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Global investors’ exposure to Chinese assets surges to $800bn

Global holdings of Chinese stocks and bonds have surged about 40 per cent to more than $ 800bn over the past year as investors bought assets at a record pace in spite of souring relations between Beijing and the international community.

The drive into China’s markets by global investors has come despite tensions between Beijing and Washington over issues from corporate audits to Beijing’s repression of Uyghurs in Xinjiang, which the US has labelled genocide.

It has also coincided with a crackdown by Beijing on Chinese listings in US capital markets, including a probe into data security at ride-hailing group Didi Chuxing announced just days after its $ 4.4bn New York listing.

Offshore investors have bought a net $ 35.3bn of Chinese stocks in the year to date via trading platforms that link Hong Kong with exchanges in Shanghai and Shenzhen, according to Financial Times calculations based on Bloomberg data. That was about 49 per cent higher compared with a year earlier.

Foreign investors have also bought more than $ 75bn in Chinese Treasuries in the year to date, according to figures from Crédit Agricole, representing a 50 per cent rise from a year earlier.

Foreign buying of Chinese stocks and government bonds has risen at the fastest rate ever compared with corresponding periods in previous years. Enthusiasm for Chinese assets has been fuelled by the country’s swift rebound from the Covid-19 pandemic but concerns are surfacing that its economic growth is slowing.

“Contrary to the geopolitical rhetoric, from an asset management point of view you cannot avoid looking at the Chinese market,” said Andy Maynard, a trader at investment bank China Renaissance.

Line chart of Net purchases via stock connect ($ bn) showing Offshore investors surge into China's onshore stocks

Inflows to Chinese markets have surged in recent years, partly because of the inclusion of renminbi assets in global stock and bond indices that are tracked by trillions of dollars worth of assets.

In March, FTSE Russell became the latest indices provider to confirm plans to include Chinese government debt in its global bond index, a move that Nomura has forecast will funnel more than $ 130bn into China.

Bond inflows this year have taken total foreign holdings to about Rmb3.7tn ($ 578bn), according to FT calculations based on figures from Crédit Agricole and Hong Kong’s Bond Connect programme, a conduit for offshore investors to trade debt issued in the mainland.

Foreign investors held more than Rmb1.4tn ($ 228bn) of onshore equities as of Wednesday via market link-ups with Hong Kong, excluding other foreign investment programmes.

This brings overseas’ investors holdings of Chinese equities and bonds through these channels to about $ 806bn, up from about $ 570bn a year ago.

A global shift this year away from richly valued tech shares has also benefited mainland China’s markets. Analysts said China’s onshore equities offered better exposure to sectors other than tech, such as industrial groups.

“As tech loses favour, people want other sectors, and most of those sectors are better represented onshore,” said Thomas Gatley, analyst at Gavekal Dragonomics.

Analysts said mainland stocks had also found favour with global investors as Chinese shares listed in the US faced domestic regulatory crackdowns.

Shares in Didi, the New York-listed Chinese ride-hailing group, tumbled last week after Beijing opened a cyber security probe into the company.

In debt markets, Mansoor Mohi-uddin, chief economist at the Bank of Singapore, pointed out that China’s government bonds offered attractive returns compared with their US counterparts.

“There’s a marked difference between Chinese bond yields and US Treasuries,” he said, pointing to a gap of 1.5 percentage points between the two.

The inflows into China’s bond market have also accompanied a rally in the renminbi, which hit a three-year high against the dollar in May.

“We’d expect that interest rate differential to continue to support the [renminbi],” said Mohi-uddin, helping boost inflows into Chinese equities and bonds in the second half of the year.

The Chinese central bank’s decision on Friday to cut lenders’ reserve requirement ratio further fuelled offshore purchases of the country’s bonds this week.

The move, which reduced the amount of capital that banks have to hold in reserve, is expected to free up about Rmb1tn in liquidity and mark an end to months of tighter monetary policy in China.

But the RRR cut also signalled to markets that Beijing may be concerned that growth is slowing, and came despite signs of rising inflation.

Patrick Wu, head of Asia emerging markets trading at Crédit Agricole, said the cut surprised many international bond investors, who had recently slowed purchases of renminbi debt.

“People were quite bearish and underweight on Chinese bonds,” Wu said, adding that the offshore buying of renminbi debt through Hong Kong had surged following the RRR reduction.

Video: Will China become the centre of the world economy?

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This post originally posted here International homepage

Verizon explores sale of media assets, including Yahoo and AOL – WSJ

Author: Reuters
This post originally appeared on Stock Market News

Verizon explores sale of media assets, including Yahoo and AOL - WSJ© Reuters. FILE PHOTO: The Verizon logo is seen on the side of a truck in New York

(Reuters) – Verizon Communications Inc (NYSE:) is exploring a sale of its media assets, including Yahoo and AOL, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.

The sales process, which includes private equity firm Apollo Global Management (NYSE:) Inc, could yield a price of $ 4 billion to $ 5 billion, report said.

Yahoo and AOL are the two large brands within Verizon Media, which also owns news publication HuffPost, technology news sites Techcrunch and Engadget, as well as social media site Tumblr.

X: Therefore doesn`t .

Analysis: DIY deals- How private equity firms buy assets from themselves

Analysis: DIY deals- How private equity firms buy assets from themselves
Reuters. FILE PHOTO: A man walks on Wall Street in New York, U.S.

(Reuters) – What’s a fair price when you are selling something to yourself? On Wall Street, that’s not a trick question.

A growing number of private equity firms are establishing new funds to buy portfolio companies from funds they already control. With the buyer and seller each an entity controlled by the same private equity firm, scrutiny is growing over how they price such deals.

“Transactions must be done at fair value and this must be sufficiently mitigated to make sure everybody feels good about the deal being done,” said Brian Rodde, managing partner at Makena Capital, a private equity investor.

In a traditional private equity transaction, investors will give a private equity fund money to invest in a portfolio of companies with the expectation that they will get their money back, plus profit, once those companies have been sold to outside buyers, usually in a 5-7 year timeframe.

The coronavirus pandemic initially disrupted private equity funds’ ability to exit companies and return funds to investors because would-be buyers were wary of deals. Raising new funds to buy the firms allowed private equity funds to hang on to good companies, keep charging investors lucrative management fees and give cash back to those investors who didn’t want to wait for their return.

The value of transactions involving buyout firms acquiring companies from themselves reached a record $ 21.8 billion in 2020, accounting for 87% of all deals in the secondary market initiated by private equity firms, according to fund placement agent Campbell Lutyens. That is up from $ 17 billion in 2019, when they accounted for 68% of all deals in the secondary market for private equity fund stakes.

A new record may be hit this year, as deal volume in the first quarter reached $ 15 billion, up from $ 7 billion from a year ago, according to a Citigroup Inc (NYSE:) estimate.

Industry executives say these deals are becoming more popular because as market fears around the pandemic recede and record levels of mergers and acquisitions ensue, some fund investors want to cash out to avail of new opportunities.

The risk for investors looking to exit is that they may be forfeiting the opportunity for extra profit by selling too early or at too low a price, while those buying may be overpaying for assets that may not deliver on promised returns.

Existing investors can, however, stick with the asset if they believe there is more value to be had in the future.

“Investors generally have the option to roll their exposure if they believe there is more upside on a go-forward basis,” Orcun Unlu, Citigroup’s global head of private funds, said.

Private equity funds have an incentive to hold on to good companies because increased competition for new acquisitions has driven up valuations, meaning it is expensive for them to go hunting anew. It is also risky; there is no guarantee that the next company they buy will be as successful as the one they own now.

“There was an expected duration for an exit for some of these (fund managers) on certain transactions and that got pushed out,” said Chris Perriello, co-head of secondary fund investments at AlpInvest Partners, a division of buyout firm Carlyle Group (NASDAQ:) Inc.

“For the most part, they have been companies that have done very well and there’s some sort of value creation story.”

FINDING A FAIR PRICE

To acquire a company already owned by investors in one of its funds, a private equity firm raises a so-called continuation fund, which may include some of the original investors from the old fund as well as new investors.

The investors are the ultimate owners of the portfolio companies, paying private equity firms fees for managing the assets and their performance.

Buyout firms Ares Management (NYSE:) Corp, Hellman & Friedman LLC and Clearlake Capital are among recent users of so-called continuation funds that are raised to buy portfolio companies from funds they manage, sources told Reuters.

Ares, Hellman & Friedman and Clearlake Capital declined to comment.

The continuation fund can invest in a number of portfolio companies but funds focused on single assets have seen the biggest growth in recent years, accounting for $ 14 billion in assets at the end of last year, compared to zero in 2017, according to data from Credit Suisse (SIX:).

For a graphic on Continuation funds on the rise:

https://graphics.reuters.com/PRIVATEEQUITY-SECONDARIES/CONTINUATION-FUNDS/ygdvzljzlvw/chart.png

With such deals growing in popularity, investors are seeking greater detail on how valuations are reached.

They do this by setting up independent committees to vet whether private equity firms have any entrenched conflicts of interest and the profitability of any proposed deal.

To further reassure investors that the price agreed reflects fair market value, private equity funds often run auctions, inviting secondary fund firms, which specialize in investing in second-hand private equity assets, to submit bids.

For example, when buyout firm Energy Capital Partners raised a $ 1.2 billion continuation fund this year to buy a 50% stake in U.S. renewable power and storage developer Terra-Gen from one of its older funds, it agreed on a price following a bid for the stake from Blackstone Group (NYSE:) Inc’s secondary funds division.

The price matched the amount Energy Capital Partners raised when it sold 50% of the company months earlier to investment firm First Sentier Investors.

Blackstone ended up as a major investor in the continuation fund, which attracted 20% of the investors in the original buyout fund holding the Terra-Gen stake, Energy Capital Partners founder Doug Kimmelman said in an interview. [L1N2LT2TH]

But the auction process does not assuage all investor concerns. Participants could end up investing alongside the private equity fund or in their continuation funds. Potential acquirers of the entire company, who have more of a reason to compete on price, are not always invited.

This can make some investors wary of the process, said David Layton, chief executive officer of Partners Group Holding AG, a private equity firm with a big secondary fund division that invests in continuation fund deals.

“There can be misalignment of interest between parties and I think this has to be navigated very carefully,” Layton said.

By Chibuike Oguh

Author: Reuters
This post originally appeared on Stock Market News

Joy Corrigan shows off her knockout assets in a high-cut one piece during beach shoot

She rose to fame modeling for Victoria’s Secret[1] and has managed to stay in top shape ever since.

Blonde bombshell Joy Corrigan put her enviable figure on display in a high-cut one-piece during a beach photo-shoot in Los Angeles[2] this week.

The 33-year-old GQ model slipped into a strapless true blue swimsuit that hinted at her cleavage and played up her derriere.

When you got it:\u00A0Joy Corrigan put her enviable figure on display in a high-cut one-piece during a beach photo-shoot in Los Angeles this week

When you got it: Joy Corrigan put her enviable figure on display in a high-cut one-piece during a beach photo-shoot in Los Angeles this week.

The beauty cut an athletic figure as she sauntered across the sand carrying a volleyball as if ready to start a game at any second.

Joy let her luxurious blonde hair fly free in the sea breeze and flashed her megawatt smile for the cameras during her workday.

At the moment she is dating the sizzling Mehran Moghaddam who is the founder and CEO of the cannabis company Kurvana.

Alongside her modeling career she has acted in movies and started a clothing line with her sister Gina called Naked Species.

Looking fab:\u00A0The 33-year-old slipped into a strapless true blue swimsuit that hinted at her cleavage and played up her derriere

Looking fab:\u00A0The 33-year-old slipped into a strapless true blue swimsuit that hinted at her cleavage and played up her derriere

Looking fab: The 33-year-old slipped into a strapless true blue swimsuit that hinted at her cleavage and played up her derriere

‘I’ve always loved fashion and my sister is really good on the business side,’ Joy explained in an interview with AfterBuzz TV[3] last year.

‘We wanted a clothing brand that gives back and helps endangered species. We partnered with the Wild Tomorrow Fund and 10% of the proceeds goes to them.’

Joy got a plug in for the clothes as well saying: ‘The most important thing with the brand are the designs…they are a little more edgy.’

Meanwhile on the acting front she has acted in such projects as the 2018 action movie Reprisal which starred Bruce Willis.

Smoldering:\u00A0She cut an athletic figure as she sauntered across the sand carrying a volleyball as if ready to start a game at any second

Smoldering:\u00A0She cut an athletic figure as she sauntered across the sand carrying a volleyball as if ready to start a game at any second

Smoldering: She cut an athletic figure as she sauntered across the sand carrying a volleyball as if ready to start a game at any second

Joy called the experience of working with Bruce ‘such an honor’ and explained that she ‘learned so much’ from observing him.

‘He is such an inspiration and his work ethic is impeccable. He only has a few takes,’ said Joy whose movies also include the Arnold Schwarzenegger vehicle Aftermath.

She dished that Bruce ‘Comes super prepared and has this confidence and energy. It’s cool to watch. Hopefully I can be like that.’

Heating up the winter:\u00A0The star got her start at age 14 when she was scouted at a mall in Raleigh and asked if she wanted to be in a fashion show. At 18 she moved to Florida and signed with an agency. Seen this year with her dog

Heating up the winter:\u00A0The star got her start at age 14 when she was scouted at a mall in Raleigh and asked if she wanted to be in a fashion show. At 18 she moved to Florida and signed with an agency. Seen this year with her dog

Heating up the winter: The star got her start at age 14 when she was scouted at a mall in Raleigh and asked if she wanted to be in a fashion show. At 18 she moved to Florida and signed with an agency. Seen this year with her dog.