Breakingviews – Corona Capital: Sports cards, Bankers, Bonds – Reuters India

NEW YORK/LONDON/HONG KONG (Reuters Breakingviews) – Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
Steven Cohen, Chairman and CEO of Point72 Asset Management, speaks at the Milken Institute Global Conference in Beverly Hills, California, U.S., May 2, 2016.
– Collectors Universe
– FIG bankers
– Emerging market debt
TOPPS OF THE HEAP. Steven Cohen here, the hedge fund billionaire and newly minted New York Mets owner, is now buying into the business of authenticating sports and other memorabilia and collectibles. Alongside entrepreneur Nat Turner and D1 Capital Partners, he is using his private capital to take Collectors Universe private for roughly $700 million. Its no steal. The financial heavy hitters said here on Monday theyre paying a 30% premium to the companys 60-day average valuation, and its stock has more than tripled this year.
The share-price runup and future potential owe something to homebound hobbyists sending the value of collectibles soaring. Sports trading cards prices were increasing even before lockdowns. But virtual auctions have since boomed, especially for the priciest finds, according to ESPN here. A rare card signed by baseball superstar Mike Trout went for $3.9 million in August the highest price ever. But like the gum that used to come with baseball cards, market bubbles have been known to pop. (By Anna Szymanski)
FIGGY PUDDING. Financial institutions bankers are munching their way through an early Christmas feast. Announced deals targeting lenders, insurers, asset managers and other groups in the sector surpassed $52 billion last month, Refinitiv said on Tuesday. That represented 15.1% of the global total, an uptick from the 10.6% average over the past five years. Notable deals include PNC Financial Services acquisition of BBVAs U.S. assets, and a joint bid for British insurer RSA Insurance by Danish and Canadian peers Tryg and Intact Financial.
The mini-boom looks sustainable. For starters, lower-for-longer interest rates exacerbated by the pandemic will continue to pile pressure on banks and insurers, making cost-savings mergers one of the few ways to boost returns. And the ongoing shift to passive investing is eating into asset-management revenue, which will force more of them together. That means FIG bankers, at least, dont need to worry about fees. (By Liam Proud)
UNYIELDING. Bond investors reluctance to grant impoverished countries virus-related relief may backfire. Of 73 poor countries qualifying for the G20s Debt Service Suspension Initiative (DSSI), some 29 have not signed up, according to S&P Global Ratings here. Countries like Nigeria and Kenya feared that the benefits of repayment holidays from bilateral creditors like France or Britain might be outweighed by the indirect cost of bond markets seeing it as a sign of weakness, and charging higher interest rates. One reason is that private investors refused to participate in the programme.
By eschewing official relief, countries may be digging themselves into a deeper hole. Under the DSSI, for instance, Mozambique and Angola would have cut their interest bill by 2% of GDP. With the latters annual debt service payments consuming over a third of the governments budget, it needs all the help it can get. A softer line from private creditors might have reduced the chances of a Zambia-style default. (By Ed Cropley)
EXX-GROWTH. Exxon Mobil has joined the oil-major impairment party. The $161 billion U.S. driller is writing down here the value of gas assets by $17 billion to $20 billion, its biggest ever impairment. Thats in the same ballpark as fellow strugglers Royal Dutch Shell, and BP, who took the red pen to their balance sheet values in the summer.
After the coronavirus smashed oil demand, smelling the coffee here on lower prices makes sense. But the write-downs will hike Exxons leverage. The companys historical valuation superiority on a price to book basis is also now a distant memory. Exxons best hope is that current low levels of investment will mean reduced oil supply in the future, helping prices snap back. Absent a sudden conversion to renewable energy, it needs them to. (By George Hay)
HOME ADVANTAGE. Nomura may let employees keep working from home post-pandemic. The bank could ask staff in Japan to spend a minimum of 40% of their hours on site, Chief Executive Kentaro Okuda said here on Tuesday. That would reduce the need for expensive office space. But the idea has its downsides for both employers and employees.
Okudas counterpart at Bank of America, Brian Moynihan, says he thinks his team works better together on the trading floor. Nomuras brokerage arm has profited from pandemic-related volatility, as have most rivals, but its nothing to take for granted. Fees from investment banking fell by nearly a quarter in the six months ending in September. The Japanese firm faces a human resource challenge too: tiny Tokyo apartments and a workaholic culture could make the offer unattractive to Japans salarymen. For investors, the ultimate test will be the impact on the bottom line. (By Katrina Hamlin)
FALLING BEHIND THE JONESES. Rishi Sunaks efforts to bolster Britains housing market may have some painful fiscal consequences. The UK chancellors emergency tax breaks for homebuyers, which are due to expire in March, helped push up average prices by 6.5% year-on-year last month, the most in nearly six years, according to mortgage lender Nationwide. However, many buyers appear to be relatively well-off households using home-working savings to upgrade their pads.
That presents Sunak with a potential opportunity, and owners with a potential problem. Before the crisis, soaring property prices, especially around London, were a key reason for the regional inequality that Prime Minister Boris Johnson promised to tackle. Weak growth and mass layoffs from Covid-19 will twist the knife. Next year Sunak will need to raise taxes to start addressing the 400 billion pounds Britain borrowed this year. If rich homeowners become a target, property and wealth taxes and even work-from-home levies may heave into view. (By Ed Cropley)
Breakingviews
Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.read more