CNBC Asia - The Rundown, April 2015

Q1 Earnings Won't Be That Bad

Did you catch René on CNBC? If you missed it, not to worry! We've got the recap right here for you.

Nourse: “We’re right at the mouth of the beginning of the earning season, so that hasn’t really played out yet in the earnings. Multinationals are going to have a tough time, still we also have significant impact and some pressure still from the weather, which is still a really big deal here and we’re just coming out of this phase. The conventional wisdom is that this is going to be the worst quarter we’ve seen since 2008, but frankly I don’t think that’s the case here. I think we’ll see some surprises.

The consumer is really quite resilient and given the fact that USGDP is based on about 70% of consumption, we’ll see the consumer rise to the occasion. For example, retail has been strong and auto sales have been strong as well. Consumer discretionary will help to offset some of the weaknesses we’ll see from multinationals and the energy sector as well.”

Chiou: “That’s encouraging to hear. Speaking of the energy sector, we’ve been seeing a lot of M&A recently, as well as M&A in the pharma space. Where are you finding the opportunities here?  Are you seeing these mergers and acquisitions in terms of desperation, for example in energy? Is it a different story in pharma?”

Nourse: “I don’t think so. As far as energy is concerned, and we can start there, the valuations are so attractive at this point. Course oil prices have collapsed by 50% and we’ve seen a concomitant drop in value with these energy companies, so there’s a great opportunity for companies that are more well heeled to step in and buy some of these great gems. That is happening.

In the pharmaceutical industry, a lot of these companies are sitting on cash, not earning anything, and they’re trying to provide some value for their shareholders, so it’s a good time to look at financials in this space as well in terms of sectors.

Across the board where you’ll see a lot of activity, at least initially, is in energy and also in technology. There’s lots of activity going on because companies are trying to take advantage of the drop of the dollar.

I’d also like to add that we’ve had some professional rabble-rousers. These are companies being approached by shareholder activists who are creating some, let’s just call it a little bit of anxiety, on these boards, so there’s also a big drive to increasing shareholder value and their wallets.”

Bakhtiar: “Getting back to the issue with M&A activity, essentially that’s good for the equity mark up returns and shareholders at large, but is it good for the border economy, because these corporations might not necessarily be deploying that capital to cap x, increasing job worth, or if not that, income gains?”

Nourse: “There’s a lot to be said about that and you’re absolutely right – what does M&A mean in terms of job growth? They’re going to be laying off people. There are duplicative departments and divisions. There’s enough of a need across the industry and the economy that there will be some absorption of some of these jobs.  As a matter of fact, what we’ve seen recently in the demand for skilled labor, for example, is that the visas have already been capped out here in the US, so people are resorting to lotteries to get good skilled labor. So while there’s an offset in labor of individuals being laid off, it’s being absorbed in other areas as well.”