October 16th – The BESA Times

Twenty-third Edition - Sunday, October 16th

Every week, a complete snapshot of what happened around the world in the past week

 

Notable Headlines

At the 23rd World Energy Congress in Istanbul presidents of Turkey and Russia, Recep Tayyip Erdogan and Vladimir Putin, signed a long-delayed agreement on the construction of "Turkish Stream". The pipeline will supply the gas to Europe bypassing Ukraine. The leaders also agreed to strengthen contacts in the military and intelligence fields. Despite diplomatic meltdown the tensions on security matters are still remaining. While Russia supports Syrian President Bashar Assad, Turkey has continuously called for his removal from power by supporting the forces fighting against the Syrian official government. Several columnists mention that the agreement signed this week may be used by Turkey to show its openness for business.


Snap Inc. (Former Snapchat) hired Morgan Stanley and Goldman Sachs to arrange its IPO which could take place in March 2017. The company's value has been recently estimated at $ 18 billion and can reach $ 25 billion after the latest news. This IPO could be the biggest in the sector of social media since Twitter in November of 2013. Snap Inc. also can become the largest company appeared on the US stock market since 2014 and will be the first embarked on this path among a small group of attention-getting and expensive start-ups led by Uber. Snapchat Messenger has more than 150 million active daily users. The company expects to increase its advertising revenue to more than $ 350 million this year and up to $ 1 billion in 2017.


The UK may be obliged to pay a huge bill to exit the European Union. Currently the EU has unpaid bills for more than €200 billion and officials asserts that the British share is around €25 billion. The head of the European Council Donald Tusk publicly stated that the talks between Brussels and London to withdraw Britain from the European Union "can be interrupted at any time." On the 2nd of October the British prime minister Theresa May said that the government will officially launch the procedure of leaving the EU before the end of March 2017. According to her this step will be taken in accordance with Article 50 of the Lisbon Treaty, which enshrines the right of a member state of the EU to voluntary withdraw from the organization.

 

What to remember of last week's news?


Samsung has taken the radical decision to completely stop selling Galaxy Note 7 after weeks of reports and videos of phones igniting. The situation becomes the first major test for the heir to the empire Lee Jae-Yong. On Tuesday the company's share price dropped by 8%. The South Korean group assumes a reduction in operating profit over the next two quarters by approximately €2.7 billion.


Russian oil giant Rosneft has bought 50.08 per cent interest in Bashneft, the country's sixth-largest oil company. According to the estimation the consolidated companies will control 39% of the total oil production in Russia and 36% of the refining capacity of the country.


Wells Fargo announced management reshuffle following a recent scandal around its retail-banking department. Current CEO Jonathan Stumpf has been replaced by the bank veteran Timothy Sloan. Well’s market capitalization has dropped by $25 billion since September. The affair can damage company’s long-term profits and reflecting a necessity to have more independent board of directors.


German authorities are considering to change labour law to attract bankers from London to Frankfurt following the Brexit. This week the second biggest Russian bank VTB, among the first, has publicly announced that due to the Brexit it will move its European headquarters to Frankfurt, Paris or Vienna.

 

Understand in pictures...


Bonds are known to be a safe way to secure return on your investment. What is a bond? What is the difference between coupon bond and zero-coupon bond? Which are the key things to look at a bond? Watch here

 

A week in the financial markets

 

Our Homemade Article

Deutsche Bank will live to see a new day, but a darker one by Evan Oliner for BESA

 

What to expect for next week?

The final third presidential debate between Hillary Clinton and Donald Trump will take place this Wednesday, October 19th, at the University of Nevada, Las Vegas. Candidates are going to give their opinions on debt and entitlements, immigration, economy, Supreme Court, foreign hot spots and fitness to be President. After the final debate until the election on Tuesday, November 8, the candidates will be crossing the country to bring on undecided voters.

On Thursday, the 20th of October, the governing council of the European Central Bank (ECB) chaired by Mario Draghi will meet to discuss monetary policy and interest rates in Frankfurt. At the previous meeting in September the bank announced that it expects the interest rates to remain at present or lower levels for an extended period of time.

 

Did you know?

That 2016 Nobel Prize in Economics winner Harvard University's Oliver Hart has proved that it may be effective to privatize prisons, hospitals and other important public institutions. He found out that private investors do an excellent job when reducing costs, but it is often accompanied by an unacceptable decrease in the quality of service. Another this year winner MIT’s Bengt Holmström pioneered in linking the executive’s pay to performance-related metrics. He states that contracts should provide the right balance of risk and incentives. For example, when defining the bonus of Oil & Gas manager it is fair to focus not on the oil price, but to compare the results of the company with the average in the industry.

 

WRITTEN BY VLADISLAVA KOLESNIKOVA FOR THE BESA RESEARCH TEAM

PLEASE DIRECT ANY INQUIRY TO AS.BESA@UNIBOCCONI.IT

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#InvestmentBanking #Brexit #Oil #Russia #Germany #USElection #EuropeanCentralBank

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