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Nick Corbishley

Articles by Nick Corbishley

Argentina Crisis Slaps Foreign Banks & Companies Operating in the Country

3 days ago

Peso collapse and inflation force Spanish companies and banks — second largest investors in Argentina, behind US companies — to tally their losses.
By Nick Corbishley, for WOLF STREET:
Having learnt their lesson, most European companies and banks have limited exposure to Argentina’s crisis-prone economy. One exception is Spain’s corporate sector, which, after the U.S.’s, has the most exposure to the South American economy, with almost €6 billion invested by its companies there, down from around €9 billion in 2011 after some divestments.
For many of those companies, Argentina is still an important source of revenues and profits. But those revenues and profits are getting slammed by the double whammy of a rapidly deteriorating economy and rampant inflation. Now, there’s the potential

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One of World’s Construction Giants Admits Using Risky Hidden-Debt Loophole “Across Group.” Australian Subsidiary Crushed

9 days ago

This “crack cocaine for CFOs” was also extensively used by Carillion until it collapsed.
By Nick Corbishley, for WOLF STREET:
The world’s seventh largest construction and services company (by sales), with subsidiaries around the globe, Grupo ACS, has revealed it is making extensive use of reverse factoring, a controversial financing technique that played a key role in the collapse of UK construction giant Carillion. In a conference call with analysts, ACS chairman, Florentino Perez, said the firm has been rolling out factoring “across the group,” to “more efficiently manage cash flows and match revenues and costs over the course of the year.”
The admission by ACS that it is using reverse factoring of payables across its vast global empire has spooked investors, given the malign role

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Investor Sentiment Goes to Heck After Draghi’s Easing Promise

12 days ago

Bitter irony: As Draghi’s term is about to end, investor expectations plunge to where they’d been when he made his “whatever it takes” speech in 2012.
By Nick Corbishley, for WOLF STREET:
The Sentix economic index, a gauge of investor sentiment in the Euro Area, fell 7.9 points in August 2019 to minus 13.7, its lowest level since October 2014. The index has been on a downward spiral since January 2018 but in recent months the trend line has sharply steepened.
The index of investor confidence is meant to serve as a barometer of the general mood of people and institutions who are invested in bonds, shares, options and other financial instruments. It is run by the Frankfurt-based boutique investment firm Sentix and is based on a regular survey of investors from over 20 countries. It is

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UK Auto Production Plunges to 7-Year Low on Slumping Global Demand & “No Deal” Brexit Fears

16 days ago

Investment in the auto sector grinds to a halt.
By Nick Corbishley, for WOLF STREET:
Production of vehicles in the UK plunged 20% in the first half of 2019, compared to the same period last year, as the fallout from sharply declining demand in key export markets such as Europe and China as well as fears of a no-deal Brexit took a heavy toll on the sector, according to the Society of Motor Manufacturers and Traders (SMMT). Engine manufacturing dropped 10% during the same period. And commercial vehicle production, until recently a rare silver lining for the embattled sector, collapsed 57% in June year-over-year, dragging down the first half by 15%.
Britain’s car industry has now racked up 13 straight months of declining vehicle production and ten straight months of declining engine

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ECB’s NIRP-Forever Policy “Destroys Banks’ Profitability Equation”: Bankia CEO. Spanish Banks Reel. Problems Stack Up

19 days ago

Spain’s Big Five banks (already down from the Big Six) could soon be four.
By Nick Corbishley, for WOLF STREET:
The ECB’s NIRP forever policy is crushing Eurozone banks’ ability to turn a profit, warned the CEO of Bankia, José Sevilla, on Monday. “It is clear that the current rate scenario is hurting the profitability of the banking business,” he said. “We think low rates are good and perhaps even desirable. But the same cannot be said of negative interest rates since they destroy banks’ profitability equation. Sustained over time — and we have been negative for five or six years now — they hinder and penalize the profitability of Spanish and European banks.”
In February last year, the formerly bailed out lender launched an ambitious three-year plan (2018-2020) that included an

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Hit by Epic Construction Downturn, Mexico Faces Reality: New President Tries to Get Folks to Play by the Rules, and Everything Stalls

21 days ago

Construction industry has worst month since 2006, fourth month in a row of declines.
By Nick Corbishley, for WOLF STREET:
Construction activity in Mexico registered its biggest year-on-year fall in May since records began, in 2006, according to a monthly survey of construction companies carried out by the National Institute of Statistics and Geography (INEGI). It was the fourth consecutive month of declining activity.
The total productive value of construction projects under development contracted 3.1% between April and May this year and 10.3% between May 2018 and May 2019. During the same 12-month period, the total hours worked in the sector fell by 5.2% and the total number of (official) workers employed fell by 4.9%, to the lowest level since records began.
The construction

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Another UK Fund Just Slammed its Doors Shut on Investors

July 19, 2019

This time, a fund liquidity crisis traps institutional investors, including pension funds.
By Nick Corbishley, for WOLF STREET:
Less than a week after the Bank of England issued a warning about the systemic risks posed by illiquid investment funds, news has surfaced that another run-on-the-fund caused fund managers to suspend withdrawals: This time, it’s M&G Investments, the fund management arm of UK insurance giant Prudential, that has suspended withdrawals from one of its property funds.
The move come into force last month and was apparently triggered by a rush to the exits from a number of big clients, most of whom are large pension funds.
Restrictions were also placed on certain withdrawals from the Prudential UK Property fund, which feeds into the M&G fund. According to The

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Not Helpful for Crushed European Bank Stocks: Stress Test a Sham, European Court of Auditors Warns

July 15, 2019

Just when European banks need to inspire confidence more than ever.
By Nick Corbishley, for WOLF STREET:
European bank stocks continue to get hammered near multi-decade lows by a slew of problems, including the ECB’s monetary policies, particularly its negative-interest-rate policy (NIRP), festering nonperforming loans, and a well-deserved lack of confidence by investors. This was just exacerbated by a scathing new report from the European Court of Auditors (ECA) highlighting a litany of problems and shortcomings with the European Banking Authority’s latest stress test. Among other things, the test ignored some of the most common factors that cause a bank to fail, excluded many of Europe’s most fragile banks, and used simulations that were a lot more benign than the last financial

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Liquidity Crisis at Woodford Equity Fund Is Symptomatic of Systemic Problem, Bank of England Warns

July 12, 2019

$30 trillion of assets globally are held by similar open-ended funds.
By Nick Corbishley, for WOLF STREET:
The Bank of England warned on Thursday that “financial stability risks are increasing” from giant open-ended funds, which are estimated to hold some $30 trillion in assets globally. These funds are vast sources of financing for the real economy but can pose a systemic risk since the money often goes into assets that are hard to sell quickly, the central bank said in its latest Financial Stability Report.
If investors in an open-ended fund decide to pull their money en masse, which they’re ostensibly allowed to do at just about any time, the fund could struggle to liquidate its assets in time, especially if those assets are not very liquid.
This is exactly what has happened at

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In Escalation of Trade War With Switzerland, EU Risks Balkanizing Europe’s Financial Markets

July 10, 2019

“Weaponizing” Europe’s financial services, with an eye on the UK after Brexit?
By Nick Corbishley, for WOLF STREET:
In recent days, the stock exchanges of Switzerland, the fourth-largest European market by value-traded, were dealt what seemed at first like a hammer blow: Brussels stripped them of financial equivalence with the European Union after a previous trade agreement between the two sides expired, with the result that traders from the EU’s 28 member states are no longer allowed to trade shares in Swiss companies if those shares are also traded in the EU.
That applies to virtually all heavyweight Swiss companies such as Nestlé, Roche and Novartis, whose shares are included in the portfolio of just about every major European investor.
The EU’s long-telegraphed decision to let

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Liquidity Fears Hit Other UK “Equity Funds” as Investors Remain Trapped in Woodford Fund

July 8, 2019

Shares of one fund plunged 22% on Friday. Other funds under pressure, raising serious questions about just how liquid “equity funds” in the UK are.
By Nick Corbishley, for WOLF STREET:
There’s still no sign of relief for the hundreds of thousands of investors whose money is trapped in one of the UK’s biggest equity funds, the Woodford Equity Income Fund. The fund is supposed to offer its shareholders daily liquidity, meaning they can take part or all of their money out any day of the week. But that was before a slow-motion (but accelerating) run on the fund forced its manager, hedge-fund legend Neil Woodford, into taking the last-gasp decision, on June 3, to place a ban on redemptions. Since then, investors have been unable to access their money. And it’s not clear how much longer

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Diesel Death-Spiral Drives UK Auto Sales to Five-Year Low

July 6, 2019

“Decline in buyer confidence,” collapsing sales of diesels & plug-in hybrids. But EV sales soar.
By Nick Corbishley, for WOLF STREET:
Sales of new passenger vehicles, as measured by registrations, fell 4.9% in June from a year earlier in the UK, according to the Society of Motor Manufacturers and Traders (SMMT). The UK is the second largest auto market in the EU, behind Germany. Total sales in the first half of 2019 dropped 3.4% year-over-year, driven by the ongoing collapse in diesel sales. But sales of gasoline vehicles rose 3.5% in the first half, and sales of battery electric vehicles (BEV) soared 60%.
It is the third year in a row of declining first-half sales for the UK’s automotive sector. Since the peak in the first half of 2016, registrations have dropped 10.6%, falling

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