HSBC plc slashes 25,000 jobs
HSBC plc (LON:HSBA) has announced it will slash 25,000 jobs in an effort to cut costs and make the bank less complex. London’s largest listed bank who makes most of thier profit in Asia has said that it will also dispose of Turkish and Brazilian units.
HSBC has come under pressure from investors of late as it has been slow to streamline the business in the face of increased regulations and higher costs. Some say the move is too little too late.
“Slaughtering the staff is not necessarily the solution unless management makes the bank considerably less complex,” said James Antos, analyst at Mizuho Securities Asia.
Shares in HSBC initially trade lower in London but pushed higher after the first hour of trading.
The move aims to save $5 billion per year by 2017, however these savings will come with their own costs; it is expected that the savings exercise will require $4.5 billion over the next 3 years.
8,000 jobs will be cut from UK operations with many branches facing a lower level of staff. Much of the other cuts will come from global IT and back office functions.
Investment banking will also see job cuts, the cost of compliance is becoming cumbersome for global banks and many banks have already slashed investment banking units. HSBC has been slow to react to regulatory changes but today’s announcement is being welcome by some investors.
“The market is likely to respond positively on the move with investors having a much clearer idea of HSBC’s direction going forward,” said Steven Leung, a sales director at UOB Kay Hian in Hong Kong.
Shares in HSBC trade at 621.2p at 9:21am London time.
Turkey enters period of political instability
Turkey has been thrown into political instability following an indecisive general election. The current ruling AKP party suffered a plunge in support to 41% and now is being forced to cobble a coalition together.
The failure of AKP to secure a majority led to heavy losses in the Turkish Lira and caused a stock market rout. Turkey’s stock market was down over 8% at when it opened on Monday.
The uncertainty spilled over to European stock with the DAX, FTSE and CAC all suffering losses.
AKP have 45 days to form a coalition and are currently meeting in Ankara.
President Erdogan has been humbled by the losses and in an effort to avoid destabilising protests, has accepted the results.
“Our nation’s opinion is above everything else,” Erdogan said “I believe the results, which do not give the opportunity to any party to form a single-party government, will be assessed healthily and realistically by every party.”
Turkey suffered a number of blasts prior to the election which some say were meant to disrupt the democratic process. The explosions took place at a Kurdish rally who were campaigning for 10% of the votes to gain seats in parliament. The pro-Kurdish HDP party won 12% of votes and will have around 80 seats.
The shake up to Turkey’s political environment may be the source of investor woes for some time to come.
“In emerging markets, investors particularly like certainty and strong leadership and that is something that we are now really lacking in Turkey. Turkey is one of the fragile five and is in a difficult situation economically and so uncertainty like this is really the last thing it needs. The key question now is what the central bank will do in the light of this huge depreciation in the lira. There is certainly an argument for it to hike interest rates. In terms valuations, many assets indeed look very attractive now, especially as valuations have taken a beating. There will be a lot of investors picking through various companies trying to look for cheap opportunities” said David Stubbs, market strategist at JP Morgan Asset Management.
Quanta Group to raise £3m in Crowdstacker’s first investment
The new Peer-to-Peer lending platform, Crowdstacker, has opened its first crowdfunding project to investors. The City of London registered company is facilitating a £3m funding raising programme for Quanta Group.
Quanta Group specialise in buying and selling residential property, since 2006 they have completed over 500 deals. Their objective is to buy properties that are in need of refurbishment and dispose of them once work is complete. Quanta acquire the properties and undertake modernisation then sell the improved homes. They say their success stems from the short time frame they are able to turn the projects around.
Quanta are embarking on a crowdfunding capital raising project to expand their activities. Each investor’s cash will either be held in a bank account or put into a property development. This is a factor Quanta are promoting to illustrate the efficiency and security of their plans.
Quanta are planning to raise £3m, investors will receive 6.8% per year paid quarterly over 3 years. Individuals can invest as little as £700.
Risk Warning: Crowdfunding projects involve a level of risk that may not be suitable for all investors. Generally there isn’t is a secondary market for crowdfunding projects meaning that investments are illiquid and an investor may find it hard to dispose of the investment quickly. Please read full details of any crowdfunding project and ensure you understand the risk before partaking in a crowdfunding project. #Investaware
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Vietnam discussions escalate South China Sea dispute
The dispute over the South China Sea escalated this morning when it was reported that Vietnam has entered discussions with EU and US contractors for Western fighter jets and drones.
The dispute over the South China Sea escalated this morning when it was reported that Vietnam has entered discussions with EU and US contractors for Western fighter jets and drones.
Vietnam seeking to upgrade its air defences is the latest event in a long-standing territorial dispute over the South China Sea. China, Vietnam, the Phillipines, Taiwan and Malaysia all have claims to the area. Since January, China have been building artificial islands on submerged reefs, dredging up millions of tonnes of rock and sand from the sea floor and pumping it into the reef to form land. China took control of the one of the bigger reefs in 1988 after a battle with Vietnam, leaving 70 Vietnamese soldiers dead. Since then, China has avoided confrontation; however, with plans to build an air base long enough for fighter jets to take off on one of the new islands, it appears they are choosing now to strengthen their claim to the area.
Ian Storey, from Singapore’s Institute of South East Asian Studies believes that “Although Hanoi knows that its military will always be outnumbered and outgunned by China’s, a strong navy and air force provides it with a limited deterrence and, if push comes to shove, the ability to give China a bloody nose in battle.”
There have already been altercations between Vietnam and China; in May 2014, China put an oil rig in water claimed by Vietnam, sparking an international incident. Strengthening their defences is a move which will further militarise the dispute with Beijing.
By Miranda Wadham
Vodafone dispels merger rumours
Vodafone has revealed that it is in talks with Liberty Global over “selected asset swaps”, but are not discussing a full-blown merger.
The FTSE 100 mobile giant issued a statement to the stock exchange this morning after reports surfaced overnight that it was in discussions with the cable operator.
Rumours have long been rife about a possible merger between the two companies, as as fixed and mobile telecom markets and networks converge. The company confirmed in a statement that “ it is in the early stages of discussions with Liberty Global regarding a possible exchange of selected assets between the two companies.”
Vodafone did not specify which parts of the company and the assets that would be involved, continuing: “There is no certainty that any transaction will be agreed, nor is there certainty with respect to which assets will ultimately be involved”. Vodafone’s shares were down 2 percent at 243 pence by 0800 GMT (9:00 a.m.) following the statement, having risen 2 percent in earlier trade following media reports that the two companies were looking at a merger. The stock is still trading up 7 percent since May 19 when renewed speculation about a combination began.
by Miranda Wadham
Moneysupermarket and Zoopla fall on Ofgem investigation
A probe by the UK’s energy regulator has led shares in Moneysupermarket.com Group PLC (LON:MONY) and its rival Zoopla Property Group PLC (LON:ZPLA) becoming the worst performers in the FTSE All-Share index yesterday.
Moneysupermarket said: “Ofgem has opened an investigation into whether two or more companies providing a supporting service for the energy industry have breached competition law…Ofgem is gathering this information to establish whether to include the company as a subject of its investigation.” Ofgem had asked it for information as part of its investigation into “whether two or more companies providing a support service for the energy industry have breached competition law”.
Rival uSwitch, which has just been bought by online property website Zoopla in a deal worth up to £190 million, has received the same request.
Ofgem’s probe comes amid wider efforts by lawmakers and regulators’ to make the energy market more competitive and bring down prices. Price comparison websites such as Moneysupermarket and uSwitch have faced criticism recently for making it easier for consumers to switch to options that earn the companies a commission.
Moneysupermarket made the biggest drop on the on the mid-cap index, although Zoopla was not far behind, down 16p to 260p.
By Miranda Wadham
Greece misses IMF payment
Greece has become the first country in over three decades to defer a payment to the IMF, the last country to miss a payment was Zambia in the 1980s.
The Greeks have not technically defaulted and today’s event will not be classed as a credit event.
The motive behind the non-payment remains unclear, Greece has the money to pay the bills as well as a number of subsequent repayments; it is not case of not being able to pay but a conscious decision not to release funds.
One theory is that the indebted nation is attempting to broker a deal with creditors that will provide an alternative to economy shattering measures.
“We are looking forward to getting a deal as soon as possible,” said economy minster Stathakis in a BBC interview.
His apparent optimism maybe displaced as the Germans grow tired of Greek brinkmanship and point out the limited impact a ‘Grexit’ may have.
Markets reacted negatively to the news, the FTSE 100 trades down 07% at 6812 and the German DAX down 0.9% at 11243 at 10:10am London time.
Although markets were deep in the red, the fall was contained as investors stepped in, assured by the ECB’s bond buying package.
The rise of equity crowdfunding
The growth of Crowdfunding, an alternative source of funding for small businesses and startups, shows no sign of slowing down; according to a report from Cambridge university and Nesta, an innovation charity, it grew by 410% between 2012 and 2014.
Crowdfunding is essentially a process whereby which the public are given the opportunity to invest in an start up companies. There are now various online platforms that list these investment opportunities; the leaders include Crowdcube, SyndicateRoom and Seedrs.
Part of its attraction is that it makes investing more attainable – now, it is not just the so called ‘business angels’ who have the chance to put money in and profit from new ideas, but also the general public.
However, it’s not all ‘Dragon’s Den’ style moneymaking; it is important to note that most start-up companies fail, and therefore investors will lose their money. Investing money in start up businesses through crowdfunding is undoubtedly a risky option – especially for anyone without a knowledge of the industry. The UK’s financial watchdog gave a stark warning to anyone considering investing in equity crowdfunding that it is “very likely that you will lose all your money”, and most crowdfunding opportunities fall outside the Financial Services Compensation scheme. Furthermore, anyone investing must be prepared to be in it for the long haul. It generally takes between 3-7 years for a company to sink or swim, so it may be some years before an investor sees any significant returns.
Despite these pitfalls, crowdfunding can be a good option for people wishing to invest relatively small amounts of money – £10 is a common minimum stake. Similarly, it seems to attract people who are confused by traditional options and therefore have avoided it in the past – 62 per cent of investors interviewed by Nesta said they had no previous experience of investing.
The safest way to invest is a portfolio approach – putting £100 into 100 start ups rather than £100,000 in one spreads the risk and ensures a safer investment. Equally, it is an attractive route for businesses in need of money in difficult times when banks aren’t lending freely.
Whilst crowdfunding is not yet regulated by an authority, the Crowdfunding Association has set up a code of practice to which every platform must adhere to if it is a member, which goes some way to providing regulation and safety. Crowdfunding platforms that have signed up have the black UK Crowdfunding Association’s logo on their website.
Undoubtedly the biggest draw that crowdfunding has is the satisfaction of seeing an idea you believe in becoming real. Rather than having money sitting in the bank, people love the idea of investing in local businesses and ideas that they feel passionate about; it is this that is the driving force behind crowdfunding’s surging popularity.
According to Nesta, crowdfunding raised $1.5 billion for businesses in 2011, and in 2012 one project raised over $1 million; these figures look set to continue to growing. For more information on new crowdfunding investment opportunities, keep checking the crowdfunding page of our website.
By Miranda Wadham
Birmingham named sixth best city for investment in Europe
PwC has recently ranked Birmingham as the sixth-best city in Europe for investment — ahead of London. For most people, the UK’s second largest city is still associated with poor post-war planning, a declining industrial base and a huge concrete ring road; however, recent developments show that this could not be further from the truth.
An influx of large businesses and commerce has boosted the economy; HSBC announced a few months ago that it is to move its head office for its retail and business lending operation, and 1,000 of its staff, from London to Birmingham. Deutsche Bank has also expanded its operations in Birmingham: it now has 1,500 people based there. The economy for the greater Birmingham sub-region grew by 2.5 per cent – the best of all the ten ‘core cities’. The Office for National Statistics (ONS) said in the latest sub-regional economic output figures for 2013 that the economy grew by 2.5 per cent, above the national figure of 1.6 per cent.
It seems that businesses are beginning to realise the benefits of the once flagging city – including how close Birmingham is to the capital (100 miles) and how much cheaper it is to set up shop outside London. The train to the capital currently takes around 1 and a half hours; however, if HS2 goes ahead — and note that its headquarters is located in Birmingham — you will be able to travel from London to Birmingham in 49 minutes. The airport has been extended and now offers direct flights to China – the only ones outside London. Birmingham is perfectly situated for business – It is within two hours of most other major UK cities, including Oxford, Cambridge, Bristol, Manchester and Leeds and 90% of the UK’s population lies within a four-hour radius.
The universities are working together to put a “strong sales pitch” to students and employers; and since 2010, Birmingham’s 20-year Big City Plan has produced a pretty good infrastructure programme. Birmingham also has a strong cultural and retail scene; since the Bull Ring was built in 2003, Birmingham was ranked third out of UK cities for retail after London and Glasgow. The City of Birmingham Symphony Orchestra (CBSO), and the renowned Birmingham Royal Ballet are based there, and several leading art galleries and theatres; it also has the Highest number of Michelin starred restaurants in England, after London.
What was once a declining industrial town has undergone a transformation – and at a time when people and businesses are being priced out of London by spiralling prices, it appears to be one to watch.
By Miranda Wadham
Shares in Horse Hill consortium suspended
Shares in the Horse Hill consortium including UK Oil & Gas Investments (LON:UKOG), Alba Mineral Resources PLC (LON:ALBA), Solo Oil PLC (LON:SOLO), Doriemus PLC (LON:DOR), Stellar Resources PLC (LON:STG) and Evocutis PLC (LON:EVO) remain suspending pending an announcement.
UK Oil & Gas Investments owns 30% of the consortium which in turn holds a 65% stake in the Horse Hill project. The remainder of the well is owned by Denver based Magellan Petroleum Corporation.
UK Oil & Gas Investments announced in April that the site could hold up to 100bn barrels of oil that triggered a sharp movement higher in shares.
Although the discovery was significant, the difficult nature of extracting the oil means only 15% may be recoverable.