Friday 24 November 2017

The punt: Regulator needs to regulate

News that the ESB has been forced to delay a bond deal is no more than an irritation for the profitable semi-state business, but its bad news for wider efforts to escape the bailout.

The ESB has said its plans for an inflation-linked bond deal are on hold because of a lack of regulatory clarity.

In a nutshell the people who would like to buy the bonds, namely the managers of under pressure pension funds, don't yet know how the bonds will be accounted for on their books. Managing a pension is a pretty technical business so that matters.

Managing the pensions industry is pretty technical too, which is why the regulator says it needs more time to consider the issue.

All well and fine, and very little skin off the ESB's nose because it is in no great need of the money. That is not true of those tasked with delivering Ireland's return to the bond markets however.

The NTMA wants to borrow between €3bn and €5bn from Irish pensions over the next 18 months.

That is a good chunk of what is needed if we are to see off the EU and the IMF by the end of next year, and its why any delay in sorting regulation really could affect us all profoundly. The regulator needs to pull up its socks.

The economy really is a joke

THE Punt likes a bit of a laugh from time to time and is heading to Kilkenomics next week for the third time in as many years.

The comedy and economics festival does not sound like a winner but David McWilliams, pictured, has consistently managed to pick an interesting mix of people over the years and introduce some new voices to the debate we are all having about what should happen next.

The mix of economists and practitioners such as the acerbic Cormac Lucey, US pundit Max Keiser and Oxford-based China expert Linda Yueh help to ensure that it is more than just a giggle.

Others such as Pimco's Paul McCulley and former US regulator Bill Black who was one of the stars of last year's show will also be making a welcome return. For some, Kilkenomics risks being something of a businessman's holiday but if past performance is anything to go by, it will be great fun.

Investors deserve more elan

MOST companies change their name every now and then but continue to do the same thing. Elan does things the other way around.

Davy Stockbrokers analyst Jack Gorman brought out a useful note that served as a reminder that the pharma company has recently moved from a high-risk drug developer to a company that basically revolves around one drug, Tysabri, which will provide 100pc of the revenue and incremental cashflow for the business in the near future.

That leaves Elan with an unusual problem for an Irish company: how to deploy what could be more than $1bn (€771m) of free cashflow that may be generated over the next three years.

Management expects to return most of this to shareholders, but Davy seems to prefer investments. Either way, things are looking up for its long-suffering investors.



Raising a glass to retail sector

IRELAND's love affair with alcohol is alive and well and helping to give the beleaguered retail sector a welcome boost, according to the latest retail figures from the Central Statistics Office

Retail sales increased last month with bars leading the charge.

Coming in a close second were electrical goods and business at department stores. As it was the third consecutive monthly hike in retail sales, industry analysts appeared upbeat.

It's about time we were given a bit of positive news. September was the first time in nine months that headline retail sales volumes were in positive territory. But the analysts aren't getting too excited just yet.

Stockbrokers Merrion were quick out of the blocks to dampen enthusiasm.

"The bottom line is that the household sector in general remains under immense pressure, and things aren't going to get any easier in the short-term, though the level of decrease in consumer expenditure this year is now likely to be less than we previously thought."

Irish Independent

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