CNBC Asia - The Rundown, August 2015

U.S. Firms Feel Urge to Merge: René Nourse discusses mergers with Pauline Chiou on CNBC.

René Nourse: There’s a lot of different factors that are playing into this, but let’s just say right now the urge to merge is the name of the game. Healthcare in particular, you might have also noticed, has been hot with a lot of M&A activity, now that the Affordable Care Act, commonly known as Obama Care, has finally been upheld again, a lot of companies are saying they need to look at aligning their resources and making sure that they can keeping their profit margins in line. So becoming vertically integrated makes a lot of sense, so we’ll see more acquisitions taking place in that space as an example, but we also have activism that is alive and well here, and that’s also creating a lot of M&A activities, spin offs, restructuring, even if the Feds move interest rates up a little bit, I don’t think it’s going to bring an end to this game.

Pauline Chiou: I was going to bring up the point about trying to get all these deals done before the Feds hike up interest rates, whether or not it’s 25 basis points or less, but we’re going to get the FOMC minutes out this week, but those are backward looking. That will give us some insight into what the Fed policy makers were talking about back last month, but that was before this whole China devaluation of the Yuan happened so they will have to be looking at that, as well as the possible strengthening of the dollar if they hike interest rates. I mean, how much emphasis will they actually put on that even though that’s not technically their mandate?

René Nourse: You’re absolutely right, but they will have to walk a very tight rope here because it’s not just a domestic decision – there’s a lot of concern that if we make the dollar any stronger, not only will we hurt our own multinationals, but we’ll have an impact on many other countries out there that are having this global impact, economies that are not completely up to par yet. Europe is just finally getting itself together at this point, as well as a number of emerging market countries in South America, and Puerto Rico of course has had its own set of woes. So while the Feds want to be data dependent and we are seeing some signs of strengthening in the US economy, I think that if they were to flip the switch it would create a global rippling effect. So I’m still in the camp of looking at the first quarter of next year before they flip the switch on higher interest rates.