It’s funny … the standard stock market manipulation in North America is Pump and Dump. In Asia, apparently, it’s Dump and Pump:
Scrutiny of anonymous research has intensified this month after the reports on Noble, a commodities trader, and Sound Global, a Chinese water-treatment firm, alleged accounting irregularities that both companies denied. The Monetary Authority of Singapore, or MAS, said it’s reviewing the report on Noble, produced by a group calling itself Iceberg Research, and will take action if securities laws were breached.
Noble, which said on Monday it “completely rejects the allegations,” lost as much as 15 percent over two days in Singapore trading after the Iceberg report. The stock rose 1.9 percent on Wednesday after the company said directors and management are “comfortable” that its balance sheet “fairly presents its book value.”
Iceberg doesn’t have any short position, or wager on a decline, in Noble securities and doesn’t work in tandem with funds, it said in the report. Iceberg’s website contains no analyst names, phone numbers or links to research notes, apart from the 17-page report on Noble.
The “Contact Us” page has a form for readers to submit comments and a link to follow a Twitter feed. When contacted on the website by Bloomberg News, Iceberg said it “cannot give phone calls” for an “anonymity reason.”
…
“No research should be anonymous,” said Jimmy Ho, president of the Society of Remisiers, Singapore’s biggest association of equity traders. “MAS should make sure analysts do not use their research for their own agenda.”
Thanks, Jimmy Ho, for calling for increased regulation! Will your operatives be combing through the commentary on Stockhouse and making sure nobody’s posting under a pseudonym?
More traders are jumping on the deflation bandwagon:
Federal fund futures give a 20.7 percent probability the central bank will lift borrowing costs at the June gathering, according to data compiled by Bloomberg. That is down from 25 percent yesterday.
Policy makers judged that risks facing the U.S. economy argued for keeping interest rates near record lows for longer, the minutes from the Jan. 27-28 meeting showed. Expectations for a possible June increase had been growing since a government report showed payroll gains in January capped the biggest three-month increase in 17 years.
SNC-Lavalin has been charged with doing business in Libya:
The RCMP has laid corruption and fraud charges against engineering firm SNC-Lavalin Group Inc. and two subsidiaries over alleged criminal acts that occurred doing business in Libya.
There is one count of corruption related to at least $47.7-million in alleged bribes to Libyan public or other officials. A second count is for fraud of about $130-million related to construction projects in Libya, including the Great Man Made River Project.
…
The RCMP, which worked with Swiss authorities, alleged in an affidavit last year that Mr. Ben Aissa funnelled an estimated $160-million in corrupt payments from SNC to Saadi Gadhafi, the son of the late Libyan dictator, and other officials in exchange for billions in engineering contracts.
Canada has an obligation to ensure that Libyan taxpayers are not overcharged for their engineering contracts, because they’re paying us a lot of money to look after their interests. Regrettably I was not able to find a media story specifying exactly how much we’re getting paid for our efforts, but I’m sure it’s billions. Billions!
The company has attempted to justify its conduct on the basis of having a Canadian headquarters:
The head of Canadian engineering giant SNC-Lavalin Group Inc. says any move by authorities to charge the company in connection with an extensive bribery scandal would immediately threaten its future and could force it to close down.
SNC chief executive officer Robert Card, speaking to The Globe and Mail’s editorial board, said he would be “deeply concerned” if the company was charged because it would hurt the business severely. And “if the company can’t do business, you really only have two choices. You are going to do some dismemberment and cease to exist entirely, or you are going to be owned by somebody else.”
A shift to a foreign owner would jeopardize the 5,000 Canadian SNC jobs that are associated with its headquarters, he said.
Our wise tough-on-crime masters consider corruption to be in the same category as wearing a niqab while pledging allegiance:
Anti-corruption experts say Ottawa has created a set of rules that is among the most far-reaching and inflexible anywhere in the world.
“The U.S., EU and World Bank all have a debarment process,” pointed out Peter Dent, president of the Canadian chapter of Transparency International, an organization committed to fighting corruption. “There is predictability, transparency and due process associated with all of them.”
The Canadian rules are “out of step” with regimes in most other countries, Transparency International said in a letter sent this week to Public Work Minister Diane Finley, who is considering possible changes to its regime.
… which brings us to S&P has downgraded the outlook for the company to negative:
- • Federal charges have been laid by the Public Prosecution Service of
Canada against SNC-Lavalin Group Inc., SNC-Lavalin International Inc., and SNC-Lavalin Construction Inc.- •Each entity has been charged with one count of fraud and one count of corruption.
- •SNC-Lavalin has stated it will defend itself and plead not guilty
- •There is no change to the company’s right and ability to bid or work on any public or private projects.
- •As a result, we are revising our outlook on SNC-Lavalin to negative from stable and affirming all our ratings on the company, including our ‘BBB’ long-term corporate credit rating.
- •The negative outlook reflects our concern as to the extent and magnitude that SNC’s competitive position will be affected following the charges being laid.
…
Standard & Poor’s is concerned about the effect that the charges will have on SNC-Lavalin’s competitive position, as well as how the company’s operations will be affected by management’s need to address the charges.However, we continue to expect SNC-Lavalin will maintain strong liquidity over the next 18 months and that net cash will exceed recourse debt preserving the financial flexibility to manage possible financial penalties. We also note that the negative outlook could be maintained until we are confident as to the resolution of the criminal charges, which could take up to a number of years.
We could lower the ratings on the company if governance-related events affect its competitive position or if SNC-Lavalin increased recourse debt such that total debt-to-EBITDA increased beyond 1.5x with poor prospects for deleveraging. We also believe that downward pressure on the ratings could result from significantly weaker liquidity.
And Bombardier’s issuing shares:
Bombardier Inc. said it will issue about C$750 million ($600 million) in stock, fulfilling a pledge made last week when the company unveiled cost overruns on its CSeries family of jets.
Bombardier will sell 339.4 million Class B shares at C$2.21 apiece, 12 percent less than Wednesday’s closing price in Toronto. The offering is expected to be completed on or about Feb. 27, Montreal-based Bombardier said Thursday in a statement.
The company said Feb. 12 it would issue about $600 million of new equity and as much as $1.5 billion in long-term debt, depending on market conditions, to shore up its balance sheet. Bombardier also halted the dividend on its Class A and B shares, and named Alain Bellemare as CEO, replacing Pierre Beaudoin.
…
Together, unidentified members of the Bombardier family plan to place orders for about $50 million in subscription receipts, the company said. Each receipt will entitle the holder to receive one Class B share.Bombardier’s Class B stock fell 2.4 percent to C$2.46 when trading was halted in late afternoon Toronto trading. The shares have lost 41 percent of their value this year.
Bombardier is the battered but still proud issuer of BBD.PR.B, BBD.PR.C and BBD.PR.D.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 8bp, FixedResets down 18bp and DeemedRetractibles off 2bp. The Performance Highlights table is its usual lengthy self, with Enbridge issues prominent among the losers. Volume was above average.
For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.
Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread
Here’s TRP:
Click for Big
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.55 to be $1.13 rich, while TRP.PR.B, resetting 2015-6-30 at +128, is bid at 14.60 to be $0.79 cheap.
Click for Big
Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).
Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.20 to be $0.26 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 26.20 to be $0.52 cheap.
Click for Big
The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.
The cheapest issue relative to its peers is BAM.PR.X, resetting at +180bp on 2017-6-30, bid at 17.87 to be $0.57 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 24.85 and appears to be $1.15 rich.
Click for Big
This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.80, looks $1.02 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.61 and is $1.00 rich.
Click for Big
All the investment grade break-even rates are scattered around zero!
On the other hand, the market’s distaste for product linked to Money Market rates does not extend to prime, as shown by the FixedFloater/RatchetRate pairs:
Click for Big
Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?
| 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 | 1.5585 % | 2,307.7 |
| FixedFloater | 4.37 % | 3.52 % | 19,579 | 18.38 | 1 | -0.0460 % | 4,046.5 |
| Floater | 3.12 % | 3.32 % | 66,697 | 18.89 | 4 | 1.5585 % | 2,453.2 |
| OpRet | 4.04 % | 2.12 % | 105,426 | 0.32 | 1 | 0.0395 % | 2,753.1 |
| SplitShare | 4.27 % | 3.50 % | 26,997 | 3.57 | 5 | 0.1425 % | 3,223.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0395 % | 2,517.4 |
| Perpetual-Premium | 5.33 % | 0.36 % | 56,781 | 0.08 | 24 | -0.0065 % | 2,513.5 |
| Perpetual-Discount | 4.95 % | 4.78 % | 119,699 | 15.11 | 10 | 0.0794 % | 2,793.9 |
| FixedReset | 4.40 % | 3.35 % | 202,127 | 17.03 | 79 | -0.1831 % | 2,434.4 |
| Deemed-Retractible | 4.90 % | 0.10 % | 106,904 | 0.19 | 39 | -0.0171 % | 2,650.5 |
| FloatingReset | 2.45 % | 2.95 % | 85,780 | 6.40 | 7 | -0.2404 % | 2,315.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.F | FixedReset | -4.59 % | Desjardins was on the sell side of 12 (3,450 shares) of the last 15 (4,850 shares) trades executed after 3pm, with prices beginning at 19.91 and ending at 19.34. VWAP was 20.31 on 48,445 shares. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 19.34 Bid-YTW : 5.54 % |
| TRP.PR.A | FixedReset | -3.84 % | A last minute – literally! – collapse, with an anonymous seller executing twelve trades totalling 3,400 shares at prices beginning at 20.31 and finishing at 19.75. VWAP was 20.36 on 19,270 shares. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 3.63 % |
| ENB.PF.C | FixedReset | -1.98 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.15 Evaluated at bid price : 22.79 Bid-YTW : 3.94 % |
| ENB.PR.Y | FixedReset | -1.57 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 20.08 Evaluated at bid price : 20.08 Bid-YTW : 4.14 % |
| ENB.PF.E | FixedReset | -1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.18 Evaluated at bid price : 22.86 Bid-YTW : 3.96 % |
| ELF.PR.H | Perpetual-Premium | -1.27 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2020-04-17 Maturity Price : 25.25 Evaluated at bid price : 25.57 Bid-YTW : 5.31 % |
| ENB.PF.A | FixedReset | -1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.27 Evaluated at bid price : 22.96 Bid-YTW : 3.91 % |
| BAM.PR.R | FixedReset | -1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 21.37 Evaluated at bid price : 21.67 Bid-YTW : 3.70 % |
| TRP.PR.B | FixedReset | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 14.57 Evaluated at bid price : 14.57 Bid-YTW : 3.54 % |
| CU.PR.C | FixedReset | -1.13 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.31 Evaluated at bid price : 24.48 Bid-YTW : 3.20 % |
| MFC.PR.L | FixedReset | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.85 % |
| BNS.PR.C | FloatingReset | -1.00 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.76 Bid-YTW : 3.11 % |
| BMO.PR.Q | FixedReset | 1.06 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.85 Bid-YTW : 3.75 % |
| CU.PR.D | Perpetual-Premium | 1.15 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2021-09-01 Maturity Price : 25.00 Evaluated at bid price : 25.44 Bid-YTW : 4.59 % |
| BAM.PF.B | FixedReset | 1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.01 Evaluated at bid price : 24.40 Bid-YTW : 3.55 % |
| IFC.PR.A | FixedReset | 1.57 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 20.04 Bid-YTW : 5.77 % |
| BAM.PR.C | Floater | 1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 14.95 Evaluated at bid price : 14.95 Bid-YTW : 3.37 % |
| TRP.PR.D | FixedReset | 1.91 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 22.84 Evaluated at bid price : 24.00 Bid-YTW : 3.35 % |
| BAM.PR.B | Floater | 1.95 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 15.15 Evaluated at bid price : 15.15 Bid-YTW : 3.32 % |
| BAM.PR.K | Floater | 1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 14.86 Evaluated at bid price : 14.86 Bid-YTW : 3.39 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| HSB.PR.C | Deemed-Retractible | 146,545 | Nesbitt crossed blocks of 90,000 and 50,000, both at 25.30. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-21 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : -1.00 % |
| TD.PF.C | FixedReset | 126,910 | TD sold 10,000 to Scotia at 24.85, crossed 50,000 at 24.87 and finally crossed 15,600 at 24.83. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.10 Evaluated at bid price : 24.82 Bid-YTW : 3.09 % |
| HSB.PR.D | Deemed-Retractible | 119,900 | Desjardins crossed blocs of 99,500 and 19,900, both at 25.35. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-21 Maturity Price : 25.00 Evaluated at bid price : 25.37 Bid-YTW : -4.57 % |
| RY.PR.J | FixedReset | 77,843 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 23.19 Evaluated at bid price : 25.15 Bid-YTW : 3.35 % |
| ENB.PR.H | FixedReset | 71,785 | RBC crossed 43,200 at 18.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-02-19 Maturity Price : 18.45 Evaluated at bid price : 18.45 Bid-YTW : 4.16 % |
| MFC.PR.N | FixedReset | 51,300 | Scotia crossed 49,500 at 24.80. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 3.67 % |
| There were 38 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.F | FixedReset | Quote: 19.34 – 20.48 Spot Rate : 1.1400 Average : 0.7539 YTW SCENARIO |
| ELF.PR.H | Perpetual-Premium | Quote: 25.57 – 26.44 Spot Rate : 0.8700 Average : 0.5581 YTW SCENARIO |
| TRP.PR.A | FixedReset | Quote: 19.52 – 20.51 Spot Rate : 0.9900 Average : 0.6918 YTW SCENARIO |
| NEW.PR.D | SplitShare | Quote: 32.37 – 32.95 Spot Rate : 0.5800 Average : 0.3915 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 17.60 – 18.13 Spot Rate : 0.5300 Average : 0.3709 YTW SCENARIO |
| BMO.PR.R | FloatingReset | Quote: 23.56 – 23.87 Spot Rate : 0.3100 Average : 0.1896 YTW SCENARIO |