Well, here’s a blunt proposal:
Hong Kong would “absolutely” welcome London-based banks HSBC Holdings Plc (HSBA) and Standard Chartered Plc (STAN) if they decided to move headquarters to the former British territory, according to Chief Executive Donald Tsang.
“If HSBC or Standard Chartered were to change headquarters it would not undermine their business at all,” Tsang said in an interview yesterday. Tsang added he didn’t “want to encourage a move that would impair relations” with trading partners including London and New York.
…
HSBC and Standard Chartered, the two U.K. lenders dependent on Asia for a majority of their profit, faced calls from investors to consider moving after the U.K. government imposed a bank levy last year to raise 2.5 billion pounds from lenders. Shifting to Hong Kong would also allow the banks to sidestep any financial transaction tax imposed by the European Union.
…
With a top tax rate of 50 percent, London-based bankers making more than 1 million pounds will pay about three times more in tax and social security than colleagues in Hong Kong, accounting firm KPMG estimated last year.“If you ask businesses why they choose Hong Kong over other places, our surveys show that almost all of them place taxes at the top of the list – or perhaps I should say a lack of taxes,” Tsang said in a speech at the Think Asia Think Hong Kong conference in London.
More bad news for the Europeans:
The European Central Bank said it will lend dollars to two euro-area banks tomorrow, a sign they are finding it difficult to borrow the U.S. currency in markets.
The ECB allotted $575 million in a regular seven-day liquidity-providing operation at a fixed rate of 1.1 percent. It’s the first time since Aug. 17 that a lender requested dollars from the ECB. The spot rate was $1.3625. An ECB spokesman declined to comment on which banks borrowed the funds.
The premium European banks pay to borrow in dollars through the swaps market is close to the highest level in almost three years. The cost of converting euro-based payments into dollars, as measured by the one-year cross-currency basis swap, was 99.1 basis points below the euro interbank offered rate, or Euribor, at 12:24 p.m. in Frankfurt, indicating a premium to buy the greenback. It widened to as much as 112.6 basis points earlier this week, the most since Dec. 2, 2008, according to data compiled by Bloomberg.
U.S. money-market funds “have stopped rolling over dollar loans of European banks,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “I wouldn’t be surprised if demand increased in the next weeks.”
As anticipated, Moody’s downgraded Credit Agricole and SocGen:
Credit Agricole was lowered to Aa2, Moody’s third-highest rating, and remains under review. Paris-based Societe Generale (GLE) was reduced to Aa3, with a negative outlook, as Moody’s re- evaluated its level of state support. BNP Paribas, the largest French bank, had its Aa2 long-term rating kept on review for a possible cut.
…
Credit Agricole’s new ratings “are more consistent with the bank’s sizeable exposures to the Greek economy,” Moody’s said in the statement.
The western world is getting a long-overdue lesson on the relationship between pipers, payments and tunes:
And, reminding his audience of his nation’s economic power, he said China is ready to invest more in Europe, but called on Europe to take “bold steps” toward recognizing China as a full market economy.
The World Trade Organization set a 2016 deadline for its member nations to recognize China’s market economy on the country’s admission to the organization in 2001. But, to China’s frustration, neither EU countries nor the United States have done so, amid continuing disputes over dumping of cheaply made Chinese consumer goods and anti-dumping tariffs in the receiving countries.
“We have been concerned about the difficulties faced by the European economy for a long time, and we have repeated our willingness to extend a helping hand and increase our investment,” Mr. Wen said. “To show one’s sincerity on this issue [of the market economy] a few years ahead of that time is the way a friend treats another friend.”
And by the way, shut up about that stupid human rights thing, OK? And spies? Shut up about them too, got it?
The TRE puts situation is causing headaches:
After a hearing on Wednesday morning, the Ontario Securities Commission announced that it needed an extra day before ruling whether or not Sino-Forest Corp.’s (TRE-T4.81—-%) put options that are affected by its cease-trade order will be allowed to be exercised.
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CDCC’s main argument is that these puts are insurance contracts that were signed before the halt was put into effect, and that letting the holders exercise them does not constitute a new investment decision. (The new investment decision is a key part of the argument because the cease prevents new decisions from being made.)
…
Sino-Forest options in question are American style, which means that they can be exercised at any time up to and on the exercise date. (Whereas European options can only be exercised on the exercise date.) Those who argue against CDCC claim that the right to have exercised before the puts makes these options equivalent to stocks. In other words, they say, holding a put is no different than being short the stock, and like the short sellers who are now stuck, the put holders should have exercised earlier.
I certainly hope that the argument regarding equivalency to stocks has been very badly reported, because it’s nonsensical as stated. They aren’t stocks. They’re put options. Losses for both parties are limited (which is not the case for call options).
Saying they’re insurance contracts can lead to murky consequences as well. We’ve already had to listen to shrill screams that buying a credit default swap on a security you don’t own is like buying fire insurance on a house you don’t own. It’s a slippery slope.
Unfortunately, the Financial Post has a direct quote:
“The holder was buying insurance against the situation that has arisen,” said lawyer James Tory of Torys LLP, who is representing the CDCC.
Those words may yet come back to haunt us.
I continue to be amazed that this issue was not dealt with long in advance; and continue to believe that in future the CDCC should simply adjust the expiration dates by a term equal to the term of the cease-trading order. Wasn’t there something a long time ago, with options having strike prices that were unaffected in Canada by a major special dividend, when every other options exchange in the world made an adjustment? It was a $5 dividend if I remember correctly, which is by no means a sure bet.
The Financial Post claims that a National Bank – HSBC retail brokerage deal is all over but the shouting.
The Canadian preferred share market fared poorly today, with PerpetualDiscounts down 8bp, FixedResets losing 12bp and DeemedRetractibles off 3bp. Volatility was OK, with BAM issues well represented – to some extent reversing their sparkling performance yesterday. Volume was on the high side of average.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -1.1109 % | 2,131.0 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -1.1109 % | 3,205.0 |
| Floater | 3.05 % | 3.35 % | 61,946 | 18.88 | 3 | -1.1109 % | 2,300.9 |
| OpRet | 4.81 % | 2.12 % | 60,633 | 1.65 | 8 | 0.0676 % | 2,462.8 |
| SplitShare | 5.37 % | 0.57 % | 52,576 | 0.45 | 4 | 0.0880 % | 2,496.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0676 % | 2,252.0 |
| Perpetual-Premium | 5.62 % | 4.52 % | 119,221 | 1.08 | 16 | -0.0295 % | 2,114.3 |
| Perpetual-Discount | 5.27 % | 5.34 % | 115,960 | 14.95 | 14 | -0.0775 % | 2,257.8 |
| FixedReset | 5.15 % | 3.08 % | 199,322 | 2.66 | 59 | -0.1189 % | 2,331.7 |
| Deemed-Retractible | 5.04 % | 4.59 % | 239,633 | 7.86 | 46 | -0.0305 % | 2,199.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.X | FixedReset | -2.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-14 Maturity Price : 22.56 Evaluated at bid price : 23.62 Bid-YTW : 3.68 % |
| PWF.PR.A | Floater | -1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-14 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 2.57 % |
| FTS.PR.H | FixedReset | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-14 Maturity Price : 23.41 Evaluated at bid price : 25.41 Bid-YTW : 2.83 % |
| BAM.PR.K | Floater | -1.27 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-14 Maturity Price : 15.50 Evaluated at bid price : 15.50 Bid-YTW : 3.38 % |
| POW.PR.D | Perpetual-Discount | -1.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-14 Maturity Price : 24.04 Evaluated at bid price : 24.33 Bid-YTW : 5.21 % |
| BAM.PR.J | OpRet | 1.34 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.50 Bid-YTW : 4.32 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.J | Deemed-Retractible | 125,550 | TD crossed 75,000 at 25.25. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 4.47 % |
| FTS.PR.C | OpRet | 100,000 | RBC crossed 100,000 at 25.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-10-14 Maturity Price : 25.50 Evaluated at bid price : 25.86 Bid-YTW : -9.21 % |
| BAM.PR.P | FixedReset | 95,644 | RBC crossed blocks of 44,600 and 44,500, both at 27.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 27.15 Bid-YTW : 3.91 % |
| TRP.PR.C | FixedReset | 87,730 | RBC crossed blocks of 31,400 and 31,500, both at 26.10. Desjardins crossed 17,900 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-14 Maturity Price : 23.50 Evaluated at bid price : 25.98 Bid-YTW : 2.89 % |
| BMO.PR.J | Deemed-Retractible | 68,054 | TD crossed 37,000 at 25.16. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 4.55 % |
| CM.PR.L | FixedReset | 57,607 | Nesbitt crossed 50,000 at 27.57. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 27.49 Bid-YTW : 2.87 % |
| There were 35 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.A | Floater | Quote: 20.50 – 22.00 Spot Rate : 1.5000 Average : 1.1980 YTW SCENARIO |
| HSB.PR.C | Deemed-Retractible | Quote: 24.88 – 25.50 Spot Rate : 0.6200 Average : 0.3855 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 25.47 – 25.97 Spot Rate : 0.5000 Average : 0.3139 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 24.33 – 24.90 Spot Rate : 0.5700 Average : 0.3911 YTW SCENARIO |
| GWO.PR.G | Deemed-Retractible | Quote: 24.90 – 25.14 Spot Rate : 0.2400 Average : 0.1663 YTW SCENARIO |
| TD.PR.K | FixedReset | Quote: 27.38 – 27.61 Spot Rate : 0.2300 Average : 0.1594 YTW SCENARIO |