1. UPDATE 1-S&P cuts BNP Paribas, sees French bank sector risks


    S&P cut BNP Paribas’ long-term credit rating to AA-minus from AA as it revised France’s banking industry country risk assessment, or BICRA, to Group 2 from the lower-risk Group 1.”We see weaker economic prospects for Europe, including the peripheral countries to which some French banks are significantly exposed,” S&P said in a statement. “We expect lower earnings due to this more difficult environment and higher funding costs.”The ratings agency, which downgraded 10 Spanish banks two days ago, including giants Santander and BBVA, said it believes French banks will increase their capital ratios by 2013.”But until then we are placing more emphasis on their currently moderate capital positions in our ratings,” it said.Despite that, S&P affirmed the ratings of the other four largest French banks — BPCE, Credit Agricole , Credit Mutuel and Societe Generale — saying it expects extraordinary government support for them.The outlook on all five banks is stable, S&P said.

  2. Gross’ PIMCO makes a big move into mortgages


    Gross increased mortgage debt to 38 percent of assets in his $242 billion PIMCO Total Return Fund in September, from 32 percent in August, as the U.S. central bank announced last month that it “will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.”PIMCO’s latest bet on mortgages isn’t going unnoticed.Gross, who helps oversee $1.2 trillion as co-chief investment officer at PIMCO, made headlines earlier this year and came under heavy criticism when the manager widely known as the “bond king” bet heavily against U.S. Treasuries — one of the biggest outperformers of this year.His move into mortgage-backed securities also comes as the PIMCO Total Return fund’s cash equivalents and money-market securities fell to negative 19 percent September, from negative 9 percent in August.In having a so-called negative position in cash equivalents and money-market securities, it is an indication of derivative use and short-term securities being put up as collateral as a way to boost leverage and increase the fund’s holdings in bonds with longer maturities such as mortgage-backed securities, Treasuries and corporate bonds, according to Eric Jacobson, director of fixed-income research at Morningstar who has covered PIMCO for more than a decade.Over the years, some analysts in the fixed-income world have pointed out that Gross’ use of derivatives to boost leverage and exposure to higher-yielding assets is what distinguishes the Total Return Fund from an ordinary plain vanilla bond fund.”One very basic thing to know, too, is that PIMCO classifies anything with a duration of one year or shorter as cash — regardless of sector,” Jacobson added.Jacobson said after careful examination of the PIMCO fund’s effective duration of 7.14 years — about double over the last six months — “it doesn’t necessarily mean PIMCO raised their pure interest-rate risk to the United States. They didn’t double down on Treasuries.”Rather, PIMCO took on “loose” interest rate risk to other credit and government markets, he said, noting that the Total Return fund increased exposure in non-U.S. developed and emerging markets securities in September.Duration is a bond’s sensitivity to interest rate fluctuations, and going longer duration is an investment strategy when rates are expected to remain low or drop further and vice versa.All told, the PIMCO Total Return fund’s bad call on Treasuries earlier this year has cost it.It is up only 1.06 percent year to date versus the benchmark BarCap U.S. Aggregate Index which is up 3.99 percent. But on a three-year basis, the fund is up 10.14 percent against the benchmark’s 9.36 percent returns. The fund has also held up well over the last five years, with the fund up 7.80 percent versus the BarCap’s 5.48 percent returns.

  3. Gross’ PIMCO makes a big move into mortgages


    Gross increased mortgage debt to 38 percent of assets in his $242 billion PIMCO Total Return Fund in September, from 32 percent in August, as the U.S. central bank announced last month that it “will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.”PIMCO’s latest bet on mortgages isn’t going unnoticed.Gross, who helps oversee $1.2 trillion as co-chief investment officer at PIMCO, made headlines earlier this year and came under heavy criticism when the manager widely known as the “bond king” bet heavily against U.S. Treasuries — one of the biggest outperformers of this year.His move into mortgage-backed securities also comes as the PIMCO Total Return fund’s cash equivalents and money-market securities fell to negative 19 percent September, from negative 9 percent in August.In having a so-called negative position in cash equivalents and money-market securities, it is an indication of derivative use and short-term securities being put up as collateral as a way to boost leverage and increase the fund’s holdings in bonds with longer maturities such as mortgage-backed securities, Treasuries and corporate bonds, according to Eric Jacobson, director of fixed-income research at Morningstar who has covered PIMCO for more than a decade.Over the years, some analysts in the fixed-income world have pointed out that Gross’ use of derivatives to boost leverage and exposure to higher-yielding assets is what distinguishes the Total Return Fund from an ordinary plain vanilla bond fund.”One very basic thing to know, too, is that PIMCO classifies anything with a duration of one year or shorter as cash — regardless of sector,” Jacobson added.Jacobson said after careful examination of the PIMCO fund’s effective duration of 7.14 years — about double over the last six months — “it doesn’t necessarily mean PIMCO raised their pure interest-rate risk to the United States. They didn’t double down on Treasuries.”Rather, PIMCO took on “loose” interest rate risk to other credit and government markets, he said, noting that the Total Return fund increased exposure in non-U.S. developed and emerging markets securities in September.Duration is a bond’s sensitivity to interest rate fluctuations, and going longer duration is an investment strategy when rates are expected to remain low or drop further and vice versa.All told, the PIMCO Total Return fund’s bad call on Treasuries earlier this year has cost it.It is up only 1.06 percent year to date versus the benchmark BarCap U.S. Aggregate Index which is up 3.99 percent. But on a three-year basis, the fund is up 10.14 percent against the benchmark’s 9.36 percent returns. The fund has also held up well over the last five years, with the fund up 7.80 percent versus the BarCap’s 5.48 percent returns.

  4. UPDATE 1-Mosaid in talks with private equity firm, stock up


    “Mosaid has received a formal nonbinding indication of interest for a potential transaction,” company lawyers said. “The potential bidder is a substantial private equity firm with an international presence and over $5 billion in capital under management.”

  5. Hana says no decision yet on renegotiating KEB deal


    Lone Star has until Thursday to submit an appeal.Market talk has swirled that Hana may seek to cut the purchase price as KEB shares have plummeted sharply since the transaction was agreed amid a global financial market rout.”We haven’t decided yet (on renegotiation) and we are waiting to see whether (Lone Star) files an appeal or not,” Hana chairman Kim Seung-yu told Reuters by telephone on Wednesday.Korean regulators plan to decide whether to approve Hana’s purchase of KEB after Lone Star’s move on last week’s verdict.Lawyers for Lone Star were not immediately available for comment.Shares in Hana fell 0.7 percent and KEB advanced 0.9 percent versus the broader market’s .KS11 0.5 percent fall as of 0033 GMT.

  6. UPDATE 2-Mothercare boss quits after profit alert


    * Shares rise over 12 pctBy James DaveyLONDON, Oct 11 (Reuters) - British mother and baby products retailer Mothercare , which last week saw over a third of its value wiped out by a profit warning, said on Tuesday its boss would step down next month.Shares in the firm traded over 12 percent higher after Mothercare said its Chief Executive of nine years Ben Gordon would leave the company “by mutual consent” after interim results are published on Nov. 17.Analysts said Gordon had paid the price for last Wednesday’s alert, the retailer’s third this year, which revealed UK like-for-like sales slumped 9.6 percent in the 12 weeks to Oct. 1, its fiscal second quarter, offsetting strong growth overseas.”I’m not too surprised, clearly something’s gone wrong in the UK,” said Arden Partners analyst Nick Bubb.”You can’t just say forever that 99 percent of babies are born outside of the UK when you’re now losing money in the UK.”Last week Bubb slashed his pretax profit forecast for Mothercare’s year to end-March 2012 from 29.5 million pounds ($46.2 million) to break-even. He also expects the dividend to be cut.Following Gordon’s departure the executive management of the company will report directly to the chairman, Alan Parker, while a new CEO is sought.Analysts said whoever succeeds Gordon faces a tough task in downsizing its 353 UK store estate, while releasing value from the fast-growing overseas business, which currently stands at 969 stores.Shares in Mothercare were up 15.8 pence at 205.8 pence at 1319 GMT, valuing the business at about 156 million pounds ($238 million).