Randomly Noted

Not a great day for Bank of America Merrill Lynch. First blow: DJN’s Amy Or discloses that Merrill Lynch didn’t get the mandate to handle all those China Construction Bank shares its parent, Bank of America, sold this week. You’ll recall Bank of America dumped about $7.3 billion of CCB shares as part of its urgent fund-raising efforts. It would make sense for BofA to hand the task of selling millions of CCB shares to its recently acquired in-house investment bank, Merrill Lynch. But Morgan Stanley got the gig. As Amy writes, “By crossing the shares, the U.S. investment bank assumed a market maker role and acted as the agent in both buy and sell sides of the trade.” Her story is headlined “Morgan Stanley Was Agent For Both Sides In CCB Deal -Sources.”  Continue reading…

Here’s what’s down, and going down, in Asia today:

Rio Tinto shares are down 12.2% on a growing sense its nearly $20 billion proposed alliance with Chinalco isn’t feasible and the miner will ultimately have a mega-rights issue to raise the money it needs. Scuttling the Chinalco pact would be an embarrassment to the Chinese company, and to Rio’s leadership. Have a look at DJN’s story: “Rio Tinto Shares Fall On Speculation On Chinalco Deal”

Also down: A slew of commodities in China. Check out DJN’s story,  by Chuin-Wei Yap: “Rout In China Commodities Complex Led By Oversupply Concerns.” In essence, “Chinese demand is coming back,” as Chuin-Wei writes, “but the flood of supply threatens to overwhelm it.” Base metals, steel, rubber and agricultural futurse are all trading down.

Likewise, Asian stock markets are down. Investors are, wisely, reassessing. The U.S. economy is still very sick. China’s economy isn’t staging a rocket-propelled rebound.  We’re in the thick of a serious downturn, and only the most selective share-buying makes sense.

Here’s something that’s going down (in the sense of happening): China Construction Bank is starting to explain what happened with those shares Bank of America disposed of earlier this week. That process was opaque, to say the least, as the troubled U.S. bank sold more than $7 billion in CCB shares as part of its bailout/fund-raising efforts. Still unclear is which of the buyers – a group including China Life, Temasek, Hupo and BOCI – subsequently re-sold some or all of the CCB shares they had just acquired. We know some quickly flipped their newfound CCB holdings because two unnamed sellers were in the market yesterday. (Temasek is the Singapore sovereign wealth fund, Hupo is an investment fund with ties to Goldman Sachs and Temasek.)

The horse-trading over Bank of America’s $9 billion stake in China Construction Bank has begun in earnest. Today, Temasek Holdings, a plausible buyer, signaled that CCB looks a bit pricey – surely a ploy by the Singapore sovereign wealth fund to make a stake in the Chinese bank a bit more affordable. Check out the DJN story by Nisha Gopalan: “BofA Approached Temasek To Buy CCB Stake-Sources.” After rising more than 10% in recent days, CCB shares slid 6.3% today in Hong Kong.  The WSJ reports China’s sovereign wealth fund, China Investment Corp. (CIC), is unlikely to take some of Bank of America’s 16.7% stake in CCB – if only to avoid the perception that China’s government is helping bail out a troubled U.S. bank. by buying CCB shares well above where BofA acquired them. Indeed, the main reason BofA wants to flip its CCB shares at the earliest possible moment is to meet Washington, D.C.’s capital sufficiency criteria.  Have a look at the WSJ piece: =WSJ UPDATE:Buyers Sought For Part Of BofA’s CCB Stake-Sources.”

News flash: Bank of America will need $35 billion (BILLION) in additional capital – which is a lot more than people expected the so-called government “stress tests” would require. The news has given the yen a boost this morning in Asia and is pushing down U.S. stock futures. With Tuesday’s U.S. stock market already showing signs investors are losing confidence, expect a lousy Wednesday. http://online.wsj.com/article/SB124158058615290821.html#mod=testMod Continue reading…