Financial Times Europe - 28.08.2019

Wednesday28 August 2019 ★ 11

© The Financial Times Limited 2019 Week 35

A Nigerian start-up that uses an Uber

model to link companies to truckers

looks set to revolutionise the logistics

systems that are key to the success of

a landmark pan-African free trade

pact. Kobo aims to bring an app-based

system to a sector mired in paperwork.

AnalysisiPAGE 12

Logistics app aims to ease

freight trade across Africa

JOHN REED— BANGKOK

The Thai owner of the gourmet grocery

and café brandDean & DeLucaplans to

issue $60m of long-term debt in a bid to

revive the US fortunes of a chain that

was a pioneer in selling pricey curated

cheeses, olive oils and cakes.

Sorapoj Techakraisri, chief executive of

parent companyPace Development,

told the Financial Timesit had no plans

to sell Dean & DeLuca, which it acquired

in 2014 but has since been laid low by

high costs and online competition.

He said that Pace would use proceeds

from the sale of the debentures to pay

back some of the money owed to banks,

artisanal patissiers and other suppli-

ers left with unpaid billsbecause of a

cash crunch at the Bangkok-based prop-

erty group.

“The first priority in the US is to bring

in new money to pay off those creditors

that we owe money to and then slowly

start rebuilding the brand,” Mr Sorapoj

saidahead of atrip to the US.

The company hasclosed most of its

stores in the US and faceslawsuits from

angry suppliers. Its mounting losses

mark a rare high-profile failure of an

overseas acquisition for Thailand,

whose Sino-Thai family conglomerates

are big investors abroad but typically

attract little publicity. Pace reported a

second-quarter net loss of Bt726m

($24m).

“Our plan now is to raise money at the

Pace level, and also to continue with two

real estate projects that we have,” Mr

Sorapoj said, adding that because of its

losses in the US, Pace had frozen work

on nearly completed high-rise condo-

minium developments in Bangkok and

Hua Hin.

“More money will come out at com-

pletion, and hopefully by then the US is

more stable, and we can start thinking

about growing again,” Mr Sorapoj said.

When Pace bought the food

emporium brand in 2014 for $140m

from US financial investors, Mr Sorapoj

spoke of expanding it to hundreds of

storesin Asia and elsewhere in a café/

restaurant format.

When asked what went wrong,a

weary looking Mr Sorapoj said the story

was “pretty complicated, and not fun”.

Dean & DeLuca owner cooks up debt

issue to pay suppliers and revive brand

bad bank. Executives have made reduc-

ing itshighfunding costsand improving

its credit rating their top priorities, in

order to improve lending margins.

It will be more difficult for Deutsche

to increase revenues if the European

Central Bank cuts interest rates further

into negative territory next month, as is

widely expected. The current deposit

rate is minus 0.4 per cent cent, meaning

it costs banks to place cash with the ECB.

Mr Jourdain, the man charged with

running the enlarged unit, was previ-

ously chief compliance officer for Bar-

clays’ international unit and also head of

the British lender’s treasury funding

and investment operation.

example,” said Mr Joshi. “We are start-

ing to do what we should be: optimising

liquidity, whilst managing resources

safely and soundly.”

Across the eurozone, banks’ earnings

have been suffering from negative inter-

est rates because it reduces the amount

of interest they can charge to lend.

Deutsche estimates that repositioning

its liquidity reserves to a more equal bal-

ance of cash and securities should add

€300m a year to its revenues.

Last month Deutsche revealed a dra-

matic overhaul of its business model to

reduce its reliance on investment bank-

ing, under which it will cut 18,000 jobs,

exit equity trading and set up a €288bn

and has identified a surplus of about

€30bn it can use to retire expensive lia-

bilities and invest in higher-returning

assets, treasurerDixit Joshitold the

Financial Times in an interview.

“What we are seeking to do is to offset

the drag of parking cash at the central

bank in a negative rate environment, for

example by buying a bond that pays

more than cash,” he said.

Additionally, the bank will start

investing some of the surplus cash in

longer-dated assets that could earn even

more, between 100 and 120 basis points

more than it currently earns.

“That might be a highly collateralised

loan, an asset-backed security as an

STEPHEN MORRIS— LONDON

Deutsche Bankis overhauling its

treasury function to put its excess cash

reserves to work as European lenders

becomesqueezed by negative interest

rates.

Germany’s biggest bank has com-

bined all its treasury markets and inv-

estment operations, which raise funds

and manage the bank’s cash and liquid-

ity reserves, into a single team.François

Jourdain, formerly ofBarclaysand the

Bank of England, will run the unit.

Deutsche has €246bn in liquidity

reserves — defined as cash and cash-like

instruments such as sovereign bonds —

Deutsche revamps treasury unit

3 German bank fights negative interest rates 3 Excess cash to be put into longer-dated assets

Costco, the US big-box retail chain, was

forced to closeearly on its first day of

operations in China yesterday because

of overcrowding by bargain-hunters.

Despite atrade war between Beijing

and Washington, thousands ofshoppers

thronged the aisles of its maiden store in

Shanghai as the US chain became the

latest overseas retailer to try its luck in

China’s fast-growing consumer market.

Traffic within 1km of theoutlet was

brought to a near-standstill as queues

formed. The store suspended operations

in the afternoon after officials warned

over the traffic congestion.

The Costco opening comes almost

three months after GermanchainAldi

opened its first stores in China, setting

up a battlefor customers in a

fragmented market in which foreign

operators have traditionally struggled.

France’s Carrefour sold a majority

stake in its China operations to local

retailer Suning for $700m in June,

following in the footsteps of Britain’s

Tesco and Spain’s Dia, which have also

sold out of China. Germany’s Metro is in

the process of selling its China unit, while

Walmart is growingbut has struggled to

gain more than a single-digit share.

Tom Hancock and Wang Xueqiao

Lexpage 10

Costco clamour

First store in China

forced to close early

‘We are

seeking

to offset

the drag

of parking

cash at

the central

bank’

Dixit Joshi

Companies / Sectors / People

Companies

African Industries.................................... 12

Aldi.................................................................... 11

AltAir Fuels................................................... 7

Altria................................................1,10,13,

Amazon............................................................ 1

Askul................................................................

Audi................................................................. 14

Autonomy Capital................................... 19

Avia Capital Services............................ 14

BMW................................................................ 14

Bain Capital................................................. 12

Bank of America..................................... 20

Barclays.......................................................... 11

Best Buy....................................................... 10

BlackRock....................................................... 9

Blackstone.................................................. 20

Boeing........................................................7,

British Airways............................................ 7

British American Tobacco.............1,

Bugatti........................................................... 14

Camsing International......................... 20

Carpetright.................................................. 10

Carso Energy..............................................

China Merchants Bank........................ 20

Costco.......................................................10,

Crispr Therapeutics............................... 10

DFS Group................................................... 13

Dangote Sugar.......................................... 12

Dean & DeLuca......................................... 11

Descente....................................................... 12

Deutsche Bank........................................... 11

Dometic........................................................ 20

Ducati............................................................. 14

easyJet............................................................. 7

Editas............................................................. 10

Elliott Management................................ 12

Endo International.................................. 13

Enel................................................................. 20

Ethiopian Airlines.................................... 14

Facebook........................................................ 2

Ferguson...................................................... 20

Fermaca......................................................... 12

Fortress......................................................... 12

Frontline,...................................................... 14

Gebr Heinemann...................................... 13

Google.............................................................. 2

Groupe Casino.......................................... 10

HDFC Asset Management................ 20

HDFC Life................................................... 20

HIS.................................................................... 12

Honeywell Flour Mills........................... 12

Huawei.........................................................3,

IAG...................................................................... 7

Iberia................................................................. 7

JD.com........................................................... 20

JM Smucker............................................... 20

JPMorgan.................................................... 20

Johnson & Johnson.........................13,

Just Eat........................................................ 20

Juul.................................................................. 10

KKR.................................................................. 12

KLM................................................................... 7

Kobo360........................................................ 12

Kroger............................................................ 10

Lagardère.................................................... 10

Lion Air......................................................... 14

Lori................................................................... 12

Lotte................................................................ 13

MAN................................................................ 14

McKesson..................................................... 13

Meditor.......................................................... 10

Mercedes...................................................... 14

Microsoft......................................................... 1

Noah Holdings......................................... 20

Pace Development.................................. 11

Papa John’s................................................ 20

Philip Morris................................1,10,13,

Porsche.......................................................... 14

Rockwool..................................................... 20

Rolls-Royce.................................................... 7

Rostec............................................................ 14

Ryanair............................................................. 7

Scania............................................................. 14

Sempra Energy......................................... 12

Shilla................................................................ 13

SoftBank........................................................ 12

Standard Life Aberdeen.................... 20

Suning.com................................................. 20

Symphony Financial Partners.......... 12

TC Energy.................................................... 12

TPG................................................................. 20

Taco Bell...................................................... 20

Takeaway.com.......................................... 20

Tapi................................................................. 10

Target............................................................ 10

TechnipFMC.............................................. 20

Tesco.............................................................. 10

Teva................................................................. 13

Third Point.................................................. 12

Trafigura....................................................... 14

Trian............................................................... 20

Uber................................................................. 12

Unilever......................................................... 12

United Airlines.........................................7,

Unizo Holdings......................................... 12

Volkswagen............................................... 14

Walmart......................................................... 10

Wizz Air........................................................... 7

Yahoo Japan............................................... 12

Sectors

Aerospace & Defence.......................7,

Airlines............................................................. 7

Automobiles............................................... 14

Banks............................................................... 11

Energy............................................................ 12

Financials................................................12,

Food & Beverage................................... 20

Healthcare................................................... 10

Industrial Goods...................................... 20

Industrials................................................... 20

Insurance..................................................... 20

Media.............................................................. 10

Oil & Gas..........................................12,14,

Personal & Household Goods........ 20

Pharmaceuticals.................................13,

Retail..............................................10,11,13,

Support Services.................................... 20

Technology.........................................1,10,

Tobacco.........................................1,10,13,

Transport................................................12,

Travel & Leisure.................................11,

People

Baran, David............................................... 12

Bezos, Jeff...................................................... 1

Brennan, Ed................................................ 13

Dieter Pötsch, Hans.............................. 14

Fink, Larry..................................................... 9

Fredriksen, John...................................... 14

Gibbins, Robert...................................19,

Harris, Martin............................................ 10

Harris, Philip.............................................. 10

Hasenstab, Michael................................ 19

Hvide Macleod, Robert........................ 14

Joshi, Dixit.................................................... 11

Jourdain, François.................................... 11

Lagardère, Arnaud................................. 10

Lundgren, Johan........................................ 7

Lutz, Bob...................................................... 14

Lynch, Rob................................................. 20

Meng, Wanzhou......................................3,

Muilenburg, Dennis................................ 14

Ozor, Obi....................................................... 12

Piëch, Ferdinand...................................... 14

Sarrau, Xavier de.................................... 10

Shakerchi, Talal........................................ 10

Son, Masayoshi......................................... 12

Techakraisri, Sorapoj............................. 11

Varadi, Joszef.............................................. 7

Walsh, Willie.................................................. 7

Winterkorn, Martin................................. 14

From the ashesStock prices soar as

investors flock back to Greece— MARKETS, PAGE 19

Turning hostileJapan starts to embrace

shareholder activism— KANA INAGAKI, PAGE 12

Laurence

Fletcher

Tail

Risk

August has proved to be anything but a summer lull for

financial markets. Stocks have bounced up and down at

the mercy of news on the health of the global economy or,

judging by President Donald Trump’s comments this

week, a possible truce in the US-China trade war.

Yields on German Bunds and other major government

bonds have been moving steadily lower, as prices rise. That

has burnished their credentials not just as a safe haven in

uncertain times but also as a way of making money for

investors who have bought and held them.

There are, of course, good reasons for Bund yields to be

so low, such as the shortage of supply from a country rap-

idlyshrinkingits debt-to-GDP ratio and the vast quantities

of bondsthat have already beenboughtby the European

Central Bank. There is also the belief that Europe is head-

ing for an apparently permanent state of low rates and low

inflation, likeJapan. But investors should be wary of the

sheer weight of expectation of further central bank stimu-

lus already priced into Bunds and across the eurozone.

Those hopes have hardly

been damped by the ECB

itself. From president Mario

Draghi’s dovish speech in

Portugal in June to com-

ments by governing council

member Olli Rehn this

month that stimulus could

exceedexpectations, it is

hard to believe that anything

but a big stimulus package is

now baked into eurozone yields. But that leaves plenty of

room for disappointment at the ECB’s September meeting.

Policymakers are, after all, aware of the damage that

such a flattened yield curve is doing to commercial banks,

which borrow short and lend long. Increasing demand for

longer-dated government bonds — which, in Germany’s

case, are already scarce — through further quantitative

easing would only worsen that problem.

“I just don’t see them [the ECB] doing QE in sovereigns,”

said Anna Raytcheva,chief investment officer athedge

fund Sonya Capital Management, citing the lack of com-

pensation that investors are receiving for holding longer-

term bonds. The shape of the curve is “impairing the

banks’ ability to lend and make money, and puts a lid on

growth”, she said.

Ultra-low yields on Bunds have also appeared justified

by those on offer elsewhere. When Italian 10-years are at

1.3 per cent, with all Rome’s politicaldysfunction, German

yields at minus 0.7 per cent do not seem quite so expensive.

But that could change. “Bund yields are the wrong

price,” said Christopher Mahon, director of asset allocation

research at Barings.Shorting Bunds has been a painful

trade for years and remains risky; however expensive they

get, there has been usually been someone ready to buy

them at a higher price. Butowning them looks more and

more unappealing.

[email protected]

When Italian

10-years are at

1.3%, German

yields at minus

0.7% do not seem

quite so pricey

People struggle to buy roast chicken yesterday at Shanghai’s newly opened Costco , the US retailer’s first outlet in China—Hector Retamal/AFP/Getty

               

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