That HSBC decision must be getting easier by the day. Who wouldn’t want to relocate to Hong Kong now, so enjoying the sort of market stability that only China can bring? It’s a wonder the bank’s boss, Stuart Gulliver, hasn’t already brought in the removal men to pack up its Canary Wharf tower.
Mr Gulliver got everyone going in April with the news that, as part of HSBC’s 150th birthday celebrations, it was having another squint at decamping east. And, to be fair, the famous nom-dom does know a thing or two about travel logistics, expertly rerouting his bonus from Hong Kong to Switzerland via Panama. But moving HSBC to a special administrative region of China? Really, Stu?
Sure, back in April, the Hong Kong Monetary Authority was making come-hither eyes, taking a “positive attitude” to any HSBC move. Since then, though, the Hang Seng index has crashed by a quarter and is now falling at the fastest rate since the last Black Monday, the one from 1987’s stock market crash. And it’s not as if HSBC would really be relocating to Hong Kong anyway. The former British colony is totally reliant on Beijing to handle a bank with $2.6 trillion of assets.
So HSBC would be becoming a Chinese bank — not exactly risk-free, as the latest carnage suggests. After all, it’s not just the slowdown in the world’s second biggest economy that’s spooked the markets: those official forecasts of 7 per cent GDP growth this year have long looked suspect. No, it’s that Beijing’s interventions to prop up its flagging economy and tanking stock market have been so cack-handed.
Devaluing the yuan to boost exports and corralling state-backed financial firms to buy Chinese stocks has backfired spectacularly. Beijing’s just looked panicky. The upshot has been capital outflows — an estimated $70 billion last month and probably more this — and global market mayhem. Worse, the meddling has created a lose-lose situation. If Beijing intervenes it seems desperate. If it doesn’t, as it failed to do meaningfully over the weekend, the markets take revenge, yesterday pushing the Shanghai index down another 8.5 per cent, its biggest one-day fall since 2007, so making a 38 per cent drop this year.
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Is this really the place for HSBC, a bank that needs a “robust regulatory environment”? Mr Gulliver must already know the answer to that.
Pipe dreams
Anyway, at least it was a good day for sewage. The promoters of the £4.2 billion Thames Tideway Tunnel have long claimed that up to 39 million tonnes of untreated stuff gets dumped into the Thames in a typical year — enough “to fill the Royal Albert Hall 450 times”.
Well, finally the risks to the Last Night of the Proms are receding. Ofwat has awarded the licence for the 25km super sewer to a new special purpose company, Bazalgette Tunnel, named after the man who brought us London’s Victorian drains that can no longer cope. The corporate Bazalgette will finance the project, managing contractors aiming to build the thing by 2023.
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The financing is not without its controversies, not least because the government will pick up the tab for some cost-overruns. But Bazalgette, a bunch of infrastructure funds investing about £1.3 billion equity, is incentivised to deliver the project for less than the headline price. The figure contains about £1 billion of contingencies, with returns shrinking once costs top £3.1 billion.
Besides, the sewer will not be the raw deal once feared for Thames Water customers, partly thanks to Ofwat setting the cost of capital via an auction. That’s got it down to less than 2.5 per cent, helping to cut the likely extra on customer bills to about £25 rather than £80 a year by the mid-2020s. It’s less than the 3.6 per cent Ofwat allows other water companies, but they get a regulatory review every five years, whereas Bazalgette’s first one won’t come until about 2030. Still, 2.5 per cent’s not enough for a financial clean-up job anyway.
Playing the game
Stamina’s handy in poker, as AIM-quoted GVC Holdings keeps proving. Some players would have folded last month when Bwin.Party seemed to bring an eight-month marathon to an end by recommending a cash-and-shares offer from 888, today worth almost 103p a share.
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Not GVC. Despite being worth just £261 million versus Bwin’s £942 million, GVC has stayed at the table. Its proposed counter-bid has less cash but is worth almost 120p a share. That’s a decent premium, whatever the concerns over the amount of GVC paper Bwin would have to take, especially now GVC has sorted key financing, regulatory and listing issues. They include a move to the main market.
There are still issues over GVC’s business in unregulated gambling markets. But 888 has a fair bit of exposure to them too. Of course, Bwin’s confirmation that it is still in talks with GVC could be an attempt to flush out a clinching higher bid from 888. Without one, though, a formal GVC bid at a 16.5 per cent premium would be hard to ignore.
Potential headache
OMG! Running out of P@ DOR. ;-) Pls send 2nite. Can’t W8. As Rowan Gormley, Majestic Wine’s boss pointed out yesterday, one reason the retailer paid up to £70 million in April to acquire both him and his company, Naked Wines, was for their superior “digital marketing skills”.
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So, it’s hard not to feel a little underwhelmed by his latest innovation: allowing customers to order a case of wine by text message. Expect lots of rows over orders, too. Who hasn’t got into trouble texting when drunk?