECB believes the combination of

Difficulties of exit
In the wake of the financial crisis, Den-
mark’s Nationalbanken was the first to
go negative in 2012 to defend a long-
standing peg between the krone and the
euro. In January it started to try to raise
its deposit rate back from a record low of
0.75 per cent.
But the easing by the European Cen-
tral Bank has limited the Danish central
bank’s ability to bring rates back above
zero again, for fear of big capital inflows.
limits on negative rates and its asset-buying pro-
how far gramme has helped to lower borrowing
rates for consumers and businesses
and for across the eurozone.
how long It became the first big player to exper-
iment with negative rates in the sum-
negative mer of 2014 when it began to charge
policy lenders a levy of 0.1 per cent a year on
deposits parked in its coffers. Since then
rates it has cut rates another three times,
can go’ most recently last month, and the
deposit rate is now minus 0.4 per cent.
IMF official Eurozone central bankers are ada-

Aggressive measures

China urges debt-for-equity swaps in move

to capitalise on positive growth signals
TOM MITCHELL AND YUAN YANG
BEIJING
China’s premier is pushing for debt-for-
equity swaps and more aggressive
measures to reduce the burden on
struggling local governments as Beijing
tries to capitalise on improved indica-
tions for economic growth in the first
quarter.
Premier Li Keqiang said yesterday that
some localities would be allowed to
reduce contributions to social security
funds while all central budgetary invest-
ment would be allocated in the first half.
“Policy measures taken so far have
paid off. At the same time, a lot remains
to be done to ensure steady growth,
advance reform and achieve further
restructuring of the economy,” Mr Li
said at a meeting of provincial leaders.
The remarks were published after
data released yesterday showed China’s
producer prices remain deep in defla-
tion. Last month’s producer prices
index, an important gauge of the woes
plaguing China’s industrial and export
sectors, dropped 4.3 per cent, easing
only slightly from a 4.9 per cent drop in
February. Consumer prices rose 2.3 per
cent, largely on the back of a sharp jump
in pork prices. Non-food inflation
remained modest at 1 per cent.
Chinese officials have been scram-
bling to paint a more optimistic picture
of the economy. While recent data sug-
gest there is some stabilisation, interna-
tional jitters remain over the slowdown
and the extent of the government’s
efforts to rebalance towards consump-
tion. A fuller picture is set to emerge this
week, with the release of trade data
tomorrow, followed by first quarter eco-
nomic growth numbers on Friday.
Despite the more positive March fig-
ure, PPI remains deep in deflation,
according to Zhou Hao, economist with
Commerzbank. “From the Chinese
authorities’ perspective, it is far more
important to get rid of [PPI] deflation.”
China’s PPI has been in negative terri-
Li Keqiang: ‘A lot remains to be done
to ensure steady growth’
tory since March 2012, a symptom of
heavy industrial spending courtesy of
Beijing’s Rmb4tn ($618bn) stimulus to
counteract the effects of the global
financial crisis. The subsequent price
deflation in sectors such as steel has rip-
pled around the globe, adding to ten-
sions between Beijing and its two largest
trading partners, the EU and the US.
Blowback from lower commodity
prices compounded the trend, since
industrial input costs account for three-
quarters of the country’s PPI. But as a
large importer of oil and iron ore, China
also benefited from the end of the com-
modity boom as large trade surpluses
helped bolster flagging economic
growth.
“Today’s data suggest [China’s central
bank] will be less aggressive in mone-
tary easing,” said analysts at ANZ
Research, who are now predicting just
one more cut this year in the level of
reserves banks are required to hold.
ANZ had previously expected three
additional cuts in the reserve require-
ment ratio by the end of the year.
China’s benchmark stock index, the
CSI 300, rose more than 1 per cent on the
inflation data. The renminbi also
strengthened against the dollar. It has
risen almost 2 per cent against the
greenback over the past two months.
4 ★ FINANCIAL TIMES Tuesday 12 April 2016

INTERNATIONAL

Offshore havens UK

France and Germany call for tax blacklist Cameron

Proposals come ahead
of Brussels’ response to
Panama Papers leak
STEFAN WAGSTYL — BERLIN
ANNE-SYLVAINE CHASSANY — PARIS
Paris and Berlin are pressing industrial-
ised nations to pull together a common
blacklist of territories that breach trans-
parency standards, in the toughest gov-
ernment responses yet to the Panama
Papers affair.
Wolfgang Schäuble, Germany’s
finance minister, and Michel Sapin, his
French counterpart, also emphasised
the need for sharing and publishing the
names of the ultimate beneficiaries of
all corporate structures, including shell
companies, trusts and foundations that
can offer anonymity to their users.
The German and French govern-
ments launched their plans in separate
initiatives yesterday as Brussels pre-
pares to announce proposals this week
to force large EU-based companies to
disclose their annual financial results on
a country-by-country basis, including
for offshore jurisdictions.
“We need full transparency world-
wide,” Mr Schäuble said as he released a
plan entitled “Fighting effectively
against tax cheating, tax evasion and
money laundering.”
Both Mr Schäuble and Mr Sapin, who
have led the way on previous global
financial transparency projects, such as
the automatic exchange of information
between banks, want to seize the oppor-
tunity created by the Panama Papers
leak to force through further reforms.
Paris put Panama back on its own black-
list last week after removing it in 2012
Bad bank. Support scheme
and plans in the coming weeks to pub-
lish a list of ultimate beneficiaries of
trusts and foundations with assets or
beneficiaries in France.
The moves come in the wake of the
embarrassing revelations last week
‘It will only work if we find
an international and
possibly a global solution’
showing the broad use of offshore enti-
ties by the world’s rich and powerful.
Offshore jurisdictions are expected to
rank high on the agenda of the twice-
yearly meeting of the International
Monetary Fund and World Bank in
Washington later this week.
Martin Jäger, Mr Schäuble’s spokes-
man, said that while individual coun-
tries — including Germany and France
— already had the right to blacklist
countries, the approach would succeed
only with international co-operation.
“It will only work if we find an interna-
tional and if possible a global solution,”
he said. Countries that condoned “seri-
ous criminality” could be “cut off from
cash flows” through the Swift interna-
tional banking network, he said.
The ministry’s blunt language signals
Germany’s determination in building on
two earlier EU initiatives — the 2014
international agreement on banks auto-
matically exchanging information,
which has been accepted by nearly 100
countries and comes into force next year;
and the G20 pact on curtailing base ero-
sion profit sharing (BEPS), which are
methods used by multinational compa-
nies to cut their tax bills by switching
profitstolow-taxjurisdictions.
In Germany, banks have given strong
backing to Mr Schäuble’s plans. Hans-
Walter Peters, the incoming chairman
of the Association of German Banks and
head of Hamburg-based Berenberg
Bank, said misconduct must lead to
sanctions. “Money laundering and tax
evasion are absolutely unacceptable,”
he said.
Jürgen Fitschen, the outgoing chair-
man and co-chief of Deutsche Bank,
welcomed the finance minister’s plans
for an international blacklist of tax
havens, saying this would not only be
good for the authorities but also for
banks.
Mr Fitschen added that the Panama
revelations were no surprise and that
Panama was not alone. In Europe too,
there was “homework to be done”, he
said, citing the example of the Isle of
Man as a European tax haven.
hits back at
critics over
avoidance
revelations
JIM PICKARD AND HENRY MANCE
LONDON
David Cameron moved to deflect dam-
aging scrutiny of his private finances
yesterday by claiming that the UK’s
Trades Union Congress, leftwing local
councils and the left-leaning Guardian
newspaper all had overseas invest-
ments similar to those he has been crit-
icised for benefiting from.
“This is not to criticise what they do. It is
to make the point that this is an entirely
standard practice and it is not to avoid
tax,” the prime minister told the House
of Commons.
Mr Cameron was trying to repair the
damage after days of criticism of his tax
affairs and a Panama-incorporated fund
set up by his father. Speaking in the

Italy bailout fund faces EU scrutiny
Vital goal for Rome is to
sidestep rules attaching tough
conditions for public backing
JIM BRUNSDEN — BRUSSELS
RACHEL SANDERSON — MILAN
An Italian plan to create a new bailout
fund to stabilise the country’s creaking
lenders will face close scrutiny from EU
regulators, who have already held up
previous efforts by Rome to shore up the
sector.
Pier Carlo Padoan, Italy’s finance
minister, met bank chiefs yesterday to
agree the fine print of a plan for a so-
called bad bank. In broad terms it would
involve the creation of an industry-led
fund that would enable Italy’s healthier
banks, insurers and asset managers to
assist lenders in difficulty by buying up
their shares and non-performing loans.
Officials acknowledge that a key goal
for Italy is to sidestep EU rules that
attach tough conditions to any public
support provided to banks, and so avoid
a repeat of the protracted wrangling
with Brussels that held up a previous
bank-support scheme put in place ear-
lier this year.
According to people briefed on the
matter, the European Commission is yet
to have any substantial discussion with
Rome over the details of the new
scheme.
The crucial issue for Margrethe
Vestager, EU competition chief, will be
whether any element of the Italian plan
constitutes state aid. If it does, then EU
rules kick in requiring drastic measures
of any bank that receives support.
Among those is a new requirement
that losses be imposed on bank credi-
tors — potentially even senior bond-
holders — before any state aid could be
received. Such a “bail in” of creditors is
politically toxic in Italy, and something
prime minister Matteo Renzi has been
trying to avoid.
In a note yesterday, Wolfango Piccoli
of Teneo Intelligence, said the latest Ital-
ian plan “confirms, once more” that
Italy “lacks a comprehensive and holis-
tic strategy on how to support Italy’s
banking sector”. He added: “Moreover,
it remains unclear whether the Euro-
pean Commission will be willing to play
along with the latest measures impro-
vised by the Renzi administration.”
The EU’s interpretation of what
Italy’s finance amounts to state aid can be broad.
minister Pier According to current guidance from
Carlo Padoan Brussels, even a private sector-support
arrives at the scheme can count as state aid if the gov-
Ambrosetti ernment acts as custodian over the
Forum in funds, and if the decision on when to use
Cernobbio on them “is imputable to the state”.
Saturday. He In Italy’s new bailout plan, the major-
met bank chiefs ity of funds are expected to come from
yesterday to banks, banking foundations, insurance
agree the fine and some pension funds with the Treas-
print of a plan ury-owned Cassa Depositi e Prestiti only
for a bad bank a minor participant, if at all, say bank-
Alessia Pierdomenico/
Bloomberg
ers. Thus, Rome is not expected to check
with Ms Vestager’s team before
announcing the deal, although this does
not prevent Brussels from subsequently
asking questions.
The rapid establishment of the new
system is essential for Rome, which has
been straining to restore public confi-
dence to banks that have been plagued
by concerns over their stockpiles of
non-performing loans. Shares in major
banks have almost halved in value this
year. The plan “has been diminished
and diminished and diminished” in
order to try to avoid confronting state
aid rules and due to tension among
bankers about the bailout of rivals, said
a senior financier with knowledge of the
talks.
While Italy’s reliance on the private
sector to shore up troubled banks may
help it steer clear of EU state aid rules,
this approach in turn throws up its own
problems. It risks sapping the strength
of financial companies called on to pro-
vide funds.
It also makes them more intercon-
nected — something that is at odds with
one of banking regulators’ key goals
since the financial turmoil of 2008: to
discourage banks for holding too much
of each other’s debt or equity in a bid to
prevent connections that could lead to
massive losses across the financial sys-
tem should one major institution fail.
Silvia Merler, an affiliate fellow at the
Bruegel think-tank, said “the idea of
having a bank-funded fund buying
unsold banks’ shares is dangerous. It
would increase the domestic intercon-
nection in the Italian banking system
and this could have potentially very
serious systemic consequences in a sec-
tor that . . . remains potentially weak.”
Senior Italian bankers admit both to
scepticism about the plans passing mus-
ter with Brussels and to tension among
Italy’s stronger banks about being asked
by the state to cough up funds to help
weaker competitors.
‘The idea of Carlo Messina, chief executive of
Intesa Sanpaolo, Italy’s best-capitalised
having a bank, has baulked at the idea of a sys-
bank- tem-wide support plan, say people with
knowledge of the talks. But some of his
funded rivals disagree. “Messina will realise he
fund has to be there because in the end, if the
system fails, it will take Intesa down
buying too,” says the CEO of another Milan-
unsold based bank.
Another Italian bank chief agreed,
banks’ saying: “Everyone will be there [in the
shares is systemic solution] in the end.”
Additional reporting by Alex Barker in
dangerous’ Brussels
Commons for the first time since the
furore broke over the “Panama Papers”
leak of legal documents last week —
published in the Guardian — the prime
minister said he accepted criticism for
not reacting more quickly.
The leak included details of Blair-
more, his father’s offshore fund, which
Mr Cameron owned shares in until
2010. The issue has undermined the
prime minister’s claim to be leading
international efforts to clamp down on
tax avoidance and risks spilling over
into his campaign to persuade voters to
remain in the EU in June’s referendum
on UK membership.
Mr Cameron said his father’s fund was
registered with the UK tax authorities
“from the beginning” and submitted
returns every year. “This is an entirely
standard practice and is not to avoid
tax,” he added.
The government should differentiate
between schemes designed to artifi-
cially reduce tax and those designed to
encourage investment, he said.
The prime minister has also sought to
get back on the front foot by publishing
his tax returns covering the past six
years. Yesterday he persuaded George
Osborne, the chancellor, to publish his
tax details, albeit for only the last finan-
cial year. That showed a total taxable
income of £198,738. The chancellor paid
£72,210 income tax. But Mr Cameron
has ruled out making other ministers or
MPs disclose their taxes.
Jeremy Corbyn, the Labour leader
who also published his tax returns yes-
terday, said the UK remained “at the
heart of the global tax avoidance indus-
try”, and that the prime minister still
did not appreciate “the anger that is out
there over this injustice”.
He questioned why the prime minis-
ter had not disclosed his offshore hold-
ings in the register of parliamentary
members’ interest, and why, in 2013,
the government had opposed G8 moves
to extend transparency of beneficial
ownership to offshore trusts.
Mr Cameron replied he had complied
with all relevant rules. The UK had
opposed action on offshore trusts
because it would have scuppered other
efforts on beneficial ownership.
The prime minister announced fur-
ther measures to tackle tax avoidance.
He said more UK crown dependencies
and overseas territories would provide
UK law enforcement officers with fur-
ther information about the beneficial
ownership of companies. He also
repeated a promise to create a new
criminal offence for companies that fail
to stop staff assisting with tax evasion.
Janan Ganesh page 9

Visa dispute Turkey

Brussels considers entry rules for US visitors
DUNCAN ROBINSON — BRUSSELS
A long-simmering row between Brus-
sels and Washington over visas is set to
break into the open today when the
European Commission considers
whether to force US travellers to apply
for a visa before travelling to Europe.
Commissioners will meet to discuss
what steps, if any, to take against the US
if Washington ignores Brussels’ demand
for a visa waiver to apply for all EU citi-
zens.
Officials involved in the negotiations
— which have dragged on for nearly a
decade — are hopeful that a diplomatic
fight can be avoided at a time when rela-
tions between the EU and the US are
already strained by issues of trade, tax
and even China.
Although most EU citizens are able to
travel to the US without a proper visa,
Washington has stricter entry rules for
visitors from some central and eastern
member states.
People from Poland, Croatia, Cyprus,
Bulgaria and Romania have to get a visa
before travelling to the US on holiday or
business. It is these countries that are
pushing for Brussels to take tough steps
against Washington unless the US
changes its ways, according to officials.
The EU demands that its member
states “act in common” when it comes to
visa policy, especially when a country
“subjects citizens to differing treat-
ment”. In 2014, the US was given two
years to offer all EU citizens the chance
to benefit from its visa waiver pro-
gramme, which is used by 30 European
countries.
“The deadline concerns the needs for
the college [of commissioners] to take
stock of the situation,” said a European
Commission spokesperson. “It will dis-
cuss the economic impact, the political
impact and the impact on external rela-
tions with these countries. Then they
will discuss the next possible steps.”
National capitals and the European
Parliament would have the final say on
whether to suspend the visa waiver pro-
gramme enjoyed by US visitors. Such a
decision would not apply to Britain and
Ireland, which have opt-outs from the
EU’s visa policy. US officials, however,
insist that countries such as Romania
simply have not met the requirements
for its visa waiver programme.
Negotiations have been complicated
by new US rules dictating that all visi-
tors who have travelled to Iran, Iraq,
Sudan or Syria have to apply for a visa —
a move that also angered Brussels.
The fight over visas is just one exam-
ple of the increasingly tetchy transatlan-
tic relationship. Since the start of 2016,
the two have clashed on everything
from the tax treatment of big US tech-
nology groups in Europe to whether
China should be treated as a “market
economy”.
These disagreements come as both
sides are negotiating a free-trade deal
called the Transatlantic Trade and
Investment Partnership.
Canada also faces the prospect of
being dragged into the argument due to
Ottawa’s insistence that citizens from
Romania and Bulgaria apply for visas
before visiting.
Central bank nomination calms investor fears
PIOTR ZALEWSKI — ISTANBUL
Turkey’s cabinet eased investor con-
cerns about political pressure on the
central bank by naming Murat
Cetinkaya, deputy governor, to take
over the helm of the institution.
The appointment of a central bank
insider to succeed Erdem Basci, whose
term ends on April 19, helped lift the
Turkish lira by 0.65 per cent against the
US dollar. Investors had feared that
President Recep Tayyip Erdogan, who
had repeatedly clashed with Mr Basci
about increases in interest rates, might
have installed a political loyalist.
“What is important for us is experi-
ence and merit,” Mehmet Simsek, the
country’s deputy prime minister, said
hours before the announcement,
explaining the choice of Mr Basci’s suc-
cessor. “That’s why it will be [someone]
from within the institution.”
The Turkish leader, having taken up
the unorthodox view that high interest
rates cause inflation, harangued the
bank for failing to cut rates. He came
close last spring to accusing Mr Basci of
sedition. “Anyone who defends [high
rates] is at the beck and call of the inter-
est-rate lobby,” he said. “This is treason
against this nation.”
Over the past year, Mr Erdogan has
campaigned in favour of constitutional
changes that would give him new execu-
Erdem Basci, right,
had repeatedly
clashed with Recep
Tayyip Erdogan
about increases in
interest rates
tive powers, something critics fear could
further erode the bank’s independence.
Mr Cetinkaya has been deputy gover-
nor since 2012. He earlier worked as a
board member at Halkbank, a state-
owned bank, and as a deputy director at
Kuveyt Turk, an Islamic lender.
“I think the markets will appreciate
an internal candidate as suggesting the
least change, rather than an uncertain
outside candidate, and perhaps some-
one less orthodox and closer to the pres-
ident,” said Timothy Ash at Nomura in
emailed comments.
Mr Cetinkaya was a “compromise
candidate”, he said, a sign “that the pres-
idency and government are working
together on this — one less potential hic-
cup. A battle over the nomination would
have been very market-negative”.
Mr Cetinkaya’s appointment remains
subject to Mr Erdogan’s approval and
some analysts warned that the new gov-
ernor could prove less robust in stand-
ing up to the president’s pressure.
“[He] is not as experienced as his
[predecessors] in the central bank to
ward off political pressure,” said Ozlem
Derici, chief economist at Deniz Invest.
“Hence, we should expect him
to . . . follow a more pro-growth mone-
tary policy approach. [But] we do not
expect him to lead premature rate cuts.”
As news of the appointment emerged,
Mr Erdogan called on commercial
banks to free up cheap credit. “Our
banks need to reduce the interest rate
on consumer loans,” he said.
Tuesday 12 April 2016 ★ FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Tuesday 12 April 2016

INTERNATIONAL

White House race. Republicans Booming economy

Swedish prime minister

Trump struggles to baffled by public gloom
widen his support RICHARD MILNE — STOCKHOLM

Sweden’s economy may be booming

Frontrunner faces conundrum
as he performs worst of three
candidates against Clinton
SAM FLEMING AND DEMETRI
SEVASTOPULO — WASHINGTON
Donald Trump caused a stir earlier in
the presidential campaign by saying
that “I love the poorly educated”, in a
comment that reflected his strong sup-
port from Republican voters with no
more than a high-school education.
While Mr Trump remains the clear
favourite to win the Republican primary
in his home state of New York on April
19, an analysis of his loss in Wisconsin
last week underscores his struggle
expanding his support beyond less-edu-
cated and lower-income voters, a trend
that would hurt his chances in the gen-
eral election in November.
According to an analysis of Wisconsin
conducted for the Financial Times by
the Economic Innovation Group, a
Washington-based research group, Mr
Trump won 21 out of the 25 counties
with the lowest high-school attainment
and 20 of the 25 counties with the lowest
job growth between 2010 and 2013.
Ted Cruz, the Texas senator, clinched
the state, taking a greater share of coun-
ties with better-educated and more
prosperous voters.
“If Mr Trump is hoping to broaden his
appeal, he has to reach out to folks who
go beyond these demographics and
appeal to people who are not as angry
about the economy and sceptical of its
institutions,” said John Lettieri, co-
founder of EIG. “He has not proven he is
able to do that consistently, as these
Wisconsin findings show.”
The figures highlight the conundrum
for Mr Trump who, despite being the
party’s frontrunner, performs worst in
potential matchups against Hillary Clin-
ton, the favourite for the Democratic
nomination. According to an average of
polls compiled by Real Clear Politics,
she would beat the New York business-
man by 11 points but would only nar-
rowly defeat Mr Cruz. Ohio governor
John Kasich would beat her by 7 points,
according to recent polls.
The Republican establishment has
started to rally round Mr Cruz as it
believes Mr Trump would lose badly to
Mrs Clinton because of his xenophobic
and misogynous rhetoric. More impor-
tantly, they think he would do lasting
damage to the party, which had been
trying to appeal to a broader, more
diverse swath of the electorate.
In Wisconsin, Mr Cruz won nine of the
10 counties with the highest median
household income, while Mr Trump
won the 10 counties with the lowest
median income. A separate gauge that
quantifies the amount of economic “dis-
tress” confirms that Mr Trump’s appeal
remains strongest among less well-off
voters. Wisconsin counties that voted
for him on average showed double the
level of economic distress as those that
went for Mr Cruz. Wisconsin has lower
levels of distress than many other states,
which helps explain why Mr Trump
struggled, as was the case in Utah where
he was trounced by Mr Cruz.
Roughly 8 per cent of Wisconsin lives
in a distressed zip code, compared with
Reaching out: 13 per cent in New York and 17 per cent
Donald Trump in Ohio. In both Wisconsin and Ohio,
greets counties that voted for Mr Trump had
supporters after an average median income of about
speaking at a 86 per cent of the figure for the whole
campaign event state. If the same pattern held in New
in Rochester, York, Mr Trump would win 32 of the
New York, Empire State’s counties — including
on Sunday Queens and the Bronx — representing
Jabin Botsford/ Washington
Post/ Getty Images
37 per cent of the state’s population.
According to the latest polls, Mr Trump
has a 33-point lead over Mr Kasich, with
Mr Cruz lagging behind in third place.
The Wisconsin numbers confirm a
broader pattern that has been seen in
the 2016 race, as Mr Trump appeals in
particular to white, working-class vot-
ers who feel left out of the recovery that
the US has seen in the past seven years.
In Ohio, Mr Trump won all of the most
distressed counties, while Mr Kasich,
who claimed the state, won 21 of the 22
best-off counties. The EIG measures dis-
tress by metrics including the preva-
lence of adults with a high-school
degree, vacancy rates and the percent-
age of people below the poverty line.
The figures from Wisconsin and Ohio
underscore the steep climb Mr Trump
will face trying to appeal to independ-
ents and more affluent Republicans if he
ends up winning the nomination. While
he has managed to make greater inroads
among better-off Republicans in some
areas — including winning nine of the
counties with better-educated voters in
Wisconsin — exit polls showed that Mr
Cruz was gaining traction among less-
‘He has to
appeal to
well-educated voters in Wisconsin, sug-
gesting he managed to appeal to parts of
Mr Trump’s core constituency.
people who
are not as
Mr Cruz also won across all income
groups, including lower-income voters
who have been a cornerstone of Mr
angry Trump’s support.
Mr Trump’s loss in Wisconsin has
about the increased the chances that he will fail to
economy secure the 1,237 delegates needed to
avoid a contested Republican conven-
and tion in Cleveland. He is hoping for a
sceptical strong result in New York, which awards
95 delegates, to deflect some of the nega-
of its tive attention surrounding his cam-
institutions’ paign in recent weeks.
and its authorities may have stemmed
a massive influx of refugees, but prime
minister Stefan Lofven is getting little
of the credit.
Sweden, says Mr Lofven, is a country
where “it is as if everything is going in
the wrong direction”.
The prime minister’s statement is all
the more extraordinary as the economy
is rattling along at 4.5 per cent while
unemployment is at its lowest since the
financial crisis.
But Mr Lofven’s centre-left govern-
ment remains unpopular amid the fall-
out from a refugee crisis that saw a
country of 9.6m people welcome
163,000 asylum seekers in 2015. He says
dealing with the biggest refugee crisis
since the second world war is “surreal”.
He adds: “The more surreal thing is
that all the numbers are going in the
right direction, but the picture the pub-
lic have is that the country is now going
in the wrong direction. It’s not only a
question about if they are afraid of the
refugee crisis; it’s as if everything is
going in the wrong direction.”
The latest opinion polls put Mr
Lofven’s leftwing bloc almost 5 percent-
age points behind the centre-right bloc.
The Social Democrat-led bloc is polling
at 38.5 per cent.
The prime minister is convinced this
is because “everything has been over-
shadowed” by the migrant disaster.
The past six months have been trau-
matic for the Swedish left. A surge in the
number of asylum seekers in the
autumn placed Sweden’s public services
and welfare system under severe strain.
Mr Lofven says the 80,000 asylum seek-
ers who arrived in a two-month period
in Sweden were the equivalent of 25m
entering the entire EU in one year.
In response, Mr Lofven announced a
massive policy U-turn, downgrading
Europe’s most generous set of immigra-
tion policies to the European minimum.
His deputy prime minister was in tears
over the move, while the minister
implementing the policy said it was the
toughest thing he had had to do in more
than 20 years in politics.
In terms of the numbers of asylum
seekers entering Sweden, the policy
seems to be working. Following the
crackdown — combined with strict
identity checks on trains, boats and
buses coming into Sweden from Den-
mark — just 500 asylum seekers arrived
in Sweden last week compared with a
peak of almost 10,000 per week.
The focus in Swedish politics is now
turning to integration. Foreigners are
Spy agency
North Korea defection one of
most significant since 1953
SONG JUNG-A — SEOUL
A colonel working for North Korea’s
spy agency has fled to South Korea,
Seoul revealed yesterday — one of the
most significant defections since the
1953 armistice that ended the Korean
war.
The colonel, who defected late last year,
worked for North Korea’s General
Reconnaissance Bureau, its primary
espionage agency, the defence and unifi-
2.6 times more likely to be out of work
than natives, the second-highest ratio of
developed countries, according to the
OECD group of mainly rich nations. And
after 10 years in Sweden, only half of
asylum seekers have a job.
That disappointing employment fig-
ure has been seized upon by the centre-
right opposition. Anna Kinberg Batra,
leader of the Moderates, the biggest
rightwing party, says: “We have people
out of society for a long time. We have to
change that.”
The three other centre-right parties
all want to introduce a lower minimum
wage to help immigrants get a job. But
Ms Batra prefers a new jobs contract
that would allow immigrants to study
Swedish during almost half their work-
ing hours.
Mr Lofven, a former trade union
leader, is also trying to speed up integra-
tion. He wants asylum seekers to start
learning Swedish while they wait for
Stefan Lofven: ‘surreal thing is all the
numbers are going in right direction’
their claims to be processed; and to
accept overseas qualifications.
For all the domestic focus, Mr Lofven
is also deeply concerned about events in
Europe. The first problem is the refugee
crisis “because we haven’t proved our-
selves capable of solving this situation”.
A second dilemma is a potential UK
exit from the EU. “As a union, we would
be weaker. We are not in a position now
to divide ourselves in a global economy
with India, with China and the United
States on the other side. In that position,
to suddenly divide and split up is going
to weaken us . . . It would be very, very
bad,” he says.
A rare bit of good news for both Mr
Lofven and Ms Batra is a fall in the polls
for the anti-immigration Sweden Demo-
crats. From a high point of about 25 per
cent, the party — which Mr Lofven calls
neo-fascist owing to its roots in the neo-
Nazi movement — is now polling at
about 15 per cent. Many credit both the
tougher policies of Mr Lofven and the
harsher rhetoric of the centre-right on
immigration for the decline.
tic political purposes, ahead of South
Korea’s parliamentary election tomor-
row. The Minjoo party yesterday
accused the government of trying to
influence the outcome by getting con-
servative voters united through the
defection cases.
“The government’s basic principle is
not to reveal defectors’ status in consid-
eration of the disadvantages that the
remaining families will suffer in the
North,” said Cheong Seong-chang, sen-

Golf New choirboy on the block snatches Spieth’s crown and image
MATTHEW ENGEL
Roman emperors returning in triumph
used to have a slave whispering in their
ear: “Remember you are mortal.” Golf-
ers do not need reminding. The game
does the job for them, especially on the
back nine at Augusta.
Thus it was that Jordan Spieth, the
most lustrous golfer of his generation,
found himself on Sunday with a five-
stroke lead over Danny Willett — some-
one hardly anyone in the US had heard
of and not all that many in Britain
either. In the commentary box the
superlatives were being dusted off. Spi-
eth was heading to retain his Masters
title, a feat achieved only by Jack Nick-
laus, Tiger Woods and Sir Nick Faldo. He
is not even 23 yet.
Back in Britain, less committed view-
ers were heading for bed. No one
remembers Masters runners-up. Well,
not normally. After four successive bird-
ies to round off the front nine, Spieth
wobbled a little. But he came to the
short 12th with the title still at his
mercy. Fate, however, was lurking like a
Georgia rattlesnake. His tee shot
bounced back into Rae’s Creek, the US
equivalent of Hellespont.
The penalty drop was even worse: the
champ’s wedge took with it no ordinary
divot, but a chunk of grass described by
observers variously as everything from
the size of a pitcher’s mound to a three-
car garage, and this time the ball
plopped straight in. To add insult to
injury, his fifth found a bunker. He got
down in seven and he was history.
Willett, a couple of holes ahead of
him, just kept playing golf. He won by
three shots, the first British winner in 20
years. Spieth had to share second with
the serial British near-misser Lee West-
wood. Not everyone was shocked.
Willett was a 50-1 chance before the
start, regarded as an outsider but not a
no-hoper. At 28, he is not a prodigy like
Victor and vanquished: Jordan Spieth applauds Danny Willett — Rob Schumacher/USA
Spieth or Rory McIlroy and has not even
made the Ryder Cup team yet.
Still, the former Open champion Dar-
ren Clarke had already marked him out
as a future star and he was well known
enough to the small coterie who watch
obscure tournaments on obscure televi-
sion channels.
But however many tournaments he
wins in the future, he will never have a
fortnight like this: had his baby son not
arrived two weeks early he would not
even have competed here.
Maybe he did not have time enough to
think too much about things, either
after Spieth’s collapse or before the
event. He just went out and hit the ball.
And his victory caused a panic among
the US media corps perhaps not seen
since the Welshman Ian Woosnam won
in 1991. “Where’s Wales?” one journalist
wailed across the press room that day.
“Is it in Scotland?”
Now they had to inquire as to the
whereabouts of Willett’s home: Rother-
ham, arguably the least glamorous town
in Yorkshire, northern England.
But Willett will be a good advert for
the game. He is the son of a vicar and a
maths teacher (how wholesome can you
get?). He even looks like a choirboy.
However, the choirboy role has lately
been hogged by Spieth, who has con-
ducted himself with extraordinary
poise since he burst to stardom here last
year, in counterpoint to his more tem-
pestuous rival McIlroy, who bombed out
on Saturday. “Big picture, this will hurt,”
Spieth admitted afterwards. “The worst
choke ever,” was the phrase being ban-
died around by others.
“Choke” is a cruel word. And in any
case this does not really match Greg
Norman’s self-destruction to hand
Faldo the last British win in 1996.
In golf you have to learn to lose before
you can really learn to win. And if Spieth
did not know that before Sunday he sure
as hell knows now.
cation ministries told reporters, declin-
ing to give further details.
The GRB, headed by hawkish party
secretary Kim Yong-chol, is in charge of
intelligence-gathering and espionage
missions against South Korea.
The agency is widely believed to have
orchestrated deadly cross-border
attacks including the 2010 sinking of a
navy ship and artillery shelling of an
island, which together killed 50 South
Koreans.
North Korea watchers believe the
colonel is the most senior military offi-
cial to have fled North Korea. The high-
est-ranking member of the Pyongyang
regime to have taken asylum in the
South is Hwang Jang-yop, a senior
Workers’ party official who once served
as a tutor to Kim Jong Il, predecessor
and late father of supreme leader Kim
Jong Un. Hwang died in 2010.
News of the colonel’s defection came
three days after the South Korean gov-
ernment announced that 13 North
Koreans working at an overseas restau-
rant had arrived in Seoul last week, the
first mass defection since 2011. The uni-
fication ministry, which is in charge of
inter-Korean relations, also said a senior
North Korean diplomat posted in an
African country had defected with his
family to Seoul last year.
Seoul’s public acknowledgment of
North Korean defections is unusual.
Critics, including those in the main
opposition Minjoo party, say the recent
revelations have been made for domes-
ior researcher at the Sejong Institute.
“But the recent disclosures seem to be
an attempt to influence the upcoming
election by showing the fact that Seoul’s
sanctions against the North are taking
‘Recent disclosures
seem to be an attempt
to influence the
upcoming election’
effect and North Korea’s leadership is
unstable.”
Seoul has adopted an unusually asser-
tive stance towards North Korea since
Pyongyang’s fourth nuclear test in Janu-
ary and a long-range rocket launch in
February.
Last month it imposed its own trade
and financial sanctions on North Korea
and adopted a law seeking to address
the Pyongyang regime’s human rights
abuses. It has also extended its drive
against North Korean revenue streams,
suspending operations at the Kaesong
industrial park and even urging South
Koreans to avoid North Korean restau-
rants abroad.
More than 29,000 North Koreans
have defected to South Korea since the
end of Korean war, including 1,280 last
year. The number has been in decline
since Kim Jong Un strengthened border
security after taking power in late 2011.
However, experts say senior-level defec-
tions have risen.
Tuesday 12 April 2016
The gap is widening between what senior lawyers earn — set to top £1,000 an hour in the UK this year —
and what most companies can afford to pay. Is it evidence that the profession is ripe for ‘Uberisation’?
M
usic companies, travel
agents, newspapers, taxi
drivers. Many sectors
have been ravaged by the
internet, mobile phone
apps and people’s ability to find free
information that they used to pay for.
Revenues have tumbled and old indus-
tries have struggled to find new business
models.
Surgery can now be done by robots, or
performed remotely. Architects use dig-
ital tools to design buildings.
One sector, however, has carried on as
if technology had never been invented:
the law. Lawyers’ working practices
“have not changed much since the time
of Charles Dickens”, say father-and-son
team Richard and Daniel Susskind in
their book, The Future of the Professions.
Lawyers still provide high-cost cus-
tomised advice. The highest-earning
legal partners preside over pyramid-
shaped firms, raking in huge fees while
teams of junior lawyers do the drudge
work of searching for precedents and
drawing up contracts.
Could that be about to change? Many
lawyers sneer at the idea that their work
could ever be done by a website or app.
But many outside the profession, and
some inside, are developing the tools
they think will turn traditional legal
practice upside down.
They have a powerful argument: few
people these days can afford a lawyer.
The cost is prohibitive, says Rose-
mary Martin, group general counsel at
Vodafone. “If we corporations think it’s
expensive, I can’t imagine how small
businesses and individuals manage.”
Many smaller companies are taking
risks. “They’re googling for legal advice.
It would make lawyers’ hair stand on
end,” she says.
Many people are alarmed by the ris-
ing cost of legal advice. “Our system of
justice has become unaffordable to
most,” Lord Thomas, the Lord Chief Jus-
tice of England and Wales, said in his
2015 report to the UK parliament.
£1,000 per hour
The top law firms in the UK and US —
the most advanced and competitive
legal markets — have sharply increased
what they charge. In the mid-1980s,
partners at top London firms charged
between £150 and £175 an hour, accord-
ing to a report by the Centre for Policy
Studies, a think-tank. By 2015, this had
reached £775-£850 an hour, with this
year’s range expected to exceed £1,000.
In the US in 2014, 74 firms enjoyed
profits per partner of more than $1m,
£375-£450 £775-£850
Averagehourly Averagehourly
ratesforpartners
atCityofLondon
ratesforpartners
atCityofLondon
lawfirmsin2003 lawfirmsin2015
with Wachtell, Lipton, Rosen & Katz,
the highest earners, turning in profits
per partner of $5.5m, according to the
journal American Lawyer.
While many see the mismatch
between what top lawyers earn and
what most can afford to pay as a prob-
lem, others see it as an opportunity. The
legal profession, they say, is ripe for dis-
ruption. Cab drivers in London are, like
lawyers, highly trained; mastering “The
Knowledge”, the layout of the city’s
streets, takes several years. But the cab-
bies’ high-quality, high-price service has
been upended by Uber, the app-based
taxi hailing system that has brought a
flood of lower-cost drivers, using satel-
lite navigation, on to the roads.
A similar thing, critics say, will hap-
pen to lawyers.
Dan Jansen is chief executive of Next-
Law Labs, a legal technology company
backed by Dentons, a global law firm.
Mr Jansen, a non-lawyer with a back-
ground in management consultancy
and technology start-ups, jokes that the
Susskinds are being too kind. The prac-
tice of law, he says, has not changed
“since Magna Carta”. What does he see
when he looks at the way lawyers work?
“A wonderful opportunity for reinven-
tion is the polite way to describe it.”
NextLaw is backing legal technology
start-ups. Its first investment was Ross
Intelligence, a Palo Alto-based start-up
launched just over a year ago by Jimoh
Ovbiagele and Andrew Arruda. Ross is
using IBM’s Watson artificial intelli-
gence system to do some of the research
currently done by junior lawyers. The
pair decided to focus first on US bank-
ruptcy law because they thought it was
an area of legal practice that was reces-
sion proof. “Bankruptcy is always
around,” Mr Arruda says.
★ FINANCIAL TIMES
FT BIG READ. TECHNOLOGY
By Michael Skapinker
Breaking the law
‘The How does their system work? Say you
are a small company, Mr Arruda says,
absence of and one of your clients has gone bust.
You suspect there are one or two legal
data in this cases that will help you recover what
marketplace you are owed. Whereas a lawyer would
have to scroll through precedents, possi-
is a real bly using a computerised keyword
search, the Ross system will rifle
surprise. through thousands of documents to find
Retailers what the company wants.
The Ross system is in its infancy, as
and other are most of the products that their
businesses champions hope will transform the legal
business.
have real “It’s pretty early in the game,” says
Mark Harris, San Francisco-based chief
data on executive of Axiom, which claims to be
which to the world’s leading technology-based
provider of legal services, with custom-
make ers that include half of both the FTSE
100 and Fortune 100 companies.
decisions’ Like the majority of his 1,500 Axiom
colleagues, Mr Harris is a lawyer. He
worked for Davis Polk & Wardwell, a
top-tier US firm, in the 1990s. He real-
ised something was wrong when a part-
ner asked him to prepare a client’s bill.
When he added the hours that he had
put in, he realised that the client was
being asked to pay his entire annual sal-
Decision-making
Predictive role of data
models set to expand
One of the most important questions
any client going to court asks a lawyer
is: which way is this case likely to go?
Faced with an expected loss, a client
would be more inclined to settle. More
sure of victory, they would probably
go ahead. The stakes and the costs are
high. Much depends on the lawyer’s
experience and instinct. Could a data-
driven approach work better?
More than a decade ago, a group of
US academics set up a contest:
humans against the machine. Each
ary for a month’s work. “I started getting
obsessed: where is that money going
to?” Apart from the partners’ profits, he
realised, it was going into art that was
hanging on the firm’s walls.
It is not just the clients who were
unhappy with the set-up, he says. So
were many junior lawyers. “They felt
overworked, underpaid and under-ap-
preciated,” he says. In 2000, he and a
friend started Axiom to offer cheaper
legal services to companies, stripping
out cost by having the lawyers work at
clients’ premises, from home or from its
own warehouselike offices. Over the
years, Axiom has increased the use of
technology in serving its clients.
Scaling up
Some use Uber to explain how law is
being disrupted, but Mr Harris prefers
to talk about how aircraft are made.
Orville and Wilbur Wright were arti-
£375-£525 £700-£900
USlawfirms’hourly Hourlyratecharged
ratefornewly byUSlawfirmsin
qualifiedlawyersin Londonfora
Londonin2015 partnerin2015
side would attempt to predict the
decisions of the US Supreme Court in the
2002 term. A group of experts used their
knowledge of the law and of the justices’
behaviour to forecast the outcomes. The
researchers fed data from 628 cases into
their computer model. The results were
startling. The experts correctly predicted
59.1 per cent of the court’s decisions, but
the model got 75 per cent of them right.
In 2014, Daniel Katz and Michael
Bommarito of Michigan State University
and Josh Blackman of South Texas
College of Law, attempted something
more ambitious: seeing whether they
could build a data-driven model that
would correctly predict Supreme Court
verdicts between 1953 and 2013, using
sanal builders of flying machines.
Today’s aircraft are not built by arti-
sans but by industrial manufacturers
led by Airbus and Boeing.
Law is still at the artisan stage, he
says. Lawyers craft individual advice
for clients. The way to bring cost down is
to industrialise much of the process.
Among Axiom’s services are running cli-
ents’ contracts. “We take all their legacy
documents and add structure to that
information. At the core of the technol-
ogy is a data model that links the infor-
mation within and between agree-
ments,” Mr Harris says. “We might look
at renewal dates and cross-selling
opportunities.”
Some products are designed to help
in-house legal departments manage
their work more efficiently. Riverview
Law, a company based in north-west
England, is launching what it calls “vir-
tual assistants”. Corporate in-house law-
yers will be able to use these systems to
identify, on a digital “dashboard”, the
units where problems have occurred,
the risk profile of any case, who is work-
ing on it and how long they take.
Karl Chapman, Riverview’s chief
executive, is a law graduate, but has
never practised as a lawyer. With a
only information available before the
date of the decisions. This model
would have to deal with justices’
deaths, retirement and new
appointments to the court. Once
again, the results were impressive. The
model correctly forecast 69.7 per cent
of the court’s decisions.
Could data-driven models help
make better legal decisions? “Simply
put, the answer is yes,” Prof Katz, who
is now at Chicago-Kent College of Law,
wrote in 2013. “Quantitative legal
prediction already plays a significant
role in certain practice areas and this
role is likely to increase as greater
access to appropriate legal data
becomes available.”
7
Client rebellion Customers are calling
for change because of rising costs and
a lack of transparency over processes
Augmented service Ross Intelligence
is using IBM’s Watson AI system to
carry out sophisticated legal research
‘Fear factor’ Post-crisis regulatory
pressures have increased firms’
willingness to spend on legal services
background in human resources and
recruitment services, he says he is
struck by how little information lawyers
and in-house legal departments have
about their work, ranging from how
much it is costing to how long it is tak-
ing. “The absence of data in this market-
place is a real surprise. Retailers and
other businesses have real data on
which to make decisions,” he says.
Much of the technology seems primi-
tive compared to what has happened in
other industries. But those who believe
in it think it can go far beyond digitising
everyday routine processes into doing
the kind of complex work that lawyers
think only they can do.
So is law approaching its Uber
moment? Some scoff at the idea. “Peo-
ple have been talking about this ever
since I’ve been a lawyer,” says one New
York lawyer. “I’ll believe it when I see it.”
Those at the top of the most successful
law firms have little incentive to change.
The system has served them well. “Most
of these people have worked for 20
years to get to the top of the business
£350-£500 £1bn
CityofLondon Thebillingsearned
hourlyratefor byeachofthetop
newlyqualified sevenCityof
lawyersin2015 Londonfirms2015
and now they’re reaping the fees,” says
Axiom’s Mr Harris. As partners, they
distribute the profits among themselves
and have little incentive to invest in new
technology. From their point of view,
says a marketing head at one US law
firm, “there’s no burning platform”.
There are other forces working in the
traditional legal profession’s favour.
Since the 2007 financial crisis, the level
of regulation has increased. And compa-
nies are frightened of getting things
wrong so they will continue to spend on
legal services. This is particularly true
when they enter new markets.
There is a “fear factor,” says Joe
Andrew, Dentons’ chairman. “People
are always prepared to spend money on
the unknown. You go into a new market,
there are new risks. [There is a danger
Deploying high- of] brand damage. CEOs get fired for
tech systems that kind of thing.”
such as IBM’s
Customer knows best
Watson, above
left, might help But corporate clients are demanding
firms phase out change. Mr Chapman says the increas-
working ing costs of law make the existing sys-
practices that tem untenable. “Customers are starting
some say are to rebel,” he says.
characterised by He says many in-house legal depart-
the Dickensian ments have already cut costs. Ms Martin
lawyer Mr
Vholes, in Bleak
points to Vodafone’s negotiation of fixed
fee arrangements with its lawyers,
House, above rather than accepting billing by the
FT montage; source for
hour. The telecoms provider has also
figures — Jim Diamond
Hourly Rates Survey and reduced the number of law firms it uses
Centre for Policy Studies from 70 to 10. Ms Martin believes tech-
nology can help departments like hers
cut costs even further. “I’m a real
believer in it,” she says.
In their book, the Susskinds quote
Harold Laski, the political theorist and
UK Labour party activist in the first half
of the 20th century, who said that the
‘You go into expert enjoyed a status “not very differ-
ent from that of the priest in primitive
a new societies”, exercising “a mystery into
which the uninitiated cannot enter”.
market, Lawyers have long played that role
there are and many will continue to do so. There
will probably always be a need for emi-
new risks. nent advisers, particularly to compa-
nies. But for those who are unable to
[There is a afford legal advice, technology offers
danger of] some hope. It has a long way to go, but
Ms Martin argues that if new applica-
brand tions can be made to succeed, they will
damage. bring great rewards to the sector.
Greater use of technology will not
CEOs get only make law cheaper, it will also take
some of the mystery out of it. The aim,
fired for that she says, should be “for companies and
kind of individuals to be able to do more legal
work themselves. [Then] it wouldn’t
thing’ seem special.”
8 ★
TUESDAY 12 APRIL 2016
Negative rates may be
nearing a political limit
Opponents of unorthodox monetary easing must offer an alternative
In less than two years, negative interest
rates have moved from the abstract
realms of economic theory into the
mainstream of monetary policymak-
ing. The experiment under way in the
eurozone, Japan and some smaller
European economies has shown that
the practical obstacles to taking rates
below zero are not as large as once
imagined. Proponents say the policy —
intended to encourage consumers to
spend and banks to lend more to the
real economy — has saved the eurozone
from sinking into disastrous deflation.
But the evidence for this remains tenta-
tive. Meanwhile, negative rates are
undeniably unpopular, and the longer
they remain in place the greater the
risk of unintended consequences.
The latest attack on the policy comes
from Larry Fink, head of the asset
manager BlackRock, who warns of the
toll that low, and now negative, rates
are taking on savers. People who want a
certain income at retirement must now
invest far more to achieve it and cut
spending accordingly, he argues —
making the policy counterproductive.
This could be said of any cut in inter-
est rates, which will always shift
income from savers to borrowers. The
burden on savers need not outweigh
the boost to borrowers simply because
interest rates have crossed a psycholog-
ical threshold at zero.
Nonetheless, José Viñals, a senior
IMF official, has warned that negative
rates could become more damaging for
society the longer they persist, under-
mining the viability of life insurers,
pensions and savings vehicles.
Savers’ anger is already a very real
political constraint on cutting rates fur-
ther. In Japan, the central bank has
attempted to shield retail deposits
from the full effect of negative rates,
but some banks are now set to impose
charges on cash they hold for pension
funds. In Germany, the issue of pen-
A sense of proportion is
needed on MPs and tax
PM’s publication of his returns should not oblige others to follow suit
At various moments in the past two
decades, the British public has
whipped itself into a frenzy about the
behaviour of politicians. Sometimes
this has been justified, such as the out-
rage over MPs taking cash to ask parlia-
mentary questions, and their abuse of
expenses. But the latest furore, about
allegations of tax avoidance, is in dan-
ger of generating considerably more
political heat than light.
Caught up in the maelstrom after his
late father was named in the so-called
Panama Papers, David Cameron has
been struggling to get ahead of the
escalating story. First, the prime minis-
ter was forced to spell out the details of
an investment he had made in an off-
shore fund, Blairmore Holdings. Then
he published a summary of his own
income and tax payments over the past
five years (something he promised to
do several years ago). This included
details of a £200,000 gift from his
mother. Now George Osborne, the
chancellor, has elected to publish
details of his own tax affairs as well.
It is hard to argue against transpar-
ency, and perhaps some good may
come from Mr Cameron’s example
serving as a template for aspirant
prime ministers. But it is always trou-
bling when precedents are set willy-
nilly in the middle of a crisis without
anyone seemingly having thought
through the consequences of each
knee-jerk response.
Disclosure will only serve a purpose
if there is a clear understanding of what
constitutes acceptable behaviour. A
good rule of thumb is the one offered by
Graham Aaronson, the senior tax QC
who advised the government on the
drafting of its general anti-avoidance
rule. He defines avoidance as “a course
of conduct that is entirely legal but is
contrary to what parliament would
have expected taxpayers to do”.
Nothing that has come to light about
sioner poverty is so explosive that
Wolfgang Schäuble has blamed the rise
of populist political parties on Euro-
pean Central Bank policies.
A bigger concern for eurozone policy-
makers has been the effect of negative
interest rates on an already fragile
banking sector. Institutions that are
unable to increase lending or to pass
the costs of negative rates on to their
depositors face a squeeze on profits.
For all banks, there is an incentive to
rely more on cheaper, but more vola-
tile, wholesale funding.
Despite these concerns, many cen-
tral bankers contend that the overall
effect of negative rates has been posi-
tive. Wholesale interest rates have
fallen, and credit growth in the euro-
zone has picked up since their intro-
duction. For smaller economies, the
policy has also helped to limit capital
inflows and stem currency apprecia-
tion — despite the notable and counter-
intuitive rise in the euro and yen.
Ben Bernanke, the former Federal
Reserve chair, judges that anxiety has
been overdone and that the policy has
“modest benefits and manageable
costs”. It could be a useful tool for the
Fed if US policymakers want to ease
without “rolling out the big QE gun”.
Yet there are clear practical limits to
cutting rates indefinitely; and in the
eurozone at least, the policy may be
close to its political limits. The question
now is what should take its place. Mr
Fink is right to say that the current
anomalies in markets are the result of
central banks being asked to solve eco-
nomic problems in the absence of
coherent fiscal policies.
The underlying challenge is how to
strengthen stimulus policies and make
them more effective. “Nein zu Allem”
— as Mario Draghi caricatured Ger-
many’s position — is not an acceptable
answer. Opponents of negative rates
need to spell out the alternatives.
the prime minister’s tax arrangements
so far would cross the line set by Mr
Aaronson. Mr Cameron paid all UK
taxes on his Blairmore investment. As
for his mother’s gift, a lifetime transfer
would potentially reduce inheritance
tax liabilities. But this is a transaction
to which parliament has expressly
given its consent.
Mr Cameron’s decision has predicta-
bly led to calls for wider disclosures by
MPs about their tax arrangements. The
prime minister has now said that he,
the chancellor and their shadows
should in future routinely disclose this
information because they are either
responsible for the conduct of the
nation’s finances or aspire to be so.
However, it is hard to see what benefit
would flow from every legislator being
obliged to follow suit.
The withdrawal of confidentiality
might enhance trust in politicians. But
if Mr Cameron’s case is anything to go
by, it is more likely to focus public
attention on those MPs whose income
is substantial, whether or not they have
paid all their tax on it.
If the concern is genuinely that MPs
have interests that conflict with their
parliamentary duties, the answer may
be to widen the register of members’
interests. As well as extra-parliamen-
tary earnings, this could encompass
greater details about holdings of prop-
erty and financial assets.
Whatever parliament now chooses
to do, a sense of proportion is needed.
The public is right to want to hold poli-
ticians to high standards. Those with
the power to make tax must abide by
the rules they set for others. That said,
even politicians are entitled to some
confidentiality regarding their finan-
cial records — unless there is good rea-
son to deprive them of it. While volun-
tary disclosure is one thing, the case for
a general throwing open of the books
has not yet been made.
FINANCIAL TIMES
The pernicious effects of low interest rates
Sir, John Plender explores one aspect of
central banks’ policies in “Central bank
paralysis prevails as currency wars get
complicated” (April 6). The impact of
the monetary policies of major central
banks on bubbles in asset prices, share
buybacks, debt-financed M&A and
potential to cause future financial
crises has also received much
comment. However, the long-term
effect of low interest rates on the
productive economy has been largely
ignored or presumed benign.
However, first, artificially sustained
low interest rates reduce the cost of
capital and must spawn a misallocation
of capital with a rash of low-return
capital projects. National economies
face a generation hamstrung by meagre
returns.
Second, the impact on pension funds
is pernicious. Low project returns will
lead to low risk-adjusted returns on
corporate equity. Companies that do
not engage in low-return expansion
Deals may be scuttled
but nothing can prevent
the talent from migrating
Sir, There is one point that has been
widely overlooked in the Pfizer-
Allergan saga: talent is borderless. It
will come as no surprise that
healthcare executive recruiters like me
have seen a recent flurry of activity in
the industry’s C-suites.
Thus, while Washington can scuttle a
tax inversion deal, it cannot prevent a
pharma executive from joining a new
company overseas. In fact, according to
the Society for Human Resource
Management, Allergan’s domicile of
Ireland is one of the top 10 countries
with the highest rate of professional
migration growth.
When political leaders intervene in
future mergers, they would be well
advised to examine the impact on the
companies’ most valuable assets, their
people.
Nona Footz
Head, Healthcare Practice,
RSR Partners,
Greenwich, CT, US
We’ve all been known to
go out for the sandwiches
Sir, Lucy Kellaway (“Don’t blame
millennials if you can’t hang on to
them”, April 11) refers to the
disappointment of many millennials as
they encounter the realities of working
life in an elite professional
environment. She lists humiliations
such as written work being vetted by a
colleague pre-dispatch, working all
night and being told to get a shave, and
being sent out for sandwiches.
My newer colleagues here have
doubtless suffered all of the above. We
require that a director proofs all
written communications externally, as
our counterpart clients are C-suite who
want the best advice of the
organisation, not any one individual,
and indeed object to typos. We
occasionally work all night, including
the directors, and of course need to be
at our most presentable anyway in the
morning, as that is one of the things
our clients expect of their advisers on
presentation issues. It was the same
when I was a diplomat and then
investment banker.
China’s children
are legally
bound to respect
their elders
Shanghai
Notebook
by Patti Waldmeir
Letters
will suffer profits shredded by low
prices brought on by their rivals who
do. The UK steel industry and US shale
oil are classic examples.
Witness also that dividend cover is
falling, with dividend cuts over a wide
spectrum: oil, miners, banks,
supermarkets and Rolls-Royce.
Dividends are the main source of long-
term returns in pension funds, while
low interest rates impose low discount
rates on actuarial calculations and
demand ever-higher pension
contributions.
There is currently no prospect that
the “save for a pension” model can
produce a meaningful pension. In fact
compulsory increases in pension saving
simply sucks income from consumers
and their suppliers while
oversupplying the capital markets and
forcing interest rates even lower in a
vicious, downward spiral.
Third, share buybacks and debt-
financed M&A raise apparent equity
‘I’ve done nothing illegal’
We have all been known to go out
and buy sandwiches, subject to the
work needs of colleagues, and on a big
day I might even get a family tray of
Ferrero Rocher chocolates to deliver a
mid-afternoon sugar spike to our
toiling grads.
Few of us here think these ways of
working are too invidious, and indeed
they help deliver our status as one of
the most awarded firms per head in
our sector in the Emea region.
Simon Brocklebank-Fowler
Chairman,
Cubitt Consulting,
London WC2, UK
Upsurge of consciousness
in Hong Kong’s youngsters
Sir, The award-winning Hong Kong
film Ten Years is indeed an epoch-
making event in the history of Hong
Kong (“Grim vision of suppressed
Hong Kong wins local film prize and
mainland ban”, April 5).
Since the signing of the joint
declaration between the UK and China
over the transfer of sovereignty of
Hong Kong in 1984 and hitherto, all
parties concerned, even the Hong Kong
people, accept without protest that
“one country, two systems” would be
operating in Hong Kong vis-à-vis
mainland China. Nobody dare raise the
issue of Hong Kong being an
independent political entity
tantamount to an independent city-
state like Singapore.
The older China becomes, the more
desperate the Chinese Communist
party is about its silver problem.
Earlier this month, a mandarin in
Shanghai threatened local residents
who neglect their elderly parents with
being put on a credit blacklist, being
refused a bank account or loans — and
even with losing their library cards.
Hit them where it hurts: in the pocket
that holds the library privileges.
It must be such fun being a
government official in China:
apparently nothing is off limits.
Imagine if Donald Trump could say:
Muslims can’t get bank loans. Or
Hispanics can’t get Visa cards. Or
“bimbos” can’t borrow library books.
Last week a certain Luo Peixin,
deputy director of the Legal Affairs
Office of the Shanghai Municipal
People’s Government, took it upon
himself to remind Shanghainese that
they can face all these restrictions
under the law if they don’t visit their
old parents regularly. That puts them
in the same category as hit-and-run
drivers, or those jumping subway
ticket barriers, according to the
official China Daily newspaper, which
said all such miscreants could find
themselves on the credit blacklist,
along with the unfilial.
More and more Chinese elders now
live separately from their grown
children, and a national law passed in
2013 decrees that Chinese offspring
who don’t visit elderly parents
regularly can be sued. Silvers can go to
court to force them to be attentive,
and if they win, the court can enforce
returns by a mirage of financial
engineering, which ignores the
heightened risk; in particular that at
some point the debt will need to be
either repaid from profits or refinanced
at higher interest rates. Both result in
diminished returns, plus the residual
risk of financial crisis.
A fourth catastrophe in prospect is
the incentive for government
borrowing and spending. Bribing
voters with debt-financed goodies is
the norm but previously it was
tempered by the burden of interest
payments. At near-zero borrowing
costs, politicians will inevitably
increase spending, particularly on
spurious, prestige capital projects
which offer political rather than
economic returns. In the UK, London’s
Crossrail, High Speed 2 and the
Hinkley Point nuclear project come to
mind.
Bill Bailey
Ballineen, Co Cork, Ireland
However, recent events evolved,
especially after the Occupy Central
movement last year, and there has
been an upsurge of consciousness
among the younger Hongkongers
under 30, that they should be
distinguished in identity from
mainland China.
Hong Kong people are capable of
forming a separate state. A month ago,
two youngsters even dared to declare
that they will form a political party in
Hong Kong seeking independence. Ten
Years is indicative that such a trend will
continue in the coming decades leading
up to 2047 — 50 years on from 1997,
when the One Country, Two Systems
will officially come to an end, if not
continue or change into another form.
Unfortunately, in the 1983
negotiations between the UK and
Chinese governments and ever since,
Hong Kong people have been under
the illusion that One Country, Two
Systems will be interpreted according
to what Hong Kong people desire and
not according to the dictate of
mainland China nor those who toe the
party line running the Hong Kong
special administrative region since
1997.
Frankie Leung
Los Angeles, CA, US
Nonsense about
our sovereignty
Sir, Regarding “Reality check: Five
‘facts’ dissected on Brexit and future of
the EU” (April 11): I cannot accept the
argument proclaiming that we are
sovereign because we “can” vote to
leave. That is like saying we are a
republic because we could overthrow
the monarchy if we so chose.
Marie-Louise Clayton
Guildford, Surrey, UK
So now we know the truth
about British weather
Sir, I have always suspected that British
weather is challenging, but now I have
the proof with the fact that David
Cameron always watches the
Glastonbury festival (held in the
summer) “at home in front of a warm
fire” (“Festival and football threaten to
hit pro-EU campaign vote”, April 8).
Stéphane Magnan
Issy, France
the judgment by hitting them in the
library card, etc. As of May 1, nursing
homes in Shanghai will have a legal
right to call the kids up and shout at
them if they don’t visit often enough.
I turned 60 myself this year, so I’m
looking into how this law affects
foreigners: maybe I can use it to force
my two Chinese teenaged children to
turn up for family dinners, or respond
politely when spoken to (or at all). I’ll
tell them they’ll never be able to get a
mortgage if they don’t.
Filial piety laws are serious
business, though: China has a massive
elder overhang, because of the same
one-child policy that helped depress
population growth for years and allow
the economy to grow so fast. The state
can’t afford to look after all those
elders so it has to use moral suasion
(backed by credit score threats) to
force grown children to help. Shanghai
has a particular problem: last year,
says China Daily, it became the first
city in China to pass the crippling 30
per cent mark for population aged
over 60. That’s nearly twice the 15.5
per cent for over 60 population
nationally in 2014, the last year for
which national figures are available.
But as we all know, money can’t buy
you love and, apparently, neither can
filial piety lawsuits. In the three years
since the new law requiring grown
children to visit elderly parents was
passed, very few elders have sued
successfully under it. Last February,
the official Xinhua news agency
reported that a 90-year-old mother
had sued her six children, all in their
Tuesday 12 April 2016
Email: letters.editor@ft.com or
Fax: +44 (0) 20 7873 5938
Include daytime telephone number and full address
Corrections: corrections@ft.com
The laugh’s on you,
Jeremy — the French love
a sexy English accent
Sir, Jeremy Paxman, whose deficient
foreign language skills are jarringly
paraded on University Challenge by his
mangling of any German term to
complete unintelligibility, entirely
misses the point for “native English
speakers” about learning French,
having first indulged a gratuitous sneer
at La Francophonie, whose members
incidentally include several
Commonwealth countries —
Switzerland, Bulgaria and Romania —
showing that it is more than a club of
former colonies (“Voilà — a winner in
the battle of global tongues”, April 8).
The fact is that the chances of a
“native English speaker” acquiring a
working knowledge of Chinese or
Arabic — mentioned by Mr Paxman as
preferable to learning French — other
than through growing up in a
multilingual family are vanishingly
small, unless the basic building blocks
of learning foreign languages — which
include understanding the structure
and grammar of English — are acquired
through a “starter” European language.
The terrors of French for the English,
such as gender, inflection of adjectives
and sounding like Jean Paul Gaultier,
are minimal compared to the fanciful
suggestion that the English learn
instead more “useful” languages such
as Mandarin Chinese, with the
challenges of tones and script.
Moreover, France is the country most
visited by the British for business and
pleasure, and it is bizarre to deny the
practical value, not to mention
fascination and pleasure, of being able
to understand the language and
thinking of the people and society in
our closest neighbour.
Finally, according to a recent survey,
the accents which the French public
find most “sexy” are Italian and
English, and the least Chinese and
Portuguese. Jane Birkin and Jonny
Wilkinson have it right — and Jeremy
Paxman as unsexily wrong as can be.
Tom Brown
London SW5, UK
Language skills are
incredibly important
Sir, Jeremy Paxman is misguided in
saying that French is a “useless
language” (“Voilà — a winner in the
battle of global tongues”, April 8). Not
only is it spoken by tens of millions
around the world, recent research from
the CBI has indicated that French —
more than any other modern language
— is in demand among UK businesses.
Being able to speak English is a huge
asset for us. But English alone is not
enough. Language skills, in general, are
incredibly important for young people
in the UK, with British Council
research highlighting that French is the
third most important language for the
UK’s future prosperity and global
standing. More of us need to fully
appreciate the value of language
learning and the crucial role it has to
play in an increasingly connected
world. We believe that learning any
language is valuable but you cannot go
far wrong by learning any of the top 10
“languages for the future” — Spanish,
Arabic, French, Mandarin, German,
Portuguese, Italian, Russian, Turkish
and Japanese.
Mark Herbert
Head of Schools Programmes,
British Council
50s and 60s, asking the court to force
them to pay her nursing home fees
and visit weekly. Up to then, the
report said, her three sons visited
occasionally, her daughters less, and
eventually no one showed up for
months. The “kids” all said they were
busy. A court mediator arranged a
deal where the six would visit Mum
once a week by turns. Xinhua hasn’t
reported how that’s working out.
The state is even meddling more
and more when children try to pay
their respects to elders who have
already passed over. A report in state
media over the recent “tomb-
sweeping” holiday in early April, said
local government officials in Beijing
had confiscated 200kg of “bank notes
for the afterlife”: fake paper money
traditionally burnt at the graveside to
wish the ancestors prosperity in the
next world. It seems it is illegal to
print anything that looks like a
renminbi note, even if it’s just for
burning (which is frowned on
environmentally, anyway). The safest
thing might be the new fad in “tree”
burials: placing a loved one’s ashes in a
biodegradable urn under a tree, where
they can become one with the soil,
without taking up cemetery space.
Those who plan to pay for the
funeral with a credit card will want to
visit ailing family elders often, to
make sure they keep that credit line.
Remember: only the filial inherit the
good credit rating (not to mention
granny’s library card).
patti.waldmeir@ft.com
Tuesday 12 April 2016
Woolly notions of ‘fairness’ are no way to run a tax system
POLITICS
Janan
Ganesh
B
ritish public life is made up of
people who are steeped in the
humanities, ignorant of
finance and quietly scared by
numbers. From parliament
to the BBC, they conflate “offshore” with
“illegal” as they elide “turnover” with
“profit”, and touchingly assume their
personal holdings never swing by such
exotic jurisdictions.
Outside these unworldly few, there is
no great Albion of common sense. The
perceived vulgarity of discussing money
in this country ensures that principles
are never thrashed out and cant is left to
fester unchallenged. Britons are sure
that footballers are “overpaid” but
accept prices set by demand and supply
as generally inviolate. They hate tax-
dodgers but pay tradesmen in cash, and
The nightmare
on Downing
Street begins
FOREIGN AFFAIRS
Gideon
Rachman
I
t is the morning of June 24th. Brit-
ain has just voted narrowly to leave
the EU. Jubilant pro-Brexit cam-
paigners wave Union Jacks in Tra-
falgar Square. A shattered-looking
David Cameron appears outside 10
Downing Street to say that he respects
the verdict of the British people and that
he intends to carry on as prime minister.
The atmosphere of crisis is com-
pounded by a stock market plunge
across Europe. The French and German
governments issue a joint statement
saying that it is imperative that the EU
now make decisive steps towards politi-
cal union and promise an “economic
government” for Europe. In Edinburgh,
Nicola Sturgeon, Scotland’s first minis-
ter, points out that Scots have voted to
stay inside the EU — and announces that
she will now press for a second referen-
dum on Scottish independence.
In the days that follow, the Conserva-
tive government is consumed by
infighting. It becomes clear that the
prime minister’s authority is too badly
damaged for him to carry on. Mr Cam-
eron announces that he will resign, and
the Tories call a leadership election. On
the second ballot, Boris Johnson defeats
George Osborne — and is invited to form
TECH NOLOGY
John
Thornhill
V
enture capital is widely
viewed as “good” capital: it
takes risks, promotes inno-
vation, actively engages
with company manage-
ment and often invests for the long
term.
As the US National Venture Capital
Association (NVCA) says in its 2016
yearbook: “Venture capital has enabled
the United States to support its entre-
preneurial talent and appetite by turn-
ing ideas and basic science into products
and services that are the envy of the
world.”
Of the 1,339 US public companies
founded since 1974, 42 per cent have
been backed by venture capital. Those
VC-funded companies now account for
63 per cent of market capitalisation and
god help a politician who suggests they
keep the receipts. Almost none of them,
even those in houses worth multiples of
the national average, believe they are
rich. Their daily newspapers seethe at
the prime minister’s banal tax arrange-
ments but lovingly exhibit tricksier
schemes in the inside pages like
semi-undressed celebrities and cassou-
let recipes.
It is melodramatic, then, to see David
Cameron as the patsy in a drumhead
trial, victimised by the kind of moral
fever Thomas Babington Macaulay
warned us about, for his stake in a trust
that allowed him to neither avoid nor
evade British taxes. The truth is better
and worse. When it comes to money,
most people just have no idea what they
are talking about. They assume he has
done wrong because they have not read
or understood the story. The prime min-
ister is mired in the dog’s breakfast of
hearsay and half-understanding,
inflamed by the tardy disclosure of his
own records last week. This is not
Kafka. If most things in Westminster are
cock-up not conspiracy, so are most
things in the country.
a government. On the steps of Downing
Street, the new prime minister amuses
the press by speaking in Latin, before
entering his new home, appearing
to stumble over the doorstep as he
enters.
Once inside Number 10, Boris is
served a cup of tea and then ushered
into the Cabinet Room for a meeting
with Sir Jeremy Heywood, the cabinet
secretary and the head of Britain’s civil
service. Sir Jeremy, who is known to
have privately opposed Brexit, is polite
but firm. With the markets in turmoil,
he tells the new prime minister that it is
imperative that he introduce some clar-
ity into the Brexit process.
The Leave campaign, fronted by Mr
Johnson, had made two key pledges. It
had promised to control immigration
by withdrawing Britain from the EU’s
laws on the “free movement of persons”.
And it had also promised that Britain
would continue to enjoy free trade with
the EU.
Sir Jeremy politely points out that
these two promises are incompatible.
He reminds Boris that the EU’s internal
market is based on the free movement
of goods, capital, services and people.
Under EU law, these four freedoms are
inseparable. Countries such as Switzer-
land and Norway — that are not part of
the EU but still want unfettered access
to the EU market — have had to accept
free movement of labour. So which is it
to be? Controls on immigration or full
access to the internal market?
During the campaign, Boris has man-
aged to shrug off this choice by repeat-
More than venture capital is needed for success
85 per cent of research and develop-
ment among that post-1974 cohort.
Three of the country’s five biggest
companies by market capitalisation
today were funded by venture capital at
an early stage: Apple, Google and Micro-
soft. The venture capital industry
remains just as ambitious to fund a new
generation of start-up tech companies.
While established companies in pub-
lic markets are returning money to
shareholders on a massive scale, ven-
ture capitalists in private markets are
still investing in the future. Publicly
listed US companies bought back
$568.9bn of shares over the past year.
That compares with the $59.1bn that
venture capital funds invested in 2015,
the second highest level in history.
“The public markets have never been
shorter term. The time horizon for pri-
vate markets has never been longer,”
says one leading Silicon Valley venture
capitalist.
At first glance, it would seem that
Europe could desperately do with more
of that kind of patient, risk-taking capi-
tal to spur innovation. As a recent paper
from the French prime minister’s office
★ FINANCIAL TIMES
Comment
The danger lies in the processes and
rules of thumb that Britons use in lieu of
actual knowledge. Since the parliamen-
tary expenses scandal in 2009, it has
become disturbingly normal to claim
that what matters is perception. “Cae-
sar’s wife must be above suspicion”, not
just in line with the formal rules. Things
must pass the “smell test”. They must be
“fair”. There is a sonorous plausibility to
this nonsense.
When it comes to money,
most people just
have no idea what they
are talking about
Fairness vies with community as the
most insidious abstract noun in politics.
It is plastic enough to mean many
things, the darker of which are cloaked
by the surface glitter of the word.
A fair tax contribution for billionaires
could be defined as something com-
mensurate with the public services they
use, which would imply a payment in
ing a favourite joke: “My policy on cake
is pro having it, and pro eating it.” As he
toys with a piece of Victoria sponge in
the Cabinet Room, however, the new
prime minister finally has to confront
the cake problem. His instinct tells him
that free trade matters a lot more than
immigration controls. As mayor of Lon-
don, he saw that Britain’s capital relied
on the flow of labour from Europe. But
he also knows that immigration was the
issue that delivered victory for the
Brexit campaign. A Norwegian-style
deal — in which Britain accepted all EU
laws, including free movement of peo-
ple, in return for access to the single
market — will not be acceptable to his
own party, which is demanding controls
on immigration and a restoration of par-
liamentary sovereignty.
A Norwegian-style deal
with the EU will not be
acceptable to the
Conservative party
noted, France — and by extension
Europe — needs more “yollies” (young
leading innovators). Younger firms tend
to have higher growth potential, create
more jobs and raise productivity. They
help renew a country’s economic fabric.
There is certainly a striking contrast
in the scale and speed of wealth genera-
tion between the US and France. At
$1.55tn, the combined market capitali-
Too much VC money
has lately been invested
in start-up companies
with daft ideas
sation of Apple, Google (now Alphabet),
and Microsoft is greater than that of the
entire CAC 40, containing France’s most
valuable public companies. Europe
could surely benefit from more adven-
turous venture capital to help its yollies.
But all is not quite so simple as it seems.
For a start, Europe’s VC industry does
not do a bad job, according to a paper by
two academics from the London School
chicken feed. It could equally mean a
conscientious donation far in excess of
the rates levied by the state. Imagine the
fine time we could have assessing the
fair tax burden on a state-educated
occupant of social housing who sees an
NHS doctor every week but earns less
than the income tax threshold. Oh, the
theories of justice we could weigh
against each other.
The reason we have laws is to avoid
losing ourselves in this vapour. If some-
thing as arbitrary as fairness is to
replace or supplement statute as the
guide to behaviour, do not be piqued
when Facebook, Twitter and above all
Google muster a plausible argument
that they should pay little or no tax.
These companies serve billions of peo-
ple for free. Your Gmail account, your
Google searches, your meandering
hours on YouTube: none of this costs
you anything beyond a monthly broad-
band fee. The consumer gains for which
this one company extracts no direct
charge surely warrants a lighter fiscal
burden.
Drug companies that sink fortunes
into mostly fruitless research to find
Looking up from his cake, Boris asks,
“How about Canada?” Sir Jeremy has
been expecting this. With a mixture of
sorrow and sadism, he begins to lay out
the limitations of the EU-Canada free-
trade deal as a model for Britain. First,
there is the question of time. Once Brit-
ain triggers Article 50 of the Lisbon
Treaty and announces that it intends to
leave the EU, it will have just two years
to negotiate a new trade deal with the
EU. But negotiations on the EU-Canada
deal began in 2009. Here Sir Jeremy
adopts the Wodehousian language that
Boris favours, and adds: “And I’m afraid
to tell you, prime minister, that the bally
thing still hasn’t been ratified.”
Boris looks momentarily crestfallen,
so Sir Jeremy presses on. The second
problem with the Canadian model is
that while it abolishes tariffs on manu-
factured goods, it does not secure true
free trade in services. But, Sir Jeremy
murmurs, the prime minister might
recall from his period as London’s
mayor that services — and in particular,
financial services — are rather impor-
tant to the UK economy.
of Economics, whose data set included
12,315 European and 23,483 US venture
capital investments.
Contrary to perceived wisdom, the
two researchers found there was no dif-
ference between the likelihood or prof-
itability of initial public offerings
between European and US deals from
comparable years — even though US
companies were prepared to pay more
than European ones for trade sales.
The biggest determinant of success in
both markets, though, was long-term
expertise in the industry. Serial entre-
preneurs and investors were more suc-
cessful on both sides of the Atlantic.
Overall, there remains a far greater
wealth of experience in the US. But
some successful European entrepre-
neurs-turned-investors, such as Niklas
Zennstrom, co-founder of Skype, are
helping to redress the balance.
Venture capital also has its draw-
backs. Too much VC money has lately
been invested in start-up companies
with daft ideas, inflating some private
market valuations beyond any mean-
ingful measure and eroding margins for
sounder businesses. As the cycle has
life-saving treatments could mount a
similar case. And why is an entrepre-
neur in a depressed mill town paying the
same corporate tax rate as his equiva-
lent in the money pit of London?
Mr Cameron’s noisy crusade against
tax avoidance over recent years contrib-
uted to this intellectual gloop, which
now covers him nose-high. His decision
to release his tax returns, unavoidable
in the circumstances, will do the same.
Until now, politicians like everyone else
sent their returns to HM Revenue &
Customs, which judged them against
the rules. Voters will now judge them
against their own moral tariff.
Prime ministers can legislate and
administer whatever laws parliament
will let through but ruminations on
matters of taste and morality should
be put off until retirement. If that lesson
is sinking in, it is sinking in slowly. Mr
Cameron’s otherwise lucid statement to
parliament on Monday included a
commitment to “change the culture”
around tax, as if the culture is any of his
business.
janan.ganesh@ft.com
Boris decides that there is nothing for
it. He must fly to Germany and woo the
true leader of Europe. In Berlin, he is
pleasantly surprised by the warmth of
his reception by Angela Merkel. The
German chancellor says that while she
regrets Britain’s decision she will do her
best to help secure a fair deal for the UK.
The British prime minister returns to
Downing Street encouraged. But for
weeks, nothing further is heard from
Berlin. Finally, the phone rings. It is
Aunt Angela. She sounds regretful. She
says that Germany would like to give
Britain enhanced access to the single
market, without the need for full free
movement of labour. But the European
Commission says that this is illegal, the
European Parliament will not hear of it,
and as for the French . . .
Boris is about to put the phone down
and pour himself a stiff one, when Ms
Merkel adds: “There is one thing that
might help.” There is a long pause.
“Would you consider accepting 200,000
Syrian refugees?”
gideon.rachman@ft.com
turned down, some of the much-
vaunted unicorns (private tech compa-
nies with valuations of $1bn or more)
are turning into unicorpses.
Moreover, as the NVCA acknowl-
edges, much of the success of US venture
capital stems from external factors:
access to good science from world-class
universities, protection of intellectual
property rights and a skilled workforce
drawn from around the world.
Professor Mariana Mazzucato, author
of The Entrepreneurial State, has also
highlighted the extraordinary role that
the US government has played in foster-
ing private sector growth. Public sector
organisations such as Darpa, the
defence industry body, and the National
Institutes of Health have pumped bil-
lions into early stage research and
proved to be remarkable engines of
innovation.
Europe has a lot to do to emulate the
success of the US in all these areas, not
just in terms of VC funding. Capitalist
success is about far more than the suc-
cess of capital.
john.thornhill@ft.com
9
In pop radio,
the audience
has always
been king
OPINION
Stephen
Witt
C
an anyone stop Big Data
swallowing the music indus-
try? Christopher Price
thinks it is worth a try. Con-
demning the use of stream-
ing services to build playlists, the new
head of music programming at the
BBC’s Radio 1 says: “You should be mak-
ing decisions about music using your
ears, rather than data served up by
third-party sources.” In an age of analyt-
ics, Mr Price still wants to be a taste-
maker.
To rate his chances, let us track the
unlikely success of a bright young music
executive. We’ll call him Ted. In the
mid-1970s young Ted moves to London
from England’s West Country, intending
to make his fortune. He secures a posi-
tion in the artists and repertoire depart-
ment of a small independent record
label. On day one, the boss gives him a
stack of demos by unsigned artists. “Go
home and listen to these,” he says. “Let
me know if you hear anything good.”
Ted, being young and irresponsible,
instead goes to a gig: The Who, “loudest
band in the world”. He leaves with ring-
ing in his ears. Listening to the demos
the next day, he can barely hear the lyr-
ics. He has permanently damaged his
hearing. He fears his career is over
before it has begun. But on the way to
work, he thinks of a way to save himself.
He stops in a record store and asks:
“What’s your best seller?” The owner
pulls out an album by a local novelty act.
Ted says: “I’ll take that.”
At the A&R meeting that afternoon,
one man claims to have found the “next
In an age of analytics,
the head of programming
at Radio 1 still wants
to be a tastemaker
Beatles”. Another enthuses about a
young songwriter with stunning emo-
tional depth. Ted pulls out the novelty
album. “I think we should sign these
guys,” he says. The label boss gives him a
funny look. The next Beatles end up as
waiters. The songwriter commits sui-
cide. The novelty act goes platinum. He
is promoted to run the division.
Realising the power of market re-
search, he begins calling record stores
and radio stations all over the country.
He pesters the back office for updated
retail inventory sheets. While the other
A&Rs waste their time in clubs, Ted
hangs out with the accountants. In this
way, he scores dozens of hits without lis-
tening to a single song. His tinnitus is
actually an asset. He has been freed
from the burden of his own taste.
In the early 1980s, the label is sold to a
corporate Japanese concern. Ted shaves
off his beard and starts wearing a suit to
the office. Electronic databases allow
him to scout demographic sales trends
more easily, even as his hearing deterio-
rates.
Toward the end of the decade, now
based in the US, Ted spots a trend: doz-
ens of West Coast retailers are reporting
the popularity of a single that has never
received a single radio spin. Ted tells the
guys in the boardroom to free up some
money for the act. They look at him
aghast. “We can’t sign those guys,” they
say. “That song is about murdering
policemen.” “Sounds good,” says Ted.
The song about murdering policemen is
an international hit. Ted is promoted to
run the entire division.
Ted buys a radio station in a small
town in Maine. He uses it to play singles
from emerging acts then calls local
stores to see if any albums are selling. If
they are, Ted rolls out a big-budget cam-
paign. If not Ted calls the band in and
says: “It’s not your turn, fellas.”
By the 2000s, Ted is the most power-
ful man in music. His method — scout-
ing audiences instead of bands —
becomes standard practice. And the
web, with its data analytics capabilities,
makes the whole thing simple.
In the twilight of his career, Ted is now
completely deaf. He decides it is time to
reveal this terrible truth and arranges
an interview with a young reporter from
Rolling Stone at his enormous Manhat-
tan office. The reporter walks in and
asks: “So, Ted, what’s your secret?” And
Ted says: “What?”
Good luck, Mr Price.
The writer is author of ‘How Music Got
Free,’ which was shortlisted in the FT and
McKinsey Business Book of the Year 2015
10 ★ FINANCIAL TIMES Tuesday 12 April 2016

BUSINESS LIFE

Andy Grove
Be scared, be very scared, advised the
late Andy Grove. “Business success
and the line contains the seeds of its own
destruction. Success breeds
complacency. Complacency breeds
between ‘good’ failure. Only the paranoid survive.”
Grove’s words, recalled worldwide in
and ‘bad’ fear the wake of his death last month, are
interesting to revisit alongside an
‘
timetable despite mounting technical Ultimately, bad fear is internally
challenges would label you “a loser”, focused. It motivates protection from Art of Persuasion
said another.
When middle managers asked
questions about the competition,
the discomfort of change in the status
quo. Good fear, in turn, is always
focused externally, on the imminent How not to deal with a PR
superiors told them to shut up and
focus on implementation. Forced to
threat outside. Excessive internal
focus, conclude professors Vuori and
crisis like Mossack Fonseca
rely on middle managers’ progress
reports because they lacked technical
The late
Intel CEO
Huy, reduced the attention that Nokia
employees devoted to processing
SAM LEITH

article analysing Nokia’s decline by
Timo Vuori of Aalto University and
Quy Huy of Insead. While Grove’s
famous paranoia helped him shepherd
Intel through the seismic shift from
memory chips to microprocessors, the
fear wrought by Nokia’s leadership
failed to produce a next-generation
smartphone in response to Apple’s
competence, the company’s leaders
were insulated from negative
information and developed an overly
optimistic view of Nokia’s capacity.
While recent obituaries recall how
Grove “wanted everyone at Intel
running scared”, a closer look at his
philosophy, as laid out in his 1995 book,
prosaically entitled High Output
external threats, generating a mortal
loved a combination of high internal fear and
shouting low external fear.
Ben Horowitz, co-founder of venture
match but capital firm Andreessen Horowitz and
staff knew long-time admirer of Grove, described
him as one of the greatest of “wartime
they could CEOs”. A peacetime CEO, he wrote in a
speak up widely circulated 2011 blog post, leads

iPhone.
A distinction that professors Vuori
and Huy make between “external” fear
and “internal” fear may well explain
the difference. While managers at
Nokia rightly feared the iPhone, they
were more afraid of their shareholders.
“If you don’t hit your quarterly targets,
you’re going to be a former [executive]
very fast,” said one senior executive.
They knew Nokia needed a better
operating system to match Apple’s but
they also recognised that it would take
years to develop it. So they pressed
middle managers to perform faster
without revealing to them the severity
Herminia Ibarra of the external threat.
Middle managers, in turn, feared
Onmanagement their bosses, and each other. Jorma
Ollila, Nokia’s former chairman and
CEO, was known for shouting at people
‘‘at the top of his lungs”, said an
interviewee quoted in the research.
Failure to agree to a relentless
’
Management, reveals a different sort of in times of market growth and
“tough boss” from those who ran Nokia significant advantage relative to the Reuters
into the ground. competition. A wartime CEO is fending
Grove’s notion of “constructive off an imminent existential threat — What do you do in the Rounding on the media is
confrontation,” for example, meant which, as Grove pointed out in Only the corporate nightmare a natural reflex in these
that decisions were debated fiercely Paranoid Survive (1996), can come from scenario? You are BP and circumstances — and it’s
and loudly. True, he loved nothing competitors, suppliers, changes in Deepwater Horizon is almost always the wrong
better than a good shouting match but macroeconomics, customer leaking. You are Trafigura one. It’s impossible to say
managers at all levels knew they were preferences, technology and regulation and you’re trending on too often that successful
expected to speak their mind to or any combination of the above. Twitter. You are Mossack persuasion is about putting
superiors and arguments were won and Leading in “wartime”, concludes Mr Fonseca and your yourself in the position of
lost with data. “Knowledge power” Horowitz, requires a different skill set confidential files are all over your audience.
trumped “position power”. from leading in “peacetime”. For the the place like a mad If you’re Mossack Fonseca,
A scientist by training, Grove made it many of today’s leaders who can stand woman’s pyjamas . . . the media looks to you like
his business to understand human, not to take a page from Grove’s playbook, The answer, in the latter the story: you’re minding
technical systems. For example, he yes, absolutely, be very scared. But, case, is: not this. Mossack your own business down in
relied on one-on-one meetings to avoid also be afraid of what kind of fear you Fonseca’s official Twitter Panama when, WHAM!, you
losing touch. Without one-on-one may sow. account has linked to a long are all over the front pages
meetings, the paranoid Grove believed,
leaders can’t understand what is really Twitter: @HerminiaIbarra
document unenticingly
titled “Statement Regarding
and people are saying nasty
things about you.
happening in their organisations, and Recent Media Coverage”. The public, though, don’t
fall prey more easily to political The writer is a professor of organisational It begins: “Recent media see the press as the story:
dynamics such as those behind Nokia’s behaviour at Insead business school. reports have portrayed an they see you as the story. In
fall. Andrew Hill’s column returns next week inaccurate view of the fact, they barely see the
services that we provide press at all. The press is the
and, despite our efforts to window through which
correct the record, they’re looking at you; and
misrepresented the nature complaining that it’s a

Luxury, Ikea and the human touch

Everything is done in a democratic
Serena Tarling meets the way in Ikea, she adds, so most meetings
designer helping the have at least 16 people round the table —
from merchandising to packing to sus-
business world rediscover tainability.
its humanity, one airport “The lorry man can’t talk about des-
ign but he can say: ‘It fits into the lorry,
lounge at a time but with the packaging I’d worry and
you need a few inches off it.’ And they
of our work and its role in
global financial markets.
“These reports rely on
supposition and
stereotypes, and play on the
public’s lack of familiarity
with the work of firms like
ours.” That may well be so;
but it butters no parsnips as
a rebuttal.
The mistakes that the
company makes in this
release seem to me to be
threefold. For the avoidance
both of doubt and legal
proceedings, I’m not making
distorting lens gets you
nowhere very fast.
You need to demonstrate
how the impression is
wrong, and crisply. The
question of why it’s wrong,
and how unfair it is that it’s
wrong, is completely beside
the point for most of your
audience. They’re interested
in Mossack Fonseca, not in
“the media”. And the means
by which your attempted
rebuttal will reach most of
them is, er, the media.
It’s true that private

T
he corporate workplace is can do that right up to the last minute — any judgment on the truth individuals can sometimes
perhaps one of the last van- which is kind of nerve-racking.” or otherwise of Mossack garner sympathy by
guards of the “non-places”: Ms Crawford’s focus was to bring the Fonseca’s position. I’m presenting themselves as
functional and soulless con- materials back to the centre of Ikea’s interested, rather, in its being monstered by a
ference rooms with their products. “We did an audit of Ikea: head, persuasive strategy. faceless corporate media. A
uncomfortable chairs and uniformly heart, hand. We said: you can’t be 1) It gets the tone wrong. corporation cannot play the
dull colour schemes; airport business faulted on your head, you’ve got more To be aggrieved and same card.
lounges with their block seating. heart than people realise, but,” she adds, petulant, even if you have The best you can hope for
Incremental change is under way as “that’s because your hand is desperately good reason to be, puts you by trying that is to cast your
the likes of Facebook, Google and Lego bad,” she says. on the back foot. audience as onlookers at an
reimagine how we work. But one leading “We told them that straight out, and 2) It issues a detailed and unedifying slanging match
British designer is gradually changing they laughed and said — ‘you’re com- legalistic rebuttal four sides between two faceless
these spaces — by putting humans and pletely right!’ The tactility of their prod- of A4 long. The whiff of corporate entities. They
their needs at the centre of the design uct is really terrible, and the quality — sulphur travels far and fast; won’t change their
process from the outset. you know they were obviously coming dullness will probably be impression.
Ilse Crawford’s design company Stu- to that conclusion themselves as well.” ignored. At the time of Mossack Fonseca may be
dioIlse has been behind high profile StudioIlse and Ikea focused on keep- writing it had a grand total very good at incorporating
projects ranging from the New York out- ing the price down through the supply of 79 retweets. companies; but it is very bad
post of Soho House members’ club and 3) And it put the focus — at public relations.
new boutique hotel Ett Hem, in Stock- ‘Whether we are in the as the statement’s title
holm, to the onyx walls of Cathay
Pacific’s new first-class lounge in Hong office or in hospital or in an suggests — on the media.
Numbers one and two
artofpersuasion@ft.com

Kong. Her driving philosophy is that
design should be human-centred.
“Really fundamentally my interest is in
how design affects human behaviour
and using it for positive effect,” she
explains, complaining that for too long
the word “design” has been used “as a
noun and not a verb”.
A visit to her studio, tucked away in
the backstreets of south-east London’s
Bermondsey, demonstrates that philos-
ophy in action. Situated in an old paper
factory, the workspace is oriented
around employees and visitors. The
lighting is subtle and sliding glass doors
separate off the meeting room, which is
more like a dining room, with elegant
Hans Wegner chairs, a large comfy sofa
and glass vases perched on the window-
sill. It exudes a Zen-like calm; visitors
are presented with a large bowl of fresh
blueberries, another of mixed nuts and
tea served from an elegant porcelain set.
This is not just a place in which you
would be happy to work, but also to live:
designers, like employers, think con-
stantly about the next generation’s
priorities.
“Millennials have very different
requirements. They want to feel at
home,” says Ms Crawford — they object
to an “inhuman” environment.
Although she herself is no newbie.
After starting out as a journalist on
Architects’ Journal, where she was told
she was “not serious enough”, Ms Craw-
ford was eventually hired in 1989 as
founding editor of Elle Decoration UK,
where she stayed for a decade. She made
the transition to set up her own studio in
London in the early 2000s, after a few
years spent learning about retail with
fashion designer Donna Karan.
Alongside the London studio, where
her team of 25 work on both commercial
and residential projects across the
world, she also heads the department of
mankind and wellbeing at the Design
Academy Eindhoven in the Nether-
lands.
With Milan’s famous Salone del
Mobile furniture fair running this week,
I ask how important these international
design fairs are? “It’s something we
debate at the school all the time. My
Peak stuff: Ilse view is that it’s still a crossroads where
Crawford’s people come together in the flesh.”
London studio Of her own ascent, she says: “There
shows her was never a great life plan in place.” But
philosophy in learning the ropes of the manufacturing
action, a place in process at Donna Karan became very
which you important, both in her own studio and
would be happy in her later partnership with Ikea.
to live as well as The Swedish furniture retailer hired
work Ms Crawford to launch her own range
Charlie Bibby
last year in a pilot project to try working
with external designers. The Crawford
collection, much of it made of soft cork,
clearly fits with the theme of creating
Ilse Crawford is hard to pin down on a
House definitive signature style. “We haven’t
style really got a house style,” she says,
arguing the space is created “around our
clients: they’ve created an identity,
Making a they’ve created something that
home for a addresses their specific personas”.
When she was taken on to design
brand Babington House, the Soho House
group’s country hotel in Somerset, she
was frank with founder and CEO Nick
Jones. “I said it needed not to be a
country house but really a house;
somewhere that was free, which was the
opposite to what country house hotels
were at the time: the clinky, clanky style,
getting dressed up for meals . . . all very
stiff.”
tactile products, natural to the touch.
But Ikea is in the process of a substantial
overhaul, repositioning itself with more
high street shops. Did it feel a sacrilege
taking on such a mass market project?
“I don’t think of myself as a name, you
just do what you do in the studio. You
don’t think about that, ever,” she says.
“For us it was a way of seeing if we could
take our human values — and we are
very interested in tactility — and take it
to a bigger audience or were we really
only appropriate for the more high
end?”
As someone who grew up in a big,
bohemian family house in Kent “where
parents go away for the weekend and
leave the keys to the drinks cabinet”, Ms
Crawford knew this more relaxed feel
provides atmosphere and character.
“Ultimately rooms have to be lived in
otherwise they die,” she adds.
So she starts from the bottom up on
any project — understanding the habits,
needs and desires of the people who will
be in the space, and the building itself,
its limitations and possibilities. The same
approach applies to a home for an
individual or a company. “Consequently
that ends up being a brand and an
identity: a space that amplifies and
accentuates who they are.”
airport, I think there is no
excuse for making non-
places any more’
chain — Portugal for the cork and
Poland for manufacturing and glass.
Ms Crawford’s cork-covered furniture
is selling at 165 per cent of the forecast,
and double the expected sales in the UK
and Sweden. It has now become part of
the main Ikea range. “Having a very
clear agenda, I think, really is how we
were able to navigate that system. If we
tried to do too much I think it wouldn’t
have worked.”
Have consumers, as Ikea’s chief sus-
tainability officer Steve Howard put it,
reached “peak stuff”? Ms Crawford
quips that if so Ikea would be well posi-
tioned to rebrand as a repair shop: “It
depends which part of the world you are
in. For sure in certain parts of Europe
where consumption has gone down con-
siderably, but I don’t think that’s so true
in China.”
Leading the redesign of Cathay
Pacific’s airport lounges involved telling
the airline it had to think about luxury
differently. “If you are travelling surely
what you need is someone who pays
attention, who cares about you, who
cares about your health, who’s got com-
mon sense,” she says, things she
describes as non-measurables: “Bec-
ause ultimately [passengers] are tired.”
The Hong Kong first-class lounge has
honed green onyx walls and Ingo Mau-
rer lighting.
“Just because something is public
doesn’t mean it has to be institutional,”
adds Ms Crawford. At the lounge in
Haneda airport in Tokyo, works by Japa-
nese textile artist Samiro Yunoki fea-
ture alongside furniture by Verner Pan-
ton and Benchmark: no place for uni-
formity there.
“Now we work everywhere and I
think we want to feel at home wherever
we are, which is about feeling safe and
grounded and comfortable. Whether we
are in the office or in hospital or in an
airport, I think there is no excuse for
making non-places any more.”
need little elaboration. It’s
number three that provides
the “teachable moment”.
Great place to meet
Zinfandel’s Restaurant, Zagreb
Where Mihanovićeva 1, 10000
Plug sockets/WiFi Yes
Open 6am-11pm; Sun from 6:30am
In its time, the Esplanade
Zagreb Hotel has hosted the
first striptease in Croatia’s
history, the Wehrmacht, and
refugees from Croatia’s 1991-
95 war of independence. Its
high-ceilinged rooms, some
with expansive views over
the elegant town centre and
hills beyond, are the first
port of call for bigwigs
visiting Zagreb. Prince
Charles was a recent guest,
following in the footsteps of
the likes of Arthur Miller and
Woody Allen.
Food has long been
central to the hotel’s appeal.
Nikita Khrushchev dined on
duck with red cabbage here,
while Queen Elizabeth was
so impressed with her
gilthead bream Dalmatian
style that she rewarded the
chef with a gold coin.
The Esplanade’s cafés and
restaurants remain the
The writer is the author of
‘You Talkin’ to Me?’ Rhetoric
from Aristotle to Obama
Espresso 18 HRK ($2.70)
Privacy AAEEE
default meeting place for
business people, politicians
and journalists.
Of note is the breakfast at
the airy Zinfandel’s
Restaurant on the ground
floor. The extensive buffet
includes spicy kulen salami,
a speciality of the Slavonian
plains to the east of Zagreb,
and Paški sir, a delicious
hard cheese from the barren
Adriatic island of Pag.
In grand central European
tradition, sparkling wine is
served at breakfast, in this
case a superb crisp
Chardonnay-based drop
from the Tomac winery in
the green hills south-west of
Zagreb. Wine with breakfast
is fairly common in the best
hotels of the former Austro-
Hungarian empire — though
always in moderation.
Andrew MacDowall
Tuesday 12 April 2016 ★ FINANCIAL TIMES 11

ARTS

The driving force behind a touring culture bus

A recreational vehicle is on a lecture. “There is so much misconcep-
tion on both sides, and anything I can do
a mission to foster artistic from a US perspective in Saudi will be so
links between the US and the interesting,” he says.
Stapleton and others are considering
Middle East. By Gareth Harris what will become of Culturunners once
its three-year odyssey is over. As impor-

I
n the past 18 months, a bus
emblazoned with the word
“Culturunners” has quietly wound
its way across the US. The 34-foot
Gulf Stream recreational vehicle
has covered more than 13,000 miles
through 27 states, heading into areas
where the inhabitants may be blissfully
unaware of its trailblazing mission: to
bring Middle Eastern artists and cura-
tors to the heartland of America.
The three-year Culturunners tour —
which began at the Rothko Chapel, Hou-
ston, in September 2014 — is spear-
headed by artist Stephen Stapleton, who
co-founded the London-based, arts non-
profit Edge of Arabia. So far more than
60 artists from countries such as Saudi
Arabia, Iran, Iraq and Turkey have
taken part in the initiative, which aims
to find “interconnected histories and
common concerns”.
Their journeys take several forms,
with artists staging exhibitions and
events, immersing themselves in
talks, or accumulating material for
future projects. Last year’s events
included a week-long community pro-
gramme in Detroit, at which the French-
Moroccan artist Sara Ouhaddou exhib-
ited abstract works derived from Islamic
design, and a series of performances at
New York’s Armory Show by Darvish
Fakhr, whose “flying carpet”-cum-
motorised skateboard referenced his
Iranian-US heritage.
Earlier this year, Palestinian artist
Khaled Jarrar installed what he calls a
“monument to the global issue of migra-
tion” in Juarez, Mexico. Named “Kha-
led’s Ladder” by the local community, it
incorporates parts of the fence built by
the US government on the Mexico-Texas
border. Jarrar, who is based in Ramallah,
says: “I am from a town surrounded by
walls. When [Donald] Trump and the
[Republican party] began to talk about
building a wall between the US and Mex-
ico, I felt compelled to explore the reality
of that situation.”
More recently, the bus parked in front
of the Capitol building in Washington
DC. The Culturunners team hosted
events to coincide with the Saudi artist
Ahmed Mater’s first solo exhibition in
the US, at the Smithsonian’s Arthur M.
Sackler Gallery. Entitled Symbolic Cities
(running until September 18), it delves
into the geographic heart of Islam, and
could not be more timely. The Desert of
Pharan series (2011-13) captures the
rampant redevelopment around Mecca
that is transforming Islam’s holiest site
into a consumer destination.
“I think it’s very important that people
in the US see different aspects of Islamic
art,” Mater says. “There is a hyper-
capitalist culture here in the US, as there
is in many ways in Saudi Arabia. Art and
culture, which cannot be isolated from
sociopolitical issues, should unite us.
Challenges: People forget that we have many con-
Saudi Arabian cerns and challenges in common.”
artist Ahmed But is anyone taking notice? Carol
Mater’s ‘Crisis’, Huh, the Freer/Sackler’s curator for con-
from the temporary art, says the visitor demo-
series ‘Ashab graphic is wide-ranging in terms of age
Al-Lal/Fault and nationality. “I have given gallery
Mirage: A talks to at least 50 to 60 individuals,
Thousand Lost mostly American, and the reaction over-
Years’ (2015) all was positive, a sense of eye-opening.”
Saudi Arabia has played an important
role in Culturunners. Initial funding
came from Art Jameel, the cultural arm
of the Abdul Latif Jameel Group, a Saudi
Arabia-based conglomerate. (Stapleton
says he is currently financing the ven-
ture through a crowdfunding campaign
and private donations and loans.) The
King Abdulaziz Centre for World
Culture, due to open in the eastern Saudi
city of Dhahran later this year, is behind
the next Culturunners scheme, which
involves sending young Saudi artists on a
four-city tour, taking in Houston and Los
Angeles. Khalid Al-Yahya, programmes
director for the museum, describes the
tour as a “people-to-people initiative,
with young Saudi creatives sharing their
stories across the US”.
The exchange cuts both ways. US art-
ist Matthew Mazzotta, who creates com-
munity-based public art projects, trav-
elled to Saudi Arabia last year to carry
out preparatory work for a future Saudi-
based Culturunners initiative. He was
impressed by the acumen and
enthusiasm of students at a women’s
university in Jeddah, where he delivered
tant as the art, it seems, is Culturunners’
role in stoking debates on policy and cul-
ture, like an itinerant think-tank. “What
has become apparent is that this model
of mobilising artists — connecting them
with bigger issues in the mainstream
media — has opened up important new
possibilities,” Stapleton says.
Andrei Tretyakov, a London-based
entrepreneur who founded the
art organisation “a/political” in 2013
and describes himself as an “investor
and partner” in the project, takes a simi-
lar view. “Many artists are becoming cul-
tural journalists, they have become
social antennae and understand politics
and the historical context. There is a
strong drive to make Culturunners a
new kind of media company, which
would be digitally focused,” he says.
Indeed, the RV already has multi-
media facilities, with filmmakers Matteo
Lonardi and João Inada on board to
‘Many artists are
becoming cultural
journalists, they
have become social
antennae’
capture the artists’ stories and reactions
in a series of 12 “character-driven vid-
eos”. The pair have also produced a film,
Reframe Iran, a series of interviews with
pivotal Iranian artists that will be shown
attheUniversityofMemphisinMay.The
stop will also feature an appearance by
Sudanese cartoonist Khalid Albaih at the
NationalCivilRightsMuseum.
Stapleton — who, as well as being
Culturunners’ driving force, also shares
driving duties — is pleased with his
project’s progress. “In spite of the cur-
rent atmosphere, we will continue to
connect people in America to what is
happening on the ground in the Islamic
world,” he says.
culturunners.com

First-timers get to the heart of a great ballet

DANCE
Giselle
Royal Opera House, London
AAAAE
Clement Crisp
Giselle, the finest flower of balletic
Romanticism, sublime in emotion and
sublimely difficult to dance well, has
been installed for several weeks at Cov-
ent Garden. It has honourably been in
the British national ballet’s repertoire
since 1934, when Alicia Markova
superbly danced its first performances.
In these eight decades it has put on a
good deal of weight and is now an
over-upholstered, 55-minute-first-act,
50-minute-second-act, heavily wooded,
thumpingly reorchestrated affair in
which the ardours of 1840s style are
clouded by portentous dramatics and
lethargic accompaniment.
I have seen many acclaimed inter-
preters of Giselle and Albrecht, and
my admiration has lately been for two
debutants. Very fine is Vadim Muntagi-
rov as Albrecht to Marianela Núñez’s
sincere Giselle. In every role Muntagirov
offers technical clarity matched by
Clarity:
Akane
Takada as
Giselle
Tristram Kenton
emotional — even spiritual — grace, and
a dramatic sense that speaks of his dig-
nity and intelligence as an artist. His
Albrecht is sweetly loving of Giselle,
then frozen with remorse as his
dalliance is revealed, and haunted
by these feelings in every dazzling step
of the forest scene. It is an interpretation
of unfailing elegance and acutely
judged expression.
In her recent debut Akane Takada
draws Giselle — as with her notable
appearance in Swan Lake last year — in
an exquisite line that exposes dance
and drama with unerring clarity. The
role, its shapes, feelings and musical
impulses, as well as its heart, are clear
and true.
Takada’s airy grace, her appreciation
of the physical and emotional logic of
her dances, and a penetrating sense
of despair in the mad scene, show
her gifts: a Giselle of subtle power. Thi-
ago Soares, who cannot make a mean-
ingless action on stage, was her Albre-
cht. The role is nobly done. His dancing
may seem momentarily thin, but the
character is superbly understood.
For the rest, various peasants leapt
energetically and rather coarsely about;
Yuhui Choe danced ravishingly in the
Act One sextet; Tomas Mock was a fine
Hilarion — no easy task — and the
orchestral tempi trudged onward.

To April 15, roh.org.uk

CLAS SICAL MUSIC
Bach Collegium Japan
Barbican, London
aaaae
Richard Fairman
Even now there are few musicians who
have performed and recorded all Bach’s
extant cantatas, more than 200 of them.
Over 19 years in the making, Masaaki
Suzuki’s recordings with his Bach Colle-
gium Japan have just been collected into
a single set — an achievement that puts
him alongside Bach conductors such as
Helmut Rilling, John Eliot Gardiner and
the late Nikolaus Harnoncourt.
The release coincides with Bach Colle-
gium Japan’s weekend residency at the
Barbican, its first in the UK. It will come
as no surprise that this was all Bach,
viewed from different angles — talks,
lectures, recitals and three concerts
comprising orchestral and choral works.
The residency culminated in a con-
cert in the Barbican’s main hall which
was itself many-sided. One striking fea-
ture was Suzuki’s daring decision to field
so few players. For the consoling
“Bekennen will ich seinen Namen”, all
that survives of cantata BWV200,
mellifluous countertenor Robin Blaze
sang to an accompaniment of two vio-
lins and continuo, but it proved enough
to fill the hall. How well the risk paid off.
Softly spoken Bach: Masaaki Suzuki
As his cantata recordings have shown,
Suzuki’s Bach has its own personality.
There are times when one wishes he
would dig deeper below the surface, but
his virtue is that the music feels natural
and light on its feet.
Bach’s Orchestral Suite No. 3, employ-
ing the full complement of two dozen
instruments, was like a breath of fresh
air, bright trumpets cutting across a del-
icately lit landscape. The Concerto for
two violins in D minor, with soloists Ryo
Terakado and Yukie Yamaguchi,
became intimate chamber music,
played one to a part.
To play the residency out in high style
Suzuki chose the Magnificat in D, most
celebratory of all Bach’s larger choral
works. The choir was well balanced and
precise. The soloists were impressively
led by Rachel Nicholls as soprano 1, fin-
ing back a voice that now lets rip in Wag-
ner operas. Others have painted the
music more vividly, but that is Suzuki’s
Bach, softly spoken, sharing its joy with
those who want to listen.
bachcollegiumjapan.org
12 ★ FINANCIAL TIMES Tuesday 12 April 2016

Tankaning sentiment
The rising yen has hurt the performance of Japanese stocks, although even in
dollar terms the Nikkei 225 has been weak. Companies more reliant on exports
for revenue have seen the worst performance on the Nikkei this year

Twitter: @FTLex Email: lex@ft.com

Caixabank/BPI:
Caixa is not king
News that Caixabank has agreed to
take a majority stake in Portugal’s
Banco BPI has been greeted by polite
applause from its shareholders. Shares
in Spain’s third-largest lender rose
3 per cent yesterday, having lost more
than a fifth of their value this year,
underperforming the MSCI Spanish
banks index.
Any applause is premature. The
terms of the deal are not yet known.
A takeover is a step into the unknown,
as it is Caixabank’s first major
acquisition abroad. Unlike Santander
or BBVA, Spain’s biggest banks,
Caixabank makes most of its earnings
in Spain, where it has ridden the
domestic economic recovery well.
Pre-tax profits tripled in 2015 and
non-performing loans as a share of
gross lending declined from double
digits two years ago to 8 per cent. It
has been a skilful buyer, snapping up
distressed banks for less than book
value and extracting savings.
Supporters argue that it would benefit
from being a consolidator in Portugal.
Once a deal is finalised, Caixabank
will be obliged to make an offer for the
rump of BPI, after the latter has sold its
operations in Angola. But regrettably
for the buyer, the risky Angolan
operation was also the most profitable
part of BPI, delivering a return on
equity in excess of 30 per cent
(compare this with just 5 per cent in
Portugal). BPI made a €76m profit
in the first half of last year, with
Portugal contributing only €6.6m.
Group-wide, its cost to income ratio,
at 57 per cent, is high compared with
rivals.
Also regrettable is the impact on
capital. Berenberg estimates that BPI’s
domestic business will raise risk-
weighted assets at Caixabank by €13bn
and reduce its core tier one capital
ratio by 100 basis points (from 11.6 per
cent last year).
Meanwhile, net interest income in
Spain is expected to drop this year as
eurozone lending rates, to which 80 per
cent of Caixabank’s loans are tied,
plunge further into negative territory.
The bank will also be hit by a Spanish
court ruling against interest rate
“floors” on mortgages, making them
less profitable.
Last year, Caixabank made an
unsuccessful bid for BPI at a 12 per cent
premium to the current share price,
implying a tangible book value of 0.8
times. Given the headwinds, this time it
needs a significantly lower price tag for
the deal to make sense.
Daily Mail/Yahoo:
Bottom fishing
If any media group can spot the value
in a bottom, it should be Daily Mail and
General Trust. Famous for the celebrity
photos in Daily Mail Online’s “sidebar
of shame”, DMGT (together with
unnamed private equity partners) is
reportedly keen on the beaten-up
shares of US internet group Yahoo.
Yahoo’s shares hit $56 in 2014. Despite
a recent sharp rally, they sit at $36 now.
DMGT will have lots of competition,
including Verizon, the US telecoms
company that, with an enterprise value
of $320bn, is 70 times DMGT’s size.
In recent years, Yahoo’s shares have
been determined by plans to realise the
value of its shareholdings in Alibaba
and Yahoo Japan. Together these are
worth $24bn after capital gains taxes
are taken out, Goldman reckons. The
company has $5.6bn in net cash. Yahoo
expects its core business to generate
about $750m in earnings (before
interest, tax, depreciation and
amortisation). That implies a value of
perhaps $4bn — a low multiple of
profits makes sense, given that
earnings fell by a fifth last year.
For DMGT, with an enterprise value
of about $3.3bn, buying even Yahoo’s
core unit by itself would be a mighty
stretch. Yahoo does have sizeable, but
slowing, online ad revenues worth
$3.4bn, eMarketer says. For DMGT that
would be an OMG: the Mail’s internet
ads business generates less than 5 per
cent of what Yahoo’s do. DMGT claims
nearly a quarter of a billion online
viewers annually but struggles to turn
the masses’ prurience into money.
DMGT profits have gone nowhere for
five years. DMGT’s strongest business is
selling information to bankers through
its Euromoney division, which
contributed an average of 40 per cent
of DMGT’s operating profits over the
past three years. However, earnings
from this unit have eroded since 2013.
A DMGT purchase, even with
partners, of core Yahoo, would be
doubly ill-advised. Certainly DMGT
Export exposure v 2016 performance
Konami
Nichirei Maruha
UNY Nichiro
Group
Sapporo
Fuji Heavy
Fast
Proportion of revenues from outside Japan (%)
0 10 20 30
FT graphic Sources: Thomson Reuters Datastream; Bloomberg; S&P
Going off the economic data, Japan
appears in the grip of violent mood
swings. How are you, Japan? Fine, no,
I mean terrible. Bankruptcies are
down, but the Tankan survey of
sentiment was awful, though wages
are rebounding, yet inflation is
weaker, which may explain falling
retail sales, even though household
spending is rising and . . . and . . .
Stop. Enough. Data does not always
tell a consistent story. Happily we
have markets too. Less happily, their
story is not a pleasant one for fans of
Abenomics. After Prime Minister
Shinzo Abe launched his economic
reforms in early 2013, the Nikkei 225
stock index nearly doubled in two
years and the yen fell a third —
exactly what a market expectation of
would struggle to absorb such a large
business, and it is far from clear that
the target’s decline is over. Bummer.
Phoenix:
premature rise
It should be an easy bet. As China’s
population ages and becomes
wealthier, money will surely flow into
healthcare. Yet there are few obvious
ways for investors to benefit. Hong
Kong-listed Phoenix Healthcare Group,
mainland China’s largest private
hospital operator by beds, is one.
Yesterday Phoenix’s shares increased
by a fifth after the company said that it
would buy 50 medical institutions from
state-owned enterprise China
Stock performance, 2016 (%)
20
Yamaha
Terumo
GS Yuasa Nikon
Japan Tobacco
Kyocera
Fanuc
Denso
Toyota Honda
TDK
-30
ALPS
Nitto Denko
40 50 60 70 80
higher growth and inflation looks like.
This year, despite another rate cut, the
yen is up a tenth, the Nikkei down a
quarter. Both send an unambiguous
message, and a bad one.
Clearly the two are related. Blaming
the yen for the Nikkei is a venerable
market rule, and one with a solid basis.
A rising currency hurts performance
measured in that currency. On top of
this, a stronger yen damages export
competitiveness. This year, the biggest
losers, such as electronics makers TDK
and Alps, have a high share of sales
going overseas, while many that won,
such as game-maker Konami and
brewer Sapporo, sell more in Japan.
Since mid March, the Nikkei has
slipped relative to the S&P even after
adjusting for the stronger yen. Finding
Resources Healthcare. The deal will
double Phoenix’s bed count and almost
triple its revenues (there have been no
disclosure about the target’s profits).
Phoenix will pay $480m in new
shares for the assets, making CRH the
company’s largest shareholder with a
stake of more than a third.
The deal is as much about survival as
growth. Phoenix owns a majority stake
in just one hospital. It also generates
government fees by operating nearly
60 publicly owned medical facilities. Its
largest business, contributing more
than half of gross profit, is managing
hospitals’ supply chains. Purchasing
power allows the company to benefit
from discounts of about 25 per cent on
various medical supplies, according to
Bernstein.
Regulations also allow hospitals a 15
Nikkei’s performance v S&P 500
$ price of Nikkei S&P
180 2100
10
0 airline food
-10 160 2000
-20
140 1900
-40
-50
120 1800
90
Apr 2015 Apr 2016
a single policy to explain a market
move is usually a fool’s errand,
particularly with such ambiguous
economic data. This said, a big factor
behind Nikkei weakness may be the
impending rise in the consumption
tax. Mr Abe recently reiterated his
resolve to see this through. Last time
this happened, in 2014, it aborted the
hopeful early stages of Abenomics,
and scrambled its core message
about a return to steady inflation.
Since 2012 the Bank of Japan has
habitually responded to yen strength
with redoubled monetary easing.
That may happen again, providing
some relief for investors. But a
sustained rally waits on a rather
more settled approach to fiscal
policy, too.
per cent mark-up on listed drug prices.
This business is being eroded. China
wants to reduce drug prices. Mark-ups
are being phased out. To compensate
hospitals, which derive as much as
40 per cent of their revenues from drug
pricing, user fees will need to rise.
Owning more hospitals outright will
enable Phoenix to move with this
trend, while developing its brand. But
patients attending most of the hospitals
owned or operated by the company are
funded by the state. As China tries to
extend medical cover while holding
down costs the company risks being
caught between conflicting policies.
The scarcity of ways to invest in
Chinese healthcare does not make
Phoenix an easy choice. As in the west,
healthcare investing requires a firm
grasp of politics.
Gategroup/HNA:
A well known Swiss company is
embroiled in a spat with some of its
shareholders about strategy and
management. A face-saving way to
settle the bust-up: agree to a takeover
bid from a Chinese conglomerate. No,
not Syngenta. This time it is Gategroup.
Yesterday, the airline catering group
agreed to a takeover from HNA Group
at SFr53 a share, a premium of 20 per
cent to the undisturbed price.
That pop comes on top of a 31 per
cent gain in the shares from a year ago.
But, including debt, the offer values
Gategroup at 8.5 times forecast
earnings before interest, tax,
depreciation and amortisation. Vienna-
listed rival Do & Co trades at 12 times
ebitda without a control premium.
Gategroup has significant market
share in the US and Europe. This has
not translated into high margins.
Operating margins are falling and over
the past five years have averaged 3.2
per cent, against just over 4 per cent at
rival LSG Sky Chefs (owned by German
flag carrier Lufthansa) and almost 8
per cent at Do & Co. The Austrian
group also doubled its revenue from
airline catering last year, albeit from a
much smaller base.
HNA’s interest in aviation services is
easily explained. Tourism and travel
are growing strongly in Asia. HNA
already owns airlines, and this year it
completed the acquisitions of
Swissport, a ground-handling business,
and Avolon, an Irish aircraft-leasing
group. Airline catering is just another
— and less capital-intensive — way to
profit from the industry’s overall
growth. Longer term, catering might
even become a selling point for full-
service airlines, rather than just
another operating cost that they
attempt to squeeze lower.
Lufthansa is not selling Sky Chefs,
and a third of Do & Co’s shares are held
by Attila Dogudan, its chairman. The
fact that Gategroup, for all its
weaknesses, is the only available option
— and appears to have room to expand
margins — should embolden its
shareholders to demand a better price.
Lex on the web
For notes on today’s breaking
stories go to www.ft.com/lex

Today’s temperatures
LO
Abu Dhabi Sun 39 Malta Sun 24
1000
Amsterdam Shower 16 Manila Sun 35
Athens Sun 26 Melbourne Cloudy 18

20 HIGH 1 0 1 0 Bangkok Sun 37 Mexico City Fair 30

LOW eoul Barcelona Sun 18 Montreal Fair 7
1020 Beij Beijing Fair 20 Moscow Sun 13
1010 4
31 okyo Berlin Cloudy 15 Mumbai Sun 34
slama ad
LOW 19 1020
Brussels Shower 16 Munich Fair 18
Sha hai Budapest Fair 20 Nairobi Fair 26
18 Buenos Aires Cloudy 22 New York Rain 14
Delhi Chicago Sun 7 Oslo Sun 14
Kolkat aipei Copenhagen Drizzle 13 Paris Shower 14
41 24 Dallas Fair 20 Perth Rain 26
mbai ong Kong Delhi Windy 36 Prague Cloudy 16
oi
3 Dubai Sun 35 Rio Sun 34
Ya Dublin Cloudy 12 Rome Sun 21
35 1010
M Edinburgh Rain 8 San Francisco Cloudy 17
B k Frankfurt Shower 18 Seoul Fair 21
Geneva Sun 21 Shanghai Rain 19
Ho i Minh City Hamburg Rain 12 Singapore Thunder 33
Colombo uala Brunei Hong Kong Rain 24 Stockholm Fair 12
3 4 L mpu Istanbul Fair 17 Sydney Rain 21
2 Jakarta Thunder 32 Taipei Cloudy 26
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1010 Kuala Lumpur Shower 34 Vancouver Shower 14
31 Kuwait Shower 28 Venice Sun 18
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Forecasts by Los Angeles Fair 19 Wellington Shower 20
Wind speed Luxembourg Shower 15 Yangon Sun 38
in KPH Madrid Shower 13 Zurich Fair 19

CROSSWORD
No. 15,212 Set by ARMONIE
        ACROSS 31 A fabulous Greek nonet
1 Ring student beset by siren entertains (6)

(6)
  4 Doctor dictates critical essay DOWN
(4,4) 1 Preserve house in archipelago
10 New ’otelier’s strange potion (8)
   (7) 2 Hesitancy in booking (11)
11 Willing to cut landed property 3 Escapade of sovereign on old
 (7) vessel (4)
 
12 Make a mistake holding 5 Understand working in yarn
American back? That’s (6,2)
  unusual! (4) 6 Is girl in sleazy bar, sneering?
13 Shocked by a dishonest (10)
 
organisation (10) 7 Some under arrest for years
  16 Drink turned Eddie joyful (6) (3)
17 Scams first to be made up (7) 8 Latest result in evaluation (6)
  20 Workman eats divine little fish 9 A scholar’s shillings pile up (5)

(7) 14 Insist choir deployed staginess
21 Opposed to Gaelic bible in the (11)
   beginning (6) 15 Quasimodo’s identical twin?
24 Know Carol’s not back in (4,6)
London (10) 18 Number taken in by flighty
  25 Complaint of German leader? female is to increase (8)
Impossible! (4) 19 Savages cook fowl (8)
27 Time husband should care (7) 22 Society girl runs to become a
29 Become aware that lies are sportswoman (6)
JOTTER PAD risky (7) 23 Crawler is a firm supporter (5)
30 Quiet soldier’s getting worn 26 Cultivate key member (4)
out (8) 28 Oscar has drill and pick (3)

Solution to Saturday’s prize puzzle on Saturday April 23

Solution to yesterday’s prize puzzle on Monday April 25
Winners’ names will be printed in Weekend FT
Tuesday 12 April 2016 ★ 13

Pioneer Olympus Anglo Shanghai US 10-year Brent crude US dollar Gold

House rules Caesars case puts American Composite Treasury index
law firm in the spotlight 8% 3.9% 6.9% 1.7% 1bp 1.81% 0.3% 1.3%
INSIDE FINANCE, PAGE 14
Y338 Y4,025 585.1p 3,034.6 1.73% $42.70 93.95 $1,255

Goldman pays $5.1bn for mis-selling Short

View
3 Deal in mortgage-backed securities case 3 Provisions for fines erase fourth-quarter profits
ALISTAIR GRAY — NEW YORK tice said. The bank knew the instru- the securities. In one example from that was presented to it between
Jennifer
ments it sold “were full of mortgages 2006 highlighted by regulators, Gold- December 2005 and 2007. The bank has Hughes
Goldman Sachs has inked a $5.1bn set- that were likely to fail”, said Stuart Del- man’s head of due diligence sent an now acknowledged the committee
tlement with US authorities over mis- ery, acting associate attorney-general. email to a colleague that appeared to received only “summaries” of due dili-
sold mortgage-backed securities, in a Goldman disclosed in January that it show that he knew investors were being gence that had been done on the loans. If the yen market were a scary movie, this is the point at
final agreement that sheds light on had agreed to the settlement in princi- misled on securities backed by loans Under the terms of the settlement, which discordant music signals a growing danger. Every-
banks’ behaviour in the run-up to the ple. Provisions for the penalties wiped from Countrywide, the mortgage lender Goldman is required to pay a $2.4bn one thinks that the authorities are prepared to intervene at
financial crisis.
Federal officials provided fresh det-
out most of its fourth-quarter profits.
It is the latest in a series of settlements
that later ran into trouble.
“If they only knew,” the Goldman
‘If they civil penalty as well as $1.8bn in relief to
homeowners and distressed borrowers.
some point, they just don’t know which door they are lurk-
ing behind. The yen reached a 17-month high yesterday,
ails yesterday of what they described as authorities have reached with banks, employee wrote, referring to a bullish only knew’ The deal includes $875m in claims from pushing the dollar back to Y107.63.
“serious misconduct” by Goldman including almost $17bn with Bank of research report that recommended Goldman other agencies, including state attor- Unlike the People’s Bank of China, which speculators
when it sold pools of loans to investors America, $13bn with JPMorgan and investors buy shares in Countrywide. employee, neys-general. battled with in January, the Bank of Japan is a familiar
that went on to cause an economic $7bn with Citigroup. The email was sent while Goldman was referring to a Goldman said: “We are pleased to put opponent with an arsenal of well-known warnings. That
meltdown. In a “statement of facts” that the bank preparing a security backed by Coun- bullish report these legacy matters behind us . . . Since language is now key. The most recent utterances rank as a
Investors suffered billions of dollars agreed with regulators, Goldman trywide loans. recommending the financial crisis, we have taken signif- three on a scale of one to five, suggesting an elevated risk of
in losses from securities issued and acknowledged it had made “false and Meanwhile, regulators said, a com- shares in icant steps to . . . reinforce our commit- intervention, according to Nomura. Taro Aso, finance
underwritten by Goldman between misleading representations” to prospec- mittee Goldman set up to vet the securi- Countrywide ment to our clients and ensure our gov- minister, on Friday talked about the economic dangers of
2005 and 2007, the Department of Jus- tive investors on the loans underpinning ties it issued approved every single one to investors ernance processes are robust.” excess volatility and disorderly moves — both level threes.
Warning that Japan would “take necessary steps under
certain circumstances”, as he did, is almost a level four.
A level five would involve hints of talks with foreign
counterparties. Beyond that, history suggests that the BoJ
calls some dealers to “check” the price, with the aim of
End of the line unsettling the market. Then comes intervention. By those
Canadian Pacific standards, action still appears a way off. But it depends on
how fast the market moves. Japanese officials are in Wash-
gives up pursuit ington this week for the annual IMF meetings, enabling
them to try to win backing for unilateral action. The dollar
Canadian Pacific, the rail company at Y105 is a possible line in the sand. But Y103 — compa-
backed by Bill Ackman, the activist nies’ average break-even, as calculated by Japan’s Cabinet
investor, yesterday conceded defeat for Office — seems more likely.
the second time in 18 months in an effort Positioning data show “long” yen bets are hovering near
to take over a rival when it abandoned its four-year highs even as leveraged investors cut back their
$27bn pursuit of Norfolk Southern, holdings for a second consecutive week. That suggests
writes Robert Wright in New York. some of the boldest money might want to take profits and
CP said that it was abandoning all its step back. Then again, post-fact justifications for the yen’s
steps to merge with NS, the second- surprise rally are coming thick and fast.
biggest rail operator in the eastern US, These range from its weak inflation-adjusted level
including a motion at NS’s forthcoming against its trading partners, to the unwinding of yen
annual meeting urging directors to hedges by foreigners dumping Japanese stocks — and they
consider CP’s approach. “No further could embolden investors who are desperate to make up
financial offers or overtures to meet with for a dire first quarter. The BoJ and the finance ministry
the NS board of directors are planned at will need to keep tight control of the script. Actors in scary
this time,” it said. movies do stupid things the rest of us would not dream of.
The company also appeared to rule The same could apply to investors under pressure.
out further attempts at consolidation
among the seven large railways that
dominate the industry in the US and Yen positioning is at extreme levels
Against Net future contracts
Canada. The pursuit of NS followed a the $ according to CFTC (’000)
similar quest by CP in October 2014 to
win over CSX, the biggest railway in the 70 100
Y per $
eastern US. That was also abandoned. 80 50
Mr Ackman’s Pershing Square fund is 90
Yen net 0
the biggest shareholder in CP, and he had 100 position ‘Long’ bets on
personally argued vigorously in favour 110
-50 the yen are near
of a merger. -100
four-year highs as
The deal’s abandonment marks a 120 the currency hit a
further setback for the activist investor 130 -150 17-month peak.
following his backing of Valeant, the 2012 13 14 15 16 The BoJ needs to
indebted drug company. Source: ANZ keep tight control
Defeat deals blow to Ackman page 16
jennifer.hughes@ft.com
Eitan Simanor/Alamy

M&A crackdown stirs investor fears

of cutback in corporate bond supply
GAVIN JACKSON — LONDON pace in 2016 to match or fall slightly replace the paper as competition for US
ERIC PLATT — NEW YORK
short of the flurry of offerings in past high-grade debt heats up.
A crackdown on mergers and acquisi- years, but the removal of several high- In a volatile start to the year for risk
tions has put investors on edge over profile M&A financing packages could assets, corporate issuance had been
the prospect of rising competition for put that in jeopardy. buoyed by a handful of large acquisi-
corporate bonds if rules scuttle other “If you get more of these capricious tion-related financings. Investment-
large deals. proclamations that are directed to the grade groups sold $364bn of new debt,
Saturated US steel sector business merits or anticompetitive mer- just behind the record first quarter of
pins hopes on mini-mills New US laws led Pfizer and Allergan to its of combinations, that would be a big- 2015, according Dealogic data.
abandon a $160bn deal because of tax ger concern,” said Bonnie Baha, head of Investor appetite has remained
The US steel industry has been concerns, while Halliburton’s takeover global developed credit at DoubleLine healthy for corporate bonds, particu-
grappling with the same surge of of Baker Hughes has been blocked on Capital. larly as the market bounced off Febru-
cheap Chinese exports that has competition grounds. “We’re in an election cycle, and what- ary lows. “Demand is outstanding,” said
devastated the sector worldwide. M&A has become a significant driver ever the landscape looks like today Brendan Moran, global co-head of cor-
However, the benefits offered by of corporate bond supply since deal could be dramatically different in a year porate origination at Société Générale.
electric furnaces are bringing hope for activity accelerated in 2013, with overall from now.” “We have continued to see net fund
inefficient US plants. US investment-grade issuance surpass- Investors, who depend on cash from inflows into fixed income, particularly
Analysis i PAGE 15 ing $1tn in 2014 and 2015. coupon payments and redemptions, are into credit. Corporate has that safe-
Several bankers had expected the concerned that they will struggle to harbour feel to it.”

Companies / Sectors / People

Companies
AK Steel........................................................15
AOL.................................................................14
Abraaj.............................................................16
Airbus...............................................................7
Alibaba...........................................................12
Allergan.........................................................13
Alps..................................................................12
Amazon.........................................................16
Andreessen Horowitz...........................10
Apollo Global ...........................................14
Apple..........................................................9,10
Avolon............................................................12
BATS Global Markets...........................16
BBVA...............................................................12
BP.....................................................................10
BPH Bank.....................................................16
Baker Hughes............................................13
Banca Popolare di Milano.................20
Banca Popolare di Vicenza..............20
Banco BPI...............................................12,17
Barratt Developments..........................21
Berkeley.........................................................21
Big Basket....................................................16
Bitdefender..................................................17
BlackRock.......................................................3
Boeing..............................................................7
CK Hutchison.............................................17
CSX...................................................................13
Caesars Entertainment........................14
Caixabank...............................................12,17
Canadian Pacific.................................13,16
Capital Group............................................22
Cassa Depositi e Prestiti......................4
Chardan Capital Markets...................14
ChemChina..................................................17
China Resources Healthcare............12
Citigroup.......................................................16
Countryside.................................................13
Cranswick.....................................................21
Daily Mail and General Trust.....12,14
Dechra............................................................21
Dell...................................................................16
Deutsche Bank..........................................17
Do & Co.........................................................12
EMC.................................................................16
ExxonMobil..................................................21
Facebook......................................................10
Flipkart...........................................................16
ForeScout.....................................................17
GE Capital....................................................16
GE Money....................................................16
GW Pharmaceuticals.............................14
Galliford Try...............................................21
Gategroup..............................................12,17
General Electric........................................16
Goldman Sachs...................................13,16
Goodyear......................................................22
Google..................................................9,10,14
HNA Group............................................12,17
Halliburton...................................................13
Herbalife.......................................................16
IMG...................................................................14
Ikea..................................................................10
Ingram Micro..............................................17
Intel..................................................................10
Intesa Sanpaolo..........................................4
JPMorgan.....................................................16
Jazztel............................................................17
Konami .........................................................12
LSG Sky Chefs...........................................12
Legg Mason...............................................22
Lego................................................................10
Lufthansa.....................................................12
Marathon Oil..............................................21
MassRoots...................................................14
Microsoft...................................................9,14
Miller Construction.................................21
Mossack Fonseca....................................10
NTT.................................................................16
National Oilwell Varco..........................21
Nokia...............................................................10
Norfolk Southern..........................13,16,21
Novo Banco.................................................17
Nucor..............................................................15
O2......................................................................17
Ola....................................................................16
Orange...........................................................17
Osborne & Little........................................4
Paul Weiss...................................................14
Paytm.............................................................16
Peppertap....................................................16
Perot Systems...........................................16
Pershing Square.................................13,16
Persimmon...................................................21
Petrobras........................................................2
Pfizer...............................................................13
Phoenix Healthcare................................12
Pimco.............................................................20
Reliance.........................................................16
Rosneft.........................................................20
Santander.....................................................12
Sapporo.........................................................12
Segro...............................................................21
Sequoia Capital........................................16
Société Générale......................................14
SoftBank.......................................................16
Soho House................................................10
Sonangol.......................................................17
StudioIlse.....................................................10
Swissport......................................................12
Syngenta.................................................12,17
TDK ................................................................12
TPG..................................................................14
Tata.................................................................16
Tata Steel.....................................................15
Taylor Wimpey..........................................21
Three...............................................................17
Tiger Global................................................16
Tough Mudder..........................................14
Trafigura......................................................10
Twitter...........................................................10
US Steel...................................................15,15
UniCredit.....................................................20
Unitel...............................................................17
Valeant.....................................................13,16
Valero.............................................................21
Verizon.....................................................12,14
Vodafone........................................................7
WME................................................................14
Walmart.........................................................15
Williams Companies...............................21
Yahoo........................................................12,14
Yahoo Japan...............................................12
Sectors
Airlines...........................................................12
Banks.......................................12,13,14,17,20
Financial Services............................20,22
Financials.........................................12,20,22
Healthcare...................................................12
Industrials...............................................15,16
Media..............................................................12
Oil & Gas................................................13,20
Personal & Household Goods.........10
Pharmaceuticals.......................................13
Retail...............................................................16
Support Services.............................7,12,17
Technology......................................10,16,17
Telecoms.......................................................17
Transport................................................13,16
Travel & Leisure......................................14
People
Ackman, Bill...........................................13,16
Crawford, Ilse.............................................10
Dean, Will.....................................................14
Dogudan, Attila........................................12
Fink, Larry......................................................3
Grove, Andy...............................................10
Gupta, Sanjeev..........................................15
Harrison, Hunter......................................16
Horowitz, Ben............................................10
Jones, Nick..................................................10
Longhi, Mario.............................................15
Menon, Hari................................................16
Messina, Carlo.............................................4
Ollila, Jorma................................................10
Oudéa, Frédéric........................................14
Rossinyol, Xavier......................................17
Santos, Isabel dos...................................17
Sechin, Igor................................................20
Spurny, Tomas..........................................16
Tan, Adam...................................................17
Worah, Mihir..............................................20

© The Financial Times Limited 2016 Week 15

14 ★ FINANCIAL TIMES Tuesday 12 April 2016

COMPANIES
INSIDE BUSINESS
Banks
FINANCE

SocGen chief to face Panama questions Sujeet

French senate to grill
Oudéa over lender’s use
of data-leak law firm
MICHAEL STOTHARD — PARIS
The chief executive of Société Générale
is to be hauled in front of the French sen-
ate today to answer questions about his
bank’s role in setting up offshore com-
panies for clients in Panama.
The information has caused a public
outcry and led to allegations of tax eva-
sion and money laundering.
Since the leak, the French financial
prosecutor has opened a formal investi-
gation into money laundering at French
banks. Last week investigators raided
the headquarters of SocGen and took
away documents.
The French senate said yesterday it
was going to look at how certain French
banks had set up offshore companies
Indap
set up by SocGen after 2012, when the 979 reminded” its clients to comply with the
bank promised to close offices in certain tax regulations of their countries of resi-
Caesars bankruptcy
Shell companies
offshore jurisdictions and to “end a commissioned by dence. The number of “active struc-
number of opaque practices”. SocGen from tures” created via the firm Mossack
At a senate hearing that year, Mr Fonseca “amounts to a few dozen”
shines spotlight on
Mossack Fonseca
Oudéa said the bank had withdrawn today, it added.
from all countries belonging to the grey 11 m
The SocGen board reiterated its sup-
list of tax havens compiled by the OECD
and had a “adopted a strict system” of
controls.
Number of
documents leaked
from the Panama
port for management on Friday and said
the bank was “especially vigilant”
concerning the application of rules and
role of law firm
SocGen admitted last week that it had legal practice safeguards against money laundering
set up accounts for clients via Mossack and tax evasion.

Frédéric Oudéa has been called to
appear after the bank was identified in
the Panama Papers data leak as the
fourth most prolific user of law firm
Mossack Fonseca to set up offshore shell
companies. It commissioned the crea-
tion of 979 such companies for clients.
The hearings are part of the global
fallout from a leak of more than 11m
documents from the Panama law firm.
that “may have sought to hide assets”,
adding that they were calling on Mr
Oudéa first.
Its action follows a week of mounting
pressure on SocGen. Michel Sapin, the
French finance minister, last Wednes-
day demanded a full inquiry to see if any
“reprehensible acts” were committed.
Mr Sapin said he would be particu-
larly vigilant about offshore companies
Technology. Break-up
Fonseca, but said that media reports
about the issue were giving rise to “out-
rageous misconceptions”.
The bank said it had closed operations
in Panama as well as the Philippines and
Brunei because they were on the OECD
grey list. The offshore companies set up
by SocGen were not owned by the bank
“but by clients”, it said.
The bank said that it had “proactively
A
The bank also said that it would pur-
sue defamation claims against Jérôme
Kerviel, the rogue trader whose losses
cost it €4.9bn in 2008, as well as Jean-
Luc Mélenchon, the well-known French
leftwing politician.
Mr Kerviel said last week that SocGen
was a “habitual offender” while Mr
Mélenchon said that the bank’s leaders
were “liars” who were “being punished”.
sk professional advisers about the worst
aspect of their work and, invariably, they will
cite the indignity of pitching for business. So
lawyers, accountants and bankers are only
too relieved when companies evolve into loyal
“house accounts” that no longer require constant market-
ing attention. But that cosiness can raise concerns about
whether longstanding client relationships can lead to
advice that is not objective, which eventually hurts not
only clients but those on the other side of the table.
In mid-March, a court-appointed examiner released a
much-anticipated report on the events leading up to the
2015 bankruptcy of a subsidiary of Caesars Entertainment
Corp: 1,787 pages analysing transfers executed by the
Caesars’ parent, which is owned by the private equity
firms Apollo Global and TPG.

Daily Mail joins potential Yahoo bidders
UK newspaper publisher
is latest to consider buying
the US internet company
HANNAH KUCHLER — SAN FRANCISCO
MURAD AHMED AND ROBERT COOKSON
LONDON
Yahoo is finally getting some love. The
purple-plastered internet brand, best
known for its glory days in the last dot-
com boom, is attracting bidders includ-
ing media companies, technology rivals
and private equity firms after years of
being valued primarily for its stake in a
Chinese ecommerce group.
The Daily Mail and General Trust, the
UK publisher of the Daily Mail newspa-
per, is the latest company to consider a
takeover of Yahoo, the internet business
under pressure from shareholders to
sell its core business as a way of splitting
the $35bn company from its $29bn
stake in Alibaba.
DMGT says discussions are at a “very
early stage” over a potential partnership
with a private equity firm to finance a
deal that would give it a broader web
‘[DMGT] tends to
identify assets that are
not on most people’s
radar screens’
presence for its online publishing
efforts.
Analysts at Liberum say that buying
Yahoo could help the Daily Mail sell
more advertising in the US, using the
internet group’s relationships and tech-
nology and adding scale by combining
the two groups’ advertising space.
But David Reynolds, an analyst at Jef-
feries, says that participating in a highly
competitive auction is not typical of
DMGT’s approach. “They tend to iden-
tify assets that are not on most people’s
radar screens,” he says. “The probability
of DMGT winning the asset is slim.”
One person familiar with the matter
says DMGT would not consider an out-
right acquisition or a cash deal for
Yahoo and sees two possibilities.
One option would be to take on
Yahoo’s news and media properties
after a private equity group secured
ownership of the full internet company.
These could include Yahoo News, Yahoo
Finance, Yahoo Sports and Yahoo’s
video operation, anchored by veteran
US television journalist Katie Couric.
A second possibility is for a private
equity group to acquire Yahoo and cre-
ate a new company that would then
incorporate Yahoo’s news and media
assets with the Mail’s online franchises,
such as Dailymail.com and Elite Daily,
the youth-focused cultural website the
Yahoo has company acquired last year for $43m.
suddenly found DMGT would be the majority share-
itself the centre holder of the new company.
of attention Yahoo declined to comment.
after years of DMGT joins a number of potential
being valued bidders, each attracted by a different
primarily for its aspect of the company.
Alibaba stake Verizon, the US telecoms group, has
Marcio Jose Sanchez/AP
expressed an interest, possibly mod-
elled on its $4.4bn purchase of AOL last
year. That deal gave the company access
to consumer data and an advertising
business, and helped it launch an online
video app. Private equity firms have
also been considering plans that could
see Yahoo broken up, with some of its
least popular properties closed. Micro-
Yahoo
Global net digital ad revenues ($bn)
3.41 3.51 3.49 3.47 3.35
2.80
2011 12 13 14 15
Sources: eMarketer; Thomson Reuters Datastream
soft might support a private equity bid
to secure its search deal with Yahoo,
which sends at least half of its search
traffic to the technology group’s Bing
search engine, according to a person
familiar with the matter.
Google has not commented on reports
that it could add cash to a PE deal,
potentially to secure its own search
agreement with Yahoo or even to pur-
chase some of its office real estate.
Yahoo, meanwhile, is torn about
whether it even wants to sell itself.
Marissa Mayer, chief executive, is press-
ing ahead with her own turnround plan,
including closing some underperform-
ing businesses. The Yahoo board had
Share price ($)
50
45
40
35
30
25
16 Jan 2015 2016 Apr
been focused on trying to spin-off the
core business in a tax-efficient way to
allow shareholders to make the most of
its 15 per cent stake in Alibaba.
But in February, under pressure from
investors, led by activist shareholder
Starboard Value, Yahoo hired Goldman
Sachs, JPMorgan Chase and PJT Part-
ners to advise a new committee of inde-
pendent board directors on alterna-
tives. That process effectively sidelined
Ms Mayer from deliberations about the
future of the company.
Analysts estimate the core business
could be worth about $4bn. However,
Yahoo has been shrinking in recent
years. Last year, it generated revenues,
excluding traffic acquisition costs, of
$4.1bn. It reported a net loss of $4.4bn.
Brian Wieser, an analyst at Pivotal
Research, believes the Yahoo board will
only sell the core business if it is offered
“a very high bid”, as it would prefer to
allow current management to continue
with its plans. However, he adds, there is
no shortage of potential buyers, some of
whom may be willing to overpay.
More companies could discover a hid-
den desire for Yahoo in the days running
up to the April 18 deadline for first bids.
As Starboard prepares for a proxy con-
test, pushing to replace the company’s
entire board at the next annual meeting,
Yahoo will feel the need to at least show
it is treating each suitor seriously.
ft.com/lombard
A flurry of creditor lawsuits allege that the owners used
the deals to move value away from the subsidiary into sep-
arate corporate entities that favoured their own interests.
According to the report, the subsidiary that held most Cae-
sars assets was in effect insolvent within months of the
$31bn buyout in 2008 — meaning that the transfers may be
legally “fraudulent”. It estimates that the value of the
transfers, along with claims of breach of fiduciary duty and
the aiding of fiduciary breaches, could be worth $5.1bn.
Wheeling and dealing at Caesars since the leveraged
buyout has raised eyebrows for years. “The Caesars case is
a brilliant and unprecedented example of creative liability
management that is testing the limits of the market,” says
Sarah Gefter, senior analyst at Reorg Research.
Apollo, the private equity firm that drove the machina-
tions at Caesars, is well known for its bare-knuckle negoti-
ating tactics. What has now become equally intriguing is
the role played by Apollo’s external law firm: Paul, Weiss,
Rifkind, Wharton & Garrison.
A key group of lawyers at the firm had been advising the
private equity titan for several years. They joined the firm
in 2011 from O’Melveny & Myers, where they had begun
working on Caesars’ transactions. Apollo’s chief legal
officer since 2006, John Suydam, was formerly at O’Mel-
veny. Dealogic data show that, since 2012, Paul Weiss has
represented Apollo or its
affiliates in about 40 merger
and acquisition deals. Cru-
‘Advisers who tell
cially, that included repre- clients what they
senting both Caesars Enter-
tainment Corp and its sub-
want to hear can
sidiary in their dealings. keep the billable
A section in the court
examiner’s report for Cae-
hours flowing’
sars is dedicated to the role of
Paul Weiss in most of the disputed transactions. Under
corporate law, insolvency at the Caesars operating com-
pany should have led to the appointment of independent
directors, lawyers and bankers to protect creditors.
Instead, the court examiner found that Paul Weiss
appeared to ignore the prospects of insolvency despite
possessing documents and analyses that suggested it. It
then repeatedly represented both the parent and subsidi-
ary Caesars entities despite their diverging interests.
Richard Davis, the examiner, wrote that he “believes
there is a reasonable case that a court would find that a
conflict existed in one law firm [Paul Weiss] representing”
both the parent and the subsidiary between 2013 and
mid-2014. Mr Davis also noted the ties between Apollo and
its attorneys.
“During this entire period, Apollo also was a very signifi-
cant client of Paul Weiss on matters unrelated to Caesars,”
he wrote. “This fact was not known to the independent
directors of [the parent]. The Caesars General Counsel was
aware of this, and believed that Paul Weiss was more
responsive to the Apollo (and TPG) directors than they
were to him.”
Paul Weiss insists it had little idea that Caesars had
reached insolvency, saying it worked in “good faith” and
“did not in any way prejudice its clients or their creditors”.
And Mr Davis concluded that a claim that the Paul Weiss
attorneys themselves aided breaches of fiduciary duty
would be “weak”, as “knowing participation” of that
breach by an adviser would be required to find liability.
Still, the work of third parties was crucial. In a press
release, the Caesars parent said it stood behind its dealings
and cited a set of 10 investment banks, law firms, and con-
sultants, including Paul Weiss, on which it relied. Yet no
firm seems to have been as embedded within both the
casino group and Apollo as Paul Weiss.
Some advisers choose to offer their best counsel, even if
it makes life difficult for a client. Others tell customers
what they want to hear, knowing a happy client can keep
the billable hours flowing. Potential damages of $5bn may
be an indication of which approach was chosen at Caesars.
sujeet.indap@ft.com

Travel & leisure Technology

Tough Mudder braced for Asia endurance test Cannabis users’ network eyes Nasdaq high life
SHANNON BOND — NEW YORK
Tough Mudder is exporting the electric
shocks, mud pits and ice baths of its
extreme obstacle courses to Asia and
the Middle East in a partnership with
IMG, the entertainment and sports
marketing group owned by WME.
The company will launch its first
events in China and the United Arab
Emirates this year with expansion to
Japan, South Korea and Singapore
from 2017. It will also stage its first
Indonesian Tough Mudder this year
through a separate deal with Seroja
Partners, a Jakarta-based media and
technology investment firm. The com-
panies did not disclose financial details.
Tough Mudder has grown rapidly
since its 2010 US launch. The privately
owned company achieved $100m in
revenue last year, up from $22m in 2011,
and made a $5m profit.
It will stage 122 courses in 10 coun-
tries this year and says more than 2m
people have participated in its events —
which founder and chief executive Will
Dean calls “challenges”, not races.
Tough Mudder is among a number of
companies looking to capitalise on
growing global interest in fitness, well-
being and live experiences. Its first
moves outside the US were to the UK
and Australia, but Mr Dean sees strong
opportunities in emerging economies.
“China is a very big market and of
course it’s a country that’s developing
very quickly. There is a huge emerging
middle class where people are changing
from sedentary lifestyles and looking to
get more active. Gym memberships and
participation in events are increasing
very quickly,” he said.
Mr Dean cites Ironman, the long-dis-
tance triathlon brand bought last year
by China’s Dalian Wanda, as a model for
the kind of “lifestyle brand” he hopes to
build. “They’ve set the standard for how
you [make] a brand global . . . They are
a good example of a company that has
shown staying power.”
NICOLE BULLOCK — NEW YORK
A social network for cannabis enthusi-
asts is bidding to trade on the Nasdaq in
what could be the first such listing for a
company that caters to both medical
and recreational users.
Launched in 2013, MassRoots, which has
beendescribedasthe“Facebookforpot”,
letsits775,000userssharetheircannabis
experiences, follow dispensaries and
keep up to date on news about legalisa-
tion. Businesses can advertise directly to
cannabisconsumers.
Yesterday, the lossmaking company
filed paperwork with US regulators to
raise up to $6.5m by selling shares and
warrants. Chardan Capital Markets, a
privately held investment bank based in
New York, will underwrite the deal.
“Our growth has been primarily
driven by MassRoots’ increasing popu-
larity as one of the first national canna-
bis brands and word-of-mouth enthusi-
asm from our users,” the company said
in its filing. “We believe that by creating
a central community of cannabis con-
sumers, we are creating a valuable mar-
keting channel for cannabis and its
ancillary products.”
Nasdaq declined to comment.
GW Pharmaceuticals, which develops
cannabinoid prescription medicine, is
already listed on Nasdaq.
MassRoots currently trades on the
over-the-counter market with a $61m
market capitalisation. Its shares ranged
from 65c to $7 over the past year.
Terra Tech, a cannabis focused agri-
culture company, also yesterday took
steps to seek a Nasdaq listing.
The MassRoots filing cited projec-
tions that cannabis sales permitted
under certain state laws would grow
from $1.43bn in 2013 to $10.2bn by
2018. Cannabis is still illegal under fed-
eral law.
MassRoots operates in the 23 US
states and the District of Columbia
which have medical cannabis laws and
four that have laws for recreational use.
Tuesday 12 April 2016
Crisis-hit US steel pins hopes on ‘mini-mills’
Benefits of modern
electric furnaces bring
hope for inefficient plants
ROBERT WRIGHT — FAIRFIELD, ALABAMA
The sign at the exit of US Steel’s Fairfield
steelworks seeks to give those leaving a
lasting, feel-good boost. “Our employ-
ees are our most valued asset,” it reads.
Turn around and look at the mill’s
buildings, however, and the sign seems
like a dark joke. Smoke stopped rising
from the plant’s blast furnace and strip
mill in August last year when US Steel —
the one-time behemoth of US heavy
industry — closed most of the facility,
making 1,100 workers redundant. If it
ever reopens, there will be far fewer
employees.
The job losses at Fairfield on the out-
skirts of Birmingham, Alabama, are
among 13,500 in US steelmaking since
January last year, and amount to almost
10 per cent of total employment in the
sector, according to the American Iron
and Steel Institute, a trade body.
The redundancies show how the US
industry has been grappling with the
same surge of cheap Chinese exports
that has devastated the sector’s eco-
nomics worldwide. Imports made up a
record 29 per cent of the US steel market
last year, while domestic production fell
12 per cent compared with 2014.
The global crisis in steelmaking,
partly rooted in excess capacity and
China’s economic slowdown, is most
apparent at Tata Steel’s lossmaking UK
operations. These were put up for sale
by the Indian group last month, placing
15,000 jobs at risk, including 4,000 at
Port Talbot, Britain’s biggest steelworks.
Fairfield is far from US Steel’s only
move to retrench. The company has
made two other significant closures on a
temporary basis in the past six months
involving plants at Granite City, Illinois,
and Lone Star, Texas.
“The market was saturated with
imported product and it just took a toll
on us,” says David Clark, president of
the main branch of the United Steel-
workers’ Union at Fairfield.
Chuck Bradford, a steel industry ana-
lyst, says that, on top of weak market
Moving metal
Smaller facilities tend to specialise in steel products for construction
conditions, Fairfield — like Port Talbot
— suffered from being a relatively out-
dated and inefficient facility. In recent
years Fairfield had been heavily
dependent on the oversupplied market
for steel pipes for the US oil industry.
“That’s dead at this hour, not only
because the oil price is down but
because too much new capacity was
built,” adds Mr Bradford.
US Steel, which has a market capitali-
sation that shrank from $14.3bn in 2007
to $2.4bn now, declined to elaborate on
the reasons for the plant closures. But
Mario Longhi, chief executive, said in
August the moves were necessary to
improve the “overall efficiency and cost
structure” of US Steel’s manufacturing
★ FINANCIAL TIMES
COMPANIES
of flat-rolled steel, which is used to
make car exteriors, among other things.
US Steel had a $1.5bn net loss for 2015,
compared with a 2014 profit of $102m.
Conditions were also dire for AK Steel,
the US’s other big listed operator of
“integrated mills” — traditional steel-
works with huge blast furnaces that
make iron using ore and coke. The com-
pany’s net loss for 2015 deepened to
$511m, from $96.9m for 2014. Some of
the highest grades of steel can be pro-
duced only in integrated mills.
Yet some hope lingers among workers
at Mr Clark’s union hall, near the Fair-
field works.
US Steel said last year it would invest
in an electric arc furnace at Fairfield,
15
Devastated
Town that can no longer
afford its police force
US Steel The empty storefronts in the centre
of town illustrate the devastating
Production 2014 v 2015 (million tons) effect of last year’s closure of most
of US Steel’s Fairfield steelworks.
25 Thrift shops that once sold cheap
21.8 21.1
second-hand goods have closed.
20 Only a sprinkling of businesses,
19.3 mostly hair salons and discount
15 stores, survive.
16.0
The fate of the town, founded in
10
7.1 1910 to house US Steel’s workers,
5 illustrates why steel provokes such
6.1 political sensitivity.
0 The industry is labour-intensive
yet prone to sharp cyclical swings.
2014 15 Market downturns can devastate
Operating income ($bn) entire communities, prompting
politicians to intervene in
1 companies’ commercial decisions.
“There are so many support jobs
that go along with all these people
0 that used to work here,” says
Patrick Herring of the United
Steelworkers’ union.
-1 The town used to support a
Walmart generating critical sales
taxes, and its closure in January has
-2 forced Fairfield to announce the
2010 15 2010 15 2010 15 abolition of its police department.
Robert Wright
Source: Bloomberg
turning it into a so-called “mini-mill”, Mini-mills, which tend to specialise in bined to produce a sudden price spike.
which should make the facility far more “long products” such as rebar steel for Prices for hot-rolled coil, the most
efficient. This is because electric arc fur- construction, are far less labour inten- common steel product, have
naces, which melt down scrap steel, can sive than those involving blast furnaces. rebounded to around $460 per tonne,
be turned off and on far more easily Workers at Fairfield accept there will says Mr Bradford. They were $350 in
than blast furnaces. be far fewer jobs if the electric arc fur- February.
Sanjeev Gupta, the Indian entrepre- nace project goes ahead. The invest- US Steel’s share price has more than
neur interested in buying Tata Steel’s ment, due to be worth $230m, was doubled, reaching $16.51 on Friday
UK assets, has proposed a similar over- halted in December because of poor after plumbing a $6.15 low in January.
haul of Port Talbot’s operations. market conditions. “We remain optimistic,” says Mr
Evidence of the benefits of electric arc “We never really established what the Clark, who hopes that further action
furnaces can be found at Nucor, the big- manning numbers were going to be,” against countries that violate interna-
gest US operator of mini-mills, which says Mr Clark. tional trade rules on steel might also
weathered the worst of the industry But tough new tariffs imposed by the boost the US industry.
downturn last year far better than US US Federal Trade Commission on steel “If we can get trade protection and
Steel. Nucor remained profitable in imports, the weakening of the dollar, take care of some of the violators, we
2015, although its net income nearly and such cutbacks as the closure of can look forward to a long and prosper-
halved to $358m. the Fairfield blast furnace, have com- ous future,” he adds.
16
Industrials
GE poised to float Czech banking business
Group plans Prague IPO
for unit as part of push to
return to industrial roots
HENRY FOY — PRAGUE
BEN MCLANNAHAN — NEW YORK
General Electric plans to float its Czech
banking business as the US conglomer-
ate continues its push to dispose of
financial assets worth $200bn and
return to its industrial roots.
The company expects to list GE
Money on the Prague stock exchange
before the end of June in what would be
the largest initial public offering in cen-
tral Europe since 2011 and one of the
biggest for the local bourse.
Online supermarket
targets scale in India’s
chaotic food market
Big Basket expands with its
inventory model as shake-out
hits ‘hyper-local’ start-ups
AMY KAZMIN — NEW DELHI
Coddled by protective government poli-
cies, the millions of small “mom-and-
pop” shops that dominate India’s
$350bn grocery retail industry have had
little real competition, despite the mar-
ket’s tantalising potential.
Foreign supermarket chains are in
effect banned. The rollout of domestic
grocery chains, owned by large con-
glomerates such as Reliance and Tata,
has been stymied by a lack of suitable
retail estate and its high cost.
But in the past three years, harried
consumers — used to running from one
tiny store to another and visiting multi-
ple markets — have had other options. A
clutch of Indian online grocery start-ups
have been using technology to bring
convenience and a greater choice.
Big Basket, based in Bangalore, has
built an online supermarket complete
with warehouses, piles of stock, a pri-
vate label and fleets of delivery vans. It
operates in 18 cities.
Asset-lite, “hyper-local” grocery
delivery companies, meanwhile, have
tech platforms that piggyback on
bricks-and-mortar stores.
India’s fledgling online grocery sector
is undergoing a shake-up. Hyper-local
services such as Grofers and Peppertap,
which have been backed by investors
including Japan’s SoftBank, and the US-
based Tiger Global and Sequoia Capital,
are pulling out of several cities. Local-
Banya shut down in October.
Big Basket, however, is expanding. Its
parent company has just $150m in a
fundraising round led by Abraaj, a
Dubai-based private equity house,
which brought Big Basket’s total fund-
raising to about $235m. People close to
the deal say it values the company at
$500m.
“Investors are now clearly looking at
whether the models are profitable, and
profitable at scale,” says Hari Menon,
the co-founder and chief executive of
Big Basket. “Funding has dried up for
people who don’t demonstrate that.”
In the next few weeks the company
will start operations in seven additional
Contracts & Tenders
Analysts have estimated it will list
with a value of around €1.5bn — €2.2bn,
based on its book value.
GE said yesterday it would retain a
minority stake in the Czech Republic’s
sixth-biggest lender by assets for at least
six months after the float. The float will
include both GE Money Bank and the
company’s car financing business.
“This is one of the most profitable
banks in Czech Republic and essentially
invented consumer lending here,” said
GE Money chief executive Tomas
Spurny. “We have had lots of positive
feedback from a number of institutional
investors.”
Mr Spurny, who will run the business
after the listing, said that GE had held
“excellent and strong” talks with
Retail. Grocery ecommerce
cities, bringing its total to 25 from six a
year ago. It then plans to focus on boost-
ing sales in the cities where it operates.
“It’s a conscious decision of saying,
‘let’s go deeper into these cities and
maximise revenues’, rather than
spreading ourselves too thin,” says Mr
Menon.
Big Basket sold groceries worth $119m
during the financial year to March 31
and expects to increase that to nearly
$300m this year and $1bn in 2017.
Online grocery shopping has a cheq-
uered record in many western coun-
tries, where large, sophisticated super-
markets and smaller convenience stores
put a dizzying array of products in con-
sumers’ reach. But India’s stunted
supermarkets give online shopping
greater appeal in a country where more
than half of total retail spending is on
food and grocery items.
“India does not have well-developed
modern retail — it is at a nascent stage of
evolution,” says Omar Lodhi, head of
‘You can’t expect a
biker to go and choose
the right tomato or
vegetable from a store’
Asia for Abraaj. “Therefore, there is an
opportunity for online grocery to leap-
frog that from an experiential and
product-delivery perspective.”
Analysts, and Mr Menon, say hyper-
local delivery businesses are struggling
because they depend on mom-and-pop
shops, with their limited inventory and
erratic availability. Such companies do
not offer significant discounts to their
consumers — and often do not make
enough money themselves.
“The current supermarket space is
inefficient and there is room to disrupt
substantially,” says Arvind Singhal,
chief executive of Technopak, an Indian
consultancy.
“But the hyper-local model is inher-
ently flawed. If you are picking up from
the last mile, you are adding cost to it
rather than taking cost away. And no
single supermarket in India carries a full
assortment, so to fulfil any shopping
basket, the hyper-local guy has to go to
five or six shops.”
Mr Menon says the model’s weak-
nesses are most pronounced when it
★ FINANCIAL TIMES
COMPANIES
potential strategic and trade buyers for
an outright sale before opting for an IPO.
In April last year, GE Capital, the
group’s finance arm, announced a plan
to shed its status as a “systemically
important financial institution”. It has
since sold tens of billions of dollars of
assets as part of a plan by its parent,
General Electric, to return to a focus on
its technology and industrial heritage.
GE Capital says it has signed
‘This is one of the most
profitable Czech banks
and essentially invented
consumer lending here’
Bangalore-based Big Basket delivers groceries in 18 Indian cities and is poised to reach seven more — Hemant Mishra/Mint/Getty
comes to fresh produce, which is often
carried by the same young men who
handle the deliveries.
“You can’t expect a biker to go and
choose the right tomato or vegetable
from a store,” he says. “There is science
behind it.”
India’s larger ecommerce companies
— including marketplaces such as Flip-
kart and Paytm, and Ola, a taxi-hailing
app — have experimented with selling
agreements for more than $165bn of the
$200bn in assets it plans to sell. The
Czech IPO proposal comes two weeks
after GE struck a deal to sell its majority
stake in Poland’s BPH Bank for $329m.
That followed the spin-off of Syncrony,
its US consumer finance business, and
the $1.67bn IPO of Cembra, formerly GE
Money Bank in Switzerland.
Last month GE Capital asked US regu-
lators to remove its designation as a Sifi,
which it received in 2013 on the basis of
its size, the breadth of its businesses and
its dependence on financial markets for
funding. Losing the tag is expected to
help the group escape tougher regula-
tory and capital-holding requirements.
As it made the request, GE Capital set
out what it described as a “complete
groceries. But only Amazon is still run-
ning a service, and that operates in a
single city, Bangalore.
In spite of Big Basket’s rapid growth
and its rivals’ difficulties, Mr Menon
says it cannot afford to be complacent.
SoftBank-backed Grofers has raised
$165m, and Mr Menon says it and other
groups could “pivot” to an inventory-
led model.
The BJP government has indicated
Transport
Canadian Pacific defeat deals blow to Ackman
STEPHEN FOLEY — NEW YORK
News that Canadian Pacific Railway
had abandoned its pursuit of Norfolk
Southern may have added almost
$100m to the value of Bill Ackman’s
stake in CP in a matter of minutes, but
it robs Mr Ackman of what he expected
would be “enormous additional value”
over the longer term.
The admission by CP that it sees “no
clear path to a friendly merger” with NS
adds to a list of situations where compa-
nies and financial markets have proved
impervious to Mr Ackman’s powers of
persuasion.
And it comes as the hedge fund man-
ager is trying to shore up confidence
among his outside investors following
the worst losing streak in his career,
including backfiring bets on Valeant
Pharmaceuticals and against Herbalife.
Until last year, CP had been an invest-
ment success for Mr Ackman’s activist
transformation” since the end of 2012. It
noted that its total assets had shrunk by
$272bn, to $265bn, and that it had cut its
dependence on short-term funding to
6 per cent of liabilities, from 21 per cent.
As a result, it said, it is “smaller, sim-
pler and less interconnected with the US
financial system”, and “does not pose
any conceivable threat to US financial
stability”.
Czech GE Money Bank, which has
1.2m customers and 229 branches, said
its tangible equity at the end of 2015 was
$1.2bn, with a core equity tier one capi-
tal ratio of 17.7 per cent.
Citigroup, Goldman Sachs and JPMor-
gan have been appointed as joint global
co-ordinators and joint bookrunners for
the listing.
that it will soon permit foreign investors
to set up retail businesses selling India-
made food, although the timing and
details are unclear. Domestic bricks-
and-mortar grocery chains are also
likely to push into online sales.
“The real challenge will come when
the physical businesses go online,”
Mr Menon says. “Now they are just try-
ing to make their physical businesses
work. But it’s just a matter of time.”
fund, Pershing Square. It first bought
into the rail company in 2011 at around
$55 per share and now holds about a
9 per cent stake. In early trading yester-
day, it was up $6 to $141, but it remains
below its 2014 peak of $215.
After ousting the previous manage-
ment and installing industry veteran
Hunter Harrison as chief executive, Per-
shing Square pushed the company to
make operational improvements that
boosted margins, but revenue has
stalled and a takeover of NS promised a
new round of efficiency gains.
Mr Ackman spoke of the “enormous
additional value” a merger would create
in a conference call with investors in his
publicly traded vehicle, Pershing Square
Holdings, last week.
He has also been a vociferous advo-
cate of consolidation in the North Amer-
ican rail industry and of the CP-NS deal
in particular. Last December, he joined
Mr Harrison on a conference call with
Tuesday 12 April 2016
Technology
SecureWorks
on track to
be first US
tech listing
of the year
NICOLE BULLOCK — NEW YORK
RICHARD WATERS — LONDON
SecureWorks, a cyber security division
of Dell, is on track to be the first US ini-
tial public offering in the technology
sector this year.
The company said yesterday it was
planning to price 9m shares at between
$15.50 and $17.50 apiece. That would
give a market capitalisation of as much
as $1.4bn, not including an overallot-
ment option.
It is expected to price on April 21.
Listings have nearly ground to a halt
with the broad US stock market having
sold off in the first quarter.
Public tech listings in particular have
been few and far between over the past
year.
Emerging companies have instead
used private transactions to raise bil-
lions of dollars of funding at attractive
valuations.
SecureWorks would be the first US-
listed tech IPO since Yirendai, the Chi-
nese peer-to-peer lender, went public
on December 17, according to Dealogic.
During the whole of 2015 there were
only 30 tech deals, raising just under
$10bn.
“It is an important first — it could
open the window for tech IPOs,” said
Matthew Kennedy, an analyst at Renais-
sance Capital, which runs IPO-focused
exchange traded funds.
“It will only get easier if this one
does well.”
A rebound for US stocks during the
past month has raised hopes that
new listings will return in the second
quarter.
BATS Global Markets, the exchanges
Dell’s move ‘could open
the window for tech IPOs.
It will only get easier
if this one does well’
operator, is expected to price its IPO
this week.
Mr Kennedy said it remained for tech
IPOs to convince investors that they had
a clear path to profitability. The public
markets had grown cautious and less
willing to accept high operating losses,
he added.
SecureWorks made a net loss of
$72.4m for the year ended January 29.
Revenue was $339.5m, up 30 per cent.
The IPO comes at a time when Dell is
having to fund a massive, $67bn
planned acquisition of EMC, the storage
maker. Cash raised will stay with the
company, though the public listing
would make it easier for Dell to shed
some or all of its remaining stake at a
later stage.
The PC maker is rethinking which
parts of its operations will still be strate-
gic after the EMC deal. It is trying lighten
the debt load from the deal and from its
own $25bn management buyout three
years ago.
Dell bought SecureWorks as part of a
push into security in 2011 that included
the purchase of SonicWall, a maker of
firewalls, which it has been reported to
be considering selling off.
EMC is already a big player in security,
thanks to it $2.1bn purchase of RSA
Security in 2006.
Last month Dell sold Perot Systems,
its IT services arm, to NTT, the Japanese
telecoms company, at a loss for about
$3.1bn. It had paid $3.9bn for the com-
pany in 2009.
investors to criticise NS management.
“They say, ‘Now we’re going to get it
right’ after 20 years of failure,” he said.
Mr Ackman’s reputation for creating
value at the companies he targets and
for his own investors has come under
threat. While in 2014, he was the best-
performing major hedge fund manager,
with a return of 40 per cent, he had lost
all those gains by January of this year.
His fund was down 21 per cent in 2015
and another 25 per cent so far this year.
CP was the third-worst performing
investment for Pershing Square Hold-
ings in 2015. The second worst was
Herbalife, which Mr Ackman has
argued is a pyramid scheme that is
worth zero. Herbalife’s shares rose in
defiance of his short position.
But his biggest debacle has been
Valeant, which collapsed in value amid
revelations of aggressive accounting
and a hidden deal with one of its product
distributors.
Tuesday 12 April 2016 ★ FINANCIAL TIMES 17

COMPANIES

Support services Banks

China’s HNA makes offer for Gategroup Caixabank in

Conglomerate extends
buying spree with $1.5bn
bid for ex-Swissair unit
RALPH ATKINS — ZURICH
YUAN YANG — BEIJING
China’s HNA Group has launched a
SFr1.4bn ($1.5bn) takeover bid for Swit-
zerland’s Gategroup air-services com-
pany, the acquisitive conglomerate’s
second big purchase in the country in
less than a year.
Extending this year’s wave of overseas
acquisitions by Chinese companies,
HNA yesterday announced an all-cash
offer for the Zurich-based catering and
hospitality group that was previously
part of the Swissair national airline.
However, the offer was rejected as
insufficient by activist shareholders
Technology
owning 11.3 per cent of Gategroup
shares. Jonathan Herbert, chief invest-
ment officer at Cologny Advisors in Lon-
don, which is acting with Switzerland-
based RBR Capital Advisors, said exten-
sive restructuring was needed at Gate-
group to boost profit margins. He
claimed the Chinese takeover was “a
way to blunt our efforts,” and predicted
rival bidders would emerge.
Chinese conglomerates spent $101bn
on outbound mergers and acquisitions
in the first quarter of the year — almost
as much in the whole of 2015 — Thom-
son Reuters figures say. The overseas
expansion has been driven by the lim-
ited options for domestic investment
and a desire to gain global exposure.
Switzerland’s industrial and services
companies have proved attractive tar-
gets for Chinese buyers, which have so
far met little resistance from Swiss poli-
ticians. In February, state-owned chem-
ical company ChemChina launched the
country’s largest overseas takeover bid
with a $44bn offer for Basel-based agri-
business Syngenta.
Adam Tan, HNA’s chief executive,
told journalists his group had been
made welcome in Switzerland and
would like to make further acquisitions
in the country. Last July, the conglomer-
ate announced the $2.8bn acquisition of
Swissport, the ground handling and
cargo services group that was also for-
merly part of Swissair.
An acquisition of Gategroup would
further expand HNA’s global portfolio,
which ranges from logistics companies,
tourism services, hotels and airport
management to insurance and financial
services. HNA already had finance in
place for the bid, Mr Tan said.
HNA’s offer for Gategroup came just
two months after it agreed to buy Cali-
fornia-based Ingram Micro for $6bn, the
largest Chinese takeover of a US infor-
mation technology company. It also
recently made an ultimately unsuccess-
ful £2bn bid for London City Airport.
Gategroup’s directors have unani-
mously recommended HNA’s offer for
all publicly held shares in the group.
Xavier Rossinyol, Gategroup’s chief
executive, said HNA’s strength in trans-
port businesses and especially in Asia
would allow Gategroup to accelerate its
expansion in emerging markets.
HNA is offering SFr53 a share — a 21
per cent premium on Friday’s closing
Adam Tan, HNA chief price — in a deal that would give the
executive, says he would company a fully diluted equity value of
SFr1.4bn. Mr Rossinyol said Gategroup
like to make further would remain independently managed
acquisitions in Switzerland with its headquarters in Switzerland.
See Lex
last-minute
‘solution’ for
Portugal’s BPI
PETER WISE — LISBON
Caixabank of Spain has reached a last-
minute agreement with Isabel dos San-
tos, the Angolan investor, and is
expected to take control of Banco BPI,
Portugal’s fourth-largest lender, after
buying her stake.
The deal was reached late on Sunday
hours before a European Central Bank
deadline for BPI to reduce its exposure
to the Angola or face heavy fines.
BPI said in a statement that Caixa-
bank and Ms dos Santos, its two biggest
shareholders, had agreed a “solution”
that would ensure the bank complied
with ECB rules on exposure to Angola.
The deal concludes more than a year
of tense negotiations that included a
late-stage intervention by Lisbon in an
effort to break the deadlock.

Security BPI’s statement, submitted to Portu-

gal’s stock market regulator, said the
terms of the agreement had been com-

experts find municated to the ECB and the Bank of

Portugal, but would not be made public
until final contracts were drawn up.

‘no cure’ for The CMVM, Portugal’s markets

ransomware
HANNAH KUCHLER — SAN FRANCISCO
When an administrator at Brown uni-
versity downloaded an invoice she had
received by email, she did not expect it
to kidnap data from her and her col-
leagues’ computers, encrypt them and
demand a ransom for their release.
But ransomware is spreading around
the world, up 35 per cent in 2015 accord-
ing to Symantec, the security software
maker, as hackers shift focus from
attacking individuals to encrypting
entire corporate networks.
Ravi Pendse, chief information officer
at Brown, said the woman had been
“devastated” when her routine action
caused a problem that took the IT
department days to rectify.
“People felt very helpless,” he said.
“They weren’t sure what they had
done wrong.”
Attachments containing malicious
software demanding a ransom were sent
to students and employees. There were
two successful attacks.
The US Computer Emergency Readi-
ness Team, a government department
that alerts industries to threats or vul-
nerabilities online, warned last month
that authors of ransomware were instill-
ing “fear and panic”, and causing loss of
proprietary information, disruption to
operations and financial losses.
Brown had backups and restored the
data, and gave employees new comput-
ers while they worked to repair the old
ones. This made it easier to refuse to pay
the ransom, which was one bitcoin,
worth about $400 at today’s price.
Hackers ask for ransoms in bitcoins
because it makes it easier to receive
anonymous payments.
But some companies are paying up to
get their files decrypted fast, encourag-
ing more attacks. In a recent spate of
ransomware incidents on US hospitals,
Hollywood Presbyterian Medical Center
admitted that it had paid cyber crimi-
nals $17,000 in bitcoin.
Allen Stefanek, the hospital’s chief,
The Hollywood said he had informed law enforcement,
Presbyterian but paid up to get online fast. “The
Medical Center quickest and most efficient way to
has said it paid restore our systems and administrative
cyber criminals functions was to pay the ransom and
$17,000 in obtain the decryption key,” he wrote in a
bitcoin after letter released to the public.
ransomware Hollywood Presbyterian was unusu-
demands ally public about submitting to the
Susan Goldman,
extortion of hackers. Many others have
Bloomberg News
done so privately.
The 70-year-old mother of Michael
DeCesare, chief executive of ForeScout,
a security company, was forced to pay
$50 to unlock her hard drive.
Hackers have realised that even large
companies are not backing up their data
properly. Mr DeCesare knows of at least
three big companies that have had prob-
lems with ransomware in the past six
months, one of which paid up.
Symantec says more people are pay-
ing up as ransomware becomes harder
to circumvent and able to attack com-
puters more comprehensively. Some old
versions only locked the screen, but new
ones can encrypt every file, sometimes
even those in connected computers,
external hard drives and cloud storage
platforms. In a Symantec survey at the
end of last year, 39 per cent of individu-
als admitted to paying the ransom, up
from 3 per cent in 2013.
Mr DeCesare says it can be hard for
companies to refuse to pay a ransom. “If
it was my account receivables, oh my
lord, we’d be out of business if we lost it
all of a sudden. It is a scary concept.”
Kevin Haley, a director at Symantec
Security Response, says hackers may be
targeting hospitals because it is alarm-
ing for them to lose data. “It is not like I
lost those two paragraphs I typed into
Word today. The stuff they are typing in
is really important and a lot harder to
recreate,” he said.
The FBI has not issued guidance on
whether US companies should pay ran-
soms. But the US-CERT warns that
doing so might not solve a company’s
problems.
“Paying the ransom does not guaran-
tee the encrypted files will be released,”
it says. “It only guarantees that the
malicious actors receive the victim’s
money, and in some cases their banking
information.”
And even if the files are decrypted the
malicious software could continue to
lurk on the network, it adds.
Paying up As the incidence of ransomware
breaches have soared, the cyber secu-
‘guarantees rity industry’s response has not kept
that the pace. Bitdefender, a Romanian security
malicious company, has launched a free tool that it
describes as a vaccine, because it tries to
actors receive trick people installing ransomware
the victim’s remotely into thinking the machine
money, and already has the malware.
Bogdan Botezatu, senior threat
in some cases researcher, says the industry was “a lit-
their banking tle bit caught by surprise” by ran-
information’ somware, which turns technology that
was created to protect information —
encryption — against companies.
The vaccine tool “plants a fake flag
that pretends a machine has already
been infected”, he says, but it relies on
“signatures”, a list of known ran-
somware that needs to be constantly
updated.
For now, hackers will continue to
make and use ransomware because it is
lucrative. Mr Botezatu said the group
behind one strain, CryptoWall,
appeared to have collected $380m in
ransoms in its bitcoin account in a year,
before it shut down.
“There is no cure to the ransomware
threat today,” he says.
watchdog, suspended trading BPI
shares yesterday pending publication of
further information about the deal.
Caixabank, Spain’s third-largest
lender, owns 44 per cent of BPI and has
been seeking to buy the 20 per cent con-
trolled by Ms dos Santos, the daughter
of Angola’s president. A sale would
oblige it to make a full takeover bid.
Isabel dos Santos:
the Angolan
investor’s personal
wealth has
been estimated
at $3.3bn
Ms dos Santos has been negotiating to
buy at least part of BPI’s controlling
stake in Banco de Fomento Angola,
Angola’s most profitable bank.
Unitel, an Angolan telecoms company
that Ms dos Santos jointly controls with
Sonangol, the state oil company, owns
49.9 per cent of BFA.
Analysts said BFA shares could be
listed on the Euronext Lisbon stock
exchange if the agreement goes ahead.
A deal could spark further consolida-
tion in Portugal’s struggling banking
sector. Under Caixabank control, BPI
would be seen as a potential bidder for
Novo Banco, the “good” bank rescued
from the collapse of Banco Espírito
Santo. A combination would create Por-
tugal’s biggest bank.
António Costa, Portugal’s Socialist
prime minister, had tried to break the
negotiating deadlock, telling the two BPI
shareholders an agreement would be
preferable to legislation to lift a cap on
voting rights, according to people close
to the talks.
Deutsche Bank has been advising
Caixabank on the talks with Ms dos San-
tos, Africa’s first female billionaire.
The Spanish lender’s influence over
BPI has been limited by a 20 per cent cap
on the voting rights of any shareholder.
Last year Caixabank abandoned a
€1.1bn bid for the rest of BPI.
Under new EU rules, exposure to
Angolan credit must be fully provi-
sioned for. BPI could have faced daily
fines of up to 5 per cent of its daily turno-
ver had it failed to cut its exposure by
Sunday, analysts said.
See Lex

Contracts & Tenders

Telecoms

Competition watchdog urges Brussels to block Three-O2 deal

CHRISTIAN OLIVER — BRUSSELS
DANIEL THOMAS — WAKEFIELD
The UK’s competition watchdog has
piled the pressure on regulators in
Brussels to block CK Hutchison’s
£10.5bn deal to acquire UK mobile
operator O2, arguing that the proposed
deal would harm British consumers.
Consolidation among UK mobile net-
works was already one of the most polit-
ically charged dossiers facing the Euro-
pean Commission, which is concerned
that any regulatory mis-step involving
Britain could stoke resentment against
the EU before the June 23 Brexit referen-
dum. The British deal is controversial
The Property Market
because it would reduce the number of
mobile operators from four to three.
Regulators fear that such deals could
sap competition and allow companies to
inflate consumers’ bills.
Alex Chisholm, chief executive of the
UK’s Competition and Markets Author-
ity, wrote to Margrethe Vestager, EU
competition commissioner, insisting
the proposed merger remedies fell short
of alleviating concerns because they
failed to create a new fourth operator.
The entire mobile network of O2 or
CK Hutchison’s Three should be sold to
an “appropriate buyer”, he added.
“Absent such structural remedies, the
only option available to the commission
is prohibition,” he wrote. “The CMA
urges the commission to act to prevent
the long-term damage to the UK mobile
telecoms market, and therefore to the
interests of UK consumers that both of
our authorities have predicted will
result from this merger.”
Yesterday’s intervention follows simi-
lar protests from Ofcom, Britain’s tele-
coms regulator, about the deal’s poten-
tial impact on consumers. Given the
increasing sensitivities over Brexit, offi-
cials following the deal in Brussels said it
would be almost impossible for Ms operators. Her tough line is in contrast
Vestager to override the British authori- to her predecessor, Joaquín Almunia,
ties and approve the deal. who waved through deals in Germany,
Hong Kong-based CK Hutchison Austria and Ireland.
reacted angrily to Mr Chisholm’s letter Hutchison insisted those cases still
and his insistence on the need for a formed an important precedent, which
fourth operator. the commissioner could not ignore.
“This can have no legitimate status in “The remedies proposed by Hutchison
the merger control process,” it said in a go far beyond remedies accepted in pre-
statement. vious mobile merger cases by the com-
Brussels has the last word on whether mission,” the company said.
to approve the deal, and Ms Vestager has People close to Hutchison were confi-
already expressed concerns about con- dent the commission would struggle to
solidating from four to three mobile justify any break with precedent, if chal-
lenged in an appeal. “The commission
may have changed but case law has not,”
said a person familiar with the matter.
Ms Vestager has until May 19 to
decide on whether to approve the
merger.
In the biggest telecoms case she has
ruled on since becoming competition
commissioner, Ms Vestager has
favoured remedies that brought in a
fully fledged new market entrant. Last
£10.5bn €3.4bn May, she cleared Orange’s €3.4bn acqui-
Price tag of Amount Orange sition of Jazztel, the Spanish cable
O2, which paid in May to group, but demanded that the French
CK Hutchison purchase Jazztel, company make concessions to allow a
wants to buy the cable group new player to enter the Spanish market.
18 FINANCIAL TIMES Tuesday 12 April 2016

MARKET DATA

WORLD MARKETS AT A GLANCE FT.COM/MARKETSDATA

Change during previous day’s trading (%)
S&P 500 Nasdaq Composite Dow Jones Ind FTSE 100 FTSE Eurofirst 300 Nikkei Hang Seng FTSE All World $ $ per € $ per £ ¥ per $ £ per € Oil Brent $ Sep Gold $

-0.07% -0.44% -0.553% -0.865%

0.23% 0.25% 0.32% 0.30% 0.35% 0.39% 0.263% 1.134% 0.56% 1.23%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Mar 12 - Apr 11 Index All World Mar 12 - Apr 11 Index All World Mar 12 - Apr 11 Index All World Mar 12 - Apr 11 Index All World Mar 12 - Apr 11 Index All World Mar 12 - Apr 11 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul
2,052.23
13,466.42 6,204.41 16,852.35
13,379.14 6,125.44 9,723.09 9,682.99 1,971.41 1,970.37
1,989.57 15,751.13
Day 0.23% Month 3.06% Year -2.45% Day 0.52% Month -0.40% Year -12.48% Day -0.07% Month 1.11% Year -12.44% Day 0.63% Month -1.42% Year NaN% Day -0.44% Month -6.53% Year -20.88% Day -0.09% Month 0.05% Year -5.62%

Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore
4,862.62 9,090.60
45,054.58 8,497.60 20,440.81
1,311.74 1,308.14
4,662.16 44,337.04 20,011.58 2,809.12 2,809.24
Day 0.25% Month 4.21% Year -2.76% Day 0.43% Month 0.67% Year 0.34% Day 0.30% Month -2.87% Year -20.45% Day 0.83% Month -3.07% Year -27.68% Day 0.35% Month 2.28% Year -25.05% Day 0.03% Month 0.00% Year -19.10%

Dow Jones Industrial New York Bovespa São Paulo CAC 40 Paris FTSE MIB Milan Shanghai Composite Shanghai BSE Sensex Mumbai
17,633.56 50,670.56 3,033.96
4,492.79 18,208.92
17,722.66 25,022.16
47,130.02 4,312.63 2,810.31 24,793.96
16,995.13
Day 0.32% Month 3.67% Year -2.43% Day 0.75% Month 2.14% Year -6.48% Day 0.22% Month -0.87% Year -17.71% Day 1.25% Month -6.66% Year -25.78% Day 1.64% Month 8.17% Year -24.80% Day 1.41% Month 1.62% Year -13.36%

Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous Country Index Latest Previous
Argentina Merval 12348.77 12221.87 Cyprus CSE M&P Gen 67.32 67.92 Italy FTSE Italia All-Share 19402.91 19165.63 Philippines Manila Comp 7291.43 7247.20 Taiwan Weighted Pr 8562.59 8541.50 Cross-Border DJ Global Titans ($) 232.20 231.73
Australia All Ordinaries 5013.20 5018.00 Czech RepublicPX 893.56 899.33 FTSE Italia Mid Cap 31169.18 30822.06 Poland Wig 47411.85 47556.03 Thailand Bangkok SET 1369.84 1369.64 Euro Stoxx 50 (Eur) 2927.78 2911.98
S&P/ASX 200 4931.50 4937.60 Denmark OMXC Copenahgen 20 953.18 956.91 FTSE MIB 17722.66 17504.62 Portugal PSI 20 4878.30 4858.42 Turkey BIST 100 81164.66 81511.27 Euronext 100 ID 851.15 848.91
S&P/ASX 200 Res 2453.40 2406.00 Egypt EGX 30 7478.74 7459.84 Japan 2nd Section 4243.53 4239.41 PSI General 2404.19 2394.73 UAE Abu Dhabi General Index 4380.63 4351.70 FTSE 4Good Global ($) 5224.97 5208.28
Austria ATX 2246.61 2241.17 Estonia OMX Tallinn 969.79 964.99 Nikkei 225 15751.13 15821.52 Romania BET Index 6711.98 6728.47 UK FT 30 2761.50 2740.80 FTSE All World 261.15 260.13
Belgium BEL 20 3369.00 3354.06 Finland OMX Helsinki General 7845.79 7831.37 S&P Topix 150 1040.72 1048.64 Russia Micex Index 1896.91 1877.27 FTSE 100 6200.12 6204.41 FTSE E300 1308.14 1304.21
BEL Mid 5624.57 5613.86 France CAC 40 4312.63 4303.12 Topix 1279.79 1287.69 RTX 895.20 879.07 FTSE 4Good UK 5582.84 5588.62 FTSE Eurotop 100 2560.06 2553.48
Brazil Bovespa 50670.56 50292.93 SBF 120 3422.33 3415.02 Jordan Amman SE 2133.96 2150.93 Saudi-Arabia TADAWUL All Share Index 6346.16 6258.11 FTSE All Share 3401.97 3405.37 FTSE Global 100 ($) 1290.47 1286.86
Canada S&P/TSX 60 788.13 784.58 Germany M-DAX 20162.75 20170.51 Kenya NSE 20 4054.29 4030.00 Singapore FTSE Straits Times 2809.24 2808.32 FTSE techMARK 100 3863.87 3885.01 FTSE Gold Min ($) 1434.53 1387.12
S&P/TSX Comp 13466.42 13396.73 TecDAX 1631.82 1635.29 Kuwait KSX Market Index 5251.11 5230.44 Slovakia SAX 320.50 320.50 USA DJ Composite 6206.69 6195.22 FTSE Latibex Top (Eur) 2563.20 2500.70
S&P/TSX Met & Min 427.67 410.39 XETRA Dax 9682.99 9622.26 Latvia OMX Riga 613.15 614.61 Slovenia SBI TOP 722.84 723.26 DJ Industrial 17633.56 17576.96 FTSE Multinationals ($) 1467.41 1458.82
Chile IGPA Gen 19228.23 19256.07 Greece Athens Gen 560.97 561.61 Lithuania OMX Vilnius 495.24 494.69 South Africa FTSE/JSE All Share 51428.08 51424.48 DJ Transport 7747.85 7736.28 FTSE World ($) 463.09 461.43
China FTSE A200 8258.45 8154.40 FTSE/ASE 20 152.96 153.18 Luxembourg LuxX 1380.94 1367.39 FTSE/JSE Res 20 28582.07 27907.90 DJ Utilities 658.91 660.11 FTSEurofirst 100 (Eur) 3659.16 3636.27
FTSE B35 10272.11 10208.54 Hong Kong Hang Seng 20440.81 20370.40 Malaysia FTSE Bursa KLCI 1715.28 1718.40 FTSE/JSE Top 40 45206.33 45252.36 Nasdaq 100 4490.42 4474.93 FTSEurofirst 80 (Eur) 3973.40 3954.98
Shanghai A 3175.09 3123.71 HS China Enterprise 8807.06 8704.81 Mexico IPC 45054.58 44859.49 South Korea Kospi 1970.37 1972.05 Nasdaq Cmp 4862.62 4850.69 MSCI ACWI Fr ($) 393.83 391.18
Shanghai B 376.55 373.33 HSCC Red Chip 3725.82 3700.25 Morocco MASI 9383.72 9534.58 Kospi 200 242.06 241.77 NYSE Comp 10155.28 10119.69 MSCI All World ($) 1632.20 1621.66
Shanghai Comp 3033.96 2984.96 Hungary Bux 26268.42 26513.45 Netherlands AEX 436.56 434.16 Spain IBEX 35 8497.60 8427.60 S&P 500 2052.23 2047.60 MSCI Europe (Eur) 1318.96 1303.10
Shenzhen A 2042.35 2002.32 India BSE Sensex 25022.16 24673.84 AEX All Share 671.51 668.06 Sri Lanka CSE All Share 6275.62 6275.62 Wilshire 5000 21224.32 21238.05 MSCI Pacific ($) 2167.10 2155.69
Shenzhen B 1139.81 1134.41 S&P CNX 500 6430.60 6346.65 New Zealand NZX 50 6725.11 6730.28 Sweden OMX Stockholm 30 1369.28 1364.94 Venezuela IBC 15201.83 15441.76 S&P Euro (Eur) 1333.03 1326.92
Colombia COLCAP 1326.57 1316.11 Indonesia Jakarta Comp 4846.70 4867.29 Nigeria SE All Share 25328.07 25369.52 OMX Stockholm AS 483.93 482.60 Vietnam VNI 579.27 572.34 S&P Europe 350 (Eur) 1342.49 1337.48
Croatia CROBEX 1664.77 1661.17 Ireland ISEQ Overall 6196.69 6189.25 Norway Oslo All Share 621.71 615.58 Switzerland SMI Index 7751.58 7817.55 S&P Global 1200 ($) 1812.24 1807.15
Israel Tel Aviv 100 12.50 12.50 Pakistan KSE 100 33566.22 33566.22 Stoxx 50 (Eur) 2757.90 2751.89
(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.

STOCK MARKET: BIGGEST MOVERS UK MARKET WINNERS AND LOSERS

AMERICA LONDON EURO MARKETS TOKYO Apr 11 %Chg %Chg Apr 11 %Chg %Chg Apr 11 %Chg %Chg Apr 11 %Chg %Chg
ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's ACTIVE STOCKS stock close Day's FTSE 100 price(p) week ytd FTSE 250 price(p) week ytd FTSE SmallCap price(p) week ytd Industry Sectors price(p) week ytd
traded m's price change traded m's price change traded m's price change traded m's price change Winners Winners Winners Winners
Facebook Class A 25.3 109.66 -0.97 Astrazeneca 138.6 4065.00 -39.96 Nestle N 497.1 66.65 0.00 Toyota Motor 831.0 5278.00 -189.00 Marks And Spencer 443.40 8.0 -2.0 Cranswick 2538.00 17.1 32.3 Hochschild Mining 114.50 23.1 137.3 Industrial Metals 980.44 9.3 35.5
Apple 15.6 109.92 1.26 British American Tobacco 110.4 4193.50 4.34 Bbva 478.7 5.46 0.05 Mitsubishi Ufj Fin,. 415.2 477.70 -12.40 Randgold Resources Ld 6715.00 7.2 60.5 Acacia Mining 296.70 13.1 64.8 Ferrexpo 29.25 14.7 36.0 Oil & Gas Producers 6232.14 2.9 10.3
Hospira 11.8 89.95 -0.01 Vodafone 90.8 225.35 -1.35 Telefonica 438.5 9.31 0.00 Sony 413.9 2965.00 106.50 Anglo American 585.10 6.9 95.4 Centamin 100.80 12.9 56.5 Enquest 28.50 14.7 44.9 Mobile Telecommunications 5155.79 2.7 1.2
Tesla Motors 9.7 256.90 6.83 Bp 90.1 351.85 0.50 Iberdrola 402.6 5.84 0.04 Softbank . 348.2 5677.00 -14.00 Sainsbury (j) 290.90 5.1 12.4 Electrocomponents 273.80 12.3 14.3 Gem Diamonds 128.50 14.2 -2.3 Pharmaceuticals & Biotech. 12524.57 2.4 -2.8
Allergan 8.2 228.97 -7.03 Hsbc Holdings 85.1 418.25 2.98 Repsol 391.8 9.61 0.13 Fast Retailing Co., 310.9 26815.00 205.00 United Utilities 958.50 4.6 2.1 Evraz 99.55 9.6 35.9 Premier Oil 50.50 12.8 4.1 Real Estate Investment Trusts 3082.30 2.2 -5.3
Pfizer 6.8 32.27 -0.23 Glaxosmithkline 78.9 1465.50 -6.00 Unicredit 361.3 3.07 0.00 Sumitomo Mitsui Fin,. 256.8 3135.00 -65.00 Next 5465.00 3.6 -24.5 Nmc Health 1151.00 7.3 36.9 Hostelworld 279.50 12.2 28.2 Gas Water & Multiutilities 6222.91 1.9 4.9
Mcdonald's 5.9 127.96 0.00 Rio Tinto 78.1 2030.50 26.12 Intesa Sanpaolo 321.5 2.29 0.00 Mizuho Fin,. 224.3 154.00 -2.70 Astrazeneca 4065.00 3.4 -11.0 Card Factory 352.10 6.9 -3.6 Lonmin 132.50 9.7 58.7 Mining 8979.75 1.7 22.5
Bank Of America 5.4 13.02 0.14 Shire 77.2 4244.00 -2.76 Sap Se O.n. 313.5 67.51 0.00 Seven & I Holdings Co., 195.3 4642.00 -13.00 Severn Trent 2235.00 3.4 2.7 Ocado 345.20 6.4 14.3 Moss Bros 104.75 9.1 3.2 Oil Equipment & Services 13539.46 1.7 4.2
Amazon.com 4.8 599.81 5.21 Glencore 70.2 141.50 4.70 Inditex 312.4 28.53 -0.04 Fuji Heavy Industries 192.6 3358.00 -43.00 Royal Dutch Shell 1732.00 3.2 13.5 Dunelm 957.00 6.3 1.5 Carpetright 362.00 8.1 -25.2 General Retailers 2788.78 1.7 -7.1
Microsoft 4.3 54.75 0.33 Royal Dutch Shell 69.0 1738.00 -2.50 Santander 305.7 3.73 0.07 Fanuc 174.1 17135.00 30.00 Fresnillo 961.00 3.1 32.1 Aa 275.00 6.0 -11.2 Hilton Food 581.50 7.1 8.5 Food & Drug Retailers 3003.54 1.6 20.2
Vodafone 225.35 2.9 2.3 Vectura 169.50 5.7 -3.7 Int Biotechnology Trust 442.00 6.8 -15.8 Tobacco 50496.98 1.5 9.7
BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's BIGGEST MOVERS Close Day's Day's
Royal Dutch Shell 1738.00 2.7 12.6 Vedanta Resources 359.00 5.3 30.5 Standard Life Eur Private Equity Trust 218.00 6.5 3.9 Personal Goods 28258.65 1.4 9.4
price change chng% price change chng% price change chng% price change chng%
Ups Ups Ups Ups Losers Losers Losers Losers
Chesapeake Energy 4.25 0.49 13.03 Cranswick 2538.00 356.00 16.32 Arcelormittal 4.36 0.31 7.76 Pioneer 338.00 25.00 7.99 Berkeley Holdings (the) 3000.00 -6.3 -18.7 Allied Minds 379.80 -16.3 -5.1 Flybe 57.25 -11.2 -37.4 Household Goods 16369.24 -2.3 -0.6
Seagate Technology 35.39 2.16 6.50 Kaz Minerals 157.30 13.00 9.01 Casino Guichard 51.80 2.24 4.51 Uny Co., 816.00 35.00 4.48 Barratt Developments 534.00 -5.8 -14.7 Ip 157.00 -10.2 -23.4 Exillon Energy 68.00 -9.2 -36.4 Industrial Engineering 7572.00 -2.1 6.0
Newmont Mining 30.76 1.66 5.70 Anglo American 585.10 38.02 6.95 Edf 10.52 0.35 3.39 Sony 2965.00 106.50 3.73 Glencore 141.50 -5.5 56.4 Int Personal Finance 259.00 -9.6 -10.4 Sepura 122.50 -8.4 -32.8 General Financial 8733.20 -2.0 -7.4
Western Digital 44.94 1.84 4.27 Evraz 99.55 6.45 6.93 Aegon 4.86 0.14 2.95 Mitsui Mining And Smelting , 177.00 6.00 3.51 Schroders 2507.00 -5.4 -16.0 Euromoney Institutional Investor 863.00 -9.2 -13.3 Gulf Marine Services 57.50 -6.5 -44.1 Banks 3027.25 -1.9 -20.6
Freeport-mcmoran 9.73 0.40 4.23 Vesuvius 305.30 16.00 5.53 B.popular 2.18 0.06 2.83 Ihi 208.00 6.00 2.97 Persimmon 1995.00 -5.3 -1.6 Crest Nicholson Holdings 510.00 -8.8 -8.4 Hss Hire 80.00 -5.3 11.1 Nonlife Insurance 2447.59 -1.2 -0.5
Int Consolidated Airlines S.a. 532.50 -5.3 -13.6 Jrp 139.10 -8.5 - S&U 2157.50 -4.4 -13.5 Electronic & Electrical Equip. 4273.27 -1.1 0.8
Downs Downs Downs Downs
Easyjet 1456.00 -4.7 -16.3 Telecom Plus 847.00 -7.7 -21.2 Hg Capital Trust 1120.00 -4.3 0.0 Travel & Leisure 8517.59 -1.0 -5.9
Endo Int 25.86 -2.44 -8.62 Galliford Try 1297.00 -103.00 -7.36 Grifols Sa 14.99 -14.40 -48.99 Olympus 4025.00 -165.00 -3.94
Pearson 834.50 -3.2 13.4 Rotork 163.10 -7.1 -10.7 Communisis 45.00 -4.3 9.8 General Industrials 4569.44 -1.0 3.9
National Oilwell Varco 27.48 -1.63 -5.60 Crest Nicholson Holdings 510.00 -28.00 -5.20 Enel Green Power 1.89 -0.05 -2.68 Toyota Motor 5278.00 -189.00 -3.46
Paddy Power Betfair 9420.00 -3.1 3.2 Phoenix Holdings 877.00 -6.6 -4.4 Foxtons 163.00 -4.0 -13.3 Media 7477.24 -0.9 0.8
Under Armour 41.38 -2.16 -4.96 Ip 157.00 -8.00 -4.85 Airbus 56.35 -1.16 -2.02 Daiwa House Industry Co., 2897.50 -101.50 -3.38
Whitbread 3832.00 -3.0 -13.5 Elementis 225.50 -6.4 -3.3 Connect 154.50 -3.9 -8.2 Forestry & Paper 13981.22 -0.8 -2.3
Mylan N.v. Ordinary Shares 45.50 -1.50 -3.20 Bellway 2445.00 -110.00 -4.31 Essilor Intl. 106.00 -1.45 -1.35 Sumitomo Mitsui Trust Holdings,. 294.40 -9.50 -3.13
Lloyds Banking 65.52 -3.0 -9.3 Aldermore 197.00 -6.2 -14.9 Hogg Robinson 62.50 -3.8 -12.4 Chemicals 10717.81 -0.7 -0.2
Allergan 228.97 -7.03 -2.98 Restaurant 350.80 -15.20 -4.15 Hermes Intl 294.70 -3.25 -1.09 Shiseido , 2395.00 -72.00 -2.92
Hsbc Holdings 418.25 -2.8 -21.9 Vesuvius 305.30 -6.2 -8.3 Ite 139.00 -3.8 -11.9 Support Services 6613.95 -0.5 -2.7
Based on the constituents of the S&P500 and the Nasdaq 100 index Based on the constituents of the FTSE 350 index Based on the constituents of the FTSEurofirst 300 Eurozone index Based on the constituents of the Nikkei 225 index
Based on last week's performance. †Price at suspension.

CURRENCIES
DOLLAR EURO POUND DOLLAR EURO POUND DOLLAR EURO POUND DOLLAR EURO POUND
Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's Closing Day's
Apr 11 Currency Mid Change Mid Change Mid Change Apr 11 Currency Mid Change Mid Change Mid Change Apr 11 Currency Mid Change Mid Change Mid Change Apr 11 Currency Mid Change Mid Change Mid Change
Argentina Argentine Peso 14.5200 0.1075 16.6152 0.1742 20.7121 0.3819 Indonesia Indonesian Rupiah 13127.5000 -15.0000 15021.7590 29.5025 18725.7852 187.0114 Poland Polish Zloty 3.7412 -0.0210 4.2810 -0.0107 5.3366 0.0296 ..Three Month 0.7011 -0.0079 0.8020 -0.0065 - -
Australia Australian Dollar 1.3148 -0.0062 1.5046 -0.0024 1.8756 0.0122 Israel Israeli Shekel 3.7658 -0.0135 4.3092 -0.0020 5.3717 0.0407 Romania Romanian Leu 3.9042 -0.0137 4.4675 -0.0017 5.5691 0.0426 ..One Year 0.7015 -0.0079 0.8014 -0.0065 - -
Bahrain Bahrainin Dinar 0.3770 0.0000 0.4314 0.0013 0.5378 0.0059 Japan Japanese Yen 107.8150 -0.6000 123.3722 -0.3016 153.7929 0.8631 Russia Russian Ruble 66.7832 -0.2468 76.4197 -0.0445 95.2630 0.7107 United States United States Dollar - - 1.1443 0.0036 1.4265 0.0159
Bolivia Bolivian Boliviano 6.9125 - 7.9099 0.0245 9.8604 0.1096 ..One Month 107.8149 -0.6002 123.3722 -0.3016 153.7928 0.8629 Saudi Arabia Saudi Riyal 3.7501 0.0001 4.2913 0.0134 5.3494 0.0596 ..One Month - - 1.1442 -0.2663 1.4265 0.0159
Brazil Brazilian Real 3.5285 -0.0979 4.0376 -0.0991 5.0332 -0.0821 ..Three Month 107.8147 -0.6006 123.3722 -0.3017 153.7925 0.8623 Singapore Singapore Dollar 1.3435 -0.0043 1.5373 -0.0001 1.9164 0.0152 ..Three Month - - 1.1440 -0.2663 1.4265 0.0159
Canada Canadian Dollar 1.2914 -0.0060 1.4777 -0.0023 1.8421 0.0120 ..One Year 107.8134 -0.6031 123.3721 -0.3020 153.7928 0.8613 South Africa South African Rand 14.7128 -0.2159 16.8357 -0.1940 20.9870 -0.0713 ..One Year - - 1.1428 -0.2663 1.4269 0.0158
Chile Chilean Peso 682.6600 -0.1650 781.1649 2.2356 973.7819 10.5914 Kenya Kenyan Shilling 101.1500 -0.0500 115.7455 0.3021 144.2856 1.5333 South Korea South Korean Won 1146.6500 -7.2000 1312.1068 -4.1420 1635.6415 8.0247 Venezuela Venezuelan Bolivar Fuerte 9.9863 0.0163 11.4272 0.0540 14.2449 0.1813
China Chinese Yuan 6.4698 -0.0055 7.4034 0.0167 9.2289 0.0948 Kuwait Kuwaiti Dinar 0.3012 -0.0005 0.3447 0.0006 0.4296 0.0041 Sweden Swedish Krona 8.0984 -0.0358 9.2670 -0.0121 11.5520 0.0778 Vietnam Vietnamese Dong 22295.0000 0.5000 25512.0915 79.7415 31802.7719 354.1543
Colombia Colombian Peso 3055.8050 -16.4350 3496.7456 -7.8982 4358.9604 25.2697 Malaysia Malaysian Ringgit 3.8890 -0.0135 4.4502 -0.0016 5.5475 0.0426 Switzerland Swiss Franc 0.9513 -0.0018 1.0886 0.0013 1.3570 0.0125 European Union Euro 0.8739 -0.0027 - - 1.2466 0.0100
Costa Rica Costa Rican Colon 535.2000 -0.0700 612.4271 1.8204 763.4372 8.3873 Mexico Mexican Peson 17.6640 -0.0678 20.2128 -0.0146 25.1969 0.1845 Taiwan New Taiwan Dollar 32.3630 -0.0795 37.0328 0.0242 46.1643 0.4010 ..One Month 0.8738 -0.0027 - - 1.2465 0.0100
Czech Republic Czech Koruna 23.6175 -0.0700 27.0254 0.0040 33.6892 0.2757 New Zealand New Zealand Dollar 1.4566 -0.0085 1.6667 -0.0046 2.0777 0.0111 Thailand Thai Baht 35.0700 -0.0400 40.1304 0.0789 50.0257 0.4996 ..Three Month 0.8736 -0.0027 - - 1.2464 0.0100
Denmark Danish Krone 6.5045 -0.0186 7.4431 0.0019 9.2784 0.0769 Nigeria Nigerian Naira 199.0500 -0.2000 227.7721 0.4786 283.9353 2.8740 Tunisia Tunisian Dinar 1.9949 -0.0222 2.2828 -0.0182 2.8456 0.0003 ..One Year 0.8724 -0.0027 - - 1.2458 0.0100
Egypt Egyptian Pound 8.8763 0.0232 10.1571 0.0580 12.6616 0.1735 Norway Norwegian Krone 8.1895 -0.0231 9.3712 0.0027 11.6819 0.0972 Turkey Turkish Lira 2.8311 -0.0158 3.2396 -0.0080 4.0384 0.0226
Hong Kong Hong Kong Dollar 7.7541 -0.0035 8.8729 0.0236 11.0608 0.1181 Pakistan Pakistani Rupee 104.7250 0.0500 119.8364 0.4289 149.3852 1.7310 United Arab Emirates UAE Dirham 3.6731 0.0001 4.2031 0.0131 5.2395 0.0583
Hungary Hungarian Forint 272.6995 -1.2650 312.0489 -0.4749 388.9928 2.5394 Peru Peruvian Nuevo Sol 3.2753 -0.1132 3.7479 -0.1175 4.6721 -0.1077 United Kingdom Pound Sterling 0.7010 -0.0079 0.8022 -0.0065 - -
India Indian Rupee 66.4475 -0.0825 76.0356 0.1418 94.7842 0.9372 Philippines Philippine Peso 46.1225 -0.0175 52.7778 0.1438 65.7915 0.7066 ..One Month 0.7010 -0.0079 0.8021 -0.0065 - -
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 FT 30 INDEX FTSE SECTORS: LEADERS & LAGGARDS FTSE 100 SUMMARY
Produced in conjunction with the Institute and Faculty of Actuaries Apr 11 Apr 08 Apr 07 Apr 06 Apr 05 Yr Ago High Low Year to date percentage changes Closing Day's Closing Day's
£ Strlg Day's Euro £ Strlg £ Strlg Year Div P/E X/D Total FT 30 2761.50 2740.80 2754.10 2723.90 2754.70 0.00 2875.90 2547.10 Industrial Metals & 27.26 Technology 2.27 Telecommunications -1.52 FTSE 100 Price Change FTSE 100 Price Change
Apr 11 chge% Index Apr 08 Apr 07 ago yield% Cover ratio adj Return FT 30 Div Yield 1.73 1.74 1.73 1.75 1.74 0.00 3.93 2.74 Mining 19.32 Oil Equipment & Serv 1.88 FTSE SmallCap Index -1.64 3I Group PLC 449.10 -3.10 Legal & General Group PLC 234.20 0.40
FTSE 100 (100) 6200.12 -0.07 6030.63 6204.41 6136.89 7089.77 4.04 0.93 26.54 77.87 4921.06 P/E Ratio net 25.84 25.70 25.78 25.55 25.64 0.00 19.44 14.26 Food & Drug Retailer 19.06 Mobile Telecomms 1.83 Health Care -1.86 Admiral Group PLC 1930 -3.00 Lloyds Banking Group PLC 65.52 -0.38
FTSE 250 (250) 16778.81 -0.30 16320.14 16829.72 16714.23 17875.11 2.70 2.15 17.20 103.09 11750.56 FT 30 since compilation: 4198.4 high: 19/07/1999; low49.4 26/06/1940Base Date: 1/7/35 Basic Materials 15.05 Food Producers 1.77 Equity Invest Instr -1.98 Anglo American PLC 585.10 37.90 London Stock Exchange Group PLC 2793 -35.00
FTSE 250 ex Inv Co (208) 18195.87 -0.32 17698.46 18254.74 18122.46 19381.67 2.72 2.30 16.00 107.64 12990.48 FT 30 hourly changes Oil & Gas Producers 9.95 Tech Hardware & Eq 1.50 Pharmace & Biotech -2.04 Antofagasta PLC 439.30 5.60 Marks And Spencer Group PLC 443.40 -0.80
FTSE 350 (350) 3451.93 -0.11 3357.57 3455.70 3420.46 3900.11 3.81 1.08 24.30 39.51 5515.88 8 9 10 11 12 13 14 15 16 High Low Tobacco 9.87 Household Goods & Ho 1.09 Support Services -2.31 Arm Holdings PLC 1033 -13.00 Mediclinic International PLC 934.50 12.50
FTSE 350 ex Investment Trusts (308) 3428.48 -0.11 3334.76 3432.17 3396.69 3878.42 3.84 1.08 24.15 39.56 2821.06 2740.8 2753.2 2753.4 2756 2761 2760.8 2760.5 2764 2757.1 2767.1 2740.8 Oil & Gas 9.68 Electronic & Elec Eq 1.08 Forestry & Paper -3.00 Ashtead Group PLC 842.00 2.00 Merlin Entertainments PLC 461.10 -1.60
FTSE 350 Higher Yield (106) 3178.30 -0.02 3091.42 3178.96 3130.44 3730.35 5.34 0.71 26.47 50.92 5233.86 FT30 constituents and recent additions/deletions can be found at www.ft.com/ft30 Personal Goods 9.49 Media 0.84 FTSE 250 Index -3.44 Associated British Foods PLC 3351 -17.00 Mondi PLC 1298 4.00
FTSE 350 Lower Yield (244) 3395.77 -0.21 3302.94 3402.76 3386.92 3689.36 2.13 2.11 22.29 22.03 3617.98 Industrial Eng 5.48 Aerospace & Defense 0.79 Real Est Invest & Tr -5.48 Astrazeneca PLC 4065 -81.50 Morrison (Wm) Supermarkets PLC 201.30 -0.10
FTSE SmallCap (288) 4565.43 0.15 4440.63 4558.70 4525.00 4684.36 2.95 1.21 28.06 31.02 6303.01 Consumer Goods 5.32 Nonlife Insurance 0.02 Travel & Leisure -5.70
FTSE SmallCap ex Inv Co (155) 4155.25 0.07 4041.66 4152.37 4121.07 4098.96 2.91 1.47 23.34 23.46 6016.82 FX: EFFECTIVE INDICES Gas Water & Multi 5.24 Electricity -0.26 Fixed Line Telecomms -6.40
Aviva PLC 432.20 3.50 National Grid PLC 991.40 -9.10
Babcock International Group PLC 965.00 -2.50 Next PLC 5465 -55.00
FTSE All-Share (638) 3401.97 -0.10 3308.97 3405.37 3370.98 3830.87 3.78 1.08 24.41 38.39 5498.21 Industrial Transport 4.76 Industrials -0.35 General Retailers -6.56
Apr 08 Apr 07 Mnth Ago Apr 11 Apr 08 Mnth Ago Bae Systems PLC 499.00 0.90 Old Mutual PLC 186.00 1.20
FTSE All-Share ex Inv Co (463) 3364.45 -0.10 3272.48 3367.94 3333.32 3796.06 3.82 1.08 24.13 38.43 2813.88 Utilities 4.10 Construct & Material -0.36 Financial Services -7.22 Barclays PLC 153.50 2.80 Paddy Power Betfair PLC 9420 -165.00
FTSE All-Share ex Multinationals (572) 1129.64 -0.15 910.67 1131.37 1121.91 1243.54 3.05 1.56 21.09 8.31 1939.99 Australia 92.14 91.51 93.02 Sweden 80.34 80.33 79.22 Beverages 3.04 Health Care Eq & Srv -0.41 Automobiles & Parts -8.50 Barratt Developments PLC 534.00 -13.00 Pearson PLC 834.50 0.50
FTSE Fledgling (99) 7681.52 0.23 7471.53 7663.81 7643.00 7485.95 2.54 0.42 93.23 41.00 13918.46 Canada 89.85 88.58 88.21 Switzerland 160.09 160.05 157.60 NON FINANCIALS Index 2.99 Chemicals -0.61 Real Est Invest & Se -11.52 Berkeley Group Holdings (The) PLC 3000 -124.00 Persimmon PLC 1995 -69.00
FTSE Fledgling ex Inv Co (49) 10740.03 0.36 10446.44 10701.03 10674.31 9608.54 2.66 -0.28 -132.13 40.23 18900.95 Denmark 107.29 107.29 106.33 UK 83.38 83.49 86.26 Software & Comp Serv 2.96 FTSE 100 Index -0.61 Life Insurance -12.35 Bhp Billiton PLC 778.20 17.70 Provident Financial PLC 2935 -11.00
FTSE All-Small (387) 3166.48 0.15 3079.92 3161.68 3139.05 3241.32 2.93 1.18 29.08 21.29 5612.69 Japan 140.09 140.94 135.64 USA 99.83 100.15 103.18 Leisure Goods 2.59 FTSE All{HY-}Share Index -1.13 Financials -12.54 BP PLC 351.85 1.50 Prudential PLC 1313 2.50
FTSE All-Small ex Inv Co Index (204) 3103.41 0.08 3018.57 3100.89 3078.14 3048.42 2.90 1.41 24.48 17.29 5693.29 New Zealand 111.02 110.44 113.30 Euro 89.08 88.93 87.20 Consumer Services -1.47 Banks -20.93 British American Tobacco PLC 4193.5 3.50 Randgold Resources LD 6715 80.00
FTSE AIM All-Share Index (835) 721.65 0.31 701.92 719.39 717.02 735.65 1.54 0.52 125.08 2.34 779.27 Norway 86.49 85.44 86.00
British Land Company PLC 711.00 3.00 Reckitt Benckiser Group PLC 6744 -34.00
FTSE Sector Indices Source: Bank of England. New Sterling ERI base Jan 2005 = 100. Other indices base average 1990 = 100. Bt Group PLC 441.15 3.70 RELX PLC 1294 -10.00
Oil & Gas (17) 6576.11 0.11 6396.35 6569.22 6338.92 7897.13 6.69 0.20 72.97 112.17 5610.62 Index rebased 1/2/95. for further information about ERIs see www.bankofengland.co.uk Bunzl PLC 2043 -8.00 Rexam PLC 617.00 -0.50
Oil & Gas Producers (10) 6266.62 0.08 6095.31 6261.40 6039.30 7481.07 6.73 0.21 72.36 108.98 5530.43 Burberry Group PLC 1297 1.00 Rio Tinto PLC 2030.5 43.00
Oil Equipment Services & Distribution (7)14006.14 0.73 13623.26 13905.15 13583.26 19855.29 5.54 0.19 96.08 102.78 10377.96 FTSE GLOBAL EQUITY INDEX SERIES Capita PLC 1034 -3.00 Rolls-Royce Holdings PLC 664.00 -3.00
Basic Materials (27) 3229.36 2.36 3141.08 3154.76 3057.19 4704.93 5.18 0.23 83.89 41.24 3211.73 Carnival PLC 3711 -53.00 Royal Bank Of Scotland Group PLC 214.30 2.80
Chemicals (7) 11444.30 0.00 11131.46 11444.02 11413.96 13133.54 2.52 2.16 18.37 61.01 9894.54 Apr 11 No of US $ Day Mth YTD Total
YTD Gr Div Apr 11 No of US $ Day Mth YTD Total YTD Gr Div Centrica PLC 233.70 1.40 Royal Dutch Shell PLC 1738 -2.50
Forestry & Paper (1) 15256.08 0.31 14839.04 15209.07 14962.24 16643.00 2.36 3.85 10.99 0.00 15847.60 Regions & countries stocks indices % % % retn
% Yield Sectors stocks indices % % % retn % Yield Coca-Cola Hbc AG 1438 -3.00 Royal Dutch Shell PLC 1732 -1.00
Industrial Metals & Mining (2) 994.23 6.80 967.06 930.89 905.42 2089.91 1.16 0.27 321.04 0.00 867.66 FTSE Global All Cap 7722 445.12 0.7 2.6 -1.3
-0.6 613.38
2.6 Oil & Gas 152 319.95 2.5 2.5 4.9 493.76 5.9 3.9 Compass Group PLC 1264 - Royal Mail PLC 476.10 -1.50
Mining (17) 8649.44 2.85 8413.00 8409.95 8103.33 13253.13 5.80 0.01 1871.52 127.71 4514.37 FTSE Global All Cap 7079 462.39 0.3 7.3 -0.3
0.2 624.68
2.5 Oil & Gas Producers 110 300.11 2.5 2.5 5.2 471.45 6.2 4.0 Crh PLC 2026 3.00 Rsa Insurance Group PLC 469.60 -0.50
FTSE Global Large Cap 1424 392.24 0.6 2.4 -1.6
-0.8 553.23
2.8 Oil Equipment & Services 32 289.48 2.6 2.6 4.3 407.22 5.2 3.7 Dcc PLC 6290 20.00 Sabmiller PLC 4215 -2.00
Industrials (120) 4336.66 -0.31 4218.11 4350.22 4304.19 4727.49 2.56 1.44 27.11 23.17 4332.44
Construction & Materials (14) 5347.41 -0.14 5201.23 5354.71 5289.03 4934.82 2.30 0.04 1140.28 70.10 5539.18 FTSE Global Mid Cap 1644 601.11 0.9 3.2 -0.1
0.4 789.49
2.2 Basic Materials 255 362.37 1.4 1.4 3.1 534.74 3.8 3.1 Diageo PLC 1897.5 -14.50 Sage Group PLC 625.50 -4.50
Aerospace & Defense (9) 4331.68 -0.25 4213.27 4342.51 4279.66 5455.98 2.64 1.52 24.81 12.94 4491.28 FTSE Global Small Cap 4654 622.14 0.7 3.2 -0.8
-0.3 793.34
2.1 Chemicals 124 577.13 1.0 1.0 -2.5 852.79 -1.9 2.7 Direct Line Insurance Group PLC 355.30 -5.40 Sainsbury (J) PLC 290.90 2.40
General Industrials (6) 3708.37 0.79 3606.99 3679.15 3647.11 3646.56 3.10 1.56 20.70 48.86 4090.29 FTSE All-World 3068 260.13 0.7 2.5 -1.4
-0.6 378.27
2.7 Forestry & Paper 16 188.68 0.7 0.7 -3.8 307.03 -2.5 3.8 Dixons Carphone PLC 415.00 -7.00 Schroders PLC 2507 7.00
Electronic & Electrical Equipment (10) 5428.48 -0.07 5280.08 5432.20 5393.97 5618.27 2.28 1.89 23.21 6.22 4813.09 FTSE World 2545 461.43 0.7 2.5 -1.3
-0.6 901.09
2.7 Industrial Metals & Mining 62 286.28 1.5 1.5 11.3 423.08 11.7 3.0 Easyjet PLC 1456 2.00 Severn Trent PLC 2235 -4.00
Industrial Engineering (14) 8050.67 -0.17 7830.60 8064.04 7897.37 9873.91 3.34 1.34 22.36 75.35 9517.51 FTSE Global All Cap ex UNITED KINGDOM In 7399 458.85 0.7 2.8 -1.0
-0.3 623.31
2.5 Mining 53 390.49 2.8 2.8 20.7 579.31 22.2 4.4 Experian PLC 1233 -6.00 Shire PLC 4244 -6.00
Industrial Transportation (8) 4105.12 -0.44 3992.90 4123.35 4072.39 4264.52 4.05 0.80 30.90 35.82 3483.61 FTSE Global All Cap ex USA 5761 406.41 1.1 1.6 -2.6
-1.8 594.81
3.2 Industrials 538 302.50 0.9 0.9 1.1 423.36 1.8 2.4 Fresnillo PLC 961.00 28.00 Sky PLC 1011 -7.00
Support Services (59) 6479.80 -0.56 6302.67 6516.36 6463.56 6902.59 2.33 1.76 24.48 18.88 6521.51 FTSE Global All Cap ex JAPAN 6458 455.98 0.7 3.0 -0.6
0.0 633.70
2.6 Construction & Materials 111 440.39 1.1 1.1 5.1 643.99 5.7 2.2 Gkn PLC 285.00 2.80 Smith & Nephew PLC 1163 -12.00
FTSE Global All Cap ex Eurozone 7077 459.58 0.6 2.7 -0.9
-0.2 622.35
2.5 Aerospace & Defense 26 502.63 0.6 0.6 -0.8 696.38 -0.2 2.4 Glaxosmithkline PLC 1465.5 -6.00 Sse PLC 1505 -1.00
Consumer Goods (41) 19176.92 -0.51 18652.69 19274.29 19252.85 17735.60 2.79 1.89 18.98 193.11 13667.95
FTSE Developed 2097 419.15 0.6 2.5 -1.8
-1.0 582.19
2.6 General Industrials 55 222.33 0.6 0.6 2.5 335.12 3.5 2.7 Glencore PLC 141.50 4.70 St. James's Place PLC 896.00 11.00
Automobiles & Parts (1) 6697.63 0.99 6514.54 6631.83 6537.83 8488.37 3.05 1.81 18.09 136.30 6288.34
FTSE Developed All Cap 5683 439.87 0.6 2.6 -1.7
-0.9 604.24
2.6 Electronic & Electrical Equipment 70 302.35 1.0 1.0 -4.4 389.26 -4.0 2.1 Hammerson PLC 592.00 2.00 Standard Chartered PLC 447.95 4.40
Beverages (6) 15830.76 -0.42 15398.00 15897.22 15901.72 15159.18 2.44 1.70 24.12 96.90 10850.13
FTSE Developed Large Cap 900 386.84 0.6 2.3 -2.0
-1.2 544.85
2.7 Industrial Engineering 104 544.79 1.7 1.7 1.7 752.41 2.7 2.8 Hargreaves Lansdown PLC 1318 25.00 Standard Life PLC 344.10 4.20
Food Producers (10) 9109.65 0.38 8860.63 9075.43 9137.31 8208.94 1.80 1.41 39.33 10.80 7632.69
FTSE Developed Europe Large Cap 223 313.53 1.4 0.9 -5.0
-3.9 499.47
3.8 Industrial Transportation 98 511.64 1.4 1.4 3.3 713.07 3.9 2.5 HSBC Holdings PLC 418.25 0.25 Taylor Wimpey PLC 179.80 -6.40
Household Goods & Home Construction (14)13694.18 -1.73 13319.84 13934.73 13988.73 12478.46 2.15 2.82 16.56 26.15 9333.28
FTSE Developed Europe Mid Cap 306 498.72 1.5 3.7 -2.7
-2.1 718.56
2.8 Support Services 74 275.31 0.6 0.6 -0.2 370.11 0.4 2.0 Imperial Brands PLC 3822.5 -27.50 Tesco PLC 193.50 2.95
Leisure Goods (2) 5551.05 -1.22 5399.30 5619.64 5628.51 5135.54 4.39 1.29 17.67 57.34 4749.18
FTSE Dev Europe Small Cap 697 705.45 1.2 3.4 -3.6
-3.1 2.6 Consumer Goods
988.88 426 416.44 0.5 0.5 0.0 596.25 0.6 2.5 Informa PLC 703.00 -7.00 Travis Perkins PLC 1821 -5.00
Personal Goods (6) 24603.57 -0.09 23931.00 24626.71 24636.55 23941.98 2.69 3.06 12.16 150.56 15978.06
FTSE North America Large Cap 292 437.63 0.3 3.6 0.3
0.9 579.97
2.3 Automobiles & Parts 104 332.02 0.5 0.5 -13.0 458.86 -12.0 3.2 Inmarsat PLC 1013 1.00 Tui AG 1029 -15.00
Tobacco (2) 50497.07 -0.17 49116.66 50584.76 50238.72 44301.88 3.68 1.34 20.25 1063.92 31452.14
FTSE North America Mid Cap 394 648.26 0.7 3.6 1.2
1.7 804.22
1.9 Beverages 48 590.10 0.8 0.8 3.2 855.65 3.7 2.5 Intercontinental Hotels Group PLC 2868 16.00 Unilever PLC 3235.5 -3.00
Health Care (20) 9237.74 -0.80 8985.21 9312.52 9339.13 10562.94 3.83 0.41 63.02 152.35 6851.01
FTSE North America Small Cap 1491 642.37 0.7 3.5 0.1
0.6 775.49
1.8 Food Producers 104 575.13 0.7 0.7 2.9 844.95 3.4 2.3 International Consolidated Airlines Group S.A. 532.50 5.00 United Utilities Group PLC 958.50 1.00
Health Care Equipment & Services (8) 7321.99 -0.32 7121.83 7345.23 7334.58 7171.01 1.54 1.86 35.00 1.60 6209.45
FTSE North America 686 292.61 0.4 3.5 0.4
1.0 397.30
2.2 Household Goods & Home Construction 49 412.89 0.2 0.2 2.8 587.13 3.4 2.3 Intertek Group PLC 3162 -68.00 Vodafone Group PLC 225.35 -2.15
Pharmaceuticals & Biotechnology (12)12434.39 -0.86 12094.48 12542.01 12583.95 14436.99 4.09 0.35 69.33 228.00 8206.68
FTSE Developed ex North America 1411 215.43 1.0 0.9 -5.0
-4.1 338.65
3.3 Leisure Goods 31 132.05 -0.3 -0.3 0.1 170.55 0.5 1.5 Intu Properties PLC 317.20 1.30 Whitbread PLC 3832 34.00
Consumer Services (96) 4832.41 -0.20 4700.31 4841.88 4837.17 5214.43 2.41 1.54 26.95 26.73 4386.85 FTSE Japan Large Cap 176 297.23 0.7 -1.6 -9.3
-8.4 375.71
2.4 Personal Goods 79 612.22 0.2 0.2 2.4 832.70 2.8 2.0
Food & Drug Retailers (7) 3132.43 0.83 3046.80 3106.71 3104.68 3590.86 1.71 0.23 255.36 0.00 3581.95 Itv PLC 240.70 2.30 Wolseley PLC 3900 -50.00
FTSE Japan Mid Cap 307 464.65 0.7 -0.2 -5.5
-4.7 566.27
1.9 Tobacco 11 1338.31 0.7 0.7 10.0 2646.84 11.3 3.6 Johnson Matthey PLC 2743 23.00 Worldpay Group PLC 275.00 -1.70
General Retailers (32) 2734.29 -0.51 2659.55 2748.32 2742.87 3060.81 2.65 2.12 17.77 2.42 2999.70
FTSE Global wi JAPAN Small Cap 781 502.92 0.6 1.7 -4.5
-3.5 633.61
2.2 Health Care 178 437.45 -0.2 -0.2 -4.6 614.47 -3.8 2.0 Kingfisher PLC 377.20 -0.60 WPP PLC 1646 7.00
Media (22) 7552.84 -0.31 7346.38 7576.49 7573.55 7867.77 2.69 1.24 29.86 43.20 4484.49
FTSE Japan 483 124.73 0.7 -1.3 -8.5
-7.6 177.09
2.3 Health Care Equipment & Services 64 658.46 0.0 0.0 1.4 757.09 1.6 1.0 Land Securities Group PLC 1122 1.00
Travel & Leisure (35) 8323.35 -0.24 8095.82 8343.67 8335.01 8867.83 2.25 1.79 24.77 79.97 7661.19
FTSE Asia Pacific Large Cap ex Japan 550 534.02 0.2 2.1 -1.3
-0.8 802.85
3.4 Pharmaceuticals & Biotechnology 114 325.56 -0.3 -0.3 -6.4 476.07 -5.5 2.4
Telecommunications (7) 3927.86 -0.24 3820.49 3937.43 3892.25 4004.98 4.16 0.15 159.52 0.00 4115.83 FTSE Asia Pacific Mid Cap ex Japan 423 749.86 0.2 2.1 0.4
0.9 1087.81
3.2 Consumer Services 390 388.55 0.3 0.3 -0.3 507.26 0.2 1.8
Fixed Line Telecommunications (5) 5098.12 0.75 4958.75 5060.09 5076.08 5244.80 3.04 1.64 20.03 0.00 4421.35
Mobile Telecommunications (2) 5147.99 -0.87 5007.26 5193.28 5085.62 5217.72 4.89 -0.45 -45.87 0.00 4814.76
FTSE Asia Pacific Small Cap ex Japan
FTSE Asia Pacific Ex Japan
1435 496.11
973 424.66
0.2
0.2
2.2
2.1
-0.6
-0.1
-1.1
-0.6
709.52
2.8 Food & Drug Retailers
678.62
3.3 General Retailers
55 301.83
122 520.33
0.4
0.0
0.4
0.0
0.7 409.96
-2.4 662.49
1.2
-1.9
1.9
1.6
UK STOCK MARKET TRADING DATA
Utilities (7) 8717.57 -0.30 8479.26 8744.11 8680.20 8643.77 4.66 1.33 16.08 33.42 9322.54 FTSE Emerging All Cap 2039 588.33 1.1 3.2 3.0
3.4 842.59
3.2 Media 85 293.00 0.6 0.6 1.3 383.26 1.8 2.0 Apr 11 Apr 08 Apr 07 Apr 06 Apr 05 Yr Ago
Electricity (2) 8781.13 0.18 8541.08 8765.39 8723.20 9291.38 5.76 1.20 14.45 145.17 11899.02 FTSE Emerging Large Cap 524 553.84 1.1 3.1 2.8
3.3 798.12
3.2 Travel & Leisure 128 383.75 0.3 0.3 0.6 506.49 1.2 1.8 SEAQ Bargains 6656.00 150.00 150.00 7452.00 8888.00 9995.00
Gas Water & Multiutilities (5) 8224.21 -0.43 7999.39 8259.36 8193.79 8016.98 4.38 1.38 16.55 5.49 8799.26 FTSE Emerging Mid Cap 447 753.44 1.4 3.9 6.1
6.6 1074.01
3.1 Telecommunication 92 164.72 0.7 0.7 4.6 293.24 5.8 4.1 Order Book Turnover (m) 106.21 87.01 87.01 84.26 111.35 90.40
Financials (283) 4004.50 0.14 3895.03 3999.00 3953.11 5061.43 4.10 1.69 14.44 69.41 3557.55 FTSE Emerging Small Cap 1068 619.47 0.7 2.6 0.6
1.0 854.63
3.0 Fixed Line Telecommuniations 43 141.80 0.3 0.3 7.0 277.31 8.7 4.4 Order Book Bargains 695625.00 1.00 1.00 844625.00 877430.00 882196.00
Banks (9) 2989.10 0.27 2907.39 2980.92 2944.19 4450.66 5.54 0.96 18.76 78.12 2111.54 FTSE Emerging Europe 111 307.00 2.2 7.5 14.9
15.3 452.36
4.1 Mobile Telecommunications 49 166.85 1.1 1.1 1.3 267.62 1.8 3.6 Order Book Shares Traded (m) 1019.00 0.00 0.00 1299.00 1282.00 1286.00
Nonlife Insurance (10) 2820.53 -0.52 2743.43 2835.23 2831.68 2482.50 2.81 2.41 14.75 42.92 4813.12 FTSE Latin America All Cap 237 684.36 3.2 4.6 14.3
15.0 1017.15
3.3 Utilities 161 253.19 0.8 0.8 6.7 467.58 7.6 3.9 Total Equity Turnover (£m) 3993.93 - - - 0.03 -
Life Insurance/Assurance (10) 6988.85 0.42 6797.80 6959.67 6829.69 8871.61 4.09 1.62 15.11 135.80 6539.40 FTSE Middle East and Africa All Cap 223 647.63 2.0 3.3 4.7
5.9 2.9 Electricity
976.37 109 277.80 0.8 0.8 7.3 508.20 8.3 3.6 Total Mkt Bargains 804044.00 163.00 163.00 5.00 13.00 60.00
Index- Real Estate Investment & Services (21) 2728.81 0.00 2654.22 2728.94 2706.95 3055.42 2.41 5.82 7.12 17.81 7062.11 FTSE Global wi UNITED KINGDOM All Cap In 323 311.77 1.1 0.5 -5.2
-4.1 3.9 Gas Water & Multiutilities
498.60 52 266.11 0.9 0.9 5.7 502.81 6.3 4.3 Total Shares Traded (m) 4687.00 1073.00 1073.00 0.00 20.00 3.00
Real Estate Investment Trusts (26) 2799.46 0.27 2722.93 2791.87 2758.52 3129.38 3.23 5.83 5.31 31.58 3346.92 FTSE Global wi USA All Cap 1961 500.60 0.3 3.5 -0.1
0.5 2.1 Financials
645.45 688 184.55 1.0 1.0 -8.1 289.30 -7.2 3.3 † Excluding intra-market and overseas turnover. *UK only total at 6pm. ‡ UK plus intra-market turnover. (u) Unavaliable.
General Financial (32) 7472.77 -0.37 7268.49 7500.54 7425.76 8616.62 3.16 2.10 15.07 60.78 8175.81 FTSE Europe All Cap 1413 366.25 1.4 1.8 -4.0
-3.0 3.5 Banks
564.85 245 155.74 1.3 1.3 -12.7 260.67 -11.8 4.0 (c) Market closed.
Equity Investment Instruments (175) 7553.96 0.00 7347.46 7554.22 7511.84 8086.13 2.73 1.07 34.17 59.25 4004.91 FTSE Eurozone All Cap 645 342.62 1.6 2.0 -4.5
-4.0 3.3 Nonlife Insurance
532.18 68 209.32 0.8 0.8 -2.4 293.32 -1.7 2.5
Non Financials (355) 4095.16 -0.17 3983.22 4102.25 4062.55 4437.42 3.68 0.88 30.98 38.58 5791.72 FTSE RAFI All World 3000 3048 5314.07 1.2 1.1 -2.1
-1.2 3.4 Life Insurance
6751.06 50 175.16 1.3 1.3 -11.7 268.41 -10.8 3.4
Technology (20) 1462.40 -0.81 1422.42 1474.32 1468.32 1381.18 1.42 1.84 38.46 5.68 1836.60 FTSE RAFI US 1000 1007 8864.72 0.6 2.5 0.2
1.0 2.6 Financial Services
11289.01 150 206.96 0.6 0.6 -6.9 277.22 -6.4 2.2 All data provided by Morningstar unless otherwise noted. All elements listed are indicative and believed
Software & Computer Services (14) 1891.64 -0.48 1839.93 1900.75 1891.03 1479.69 1.93 1.73 30.05 14.69 2501.11 FTSE EDHEC-Risk Efficient All-World 3068 317.08 0.6 3.0 0.5
1.1 2.4 Technology
428.77 188 175.33 0.1 0.1 0.6 210.03 1.0 1.8 accurate at the time of publication. No offer is made by Morningstar or the FT. The FT does not warrant nor
Technology Hardware & Equipment (6) 1597.47 -1.10 1553.80 1615.24 1610.16 1739.05 0.96 2.03 51.22 0.93 1834.82 FTSE EDHEC-Risk Efficient Developed Europe 529 273.94 1.3 3.0 -1.9
-1.3 2.7 Software & Computer Services
402.32 90 311.96 -0.2 -0.2 0.6 358.98 0.9 1.1 guarantee that the information is reliable or complete. The FT does not accept responsibility and will not be
Technology Hardware & Equipment 98 127.20 0.6 0.6 0.7 157.01 1.3 2.6 liable for any loss arising from the reliance on or use of the listed information.
Hourly movements 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 High/day Low/day Alternative Energy 10 100.68 0.7 0.7 -2.6 134.16 -2.0 1.3 For all queries e-mail ft.reader.enquiries@morningstar.com
FTSE 100 6187.13 6218.74 6202.40 6204.54 6210.46 6201.37 6207.41 6211.41 6196.37 6228.43 6165.75 Real Estate Investment & Services 103 278.09 0.5 0.5 -1.7 446.44 -1.1 2.5
FTSE 250 16816.98 16851.46 16771.54 16778.52 16819.39 16804.99 16805.04 16778.08 16779.58 16857.41 16760.81 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
Data provided by Morningstar | www.morningstar.co.uk
FTSE SmallCap 4557.00 4568.16 4570.70 4571.65 4571.37 4570.91 4578.59 4579.67 4572.91 4580.35 4556.45
FTSE All-Share 3397.31 3412.64 3402.87 3404.07 3408.01 3403.54 3406.39 3407.28 3400.54 3417.00 3387.48 (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,
Time of FTSE 100 Day's high:07:58:00 Day's Low07:21:15 FTSE 100 2010/11 High: 6242.32(01/01/2016) Low: 5536.97(11/02/2016) 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
Time of FTSE All-Share Day's high:07:58:00 Day's Low07:20:00 FTSE 100 2010/11 High: 3444.26(01/01/2016) Low: 3046.53(11/02/2016) 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.
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 UK COMPANY RESULTS UK RECENT EQUITY ISSUES

Amount Latest Company Turnover Pre-tax EPS(p) Div(p) Pay day Total Issue Issue Stock Close Mkt
Issue paid renun. closing Access Intelligence Pre 8.119 4.291 4.687L 1.477L 1.28L 0.46L - - - - - date price(p) Sector code Stock price(p) +/- High Low Cap (£m)
price up date High Low Stock Price p +or- Carr's Group Int 189.073 - 10.519 - 8.9 - 0.95 - May 13 2.79 - 03/17 185.00 AIM YU/ Yu Group PLC 223.00 2.00 225.00 190.00 3134.1
22p Nil 18-04-16 Tribal Group PLC CDialogues Pre 8.711 9.924 0.979 2.614 0.153 0.434 - 2.56 - - 2.6
Central Asia Metals Pre 64.412 73.141 32.746 70.276 0.201 0.56 11.393 11.674 Jun 15 18.493 20.2
Hygea VCT Pre 1.352L 0.455L 1.205L 0.495L 14.9L 6.1L - - - - -
Nasstar Pre 13.759 11.182 1.296L 1.904L 0.1L 0.5L 0.045 - Jul 4 0.045 -
Safestay Pre 4.023 1.938 0.61L 0.137 2.52L 1.29 - 0.3 - - 0.3
Schroder Japan Growth Fund Int 9.728L 20.925 1.08 0.83 - - - - -

Figures in £m. Earnings shown basic. Figures in light text are for corresponding period year earlier. §Placing price. *Intoduction. ‡When issued. Annual report/prospectus available at www.ft.com/ir
For more information on dividend payments visit www.ft.com/marketsdata For a full explanation of all the other symbols please refer to London Share Service notes.
Tuesday 12 April 2016 FINANCIAL TIMES 19

MARKET DATA

FT500: THE WORLD'S LARGEST COMPANIES

52 Week 52 Week 52 Week 52 Week 52 Week 52 Week
Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m Stock Price Day Chg High Low Yld P/E MCap m
Australia (A$) Finland (€) Japan (¥) Sweden (SKr) AT&T♦ 38.51 0.01 39.72 30.97 4.75 16.83 236971.89 Lockheed 224.80 -1.50 228.00 181.91 2.65 20.27 68513.31
ANZ 22.25 -0.03 36.98 21.86 10.10 9.95 49371.56 Nokia 5.22 -0.08 7.87 4.91 2.47 18.31 34429.16 AstellasPh 1448 -3.50 2009 1358 1.92 19.56 29840 AtlasCpcoB 191.10 0.20 270.00 162.60 2.92 21.38 9208.1 AutomData 90.23 -0.10 90.99 64.29 2.15 30.51 41275.82 Lowes 75.70 0.67 78.13 62.62 1.42 27.60 67936.1
BHPBilltn 16.55 0.37 33.35 14.06 12.74 21.25 40425.81 SampoA 41.19 0.08 49.40 36.76 4.35 15.16 26338.22 Bridgestne 3905 -31.00 5182 3561 2.89 12.40 29450.12 Ericsson 82.23 0.13 120.00 70.65 3.84 21.42 30899.31 Avago Tech 156.82 0.67 158.33 100.00 1.05 30.94 61230.05 Lyondell 85.76 1.89 107.32 69.10 3.43 9.23 36915.39
CmwBkAu 70.70 -0.06 94.77 69.79 7.84 14.54 92224.57 France (€) Canon 3140 -12.00 4539 2977.5 4.14 17.95 38844.47 H&M 289.10 1.10 362.00 259.80 3.25 25.00 52143.67 BakerHu 43.03 -0.08 70.45 37.58 1.53 -9.90 18840.85 Marathon Ptl 38.37 -0.33 60.38 29.24 2.88 7.53 20306.3
CSL♦ 100.19 -1.06 108.68 85.40 1.52 26.09 35278.03 Airbus Grpe 56.35 -1.16 68.50 49.96 1.96 17.94 50179.08 CntJpRwy 18960 -155.00 22960 18255 0.55 14.16 36226.5 Investor 292.20 4.10 363.40 256.80 2.80 15.61 16434.42 BankAm 13.02 0.14 18.48 10.99 1.49 10.47 134395.89 Marsh&M♦ 61.03 0.52 61.61 50.81 1.87 21.16 31817.85
NatAusBk 24.93 -0.20 39.71 23.82 9.80 11.74 50149.4 AirLiquide 95.40 1.02 123.95 90.77 2.46 20.36 37577.63 Denso 3954 -62.00 6548 3879 2.70 13.86 32422.27 Nordea Bk 77.20 0.85 114.60 72.40 6.84 9.96 38607.18 Baxter 42.08 0.24 43.44 32.18 2.92 60.39 23055 MasterCard♦ 93.98 0.19 101.76 74.61 0.69 28.99 102389.54
Telstra 5.15 -0.01 6.53 4.98 7.83 16.06 47885.82 AXA 20.18 0.26 26.02 18.80 4.33 9.55 56061.07 EastJpRwy 9650 -11.00 12815 9162 1.12 18.75 35130.78 SEB 78.50 0.90 111.10 75.85 5.50 10.77 21034.58 BB & T 32.78 0.29 41.90 29.95 3.10 13.26 25583.82 McDonald's 127.96 - 128.74 87.50 2.60 27.57 115369.75
Wesfarmers 40.02 -0.31 45.00 36.65 6.61 19.76 34276.23 BNP Parib 42.32 0.38 61.00 37.00 3.26 8.97 60351.05 Fanuc 17135 30.00 28575 15300 3.92 20.84 32730.32 SvnskaHn 101.10 0.70 402.90 95.85 3.83 13.07 23367.39 BectonDick 154.58 -0.06 157.50 128.87 1.54 49.29 32742.62 McGraw Hill 96.97 -0.26 108.14 78.55 1.32 23.80 25743.53
Westpc 28.42 -0.10 40.00 27.69 8.03 13.51 71823.95 ChristianDior 154.35 -1.50 195.35 140.80 1.90 19.66 32097 FastRetail 26815 205.00 61970 26375 1.08 36.97 26381.9 Swedbank♦ 166.10 -0.20 208.60 150.80 6.21 12.95 23217.69 BerkshHat 212267.62 562.62223011.49 186900 - 14.96 171351.34 McKesson 162.61 0.41 243.61 148.29 0.62 17.59 37170.53
Woolworths 20.82 -0.32 29.88 20.50 8.83-264.55 20124.82 Cred Agr 9.19 0.09 14.49 7.59 3.50 8.20 27758.38 Fuji Hvy Ind 3358 -43.00 5223 3275 2.82 7.38 24383.09 TeliaSonera 41.46 -0.05 52.95 37.04 6.73 20.65 22168 Biogen 268.19 -2.64 432.88 242.07 - 18.06 58645.84 Medtronic♦ 76.10 -0.27 79.08 55.54 1.91 44.52 106619.39
Belgium (€) Danone 60.93 -0.33 67.74 51.73 2.26 31.56 45664.47 Hitachi 467.00 -7.70 858.00 431.00 2.23 9.57 20936.1 Volvo♦ 88.80 0.45 120.50 72.20 3.14 12.89 17795.73 BkNYMeln 35.91 0.42 45.45 32.20 1.83 13.71 38639.17 Merck 55.34 -0.02 61.70 45.69 3.17 36.57 153582.81
AnBshInBv 106.05 -0.80 124.20 87.73 3.12 25.28 195164.3 EDF 10.52 0.35 23.56 9.13 10.50 6.26 23123.11 HondaMtr 2822.5 -60.00 4499 2726 2.70 11.28 47421.57 Switzerland (SFr) BlackRock 334.88 3.28 378.80 275.00 2.52 17.49 54882.36 Metlife 42.43 0.54 58.23 35.00 3.36 9.59 46526.09
KBC Grp 47.14 0.74 66.00 44.15 3.90 13.51 22552.49 Engie SA 13.48 0.15 19.69 12.96 6.82 -7.37 37564.54 JapanTob 4655 -53.00 4850 3551 2.20 24.19 86351.62 ABB 18.62 0.05 22.16 15.94 - 23.25 45306.98 Boeing 128.13 0.25 155.50 102.10 2.75 17.79 84886.61 Microsoft 54.75 0.33 56.85 39.72 2.28 40.25 437338.25
Esslr Intl 106.00 -1.45 125.15 95.01 0.88 33.01 26257.76 KDDI 3024 -21.00 3375 2519 1.72 18.35 75474.24 CredSuisse 13.28 0.28 28.94 12.23 4.77 -8.35 27324.7 BrisMySq♦ 66.04 -0.03 70.87 51.82 2.18 73.21 110460.37 Mnstr Bvrg 131.56 -1.02 160.50 113.08 - 47.88 26696.13
Brazil (R$)
Hermes Intl 294.70 -3.25 365.55 281.20 0.88 37.73 35600.53 Keyence 58420 -990.00 70100 50500 0.30 33.87 32945.77 Nestle♦ 70.05 -2.50 77.00 65.70 2.90 16.81 234781.28 CapOne 67.05 0.38 92.10 58.49 2.17 9.90 34803.74 MondelezInt♦ 42.45 0.13 48.58 35.88 1.46 9.88 66100.36
Ambev 18.27 -0.33 20.46 15.99 2.31 27.02 81383.3
LOreal 153.95 -0.75 181.30 140.40 1.61 28.69 99177.58 MitsbCp 1789 -1.50 2837 1565 2.67 10.19 26384.53 Novartis 71.85 -0.15 103.20 67.00 3.50 27.10 202188.52 CardinalHlth♦ 82.21 -0.79 91.91 74.73 1.77 20.69 27074.13 Monsanto♦ 86.84 0.21 123.82 81.22 2.43 27.32 37935.62
Bradesco♦ 31.48 0.75 32.07 17.90 2.59 13.13 22521.47
LVMH 146.05 0.40 176.60 130.75 2.08 22.46 84728.77 MitsubEst 2001 -8.50 2968 1962.5 0.65 58.02 25805.17 Richemont 60.00 -0.20 87.55 58.60 2.44 21.12 32923.37 Carnival 50.86 -0.28 55.77 40.52 2.31 20.86 28590.23 MorganStly 24.23 0.48 41.04 21.16 2.20 8.60 46996.74
Cielo 31.93 -6.15 38.56 23.36 1.55 23.78 17072.86
Nmrcble-SFR 30.10 0.60 57.35 27.05 - -40.29 15092.11 MitsubishiEle 1106 -7.00 1718 947.00 2.12 11.32 22026.66 Roche 242.50 -0.90 283.90 229.90 3.03 25.64 179093.3 Caterpillar 75.00 0.65 89.62 56.36 3.79 22.17 43675.31 MylanNV 45.50 -1.50 76.69 37.59 - 27.59 22372.52
ItauHldFin 27.50 0.23 35.93 21.49 3.89 7.35 23747.66
Orange 14.40 0.17 16.98 12.21 3.83 20.89 43632.81 MitsuiFud 2545 -13.00 3879 2260.5 0.95 23.25 23402.83 Swiss Re 88.40 0.85 99.75 76.85 4.71 7.94 34448.12 CBS 53.82 -0.30 63.95 38.51 1.08 19.38 22702.03 Netflix 104.31 0.50 133.27 62.11 - 383.56 44580.87
Petrobras 10.54 0.05 16.26 5.67 - -4.73 22231.43
PernodRic 96.63 -0.31 117.75 88.00 1.71 29.18 29348.54 MitUFJFin 477.70 -12.40 936.80 431.90 3.27 5.31 62778.51 Swisscom♦ 497.90 -4.60 576.00 452.70 4.06 20.60 27112.57 Celgene 105.01 -1.25 140.72 92.98 - 55.87 82082.59 NextEraE 116.60 -0.21 119.37 93.74 2.56 19.88 53803.09
Vale 17.09 0.89 27.89 8.60 6.00 -2.13 15582.19
Renault 82.40 0.60 100.25 59.59 2.12 8.71 27883.64 Mizuho Fin 154.00 -2.70 280.40 149.30 4.37 6.08 35623.01 Syngent 400.00 -0.70 435.20 288.50 2.69 29.92 39081.53 CharlesSch 27.09 0.48 35.72 21.51 0.86 27.23 35796.62 Nike 58.88 -0.54 68.20 47.25 1.04 26.67 78396.95
Canada (C$) Murata Mfg 12700 -135.00 22220 11610 1.37 14.58 26534.78 ChevrnTx 95.72 -0.61 112.20 69.58 4.33 40.43 180403.71 NorfolkS 79.16 -2.33 107.31 64.51 2.89 15.93 23605.41
Safran 59.06 0.12 72.45 48.87 1.93 -63.31 28183.74 UBS 14.57 -0.01 22.57 13.51 4.73 9.66 58967.2
BCE♦ 59.54 -0.32 59.92 51.56 3.93 22.22 40018.23 NipponTT 4752 28.00 5419 3934 1.73 17.23 92399.63 Chubb♦ 119.08 0.27 134.49 94.35 2.16 14.28 55230.25 Northrop 199.62 -0.95 203.88 152.31 1.50 19.86 36165.63
Sanofi 74.21 -0.36 101.10 66.44 3.53 24.18 110877.39 Zurich Fin 200.50 2.80 315.30 194.70 - 17.65 31715.79
BkMontrl 78.83 0.50 80.76 64.01 3.84 12.77 39267.38 Nissan Mt 952.00 -16.40 1350 922.00 3.42 8.05 39688.06 Cigna 131.84 1.43 170.68 123.54 0.03 16.66 33784.45 NXP 83.70 0.96 114.00 61.61 - 14.18 28960.44
Sant Gbn 38.63 -0.07 44.84 31.47 1.42 29.34 24796.02 Taiwan (NT$)
BkNvaS 61.82 -0.03 67.44 51.17 4.12 11.84 57554.77 Nomura 448.20 -6.20 909.20 435.10 4.45 8.20 15890.85 Cisco♦ 27.87 0.18 29.90 22.46 3.03 13.73 140245.22 Occid Pet♦ 71.19 0.59 82.03 58.22 4.04 -6.91 54370.69
Schneider 53.56 0.44 74.14 45.32 3.29 23.70 36082.64 Chunghwa Telecom 109.50 1.00 111.00 93.10 4.11 23.13 26247.24
Brookfield 42.77 -0.41 48.64 37.70 1.38 14.26 32682.49 Nppn Stl 2075.5 5.00 3505 1773.5 2.72 10.26 18294.23 Citigroup 41.13 0.66 60.95 34.52 0.38 7.84 120972.53 Oracle 40.71 0.35 45.24 33.13 1.51 19.62 168951.38
SocGen 31.20 0.32 48.77 26.61 3.53 7.56 28784.39 Formosa PetChem 89.80 -0.10 94.50 63.90 0.90 18.96 26432.35
CanadPcR♦ 180.74 5.43 241.73 140.02 0.70 23.92 21416.5 NTTDCMo 2615.5 29.50 2888 1961 2.32 22.52 96030.89 CME Grp 89.97 0.88 100.87 81.87 2.15 25.19 30446.89 Pepsico 105.02 -0.06 105.77 76.48 2.55 29.56 153464.41
Total 40.19 0.18 50.30 35.21 5.68 21.53 112857.76 HonHaiPrc 81.20 -0.70 99.70 72.70 4.25 9.15 39237.09
CanImp♦ 96.44 0.17 102.90 82.19 4.23 11.57 29460.09 Panasonic 906.30 2.00 1853.5 799.00 1.45 142.69 20620.54 Coca-Cola 46.83 -0.05 47.13 36.56 2.73 28.99 202728.73 Perrigo 125.32 -3.39 205.72 122.62 0.36 131.81 17945.4
UnibailR 239.40 2.55 257.85 212.05 3.68 11.20 27141.21 MediaTek 232.00 2.50 439.50 193.50 9.04 14.68 11266.18
CanNatRs 36.27 0.30 42.46 21.27 2.28 -69.22 30745.65 Seven & I 4642 -13.00 5998 4168 1.34 28.94 38165.96 Cognizant 60.37 0.21 69.80 51.22 - 23.56 36772.6 Pfizer 32.27 -0.23 36.46 28.25 3.36 30.04 199562.2
Vinci 64.58 -0.44 66.69 50.08 2.55 19.18 43550.71 TaiwanSem 158.50 1.00 163.00 112.50 2.63 14.60 126995.86
CanNatRy 80.70 0.06 84.92 66.62 1.33 20.95 49142.24 ShnEtsuCh 5821 2.00 7930 5160 1.56 19.71 23329.71 ColgtPlm 71.31 0.24 71.47 50.84 2.04 48.43 63616.42 Phillips66 85.64 -0.42 94.12 69.79 2.46 11.45 45065.96
Vivendi 18.39 -0.03 24.83 16.30 9.99 39.25 28796.46
Enbridge 50.86 0.18 66.14 40.03 3.29-1412.97 36404.35 Softbank 5677 -14.00 7827 4133 0.61 14.09 63220.78 Thailand (THB) Comcast♦ 61.82 0.22 64.99 50.01 1.57 19.70 129482.56 PhilMorris 101.08 0.20 101.80 76.54 3.87 23.62 156799.87
GtWesLif 34.71 -0.29 37.70 30.42 3.38 13.94 26695.03 Germany (€) PTT Explor♦ 284.00 4.00 370.00 197.00 3.65 43.14 23130.57
Sony 2965 106.50 3970 2199 0.66 31.80 34718.02 ConocPhil 41.86 0.63 69.72 31.05 6.80 -12.08 51838.01 PNCFin 82.28 0.46 100.52 77.67 2.36 11.46 41230.93
ImpOil 40.47 -0.48 55.37 37.25 1.08 34.10 26562.13 Allianz 139.65 0.75 170.15 126.55 4.51 10.44 73029.01
SumitomoF 3135 -65.00 5770 2819.5 4.29 8.86 41117.33 United Arab Emirates (Dhs) Corning 20.74 0.21 22.98 15.42 2.24 23.19 22808.68 PPG Inds 112.42 0.59 118.69 82.93 1.22 22.60 29988.58
Manulife 17.36 0.15 24.20 15.32 3.45 18.38 26508.39 BASF 64.11 1.02 97.22 56.01 4.01 16.12 67380.33
Takeda Ph 5105 -50.00 6609 4950 3.06 -41.27 37417.61 Emirtestele 18.20 0.05 19.05 11.15 3.94 19.46 39175 Costco 150.53 -1.12 169.73 117.03 1.09 28.16 66087.95 Praxair 113.19 0.89 124.99 95.60 2.45 21.85 32289.27
Potash♦ 20.43 -0.34 41.75 20.40 9.12 10.78 13243.91 Bayer 102.05 0.30 146.45 91.08 2.03 22.81 96567.14
TokioMarine 3435 -44.00 5504 3310 2.71 13.95 24134.83 United Kingdom (p) CrownCstl 87.86 -0.19 88.82 75.71 3.68 63.04 29658 Priceline 1278.66 4.51 1476.52 954.02 - 26.72 63442.76
RylBkC 75.23 0.42 81.53 64.52 3.83 12.27 86618.71 BMW 74.79 0.49 117.90 66.00 3.56 8.39 51519.87
Toyota 5278 -189.00 8700 5256 3.70 8.25 163409.1 AscBrFd 3351 -17.00 3606 2705.75 1.01 46.96 37842.35 CSX 24.70 -0.10 37.67 21.33 2.74 12.77 23645.58 ProctGmbl 83.06 -0.14 84.20 65.02 3.07 27.84 224641.22
Suncor En 35.87 0.05 40.93 27.32 2.86 -28.90 43938.94 Continental 184.20 2.20 231.90 171.30 1.62 14.70 42157.12
Mexico (Mex$) AstraZen 4065 -81.50 4931.68 3746 4.70 26.83 73322.5 CVS 101.09 -0.38 113.65 81.37 1.34 22.61 111046.44 Prudntl 71.62 1.45 92.60 57.19 3.30 6.08 31819.42
ThmReut 52.43 0.44 55.92 47.25 3.19 26.25 30793.72 Daimler 60.50 0.88 92.70 57.01 3.72 8.36 74064.73
AmerMvl 13.43 -0.09 17.17 10.87 1.83 40.69 31946.72 Aviva♦ 432.20 3.50 574.00 400.10 4.40 19.38 24963.25 Danaher♦ 93.01 -0.18 97.62 81.25 0.56 26.19 63999.18 PublStor 272.49 -1.56 277.06 182.08 2.31 46.39 47181.15
TntoDom♦ 54.73 0.26 56.48 47.75 3.44 13.81 78463.96 Deut Bank 14.00 0.01 33.42 13.03 4.92 -3.01 22096.15
FEMSA UBD 160.14 -2.45 176.84 133.52 0.67 31.80 32439.84 Barclays 153.50 2.80 289.90 143.91 4.23 -79.04 37006.79 Deere♦ 76.13 -0.18 98.23 70.16 3.17 13.78 24005.75 Qualcomm 51.03 0.47 71.90 42.24 3.53 17.55 76284.1
TrnCan♦ 50.45 0.16 58.12 40.58 3.71 -32.06 27437.87 Deut Tlkm 15.16 0.06 17.63 13.39 3.03 23.09 79913.99
WalMrtMex 41.07 0.85 47.44 35.50 1.29 32.04 40600.54 BP 351.85 1.50 487.50 252.55 7.85 -14.66 93566.46 Delphi 72.93 1.34 90.57 55.59 1.33 18.20 20141.26 Raytheon♦ 125.44 -0.99 129.99 95.32 2.07 19.20 37506.31
ValeantPh 41.66 -2.20 347.84 32.35 - 19.58 11006.67 DeutsPost 24.30 0.25 31.19 19.55 - 22.12 33715.35
BrAmTob♦ 4193.5 3.50 4200.5 3231.5 3.58 18.21 111515.16 Delta 46.88 0.59 52.77 34.61 0.93 8.60 36496.48 Regen Pharm 398.35 -6.59 605.93 348.96 - 74.57 40980
E.ON 8.46 0.19 14.85 7.08 1.52 -2.56 19373.46 Netherlands (€)
China (HK$) BSkyB♦ 1011 -7.00 1180 953.50 3.24 27.68 24790.44 Devon Energy 29.05 0.28 70.48 18.07 3.20 -0.84 15124.71 ReynoldsAm 51.21 0.27 52.54 35.39 2.63 20.59 73136.87
Fresenius Med 78.21 -0.02 83.17 63.10 0.92 27.39 27413.69 Altice 14.19 0.23 47.73 9.98 - -48.96 13334.45
AgricBkCh 2.79 0.04 4.55 2.50 7.66 4.39 11060.14 BT 441.15 3.70 502.60 404.00 2.81 16.20 62675.92 DiscFinServ 50.61 0.06 60.57 42.86 2.07 10.20 20962.94 Salesforce 74.66 -0.19 82.90 52.60 - -1035.81 49574.24
Fresenius SE 63.51 0.15 70.00 51.01 0.64 27.90 39661.19 ASML Hld 88.30 -0.35 104.85 70.25 0.73 29.98 43784.48
Bk China 3.09 0.01 5.68 2.83 7.22 4.77 33323.48 Compass 1264 - 1298 963.00 2.18 24.21 29639.83 Disney 96.93 0.51 122.08 86.25 1.37 18.72 158148.09 Schlmbrg 74.73 0.88 95.13 59.60 2.59 47.37 93653.68
HenkelKgaA 87.39 -1.07 99.44 75.76 1.36 21.50 25979.59 Heineken 78.42 -0.60 85.90 64.54 1.38 25.85 51687.98
BkofComm 4.91 0.05 8.61 4.24 6.45 4.72 22170.21 Diageo 1897.5 -14.50 1979.5 1592.5 2.97 19.31 68120.12 DominRes 73.03 -0.01 76.59 64.54 3.43 23.58 44254.59 Sempra Energy♦ 103.68 -0.56 110.31 86.72 2.61 19.93 25847.44
Linde 123.50 2.05 194.75 113.50 2.34 21.77 26247.91 ING 10.37 0.21 16.00 9.19 3.19 8.18 45936.24
BOE Tech 1.67 0.02 4.78 1.24 1.16 29.37 42.85 GlaxoSmh♦■ 1465.5 -6.00 1645 1227.5 5.46 8.51 101821.11 DowChem♦ 50.80 0.03 57.10 35.11 3.28 8.87 56988.97 Shrwin-Will 295.80 -1.18 298.75 218.27 0.88 27.39 27293.59
MuenchRkv 175.45 0.65 206.50 156.00 4.06 10.20 33496.71 Unilever 39.53 0.06 42.84 32.86 2.77 25.02 77564.01
Ch Coms Cons 9.58 0.11 16.56 5.77 2.07 8.73 5470.09 Glencore 141.50 4.70 318.46 66.67 8.63 -5.60 29054.78 DukeEner 79.72 -0.05 81.39 65.50 3.93 20.49 54918.84 SimonProp 207.09 -0.01 210.41 170.99 2.83 36.39 64075.48
SAP 67.42 -0.09 75.75 53.91 1.50 28.69 94777.16 Norway (Kr)
Ch Evrbrght 3.55 - 5.65 3.07 6.15 4.88 3144.71 HSBC♦ 418.25 0.25 674.57 413.95 8.22 9.57 117813.71 DuPont 63.31 0.11 75.72 47.11 2.63 31.30 55485.33 SouthCpr 26.67 0.75 33.31 21.55 1.23 29.74 20634.77
Siemens 89.39 0.14 104.20 77.91 3.39 15.45 86945.3 DNB 97.65 0.95 143.00 90.10 3.48 7.27 19421.47
Ch Rail Cons 9.53 0.08 17.70 6.72 1.85 8.41 2551.85 Imperial Brands 3822.5 -27.50 3898 2926 3.46 21.61 52274.79 Eaton 60.89 0.98 73.82 46.19 3.50 14.85 27889.73 Starbucks 61.06 0.02 64.00 42.05 1.08 38.70 90252.79
Volkswgn 121.40 1.05 245.30 95.00 3.63 10.50 40993.14 Statoil 127.70 1.20 161.70 97.25 5.05 -12.09 49721.02
Ch Rail Gp 5.94 0.04 12.30 4.21 1.54 9.70 3223.07 LlydsBkg♦■ 65.52 -0.38 89.35 55.84 2.29 86.78 66706.61 eBay 24.24 0.17 29.83 21.52 - 15.65 27697.5 StateSt♦ 56.66 0.39 81.26 50.73 2.25 13.10 22665.44
ChConstBk 4.92 0.04 7.98 4.31 7.18 4.68 152547.19 Hong Kong (HK$) Telenor 135.10 5.00 186.10 116.80 2.54 36.54 24769.15 Ecolab♦ 112.22 0.59 122.48 98.62 1.16 34.88 32951.92 Stryker♦ 108.34 -0.21 109.79 86.68 1.26 29.63 40429.74
Natl Grid 991.40 -9.10 1003.5 806.40 4.32 17.28 52980.88
China Vanke 19.42 0.76 24.10 15.52 3.00 10.25 3293.3 AIA 43.10 -0.15 54.25 36.85 1.16 26.17 66969.78 Qatar (QR) EMC♦ 25.80 0.11 28.77 22.66 1.73 26.28 50374.52 Sychrony Fin 28.04 0.02 36.40 23.74 - 10.93 23380.6
Prudential♦■ 1313 2.50 1720 1045.99 2.90 13.01 48184.51
ChinaCitic 4.67 0.05 7.40 4.00 - 4.59 8963.08 BOC Hold 22.95 0.05 33.70 18.82 4.43 10.33 31292.68 QatarNtBk 138.60 -1.30 169.00 122.50 2.48 10.35 31958.65 Emerson 54.09 0.25 62.75 41.25 3.37 14.69 34786.13 Target 80.41 -0.47 85.81 66.46 2.70 15.23 48244.56
RBS 214.30 2.80 370.00 204.30 - -7.74 35646.67
ChinaLife 18.24 0.18 40.35 16.12 2.52 11.59 17504.02 Ch OSLnd&Inv 24.15 0.10 34.05 20.45 2.21 6.91 30710.78 EOG Res 74.63 1.16 101.36 57.15 0.87 -9.30 41038.01 TE Connect 62.22 0.79 71.22 51.70 1.99 23.12 23282.55
Russia (RUB) ReckittB 6744 -34.00 6868 5403 1.92 28.00 67846.8
ChinaMBank 16.10 0.12 26.85 12.72 4.86 6.04 9532.23 ChngKng 50.55 0.55 77.55 38.20 0.67 11.78 25161.9 EquityResTP 72.57 -1.34 82.39 61.90 2.95 31.77 26498.33 Telsa Mtrs 256.90 6.83 286.65 141.05 - -38.29 33925.13
Gzprm neft 146.70 1.00 158.70 122.75 4.70 12.72 52002.66 RELX 1294 -10.00 1314 988.50 2.04 27.31 37466.23
ChinaMob 85.75 -0.60 116.80 79.00 3.08 14.22 226433.04 Citic Ltd 11.62 0.04 16.40 10.02 1.68 6.05 43593.8 Exelon 34.75 0.05 35.95 25.09 3.45 14.13 32031.66 TexasInstr 58.37 0.48 59.67 43.49 2.32 21.37 58676.59
Lukoil 2772 -5.50 2840 2040.1 5.33 11.71 35304.74 RioTinto 2030.5 43.00 3072 1557 7.57 -63.06 39809.27
ChinaPcIns 27.65 0.05 47.10 23.70 2.05 14.25 9896.39 Citic Secs 18.30 0.68 38.20 12.82 1.81 9.26 6887.43 ExpScripts 69.62 -0.47 94.61 65.55 - 20.21 44055.76 TheTrvelers 115.35 0.12 118.28 95.21 2.00 10.96 33763.89
MmcNrlskNckl 8767 138.00 11284 7840 18.28 11.18 20773.77 RollsRoyce 664.00 -3.00 1061 497.00 2.12 148.21 17415.54
ChMinsheng 7.12 0.04 11.88 6.13 1.81 4.85 6366.62 CK Hutchison 98.95 -0.05 174.90 91.80 3.35 4.30 49253.63 ExxonMb 83.48 0.27 90.09 66.55 3.34 22.41 346672.12 ThrmoFshr♦ 142.12 -0.09 145.31 117.10 0.41 29.79 55920.32
Novatek 596.00 11.60 650.00 451.30 9.43 56.66 27097.24 RylDShlA 1732 -1.00 2122 1256 7.43 84.18 105627.54
ChMrchSecs RMB 17.79 0.55 39.34 13.45 4.17 9.81 13207.08 CNOOC 9.10 0.15 13.78 6.41 5.66 8.68 52397.36 Facebook 109.66 -0.97 117.59 72.00 - 88.11 247802.48 TimeWrnr 73.66 0.05 91.34 55.53 1.84 16.62 58202.77
Rosneft 323.45 6.95 329.20 214.80 2.43 9.10 51330.05 SABMill 4215 -2.00 4265.5 2773 1.76 34.92 97486.66
Chna Utd Coms RMB 4.41 0.07 10.74 3.86 1.47 27.93 14448.24 HangSeng 135.50 1.60 162.10 121.10 4.00 9.73 33408.95 Fedex 164.06 0.64 185.19 119.71 0.59 45.34 44037.6 TimeWrnrC♦ 203.51 -0.95 206.66 145.44 1.78 32.94 57648.35
Sberbank 116.00 3.08 117.85 66.50 0.37 13.03 37495.88 Shire♦ 4244 -6.00 5870 3423 0.36 27.74 35912.83
ChShenEgy 12.20 0.42 22.05 10.12 7.01 13.00 5347.23 HK Exc&Clr 187.20 1.60 311.40 160.10 2.71 29.12 29176.74 FordMtr 12.70 0.15 16.10 10.44 4.57 7.12 49658.76 TJX Cos 75.85 -0.33 79.20 63.53 1.07 22.63 50257.54
Surgutneftegas 37.38 -0.22 41.16 30.31 - 1.47 19996.55 StandCh 447.95 4.40 1122 373.40 10.02 -7.73 20967.3
ChShpbldng RMB 6.97 0.09 20.19 5.66 0.52-444.26 19346.18 MTR 37.95 -0.70 39.20 33.10 2.51 15.36 28694.08 Franklin♦ 37.54 0.30 52.76 31.00 1.62 12.40 22247.93 T-MobileUS 38.67 -0.03 43.43 31.19 - 48.48 31556.17
Saudi Arabia (SR) Tesco 193.50 2.95 251.55 137.00 0.60 -2.78 22470.9
ChStConEng RMB 5.65 0.06 12.52 4.88 2.92 7.55 26111.13 SandsCh 29.45 -0.15 37.75 20.75 6.54 21.70 30649.05 GenDyn♦ 132.71 -0.20 153.76 121.61 1.96 15.10 40696.86 UnionPac 79.26 0.09 112.44 67.06 2.69 14.92 66816.26
AlRajhiBnk 53.84 1.06 69.00 44.70 2.22 12.83 23330.35 Vodafone 225.35 -2.15 258.00 197.70 4.98 -42.20 85372.79
ChUncHK 9.95 0.03 16.00 7.87 2.34 22.28 30728.89 SHK Props 93.70 0.90 137.60 79.00 2.32 9.40 34963.83 GenElectric♦ 30.88 0.09 32.05 19.37 2.88 187.66 286678.41 UPS B 104.58 0.27 107.32 87.30 2.70 20.21 72175.65
Natnlcombnk♦ 40.27 0.14 72.75 36.60 1.90 9.24 21477.04 WPP 1646 7.00 1678 1273 2.32 17.01 30374.16
CNNC Intl RMB 7.65 0.12 14.38 4.07 - 22.45 4600.8 Tencent 159.50 -0.50 171.00 124.00 0.21 45.18 193497.86 GenMills♦ 62.99 -0.31 65.49 47.43 2.86 25.06 37441.35 USBancorp♦ 39.62 0.24 46.26 37.07 2.47 12.94 68777
SaudiBasic 77.66 1.21 110.50 59.50 6.16 10.60 62127.18 United States of America ($)
CSR 7.74 0.06 20.70 6.61 1.79 15.57 4363.15 India (Rs) GenMotors 29.76 0.39 37.45 24.62 4.49 5.21 45964.1 UtdHlthcre 126.35 0.67 131.11 95.00 1.44 21.72 120117.09
SaudiTelec♦ 61.75 0.25 73.25 52.75 6.19 13.95 32932.9 21stC Fox A♦ 28.64 0.05 35.15 22.66 1.01 24.51 32055.36
Daqin RMB 6.90 0.09 15.15 6.41 6.67 7.58 15855.28 Bhartiartl 348.25 - 452.45 282.30 0.62 26.29 20950.29 GileadSci 96.71 0.62 123.37 81.89 1.29 8.39 131007.41 UtdTech 102.24 0.92 119.66 83.39 2.42 23.32 85547.27
Singapore (S$) 3M 167.05 0.42 167.99 134.00 2.38 22.76 101219.7
Gree Elec Apl 0.21 -0.01 0.45 0.13 - -2.42 361.22 HDFC Bk 1070.95 - 1128 928.00 0.73 24.40 40747.39 GoldmSchs 152.24 1.96 218.77 139.05 1.62 12.96 64298.49 ValeroEngy 61.22 -1.84 73.88 51.68 2.69 7.92 28759.82
DBS 15.06 0.06 21.50 13.01 3.65 9.29 28082.72 AbbottLb 42.61 0.24 51.74 36.00 2.18 25.60 62774.84
GuosenSec RMB 16.36 0.47 34.94 13.28 1.17 10.35 5550.58 Hind Unilevr 864.30 - 950.95 766.40 1.59 42.02 28146.89 Halliburton 37.80 0.47 50.20 27.64 1.84 -50.07 32451.97 Verizon♦ 51.77 -0.41 54.49 38.06 4.17 12.25 210902.75
JardnMt US$♦ 58.44 0.41 63.00 45.00 2.40 12.57 41046.74 Abbvie 58.64 0.17 71.60 45.45 3.33 19.28 94857.53
HaitongSecs 12.92 0.22 27.55 10.00 2.27 7.55 5681.13 HsngDevFin 1079.8 - 1372.4 1011.45 1.35 18.89 25673.17 HCA Hold 79.43 0.29 95.49 43.91 - 16.45 31435.88 VertexPharm 85.56 0.31 143.45 75.90 - -38.27 21081.3
JardnStr US$♦ 30.21 0.23 35.61 25.24 0.88 9.59 33625.2 Accenture 113.46 0.63 116.52 88.43 1.91 20.30 92233.1
Hngzh HikVDT RMB 31.02 0.36 56.48 23.72 1.28 21.20 15130.29 ICICI Bk 224.70 - 338.00 180.75 2.12 10.61 19663.43 Hew-Pack 12.29 0.23 16.16 8.91 5.20 5.01 21220.62 VF Cp 62.43 -0.19 77.40 52.21 2.06 22.63 26435.03
OCBC 8.87 0.09 10.92 7.41 3.72 10.16 27136 Adobe 93.54 -0.53 98.00 71.27 - 57.96 46789.6
Hunng Pwr 7.04 0.19 11.90 5.63 6.26 7.02 4267.52 Infosys 1183.9 - 2245 932.65 3.34 20.86 40723.04 HiltonWwde 22.42 0.12 31.60 16.16 0.60 16.32 22190.37 Viacom 38.42 0.43 73.52 30.11 3.85 8.52 13309.12
SingTel 3.66 -0.05 4.57 3.38 4.38 16.49 43434.71 AEP 65.77 -0.24 67.19 52.29 3.16 18.93 32281.06
IM Baotou Stl RMB 3.08 0.09 7.50 2.66 - -41.10 7494.15 ITC 327.25 - 359.80 268.00 1.87 26.73 39632.01 HomeDep 134.06 0.44 136.23 92.17 1.77 24.40 167775.18 Visa Inc 78.21 0.18 81.01 60.00 0.62 29.49 152231.26
UOB 18.56 0.03 25.05 16.80 4.20 10.48 22204.98 Aetna 108.74 -0.13 134.40 92.42 0.89 16.57 37036.84
In&CmBkCh 4.14 0.03 7.10 3.72 7.25 4.65 46340.21 L&T 1213.35 - 1888 1016.05 1.20 23.18 17009.06 Honywell 112.38 0.26 113.47 87.00 1.85 19.22 85558.86 Walgreen 81.17 -0.20 97.30 71.50 1.79 25.85 87683.55
Aflac 64.17 0.26 66.53 51.41 2.38 11.34 26889.82
IndstrlBk RMB 15.61 0.21 21.42 11.90 3.50 6.22 45968.53 OilNatGas 207.60 - 343.20 187.75 4.55 9.50 26729.66 South Africa (R) HumanaInc♦ 169.25 -1.78 219.79 155.24 0.66 20.71 25221.26 WalMartSto 68.12 0.06 81.39 56.30 2.89 14.82 214176.39
AirProd♦ 143.95 1.43 153.93 114.64 2.18 24.57 31041.79
Kweichow RMB 243.72 -6.14 290.00 166.20 1.73 20.48 47321.49 RelianceIn 1040.3 - 1089.75 818.00 0.93 11.84 50731.22 Firstrand 45.58 0.34 58.47 34.08 4.23 12.44 17378.14 IBM 150.50 1.15 176.30 116.90 3.22 11.43 145341.01 WellsFargo 47.35 0.28 58.77 44.50 3.02 11.87 239435.29
Alexion 148.50 -0.39 208.88 124.16 - 229.48 33368.95
Midea 1.80 - 2.68 1.65 5.38 10.85 49.92 SBI NewA 188.25 - 305.00 148.25 1.81 9.41 21992.41 MTN Grp 127.96 -1.62 250.00 109.56 10.70 6.98 16050.66 IllinoisTool 103.65 0.44 104.36 78.79 1.93 20.88 37402.74 Williams Cos 16.90 0.66 61.38 10.22 14.03 -22.97 12672.88
Allegran 228.97 -7.03 340.34 226.43 - -28.03 90471.76
New Ch Life Ins 26.40 0.45 54.90 22.00 0.92 7.73 3520.79 SunPhrmInds 817.30 - 1162.3 704.00 0.36 52.01 29601.88 Naspers N 2073.3 -27.55 2270 1521.98 0.23 65.02 61711.09 Illumina 171.42 3.06 242.37 130.00 - 57.21 25205.81 Yahoo 36.52 0.45 46.17 26.15 - -8.13 34579.92
Allstate 67.16 0.32 72.39 54.12 1.73 13.74 25406.66
PetroChina 4.91 0.03 11.04 4.16 3.74 18.15 13360.25 Tata Cons 2506.65 - 2770 2115 1.55 23.51 74331.97 South Korea (KRW) Intcntl Exch 232.60 -0.92 268.89 220.28 1.21 21.10 27687.37 Yum!Brnds 81.98 -0.36 95.90 64.58 2.00 29.02 33506.21
Alphabet 762.57 3.10 810.35 529.00 - 34.50 223117.05
PingAnIns 35.45 0.40 62.90 30.50 2.24 10.29 34048.83 Indonesia (Rp) HyundMobis 236000 - 272000 185500 1.40 13.93 20035.02 Intel 32.02 0.39 35.59 24.87 2.90 14.18 151046.47 Venezuela (VEF)
Altria 63.78 -0.02 64.16 47.31 3.29 24.71 124809.94
PngAnBnk RMB 10.72 0.15 17.50 9.30 1.57 7.13 19558.49 Bk Cent Asia 13075 -25.00 15225 11000 1.07 19.61 24528.28 KoreaElePwr♦ 58700 - 61200 40800 0.78 3.39 32863.81 Intuit♦ 103.00 -0.38 109.21 79.63 1.07 51.40 26452.59 Bco de Vnzla 108.05 -18.95 143.95 40.00 - - 1581.83
Amazon 599.81 5.21 696.44 374.40 - 496.02 282864.76
Pwr Cons Corp RMB 6.63 0.13 20.00 5.60 1.44 13.61 3381.71 SK Hynix 27150 -650.00 51700 25800 1.74 5.14 16729.28 John&John 108.99 -0.11 109.84 81.79 2.62 20.56 300631.96 Bco Provncl 3655 -165.00 4400 1400 2.92 2.20 1295.37
Israel (ILS) AmerAir 39.27 0.77 53.47 34.10 0.99 3.66 23680.52
SaicMtr RMB 20.42 0.24 29.18 14.00 6.10 8.15 34798.89 SmsungEl 1266000 20000 1494000 1033000 1.48 10.19 160169 JohnsonCn 38.77 0.34 54.52 33.62 2.67 18.73 25132.08 Mrcntl Srvcs 5500 - 6200 2000 3.14 1.80 1073.83
TevaPha 215.10 1.90 275.90 200.30 2.26 32.60 57982.83 AmerExpr♦ 59.60 0.10 81.92 50.27 1.83 12.20 57117.39
ShenwanHong 0.15 0.00 0.41 0.12 - -2.37 47.41 Spain (€) JPMrgnCh♦ 58.35 0.61 70.61 50.07 2.85 10.04 214159.96
Italy (€) AmerIntGrp 53.66 0.50 64.93 50.20 1.46 33.60 60840.62
ShgPdgBk RMB 17.67 0.07 20.12 11.91 4.11 6.97 50945.43 Kimb-Clark 138.27 0.78 138.76 103.04 2.46 51.58 49869.81 Closing prices and highs & lows are in traded currency (with variations for that
Enel 3.78 0.02 4.50 3.33 3.40 68.55 43952.08 BBVA♦ 5.46 0.05 9.75 5.24 2.69 15.24 39785.38 AmerTower♦ 105.84 0.13 106.53 83.07 1.66 77.76 44865.32
Sinopec Corp 5.13 0.07 7.79 3.86 4.51 25.33 16879.44 KinderM 17.89 -0.06 44.71 11.20 10.44 178.53 39911.38 country indicated by stock), market capitalisation is in USD. Highs & lows are
ENI 12.89 0.04 17.66 10.93 6.84 -18.41 53604.12 BcoSantdr 3.73 0.07 7.17 3.31 12.21 7.81 61626.19 Amgen 156.71 0.25 181.81 130.09 1.95 17.87 117537.62
Sinopec Oil RMB 5.06 0.04 14.23 4.71 - 2610.86 1394.74 Kraft Heinz 78.22 -0.25 81.20 61.42 2.10-237.71 95052.12 based on intraday trading over a rolling 52 week period.
Generali 12.55 0.15 18.64 10.90 4.39 10.43 22358.12 CaixaBnk 2.53 0.04 4.53 2.37 4.36 19.91 16840.88 Anadarko 47.93 -0.36 95.94 28.16 2.18 -3.76 24731.15
Denmark (kr) Iberdrola 5.84 0.04 6.71 5.66 0.47 16.54 42779.72 Kroger 37.39 -0.60 42.75 27.32 1.06 17.87 35991.08 ♦ ex-dividend
IntSPaolo 2.33 0.04 3.65 2.12 2.76 15.59 42357.6 Anthem 142.19 -1.55 173.59 115.63 1.70 15.66 37347.62
DanskeBk 175.30 0.70 218.00 168.30 2.88 14.42 27182.88 Inditex 28.53 -0.04 35.38 26.00 1.34 32.49 101748.59 L Brands 80.07 -0.43 101.11 75.11 2.51 18.87 22986.5 ■ ex-capital redistribution
Luxottica 48.68 -0.02 67.80 47.56 1.36 32.18 26942.09 Aon Cp 102.05 0.74 105.24 83.83 1.09 21.61 27561.84
MollerMrsk 8550 140.00 14970 7355 3.20 36.71 13989.8 Repsol 9.61 0.13 18.75 7.95 9.09 -12.20 15848.23 LasVegasSd 50.02 0.54 59.90 34.88 5.03 20.97 39750.62 # price at time of suspension
Unicred 3.14 0.07 6.61 2.77 3.51 10.60 21467.94 Apple 109.92 1.26 134.54 92.00 1.79 12.09 609460.56
NovoB 366.50 -1.30 415.00 305.10 1.25 29.57 116216.43 Telefonica 9.31 0.00 14.31 8.48 7.35 506.52 52985.67 LibertyGbl 39.26 0.24 58.66 30.65 - -31.69 9923.88
ArcherDan 36.41 0.32 53.31 29.86 2.98 12.64 21378.32
Lilly (E) 74.33 -0.06 92.85 67.88 2.60 33.99 82096.92

FT 500: TOP 20 FT 500: BOTTOM 20 BONDS: HIGH YIELD & EMERGING MARKET BONDS: GLOBAL INVESTMENT GRADE
Close Prev Day Week Month Close Prev Day Week Month Day's Mth's Spread Day's Mth's Spread
price price change change % change change % change % price price change change % change change % change % Red Ratings Bid Bid chge chge vs Red Ratings Bid Bid chge chge vs
ValeantPh 43.86 43.86 0.00 0.00 9.53 27.8 -54.65 MTN Grp 127.96 129.58 -1.62 -1.25 -13126.04 -99.0 -11.79 Apr 11 date Coupon S* M* F* price yield yield yield US Apr 11 date Coupon S* M* F* price yield yield yield US
Devon Energy 29.05 28.77 0.28 0.97 3.00 11.5 17.03 Firstrand 45.58 45.24 0.34 0.75 -4656.42 -99.0 4.16 High Yield US$ US$
Halliburton 37.80 37.33 0.47 1.26 3.80 11.2 4.51 Naspers N 2073.30 2100.85 -27.55 -1.31 -203926.70 -99.0 6.66 Navient Corporation 06/18 8.45 BB- Ba3 BB 106.37 5.37 -0.02 0.12 4.67 Halliburton Company 02/27 6.75 A A2 A- 124.93 3.94 0.00 -0.59 2.21
Williams Cos 16.90 16.24 0.66 4.04 1.69 11.1 5.31 FastRetail 26815.00 26610.00 205.00 0.77 -7255.00 -21.3 -21.21 High Yield Euro Korea Electric Power Corporation 08/27 6.75 AA- Aa2 AA- 103.74 6.38 0.00 -0.28 4.66
Vale 16.20 16.20 0.00 0.00 1.41 9.5 23.50 Allegran 228.97 236.00 -7.03 -2.98 -48.58 -17.5 -23.59 Kazkommerts Intl BV 02/17 6.88 B Caa1 B 97.50 - 0.00 0.00 - SouthTrust Bank 12/27 6.57 A Aa3 A+ 123.04 4.11 0.00 -0.27 2.38
Petrobras 10.49 10.49 0.00 0.00 0.89 9.3 4.56 Fuji Hvy Ind 3358.00 3401.00 -43.00 -1.26 -438.00 -11.5 -16.65 Archer Daniels Midland Company 12/27 6.75 A A2 A 127.92 3.81 0.00 -0.22 2.08
Anadarko 47.93 48.29 -0.36 -0.75 3.34 7.5 3.26 Daimler 59.62 59.62 0.00 0.00 -5.78 -8.8 -7.49 Emerging US$ SunTrust Banks, Inc. 01/28 6.00 BBB+ Baa1 A- 113.76 4.53 0.00 -0.27 -
CanNatRs 35.97 35.97 0.00 0.00 2.50 7.5 0.51 HumanaInc 169.25 171.03 -1.78 -1.04 -16.22 -8.7 -9.46 Mexico 09/16 11.40 BBB+ A3 BBB+ 106.80 1.49 0.03 0.01 0.44 FleetBoston Financial Corp. 01/28 6.88 BBB Baa3 A- 123.74 4.33 0.00 -0.23 -
Sony 2965.00 2858.50 106.50 3.73 202.50 7.3 8.07 Toyota 5278.00 5467.00 -189.00 -3.46 -493.00 -8.5 -14.25 Brazil 01/18 8.00 BB+ Ba2 BB+ 105.83 4.52 -0.02 -0.22 3.83
Russia 07/18 11.00 BB+ Ba1 BBB- 117.32 3.09 -0.01 -0.05 2.39 Euro
ConocPhil 41.86 41.23 0.63 1.53 2.76 7.1 3.18 L Brands 80.07 80.50 -0.43 -0.53 -6.63 -7.6 -7.26 Credit Agricole S.A. 03/27 2.63 BBB Baa3 A- 100.16 2.61 0.00 -0.07 0.88
H&M 288.00 288.00 0.00 0.00 18.70 6.9 -0.14 ICICI Bk 221.25 224.70 -3.45 -1.54 -17.05 -7.2 4.27 Peru 03/19 7.13 BBB+ A3 BBB+ 114.46 2.08 0.00 -0.03 1.38
Peru 03/19 7.13 BBB+ A3 BBB+ 114.01 2.60 0.00 0.20 0.84 Electricite de France (EDF) 03/27 4.13 A+ A1 A 122.21 1.91 0.00 0.00 0.19
EOG Res 74.63 73.47 1.16 1.58 4.32 6.1 -0.92 CME Grp 89.97 89.09 0.88 0.99 -6.77 -7.0 -5.06 TeliaSonera 09/27 3.00 A- A3 A- 112.14 1.82 0.00 0.00 0.09
Cielo 38.08 38.08 0.00 0.00 2.20 6.1 -5.39 Denso 3954.00 4016.00 -62.00 -1.54 -282.00 -6.7 -11.82 Colombia 07/21 4.38 BBB Baa2 BBB 103.67 3.63 0.00 -0.18 2.48
Brazil 01/22 12.50 BB+ Ba2 BB+ 97.21 13.21 -0.01 -0.02 12.05 BHP Billiton Fin Ltd 09/27 3.25 A+ A3 A+ 117.39 1.58 0.00 -0.61 -0.15
ItauHldFin 27.27 27.27 0.00 0.00 1.52 5.9 -1.72 Cigna 131.84 130.41 1.43 1.10 -9.39 -6.6 -8.98
Poland 03/22 5.00 A- A2 A- 117.38 2.80 0.00 0.00 1.64 Yen
Lukoil 2777.50 2777.50 0.00 0.00 152.50 5.8 4.08 Nomura 448.20 454.40 -6.20 -1.36 -31.40 -6.5 -13.85
Turkey 09/22 6.25 - Baa3 BBB- 110.92 4.34 -0.01 -0.19 3.18 Wal-Mart Stores, Inc. 07/15 0.94 NR WR NR 100.00 0.31 0.00 0.00 -
BOE Tech 1.67 1.65 0.02 1.21 0.09 5.7 -11.58 SBI NewA 183.10 188.25 -5.15 -2.74 -12.55 -6.4 4.29
Pfizer 32.27 32.50 -0.23 -0.71 1.55 5.0 5.85 TokioMarine 3435.00 3479.00 -44.00 -1.26 -224.00 -6.1 -13.19 Turkey 10/26 4.88 - Baa3 BBB- 101.20 4.78 0.00 -0.26 3.06 £ Sterling
Softbank 5677.00 5691.00 -14.00 -0.25 267.00 4.9 -0.98 MitUFJFin 477.70 490.10 -12.40 -2.53 -31.00 -6.1 -10.75 Emerging Euro IPIC GMTN Limited 03/26 6.88 AA Aa2 AA 122.65 4.11 0.06 0.12 1.82
Rosneft 316.50 316.50 0.00 0.00 14.70 4.9 7.48 Walgreen 81.17 81.37 -0.20 -0.25 -5.14 -6.0 -0.45 Brazil 02/15 7.38 BBB- Baa2 BBB 111.75 0.73 0.00 0.00 0.09 B.A.T. Intl Fin plc (Re - British American Tobacco) 09/26 4.00 A- A3 A- 104.67 3.47 0.06 0.29 1.18
China Vanke 19.42 18.66 0.76 4.07 0.90 4.9 7.29 Hitachi 467.00 474.70 -7.70 -1.62 -27.80 -5.6 -9.64 Mexico 07/17 4.25 BBB+ A3 BBB+ 111.13 1.50 0.00 0.00 0.80 Data provided by SIX Financial Information. US $ denominated bonds NY close; all other London close. *S - Standard & Poor’s, M -
Mexico 02/20 5.50 BBB+ A3 BBB+ 121.63 2.06 0.00 0.00 0.90 Moody’s, F - Fitch.
Based on the FT Global 500 companies in local currency Based on the FT Global 500 companies in local currency
Bulgaria 09/25 5.75 BB+ - BBB- 115.50 3.82 0.00 0.11 2.10
Data provided by SIX Financial Information & Tullett Prebon Information. US $ denominated bonds NY close; all other
London close. *S - Standard & Poor’s, M - Moody’s, F - Fitch.

INTEREST RATES: OFFICIAL BOND INDICES VOLATILITY INDICES GILTS: UK CASH MARKET
Apr 11 Rate Current Since Last Mnth Ago Year Ago Day's Month's Year Return Return Apr 11 Day Chng Prev 52 wk high 52 wk low Red Change in Yield 52 Week Amnt
US Fed Funds 0.25-0.50 16-12-2015 1.00 0.25-0.50 0.00-0.25 Index change change change 1 month 1 year VIX 15.46 0.10 15.36 53.29 10.88 Apr 11 Price £ Yield Day Week Month Year High Low £m
US Prime 3.50 16-12-2008 3.50 3.50 3.50 Markit IBoxx VXD 14.33 -1.00 15.33 56.32 7.76 Tr 4pc '16 101.44 0.41 0.00 0.00 0.00 2.50 102.23 100.00 0.35
US Discount 0.75 16-12-2015 0.75 1.00 0.75 ABF Pan-Asia unhedged 184.15 -0.22 0.09 6.27 3.21 1.91 VXN 17.80 -0.68 18.48 46.72 12.06 Tr 1.75pc '17 101.04 0.41 5.13 5.13 -8.89 -6.82 102.37 101.04 0.29
Euro Repo 0.05 10-09-2014 0.05 0.05 0.05 Corporates( £) 305.85 -0.27 0.65 3.62 2.67 0.73 VDAX 22.04 -0.03 22.07 32.55 16.71 Tr 5pc '18 108.98 0.26 4.00 0.00 -25.71 -59.38 112.61 108.98 0.35
UK Repo 0.50 05-03-2009 0.50 0.50 0.50 Corporates($) 260.48 0.34 0.65 4.41 0.65 4.41 † CBOE. VIX: S&P 500 index Options Volatility, VXD: DJIA Index Options Volatility, VXN: NASDAQ Index Options Volatility. Tr 4.5pc '19 111.97 0.35 6.06 -7.89 -31.37 -60.23 114.07 111.04 0.36
Japan O'night Call 0.00-0.00 05-10-2010 0.00 0.00-0.10 0.00-0.10 Corporates(€) 217.32 -0.05 0.42 2.86 1.55 0.54 ‡ Deutsche Borse. VDAX: DAX Index Options Volatility. Tr 4.75pc '20 116.25 0.54 3.85 -8.47 -23.94 -49.53 117.83 114.45 0.33
Switzerland Libor Target 0.00-0.25 15-01-2015 0.00-0.75 -1.25--0.25 0-0.25 Eurozone Sov(€) 233.13 0.11 0.03 3.48 0.88 0.82 Tr 1.5pc '21 103.36 0.78 2.63 -6.02 -17.89 -36.07 140.54 99.91 0.23
Gilts( £) 302.94 -0.52 0.36 5.61 -0.06 3.68 BONDS: BENCHMARK GOVERNMENT Tr 4pc '22 118.26 0.82 2.50 -6.82 -18.00 -37.40 119.14 113.65 0.38
INTEREST RATES: MARKET Global Inflation-Lkd 249.14 0.23 -0.07 4.53 2.58 -0.19 Red Bid Bid Day chg Wk chg Month Year Tr 5pc '25 131.22 1.28 2.40 -1.54 -9.86 -18.99 132.97 124.47 0.35
Over Change One Three Six One Markit iBoxx £ Non-Gilts 305.96 -0.27 0.56 3.74 1.87 1.02 Date Coupon Price Yield yield yield chg yld chg yld Tr 4.25pc '27 128.33 1.58 1.94 -1.25 -6.51 -11.73 130.43 119.79 0.31
Apr 11 (Libor: Apr 08) night Day Week Month month month month year Overall ($) 234.07 0.36 0.58 4.02 0.58 4.02 Australia 10/18 3.25 103.45 1.84 -0.02 -0.04 -0.19 0.05 Tr 4.25pc '32 131.70 1.95 1.56 -0.51 -3.94 -5.80 134.41 121.93 0.35
US$ Libor 0.37750 -0.001 -0.006 -0.002 0.43470 0.63080 0.89490 1.20455 Overall( £) 301.09 -0.45 0.42 5.05 0.51 2.88 11/27 2.75 101.97 2.55 -0.03 -0.05 -0.25 0.00 Tr 4.25pc '36 134.08 2.14 1.90 0.00 -2.73 -2.73 137.18 123.52 0.28
Euro Libor -0.39057 -0.001 -0.022 -0.002 -0.33857 -0.26043 -0.14700 -0.02714 Overall(€) 227.52 0.05 0.14 3.09 0.89 0.74 Austria 10/19 0.25 99.98 0.26 0.00 0.00 0.00 0.00 Tr 4.5pc '42 144.82 2.25 1.35 0.00 -2.17 -1.32 148.39 132.20 0.26
£ Libor 0.48313 0.000 0.005 0.001 0.50975 0.58938 0.74213 0.99713 Treasuries ($) 225.47 0.40 0.62 4.00 0.62 4.00 10/26 0.75 102.53 0.50 0.03 0.00 0.00 0.00 Tr 3.75pc '52 138.95 2.19 1.86 0.00 -1.79 -4.78 142.78 121.95 0.23
Swiss Fr Libor 0.000 -0.78020 -0.72900 -0.65580 -0.53540 FTSE Belgium 06/18 0.75 101.74 -0.06 0.00 0.00 0.00 0.00 Tr 4pc '60 152.72 2.14 1.90 0.47 -1.83 -5.73 157.42 131.72 0.22
Yen Libor 0.009 -0.05200 -0.01171 0.01907 0.10129 Sterling Corporate (£) 112.10 -0.38 - - 1.73 -3.72 06/26 1.00 104.92 0.50 0.03 0.01 -0.16 0.00 xd Ex dividend. Closing mid-prices are shown in pounds per £ 100 nominal of stock. Red yield: Gross redemption yield.
Euro Euribor 0.000 -0.33900 -0.24800 -0.13400 -0.01000 Euro Corporate (€) 108.53 -0.11 - - 1.29 -2.31 Canada 05/18 0.25 99.38 0.55 0.00 0.00 -0.04 0.00 This table shows the gilts benchmarks & the non-rump undated stocks.
Sterling CDs 0.000 0.50000 0.60000 0.77500 Euro Emerging Mkts (€) 892.52 27.60 - - 4.53 -18.51 06/26 1.50 101.62 1.33 0.00 0.01 -0.13 0.00
US$ CDs
Euro CDs
0.000
0.000
0.44000
-0.37500
0.60000
-0.28500
0.85000
-0.18500
Eurozone Govt Bond 116.27 -0.29 - - 0.59 -2.39 Denmark 11/18 0.25 101.82 -0.45 0.00 0.00 0.00 0.00 GILTS: UK FTSE ACTUARIES INDICES
CREDIT INDICES Day's Week's Month's Series Series 11/25 1.75 113.23 0.35 0.02 -0.05 -0.25 0.00
Price Indices Day's Total Return Return
Short 7 Days One Three Six One Index change change change high low Finland 05/18 1.00 100.03 0.99 0.00 -0.05 -0.26 0.00
Fixed Coupon Apr 11 chg % Return 1 month 1 year Yield
Apr 11 term notice month month month year Markit iTraxx 04/26 0.50 100.93 0.40 0.03 0.00 0.00 0.00
1 Up to 5 Years 98.47 -0.07 2403.46 0.14 2.07 0.50
Euro -0.45 -0.35 -0.45 -0.35 -0.45 -0.30 -0.36 -0.21 -0.26 -0.11 -0.08 0.07 Crossover 5Y 331.34 -4.73 26.79 - 339.86 298.18 France 05/19 1.00 104.33 -0.38 0.00 0.00 0.00 0.00
2 5 - 10 Years 184.10 -0.24 3373.07 0.20 4.22 1.07
Sterling 0.40 0.50 0.45 0.55 0.55 0.65 0.70 0.85 0.93 1.08 Europe 5Y 78.33 -1.03 4.90 - 82.07 71.90 11/20 0.25 102.33 -0.25 0.00 0.00 0.00 0.00
3 10 - 15 Years 214.78 -0.45 4000.44 0.03 4.25 1.66
Swiss Franc - - - - - - - - - - - - Japan 5Y 85.42 -0.40 -0.78 - 93.03 83.87 05/26 0.50 100.35 0.46 0.03 0.00 -0.16 0.00
4 5 - 15 Years 191.47 -0.30 3524.96 0.15 4.34 1.32
Canadian Dollar - - - - - - - - - - - - Senior Financials 5Y 99.92 -0.94 9.05 - 102.83 87.63 05/45 3.25 143.73 1.41 0.06 0.08 -0.16 0.00
5 Over 15 Years 315.57 -0.91 4615.91 -0.30 4.51 2.15
US Dollar 0.35 0.45 0.35 0.45 0.35 0.45 0.55 0.65 0.80 0.90 1.15 1.25 Germany 04/19 0.50 103.11 -0.53 0.00 0.00 0.00 0.00
Markit CDX 7 All stocks 178.00 -0.48 3371.35 -0.03 3.65 1.86
Japanese Yen -0.30 -0.15 -0.40 -0.20 -0.40 -0.20 -0.30 -0.10 -0.20 0.00 -0.10 0.10 10/20 0.25 103.17 -0.45 0.00 0.00 0.00 0.00
Emerging Markets 5Y 308.12 -3.17 18.38 0.00 311.29 278.15 02/26 0.50 103.79 0.11 0.01 -0.02 -0.17 0.00
Libor rates come from ICE (see www.theice.com) and are fixed at 11am UK time. Other data sources: US $, Euro & CDs: Day's Month Year's Total Return Return
Nth Amer High Yld 5Y 453.86 -4.33 15.28 0.00 461.04 438.54 08/46 2.50 145.87 0.79 0.04 0.03 -0.23 0.00
Tullett Prebon; SDR, US Discount: IMF; EONIA: ECB; Swiss Libor: SNB; EURONIA, RONIA & SONIA: WMBA. Index Linked Apr 11 chg % chg % chg % Return 1 month 1 year
Nth Amer Inv Grade 5Y 82.30 0.07 6.78 0.00 83.19 75.52 Greece 07/17 3.38 92.71 9.78 0.02 -0.42 3.07 0.00
Websites: markit.com, ftse.com. All indices shown are unhedged. Currencies are shown in brackets after the index names. 1 Up to 5 Years 309.82 0.06 0.02 -0.97 2385.07 0.37 0.82
02/26 3.00 66.50 8.81 -0.03 0.06 0.23 0.00 2 Over 5 years 591.62 -0.72 -0.67 0.39 4374.50 -0.62 1.08
Ireland 10/17 5.50 108.91 -0.36 0.00 0.00 0.00 0.00 3 5-15 years 440.63 -0.09 0.53 0.30 3360.28 0.55 1.41
05/26 1.00 101.61 0.83 0.06 0.12 -0.02 0.00 4 Over 15 years 732.25 -0.96 -1.14 0.56 5310.66 -1.07 1.09
COMMODITIES www.ft.com/commodities BONDS: INDEX-LINKED Italy 10/18 0.30 100.65 0.04 -0.02 0.02 0.03 0.00 5 All stocks 545.20 -0.61 -0.58 0.23 4086.47 -0.48 1.08
06/21 0.45 99.88 0.47 0.02 0.08 0.00 0.00
Energy Price* Change Agricultural & Cattle Futures Price* Change Price Yield Month Value No of
06/26 1.60 101.76 1.42 0.03 0.11 0.07 0.00 Yield Indices Apr 11 Apr 08 Yr ago Apr 11 Apr 08 Yr ago
Crude Oil† Apr 39.76 0.22 Corn♦ May 359.50 -2.25 Apr 08 Apr 08 Prev return stock Market stocks
03/47 2.70 104.25 2.52 0.02 0.11 -0.04 0.00 5 Yrs 0.68 0.64 1.06 20 Yrs 2.18 2.13 2.21
Brent Crude Oil‡ 42.76 0.96 Wheat♦ May 454.75 -5.25 Can 4.25%' 21 126.99 -0.464 -0.500 -0.04 5.18 74208.02 7
Japan 04/18 0.10 100.70 -0.24 0.00 0.00 0.00 0.00 10 Yrs 1.46 1.41 1.67 45 Yrs 2.12 2.07 2.29
RBOB Gasoline† Apr 1.47 0.01 Soybeans♦ May 919.50 2.75 Fr 2.25%' 20 115.26 -1.193 -1.168 0.40 20.31 224681.94 15
04/21 0.05 101.27 -0.20 0.00 0.00 0.00 0.00 15 Yrs 1.96 1.91 2.02
Heating Oil† Apr 1.20 0.07 Soybeans Meal♦ May 275.30 1.90 Swe 0.25%' 22 110.65 -1.288 -1.303 -0.04 29.90 232134.52 7
03/26 0.10 101.81 -0.08 0.00 0.00 0.00 0.00
Natural Gas† Apr 1.92 -0.06 Cocoa (ICE Liffe)X May 2149.00 9.00 UK 2.5%' 20 362.29 -1.666 -1.649 0.42 6.58 514198.95 27
03/46 0.80 110.50 0.41 -0.02 0.00 -0.32 0.00 inflation 0% inflation 5%
Ethanol♦ - - Cocoa (ICE US)♥ May 2909.00 43.00 UK 2.5%' 24 345.13 -1.139 -1.147 0.61 6.82 514198.95 27
Netherlands 04/17 0.50 101.00 -0.49 0.00 0.00 0.00 0.00 Real yield Apr 11 Dur yrs Previous Yr ago Apr 11 Dur yrs Previous Yr ago
Uranium† Apr 29.00 0.00 Coffee(Robusta)X May 1547.00 32.00 UK 2%' 35 236.51 -0.936 -0.965 0.29 9.08 514198.95 27
07/25 0.25 100.25 0.22 0.03 0.01 -0.15 0.00 Up to 5 yrs -1.38 2.11 -1.35 -1.16 -2.02 2.12 -2.01 -1.80
Carbon Emissions‡ - - Coffee (Arabica)♥ May 120.75 0.25 US 0.625%' 21 105.00 -0.315 -0.330 0.02 35.84 1181573.66 37
White SugarX 418.10 -12.40 New Zealand 03/19 5.00 108.29 2.06 -0.01 0.01 -0.10 -1.03 Over 5 yrs -0.96 23.77 -0.99 -0.93 -0.99 23.85 -1.02 -0.96
Diesel† - - US 3.625%' 28 138.02 0.385 -0.330 0.22 16.78 1181573.66 37
Sugar 11♥ 14.29 -0.41 04/25 2.75 100.98 2.64 0.00 0.00 0.00 0.00 5-15 yrs -1.04 9.38 -1.05 -0.96 -1.14 9.39 -1.15 -1.08
Unleaded (95R) - - Representative stocks from each major market Source: Merill Lynch Global Bond Indices † Local currencies. ‡ Total market
Norway 05/19 4.50 112.47 0.45 0.02 0.02 -0.08 0.00 Over 15 yrs -0.95 29.31 -0.99 -0.93 -0.97 29.35 -1.00 -0.95
Base Metals (♠ LME 3 Months) Cotton♥ May 60.50 0.37 value. In line with market convention, for UK Gilts inflation factor is applied to price, for other markets it is applied to par
02/26 1.50 102.49 1.23 0.02 0.02 -0.18 0.00 All stocks -0.97 20.79 -1.00 -0.94 -1.00 20.91 -1.03 -0.97
Aluminium 1510.00 -11.50 Orange Juice♥ May 137.45 -1.75 amount.
Aluminium Alloy 1605.00 15.00 Palm Oil♣ - - Portugal 06/19 4.75 109.82 1.55 0.20 0.46 0.41 0.00 See the FTSE website for more details: http://www.ftse.com/products/indices/gilts
Copper 4676.00 11.00 Live Cattle♣ Apr 134.50 0.00 BONDS: TEN YEAR GOVT SPREADS 02/26 3.30 99.63 3.34 0.00 0.43 0.49 0.00
Spain 04/18 0.25 100.46 0.03 -0.03 0.01 0.00 0.00 All data provided by Morningstar unless otherwise noted. All elements listed are indicative and believed accurate
Lead 1694.00 -9.50 Feeder Cattle♣ Apr 155.85 2.13
Nickel 8630.00 70.00 Lean Hogs♣ May 76.73 0.00 Spread Spread Spread Spread 04/26 1.95 104.08 1.51 -0.02 0.04 -0.02 0.00 at the time of publication. No offer is made by Morningstar or the FT. The FT does not warrant nor guarantee
Tin 16925.00 125.00 Bid vs vs Bid vs vs Sweden 10/18 1.00 100.07 0.97 0.00 0.04 -0.23 0.00 that the information is reliable or complete. The FT does not accept responsibility and will not be liable for any
Zinc 1756.00 -2.50 % Chg % Chg Yield Bund T-Bonds Yield Bund T-Bonds 05/25 2.50 117.83 0.49 0.00 0.01 -0.13 0.00 loss arising from the reliance on or use of the listed information. For all queries e-mail
Precious Metals (PM London Fix) Apr 08 Month Year Australia 2.55 2.44 0.83 Italy 1.42 1.31 -0.31 Switzerland 05/19 3.00 112.40 -0.95 0.00 0.00 0.00 0.00 ft.reader.enquiries@morningstar.com
Gold 1254.75 15.25 S&P GSCI Spt 332.14 1.36 -19.52 Austria 0.50 0.39 -1.22 Japan -0.08 -0.19 -1.80 05/26 1.25 116.71 -0.37 0.00 0.00 0.00 0.00
Silver (US cents) 1556.00 40.00 DJ UBS Spot 79.29 -0.14 -20.31 Belgium 0.50 0.39 -1.22 Netherlands 0.22 0.11 -1.50 United Kingdom 07/18 1.25 101.92 0.40 0.02 -0.04 -0.15 0.00 Data provided by Morningstar | www.morningstar.co.uk
Platinum 981.00 24.00 R/J CRB TR 172.51 0.00 -20.75 Canada 1.33 1.22 -0.40 Norway 1.23 1.12 -0.49 01/21 1.50 103.41 0.77 0.01 -0.07 -0.22 0.00
Palladium 547.00 10.00 Rogers RICIX TR 2027.81 - - Denmark 0.35 0.23 -1.38 Portugal 3.34 3.23 1.62 07/26 1.50 99.76 1.52 0.03 -0.04 -0.15 0.00
Bulk Commodities M Lynch MLCX Ex. Rtn 231.14 -9.84 -33.05 Finland 0.40 0.29 -1.32 Spain 1.51 1.40 -0.21 12/46 4.25 144.12 2.25 0.03 -0.02 -0.04 0.00
Iron Ore (Platts) 56.50 2.90 UBS Bberg CMCI TR 12.16 -0.39 -21.59 France 0.46 0.35 -1.26 Switzerland -0.37 -0.48 -2.09 United States 03/18 0.88 100.34 0.70 0.00 -0.05 0.00 0.00
Iron Ore (The Steel Index) 55.90 2.60 LEBA EUA Carbon 5.01 -0.99 -26.32 Germany 0.11 0.00 -1.61 United Kingdom 1.52 1.41 -0.20 03/21 1.25 100.45 1.16 -0.01 -0.05 0.00 0.00
GlobalCOAL RB Index 53.00 1.30 LEBA CER Carbon 0.43 19.44 -18.87 Greece 8.81 8.70 7.09 United States 1.72 1.61 0.00 02/26 1.63 99.11 1.72 0.00 -0.04 -0.24 0.00
Baltic Dry Index 555.00 38.00 LEBA UK Power 2392.00 -11.73 -25.13 Ireland 0.83 0.72 -0.89 02/46 2.50 98.77 2.56 0.00 -0.03 -0.17 0.00
Sources: † NYMEX, ‡ ECX/ICE, ♦ CBOT, X ICE Liffe, ♥ ICE Futures, ♣ CME, ♠ LME/London Metal Exchange.* Latest prices, $ Data provided by SIX Financial Information & Tullett Prebon Information Data provided by SIX Financial Information & Tullett Prebon Information
unless otherwise stated.
20 ★ FINANCIAL TIMES Tuesday 12 April 2016

MARKETS & INVESTING

INSIGHT Capital markets

Ara
Lovitt China eyes revamp of sovereign bonds
Beijing urged to rewrite tion in the past two years as policymak- Last year a G20 communiqué called
$1.5tn ment debt remains a fraction of the total
ers and financial institutions seek to for the inclusion of strengthened pari at close to 2 per cent, but according to
contracts to align with prevent a repeat of the messy and pro- passu and collective-action clauses in all Outstanding Deutsche Bank it could reach 10 per cent
renminbi
This time it is the international credit plan tracted debt crisis that trapped Argen-
tina for more than a decade.
In 2014, after Argentina’s second
future international sovereign bonds.
China has stated its public support for
the changes, including at a G20 meeting
government bonds,
against $65bn in
foreign currencies
by 2020 as Beijing loosens restrictions
and tries to widen the pool of capital.
“Foreign ownership of bonds in China
nimble who will profit ELAINE MOORE — LONDON
GABRIEL WILDAU — SHANGHAI
default in 13 years, a group representing
more than 400 of the world’s largest
of finance ministers and central bank
governors in last month. 10 %
is limited,” said Neil Weller at JPMorgan
Asset Management. “So it makes sense

from distressed debt Beijing is considering an overhaul of

sovereign debt issuance as the world’s
third-largest bond market seeks closer
integration with the global financial
system.
banks, investors and debt issuers con-
vened to create a set of clauses for inclu-
sion in government bond contracts.
The provisions focus on strengthen-
ing collective action and clarifying the
At the Paris meeting Zhou Xiaochuan,
governor of the People’s Bank of China,
said: “We must continue to promote
orderly restructuring of sovereign debt,
including inserting strengthened con-
Possible level of
foreign ownership
of China sovereign
that China would be interested in this
path of internationalisation.”
Alexi Chan, head of HSBC’s debt capi-
debt by 2020, tal markets in Asia, said Beijing’s overall
from 2% today goal was to promote the renminbi as an

C
redit cycles are nothing new. In 1837 Lord
Overstone wrote of the “apparently estab-
lished cycle of “quiescence — next improve-
ment — growing confidence — prosperity —
excitement — overtrading — convulsion —
pressure — stagnation — distress — ending again in
quiescence”.
The high-yield market has undergone three cycles since
becoming an institutional asset class in the 1980s. History
teaches that as each cycle turns there is a “Minsky
moment”, or sudden collapse in asset values, followed by
glamorous opportunities for distressed debt funds.
Most investors know that distressed investing takes spe-
cialised skills. Mega-funds pursuing this strategy tout their
large teams of analysts and lawyers. Ironically, in the com-
ing cycle, the sheer size of some funds may place them at a
disadvantage because of changes to the credit markets.
Immense volumes of new debt, unresolved excesses
from the prior cycle and thin levels of trading liquidity cre-
ate a tough environment for mega-funds. The old play-
book of buying defaulted bonds at 35 cents because they
tend to recover 50 cents may be obsolete. In the coming
cycle nimbleness will be critical.
What is different this time is, at least in part, the unin-
tended consequence of actions taken in response to the
most recent crisis. Years of extraordinary monetary policy
have encouraged corporations to borrow colossal amounts
of debt, often for dubious purposes.
There are problems in the credit markets, the most obvi-
ous being energy and mining. What is more, zombie com-
panies from the previous cycle that were bailed out by easy
credit are due a comeuppance. While it is impossible to
predict the timing, based on the indicators we track, it
seems default rates have begun their inexorable climb.
For the past several years, in an environment of low
default rates, recovery rates
(that is, the price at which
bonds trade upon default)
For a mega-fund
have been running considera- there are fewer
bly lower than in previous
low-default periods (about 40
good ideas
cents instead of 50 cents). that can affect
Performance has been even
worse during bankruptcy, as
performance
measured by the Altman-
Kuehne Defaulted Bond index, which returned minus
39.5 per cent in 2015 after a disappointing minus 13 per
cent in 2014.
Investors in distressed debt funds are doubtless familiar
with the disappointments in shipping, power, retail and,
worst of all, oil and gas. For whatever reason — excess mon-
etary stimulus, zombie companies, unsustainable profit
margins — something different is happening this time.
The problem is compounded by regulations that have
severely curtailed credit trading. While the amount of debt
has skyrocketed since the crisis, we have lower trading vol-
umes, less market depth and more challenged financial
intermediation. Many broker-dealers are stepping away
from the markets. News (whether good or bad) tends to
cause exaggerated, and sometimes fleeting, price moves
on light volumes.
Like all investing, in distressed debt one must buy at the
right price. But distressed debt investing also requires buy-
ing the right instrument, backed by the right subsidiaries
or assets, with the right covenants or other structural fea-
tures. Often successful investments require the pairing of
multiple instruments, whether bonds, loans, credit-
default swaps, equity, options — long and short — to isolate
the best risk/reward relationship.
This painstaking work is far harder in the post-Dodd-
Frank markets. Instruments that might have traded in
$25m increments pre-crisis may trade in $5m, if at all. For
a mega-fund, this means fewer good ideas that can affect
performance, and more difficulty entering and exiting
investments — in effect an extra tax on investors.
It may be anathema to some managers to argue against
raising a huge fund in advance of an exciting opportunity.
Much as the man who only has a hammer is tempted to
treat everything as a nail, so a dedicated distressed man-
ager may naturally think it always a great time to be gath-
ering assets.
When investors look back at what they achieved, or
didn’t, after the coming cycle, many will wish they had
invested with managers who stayed nimble enough to
maintain the luxury of picking their spots.
Ara Lovitt is a portfolio manager at GMO
People close to the discussions say
China has been urged to rewrite its sov-
ereign bond contracts to show support
for a new Washington-backed financial
framework designed to improve the
relationship between governments and
creditors.
International sovereign debt markets
have undergone a radical transforma-
Investors place bets on higher inflation
Strategists say it is only a
matter of time before US
consumer prices pick up
JOE RENNISON — NEW YORK
DAN MCCRUM — LONDON
It has been a long time coming but Mihir
Worah, Pimco’s chief investment
officer, thinks 2016 will be the year
when inflation bets finally come good.
For years it was the dog that did not
bark. Central banks, led by the US
Federal Reserve, embraced aggressive
and unconventional monetary policies
to stave off the threat of deflation, but
fears for big rises in consumer prices
proved false.
Securities linked to the level of infla-
tion have at times been reasonable
investments as expectations for the
future shifted.
Yet ultra-low interest rates and vast
purchases of bonds have failed to
deliver the main ingredients for infla-
tion: a robust economic recovery
matched by consistently rising wages.
Central banks in Japan, Europe and
the UK have all announced stimulus
measures, while the Fed has signalled
a lower pace of interest rate rises this
year.
Iain Stealey, fixed income portfolio
manager for JPMorgan Asset Manage-
ment, says: “It has all been easier than
expected monetary policy.
“I like to think of it as the great hunt
for inflation, and they can’t find it at the
moment.’’
That is not deterring some investors,
who feel it is only a matter of time before
inflationary forces begin to show up in
the US economy.
Barclays’ index for Treasury infla-
tion-protected securities — US govern-
ment debt that is insured against infla-
tion — has returned 4.57 per cent this
year, rewarding the likes of Mr Worah.
“We are enjoying the ride,” he says.
Movements in Tips have tended to
echo investors’ expectations about
future consumer price inflation, and
these have reflected the rebound in oil
prices and a weaker dollar, which means
higher import prices.
At the same time the “core” US infla-
tion rate, which strips out the effect of
volatile components such as energy and
food, has been rising.
“I think we will get some pretty hot
CPI [consumer prices index] readings
soon,” says Mark Heppenstall, chief
investment officer at Penn Mutual Asset
Management.
pari passu clause — a traditional feature tract provisions into newly issued and international currency.
of sovereign bonds that ranks creditors existing sovereign bonds, as well as China had only $65bn in foreign-cur-
equally. Hedge funds used pari passu to incentivising strengthened co-ordina- rency government bonds outstanding
argue for full repayment of Argentina’s tion between government creditors and at the end of 2015, according to the
defaulted debt. debtors.” State Administration of Foreign
Mexico and Poland are among coun- However, the country has so far not Exchange. That compares with more
tries to have adopted the changes, which included the provisions in its sovereign than $1.5tn of renminbi-denominated
backed by the International Monetary bonds. bonds, as recorded by the main domes-
Fund and authorities in Washington. Foreign ownership of Chinese govern- tic bond clearing houses.
Analysis. Capital markets
Breakeven rally closely
follows oil
Five-year break- Brent crude
even inflation ($ per barrel)
rate (%)
1.6 42
1.5 40
1.4 38
1.3 36
1.2 34
1.1 32
1.0 30
0.9 28
Dec 2016 Apr
2015
Tips funds see inflows
$m
800
600
400
200
0
-200
-400
Apr 2015 2016 Apr
Sources: Bloomberg; EPFR
A weaker dollar “Once we get some readings above the US dollar strengthening against which is why I do not think it is sustaina-
and the oil price expectations you are going to see other currencies.” ble . . . I think it is a trade, I don’t think
rebound have Tips continue to outperform nominal The current buying of Tips may it is a trend.”
prompted Treasuries.” reflect a view that the cycle of dollar Indeed Janet Yellen, the Fed chair, has
interest in Martin Hegarty, head of inflation- strength and commodity weakness has cast doubts on the durability of the
securities linked linked bond portfolios at BlackRock, ended. pick-up in core inflation and inflation
to the level concurs: “I still think there is a tremen- However, for it to be anything more expectations, arguing that the case for
of inflation dous amount of room for some of these than a short-term tactical bet will moving cautiously on interest rates is
J R Bale/Alamy
inflation metrics to move.” require a fundamental break from the still strong.
The five-year “break-even” rate — a post-crisis status quo. Investors buying Tips also focus on
market measure of inflation expecta- Break-even rates remain well below the strong relationship between oil and
tions derived from comparing the yield the peaks of recent years, suggesting the inflation expectations. They say the rise
of Tips and conventional Treasuries — bond market thinks the rebound in oil in break-evens was probably a result of
has climbed to 1.45 per cent from a low prices and pick-up in US measures of the recovery in energy prices. As such
of 0.95 per cent on February 9. core inflation may be shortlived. the Atlanta Fed has been a vocal critic of
Investment in Tips funds is also pick- David Ader, a strategist at CRT Capi- break-evens as a gauge of inflation
ing up. EPFR, a data provider, says tal, points to weak US wage growth. It is expectations.
$2.3bn has flowed into Tips funds dur- down to 2.3 per cent year on year from “People see an increase in break-even
ing the past six weeks. 2.6 per cent at the start of the year, and inflation rates and some people see it as
“There is this sense that two of the fac- compares with a typical pre-crisis level a pick-up in inflation expectations, but
tors that have been holding US inflation of about 3.5 per cent. according to our model that is not the
low could be fading,” says Mr Worah. “There is no signal of underlying case,” says Bin Wei, a financial econo-
“We have seen some stability after the demand or inflationary demand from mist and policy adviser at the Atlanta
drop in oil prices and we also think we the real economy,” he says. Fed. “Our models say that inflation
are at the end of the relentless trend of “A lot of it is these technical events expectations have been very stable.”

Commodities Equities

Brent rallies ahead of Doha output meeting
DAVID SHEPPARD AND NEIL HUME
Oil prices rose sharply, sending Brent
to a new high for the year, as investors
sharpened their focus on a meeting of
major producers next week that
many hope will bolster crude’s recent
comeback.
Brent, the international oil marker, shot
up as much as 2.7 per cent to $43.06,
while the US crude oil benchmark, West
Texas Intermediate, climbed 2.6 per to
$40.05, its strongest level since late
March.
The so-called Doha Meeting in Qatar
next week will bring together the major-
ity of the largest Opec and non-Opec
members to try to “freeze” output in a
bid to hasten the end of a near two-year
glut. The prospect that the first con-
certed effort by producer nations to end
the glut would be a success helped send
Brent up 8.5 per cent last week. It has
rallied since hitting a 13-year low near
$27 a barrel in January.
But doubts still remain whether sim-
ply holding output steady will be
enough, with most countries already
having raised it close to capacity, and
Iran insisting it will continue to raise
production as it returns from sanctions,
despite opposition from Saudi Arabia,
its regional rival.
Goldman Sachs, one of the most influ-
ential banks in commodity markets,
warned that Sunday’s meeting of pro-
ducer nations could fail to tighten a
heavily oversupplied market.
“A production freeze at recent pro-
duction levels would not accelerate the
rebalancing of the oil market,” said
Goldman analyst Jeffrey Currie, adding
that Russian and Opec output, exclud-
ing Iran, was already close to their
average forecast level for 2016 of 40.5m
barrels a day.
“While a lot of discussions and prepa-
rations have occurred since the freeze
was first proposed in mid-February,
there remains high risk that the meeting
fails to deliver any concrete agreement,
in our view . . . the biggest hurdle to
reaching any meaningful agreement
will be the conflicting Saudi and Iranian
stances.”
Igor Sechin, the head of Russia’s state-
backed oil producer Rosneft, is due to
speak at the Financial Times Commodi-
ties Global Summit today and his words
will be closely watched for any signs of
Russia’s intentions, with the country’s
output running at a post-Soviet record.
WTI gained 8 per cent last week to
nearly $40 a barrel, but data released on
Friday showed hedge funds had lowered
their bets on a further increase in prices.
Italian banks extend gains on rescue fund hopes
THOMAS HALE
Italian lenders led European markets
higher yesterday, with investors draw-
ing comfort from the prospect of gov-
ernment support for the sector after
months of uncertainty.
The FTSE Italia All-Share Banks index
was up 4.2 per cent in afternoon trading
yesterday, for a gain of 12 per cent since
Thursday’s close, cutting this year’s loss
to just over 30 per cent.
The share prices of Italian lenders
remain sharply lower this year on con-
cerns over an estimated €360bn of bad
loans, new rules for failing banks and
weak equity markets globally.
Over the weekend, details emerged of
a new bank rescue fund that would be
backed by big Italian lenders. The fund,
still under discussion, could include up
to €5bn in equity, mostly from lenders
and investors in Italy, alongside debt,
and would aim to buy distressed banks’
shares. A secondary vehicle would buy
non-performing loans. EU rules on state
aid constrain the extent to which Rome
can directly back the country’s banks.
The developments come after con-
cerns over a €2bn capital raising for
Banca Popolare di Vicenza, a regional
Italian bank. UniCredit, Italy’s largest
bank by assets, is the lead underwriter
on the deal. The broader Italian banking
sector has experienced a wave of activ-
ity, with Banca Popolare and Banca
Popolare di Milano agreeing to merge.
“They’re trying to secure the smaller
banks at a relatively small cost to the
larger banks,” said Filippo Alloatti, an
analyst at Hermes. “That’s because not
doing anything . . . would be very detri-
mental. If you had a bail-in, it could do
some quite serious damage.”
The recent performance of Italian
bank bond prices has been mixed,
reflecting ambiguities over their poten-
tial role in losses. A Vicenza subordi-
nated bond is trading at 81.5 cents on the
euro, up from 72 cents late last week. But
a UniCredit €1bn coco bond is down 2.5
per cent over the past three trading days.
The presence of large numbers of
retail bond investors in Italy has further
complicated the politics of resolving the
sector, which also involves decisions
from regulators in Brussels and Frank-
furt. The Vicenza capital increase came
after demands from European Central
Bank supervisors.
New European rules, introduced on
January 1, govern how bank failure is
managed across the continent. They
aim to transfer risk to bank bondhold-
ers, rather than taxpayers, as part of a
broad post-crisis regulatory shift.
Tuesday 12 April 2016
TRADING POST
Jamie
Chisholm
The central banks of Canada and the
UK will deliver their latest monetary
policy decisions tomorrow and
Thursday respectively. This provides
an opportunity to sell sterling versus
the Loonie, says RBC Capital Markets.
In its “Trade of the Week”, a punt
designed to last just a few days, RBC
yesterday went short GBP/CAD at
$1.8360 with a target of $1.8000 and a
stop loss at $1.8515.
“GBP/CAD has been trading towards
12-month lows and we think the
contrast of the two central banks could
push it through those lows this week,”
says the bank.
RBC reckons that the Bank of
Canada will leave rates on hold but its
accompanying comments will include
some more positive news on growth.
“Both its Q1 and 2016 growth
forecasts need to be upgraded (the
former from 1.0 per cent to about
3.0 per cent; the latter to incorporate
the fiscal easing in the Budget).”
RBC’s economists think the BoC will
keep its output gap closure date
unchanged “at around the end of 2017”
— with a stronger Loonie and weaker
global growth counteracting firmer
domestic data — but the risks are
skewed to it happening sooner rather
than later. That’s Loonie bullish.
In the UK, the Monetary Policy
Committee “is unlikely to substantially
change its narrative so close to the
May Inflation Report but we see some
risk of a shift to an 8-1 vote with the
dissent in favour of easing,” says RBC.
That may be sterling bearish. Still,
Trading Post notes sterling crosses are
vulnerable to an errant “Brexit” poll.
jamie.chisholm@ft.com
Sterling
Against Canadian dollar (C$ per £)
2.1
2.0
1.9
1.8
1.7
2014 15 16
Source: Thomson Reuters Datastream
Wall Street
NOV shares slide
after dividend
cut setback
Adam Samson
National Oilwell Varco cut its dividend
by almost 90 per cent yesterday as the
collapse in energy sector capital
spending weighed heavily on the
company.
The US oilfield equipment maker cut
its quarterly dividend to 5 cents a share
from 46 cents, citing “market
conditions which continued to
deteriorate through the first quarter of
2016”.
It is the lowest payout since the
company began offering regular
dividends in 2009, according to
Bloomberg data.
The Houston-based company also
said it expected its first-quarter
revenues to decline 20 per cent
sequentially to $2.2bn compared with
estimates of $2.4bn.
Energy groups have dramatically cut
London
Homebuilders retreat
on overheating fears
Bryce Elder
Fears of an overheating UK housing
market left the homebuilders among
yesterday’s sharpest fallers.
Berkeley, Taylor Wimpey and Barratt
Developments slipped amid concerns
that a surge in selling prices ahead of
this month’s stamp duty change would
not prove sustainable.
The most recent Halifax house price
index showed prices up 10.1 per cent in
Global overview
Cautiously positive mood reigns
ahead of US earnings season
Brent crude reaches high
for the year amid hopes
of production freeze as
gold surges and the yen
continues to strengthen
FT REPORTERS
Equity markets began the week in a cau-
tiously positive mood, with investors
awaiting the start of US earnings season,
monitoring oil and the Japanese yen.
Gains for equities and crude discour-
aged buyers of government bonds,
pushing US and German 10-year yields
slightly higher to 1.72 per cent and
0.11 per cent respectively. Gold rose $17
to $1,257 an ounce as the dollar index
slipped 0.27 per cent to 93.98, breaking
through its lowest level since August in
intraday trading.
After a muddled Asian session the
pan-European Stoxx 600 reversed early
losses to close up 0.3 per cent as miners
recovered ground. The Italian stock
market outperformed, rising 1.25 per
cent as banks rallied on hopes for a gov-
ernment support package.
In New York the S&P 500 erased
much of its early rally to stand 0.2 per
cent higher at 2,052.27, ahead of alumin-
ium producer Alcoa unofficially kicking
off first-quarter corporate results fol-
lowing Wall Street’s closing bell.
According to S&P Global Market
Intelligence, analysts expect overall
S&P 500 earnings to fall 8.1 per cent
from the same period a year ago,
weighed down by a collapse in earnings
from the energy sector.
Hopes that producers will agree a pro-
duction freeze at a meeting next week
helped send Brent crude, the interna-
tional oil benchmark, to a new high for
the year. It was up 2.2 per cent at $42.86
a barrel, more than 50 per cent above
the two-year low touched in January.
With expectations for US earnings so
National Oilwell Varco
Share price ($)
Apr 2015
Source: Thomson Reuters Datastream
2016 Apr
Indices Close
Day's
change
S & P 500
DJ Industrials
2052.23
17633.56
56.60
Nasdaq Comp 4862.62 11.93
Russell 2000 1204.70 -8.35
VIX 15.46
US 10 yr Treas Bd 1.72
US 2 yr Treas Bd 0.70
back on investment amid the sharp
decline in the price of crude oil.
Indeed, fixed capital expenditures of
the S&P 500 energy sector slid 41.2 per
cent in the fourth quarter on a year-on-
year basis, according to data from
FactSet.
The sector accounted for just 21 per
cent of S&P 500 (ex-financials) capex,
down from a third in the fourth quarter
of 2014.
NOV shares fell 5.8 per cent to $27.42,
extending their 12-month decline to
nearly 50 per cent.
Valero, an oil refiner, also came under
pressure after Credit Suisse cut its rating
on the stock from “outperform” to
“neutral”.
The investment bank said the stock’s
valuation relative to its peers was no
longer as appealing, noting, however,
the three months to March. Double-
digit inflation was bad news for the
builders, argued Shore Capital, because
it provided low-quality earnings growth
while inviting political intervention.
Any stimulus targeted at quelling
demand or improving supply “would
risk upsetting the golden market
conditions the housebuilders enjoy”,
said the broker.
Berkeley slid 4 per cent to £30, Taylor
Wimpey lost 3.4 per cent to 179.8p and
Barratt was off 2.4 per cent to 534p.
Persimmon fell 3.3 per cent to £19.95
ahead of a trading update on Thursday.
Since the start of 2012, the UK
housebuilding sector has tripled in
value. A mixed wider market left the
FTSE 100 little changed, losing 4.29
points to 6,200.12.
Segro, the business park developer,
rose 2.5 per cent to 432.2p after
Goldman Sachs turned positive.
Rents in UK industrial markets were
growing at their fastest since 1990,
which, in combination with Segro’s
successful restructuring to cut debt
costs and boost yields, meant that
earnings growth should exceed
★ FINANCIAL TIMES 21
MARKETS & INVESTING
Markets update
S&P 500 index
Change on day 0.14%
2080
2060
2040
2020
2000
Mar 2016 Apr
2016 financial year “looked decent” US equities Wall Street started
based on the Bank of Japan’s March the week brightly before paring
quarter Tankan survey, released on gains by early afternoon —
April 1, it added. although every significant sector
Unfortunately for investors in Japa- was in the black
nese equities, the data did little to halt
the yen. In Asian trading the dollar FTSE 100 index
dropped 0.3 per cent to Y107.75, its Change on day 0.07%
weakest since October 2014 — roughly a 6250
week before the BoJ boosted its asset 6200
purchase programme at the end of that 6150
month — and this led the exporter-sen- 6100
sitive Nikkei 225 to shed 0.4 per cent. 6050
The dollar/yen exchange rate is con- Mar 2016 Apr
sidered by many traders to be a proxy
for global risk appetite, so its decline UK equities Indices lacked
was weighing more broadly on senti- direction with rising oil prices
ment early in the session. The dollar was boosting materials, while financials
trading 0.1 per cent lower at Y107.92 at and energy were the only sectors
midday in New York. that performed positively
In China the mood was brighter and
the Shanghai Composite rose 1.7 per Eurofirst 300 index
cent after data showed that inflation
Change on day 0.30%
had held steady at 2.3 per cent year on 1360
year in March, according to the National 1340
Bureau of Statistics. 1320
Haruyoshi Yamaguchi/Bloomberg News
The pace of wholesale price deflation 1300
Tension builds over yen strength: FT.com/video last month fell to minus 4.3 per cent
1280
Pressure is rising on the Bank of Japan to handle the markets year on year, from minus 4.9 per cent
Mar 2016 Apr
skilfully as the yen gets closer to a possible intervention level in February.
Inflation data suggested that the Peo- European equities After an early
ple’s Bank of China might be less aggres- dip, stocks gained ground, ending
low, some investors say the fall in the opened, data showed that the country’s sive in easing monetary policy this year, the day in positive territory with
dollar and firmer oil prices might machinery orders, which are a popular said ANZ, which has pared its forecast materials leading the pack by
prompt a brighter outlook from com- but volatile proxy for capital expendi- for further cuts to lenders’ reserve gaining 1.1 per cent
pany executives in the coming weeks. ture, shrank at a lower pace than requirement ratios this year from three
“Recent earnings seasons have been expected in February. to one.
disappointing as a surging dollar hurt Analysts at Barclays noted that “core Hong Kong’s Hang Seng rose 0.4 per Nikkei 225 index
international profits and a huge decline orders”, which strip out orders for ships cent, while Australia’s S&P/ASX 200 lost (’000) Change on day 0.44%
17.5
in oil prices resulted in writedowns and and those from electric power compa- 0.1 per cent. 17.0
lower operating earnings for energy nies, were projected to rise 6.4 per cent Back in forex, sterling was up 0.8 per
16.5
companies,” said David Kelly, chief glo- quarter on quarter during the first three cent to $1.4243 as traders cited a
16.0
bal strategist at JPMorgan Funds. months of this year, according to the rebound from oversold conditions after
“These effects should fade over the Cabinet Office’s survey of large machin- “Brexit” fears and as sellers of the com- 15.5
course of the year.” ery makers. mon currency emerged once the pound Mar 2016 Apr
Elsewhere investors focused on global “With orders 6.6 per cent higher on failed to break above 81p per euro. Asian equities A stronger yen
macroeconomic issues, and the latest average in January-February than in the continued to inflict damage on
news from Japan and China was a little fourth quarter, such growth appears to Reporting by Jamie Chisholm in London, Japanese stocks, leaving the Nikkei
better than expected. be within reach,” Barclays said. Peter Wells in Hong Kong and Joe Rennison 225 down 17 per cent so far this year
Before the Japanese stock market Capital expenditure plans for the in New York
that it could rally into the summer.
Refiners have outperformed recently Trading Directory
50 as they have benefited from the low
price of oil, their main input, as well as
40 robust consumer demand for gasoline.
30 But Credit Suisse reckons “the bottom
20 of the oil market is behind us”, barring a
recession.
Valero fell 2.3 per cent to $61.64,
extending their 2016 decline to 12.8 per
cent.
The S&P 500 energy sector was in the
4.63
black, however, as oil prices built on
their gains from last week.
West Texas Intermediate, the US
crude benchmark, climbed 1.1 per cent
0.10
to $40.14 a barrel, after jumping almost
0.00
8 per cent last week.
0.00
ExxonMobil, the world’s biggest
publicly traded energy company,
advanced 0.9 per cent to $83.95.
Williams Companies, an energy
infrastructure operator, jumped 5.1 per
cent to $17.07 while exploration and
production group Marathon Oil rose 2.7
per cent to $12.09.
Elsewhere, Norfolk Southern fell 1.3
per cent to $80.43 after Canadian Pacific
said it would end its months-long
pursuit of the US railway operator.
CP said that with “no clear path to a
friendly merger at this time, we will turn
all of our focus and energy to serving our
customers and creating long-term value
for CP shareholders”.
In mid-morning trading, the S&P 500
rose 0.7 per cent to 2,061.9, the Dow
Jones Industrial Average climbed 0.8
per cent to 17,720.4 and the Nasdaq
Composite jumped 0.9 per cent to
4,895.5.
consensus expectations, said Goldman.
It put a 555p target on the stock.
Contractor Galliford Try dropped
7.4 per cent to £12.97 on reports that
Edinburgh council had shut 17 schools
built by Miller Construction over fears
about structural safety.
Galliford bought Miller in 2014, just
under a decade after the schools were
completed as part of a £360m private
finance initiative.
Cranswick rose 16.4 per cent to £25.38
after the pig farmer made its second
Trading Directory
poultry acquisition by buying Crown
Chicken for £40m. Analysts saw a boost
of about 6 per cent to current-year
earnings.
Dechra slipped 3.8 per cent to £11.79
after Stifel cut to “hold” on valuation
grounds. The pharmaceuticals group
was “a quality company” with “a strong
portfolio of new products to maintain its
leading position in specialist
therapeutic areas such as endocrinology
and dermatology”, the broker said. Trading Directory
But those strengths were fully Runs Daily
reflected in a valuation of more than 27 .....................................................................................................................................................................................................................................................................................................................................................................................................................
times 2016 earnings, a 20 per cent Classified Business Advertising
UK: +44 20 7873 4000 | Email: acs.emea@ft.com
premium to its peers, Stifel added.
22 ★ Tuesday 12 April 2016

SMART MONEY Analysis. Capital markets

Stephen
Foley
EM rollercoaster creaks ahead of next Fed move
US policy has overtaken Relief rally
China as the main worry for Stocks Bonds
MSCI Emerging Markets index JPMorgan EMBI global index
Investors must defend developing-world assets
850 700

against protectionism if JONATHAN WHEATLEY

A rash of funfairs springing up on open 800

680
anti-globalisation grips spaces across London has caused a
phenomenon increasingly familiar to
many parents of small children: roller-
750
660
700
coaster fatigue.
It is a sensation felt elsewhere in the 650 640

W
orldwide stocks plunged again on Friday, city and other global financial centres,
completing the worst month on record but this is no funfair. The plunges and Oct 2015 16 Apr Oct 2015 16 Apr
as trade wars with both China and Mexico surges of emerging market assets over
seem imminent . . . the past six months would win the Commodities Currencies
This was how The Boston Globe began a admiring recognition of all but the surli- Brent crude ($ per barrel) JPMorgan Emerging FX index
news report on the first weeks of a Trump presidency, in a est fairground impresarios. 50 70
satirical front page it published over the weekend to illus- There is little reason to think the ride
trate its editorial board’s opposition to Donald Trump will turn restful soon. The strong rally in 45 68
becoming the Republican nominee. EM assets in March has lost momentum 40
An investor need not expect Mr Trump to win the in April. With asset prices swinging side- 66
White House to be profoundly worried about the anti- ways, investors are bracing themselves 35
globalisation mood the billionaire politician is exploiting. for the next vertical lurch. 64
In the US, a centrist Hillary Clinton has turned against When looking for the causes of volatil- 30
the Trans-Pacific Partnership; across Europe, tolerance ity, it is easy to identify trouble spots in 25 62
for immigration and integration seems to have run out; the emerging world. Brazil is flirting
even in Asia, Sri Lankan prime minister Ranil Wickremes- with economic and political meltdown. Oct 2015 16 Apr Oct 2015 16 Apr
inghe warned that “the window for generating growth by Something similar could be said for Ven- FT graphic Source: Thomson Reuters Datastream Photos: Dreamstime
tapping into world markets appears to be closing quickly”. ezuela, Ukraine and South Africa. Rus-
An obvious question follows: is there something that an sia and China give cause for concern.
investor can do to protect their portfolio against protec- Only Mexico and India among big EMs ‘When the Marc Chandler, global head of cur- ual pace. That’s going to take the shine so great in Brazil, for example, where
tionist sentiment? For many investors, the bedrock of their are often mentioned in positive tones. rency trading at Brown Brothers Har- off some EMs,” he says. local fixed income assets can earn more
portfolio will be a market cap-weighted index fund, or Many analysts say a perception that dollar turns riman, says even last month’s relief Simon Quijano-Evans, chief EM strat- than 14 per cent a year, that highly capi-
active funds benchmarked to a market cap-weighted things in China were not as bad as previ- around, we rally had more to do with the Fed than egist at Commerzbank, agrees that any talised investors in search of yield are
index, which means they are likely to be heavily exposed ously feared was behind the relief rally make the with China. change in the Fed’s perceived dovish willing to take the risk.
to the large, multinational companies with most to lose that followed the panic selling of EM “Most of the relief came from the stance promises a blow to EM assets. Mr Quijano-Evans says oil is the
from an end to the era of globalisation. assets in early 2016. transition weaker US dollar, which is important But much of the impact of policies at driver that has split the fortunes of EMs
Investors need to consider two potential scenarios. The “Concerns about a disorderly depreci- from risk-on because a lot of emerging markets have the US and other big central banks is between commodity and non-commod-
most dangerous involves the outbreak of trade wars, ation of the renminbi have declined to risk-off’ taken on a lot of dollar debt,” he says. playing out in the quantity of liquidity ity exporters. The planned meeting of
fuelled by a pushback against and the outflows [from China] have “The bottom line is that when the US that is flooding the world’s capital mar- Opec and non-Opec oil exporters on
existing international deals. diminished,” says Charles Collyns, chief dollar turns around, we make the tran- kets after years of loose monetary April 17 will be a defining moment, he
The other is a more insidious
In a trade war economist at the Institute of Interna- sition from risk-on to risk-off. We are moves, he adds. says, but he warns against guessing the
deglobalisation, as politicians there would be a tional Finance, an industry group. telling clients to take profits.” “It is not only companies that are course of oil prices.
give up on further attempts to “And Chinese activity data have begun Selling in EM assets, Mr Chandler awash with cash but also investment “The consensus has got it wrong for
liberalise trade and succumb
dramatic impact to turn around.” adds, was driven by fear that the Fed funds. They have such historically high the past two years,” he says.
to piecemeal protectionism. on specific But even given the enormous role that would raise interest rates four times this levels of cash that if they face redemp- What is called for, he adds, is a “rules-
In a trade war scenario, the country plays in the global economy year. That belief was mistaken. But tions it doesn’t matter nearly as much as based” approach: any gap between the
there would be dramatic
companies and in prospects for EMs, a common investors are just as wrong, he says, to it did during the [taper tantrum] sell-off spot price and its 30-day moving aver-
impacts on specific compa- opinion as the second quarter gets believe the Fed will raise rates just once in 2013.” age is a reason to be overweight or
nies, but investors would have to be fleet of foot in under way is that one factor will deter- more or not at all this year. The “carry” — the difference between underweight in commodity exporters.
responding to the details of planned tariffs and retaliatory mine the future swings in EM assets: the “Everything the Fed has said suggests the interest rates investors can earn and That sounds like a fairground attrac-
actions. US Federal Reserve. it will continue [to raise rates] at a grad- those they pay on capital they invest — is tion in its own right.
But trade is not a zero sum game; it grows the pie for all,
so losers will by definition outnumber winners. A wider
trade war could spark Chinese or Mexican retaliation that
hurts US high-tech manufacturers and agricultural Capital markets
groups. Any company with a global supply chain would
suffer rising costs that, if passed on, would hurt sales.
The Boston Globe is certainly right to imagine markets
would price in a recession in such circumstances. Investors
Active funds struggle
would typically pick defensive stocks to weather such a
recession, but since many consumer staples companies
amid ‘flowmageddon’
rely on overseas manufacturing, utilities and healthcare
could be better hedges against this tail risk.
The deglobalisation scenario is tougher for investors to ROBIN WIGGLESWORTH AND latest newsletter. “Some-
prepare for, as its effects will be felt incrementally over STEPHEN FOLEY — NEW YORK thing big is happening [to the
years. The technology companies that are among the main The deteriorating ability of investment management
beneficiaries of the latest round of trade harmonisation money managers to beat industry],” it said. “ETFs
talks would not see the hoped-for protections for intellec- their indices has accelerated have gained the upper hand
tual property rights; the downward pressure on prices for a shift towards passive strat- in the active/passive debate”.
consumer goods would abate; in aggregate, manufacturing egies such as exchange The trend has been under
profit margins would be squeezed. traded funds, adding pres- way for years but the contin-
But while these amount to long-term headwinds for sure on actively managed ued — and worsening — abil-
equity markets, their effect on share prices will probably fundstojustifytheirfees. ity of asset managers to con-
be swamped in any given period by the economic cycle or sistently beat their indices is
other developments. Equity funds that are actively expected to accelerate it.
What is likely, however, is that deglobalisation will be a managed have suffered net Just 19 per cent of US
bigger headwind for internationally connected companies outflows of $34.9bn globally mutual funds that invest in
than domestically focused ones, and that in turn suggests this year, but stock market “large-cap” companies out-
one potential portfolio tilt for long-term investors, namely ETFs have taken in $7.6bn, performed the S&P 500 in
away from large-caps and towards small-caps, where according to research com- the first three months of
domestic companies are most common. panyEPFR. 2016, according to Bank of
This has the advantage of running in line with a well- Last year ETFs drew in America Merrill Lynch, the
established, if still largely mysterious, tendency for small- $200bn while actively man- lowest quarterly hit rate
cap stocks to outperform over the very long run. aged equity funds lost since its data began in 1998.
In the US, an investor might consider overweighting the $124bn. Only 6 per cent of “growth”
Russell 2000 small-cap index, versus the Russell 1000 of “It doesn’t surprise me funds managed to beat their
large-cap stocks. US small-caps are just coming off their that we’re getting this contin- index, the worst rate since at
best month since 2011 but are far from having recaptured uous move towards passive least 1991.
their historic valuation premium versus large-cap peers. investment,” said Mohamed As a result of the shift
The rise in anti-globalisation sentiment will take time to El-Erian, chief economic towards cheaper funds, the
play out in global markets, but investors who pay attention adviser to Allianz. “Active shares of US-listed asset
to the headlines — real and imagined — stand a good funds have disappointed managers have dropped
chance of finding ways to protect themselves. investors, and in a low-re- nearly 8 per cent this year,
turn environment costs compared with the S&P 500’s
stephen.foley@ft.com become more important.” 0.6 per cent gain, and overall
The shift is most pro- have sagged by more than a
nounced in stocks. This year fifth since the 2015 peak.
the assets of passive US Active managers will have
equity vehicles crossed the to respond to the changing
40 per cent mark of total US landscape by cutting costs
More comment and data on ft.com equity fund assets, up from and making staff run larger
18.8 per cent a decade ago, portfolios, according to Tim
according to Morningstar, a Guinness, chief investment
Y Fast FT Our global economies, headed data provider. officer of Guinness Asset
team gives you market- by Brazil, Russia, India In bonds the trend is also Manager and manager of the
moving news and views, and China. accelerating. Actively man- Guinness Global Money
24 hours a day, five days ft.com/beyondbrics aged fixed income funds glo- Managers Fund, an invest-
a week. ft.com/fastft bally have lost almost $16bn ment fund focused on the
Y Podcast The Hard
Y Alphaville Our Currency podcast takes a in 2016, while bond ETFs industry. The result could be
irreverent financial blog. look at what is driving have absorbed nearly $41bn “paymageddon” for active
Join Paul Murphy and the global currency of investor inflows, according managers, he said.
Bryce Elder for the daily market. ft.com/podcasts toEPFR. “We see ETFs and passives
Markets Live session at More than a quarter of US taking market share for a few
Y Lex Video Analysis bond fund assets are in pas- more years, and I would
11am. ft.com/alphaville
and opinion from the sive vehicles, according to expect active funds to get
Y beyondbrics News and team on the hot issues Morningstar, up from less cheaper and cheaper to com-
comment from more affecting companies and than10percentadecadeago. pete. The days of great pros-
than 40 emerging markets. ft.com/lexvideo Morningstar dubbed the perity for active fund man-
trend “flowmageddon” in its agement may be behind us.”
 FT SPECIAL REPORT

Central & Eastern Europe

Property
Tuesday April 12 2016 www.ft.com/reports | @ftreports

Inside
Investors hold
their nerves
Money is flowing
back into the region
Page 2

Political risk
Populist policies
unsettle observers
and professionals
Page 5

Clouds over Kiev

Conflict with Russia
Aleksandar Vucic (centre), Serbia’s prime minister, at the unveiling of Belgrade’s Waterfront development scheme — AFP/Getty has taken its toll
Page 6

Serbs divided over Waterfront New kids on the

block
Rivals compete with
western backers
Inside A prestige $3bn development in Belgrade is under close scrutiny, Page 4 Page 9
2 | FTReports
Investors hold nerve as deals roll on
Deal flows
Money is returning
to the region in spite
of market jitters.
Henry Foy reports
I
t is a region marked by concerns
over the actions of illiberal, pop-
ulist governments, worried by
clashes over policies with Brus-
sels and the rest of the EU and
with some states under threat of sov-
ereign debt downgrades.
Central and eastern Europe is sup-
posedly becoming a trickier place for
investors to do business.
You would not guess this, however,
from gazing at the steel and glass sky-
lines, colossal shopping centres and
office atriums of Warsaw, Budapest,
Prague and Bratislava.
Including the Balkans and other
south-east European countries,
€9.1bn flowed into the region’s mar-
kets last year, the third highest
annual amount on record. Projects in
the pipeline and estimates of deal-
making suggest 2016 will be just as
active.
“Investor interest in the CEE real
estate market has been growing over
the past few years — and that trend is
continuing,” says Richard Wilkinson,
chief executive of Erste Group
Immorent, the real estate financing
arm of Vienna-based Erste Group.
“Investors from Germany, the UK
and North America are focusing in
particular on prime real estate and
the office and logistics segments, with
healthy inflows spread across most of
the region’s markets.”
Some countries appeal to short-
term investors. However there is a
growing interest in longer-term
projects as the region’s property mar-
kets mature and the quality of devel-
opments increase.
“There is much more focus now on
the intrinsic value of real estate,” says
James Chapman, head of capital mar-
kets for central Europe at Cushman &
Wakefield. “In CEE, we have reached
the point in the development cycle
where . . . you can see defined loca-
tions where the best asset classes are
performing and stand out.”
He adds: “That is where the core
money is coming in, which values
long-term growth.”
The change in government in
Poland and subsequent fall in inves-
tor confidence over political stability,
top the list of immediate concerns for
many property specialists. This raises
eyebrows across the industry because
of the Polish market’s importance.
Poland takes the lion’s share of
property investment into central and
eastern Europe. Anyone active in the
region is likely to have interests there.
Central & Eastern Europe Property
Ups and downs: Moves by the ultraconservative Law
shoppers flock and Justice party’s new government,
to Warsaw’s including changes to the workings of
new malls the top court which critics say threat-
Bloomberg ens its independence from the execu-
tive, have caused a constitutional cri-
sis, international condemnation and
a lowering of Poland’s investment
credit rating (see story, Page 5).
The property industry typically
considers more than just short-term
political strife when it comes to draw-
ing up future plans, however, and
Poland’s growing potential marks it as
still one of the most attractive desti-
nations for investment in Europe.
Increased risk in the region was
among the hot topics at Mipim, the
property industry international trade
fair, which took place in Cannes last
month. The message from developers
and sales representatives to nervous
FINANCIAL TIMES Tuesday 12 April 2016
property investors was “keep calm
and carry on”.
“We do receive questions from
investors who are interested in the
latest changes in Poland and the influ-
ence these events have on the coun-
try’s investment real estate market,”
says Tomasz Trzoslo, managing
director of Jones Lang LaSalle in
Poland.
Yet “real estate investors base their
investment strategies on a long-term
perspective,” he adds. “Investment
decisions take into account a number
of economic factors and as a result,
knee-jerk reactions to unexpected
events or sudden market fluctuations
are taken out of the equation.”
“Political risk can’t be ignored
and . . . the immediate impact is
almost always one of investor — and
often occupier — hiatus,” says Dam-
ian Harrington, head of European
research at property advisers Colliers
International. Investment may slow
down “but significant transactions
keep on happening, especially when a
wider market is buoyant.”
Further afield, the lack of resolu-
tion to the military stand-off in east-
ern Ukraine and political turmoil in
Kiev have kept most investors away
from that country. Before Russia
annexed Crimea in 2014, many had
hoped Ukraine would become a prof-
itable market, on a par with Poland a
decade ago (see Page 6).
Other countries are showing strong
growth.
A surge in deals at the end of 2015
saw the Czech Republic, the region’s
‘Political risk cannot be
ignored and the
immediate impact is
almost always one of
investor — and often
occupier — hiatus’
second-largest market, record trans-
actions of €2.65bn last year. The fig-
ure is 65 per cent higher than that of
2014 and just shy of the pre-crisis
record.
In Hungary, where investors are
regaining confidence despite a series
of business unfriendly policies since
Viktor Orban returned as prime min-
ister in 2010, the market is bubbling
again. Commercial deals were up 62
per cent last year and total market
size of €790m was the highest since
before the financial crisis of 2008.
Investment flows remain strong in
the Baltic states of Latvia, Lithuania
and Estonia. Lithuania adopted the
euro last year, which boosted its
appeal, particularly to commercial
developers keen to enhance the
FINANCIAL TIMES Tuesday 12 April 2016
region’s role as a destination for IT
and outsourcing services.
In Serbia, reforms to property laws
have raised investor optimism in a
country whose government is eager
to benefit from its lower-cost advan-
tages over neighbouring countries
inside the EU. Serbia’s accession to
the 28 member bloc, though, remains
some way off.
The flow of property deals in the
region has been helped by a surge of
funding from new sources, such as
Asian and South African investors.
They are muscling in on a market pre-
viously sewn up by German, UK and
US-based investors (see Page 9).
The new investors are attracted by
the theme of central Europe property
being a low-cost, high-return bet that
offers a foothold and training ground
for the wider EU market.
“In Romania the first institutional
investors are returning,” says Ernst
Vejdovsky, chief executive of
S-Immo, an Austrian property group
with operations across the region.
“These are not the classical ones from
the UK or the US but, for example,
investors from South Africa,” Mr
Vejdovsky adds (see Page 6).
The trend of offshoring, in which
western companies such as banks
and technology firms use offices in
FTReports | 3
Central & Eastern Europe Property
lower-cost countries to perform back- Contributors
Central and eastern Europe investment volumes office or other tasks, is continuing to
2012–15, €bn support commercial developments, Henry Foy
particularly in Poland, though also in Central Europe correspondent
9 countries such as Romania.
Other CEE Companies that pioneered offshor- Zosia Wąsik
Slovakia
ing to the region a decade ago are add- Warsaw reporter
Romania
Hungary 8 ing increasingly more complex tasks
Czech Republic to their central European offices. Andrew MacDowall
Poland To facilitate this, they are tapping Freelance writer
7 large numbers of well-skilled gradu-
ates in such cities as Warsaw and Kra- Roman Olearchyk
kow in Poland and in the Romanian Ukraine correspondent
6 capital Bucharest. They are also tak-
ing on more office space. Tadas Povilauskas
5 Demand for premium retail space Senior economist at SEB Bank Group
is rising fast, too. Investors look to in Lithuania
profit from the growth of the region’s
4 middle classes, who are showing off Michael Kavanagh
newly acquired spending power by Commissioning editor
shopping for western brands in mod- Steven Bird
3 ern malls. Designer
Investors poured €2.3bn into retail Alan Knox
projects in Poland last year, the most Picture editor
2
since 2006. Another €1.1bn went into
Czech retail schemes. For advertising details, contact:
1 The sector saw some 42 per cent Lyn Thompson, +44 (0) 20 7873
of total real estate transaction 4967, lyn.thompson@ft.com, or your
volumes in the region. Retail usual FT representative.
0 accounted for the largest chunk of
industry dealmaking in the south- All editorial content in this report is
east Europe group of Croatia, Serbia, produced by the FT. Our advertisers
2012 2013 2014 2015*
Bulgaria and Slovenia, according to have no influence over or prior sight
* Preliminary figures Source: JLL, 2015 JLL research. of the articles.
4 | FTReports
Waterfront plan raises Serbian ire
Belgrade Sprawling
development for the
River Sava area has
prompted strong
criticism, reports
Andrew MacDowall
B
elgrade’s Co-operative
building is one of the city’s
finest structures, a master-
piece embellished with
statues, busts and reliefs of
wreaths and flowers.
It was built in 1905 and is a monu-
ment to a time when this part of the
city, beside the River Sava and
beneath the ridge on which central
Belgrade sits, was the commercial
heart of the Serbian capital. It is also
the headquarters of an ambitious and
controversial project that could
transform the city — Belgrade Water-
front.
The project, led by UAE-based
developer Eagle Hills, is a $3bn devel-
opment that would cover 1.8m sq m
on the right bank of the Sava, near its
confluence with the Danube. The cen-
trepiece is to be an outlandish 200m
tower, called Kula Belgrade. The
development will include “the biggest
mall in the Balkans”, 6,000 residen-
tial units, 24 commercial office “clus-
ters” and eight hotels.
For critics — including many
among the city’s middle class —
Belgrade Waterfront epitomises what
Central & Eastern Europe Property
is wrong with Serbia. They accuse the
government of bulldozing through
the development with minimal pub-
lic consultation, amending planning
legislation to fit the needs of the
project and using public funds to sup-
port private profiteers.
Protest groups such as Ne Davimo
Beograd (Don’t Drown Belgrade)
warn that the development could
become a focus for money laundering
and corruption.
The developers and the govern-
ment insist that all dealings will be
transparent and that Belgrade Water-
front will rejuvenate a neglected riv-
erside area.
Several architects have condemned
Belgrade Waterfront as out of keeping
with the city’s geography, architec-
ture and character. The large-scale
model of the planned district on dis-
play in the Co-operative Building
seems to omit one of Belgrade’s defin-
ing features — its hills. There is doubt
about whether the scheme’s hotels
and restaurants will cater for ordi-
nary Serbs. In a country with an aver-
age wage of €400 a month (albeit
considerably higher in the capital),
can such a project be sustainable?
Srdjan Vujicic, director of property
operations at Savills’ local partner,
Coreside Serbia, says the project may
not emerge in its entirety but he is
upbeat about the momentum the
development could generate.
“The whole project will probably
not be in the quantity presented in
the model, but we are sure that
several residential buildings will be
easily sold and that the hotel and
shopping mall will boom,” he says.
Unlike some of its neighbours,
Serbia did not experience a property
boom in the mid-2000s and so
avoided a bust when the economic
crisis hit in 2008. However, some
projects were put on hold after 2009.
Following a stagnant period, devel-
opments are pushing forward again,
particularly in the office and retail
sector.
“We’ve seen more liquidity in Ser-
bia over the past six months than in
the past six years,” says Oliver Hurley,
managing director of Poseidon
Group, a property developer and
investor in the region.
Mr Vujicic cites office projects
including the 30,000 sq m GTC
Square development, the 25,000 sq m
Sirius Offices being developed by
Austria’s Erste Group Immorent, the
22,000 sq m Navigator Business Cen-
tre and the 15,000 sq m fifth phase
development of Airport City Bel-
grade. All are in New Belgrade, on the
plain between Nikola Tesla airport
and the city centre.
‘We have The airport is the hub for Air Ser-
seen more bia, in which Abu Dhabi’s Etihad took
a 49 per cent stake in 2013. The deal
liquidity in has resulted in a rapid improvement
Serbia in in services and connectivity. The
hope is that the city can establish
six months itself as a regional business centre and
than in the tourist destination, with knock-on
benefits for the property business.
past six Serbia is on a path towards joining
years’ the EU, while its educated and cheap
workforce has broad appeal to out-
FINANCIAL TIMES Tuesday 12 April 2016
side investors, says Claus Graggaber,
Not ducking
the issue: managing director of Erste Group
street protests Immorent. “With regard to downside
risks, Serbia is still burdened by
against
Belgrade administrative issues.” The legal
Waterfront and tax systems “show room for
improvement”.
AFP/Getty
Office and retail properties have
vacancy rates of less than 5 per cent.
Rents are stable and comparable to
other cities in central and eastern
Europe, Mr Graggaber adds, with
office prime rents at about €15-€17
per sq m. Retail rents in modern
shopping centres vary greatly, from
€15 to €60 per sq m.
Investors are now targeting provin-
cial cities, with retail parks opening
recently in Subotica and Zrenjanin in
the affluent Vojvodina region.
Dragoljub Cibulic, a partner at Bel-
grade lawyers BDK, says the invest-
ment environment has improved
with the introduction of a one-stop
shop for construction permits, which
can be issued within 35 days in most
cases.
However, privatisation of state
land and the restitution of property
confiscated under communism — a
thorny problem across the region —
are proceeding sluggishly.
Sceptics say the Serbian govern-
ment’s plans for attracting invest-
ment and transforming the country
have borne little fruit. Growth
remains low for an emerging market.
As for Belgrade Waterfront, it is an
open question whether it will emerge
as a remarkable success or a white
elephant.
FINANCIAL TIMES Tuesday 12 April 2016
Investors worry over political direction
Poland The ruling
party has startled
those who have
become used to
stability, reports
Henry Foy
During its annual European
investor roadshow in Febru-
ary, members of Cushman &
Wakefield’s Poland capital
markets team soon discovered
that those keen to put cash into
central and eastern Europe’s
property market tended to
talk on a common theme.
“Every meeting we had
started with a discussion about
Polish politics,” says James
Chapman, head of central
European capital markets at
the property services com-
pany. “There are lots of ques-
tions,” he adds. “It is a slight
cloud on what was previously a
clear blue sky.”
Since coming to power in
October, Poland’s new ruling
party has startled investors
and shocked political analysts
who had become used to sta-
bility in the EU’s sixth-largest
economy. The party’s pro-
nouncements have prompted
international concern about
the direction of this pivotal
member of the central and
eastern European group of
countries.
Ultra-conservative, popu-
list, broadly Eurosceptic and
nationalist, the Law and Jus-
tice party has wasted little
time in using the first parlia-
mentary majority in Polish
democratic history to push
through a range of political,
economic and social reforms.
Overseas investors have been
left to worry and work out
what this means for them.
“One of the great advantages
of doing business in Poland
had been that you could rely
on a stable and predictable
political landscape that was
pro-business,” says Ben Habib,
managing director of First
Property Poland, a fund man-
ager with more than €300m in
the Polish property market. “It
is interesting that throughout
the credit crunch, Poland
maintained its A-minus
[credit] rating and within two
months the new government
managed to get downgraded.”
That one-notch downgrade,
by Standard & Poor's in Janu-
ary to BBB+, was the most
serious shift in sentiment
towards Poland since the elec-
tion. Investors are concerned
about two policies. Firstly, the
government’s steps to impose
control on state-run media
and to change the way the judi-
cial system works have led to
accusations of undermining
democracy and the rule of law.
Today, investors must price
political risk into their plans
more carefully than before.
Secondly, moves by the gov-
ernment to raise taxes on the
banking and retail industries
— both majority foreign-
owned — have had a direct
effect on property, driving up
the cost of finance and raising
questions over the future of
investing in Polish retail.
“Although international
funds are not interested in pol-
itics, they are interested in its
influence on the country’s
economy and investment
attractiveness,” says Tomasz
Trzoslo, Poland managing
director at property services
company Jones Lang LaSalle.
“Foreign investors will not
‘Within two months,
the new government
managed to get
Poland’s A-minus
credit rating
downgraded’
withdraw from Poland,
although a more cautious atti-
tude and some changes in
investment strategies cannot
be ruled out.”
Those concerns echo wor-
ries elsewhere in the region.
FTReports | 5
Central & Eastern Europe Property
more encouragement instead.
Foreign investors provided
the overwhelming majority of
capital that led investment in
Poland’s property market to
hit €4.1bn in 2015, according
to JLL.
This was the highest volume
since 2006, with commercial
and industrial markets hitting
record levels.
Poland’s market accounted
for almost half the total
invested in property across
central and eastern Europe
last year, underscoring its
importance to the region.
“It seems to be lost on the
government that there are
knock-on effects to their pro-
gramme,” says Mr Habib.
“I am rather hoping that
In Hungary, prime minister Hot topic: Beata Szydlo, targeting foreign investors. there are sane voices inside the
Viktor Orban’s controversial the Polish prime minister Some Polish government min- government that would advise
interpretation of democracy Getty
isters have called for overseas against more actions that
and moves to squeeze foreign investors to lose “privileges” would upset the international
capital make some overseas and for local funds to be given financial community.”
investors wary. Ukraine suf-
fers from long-running con-
cerns over political stability
and rule of law, while Slovakia
raised fears over its political
direction in March, when
it elected fascists to its
parliament.
Developers, fund managers
and estate agents in Poland
point to examples of banks
increasing the cost of capital or
tearing up funding agreements
as a result of Warsaw’s tax on
bank assets, which came into
force on March 1 and has been
earmarked to help pay for a
€5bn rise in child benefits.
“Where we have seen deals
wobble is with the banking
tax,” says Mr Chapman. Such
deals may not have fallen
through but have been renego-
tiated “because banks have
changed their terms”.
Although the new tax, and a
levy on supermarkets that
could dampen demand for
large-scale retail projects, have
raised investor concern, the
majority of developers say
they have no plans to with-
draw from Poland.
Indeed, some have cheered
the government’s moves to
increase social benefits and
reduce taxes on the poorest
members of society, suggest-
ing that these policies will
increase consumption of goods
and services across the wider
economy.
At the same time, the gov-
ernment’s stance towards
overseas capital has raised
eyebrows and comparisons
with Mr Orban’s programme of
6 | FTReports FINANCIAL TIMES Tuesday 12 April 2016 FINANCIAL TIMES Tuesday 12 April 2016 FTReports | 7

Central & Eastern Europe Property Central & Eastern Europe Property

way involving three potential new “The volume of office space occu-

Conflict in the east weighs foreign investments in the country’s

commercial property market. “The
market is structurally undervalued,”
he adds. “A number of assets are
available at below-build costs.
pied today is higher in gross terms
than it was before the war,” Mr Cotton
says.
He points to Ukraine’s booming IT
industry — which is an important for-

heavily on asset values “The interest is coming from pri-

vate equity investors,” he notes, add-
ing that the high cost of borrowing in
Ukraine has kept some investors out
of the market. “The opportunities
will really come when significant
eign currency earner as a software
development outsourcing hub — as
one part of the economy with a grow-
ing workforce.
Back in the Epicentr DIY store,
Vadim continues with his shopping.
investors who have assets outside of “If I ever get to selling my apartment,

I
t is hardly a surprise that the
Ukraine two-year war with Russian-
Prices are subdued backed separatists over the far-
eastern breakaway region of
part of a popular local chain. Locals
shop here for building materials and
furniture to smarten up their often-
dilapidated apartments built in the
Kiev’s main street, it is difficult to Ukraine will be able to leverage debt even with the upgrades, I will not get
miss the “For Rent” notices in the from outside Ukraine,” Mr Cotton what I spent purchasing it years ago,”
windows of about a dozen retail
stores that are now vacant. Two years
says. “Only then will we see material
volumes and lots in size.”
he says.

but development Donbass would have a devastat-
continues away from ing effect on Ukraine’s property mar-
ket. The turmoil has further
Donbass, reports depressed investment, building
activity and prices that had already
Roman Olearchyk been battered by the global financial
crisis of 2008-2009.
But as the packed parking lot at a
DIY hypermarket in Kiev, Ukraine’s
capital city, illustrates, the market
has not died. Far from the conflict,
life in such areas goes on, and people
continue to build.
“It is time to upgrade our kitchen
and living room,” 29-year Vadim
says, looking with his wife Anna at
sinks and counter tops at Epicentr,
Soviet era.
“It is only logical to add value to my
flat.” Costs for materials, Vadim adds,
are bound to go up.
His family has not been in a finan-
cial position to take advantage of fall-
ing residential property prices. Some
flats that eight years ago sold for
$3,000 per sq m, for example, are on
the market at a third of that price.
For Vadim and many others, sur-
vival is about hedging against cur-
rency risks that have seen Ukraine’s
currency, the hryvnia, lose half of its
value since early 2014 and inflation of
some 40 per cent last year.
Walking along Khreshchatyk,
ago, these were fashionable and
expensive clothing shops and cafés.
Yet a short walk from Khresh-
chatyk the scene is more encourag-
ing. Scores of new cafés have popped
up on Shota Rustaveli, a street serving
everything from halal food to diner-
style sandwiches.
A few kilometres away where
rental prices are lower, the market is
also showing positive signs. In areas
such as the up-and-coming Podil dis-
trict, newly-opened hipster cafés full
of youth from a nearby university
have brightened the mood.
An even more vibrant street cul-
ture and signs of a property market
revival have emerged some 540km
west of Kiev in Lviv. The city is
blessed with medieval architecture
and a picturesque, cobble-stoned
byway. Rumours abound that rich
Life goes on: apartment blocks
being built near the Dnieper river
in Kiev, Ukraine
Bloomberg
Ukrainians from the war-torn eastern
regions are snapping up residential
property, particularly the more afflu-
ent addresses.
“Ukraine has really stayed off the
radar screen of investors since the
global financial crisis,” says Nick Cot-
ton, managing director of property
consultants DTZ Ukraine.
He points, however, to talks under
Property development from com-
mercial to residential has not ground
to a halt. Cranes erecting high-rise
apartment buildings are still visible in
much of Kiev. Such development is
largely in the hands of domestic busi-
ness groups.
Low costs for office space has been
a source of opportunity for some.
Vacancy rates in Kiev have increased
from 17 per cent in the fourth quarter
of 2013 to nearly 22 per cent by the
end of 2015 amid the roll out of new
stock, says DTZ. Yet the space occu-
pied has increased by 100,000 sq m in
Kiev since the start of the war in 2014,
reaching 1.4m sq m.
‘Ukraine has really stayed
off the radar screen of
investors since the
global financial crisis’
“We have just put 20,000 hryvnia
($775) into fixing up our bathroom.
But I reckon our flat is valued at
$20,000 less than it was in past
years.”
“We will probably put more into
the improvements than our apart-
ment is worth,” his wife Anna says,
with a sigh.

Bucharest market hits the road to recovery

Romania
Stability and growth
have caught investors’
attention, writes
Andrew MacDowall
The resignation of a prime
minister under pressure over
allegations of corruption, the
run-up to a close-fought elec-
tion and an armed conflict in a
neighbouring country are not
generally conditions that send
property investors your way.
Romania has powered
through such difficulties over
the past year, however, and
clocked up GDP growth of 3.7
per cent in 2015 — one of the
highest rates in Europe. This
has fed a recovery in the prop-
erty sector, which was hit hard
by the global economic crisis
from 2009.
An EU member since 2007
but not yet part of the euro-
zone, Romania has impressed
outsiders with the way it has
picked itself up.
“Romania has done its
homework,” says Friedrich
Wachernig, member of
the board of S Immo, the Aus-
trian property investor. “The
fundamental economic data is
stable, the country leads a
determined fight against cor-
ruption and the outlook is very
promising.”
The anti-corruption cam-
paign saw some 1,250 public
officials indicted last year
alone. These included then
prime minister Victor Ponta,
who stood down in November.
Investors have welcomed the
campaign as evidence that
Romania is getting to grips
with serious problems in pub-
lic administration.
Property transactions in
2015 reached €650m, down
from €1.17bn in 2014, a year in
which results were distorted
by large deals. But yields are
attractive and “the market
remains liquid and is main-
taining momentum”, accord-
ing to consultants JLL.
Industrial property had a
record year in 2015, account-
ing for 41 per cent of transac-
tions, followed by the office
market with 38 per cent. Deals
included the Czech developer
CTP’s acquisition of six indus-
trial properties of more than
€130m in total, among them
west Bucharest’s industrial
park. Prime industrial yields
are 9 per cent, says JLL.
The automotive sector is one
Timisoara in the west, Cluj in
Transylvania and Iasi, a city
close to the Moldovan and
Ukrainian borders.
JLL estimates that yields on
prime offices stood at 7.5 per
cent in 2015. Rents in Bucha-
rest ranged from €10-€18 per
sq m depending on location,
according to research by Col-
liers Romania. Further devel-
opment could mean oversup-
ply becomes an problem in
parts of Bucharest, but other-
wise growing demand should
mop up extra space, says Ms
Paun.
Retail premises have per-
formed solidly, largely because
of rising wages and purchasing
power, according to Colliers
Romania. Foreign retail chains
are an increasingly common
feature and more are expected
to target Romania.
A pipeline of 500,000 sq m
of shopping-centre space is
In demand: Dacia’s factory in Pitesti — Bloomberg expected to enter the market
by 2020, with 95,000 sq m to
of the biggest sources of tries has been growing by as be delivered this year in the
demand among industrial cus- much as 20 per cent a year, capital city alone.
tomers, boosted by the success says Ilinca Paun, managing Residential property had a
of Dacia, the local carmarker director of commercial prop- record year in 2015, with home
acquired by Renault in 1999. erty experts Colliers Romania. sales exceeding even the
Office property remains an This has led to the develop- boom-time peak of 2007.
important destination for for- ment of more office space, not Sorin Blaga, general man-
eign funds. The value of Roma- just in Bucharest but also in ager of developer Liebrecht &
nia’s IT and outsourcing indus- regional centres such as Wood Romania, says more
satellite developments are
coming to market around
Bucharest, offering generous
living space and connections
to the city centre. The capital’s
patchy public transport and
traffic congestion, however,
remain concerns for investors.
If the overall picture is rosy,
risks are emerging. A new
mortgage law before parlia-
ment could allow debtors to
hand property back to banks if
they are unable to service their
housing loans.
Such legislation would make
banks more reluctant to lend
against property at a time
when financing is just starting
to ease, says Bucharest-based
economic commentator Cris-
tian Pantazi. Mugur Isarescu,
Romania’s central bank gover-
nor, criticised the proposed
mortgage law in March.
Concern is also growing
about the status of property
seized under communism and,
theoretically, eventually eligi-
ble to be returned to its origi-
nal owners.
A spate of legal cases in
recent years have seen state
bodies fail to act on court
directions to hand such assets
back, raising fundamental
questions about property
rights.
8 | FTReports
Warsaw millennials
want creature comforts
U
Office design ntil last year,
KPMG’s logo sat
Employers are proudly on the
enticing staff with top of Warsaw
Trade Tower, one
informal work of the highest buildings in
Polish capital.
spaces, writes A central location, prestig-
Zosia Wasik ious decor and open-plan lay-
outs had met the local needs of
the global company for years.
Today, the logo has gone. In
2015, KPMG moved its offices
4km north to the brand new
Gdanski Business Centre.
KPMG’s website stated that
the move was “not only a
change of address but also a
step forward in thinking about
company as a workplace”.
Indeed, its Warsaw employees
brag about having new
Central & Eastern Europe Property
spacious kitchens, modern
conference rooms and a large
rooftop terrace.
In Poland today, 1.5m sq m
of modern office space is being
built. Half is situated in War-
saw, which is the rising star of
the office market in central
and eastern Europe.
To be successful in the fight
for tenants, the new offices
must offer something more
than just a good location and
design. More and more leading
companies, competing for the
best employees, want to
attract and retain their staff
with work environments a cut
above traditional offices.
Many Polish millennials —
those born in the 1980s and
1990s — like their western
FINANCIAL TIMES Tuesday 12 April 2016
counterparts, are adopting a
different approach to their
careers. They value teamwork
and creativity and are not used
to strict hierarchical manage-
ment. A small but growing
trend of office developers are
attempting to capture the
spirit of these attitudes.
This less formal approach to
workplace design, now com-
mon among high-tech compa-
nies in North America and
western Europe, is a new phe-
nomenon in central and east-
ern Europe, says Monika Rajs-
ka-Wolińska, managing part-
ner of Colliers.
Companies are mimicking
Google and Facebook. Their
offices include areas designed
for different types of work,
such as creative spaces with
walls for writing notes;
“silence boxes”, where people
can concentrate in peace, as
well as relaxation rooms with
games consoles and spacious
kitchens with full fridges.
“The office has to support Above: anger management, Polish style, in a Colliers office
the creativity, conversations, Below: Warsaw Spire joins the city skyline
teamwork . . . companies
have noticed that their work- [of employees and manage- Large property groups
ers are much more efficient if ment], we will only have a themselves are changing their
no one imposes . . . where beautiful building and a nice own workspaces to match the
they have to work,” says office, which will not serve its shared-office philosophy.
Ewelina Kałużna, a director at function.” Office-sharing businesses
Skanska Property Poland. Facilities are also important. such as Regus that are com-
Companies try to outdo one “[Tenants] expect that the mon in western markets and
another with creative ideas in building will not only offer particularly popular among
office design to attract the them a place to put desks,” start-ups, are also affecting the
most talented employees. Doc- explains Katarzyna Zawodna, trend. In 2015 there were 145
Planner, a Warsaw start-up business unit president of of such offices in Poland,
that runs an Internet platform Skanska CDE. according to a survey by
that connects doctors and Standard facilities in mod- Best2Invest.
patients, has a meeting room ern office blocks include res- Five years ago this phenom-
made from the inside of an taurants, hotel-like lounges in enon was almost nonexistent
ambulance, complete with the reception, cycle racks and in Poland. Now it is still small
siren that sounds when its showers. The new Warsaw compared with Berlin, but it is
website is down. Warsaw staff growing fast. Such offices usu-
at advertising agency Dentsu ally offer flexible leasing
enjoy sliding down a slide next arrangements. Entrepreneurs
to stairs, and an ecological fea- can rent whole rooms or single
ture wall made of moss.
The staff of Dentsu desks for a month or by the
But Ms Rajska-Wolinska advertising agency hour.
says these are only accessories. Ms Rajska-Wolinska says
“It is very often confused that
enjoy a twisted slide co-working office environ-
workplace innovation is only next to stairs and an ments might one day become
about hot desks and nice popular even among estab-
design . . . The office has to
ecological wall made lished businesses.
reflect the culture of organisa- of moss “It is about not competing
tion — it has to be very well but co-operating with each
analysed,” she says. other, about building the com-
“It is not about changing the Spire, the second tallest build- munity, exchanging of experi-
office but about changing ing in the Polish capital, offers ences,” she says. “This is a chal-
human behaviours,” adds Syl- renters not only 100,000 sq m lenge — in terms of both costs
wia Predzinska, partner at Col- of office space but also a green and legislation . . . But the first
liers. “If we do not change the area with ponds, an amphithe- developer to do it will defi-
mentality and the approach atre, art galleries and cafés. nitely succeed.”
FINANCIAL TIMES Tuesday 12 April 2016
Wave of investors hunts for high returns
Capital sources
Arrivals from Asia and
South Africa are
competition for western
backers, reports Henry Foy
Property developers in the central
and eastern Europe region are used to
looking west for capital — €16.4bn
rolled in from investors in western
Europe and North America in the
four years to 2015.
Now, money is flowing into the
region from points south and east on
the global map.
The €1.2bn paid by South African
investor Redefine to take control of
Poland’s Echo Prime Properties
announced in March was the CEE’s
largest property transaction involv-
ing a fully completed development.
Marc Wainer, Redefine’s executive
chairman, says of the deal: “This sig-
nificantly advances our international
strategy.”
The transaction is the largest off-
shore purchase by a South African
property company, and there could
be more to come, adds Mr Wainer.
Foreign capital has flowed into cen-
tral and eastern Europe’s property
markets since they emerged in the
early 1990s from decades of commu-
nist rule. This has especially been the
case since 10 states including Poland,
the Czech Republic, Slovakia and
Hungary joined the EU in 2004.
The region’s capitals have trans-
formed from sleepy centres domi-
nated by drab 1970s concrete into
modern glass and steel business dis-
tricts dotted with skyscrapers.
German and other western Euro-
pean property funds led the way, fol-
lowed by interest from US funds and
private equity investors. All were
eager for the higher yields offered by
the developing markets’ economic
growth rates. These were typically
higher over the past two decades than
in the rest of the EU. Annual growth
in Poland , for example, averaged 3.9
per cent in the decade to 2014 com-
pared with an EU average of 0.9 per
cent.
The process was fuelled by the huge
quantitative easing programmes
launched by central banks in the US,
UK and the eurozone since 2008.
These interventions created cheap
capital in search of returns.
Over past years, however, investors
from China, Southeast Asia, South
Africa and other emerging economies
have begun buying assets across the
region with increasing frequency.
Some have invested to diversify away
from domestic assets or to secure
exposure to the European market.
Some view the region as a spring-
board into investments further west.
FTReports | 9
Central & Eastern Europe Property
“There has certainly been involvement of wealthy local inves- overall market. That gives investors funds. This, in turn, increases general
increased Asian and other interest in tors there. an alternative route for disposals, market liquidity.
the region and it will continue,” says Market analysts estimate that, in namely selling to locals instead of Having more local investors is a
Stuart Jordan, head of CEE capital Poland at least, the local asset man- other parties from overseas. It also growing trend, says Mr Jordan. “It is a
markets at JLL, the global property agement industry accounts for means that typically smaller local good thing because it is a sign that the
advisory group. “At the moment it is between 5 and 10 per cent of property investors can snap up more modestly CEE market is becoming more
characterised by ‘non-typical’ flows transactions by total value and is priced projects of up to €100m that sophisticated,” he adds. “It gives a lit-
like South African money.” growing at a rate that is outpacing the are often ignored by large foreign tle bit more stability to the market.”
Redefine’s deal came months after
South Africa’s Hyprop Investments
backed two Serbian shopping malls in Shop ’til you
a €200m investment, following drop: Galeria
another similar deal by South African Echo in Kielce,
investor Atterbury. Poland
New Europe Property Investment,
a South African investment fund, has
stakes worth about €1.5bn in Roma-
nia, while Cape Town-based Tower
Property made its first investment in
Croatia in February.
South Africa’s currency troubles
are a push factor for investors looking
outside their own economy. But the
trend is encouraging optimism in the
region about its assets being increas-
ingly regarded as core European
investment options. A group of South
African investors is expected to tour
Polish cities later this month.
Investors from South Korea, China
and Malaysia are making moves,
regarding central and eastern Europe
as a place to learn about EU business
practices — at lower cost and with
higher returns than further west.
Hana Asset Management, based in
Seoul, is in the process of acquiring an
$85m Amazon logistics centre out-
side Poznan, in western Poland. Chi-
nese investors have shown interest in
projects from Prague to Belgrade. At
the lower end of the market, the long-
heralded arrival of domestic capital
and local funds is beginning to have
an impact.
“The growth of the domestic mar-
ket is one of the most striking trends
over the past year,” says Charles
Taylor, head of Cushman & Wake-
field’s Poland business. “Overall it is
very healthy across CEE.”
In the past 20 years, domestic capi-
tal has been negligible in driving the
region’s property market aside from
in the Czech Republic, thanks to the
10 | FTReports
Baltic capitals still offer scope for returns
Outlook
A rebound in confidence
is well underpinned, says
Tadas Povilauskas of SEB
Concerns over Russia’s ambitions to
wield influence over Estonia, Latvia
and Lithuania as well as wider afield
continue to cast a shadow over the
formersovietstates.
But all three countries are continu-
ingontheirpathoffullintegrationinto
the EU and economic catch-up with
the west. Volumes of investment into
the commercial Baltic property
market have returned to the level of
theboomyearsof2007-2008.
This should not be viewed as a pre-
cursortotheburstingofanotherprop-
erty bubble. When compared with
febrile conditions ahead of the 2008
financial crash, today’s property
market appears to be supported by
economicandpoliticalstability.
Tensions between the Russian
Central & Eastern Europe Property
FederationandUkrainehaveonlyhad
a moderate impact on foreign inves-
tors’ attitude towards the Baltic prop-
erty market. Certainly, GDP growth
across Latvia, Lithuania and Estonia
slowed in 2015 due to the knock-on
effects of Russia’s economic slump.
But growth in the Baltic economies is
expectedtoreboundnextyearto3per
cent or more in Latvia and Lithuania,
and to above 2 per cent in Estonia
accordingtolatestEUforecasts.
Though yields in the Baltic market
have contracted in recent years, they
still remain attractive compared with
thereturnsonoffersintheNordicand
westernEuropeanmarkets.
Average yields for prime retail and
office space in Baltic capitals now
stand at around 7 per cent. These are
higher than the returns on offer in
much of central Europe and well
ahead of the 5 per cent yields typically
onofferinwesternEurope.
Local and western European prop-
erty funds have joined Nordic buyers
who have previously been the most
activeplayersinthemarket.
But although the three Baltic states
are usually thought of as one region,
considerable differences exist within
andbetweenthesepropertymarkets.
The majority of funds are invested
in capital cities of Tallinn in Estonia,
Vilnius in Lithuania and Riga in
Latvia.Forgoodreason:whilethepop-
ulations of these cities are generally
stable,thenumbersofpeoplelivingin
some provincial areas are declining
sharply.
The office market is heating up par-
ticularly in Estonia and Lithuania,
where the vacancy rates for prime
office space are close to zero. Strong
demand from international compa-
nies establishing IT and back-office
serviceshasgivenaboosttothedevel-
opmentofnewmodernofficeprojects.
In the next two years, office space
The drift of population
from provincial areas to
capital cities continues
will increase by 25 per cent in Lithua-
niaandby15percentinEstonia.
Demand for this increased stock of
floor space will depend on the success
ofBalticcountriesinattractingforeign
investors with comparatively cheap
butskilledworkforces.
Theretailsectorwasthebiggestcat-
egory by value of commercial prop-
erty transactions across the Baltics in
2015,drivenbyseverallargedeals.
However, this year the office sector
will most likely take the leading
investment position. Good growth in
retail spending and a lack of floor
space in high-quality shopping cen-
tres has driven down the vacancy rate
in the most successful shopping desti-
nations to close to zero. International
brands are still coming to the Baltics,
pushing out weaker retailers to less
attractive locations. In Tallinn, devel-
opment of shopping centres over the
next three years will increase overall
retailspacebyaquarter.
There is also reasonable demand in
the industrial property arena as man-
ufacturers seeking new sites, though
FINANCIAL TIMES Tuesday 12 April 2016
transaction volumes in this segment
wererelativelysmallin2015.Thedrop
in trade with the Russian Federation
hashitthewarehousingsector,though
rents for warehouses remained stable
acrossallBalticstateslastyear.
Residential property prices contin-
ued to improve. Across the region, the
average price for an apartment
increased the most in Tallinn and Vil-
nius.ConditionsintheLatviancapital
ofRigaweremoresubdued.
In Vilnius, the number of apart-
ments sold last year was the largest
since 2007, revealing solid demand
especially in the prime residential
sector. However an increase in the
construction of local housing stock in
recent years has helped put a curb on
risingprices.
TheBalticpropertymarketsshould
remain of interest to foreign investors
because of relatively high property
yields. Prudent policies imposed
by the central banks on property
borrowing should act as a safeguard
againstanyrisksofanotherboomand
bust.
FINANCIAL TIMES Tuesday 12 April 2016
If you seek
his work,
just look
around
Profile Poland’s Jan Kulczyk left his
mark on the skyline. By Zosia Wosik
T
he Ufficio Primo
is a renaissance-
style palace built
in central Warsaw
during a period
when the style known as
socialist realism was favoured.
The building, designed in
the 1950s by Marek Leykam,
one of Poland’s most visionary
architects of the epoch, is not
everyone’s idea of a straight-
forward property investment.
Intended to serve as the pre-
sidium of the communist gov-
ernment, the building — its
façade and interior borrowed
from the Palazzo Strozzi in
Florence — lost its prestige
over time, and became home
to second-rate offices, a cin-
ema and a nightclub.
Another visionary saved it
from falling into ruin. In 2012
the premises underwent reno-
vation by Kulczyk Real Estate
Holding, owned by Jan Kulc-
zyk, who died last year as
Poland’s richest man.
Mr Kulczyk was born in
1950, after the introduction of
the country’s planned econ-
omy. The Soviet era and envi-
ronment he grew up in was far
from entrepreneurial. Despite
this, he followed the example
of his father who had worked
in Germany as a highly suc-
cessful representative of a US
company.
“I got my first million dollars
from my father,” Mr Kulczyk
used to tell journalists when
asked about his start in busi-
ness. “That is why I would
rather talk about my first bil-
lion.”
Taking advantage of the fall
of communism in Poland in
1989, he acted as a buyer and
seller of businesses during
1990s privatisations. Not eve-
ryone admired him. He was
often accused of having close
relations with politicians who
allegedly helped him to buy
state assets cheaply.
In 1991 he set up what would
become Kulczyk Investments,
with a portfolio of interests
across a range of activities
including infrastructure, tele-
coms, energy and brewing.
From 2000 he was ranked as
the wealthiest Pole, according
to Wprost magazine. His for-
tune was estimated at 16bn
zloty ($4.3bn) in 2015.
For much of his career, his
property portfolio did not con-
stitute a significant part of his
fortune. But when he took up
investing in property, his
actions were far-sighted.
In 2010, Kulczyk Real Estate
Holding, one of the companies
in the Kulczyk Investments
group, formed a joint venture
with Silverstein Properties, a
US company famous for,
among other projects, recon-
struction of the World Trade
Center in New York.
For the US company, the
venture was a part of its strat-
egy to expand outside New
York. For the Polish entrepre-
neur it was a way to expand his
investments in property. In
business, he had done “every-
thing but one thing”, Larry Sil-
verstein, head of the US com-
pany, told Bloomberg at the
time of the venture, referring
Kulczyk had
plans for
Europe’s
tallest
skyscraper
to Mr Kulczyk’s lack of experi-
ence in property development.
“It took a little while to under-
stand his goals and to make
sure they coincided with ours,”
Mr Silverstein added.
M r Ku l c z y k p l a c e d
FTReports | 11
Central & Eastern Europe Property
emphasis at the time on office Renaissance: inside the imagined and, sadly, for all his empire to his son, Sebastian.
blocks, given that he thought Ufficio Primo enterprise, Mr Kulczyk did His admirers have little doubt,
the CEE region lacked “world- never see his ambition of however, that his legacy
class buildings and architec- building Europe’s biggest will remain an eye-catching
ture that would meet the tower realised. and lasting one against
expectations of more and When he died last year aged Warsaw’s rapidly changing
more demanding customers”. 65, he left management of his skyline.
Kulczyk Silverstein Proper-
ties has since developed,
owned and managed more
than 3.25m sq m of commer-
cial, residential and retail
space in the US and central and
eastern Europe.
In 2013, the value of Mr Kul-
czyk’s property business was
estimated at 1bn zloty
($270m). The company put
some of its investments in the
renovation of prestigious resi-
dences, managing to combine
tradition with modern design.
Aside from the Ufficio
Primo, the company manages
other prominent Warsaw
properties, including the land-
mark Malachowskiego Square
block designed by Jan Heurich
and built in 1910, and Krucza
House, one of central Warsaw’s
more stylish office buildings
constructed in the 1950s.
The company has invested
in original as well as historic
buildings. The highlight of Mr
Kulczyk’s ambitions was
intended to be a skyscraper
that would have been the tall-
est in Europe. In 2007 he
unveiled plans for a 282m
tower in Warsaw, some 50m
higher than the Palace of Cul-
ture and Science, one of the
chief edifices of the Polish cap-
ital’s Soviet era.
Because of the site’s proxim-
ity to the city’s airport, Kulc-
zyk Silverstein had to adapt its
plan by shrinking the height,
first to 130m and then to just
80m. The latest project,
though set to be important and
eye-catching feature in the
city, is not what its originator