Daily Agenda: Scandals Rock Emerging Giants

BTG Pactual CEO arrested in Brazil and another Chinese CEO goes missing; Shire to make a new bid for Baxalta; Russia turns off natural gas to Ukraine.


There is an old adage on Wall Street that in periods of economic stress, structural flaws in business models and outright frauds suddenly become apparent, like damage to a ship’s hull at low tide. For emerging markets this appears to be the case as slowing growth and mounting concern over debt levels casts a harsh spotlight on problems that had remained in the shadows during the rapid growth that followed the credit crisis. Case in point: Grupo BTG Pactual CEO Andre Esteves was arrested Wednesday as part of Brazil’s ever-widening Petrobras corruption probe that has ensnared some of the highest-level government and private-sector leaders in the country. The full scope of the role authorities believe Esteves, the leader of Latin America’s largest independent investment bank, played in the scandal remains unclear. Shares of Sao Paulo-based BTG Pactual fell by nearly 20 percent on the news, however. Meanwhile, in China, Guotai Junan International Holdings, a Hong Kong subsidiary of one of China’s largest brokerages, became the latest firm to announce that its leader had disappeared. On Monday the company announced that it had lost contact with CEO Yim Fung, prompting concern among investors that he was in custody or had fled due to investigations by Chinese regulators as high-profile corruption probes there continue.

Shire returns with new offer for Baxalta. Media reports surfaced today indicating that Dublin, Ireland pharmaceutical company Shire is about to relaunch efforts to acquire Bannockburn, Illinois-based biotech Baxalta. Baxalta’s board rejected a $30 billion bid during the summer.

ECB warns on emerging markets risks. The European Central Bank released its biannual financial-stability report citing increased systemic risks to the global financial system as emerging markets grapple with huge debt levels, raising the risk assessment level to “medium.” The euro slid to its lowest versus the dollar since April in response as investors factored the increased likelihood of expanded ECB easing.

Putin turns off the gas. Gazprom, the Russian state-owned energy firm, suspended natural-gas supplies to Ukraine on Wednesday after the embattled nation failed to make contracted-for payments. The move comes one day after Russian leaders threatened to suspend gas supplies to Turkey in response to the downing of a Russian jet by Turkish military over the Syrian border.

US Jobless Claims fall further. Initial unemployment benefit claims data released by the Department of Labor on Thursday contracted by 12,000 to 260 thousand, a level only a few thousand higher than multi-decade lows. Continuing benefits rose slightly to 2.21 million.

Japanese regulators investigate activist. The Securities and Exchange Surveillance Commission today searched the Tokyo home of hedge fund manager Yoshiaki Murakami, reportedly as part of an insider trading probe. Murakami is a well known shareholder activist who has a prior conviction for trading based on non-public information.