In the news this week

Author: John Crabb, Karry Lai, Olly Jackson | Published: 11 May 2018
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Americas: it's a small world, after all

The US influence on the international arena was fully visible this week, with two major news stories - one in the Middle East and another in South America - both coming as a direct result of stateside affairs. In Iran, President Trump took withdrawing from an agreement signed by the Obama administration to denuclearise the Arab nation. 

In Argentina, Macri's government raised the interest rate for the third time in eight days in an attempt to stabilise the peso. It is hoped that the 40% rate, among the highest in the world, will counteract the outbound flow of funds to the buoyant US market. After the move failed to stabilise the currency Argentina requested significant financial aid from the IMF. 

Closer to home, Securities and Exchange Commission (SEC) commissioner Michael Piwowar announced his intention to stand down from his role this week, throwing doubt over the future of the best-interest standard rule proposed by the agency last month.

The transactional value of deals continues to reach new levels, and those which have been ground-breaking until fairly recently seam unremarkable in this climate. The acquisition of the entire share capital of Shire by Takeda for approximately $62 billion for example, or Blackstone's $7.6 billion acquisition of Gramercy Property Trust - the largest private equity buyout of a US public companies this year - barely made the headlines. Retail giant Walmart's acquisition of Flipkart did, however, at a mere $16 billion, a clear indicator that the US is increasingly intrigued by the Indian market.

Asia Pacific: big steps, long strides

The Hong Kong Institute of Certified Public Accountants released its report on Improving Corporate Governance in Hong Kong. The institute has put forward 28 recommendations, including the improvement of board processes to protect shareholders, strengthening of shareholder rights, increasing regulatory efficiency of regulators especially under the dual responsibilities model of regulatory oversight undertaken by the Securities and Futures Commission and the Hong Kong Exchange.

China's securities regulator has issued draft rules on the issuance and trading of China Depository Receipts (CDRs). These are available for public comment until June 3. The rules aim to attract domestic companies listed abroad back to China, a strategy which several other local regulators have been following in recent months.

Chinese smartphone and electronic device maker Xiaomi was the first company to test Hong Kong's new dual class shares listing rules after they were released on April 30. The company aims to raise $10 billion from the initial public offering (IPO). Hangzhou-based Ascletis Pharma was the first biotech firm to file for an IPO in Hong Kong following the launch of new listing rules targeting pre-revenue biotech firms. The company has a new drug to treat hepatitis C in the pipeline. 

EMEA: regulation crackdown

A decision from the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) that ethereum - the second most valuable cryptocurrency - is a security, not a commodity could potentially have wide ranging effects on exchanges and investors. It could also further bolster regulation in a sector that had remained relatively untouched until recently. Kevin Grimm, chief executive of the Daily Bit, said that shoehorning blockchain into existing frameworks that do not account for decentralised models is not the right approach to take and would cripple short-term industry growth.

The European Commission's €125 million fine to Altice signals a fiercer gun-jumping enforcement regime and companies need to exercise more caution in the actions they take between signing the contract and completion. But the rules are unclear and enforcement will be largely taken on a case-by-case basis, meaning companies are left in state of confusion. Herbert Smith Freehills competition partner André Pretorius said: "There does seem to have been a step-up in enforcement of the procedural rules, even where transactions do not necessarily give rise to substantive competition concerns."

The syndicated loan market is enjoying a buoyant period and this is being helped by the dramatic increase in club-style transactions. Director and capital debt advisory at EY Michael McCartney said many corporates may have looked at syndicated loans, but are now looking at club-style transactions. The impact is smaller total bank groups but more significant tickets on the table. 


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