Power Grab Trumps Nanotechnology in Putin’s Russia

Power Grab Trumps Nanotechnology in Putin’s Russia

Russian President Vladimir Putin’s changing attitude toward two giant government-led high-tech projects sends a troubling message about his third term in office: Maintaining power is more important than modernizing the economy.

The projects, known as Rusnano and Skolkovo, were meant to propel Russia’s raw-material economy into the technology age. They involved multibillion-dollar government investments, the first in nanotechnology and the second in a new city that would become Russia’s answer to Silicon Valley. They were supposed to provide the infrastructure and stability required to attract large amounts of foreign investment.

Now, both have become targets in Putin’s campaign to demonstrate that he’s being tough on corruption and mismanagement of government funds. As a result, their chances of succeeding are looking increasingly remote. Read more of this post

China Small-Cap Bubble Seen Bursting by Chen After 43% Advance

China Small-Cap Bubble Seen Bursting by Chen After 43% Advance

Chen Li, the UBS AG (UBSN) strategist who predicted the tumble in China’s smallest shares two years ago, says the companies are poised to retreat again after valuations rose to the biggest premium over larger stocks since 2010. The ChiNext index of Shenzhen-listed companies with a median market value of $765 million has climbed 43 percent this year while the CSI 300 Index, which has a median capitalization of $3.5 billion, rose 2.7 percent. The smaller-company gauge trades for 4.6 times net assets versus 1.7 for the CSI index, the widest gap since June 2010, data compiled by Bloomberg show. Small-cap stocks have surged on speculation President Xi Jinping’s plan to boost the consumer, technology and alternative energy industries will benefit companies from Huayi Brothers Media Corp. (300027) to Leshi Internet Information & Technology Co. (300104) The rally may get derailed by tighter monetary policy, which helped spur the last slump, according to Chen.

“The bubble may burst” within two months, Chen said in a May 9 phone interview. The Shanghai-based strategist predicted in January 2011 that small-cap stocks would drop as much as 20 percent. The ChiNext gauge fell 21 percent in nine months. Investors will rotate out of smaller companies and into larger stocks as liquidity tightens, Chen said.

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Japan Biotech Ventures Surge as Abenomics Cash Spurs Speculation

Japan Biotech Ventures Surge as Abenomics Cash Spurs Speculation

Japanese biotech ventures promising to make jet fuel from algae and to produce synthetic cartilage are soaring in Tokyo trading as cash pumped into the economy by the central bank cascades into speculative investments.

Five of the 10 best-performing stocks this year traded on JASDAQ, which has lower minimum profit requirements than Japan’s main bourse, are biotech firms.

The companies have surged as the Bank of Japan last month voted to double debt-buying to more than 7 trillion yen ($68 billion) a month to achieve 2 percent inflation in two years. Prime Minister Shinzo Abe’s proposal this month to provide 110 billion yen in support to stem cell research over the next 10 years is also helping the shares.

“The market expects quantitative and qualitative easing to continue long term, boosting liquidity and drawing investors to speculative shares like biotech,” said Kazuyuki Terao, chief investment officer at Allianz Global Investors Japan, in an interview. “Abe raised health-care reform as a part of his growth plan and that’s also supporting the buy.”

Japan’s regenerative medicine market will probably increase by 62 times to 1.6 trillion yen by 2030 from 26 billion yen in 2012, the economy ministry estimates. Read more of this post

Oil prices are likely to fall over the next few years, the chief executive of Eni, one of Europe’s largest energy companies has said, suggesting a tough time ahead for oil producers

May 19, 2013 7:16 pm

Tough oil pricing ahead, says Eni chief

By Ed Crooks

Paolo Scaroni: ‘Where we can add most value is in countries that are complex and not easy to work in’

Oil prices are likely to fall over the next few years, the chief executive of one of Europe’s largest energy companies has said, suggesting a tough time ahead for oil producers.

Paolo Scaroni, chief executive of Eni, the Italian oil and gas group, said that unless there was another boom in the world economy, sluggish demand and new supply coming on to the market meant the price of crude was “more likely to go down than up” over the next two to five years. However, he suggested his company could survive at much lower prices, and identified Asia as the main target in its plans for future growth.

Mr Scaroni’s expectation of lower oil prices is based on his view that there are two glaring “anomalies” in world energy markets resulting from the US shale revolution, which has caused a surge in gas and oil production. Benchmark US gas at Henry Hub in Louisiana is about $4 per million British thermal units, which compares with about $15 per mBTU for liquefied natural gas imported to Asia, and about $16 per mBTU for the energy content of US crude oil. Over time, Mr Scaroni believes, market forces will narrow both of those gaps. Read more of this post

Enron No Lesson to Traders as EU Probes Oil-Price Manipulation

Enron No Lesson to Traders as EU Probes Oil-Price Manipulation

Enron Corp.’s 2001 collapse revealed the extent of its manipulation of spot gas prices. Twelve years later, European Union regulators may discover energy traders never learned the lessons of the scandal.

BP Plc (BP/), Royal Dutch Shell Plc (RDSA) and Platts were visited by EU inspectors last week over allegations they “colluded in reporting distorted prices” to manipulate the published prices of oil and biofuel products, the European Commission in Brussels said after the raids.

Shell, London-based BP and Statoil ASA (STL), three of Europe’s biggest oil explorers, are under investigation for potential manipulation of prices in the $3.4 trillion-a-year global crude market. The involvement of McGraw Hill Financial Inc. (MHFI)’s Platts, which publishes pricing data, hearkens back to other pricing scandals including Enron, and more recently, Libor.

“We’re making exactly the same mistakes we did with Enron, just with a different commodity,” Robert McCullough, an energy consultant, said by telephone from Portland, Oregon. “The same manipulation we saw in electricity and gas pricing is what we’re seeing in oil.”

The Enron scandal started in 2001 as traders used trading strategies called “Fat Boy” and “Get Shorty” to create phantom congestion in the California energy markets. Electricity prices rose 10-fold on average and California consumers endured days of rolling blackouts. Read more of this post

US shale gas may become export rival to Australia

US shale gas may become export rival to Australia

May 20, 2013, Peter Ker

Fears that the US could become a gas export rival to Australia are firming, after the Obama administration approved more liquefied natural gas exports at the weekend.

In a positive indicator for BHP Billiton’s petroleum business, the US Department of Energy gave conditional approval for the Freeport LNG project in Texas to export to nations that do not have a free trade agreement with the US.

The US has traditionally been reluctant to allow energy exports, given the nation has needed imports to meet its energy needs, but the recent shale boom has created a gas glut that has allowed the nation to consider more exports. Read more of this post

Toyota Pulls Bond Deal Due To Soaring Yields: The Japanese “VaR Shock” Feedback Loop Is Back

Toyota Pulls Bond Deal Due To Soaring Yields: The Japanese “VaR Shock” Feedback Loop Is Back

Tyler Durden on 05/19/2013 12:18 -0400

Despite the eagerness of Abenomics and the new BOJ head Kuroda to have their cake and eat it too, in this case manifesting in soaring stock prices, plunging Yen, rising GDP and exports, and most importantly, flat or declining bond yields, so far they have succeeded in carrying out three of the four (assuming Japanese economic data reporting is more accurate than that of its neighbor China), as it is physically impossible for any central planner to completely overrule the laws of math, economics and physics indefinitely. In this vein, we have described on numerous occasions in the past several days the shock to the system that the massive one-way transfer out of all asset classes and into equities has engendered, and resulted in several JGB futures trading halts in an attempt to normalize a market where bond volatility has suddenly exploded. Volatility aside (and it shouldn’t be as the below section from JPM explains), the recent surge in yields higher is finally starting to take its tool on domestic bond issuers. As Bloomberg reports, already two names have pulled deals from the jittery bond market due to “soaring” borrowing costs.The first is Toyota Industries which as NHK reported, canceled the sale of JPY20 billion debt. Toyota is among Japanese firms that put off selling debt as long-term yields on government debt have risen, increasing borrowing costs, public broadcaster NHK says without citing anyone. Last week JFE Holdings announced it would delay plans to sell bonds due to market volatility. Two names down… and the 10 Year is not even north of 1%.

Read more of this post

Greying China taps rural elderly to care for those even older

Greying China taps rural elderly to care for those even older

1:08pm EDT

By Li Hui and Maxim Duncan

QIANTUN, China (Reuters) – Two years short of 70, Zhang Guosheng spends his days caring for an 81-year-old fellow villager – washing his clothes, bringing meals to his bed, and keeping him company – a routine he’ll keep up until he himself needs the type of care he is now giving.

“Living here is better than staying at home alone. We help each other and have a common language,” said the spritely Zhang, an enthusiastic dancer. “We are very happy here.”

With younger villagers who would traditionally have looked after their parents and grandparents flocking to the booming cities to seek work as part of Beijing’s urbanization drive, Qiantun village in northern China’s Hebei province has had to pioneer a new model – the old looking after the even older. Read more of this post

The Giant of Shareholders, Quietly Stirring; BlackRock, the world’s largest asset manager, is far from being an activist investor, but it is starting to ask more questions about companies in which it has stakes.

May 18, 2013

The Giant of Shareholders, Quietly Stirring

By SUSANNE CRAIG

AT 11 a.m. on a Wednesday earlier this month, Michelle Edkins and her team began wheeling extra chairs into a cramped conference room in a San Francisco office tower, preparing for the corporate-governance equivalent of speed dating. Once settled, Yumi Narita started describing the disappointing qualities of a big entertainment company she’d been checking out. “I’m inclined not to trust this compensation committee,” she told the group.  “Year-over-year, they pay their C.E.O. more, and the metrics are often questionable.” There were sympathetic nods around the room. Ms. Narita is one of about 20 analysts on the corporate governance team at BlackRock, the world’s largest asset manager. BlackRock’s size is mind-boggling. With almost $4 trillion under management, it is, according to a recent University of Michigan study, the single largest shareholder in one of every five United States companies. It manages money from pension funds and endowments as well as retail investors, controls large stakes in companies like JPMorgan Chase, Wal-Mart and Chevron and owns 5 percent or more of roughly 40 percent of all publicly traded companies in the country.

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Is This the Best Time for Investors? Don’t Bet On It.

Updated May 18, 2013, 8:34 p.m. ET

Is This the Best Time for Investors? Don’t Bet On It.

By BRETT ARENDS

These have been good times—surprisingly good times—for investors. Stock prices have hit record highs. The Dow Jones Industrial Average has rocketed above 15000 for the first time, leaving even Wall Street bulls scrambling to raise their year-end forecasts to catch up. Meanwhile, even the normally staid bond market, as measured by the Barclays U.S. Aggregate Bond index, is up about 30% over the last five years. Interest rates on Treasury bonds are near historic lows. Corporate bonds, including those for blue-chip and riskier companies, are booming. Those who stuck with markets through the crisis of 2008, and especially those who held a balanced portfolio of stocks and bonds, are probably feeling very pleased with themselves, and well they might. But there’s a problem at the heart of financial markets. Psychologists would call it cognitive dissonance—the problem of trying to believe two incompatible things at the same time.

Read more of this post

Adrian Cheng: updating the Hong Kong family empire of Chow Tai Fook/New World for a changing China

Saturday May 18, 2013 MYT 10:05:00 PM

Adrian Cheng: updating a Hong Kong family empire for a changing China

HONG KONG: He has trained on Broadway and been a Wall Street banker.

Now, Adrian Cheng, 33-year-old scion of the world’s largest jewellery retailer and one of Asia’s leading property developers is gearing up for his latest challenge – modernizing his family’s $25 billion empire for what he calls a “new era”.

The grandson of Hong Kong billionaire Cheng Yu-tung, who built up jeweler Chow Tai Fook (1929.HK) and real estate titan New World Development (0017.HK), Cheng is one of a new generation of business leaders in Asia who are taking over the corporate reins from their ageing rags-to-riches forebears. Read more of this post

Meet the man who is betting against China; Muddy Waters’ Carson Block believes that China’s banks hold more toxic assets than Western peers did ahead of the 2008 financial crash

Meet the man who is betting against China

Carson Block, the founder of Muddy Waters Research, believes that China’s banks hold more toxic assets than Western peers did ahead of the 2008 financial crash .

Earlier this month, Mr Block caused shares in Standard Chartered to fall and the cost of insuring its debt to spike after he warned the emerging market-focused lender had more risk on its balance sheet than the market commonly believed and suggested that betting against the bank was a good way to profit from any Chinese downturn. Photo: Bloomberg

By Harry Wilson

10:00PM BST 18 May 2013

He is listened to by institutional investors, regulators and politicians but he rarely speaks publicly. Last week, his analysis of Standard Chartered’s exposure to China caused a tremble in its share price and its backers to leap to the bank’s defence. Carson Block has broken his silence this weekend to reveal his fears for the global economy. The secretive fund manager said the risks within China’s banking system are more severe than those in Western financial institutions before the crisis. Mr Block, founder of Muddy Waters Research, which has gained a reputation over the past three years for its in-depth reports on financial irregularities in scores of Chinese companies, said the country’s banks hold more toxic assets than their peers in the West did ahead of the 2008 financial crash. “We believe that the domestic Chinese banking system is a mess, with an enormous amount of bad loans, or loans waiting to go bad,” he told theSunday Telegraph. Read more of this post

Chinese enterprises’ globalization ‘big in scale but weak’: Accenture

Chinese enterprises’ globalization ‘big in scale but weak’: Accenture

Staff Reporter

2013-05-19

The globalization of Chinese enterprises has been “big in scale but weak,” Claire Yang, head of Accenture’s Greater China talent and organization service line, was quoted May 14 in a report on the caixin.com Chinese business news website.

In terms of business scale, direct overseas investments made by Chinese enterprises touched US$77.2 billion in 2012, posting a growth rate of more than 20 times the levels seen less than a decade ago, the report said.

However, the global percentage of Chinese foreign investments remained at a low level compared with other countries. An Accenture report indicated that in 2011, capital flow involving Chinese direct foreign investment accounted for 16% of that of the United States and 57% of Japan, and was ranked the world’s ninth largest.

The ratio of Chinese enterprises overseas revenue was low. Using Standard and Poor’s 500 index, the average overseas revenue recorded for an enterprise accounted for 27% of the total the enterprise generated in a year. Read more of this post

Dongguan, one of China’s richest cities, suspends free services as debt crisis bites

Dongguan suspends free services as debt crisis bites

Saturday, 18 May, 2013, 12:00am

Charlotte So in Dongguan charlotte.so@scmp.com

In a telling sign of the mainland’s mounting local government debt crisis, some towns in Dongguan – one of the richest cities – are being forced to suspend free public services and infrastructure projects.

In February, Shipai town terminated the free bus services that it introduced with much fanfare about two years ago. Then in March, the township government said it was reviewing a policy of providing free education to all residents aged below 25 because the government’s coffers had dried up.

The town of Zhangmutou – dubbed little Hong Kong because of its popularity as an investment and holiday destination – has scrapped an ambitious plan to build a 100-million yuan (HK$126.4 million) recreational park, leaving a large chunk of empty land in the town centre.

Many local township authorities in Dongguan are struggling to pay the salaries of their employees.

Their problems underline the magnitude of local government debt issues on the mainland. Read more of this post

S&P warns it may lower India rating to junk status

S&P warns it may lower India rating to junk status

India faces at least “a one-in-three” chance of losing its prized sovereign grade rating. -AFP
Sat, May 18, 2013
AFP

NEW DELHI – India faces at least “a one-in-three” chance of losing its prized sovereign grade rating, global ratings agency Standard and Poor’s has warned, in another blow to the scandal-tainted Congress government. The announcement late on Friday comes after finance ministry officials have been arguing for a ratings upgrade, saying the government has been taking strong steps to curb India’s financial deficit and promote investment. India’s BBB-minus investment rating is already the lowest among its BRICS peers Brazil, Russia, China and South Africa, and cutting it to “junk status” would push up the country’s hefty borrowing costs as it would signal higher risk. Read more of this post