If driverless deliveries prove faster, cheaper, safer, and more accurate, they would likely be adopted quickly and affect all parts of the country. Truck driving is much less concentrated in particular areas than, say, coal mining or steel making.

In 2016, there were 1.7 million heavy and tractor-trailer truck drivers, with a median annual wage of $43,590; 859 hundred thousand light-truck and delivery workers, who earned $34,700; and 426 hundred thousand driver/sales workers, who earned $28,449. So a rough estimate would be that driverless deliveries would put at least 2.5 million drivers out of work, not counting drivers’ helpers and a substantial number of workers in truck stops and roadside services patronized by truckers. Truck drivers drink a lot of coffee.

Like many lost manufacturing jobs, truck driving requires skill, some special training, hard work, and fortitude, but not much formal education. If you did not go beyond high school, but are a reliable, safe driver—especially if you are willing to work the demanding schedules of long-haul truckers—you can support a family and have decent benefits by driving a truck.

The transition to driverless deliveries would also create some new jobs, many of them technical jobs involving software development and programming that would command relatively high wages. Vehicle maintenance jobs would still be necessary, and would likely require enhanced electronic skills with higher pay than current truck maintenance jobs. Expanded demand for the cheaper delivered products would likely create additional jobs in the transportation sector. It is impossible to predict the ultimate effects of any major technological change, but in the short run it is a good bet that a lot of former drivers would be looking for work and finding their skills and experience ill-suited to available jobs at comparable wages.

The one question I get wherever I go to talk is what am I going to do when the robots take my job? It’s a big question but over the last year it has really moved into the public consciousness. The prospect of machines driving down our roads with no human behind the wheel has lent a sense of reality to the debate that was not present in years past. 

More positively though, in terms of capital investments, the flow of FDI into Africa recovered in 2016 after a dip in 2015. During 2016, capital investment into Africa rose 31.9%. Investment per project averaged US$139m, against US$92.5m in 2015. This surge was driven by several large, capital intensive projects in the real estate, hospitality and construction (RHC), and transport and logistics sectors. The continent’s share of global FDI capital flows increased to 11.4%, up from 9.4% in 2015. That made Africa the second fastest growing destination when measured by FDI capital.

This somewhat mixed picture is not surprising to us. We believe that investor sentiment toward Africa is likely to remain somewhat softer over the next few years. From our point of view, this has far less to do with Africa’s fundamentals than it does with a world characterized by heightened geopolitical uncertainty and greater risk aversion. Companies already doing business in Africa will continue to invest, but will probably exercise a greater degree of caution and be more discerning. We are still of the opinion that any shorter-term shifts in FDI levels will be cyclical rather than structural. We also anticipate that the evolution of FDI — increasing diversification in terms of sources, destinations and sectors — will continue. Over the longer term, as economic recovery slowly gathers pace and as many African economies continue to mature, we also anticipate that levels of FDI will remain robust and will continue to grow.  

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Africa is a massive continent which for all practical purposes is undeveloped. It is also going to represent the bulk of population growth and the most attractive demographics over the next 30 years so there is a logical explanation for why FDI is flowing towards countries with improving governance and/or abundant mineral wealth. 

There’s plenty of talk about the retail industry dying, with malls closing and the slump stressing iconic chains like Sears Holdings Corp. and J. Crew, but healthier big-box giants such as Wal-Mart Stores Inc. and Costco Wholesale Corp. are still chronically in need of employees, at least for now. The number of U.S. retail jobs was about the same last year compared with 2015, according to the Bureau of Labor Statistics. What’s really bedeviling retailers is annual turnover -- at 65 percent, it’s the highest since before the Great Recession -- making it necessary to keep hiring. The chains are so hungry for good help they’re poaching workers from fast-food restaurants.

“Those jobs tend to be more transitional, they tend to be more fluid, and as a result there tends to be higher turnover,” said Michael Harms of Dallas-based researcher TDn2K. “Even though you hear headlines like retail is dying and the robots are coming, there’s still a lot of things that need human touch points. It’s a dogfight over good employees.”

What interested me most about this story was not so much the fact big box stores need more workers as their share of the retail market increases, but the effect this is having on restaurant wages. 

For the first time since 2010, the global economy is enjoying a synchronous recovery (see chart). The developed markets’ (DM) private sector is exiting deleveraging after several years of slow growth due to a focus on balance sheet repair and, after four years of adjustment, the emerging markets are in a recovery mode. These trends create a positive feedback loop. Indeed, the DM economies account for 60% of emerging market (EM) exports, so as their real import growth accelerates, EM exports are rebounding. What’s more, an improving EM outlook reduces DM disinflationary pressures. 

How sustainable is this recovery? Typically business cycles end with macrostability risks (price, external and financial) spiking, forcing policymakers to tighten monetary and/or fiscal policy. In this cycle, considering that emerging markets inflation and current account balances are moving toward their central banks’ comfort zones, it is unlikely that macrostability risks will surface soon. Moreover, the emerging markets now have high levels of real rate differentials vis-àvis the US, providing adequate buffers against normalization of the Federal 

DEVELOPED MARKET RISK. In our view, the key risk to the global cycle is apt to come from the developed markets— most likely the US, considering that it is most advanced in the business cycle. Moreover, the US tends to have an outsized influence on the global cycle, particularly the emerging markets. While price stability features prominently in debating the monetary policy stance of any central bank, financial stability is clearly emerging as an equally important factor.

How will it play it out? For insight, we can look at history. The late ’60s saw fiscal expansion at a time of strong growth and low unemployment. In the mid ’80s, the US pursued expansionary fiscal and protectionist policies in an improving economy. We look at similarities and differences versus today, analyzing asset class performance by fiscal deficit and unemployment quartiles.

To that end, private-sector leverage has picked up modestly in the US. In fact, the household-sector balance sheet, which was the epicenter of the credit crisis, had been deleveraging until 2016’s third quarter. Moreover, the regulatory environment has been relatively credit-restrictive. Hence, we see moderate risk to financial stability. However, risks could rise, considering that monetary policy is still accommodative, and particularly so if the administration eases financial regulations. Price stability is a critical risk, too—especially since the core Personal Consumption Expenditures Index inflation rate is close to the Fed’s target and US unemployment is around the rate below which inflation could accelerate. Reflecting this, we expect the Fed to hike rates six times by year-end 2018 (see page 3). We expect other major DM central banks to take a less dovish/more hawkish stance

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The MSCI World Index broke out to new all-time highs in March and continues to extend that breakout. There is no denying that the Index is heavily weighted by the USA but it has been a generally firm period for global stock markets as economic growth figures pick up against a background where interest rates are still relatively accommodative. 

Tergnier may be Macron’s toughest sell.

The town, with a population of 13,000, used to vote Communist and then Socialist. It turned to the National Front as its sprawling rail freight station — once one of France’s biggest — shed hundreds of jobs. Steelworks, a sugar-manufacturing plant and other firms closed down or moved elsewhere leaving the jobless rate at 15 percent. The national average is 10 percent. Thirty-six percent of voters backed Le Pen last month, among her highest votes in the country.

“Globalization is bad for Tergnier,” said mayor Christian Crohem, 67, who heads a mainly leftist coalition. “We’ve brought more countries into the EU and we’ve allowed businesses to move around, so we’re up against workers from abroad who don’t play by the same rules, it’s unfair competition.”

He tells the story of a 70-year-old woman who came to see him recently because she didn’t have enough money to feed herself. Sitting in his office, she cried with shame as she asked him for a handout to buy food.

“That kind of thing really gets to you,” he says. “People here feel abandoned, and so do we, the officials they elect.”

 

In a country like France, which prides itself on its social infrastructure, this kind of story is all the more troubling. Fiscal austerity over much of the last decade has laid bare the hollowing out of rural and legacy manufacturing centres right across the developed world. We are talking about France right now because the election is on Sunday but this is a broad issue which has contributed to populism in a number of countries and there is little evidence of sincere efforts to curb it. 

Acceleration in market share gains: Our AlphaWise survey indicated that the low price course strategy is highly effective for leading players to gain market share, thanks to their strong brand name, well established systems, standardized teaching procedures, and strong teaching curriculum development capabilities. We expect the promotional environment in China's K-12 after-school tutoring market will become a new norm, and the low user stickiness in the market will benefit the leading players like TAL and New Oriental, as they're considered top providers for potential switchers. We believe New Oriental's roll out of its low price strategy to over 30 cities and TAL's acceleration in capacity expansion will accelerate their market shares in the coming quarters. Although this may bring some short-term uncertainty to revenue growth and margins when the summer course revenues are booked, we believe this strategy is value accretive to the leading players given they can manage to achieve high retention rate.

Market demand remains robust amid macro slowdown: According to our AlphaWise survey results, K-12 after school tutoring expenses are the last item to cut among major household expenses during weak financial conditions. Moreover, 24% of respondents intend to increase their spending on tutoring classes in the next 12 months. This shows that education is not only resilient during macro downturns, but also remains a structurally growing sector in China. 

Good potential for online education: The survey results also show that the acceptance level of online education is very high and 43% of respondents thought online education was as good as offline, but more convenient. We believe this bodes well for future demand for the leading players' online and O2O initiatives, which could bring in incremental revenue opportunities with better operating leverage.

 

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For most families education is the surest and in many cases only way to climb out of poverty. Despite the fact there is a great deal of debate about the best way to impart knowledge and indeed what should be prioritised in the West, Chinese parents are under no illusion, their child has to perform well in the state exam. Competition is such that the only way to ensure your child is getting the grades they need when you do not have knowledge/time yourself is to employ a tutor. 

Indonesia: buy for the 2H17/2018 recovery? Our earlier worries for equities – politics, tax scrutiny, rising rates, earnings risk – have not disappeared, but we now think an expected period of support for EM currencies will help to keep bond yields and risk-free rates down – a bigger tailwind. This is coupled with improving earnings momentum with an acceleration to 17% growth in 2018, supported by less bank provisioning and increased infrastructure momentum ahead of the 2019 elections and a consumption recovery. Our Focus List includes BBCA, ASII, TLKM, UNTR, LPPF and LINK; our new index target implies 8% upside.

Malaysia: window still open. We initiate on Malaysia (Malaysia strategy initiation) and position it as our No.2 OW in ASEAN. Interest is back, as evidenced by US$1bn of foreign equity inflows in March. We see room for more outperformance from: 1) upcoming elections, 2) infrastructure pick-up, 3) better commodity prices, 4) return of earnings growth, and 5) currency support. We add IHH Health Care to our Focus List. 

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The AEAN region was among the first to recover following the credit crisis and has been a centre of investor interest for more than a decade. It remains a hotbed of economic growth not least because of favourable demographics and proximity to the world’s major population centres. Governance is everything and ASEAN offers some wildly different examples of how countries have gotten it right and indeed wrong. 

Turkish President Recep Tayyip Erdogan has lambasted friend and foe alike in a campaign for vast new powers, but his political fate may hang on the one thing he’s stopped carping about: the price of money.

With the April 16 vote on strengthening the presidency too close for pollsters to call, Erdogan is no longer berating the central bank and commercial lenders over borrowing costs they’ve pushed to a five-year high. He’s betting any measures taken to arrest the lira’s plunge will pay off at the ballot box.

The lira’s value versus the dollar is more than just a pocketbook issue in Turkey, where millions of voters still remember the abrupt devaluations that ravaged their livelihoods in past decades and view the exchange rate as the most important indicator of the nation’s economic health.

Turkey’s trade deficit is the biggest of all top 50 economies relative to output and most of its imports and foreign debt are priced in dollars, so sharp declines in the lira can be ruinous for legions of entrepreneurs like Ramazan Saglam, who owns a print shop in a working-class neighborhood of Ankara.

“I bitterly recall when the dollar jumped in 1994 and 2001 -- my business collapsed both times,” Saglam said. “I’m supporting the new presidential system wholeheartedly because I don’t want to go bankrupt again.”

Turkey is a NATO member, it controls the Bosphorus so it’s in a strategic position geopolitically and it is flirting with becoming an outright dictatorship. That represents an uncomfortable problem for its NATO allies who will be all too aware that allowing Turkey to migrate towards Russia’s sphere of influence would be a serious loss. In addition, refugees represent an election catalyst for half a dozen European countries to which Turkey holds the key. That means there is little the EU can do but protest at the trend toward despotism. 

The overthrow of Mubarak, one of a series of military men to rule Egypt since the 1952 abolition of the monarchy, embodied the hopes of the Arab Spring uprisings that shook autocrats from Tunisia to the Gulf and briefly raised hopes of a new era of democracy and social justice.

His release takes that journey full circle, marking what his critics say is the return of the old order to Egypt, where authorities have crushed Mubarak's enemies in the Muslim Brotherhood, killing hundreds and jailing thousands, while his allies regain influence.

Another military man, Abdel Fattah al-Sisi, stepped into Mubarak's shoes in 2013 when he overthrew Mohamed Mursi, the Brotherhood official who won Egypt's first free election after the uprising.

A year later, Sisi won a presidential election in which the Brotherhood, now banned, could not participate. The liberal and leftist opposition, at the forefront of the 2011 protests in Cairo's Tahrir Square, is under pressure and in disarray.

Years of political tumult and worsening security have hit the economy, just as Mubarak always warned. Egyptians complain of empty pockets and rumbling bellies as inflation exceeds 30 percent and the government tightens its belt in return for loans from the International Monetary Fund.

 

Egypt might not have oil but it is strategically important and has a large young population. The release of Mubarak and return to a business as usual stance by the Al-Sisi administration is unlikely to do anything to quell the disaffection of protestors and it would appear to be only a matter of time before they regroup. 

Nike Inc. tumbled the most in 19 months after third-quarter sales missed estimates, renewing concern that the long-dominant athletic brand is losing market share to Adidas AG and Under Armour Inc.

Revenue rose 5 percent to $8.43 billion, the Beaverton, Oregon-based company said after the market closed on Tuesday. Analysts estimated $8.47 billion, on average.

Under Armour and a resurgent Adidas have been grabbing market share from Nike, especially in the U.S. That’s led investors to sour on the stock, which had its first annual decline in eight years last year. And last quarter’s results only reinforced Nike’s woes as North American sales rose just 3 percent. Executives on a conference call didn’t provide much reason for optimism, either. Worldwide futures orders, excluding the effects of currency fluctuations, fell 1 percent, the first drop since 2009. Analysts had predicted a 3.4 percent gain.

 

Nike produces great products and has a dominant position in the apparel sector which makes it a target. With Adidas moving to a fast fashion model, Nike is under pressure to innovate and most particularly by moving to an online presence. Under Armor might be grabbing market share but it has also struggled to boost its online offering and as a customer of all three, I personally find the online shopping experience far from compelling with all their sites. 

Taiwan dollar advances 0.3% after closing at the strongest level in more than two years Monday

TWSE climbs 0.6%; inflows into stocks exceed $3.8 billion for 2017, the third-biggest in Asia, according to data as of Monday

Stocks including Wistron gain on Apple-related optimism, with Fubon Securities raising rating on the stock

Ten-year bond yield rises 2bps to 1.14%

 

The Taiwan Dollar has appreciated by more than 10% against the US dollar over the last 12 months and extended that advance today. It is overbought in the short-term but its recent strength has broken the Dollar’s five-year progression of higher reaction lows suggesting a medium-term change to the relationship between supply and demand. 

In short, every time Porsche sells a 911 sports car or one of its Cayenne SUVs, it could take the profit alone and go buy a brand new Chevy Cruze.

Its Teutonic peers don’t have nearly as much profit punch. Daimler AG pocketed about $5,000 a vehicle last year, roughly the same margin Bayerische Motoren Werke AG (BMW) has been managing. Part of the money magic is simply price. Porsche doesn’t make cheap cars. Even luxury players like Mercedes occasionally offer more pedestrian versions at narrower margins to get aspiring buyers into the family. And make no mistake, Porsche customers are paying a premium for the brand’s reputation.

Ferrari knows this game well. Its operating profit equates to almost $90,000 a vehicle. But about 30 percent of Ferrari’s business comes from engines, key chains, amusement parks, and other things that don’t have wheels. What’s more, the company makes only about 8,000 cars a year, scrimping on supply to keep prices high.

 

Porsche might be making significant profits on every car it sells but the company is also among the largest shareholders in Volkswagen. It was far from immune to the fallout from the diesel scandal which saw the stock plummet from €95 to €35 and it has been heavily influenced by its parent’s performance since. 

The state settlements already had prompted the credit-reporting firms to remove several negative data sets from reports. These included non-loan related items that were sent to collections firms, such as gym memberships, library fines and traffic tickets. The firms also will have to remove medical-debt collections that have been paid by a patient’s insurance company from credit reports by 2018.

Such changes might help borrowers and could spur additional lending, possibly boosting economic activity. But it could potentially increase risks for lenders who might not be able to accurately assess borrowers’ default risk.

Consumers with liens or judgments are twice as likely to default on loan payments, according to LexisNexis Risk Solutions, a unit of RELX Group that supplies public-record information to the big three credit bureaus and lenders.

“It’s going to make someone who has poor credit look better than they should,” said John Ulzheimer, a credit specialist and former manager at Experian and credit-score creator FICO. “Just because the lien or judgment information has been removed and someone’s score has improved doesn’t mean they’ll magically become a better credit risk.”

 

Credit affects just about every large purchase. This is especially true for the USA, where possession of a credit card is practically a necessity for daily life and not least because of the substantial points programs they offer. 

Inditex put greater emphasis on online expansion last year, cutting its target for new brick-and-mortar stores. The retailer is also making changes to some of its brands to gain market share, with the most recent example being February’s foray into men’s clothing by the Stradivarius brand, which has focused on women.

After starting online sales in Singapore and Malaysia this month, the company plans to add such services in Thailand and Vietnam in the next few weeks and also in India this year.

“India is a very attractive market for us,” Isla said on a conference call with analysts. This year Zara will open a 5,000 square-meter flagship store in Mumbai, which will be its largest store in the country. Inditex has 21 stores in that market.

 

Fast fashion is a major business but is also highly competitive and gaining access to consumers is the key to unlocking growth potential. Moving into high population countries with expanding middle classes is one solution to that challenge and expanding online is another. Creating multiple product lines in a short period of time and getting them to market instantaneously is what has allowed companies like Inditex, H&M and more recently Primark to expand globally but it’s a ruthless sector with clear winners and losers.  

The impeachment of Park Geun-hye opens the door for a reset in ties with North Korea and China.

The leading candidates to replace Park, who was ousted as president by South Korea’s constitutional court on Friday, favor a softer touch with North Korean dictator Kim Jong Un. They’re also open to rethinking the deployment of the Thaad missile shield, which has spurred Chinese retaliation against South Korean companies.

“The liberals believe that if you engage with North Korea, then they could get some kind of missile-test moratorium,” said John Delury, an associate professor of Chinese studies at Yonsei University in Seoul. “The Chinese strategy will be to push just hard enough so the South Korean public sees the cost of having Thaad, but not too hard that you unleash outrage.”

The election campaign -- a vote must be held within 60 days -- will spur fresh debate on how to stop Kim from acquiring more powerful nuclear weapons and missiles. Secretary of State Rex Tillerson plans to seek a new approach to dealing with North Korea in a trip to the region next week, though China’s calls for talks have been rebuffed by the U.S., Japan and South Korea.

Earlier this week, the U.S. military unloaded two mobile missile launchers in South Korea to start deployment of Thaad. It came as North Korea launched four ballistic missiles that landed in waters near Japan.    

 

The potential for a reset with North Korea is a double-edged sword. After all this is a regime whose main export has been nuclear technology to any country willing to pay for it, but most particularly those which are at odds with Western interests. In that regard it is reasonable to conclude North Korea’s actions are those of a Chinese puppet state. Too often the liberal attitude to negotiations has been to give the recalcitrant threatening aggressor whatever they want just to make them go away. Unfortunately, that only emboldens them to ask make even more ambitious demands. 

When the previous record was set, the picture for investors was markedly different: the Turkish currency was 50 percent stronger against the dollar, the country was celebrating earning its second investment-grade credit rating and economic growth was stronger. The only piece of the puzzle that’s more attractive now are valuations that are still at a discount of about 30 percent to Turkey’s emerging-market peers.

Reasons to potentially avoid Turkish stocks were numerous: rising geopolitical risks, terror attacks, a coup attempt, and the prospect of higher U.S. interest rates. The spread between the valuation of Turkish stocks and its emerging market peers widened to more than a seven-year high in July and remained near those levels for almost six months.

This year’s rally developed from “a reaction to Turkey’s long-term under performance to peers and highly attractive valuations,” according to Haydar Acun, a fund manager at Istanbul-based Marmara Capital. “What usually happens in these kind of rallies is the market becomes overconfident after a while and starts forgetting what set the rally in the first place.”

Economic growth is expected to have slowed to 2.2 percent in 2016, according to data compiled by Bloomberg. That compares with 6.1 percent in 2015 and 8.5 percent in 2013 when stocks set their record, according to figures from Turkey’s statistical agency. Turkey lost its last-remaining investment-grade credit rating in late January this year.

 

Turkey doesn’t score particularly week on the governance scale not least because Erdogan has become increasingly volatile following last year’s failed coup attempt.  The Dollar hit an accelerated peak below TRY4 in January and pulled back to test the TRY3.5 region; unwinding about half its overextension relative to the trend mean in the process. Last week’s Dollar bounce takes the Lira back to being the world’s worst performing currency this year and a sustained move below the trend mean would be required to question medium-term Dollar dominance.  

U.S. Commerce Secretary Wilbur Ross triggered a rally in the peso when he said the currency could recover “quite a lot” if his country can reach a sensible agreement with Mexico on the North American Free Trade Agreement.

“The peso has fallen a lot, mainly because of the fear of what will happen with Nafta,” Ross, 79, said in an interview on CNBC on Friday. “I believe that if we and the Mexicans make a very sensible trade agreement, the Mexican peso will recover quite a lot.”

The peso surged 1.9 percent on Friday morning New York time in the wake of Ross’s comments, paring its depreciation over the past year. The 8.7 percent decline in the currency’s value since March 2016 has boosted the cost of imports into Mexico, while making its exports more competitive.

 

The Peso has been about the most unloved currency in the world but the speed of the decline spurred the central bank into action and short-term interest rates have been hiked on successive occasions over the last 18 months and a number of other measures to support the currency have also been implemented.

Walsh spoke a day after Norwegian Air presented details of flights from five locations in Britain and Ireland to three low- fee airfields in New York state, Rhode Island and Connecticut, to be served by Boeing Co.’s 737 Max 8 model from June with one- way fares starting at 69 pounds or 69 euros ($86/$73).

While the Boeing jets will be operating close to the limits of their range, Norwegian Air has also ordered 30 A321neoLRs with which it could connect dozens of smaller cities either side of the Atlantic in the medium term.

Aer Lingus already operates long-haul flights with a fleet of Boeing 757s, the only narrow-body model to see regular use on non-stop Europe-U.S. services, but which ceased production in 2004. The seven A321s on order will serve as replacements while also adding new routes. The Irish unit began serving Hartford from Dublin last year and IAG has said that several other smaller U.S. airports are keen to attract flights with competitive fees.

Walsh said on a conference call with analysts that the introductory fares offered this week by Norwegian Air aren’t sustainable. “Norwegian has a very small margin of profitability and the fares that they’ve launched are clearly just designed to get some headline media coverage,” he said.

 

Michael O’Leary at Ryanair has been talking about initiating Trans-Atlantic flights for years but to no avail so far. That is a testament to how difficult it is to achieve sustainable economics for what is a long flight for a narrow body aircraft. Nevertheless, technology has improved, aircraft are more fuel efficient and Europe has a much lower fares than the USA which raises the prospect of disruption when it could well cost less to fly to the UK than Florida over the summer. 

Citigroup Inc. agreed to pay an administrative penalty of 70 million rand ($5.4 million) to settle a South African antitrust investigation that it participated in a cartel to manipulate the value of the rand.

The figure does not exceed 10 percent of Citigroup’s annual turnover in South Africa and comes after the New York-based lender undertook to cooperate with the Competition Commission and “avail witnesses to assist the prosecution of the other banks that colluded in this matter,” the Pretoria-based commission said in an e-mailed statement on Monday.

“This settlement was done to encourage speedy settlement and full disclosure to strengthen the evidence for prosecution of the other banks,” Commissioner Tembinkosi Bonakele said in the statement. Barclays Africa Group Ltd. has also agreed to cooperate, people familiar with the matter said last week.

The commission on Feb. 15 referred a collusion case to the country’s Competition Tribunal for prosecution and identified lenders including Bank of America Merrill Lynch, HSBC Holdings Plc, BNP Paribas SA, Credit Suisse Group AG, JPMorgan Chase & Co. and Nomura International Plc as among those that participated in price fixing and market allocation in the trading of foreign-currency pairs involving the rand.

Commerzbank AG, Macquarie Group Ltd., Australia & New Zealand Banking Group Ltd., Investec Ltd. and Standard Bank Group Ltd. were also named.

This news item may be responsible for the spike in open interest in Rand options. The currency has been strengthening since the news broke, in line with other commodity currencies and suggests that a good many traders were short and that the continued resilience of the commodity complex is a tailwind for related currencies. 

How can Africa’s leaders and policymakers spring cities from this trap? Crucially, they must first realize that the problem does not begin with low capital investment and the lack of physical structures, or even with undersized infrastructure. To be sure, low investment in structures limits urban economic density; it exacerbates spatial fragmentation, and it precludes agglomeration economies. But the lack of investment results from low investor expectations, which result when cities are spatially dispersed and disconnected.

When potential investors and trading partners look at African cities, they see spatial fragmentation and a lack of connections. They know that such fragmentation constrains public service provision, inhibits labor market pooling and matching, and prevents firms from reaping scale and agglomeration benefits. So the key to freeing Africa’s cities from their low development trap is to set them on a path toward physical and economic density, connecting them for higher efficiency and boosting expectations for the future. The first priority is to reform land markets and land use planning — to promote the most efficient uses of urban land, and to develop land at scale.
Informal land markets are not good enough for African cities. Urban land is a vital economic asset, and asset transactions are viable only where purchasers can rely on enduring extra-legal documentation of ownership. A formal market both offers purchasers the protection of the state and — because transactions are readily, observable and recorded — generates the public good of accurate valuation.

Clear rights to urban land are a precondition for formal land markets. African cities struggle with overlapping and sometimes contradictory property rights systems — formal, customary, and informal (box 3). When these systems pose barriers to urban land access, they impede the consolidation of plots and the evolution of land use. Firms cannot readily buy downtown land to convert it from low-density residential use into higher-density apartments, or to build clusters of new commercial structures. Land transactions are long, costly, and complicated (World Bank 2015c). Such market constraints reduce the collateral value of structures, giving developers little incentive to invest in residential height — while tempting all parties to enter informal arrangements (Collier 2016).

 

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Africa is going to account for a billion new consumers within the next couple of decades so improving standards of governance are going to be essential if that demographic dividend is not going to be squandered. 
 

"These countries are under enormous fiscal pressure and are reacting to it," said Samar Maziad, a sovereign analyst at Moody’s.

President Mauricio Macri has made Argentina’s economy more competitive since he took over in 2015, and an 8 percent gasoline price increase this month has contributed to Buenos Aires-based YPF’s recent rally to the highest in more than a year. Argentina is moving to completely liberalize prices by 2018. YPF declined to comment on its stock price.

Mexico has lifted prices about 20 percent this month as it opens state-owned Petroleos Mexicanos’s monopoly to foreign competition. It has pledged to completely phase out fuel subsidies over the course of the year. The so-called “gasolinazo,” or fuel-price slam, sparked protests across the country that curtailed fuel distribution and has left President Enrique Pena Nieto’s approval rating at an all-time low of 12 percent. Mexico is planning another fuel price increase on Feb.

The main outlier is Venezuela, the region’s biggest exporter with the cheapest gasoline in the world at about 15 U.S. cents to fill a tank, even after the first price increase in almost two decades last year. Colombia got a head start when it began tracking international prices in 2008, a year when fuel subsidies contributed to an economic contraction.

In Brazil, where subsidies drained an estimated $40 billion from Petrobras between 2011 and 2014, Chief Executive Officer Pedro Parente has shown greater independence from the government to set fuel rates. Under Parente, the company formally known as Petroleo Brasileiro SA set a new price methodology in October and has implemented five adjustments since then.

 

Fuel subsidies are politically popular but ruinous for oil companies. Subsidies represent a drag on finances which are at partially offset when oil prices are high but represent an existential threat when prices are low. The collapse of regional currencies, massive deficits and challenges to growth have resulted in populist socialist governments being replaced with more fiscally minded right wing parties across the continent. As commodity prices recover that is translating into their stock markets beginning to do better. 

Retail sales rose 10.9 percent in December from a year earlier, the best monthly result in 12 months. Chinese imports of Swiss watches are up after falling for seven consecutive months through July, rising 7.9 percent in November from a year earlier. Led by its best-selling Macan SUV, Porsche had a 12 percent sales increase in 2016. Tiffany on Jan. 17 reported “strong growth” in China. On Jan. 19, Luca Marotta, chief financial officer of Rémy Cointreau, said the outlook for the Chinese New Year was “very, very positive.” Xi hasn’t ended his anticorruption drive, but its chilling effect on spending is easing. “A rebound across all luxury categories is now in progress,” Bloomberg Intelligence analyst Deborah Aitken wrote on Jan. 9.

During the Lunar New Year holiday, millions of Chinese will travel and shop at home and overseas. Bookings for international air travel made in December for Chinese New Year rose 9.8 percent from the previous year, according to ForwardKeys, an analyst of tourism data. Mainland tourist arrivals in the gambling hub of Macau jumped 7.8 percent in December, the largest increase since February 2015. Chinese consumers “are still very confident,” says Amrita Banta, managing director of Agility Research & Strategy, a consulting firm focusing on the affluent.

In Macau, tourist arrivals from mainland China for the first three days of the holiday period increased 9.1 percent to 234,000 compared to Chinese New Year in 2016, the Macau Government Tourism Office reported on its website Thursday.

Yet they may not be prepared to spend as much. Rather than purchase expensive items as gifts, Chinese are buying more for personal use, says Bruno Lannes, a Bain partner in Shanghai.

The strong weakness of the Yuan might currently be offering a tailwind for luxury goods companies since consumers have an incentive to buy now rather than pay more later. Additionally the potential for stronger economic growth and the knock-on effect that would have on consumer spending may be an additional factor in the outperformance of luxury goods’ stocks. 

Palladium was susceptible to a pullback following such an impressive rally. Today’s clear downside key day reversal is in keeping with similar reactions during what has been a choppy 12-month uptrend and suggests a process of mean reversion is now underway. 

Foreign direct investment in Brazil soared to a six-year high in December as investors abroad kept an optimistic view of the country’s long-term prospects, the central bank said.

Brazil attracted $15.4 billion in foreign investment last month, more than twice the amount expected by economists in a Bloomberg survey, and the strongest monthly performance since December 2010. In the whole of 2016, foreigners poured $78.9 billion in Brazil, more than enough to finance the country’s current account deficit of $23.5 billion.

“December’s foreign direct investment was really something,” Fernando Rocha, deputy head of the central bank’s economic research department, told reporters in Brasilia. “It shows foreigners hold a positive long-term view of the country.”

Investors remain generally optimistic that Latin America’s largest economy will emerge from its worst recession on record this year, even as economists surveyed by the central bank have recently cut their 2017 growth forecasts and the International Monetary Fund warned of near-stagnation this year.

December’s investment performance was boosted, in particular, by operations in the auto industry, as well as in the retail and power sectors, Rocha said. Yet overall investment has been “quite widespread” across a number of sectors, he added.

 

The ouster of Dilma Rousseff was a catalyst for international investors to take a second look at Brazil. The Real had been rallying from January 2016 in anticipation of the event and encountered resistance following Michel Temer’s inauguration as investors waited to see what kind of reforms could in fact be delivered. 

South Korea remained the big winner, topping the international charts in R&D intensity, value-added manufacturing and patent activity and with top-five rankings in high-tech density, higher education and researcher concentration. Scant progress in improving its productivity score — now No. 32 in the world — helps explain why South Korea’s lead narrowed in the past year.

Silver medal winner Sweden owes most of its rise to improvement in the manufacturing value-added metric, while Nordic neighbor Finland jumped two spots in large part because of the rise of high-tech firms in the country. Norway held its No. 14 spot from last year.

Fresh ideas tend to pay off big in Sweden, even as the current government is less business-friendly and has imposed labor taxes that could crimp business investment, said Magnus Henrekson, director of the Research Institute of Industrial Economics, a private foundation in Stockholm. The Swedes themselves promote an atmosphere of great personal ambition — unlike some European neighbors that emphasize the collective — and that’s a boon to innovation, he said.

“In the culture, people are super individualistic — this means that people have ideas and are very interested in pursuing them in this way in order to become wealthy,” said Henrekson. “The incentives are there and the tax system favors them.”

 

If the results of the above report are anything to go by then having a relatively small population and an export focus is a common theme for the most innovative countries in the world. Of course being from a small country means companies have to innovate if they are to compete globally. Small countries also can’t afford to slide on education because the pool of available workers is limited and needs to be nimble enough to supply the economy with the skills it requires. Success is therefore multiplied. 

Alibaba’s move to partner with Maersk Line should be seen as a game of one-upmanship with US rival Amazon, a leading name in online logistics has said.

Chinese customers will now be able to book space on Maersk ships, a first for the industry and one that potentially removes many freight forwarders as middlemen.

Dr Zvi Schreiber, CEO and founder of logistics technology Freightos, offered his perspective on the bigger picture and what this deal means for online shoppers and Alibaba’s rival, Amazon.

“Maersk is testing the waters of digital sales with one of the world’s largest ecommerce companies while threatening forwarder business. But for Alibaba, this is a direct challenge to global retailers like Amazon. Beyond drones and futuristic supermarkets, Amazon opted to get licensed as a forwarder. Alibaba one-upped them by going directly to the world’s largest ocean liner. Point, Alibaba.” 

 

There is a great deal of speculation going on at present relating to the implications of a Trump presidency on global trade. Certainly an America first manufacturing policy would have profound implications for low cost, high population countries’ ability to compete against what would in all likelihood be a highly automated US attempt to re-shore. Nevertheless even with the most ambitious timetable that kind of initiative could take years to unfold. 

On your piece about MOOCs I couldn't help but observe that you did not mention FutureLearn

This service is UK based and is an offshoot of the Open University.

It claims to be the largest MOOC. See below. I've used it and it's very good. I particularly like the fact that many courses are short - 6 weeks and typically 2 - 3 hrs per week.  
All the best

 

Thank you for highlighting FutureLearn.com which, as you point out, is another major centre of online learning and builds on Open University’s long history of distance learning. This article from May last year highlights how a number of universities will allow students to earn as many as 30 credits towards a degree using FutureLearn’s portal. That’s a powerful method to help reduce the cost of earning a primary degree and enhances even further our ability to enjoy learning throughout our lives.

This is indeed well under way and generally government-supported trend globally, with Germany (as always) at the forefront, but also the US and the rest of Europe promoting and facilitating the process.

The article below is interesting I think

It gives an idea of how easily these processes are implemented (2 weeks to start production) and the advantages offered to producers (design innovation + shorter time to market + customisation). €2 million investment for being able to produce a total of 200k pieces every year seems very low.

Shima Seiki (6222) - that provided the machinery to Benetton - is a company worth looking into, and the recent rally in share price confirms what you mentioned re the growth potential from clothing manufacturers in Asia.

This is also confirmed on their IR page
 

 

Thank you for this above article expounding upon the seamless garment manufacturing being pioneered by Shima Seiki. Seamless garment manufacture has been around in the hosiery business for a long time but finishing was always required to sew the legs on the gusset. Introducing seamless manufacture to outer wear is a major innovation and as you point represents an additional sign of increasing interest in automation in the garment industry. 

The UK’s largest cap index is in the process of completing a 16-year range by breaking on the upside. The Index has rallied for six consecutive weeks, hit new all-time highs last week and improved on that performance this week. Prior to this breakout it had spent three years ranging below, but in the region of, its previous peaks. While a short-term overbought condition is evident that is consistent with what is to be expected from a major breakout. 

Samsung is emerging from its biggest corporate crisis, when reports of incendiary Note 7s forced the Korean company to kill its most profitable gadget. It still hasn’t revealed the results of a subsequent investigation into an episode that cost Samsung more than $6 billion and assured Apple Inc. of the lead in premium devices over the holidays. It’s now counting on its next marquee phone to repair its reputation.

“Despite the Note 7’s vacuum, Samsung acquitted itself well on the back of sound S7 sales,” said Lee Seung-woo, an analyst with IBK Securities Co. in Seoul. “After a softer landing in the first quarter, Samsung is on track for record June quarter profit with the new S8 coming to market.”

Operating income rose to 9.2 trillion won ($7.8 billion) in the quarter ended December, its biggest profit in three years, the Suwon, South Korea-based company said in preliminary results Friday. That compares with the 8.29 trillion-won average of analysts’ estimates compiled by Bloomberg in the past four weeks.

 

The heir to Samsung’s empire is being accused of taking part in a bribery scandal yet the share continues to outperform suggesting this news was already priced in. Perhaps more important is the fact Samsung was awarded more US patents last year than any other company. That suggests it at least has the potential to improve on its product line even after the Note 7 debacle. 

Bitcoin's value suffered its biggest single-day decline in two years Thursday, just hours after China's offshore yuan posted its biggest two day gain and days after the cryptocurrency touched $1,000.

The price of bitcoins against the U.S. dollar fell 13% in London trading, changing hands at around $950 each by 13:45 GMT. Bitcoins traded as low as $880 during a volatile session which saw it reach as high as $1137, according financial bookmakers IG.

The moves follow the biggest two-day gain on record for China's offshore yuan, which trades more freely than the domestically controlled currency of the world's second-largest economy. Speculation of government buying led the gains as investors bet authorities are determined to stem capital outflows and avoid a sustained decline in the currency ahead of the inauguration of President elect Donald Trump, who has vowed to label China as a currency manipulator.

The connection is relevant in the nearly all of the daily trading in bitcoin is linked to the yuan, which has fallen more than 7% against the dollar over the past year, as speculators attempt to skirt currency controls and ensure value.

The offshore yuan gain 1% to 6.7989 against the greenback in Asia trading, putting downward pressure on the dollar index and boosting the yen in foreign exchange trading. The move whipsawed the dollar index, a measure of its strength against a basket of six global currencies, from a near 14-year high on Tuesday to three-week low of 101.74 by the start of European trading before it recovered to 102.10 by 13:45 GMT

I have been pointing out in recent audios that China represents the majority of Bitcoin trading and what goes on in that country is likely to have a profound impact on the value of the cryptocurrency. In many respects we might look on Bitcoin as the anti-Renminbi because it tends to do best when Chinese investors are worried about the stability of their domestic currency. 

Ghana is the pride of Africa when it comes to democratic transitions. Once again, its most recent election has proven this point.  Despite the tense and intensely fought campaign both parties continue to pledge respect for the process. Indeed, there is much to celebrate around Africa’s leadership transitions, but much remains to perfect the process the continent over. This year many elections were held freely and fairly on the continent, and both incumbents and new leaders were elected to office—including Benin, Cabo Verde, São Tomé and Príncipe, and Zambia for example. And in an unprecedented move the President of Mauritania and Angola all declared they will not seek re-elections at the end of the term. A very positive and encouraging trend if the pronouncements come to pass.

However, in a number of countries the old has not given way to the new, and the evolution of democracy is still in motion with too-often deadly consequences for the citizens in Burundi, Gabon, and the Gambia to name a few. These examples demonstrate that the concept of leadership transition has not yet been fully adopted. A number of lessons can be drawn from these latter experiences. The populations are increasingly more vocal about transparency of elections. Both sides incumbent and opposition have increasingly equal chances of getting their voices heard and results tend to be closer in these countries. There is still a need for vigilance, and the tendency to slip remains. Peaceful leadership transitions are not yet the norm.

 

The investment case for Africa is predicated on standards of governance improving. Unsurprisingly there is considerable variability in performance across the continent, nevertheless the general trend is toward gradual improvement and that is a very positive development. The recovery in commodity prices is an additional positive development from an investment perspective. 

If Monte dei Paschi's capital plan fails, Prime Minister Paolo Gentiloni's new government is likely to meet this week to issue an emergency decree to inject capital into it.

But that could prove to be politically explosive given that investors are required to bear losses under EU bailout rules.

Parliamentary approval for the 20 billion euro government plan was needed to allow the state to take on new debt. Italy's debt burden, at about 133 percent of annual output, is already the second highest in the euro zone after Greece.

The measure approved by parliament on Wednesday says the state can borrow money to provide "an adequate level of liquidity into the banking system" and can reinforce a lender's capital by "underwriting new shares".

The failure of Monte dei Paschi, the world's oldest bank, would threaten the savings of thousands of Italians and could undermine confidence in the country's wider banking sector, saddled with a third of the euro zone's total bad loans.

Before the vote, Economy Minister Pier Carlo Padoan vowed to shield retail bank investors from losses.

"The impact on savers, if a (government) intervention should take place, will be absolutely minimised or non-existent," Padoan told parliament.

Italy Senate also approves government request to lift debt to help banks
Monte dei Paschi said it expected its net liquidity position, now at 10.6 billion euros, to turn negative after four months.

 

A bailout of Italy’s banking sector highlights clearly that the EU has one set of rules for small countries but is willing to set them aside in the cause of realpolitik to ensure the sustainability of the currency regime. 

A rationalisation I have heard promulgated is that the bail-in imposed on the people of Cyprus was nothing more than a refusal to bailout Russian billionaires and that Italy represents an altogether different case. That of course ignores the very real pain and suffering of savers who had their assets confiscated simply because they were unlucky enough to live in Cyprus. 

But don’t expect a trend heading back in time. This is a difficult system to replicate, said Simeon Siegel, an analyst at Instinet. TJX boasts a wide net of inventory buyers who find small batches of desirable clothing, then make a small bet on those goods. This is unlike the traditional department store model, where buyers look at runway trends and make large orders of a few items, hoping that they’ll be the winner for the season.

“You’re buying closed-out product and you’re buying samples,” said Siegel. “You have to be very attuned to the numbers and very attuned to the fashion. The vendor base that you need to be plugged into and the intelligence that goes into buying the product is the most important asset they have. You need to find the most compelling stuff.”

When stores like T.J. Maxx do it right, they leave their shoppers filled with feelings of adventure and serendipity, says Jordan Rost, vice president of consumer insights at Nielsen, a research firm. Even an unsuccessful trip to a discount store can reinforce the thrill of the hunt. The instincts driving customers into parking lots is similar to those shopping online, Rost says. They’re searching for deals and the best item to fill some broad want or need without a target in mind.

As shoppers across generations and demographics become more focused on value than ever before, the excitement of finding something on sale has an even broader appeal. Millennials who grew up relying on e-commerce for all their needs are coming through the doors, too.

“Younger consumers are really open to that kind of open- minded approach to shopping, not necessarily coming in with a specific brand or product in mind,” says Rost. “Discovery is part of the experience.”

 

Retail is anything but simple however there would appear to be three primary business models. A business can compete on price, convenience or exclusivity. Amazon has mastered convenience, TJX competes on price while luxury brands offer exclusivity. In an increasingly connected world it is possible for all three business models to survive but it is hard to excel at more than one. 

We are positive on Indonesia in the regional context. We continue to regard Indonesia as one of the prominent structural growth stories in the region and the recent equity market correction is a good buying opportunity. The combination of a tax amnesty, a build out of much-needed infrastructure and the roll-out of a healthcare scheme should support growth going into the New Year. With regards to the tax amnesty programme and repatriation, approximately 29% of funds have been repatriated to Indonesia by the end of November, implying that more is to come 

These repatriated funds will be put to work in 2017, allowing for funding of government infrastructure projects. Looking ahead, the equity market’s performance may hinge on a stronger earnings outlook and continuation of the positive earnings revision ratio trend 

Some have pointed at rising political risk following demonstrations against the Jakarta mayor, a Christian who had made some comments on Islam. While this might have little to do with government policies, the mayor is a close ally of President Joko Widodo. The removal of the mayor in upcoming elections in February could have an impact on support for the president and his policies.

Based on the macro-environment, we see consensus forecast for 11% EPS growth for 2017 as quite reasonable. We are expecting a pick-up in economic activity due to greater and more efficient fiscal spending, stronger commodity prices and resilient consumer spending 

Infrastructure investment remains a key theme for the market, as Indonesia looks to modernise its road-rail network. In addition, our banks’ analysts expect the asset quality concerns to peak out by end 2016, which means credit cost should at the very least stabilize in 2017. This should benefit Indonesian banks.

A link to the full report is posted in the Subscriber's Area.

Widodo has not been blessed with Modi’s large majority and as a result has had a more difficult route to implementing reform and cleaning up cronyism. Nevertheless progress has been made and the currency stabilised from last year. 

The weakness of the currency boosted the nominal performance of the stock market which has been largely rangebound since 2013. Foreign currency funds offer a truer perspective on the performance of the market when the Rupiah is accounted for.  

“Latin America will recover more than other regions in GDP terms and do more reforms,” said Dehn, a London-based head of research at Ashmore Group, whose top pick is Brazil.

President Michel Temer’s push to pass spending and pension overhauls is another reason investors remain bullish on Brazil.

The real has jumped 19 percent this year, the second-largest advance in the world, helping bolster returns in local bonds. It will soar another 10 percent by the second-quarter of 2017 before weakening to 3.4 per dollar by year’s end, according to Gustavo Rangel, the chief Latin American economist at ING Financial Markets LLC and the region’s top currency forecaster last quarter, according to Bloomberg rankings.

While Brazil’s prospects continue to improve, Mexico’s outlook is more mixed. Trump’s pledges to rip up the North American Free Trade Agreement and build a wall along the southern border have unsettled investors in assets from the region’s second-biggest economy, with the peso plunging 16 percent this year. Mexico sends almost 80 percent of its exports to the U.S.

 

For almost a decade the Dollar trended consistently lower against the currencies of commodity producers and emerging markets. That ended a few years ago and currency market volatility now plays an important role in any consideration of when and whether to invest in these markets. 

Australia’ economy shrunk by 0.5% in 3Q16. Typically in such a situation a cut in official interest rates can ease the pain. While the RBA may choose to lower interest rates, its impact on customers’ borrowing costs may be limited. In fact mortgage rates could rise again soon.

Why? The RBA only controls the cost of borrowing overnight. The longer the term of the bond, the more the market sets its yield. As the marginal investor in the A$ bond market is from overseas what happens in the global market place drives our longer term bond yields.

Just as Australian home loan borrowers could do with some relief interest rates are edging up. The reason is Australian banks raise insufficient deposits to fund their loan book. The balance of funds comes from the bond market. Should the cost of borrowing for our “AA” rated banks rise further customers will likely get more hikes on their mortgage rates.

A concern Spectrum has is if the U.S continues to grow at near its current 3% run rate both U.S and Australian bond yields could rise further. Borrowing while rates were falling was easy 

Since the 1980’s Australian households have piled on the debt. Much of this has gone into residential real estate. The continuous fall in interest rates and rising property prices created a re-affirming inducement to borrow more. Today, Australian households have world beating debt levels. This makes parts of the sector hyper-sensitive to rate rises. Should the cost of borrowing rise notably from here wide-spread financial stress within Australian households looks set to follow.

 

A link to the full report is posted in the Subscriber's Area.

Australian 10-year bond yields last traded above the trend mean in 2013 when rates were 2.5% or 100 basis points above today’s level. The yield is closing in on the 3% level more in sympathy with US Treasuries than any particular hike in Australian inflation expectations. 

Hello I’ve noted that high level luxury looks pretty bad, but medium level luxury have interesting graphs. Tods Safilo and Luxottica seem to be basing, Tods is high quality but not flashy for example 

Piquadro has stopped going down IT0004240443

Ferragamo I can’t figure out the graph yet but it is to watch as well 

Yoox looks bad to me, the site is awful compared to mytheresa.com 

LVMh has broken out too it seems 

I’m asking because I thought that with the dollar so strong , Asians would lower consumption, buy maybe they are buying less Prada and more sober brands I haven’t figured it out yet I read Dolce and Gabbana are going badly 

Saluti!

 

 

Thank you for this thoughtful email and I think it is the right time to be looking at some of Italy’s exporters rather than focusing on the melodrama of politics which is likely to remain tortuous for the foreseeable future. A weaker Euro, or even the remote near-term possibility of a new Florin, both represent bullish potential outcomes for nominal Italian share prices.  

The common European currency rose against the dollar even as Italy slid into political limbo after Italian Prime Minister Matteo Renzi’s resignation opened the door to fresh elections. The euro earlier fell to its weakest in 20 months. European shares headed for the biggest gain three weeks, while the cost of insuring Italian bank bonds against default jumped. Gold headed for the lowest close since February, Treasury 10-year yields rose to 2.42 percent and a gauge of equity-market volatility slid.

Political risk from Italy hasn’t spread beyond its borders as markets were correctly positioned for the anti-establishment mood sweeping around the world. This was a departure from the Brexit referendum and Donald Trump’s surprise election, when traders were caught out by populist votes.

“After Brexit, it took three days for markets to shake it off, with Trump it took three hours, with Italy it took three minutes,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm oversees $260 million. “The outcome was not as much of a surprise as many expected it to be -- markets learned their lesson.”

 

The Italian decision to vote No on the referendum was widely anticipated with the risk residing in whether a snap election would be called. With that option being swept aside soon after the decision, some of the shorts on the Euro were closed in what is a classic example of “sell the rumour, buy the news”. 

The changes around the world will have major consequences especially for small, open countries like Singapore, said Mr Lee. 

“We have always depended on open trade, making friends around the world, looking for opportunities to cooperate with others,” he said. “We have relied on a secure, peaceful Asia, an international order where countries big and small cooperate and compete according to rules which are fair to all; where small countries have a right to their place in the sun.” 

“That is how we have prospered these last 50 years.” 

He added: “Yes, we worked very hard, and earned our success. But we were also very lucky to enjoy this international environment. We attracted foreign investments, negotiated FTAs, worked with other countries, expanded our exports, traded, prospered.” 

But now, said Mr Lee, other countries are flexing their muscles and becoming increasingly assertive. 

“Nobody can tell how relations between the big powers will develop,” he admitted. “If US-China relations grow tense, Singapore is going to be in a very difficult spot, because we regard both as our friends and do not want to have to choose between them.

 

As a major centre for asset management and private banking Singapore has no choice but to remain open and neutral, as competition between much larger countries increases. There has been a great deal of internal debate about the role of foreigners in pushing up the price of real estate and the rising cost of living and it is probably these points the PM is referring to in his statement. Negotiating a path forward during what is likely to be a time plagued by higher political uncertainty all over the world is going to take a deft hand and strong governance. Against that background Singapore is in a positive position.  

The cramped crew capsule hasn't nearly as much room as the ISS, and because it's designed to operate in deep space, its payload weights are much tighter. Still, it needs to carry enough food for the crew as they spend weeks or even months in long-range missions but cannot be resupplied from Earth, nor can it dump its rubbish until it returns home.

To cut down on space and weight, NASA wants astronauts to substitute breakfast for food bars. The bar has to provide enough calories as well as a carefully balanced diet, need no special storage or cooking facilities, and leave no waste beyond its minimal packaging. In addition, it needs to lightweight and have a shelf life of several years.

Commercial breakfast bars are designed for relatively sedate people who have easy access to other foods. There aren't any food bars that meet NASA's requirements and no one wants to use lifeboat rations, so NASA had to take on the task of designing it in house.

What it is working on is a breakfast bar that provides 700 to 900 calories and balanced nutrients to act as a meal substitute. The goal is to provide flavors like orange cranberry or barbecue nut to have enough taste and variety to keep morale high and the astronauts wanting to eat them even after weeks in space – though what the final bars will ultimately look and taste like has yet to be decided.

 

We had a good laugh about this story this morning because I’ve been making my own breakfast bars for a year and personally have been very happy with the results. The fact NASA is getting in on the game is a testament to how large the sector for purportedly healthy snack foods has become. 

The lira has weakened faster than that of any fellow emerging market's this year except Argentina, as a failed coup — and the crackdown that's followed — spooked foreign investors, exacerbating the effects of the stronger dollar that's greeted the election of Donald Trump. 

After a 25 basis point rate hike to the central bank's overnight lending rate last month failed to prevent the rout, clamors for householders to risk their savings have grown. The odds are stacked against them. Turkish central bank data show that banks worldwide trade $17 billion liras every day; a volume which every adult in Turkey would have to change more than a daily $300 dollars to overpower.

Still, the efforts of those fighting the fallout have taken varied forms. While some businesses are rewarding those dumping dollars, farmers in the central Anatolian province of Aksaray staged a symbolic protest at one of the country's largest livestock markets on Wednesday, burning bills "in retaliation at the U.S. and Europe," according to Ihlas news agency. 

“Europe and America now want to realize economically the coup that they failed to carry out with tanks, rifles and F-16s on July 15,” Ihlas cited Hamit Ozkok, chairman of Aksaray Commerce Exchange, as saying. He was referring to the date of the failed putsch earlier this summer, in which hundreds lost their lives. While Erdogan blames a former political ally, Fethullah Gulen, for instigating the coup, the cleric resides in Pennsylvania, and Turkey has sparred with the U.S. about his extradition. Gulen has denied the allegations.

"I think there's a failure to appreciate that some of the rhetoric smacks of desperation," said Paul McNamara, a fund manager at GAM Ltd in London who oversees around $5 billion in assets. He said only a strong increase to central bank borrowing costs can halt the currency's declines.

 

Local currency five-year bonds yield over 10% while US Dollar denominated bonds yield half that. Brazil’s local currency bonds have a higher yield while its US Dollar debt is lower. Both countries face challenges but Turkey is receiving more attention because it is much less politically stable. 

“With the lines between traditional brick and mortar and e-commerce continuing to blur, the need to make a big splash during large retail events like Black Friday is significant,” Traci Gregorski, senior vice president of marketing at Market Track, said in an e-mailed statement. “The ease of comparison shopping across channels is creating a situation that puts a definitive advantage in the consumers’ hands.”

Wal-Mart and others also are steering customers toward online deals, rather than just physical stores. While the chain still offers Black Friday specials at its supercenters, the day marks the beginning of a streak of online promotions called “Cyber Week.” Wal-Mart has tripled its e-commerce selection to 23 million products this year, aiming to better compete with Amazon. The world’s largest retailer said in a statement Friday that Thanksgiving was one of its top online-shopping days this year and that about 70 percent of the traffic to its website came from mobile devices.

Target, meanwhile, is offering 15 percent off almost everything in its stores and website for two days: Sunday and Monday. The aggressive discounts come at a cost. When Target slashed prices last holiday season, its profit margin slipped to 27.9 percent from 28.5 percent.

 

Retail is becoming increasingly competitive but online only companies like Amazon have a distinct advantage relative to those maintaining large brick and mortar locations. Nevertheless, the benefit of a large physical location network is brand awareness; meaning companies have to work less hard to create an online shopping footprint. High competition however is likely to ensure margins continue to compress. 

Our focus, therefore, is on the banking sector, and the ability of banks to take on
leverage. The key message of our paper is that the value of the dollar plays the role of a barometer of risk-taking capacity in capital markets. In particular, it is the spot exchange rate of the dollar which plays a crucial role. Deviations from CIP turn on the strength of the dollar; when the dollar strengthens, the deviation from CIP becomes larger. To the extent that CIP deviations turn on the constraints on bank leverage, our results suggest that the strength of the dollar is a key determinant of bank leverage.

The cross-currency basis is the difference between the dollar interest rate in the cash market and the implied dollar interest rate from the swap market when swapping foreign currency into dollars. The cross-currency basis measures deviations from the CIP condition. Figure 1 plots the broad dollar index (in red), which is the trade-weighted US dollar exchange rate against its major trading partners. When the red line goes up, the dollar strengthens. The blue line tracks the average cross-currency basis for the ten most liquid currencies vis-à-vis the dollar. We see that the cross-currency basis is the mirror image of dollar strength. When the dollar strengthens, the CIP deviations widen. This is especially so in the last 24 months, reflecting the stronger dollar.

One of the biggest sources of speculation following Donald Trump’s election has been corporate taxes. The USA has one of the most punitive rates in the world and that acts as a headwind domestically and an obstacle to highly successful corporations repatriating overseas profits. If the Republican-led government does indeed succeed in reforming corporate taxes and gives an incentive to large companies to bring their profits home it could have an outsized effect on the Dollar which is why the issues discussed in the above report are important. 

“We are seeing carnage in Asian FX markets,” said Robert Rennie, head of financial markets strategy at Westpac Banking Corp. in Sydney. “It’s providing a very strong reminder that the S&P 500 is not the correct barometer of Trump-driven risk aversion -- it’s Asian currencies.”

And 

Investors are betting Trump will cut taxes, ramp up infrastructure spending to spur economic growth and inflation, triggering Fed rate increases. Traders see an 84 percent probability of a quarter-point hike at the central bank’s December meeting, according to pricing in federal funds futures.

After Trump’s election, benchmark 10-year Treasury yields climbed above 2 percent for the first time since January on speculation the likely spending to spur growth will quicken inflation. Trump’s proposals include pledges to cut taxes and spend as much as $500 billion on infrastructure.

“The market’s tone remains negative on bonds, emerging markets, positive on U.S. stocks and the dollar,” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. in Singapore.

 

Lower taxes, higher rates and outsized US growth are a powerful siren for US funds to be repatriated. That means the case for investing in emerging markets will have to be even more attractive than normal in order to compete on a risk-adjusted basis. Currency trends are a big part of that. US Dollar investors are less inclined to invest abroad when the currency market is not in their favour. 

It was a bruising campaign but with control of all three branches of government the Republican Party now has a relatively unfettered path to introducing a broad range of policy options. The one obstacle of course is that the entrenched bureaucracy in Washington and the various unions are totally opposed to just about any change to the status quo. 

Corporate taxation and the tax code more generally could be up for debate. Securing a budget large enough to make a dent in the deferred maintenance of the USA’s infrastructure is perhaps the clearest ambition of a Trump Presidency. Protectionism is also high on the agenda and the responses of NATO and EU spokespeople to the news was a picture of unease at this new source of uncertainty. Immigration is also likely to be a major topic of conversation for this administration. 

In California, where medical marijuana has been legal since 1996, a recent poll by the Public Policy Institute of California showed 55 percent of likely voters supported a ballot initiative that would authorize the state to tax and regulate retail cannabis sales much like it does alcoholic beverages.

That was similar to the numbers favoring legalization from opinion polls in Massachusetts and Maine. Slimmer majorities or pluralities also point to legalization in Arizona and Nevada.

Approval by California alone, America's most populous state with 39 million people, would put nearly a fifth of all Americans living in states where recreational marijuana is legal, according to U.S. Census figures. That number grows to more than 23 percent if all five state measures pass.

Backers of legalized marijuana sales have tried for decades to win support at the ballot box, with little success until the past few years, starting with victories in Colorado and Washington state in 2012.

Experts say the latest initiatives include more sophisticated regulatory mechanisms aimed at keeping cannabis away from children and banning the involvement of criminal gangs and drug cartels. Public opinion has rapidly swung toward favoring legalization.

"It's changed in the minds of these voters from being like cocaine to being like beer," said University of Southern California political scientist John Matsusaka.

 

Time and again prohibition has been demonstrated as a failed strategy. There are of course very real side effects that result from smoking cannabis and most particularly for young people. The problem for those campaigning against legalisation is proving cannabis has no health supporting effects. Millions of people have personal experience to the contrary and that has helped drive wider acceptable of the plant’s curative properties. This is especially true for ailments modern medicine is not a good fit for such as chronic pain, migraines and posttraumatic stress.

Tangshan, China’s largest steel-making city, orders mills, coking plants, cement and glass industry to halt production because of heavy air pollution, consultant Mysteel says in note Friday.

City halts production in all factories that discharge “volatile organic compounds”

City halts production of coal-fired boilers except ones used for central heating

Suspension starts 3pm local time

City also bans trucks with articulated five axles or more from 6pm. Tangshan is about 180 kilometers east of Beijing

 

It’s that time of year again when Beijing is shrouded in smog and when parents really worry whether that lung infection their only child has is ever going to get better. In winter the prevailing wind generally blows from the Northwest. While Tangshan is a major steel and heavy industry hub, it is unlikely to be the only source of pollution since it lies to the east of the city. 

The gradual rationalisation of heavily polluting, inefficient steel production is good news for the global sector because it helps to reduce the overhang of cheap supply coming from China. Clicking through the constituents of the steel section of the Chart Library there is evidence of some steadying following sharp pullbacks last year. 

An abundance of global savings. Trillions of dollars of negative-yielding bonds. And a bevy of institutional investors hungry for positive, long-dated yields to match their liabilities.

Conditions are ripe for an avalanche of private-sector capital to flow into unlisted infrastructure, turning an industry facing an estimated $49 trillion shortfall into an asset class which, its sponsors say, offers strong cash flows, uncorrelated returns and positive real yields.

58 percent of active investors surveyed in the second quarter of the year by data provider Preqin will invest more than $100 million in unlisted funds over the next 12 months compared to 42 percent who said that in the corresponding period last year, underscoring the increasing allure of alternative assets amid ultra-low yields from more conventional capital-market instruments.

 

It’s been a while since there was dynamism in the case for funding infrastructure spending. Part of the reason of course is that the environmental movement is highly active in demonstrating against any energy infrastructure projects, the case for new roads comes up against similar arguments while water and power suffer more than any from not in my backyard (NIMBY) arguments. Added to that has been the reluctance of governments to commit to big projects when their coffers are empty and unfunded liabilities are a constant bugbear. 

The announcement Monday by National Prosecuting Authority head Shaun Abrahams signaled a dramatic turnaround in the legal pursuit against Gordhan, who was under investigation over the early retirement of a former colleague at the national tax agency that resulted in 1.1 million rand ($80,149) of allegedly wasteful expenditure. Gordhan was scheduled to appear in court on Wednesday. He’s still being probed for overseeing the establishment of an allegedly illegal investigative unit when was the head of the revenue service.

Gordhan and two former colleagues “did not have the requisite intention to act unlawfully,” Abrahams told reporters in Pretoria, the capital. “I have decided to overrule the intention to prosecute. I have directed the summonses to be withdrawn with immediate effect.”

Gordhan, 67, has been a key driver of a campaign to maintain South Africa’s investment-grade credit rating, which is up for review over the next two months. He called the allegations a political stitch-up, and he’s clashed with Zuma over the affordability of nuclear power plants the president wants to build, and the management of state companies and the national tax agency.

“It is certainly ratings-positive,” Rian le Roux, chief economist at Old Mutual Investment Group in Cape Town, said by phone. “I still think there is some chance we may get a reprieve. It is fairly evenly balanced as to whether we get a downgrade.

This is a positive development from the perspective of South African institutional governance remaining resilient in the face of quite intense political pressure. The clashes, often public, between Gordhan and Zuma are a healthy sign that a debate is ongoing on how best to manage the largest economy on the continent. It is to be hoped that Zuma’s influence is contained and he loses the next election.

Pimco’s vote of confidence, albeit with a few cautionary caveats, is helping to reinvigorate investor appetite for a currency that has climbed 28 percent this year. It adds to a string of positive developments in recent weeks that has prompted traders to reassess bets that Brazil’s rally may be over, from President Michel Temer’s success in advancing a spending-cap bill to last week’s rating upgrade for the battered state-run oil giant, Petroleo Brasileiro SA. The central bank signaled Tuesday that it’ll be modest in its quest to lower borrowing costs -- the benchmark rate is 14 percent -- which also supports the real.

“A better-than-expected improvement on the fiscal outlook and the slower-than-expected pace for interest-rate cuts both strengthen Brazilian assets,” said Andres Jaime, a strategist in New York at Barclays Plc. Back in September, “we had a less optimistic outlook.”

In a note on Pimco’s website, emerging market portfolio managers Yacov Arnopolin and Lupin Rahman wrote that Brazil’s high interest rates offer a “decent cushion against potential weakness.” Borrowing dollars to lend in reais has returned 40 percent in a so-called carry trade this year, the most among major currencies.

“The country’s fixed-income assets continue to present compelling opportunities,” they wrote. “With confidence in the government returning, Brazil could be set for a comeback -- one that could restore nominal interest rates to single digits and put credit rating upgrades back on the table.”

 

In a world of close to zero interest rates and where a significant quantity of government debt has negative yields it’s hard to find 14% interest rates in an appreciating currency. Brazil still has a lot of challenges but with commodity prices rebounding and a BIDU new administration, intent of squeezing inflation out of the economy, the outlook for both the currency and asset prices remains positive.  

Thai monarchy observers said the choice of words stood out from previous official updates on the ailing king’s health. The widely venerated monarch enthroned since 1946 has been out of the public eye in recent years due to a range of health issues including renal failure. The palace has released more frequent updates of his health this year.

Ailing Thai king's health 'not stable' after haemodialysis treatment, palace says
Commentary from within Thailand about the king’s health and succession plans is scarce because of the country’s tough royal defamation laws, which has seen increased usage under the current military government.

“This is an extraordinary statement from the Royal Household Bureau. Usually they try to say something positive, not this time,” said Kevin Hewison, a veteran Thai politics expert who is emeritus professor of Asian Studies at the University of North Carolina at Chapel Hill.

 

The Thai king has been a unifying force in a country where political uncertainty has long been a destabilising issue. Proposed elections and a return to civil rule might be delayed should the king die even if the crown prince is expected to take over. 

I would like to draw your attention to the 20 year Korean Kospi chart... An explosion waiting to happen ???

Thank you for this question and I displayed a number of long-term charts in the big picture long-term audio / video on Friday. A number of Asian markets are in very long-term ranges and some are testing their long-term highs so I agree it is a good time to ask a question whether they represent explosions waiting to happen now or perhaps later?

Speaking at the Senate Economic Committee on Tuesday, BCB President Ilan Goldfajn. Goldfajn repeated several statements that had already been published in the central bank’s Inflation Report last week, reaffirming the intention of making inflation converge to the 4.5% target in 2017. Goldfajn also repeated the remarks published in the Inflation Report about the three conditions for the authorities to initiate an easing cycle (namely limited persistence of food price shock, disinflation of IPCA components, and lower uncertainty about the fiscal adjustment implementation). The Goldfajn, however, added that the BCB “does not have a pre-established timetable for monetary easing,” as the COPOM decision will depend on several factors, including inflation expectations and forecasts. This comment suggests that the BCB has not yet made a final decision to cut rates, perhaps because market inflation expectations for 2017 have not converged to the 4.1% target yet. Despite Goldfajn’s cautious remarks, we still expect the COPOM to cut the SELIC rate by 25bps at the next meeting later this month.

A link to the full report is posted in the Subscriber's Area.

Brazil has a number of challenges facing the economy not least corruption and the low standards of governance in its state institutions which have contributed to low approval ratings for the government regardless of who is in power. Controlling inflation will be one of the key tests from an international perspective because of the impact that would have on the currency. 

SPDR Utilities Index – With bond yields beginning to rise, “bond proxies” like the Utilities ETF, which yields 3.47%, has now broken to a new low and is trading below its trend mean. A clear upward dynamic will be required to stem the decline. 

“It’s not just the FTSE 100 -- this is a buy U.K. phenomenon,” said Alan Higgins, chief investment officer at Coutts & Co. in London. His firm oversees 14.6 billion pounds ($19 billion). “We have a really nice combination of sterling weakness, reasonably robust economy and generally not a bad environment for risk assets.”

The FTSE 100 and the FTSE 250 climbed 1.8 percent at 3:06 p.m. in London, while the FTSE Small Cap excluding investment trusts index advanced 1.7 percent.

The falling pound is helping the three gauges because their members get a big chunk of their revenues from overseas -- almost three-quarters for FTSE 100 companies, and about half for those on the FTSE 250, according to JPMorgan Chase & Co. and UBS Group AG. JPMorgan Asset Management has estimated the measure of smaller shares also gets about half of its sales from abroad.

The pound fell to its lowest level since 1985 on Tuesday, surpassing the bottom reached following the June 23 vote, after three senior figures in Prime Minister Theresa May’s administration said financial-services companies will get no special favors in secession talks. That increased concern that the nation is heading for an exit that would restrict access to the EU’s single market. May said on Sunday she will trigger the process of leaving the bloc by the end of March, which will mark the formal start of a two-year negotiation process.

Recent data have reinforced optimism that the domestic economy is weathering the aftermath of the vote. The construction industry unexpectedly grew in September, while a manufacturing gauge jumped to its highest level in more than two years. A Citigroup Inc. index tracking economic surprises in Britain is near a three-year high, and the International Monetary Fund upgraded its outlook for the nation, predicting growth of 1.8 percent this year from the 1.7 percent projected in July.

 

With the weekend announcement that the UK government is planning to begin negotiating to leave the EU in Q1 2017, and to a large extent signalling it is willing to risk the passporting rights of the City’s financial services companies, a high stakes period of brinksmanship is unfolding. That is putting pressure on the Pound and it extended its downtrend today by breaking to a new low. While a short-term oversold condition is evident a clear upward dynamic would be required to check the slide and signal of low of near-term significance.

Lowe’s key challenge -- like many of his developed world counterparts -- is generating inflation; part of that involves trying to tame a currency that’s up more than 10 percent in around nine months. The Aussie’s revival, even if partly justified by a jump in iron ore and coal prices and a better outlook for key trading partner China, puts pressure on services industries that are key growth drivers for the post-mining boom economy.

The new governor offered insights to his strategy in the RBA’s renewed agreement with the government, stressing financial stability concerns as part of monetary policy. The risk of further stoking Sydney’s housing boom should discourage him from further cuts, especially as the economy grew an annual 3.3 percent last quarter and unemployment has fallen to 5.6 percent amid rising terms of trade, or export prices compared to import prices.

Coking coal prices have surged more than 150 percent this year as output from China, the world’s biggest miner, tumbles under government pressure to cut overcapacity. Iron ore, Australia’s biggest export, has rebounded 30 percent, though analysts are skeptical about the rally’s durability. Still, the jump in prices for Australia’s biggest exports is a boon for the economy and a government struggling to rein in its budget deficit.

 

The recovery in commodity prices from depressed levels at the end of last year has been a benefit to just about all commodity exporters. Australia’s dependence of some of the major resources China’s economy requires not least  iron-ore, coal and natural gas means that the rebound in all three has been a major influence on the advance in the stock market this year. 

Data shows Mexicans are sending more dollars back home than they have in years, a surge explained in part by the rush to take advantage of the attractive exchange rate. What’s more, some experts even believe that more Mexicans could eventually be tempted to cross into the U.S. in search of work if the peso remains at these levels for months to come.

“If you’re saving to buy a house or have a big expense coming up,” said Carlos Vargas-Silva, an economist with Oxford University’s Migration Observatory, “this is the moment” to ship back the money.

Lozano understands that part, of course. Like most Mexicans here, he follows the peso’s fluctuations closely and has been scrambling of late to repatriate every dollar he can. Some weeks, he sends as much as $200, double what he used to. That’s part of the reason his wife has had so much extra spending money. He just hadn’t realized that it was Trump that was triggering those swings in the peso.

It plunged to a record low of 19.93 per dollar early last week before recovering some of its losses as Trump’s campaign showed signs of faltering weeks before the November vote. Investors worry that if elected, Trump would try to seize migrant remittances; or force American manufacturers to close plants in Mexico and re-open them at home (he’s called out Ford Motor Co. and Carrier Corp. on this point); or wind up accidentally weakening the U.S. economy, the buyer of four-fifths of all Mexican exports.

 

MXN 20 represents a psychological resistance level for the Dollar and some consolidation of its impressive rally is now underway. Nevertheless, a sustained move below the trend mean would be required to question the medium-term uptrend. The fact that the Dollar has been trending higher against the Peso since 2014 highlights the fact that while Donald Trump’s antagonistic rhetoric may have been a factor in the currency’s recent strength it is far from the only challenge facing the economy. 

"Based on the information at its disposal, (the HCFP) considers as uncertain that the nominal deficit will be brought to less than 3 percent of GDP in 2017," it said in a report issued as Hollande's government prepares to publish its 2017 budget on Wednesday.

Finance Minister Michel Sapin dismissed the watchdog's concerns, saying that it was skeptical every year and yet the deficit targets had been met.

"I therefore reaffirm the seriousness of the budget and the government's determination to bring the deficit to less than 3 percent in 2017," Sapin said in a statement.

Paris hopes to rebuild its fiscal credibility with its European partners by targeting a deficit of 2.7 percent of GDP for 2017, the lowest in a decade and under the EU's limit of 3 percent.

A serial offender of the EU's fiscal rules, France has delayed bringing its deficit below 3 percent several times under both Socialist and center-right governments in recent years.

EU Economic Affairs Commissioner Pierre Moscovici, who in effect polices government finances to ensure they are living up to their promises, said he expected France to get the deficit below the 3 percent threshold next year.

"I think it's possible," Moscovici, a former finance minister in Hollande's first government, said in an interview with L'Opinion newspaper.

France's fiscal watchdog said government forecasts for 1.5 percent GDP growth this year and next were optimistic, noting they were higher than what most private sector economists expected.
"The government's growth outlook, which is based on a number of favorable assumptions, does not display the caution necessary to best meet public finance targets and commitments," it said. 

 

More than any other country France exemplifies that within the EU there is one set of rules for large countries and quite another for smaller ones. If any smaller country had failed to adjust its fiscal deficits in the same way that France has it would have come under severe scrutiny from the EC, ECB and possibly even the IMF. Yet for France there has been no such talk despite the fact it has been a serial offender. 

The 65-year-old chairman and chief executive officer of Walt Disney Co. is scheduled to retire in June 2018. He’s already achieved a number of milestones, including Disney’s revival of the “Star Wars” film series and the opening in June of the company’s $5.5 billion Shanghai resort. But one issue bedevils him and most other media executives: how to transition to a world where mobile devices, not TV screens, dominate news and entertainment.

The question underscores Disney’s interest in Twitter Inc. The Burbank, California-based company has hired an investment bank to advise on a possible Twitter merger, Bloomberg News reported Monday. A deal would unite the world’s largest entertainment company, the home of ABC, ESPN and Mickey Mouse, with the technology pioneer that created the 140-character tweet. It could let Iger leave knowing he’s given Disney a big presence in digital media and advertising.

“That would be his final stamp on Disney,” said Tim Galpin, a professor of management at Colorado State University and co- author of “The Complete Guide to Mergers and Acquisitions.” “If he could get that behind him, he could walk off with a final major success story.”

Twitter, whose co-founder and CEO Jack Dorsey sits on the Disney board, has already been dipping his toes in live sports, airing National Football League’s night games. That’s a business that Disney, the parent of the leading sports TV network ESPN, knows well and that clearly intrigues Iger

The acquisition and successful reboot of Star Wars coupled with the opening of the Shanghai resort were major successes for Disney. However that does not obscure the fact that the company’s broadcasting and cable divisions represent almost half of revenues and face challenges from interlopers like Netflix, Hulu and YouTube. These challenges have yet to be addressed. 

The Brussels-based SRB, the resolution authority for 142 banks including Deutsche Bank AG and BNP Paribas SA, will use the minimum capital requirement set by the European Central Bank as a proxy for capital that would be needed to absorb losses in a crisis, Koenig said in an interview this month. The ECB last year set an average requirement for the highest-quality capital of 9.9 percent of risk-weighted assets.

Requiring banks to have at least that same amount again in loss-absorbing liabilities will ensure that they can recapitalize themselves quickly after restructuring, Koenig said. This minimum requirement of own funds and eligible liabilities, or MREL, is calculated at the “30,000-foot level,” and more precise levels tailored to each bank will follow after the ECB sets new capital requirements and changes are made to capital, bank-failure and insolvency rules, she said.

“We want to avoid confusing the markets by saying, this is our decision this year, knowing that it will be different next year,” Koenig said. “So we take an indicative step this year. For next year, we hope that some of the dust has settled.

When reading about the increasingly high obstacle of regulation, higher and higher capital requirements for banks and stricter requirements for what constitutes Tier 1 capital I am put in mind of the adage that “generals are always fighting the last war.” These are policies that would have been appropriate before the crisis in order to mitigate risks. They represent a barrier to lending activity today that deters banks from acting as liquidity providers, regardless of where short-term interest rates are set. 

We're not talking about de-criminalization, or police de-prioritization.

We're talking about alcohol-style regulation and sale of marijuana to adults, age 21 and up. We're talking about legally allowed personal cultivation, state/local taxation of retail sales/distribution, and re-evaluation of sentences/records for people charged with marijuana offenses.
We're talking about outright, full-on legalization of marijuana. And in the world's sixth largest economy, that means billions of dollars. 

If California's Proposition 64 passes on November 8, and sales begin by January 1, 2018, California's looking at an additional $1.5 billion flooding into the marijuana market. That number swells to just shy of $3 billion in 2019, and nearly $4 billion by 2020, based on the latest report from New Frontier Data and ArcView Market Research.

And to be clear, that's on top of the already booming medical marijuana market — the total size of the cannabis market would reach $4.27 billion in 2018, and would grow to $6.45 billion by 2020.
The ballot initiative has overwhelming support in California: Over 60% of respondents support Prop. 64, compared to just 34% opposed, according to Ballotpedia's average of polls.

 

Evidence from companies like GW pharmaceuticals and others means that the Drug Enforcement Agency’s (DEA) assertion cannabis is a Schedule 1 narcotic with no medical use and a high probability for misuse is looking increasingly outdated. Arguments for full legalisation go a step further and promote the view cannabis is no more dangerous for consenting adults than alcohol. Considering the damage abuse of alcohol is capable of that’s not a particularly high barrier. 

Taiwanese shares jumped the most in a year amid speculation Apple Inc.’s latest iPhone model will prove popular, boosting earnings for the island’s suppliers.

The Taiex index advanced 2.8 percent at the close, its biggest gain since September 2015. Taiwan Semiconductor Manufacturing Co., a major Apple supplier, posted its biggest gain in a year, while Hon Hai Precision Industry Co., the main assembler of iPhones, added 3.9 percent. Apple has jumped 6.5 percent since Taiwan’s markets last traded on Wednesday amid holidays. The island’s dollar strengthened by the most since Aug. 1 against the greenback.

“It’s the Apple story again,” said Michael On, president of Beyond Asset Management in Taipei. “There’s a revived optimism that Apple will increase orders for Taiwanese suppliers after better-than-expected sales of the iPhone 7.”

T-Mobile US Inc. and Sprint Corp. said they’d received almost four times as many orders for the iPhone 7 as previous models, fueling speculation that the new product is off to a faster start than usual. Expectations for the iPhone 7 line had been muted before it was unveiled in San Francisco this month amid slowing growth in global smartphone sales.

 

As the world’s largest company Apple outsources all of its manufacturing which means it has a vast ecosystem of suppliers that are responding favourably to the release of the company’s new products as well as to the relative difficulties being experienced by Samsung. 

President Barack Obama said he would lift economic sanctions on Myanmar after meeting at the White House on Wednesday with the country’s de facto leader, Aung San Suu Kyi, a former political dissident whose government took power in March.

"The United States is now prepared to lift sanctions that we have imposed on Burma for quite some time. It’s the right thing to do," Obama said after the meeting, calling the country’s ongoing transition to democracy a "good news story."

U.S. companies have been watching closely for any sign they’ll get more access to the fast-growing Southeast Asian nation, known as Burma before its former military rulers changed the name to Myanmar in 1989. Business groups in the U.S. have complained that sanctions hinder them from competing with major rivals in an economy that the Asian Development Bank projects will expand 8.4 percent this year and 8.3 percent in 2017, making Myanmar Asia’s best performer.

"We are very interested in successful businesses" entering Burma, Suu Kyi said after the White House meeting. "We think our country is ready to take off."

She said that U.S. sanctions helped drive the country’s military junta to surrender power, but that the time had come to lift them.

 

Myanmar is a resource rich country with a number of unique attributes not least in jadeite, rubies and rosewood in additional to oil and gas. With a clear trend of improving governance the argument for dropping sanctions and internationalising the economy is a compelling one not least as the US needs as many allies in the region as it can get. 

The majority of ASEAN markets have benefitted from increasing international investor flows over the last few months and Thailand is no exception. It has received net inflows of nearly $16 billion year-to-date but this has done little to support the stock market in currency adjusted terms. Just about every Asian market pulled back today but Thailand has been leading on the downside. 
 

“The latest incident raises concern that President Duterte’s unpredictable behavior in politics will be disruptive and could eventually spill into economics and business,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc., the Philippines’ biggest lender. It’s “further weakened a market that’s already been made vulnerable by uncertainty over U.S. interest rates, elevated valuations and overseas fund withdrawals,” he said.

The Philippine index is trading at 18.3 times 12-month estimated earnings. While that’s down from 19.6 in July, it’s still the highest in Asia and at a 32 percent premium to the MSCI Asia Pacific Index. The country’s economy expanded 7 percent last quarter from a year earlier, after 6.8 percent growth in the first three months of 2016.

Investors may be better off holding cash in the near term as the index could test its 7,500 support level, said BDO Unibank’s Ravelas. The gauge could fall as low as 7,330 in the next two months over concerns the budget deficit will rise when taxes are cut and spending raised, April Lee-Tan, head of research at COL Financial Group Inc. in Manila, said Monday.

“Smart investors should take advantage of the weakness and accumulate because this is all sentiment-driven," said Rizal’s Palma Gil. “Other than incendiary statements and killings related to the drug war, investors like Duterte’s economic and fiscal policies or at least what has been communicated so far,” he said, adding that he expected the index would go back up to 8,000.

 

Duterte was elected on a law and order and anti-corruption ticket and admitted in his inaugural address that his methods were unorthodox and would not be approved of by many observers. Here is a link to a video of that address. 

"The failure of Russia and Saudi Arabia to take any steps to support the market is sending us lower," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "The Saudi oil minister actually talked the market lower, which is going to cost his country billions." 

Brent rose the most in three weeks on Friday after President Vladimir Putin said he’d like OPEC and Russia to agree to an output freeze, speaking before he traveled to China to meet Saudi Deputy Crown Prince Mohammed bin Salman. Oil had rallied in August on speculation that members of the Organization of Petroleum Exporting Countries and other producers would agree to cap output when they meet informally in Algiers later this month. A similar proposal was derailed in April over Saudi Arabia’s insistence that Iran participate. 

 

Russia, more than most countries, must want to see oil trading at higher prices. It’s by far their most important export and is responsible for funding not only public services but the country’s adventurism in Eastern Europe and The Levant. Saudi Arabia on the other hand has deliberately used oil as a policy tool in its attempt to deprive Iran, against whom it is engaged in open conflict in Syria, Yemen and Iraq, from deriving any advantage from the loosening of sanctions. If Saudi Arabia were to agree to Russia’s terms without a commensurate move from Iran it would be an admittance of failure which would be hard to countenance at this stage. 

The accord is only the beginning: As many have already commented, after the agreement comes the hard work of building peace. This can be broken down very broadly into reestablishing government control over rural areas where state presence has historically been limited or absent, addressing the needs of victims of the conflict, and demobilizing and reintegrating former combatants in ways that contribute positively to society. On the security front, the Disarmament, Demobilization, and Reintegration process (DDR) is already a concern to Colombia watchers. It is unclear if all members of the various FARC combat and support units will agree to demobilize or if they will instead migrate into other insurgent organizations such as the Ejercito de Liberación Nacional or join Colombia’s vast network of criminal organizations. In fact, a recent experience with the demobilization of right-wing paramilitaries affiliated with the Autodefensas Unidas de Colombia under President Uribe showed that a substantial number of former combatants joined criminal organizations, known as BACRIM or Bandas Criminales. The state will have to move swiftly to establish its presence in those areas where the FARC once operated, or else these gaps will be filled by organized crime. For those insurgents that do demobilize, their success will depend on their ability to find legitimate work and the people’s ability to accept former combatants as members of their community.

In Freakonomics Dubner and Levitt make some very instructive points on the incentives drug dealers have to persist in what is typically a dangerous, competitive environment where death is a realistic possibility before the aspiration to achieve riches is every achieved. If we accept that demand for illicit narcotics is a relative constant, subject to a moderate growth rate, then volatility arises as a factor of supply. 

Gordhan, 67, was named finance minister in December after Zuma roiled markets by firing Nhlanhla Nene from the position and replacing him with a little-known lawmaker. His relationship with Zuma has been a fractious one, with the president denying his requests to fire the nation’s tax chief for insubordination and appoint a new board at the state-owned airline.

“President Jacob Zuma wishes to express his full support and confidence in the minister of finance and emphasizes the fact that the Minister has not been found guilty of any wrongdoing,” the Presidency said in a statement. “The negative effect of these matters on our economy, personal pressure on the individuals affected as well as the heads of institutions, however disturbing, cannot be cause for the president to intervene unconstitutionally.” 

The National Prosecuting Authority hasn’t received a docket from the police and there was no indication when they would receive one, Luvuyo Mfaki, a spokesman for the national prosecutor, said by phone. City Press reported that the docket would be handed to the NPA on Friday after the police questioned tax agency officials including Ivan Pillay, the former deputy commissioner, and Oupa Magashula, the ex-commissioner.

 

Standards of political governance have been declining steadily since the ANC assumed what is in effect single party rule. Institutions and laws which support the free market, such as the independence of the judiciary, minority shareholder and property righrs have all been under attack. Continued political turmoil and the volatility of Zuma’s administration are additionally not good for confidence. 

The most common type of banana the western world eats is the Cavendish, which is produced through vegetative reproduction – instead of growing from seeds, cuttings of the plant's shoots are replanted and cultivated, making all Cavendish bananas essentially "clones" of one specific plant. Without genetic variety, as diseases gain a foothold over the fruit, they're equipped to potentially take out the entire worldwide crop.

"The Cavendish banana plants all originated from one plant and so as clones, they all have the same genotype – and that is a recipe for disaster," says Ioannis Stergiopoulos, plant pathologist at UC Davis.

Currently, close to 120 countries produce about 100 million tons of bananas each year, but 40 percent of the yield is spoiled by Sigatoka, a fungal disease complex comprised of three strains: yellow Sigatoka, black Sigatoka and eumusae leaf spot. To combat the ever-present threat, farmers need to apply fungicide to their crops 50 times a year, which isn't only costly, but can pose a threat to the environment and human health.

"Thirty to 35 percent of banana production cost is in fungicide applications," says Stergiopoulos. "Because many farmers can't afford the fungicide, they grow bananas of lesser quality, which bring them less income."

 

The susceptibility of bananas to bacterial attack, due to their lack of genetic diversity, puts me in mind of the Irish potato famine where reliance on a single breed of tuber left the population bereft of a major portion of their diet when blight destroyed the crop. Of course no one is as heavily reliant on bananas yet they do form a constituent part of many people’s diet globally. It should be possible, given today’s technology, to protect the crop from infection and potentially even enhance yields which could flatter profitability for major producers.   

Asked whether hundreds of thousands of refugees in Turkey would head to Europe if the EU did not grant Turks visa freedom from October, Cavusoglu told Bild: "I don't want to talk about the worst case scenario - talks with the EU are continuing but it's clear that we either apply all treaties at the same time or we put them all aside."

Visa-free access to the EU - the main reward for Ankara's collaboration in choking off an influx of migrants into Europe - has been subject to delays due to a dispute over Turkish anti-terrorism legislation, as well as the post-coup crackdown.

Brussels wants Turkey to soften the anti-terrorism law.Ankara says it cannot do so, given multiple security threats which include Islamic State militants in neighboring Syria and Kurdish militants in Turkey's mainly Kurdish southeast.

European Commissioner Guenther Oettinger has said he does not see the EU granting Turks visa-free travel this year due to Ankara's crackdown, which has included the round-up of more than 35,000 over alleged involvement in the coup.

Cavusoglu said the migration deal with the EU stipulated that all Turks would get visa freedom in October, adding: "It can't be that we implement everything that is good for the EU but that Turkey gets nothing in return."

 

It is a bit disingenuous of Turkey to say they get nothing in return when the EU is paying a multi-billion euro stipend to contain migrants in Turkey, instead of having to deal with them within the borderless EU. However the Turkish administration is understandably on edge and feeling defensive following the foiled coup and is probably looking for a win, internationally, to bolster confidence in its ability to govern successfully. 

European equity markets are by far the most global, more than their economies, and are most exposed to Emerging Markets (EM)

US equity market is the most closed of the Developed Markets (DM), a key ingredient to the US’s relative ‘safer-haven’ status

Japanese overseas revenues have grown sharply in recent years, but are now threatened by yen strength

EM stock markets are the most closed, accounting for the bottom seven countries in our ranking
Economies are not stock markets. DM and EM have similar exports/GDP levels, but DM stock markets are twice as global

Chinese corporates going abroad, but only generate 10% overseas today. Brazil corporates only 20% overseas after commodity slump 

Italy and India have ‘globalized’ the most in recent years

IT is the most global US sector; Healthcare the most global European sector. Utilities and telecom are respectively the most local

Overall overseas revenue contribution has stalled (at 44%) the last three years, as globalization has come under pressure

Looking at indices based on revenue rather than domicile transforms the investment universe: EM much larger, whilst US a lot smaller

 

A link to the full report is posted in the Subcsriber's Area.

With the growth of the global consumer base we began to pay attention to large international businesses that dominate their respective sectors from about 2011. I developed the list of Autonomies by looking at data similar to that compiled in this report; using it to identify companies that have global businesses. In perusing the report veteran subscribers will no doubt be familiar with many of the names. 

After taking over in May, Temer has yet to drive through any major policy proposals amid concern that painful spending cuts or unpopular reforms could weaken Senate support for his administration ahead of the impeachment vote. His economic team is expected to propose changes to social-security laws immediately after the ruling, and support for that and other measures will be an important indicator of whether Brazil’s world-beating currency, bond and stock rallies have staying power.

Optimism about political change in Brazil “is somewhat being reflected in year-to-date momentum, but it’s not completely priced in,” said Sean Newman, a senior portfolio manager for emerging markets at Invesco Advisers in Atlanta.

Investors will likely remain bullish on Brazil’s corporate and government debt throughout August, and credit default swaps may extend this year’s gains once Rousseff is removed for good, he said. In the swaps market, the cost to hedge against losses on Brazil’s bonds has fallen by almost half since February. The currency, meanwhile, has rallied 26 percent against the dollar, the most in the world, and the benchmark Ibovespa index’s 68 percent increase in dollar terms in 2016 outperforms all other major benchmarks.

 

Foreign investors had been waiting for a catalyst to re-enter the Brazilian market and the prospect of a new reform minded president has seen the Real surge and the iBovespa challenge a six-year progression of lower rally highs. The big question is to what extent these rallies have already priced in much of the good news since none of the expected fiscal reforms have yet been passed.

Indonesia – The Jakarta Composite is now testing the March 2015 peak and while overbought in the short-term a clear downward dynamic will be required to signal more than temporary resistance in this area.
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Emerging-market currencies rallied after the Bank of England cut its key rate for the first time in more than seven years, boosting speculation that policy makers around the world will continue to ease monetary conditions and the U.S. Federal Reserve will delay rate increases. After keeping its Selic rate at 14.25 percent at a meeting last month, Brazil’s central bank said there is no room for monetary flexibility, citing the need for further fiscal adjustment and an unfavorable climate that is harming global food production.

"The real is gaining momentum as most central banks across the globe continue to ease further their monetary policy," said Arnaud Masset, an analyst at Swissquote Bank SA in Gland, Switzerland. "Investors are desperately chasing higher returns, while volatility in the FX market is at multi-month low, which creates an enabling environment for carry trade and definitely drove the real higher over the last few months."

Buying the real with borrowed dollars in a carry trade has returned 32 percent this year, the most among 42 currencies tracked by Bloomberg.

Bank of England officials voted to reduce the benchmark rate to a record-low 0.25 percent and also to expand quantitative easing, as they slashed economic growth forecasts by the most ever.
"The BOE actions help foster expectations that other central banks might follow and improve liquidity worldwide," said Mauricio Oreng, a senior strategist at Rabobank in Sao Paulo. "And when the general market mood improves, the search for returns causes the high yielding real to outperform."

 

Brazil has an overnight deposit rate of 14.15% which is attractive to investors, particularly those residing in negative interest rate jurisdictions, despite the obvious issues the economy is subject to that require such a high rate. 

Governance is Everything has been a mantra at this service for decades. Brazil represents another great example of how a failure to improve standards of governance during the good times means the drawdown during the bad times is often worse than anyone might have expected. 

HSBC Holdings Plc. rose the most since April after it announced a $2.5 billion stock buyback for this year and said it plans more share repurchases while keeping its dividend at the current level for the foreseeable future.

Chief Executive Officer Stuart Gulliver is returning half the equity freed up from selling the bank’s Brazil unit, with the rest boosting the firm’s capital ratio to 12.8 percent. That outweighed concerns about profitability, as pretax earnings fell 45 percent to $3.61 billion from a year earlier, and the bank removed a target of surpassing a 10 percent return on equity by the end of next year.

“There is absolutely an intention to be in a position to do further buybacks,” using capital no longer needed by its shrinking U.S. operations, Finance Director Iain Mackay said on a conference call with analysts. The Federal Reserve approved the firm’s U.S. unit returning “substantial” capital to the parent company next year, which “could lead to another buyback,” he said.

 

HSBC does what very few lenders can do at present; it pays a substantial dividend. By keeping the level unchanged, the 12-month yield of 6.86% will be maintained for another year which ensures investors at least three more dividend payments before the rate is next questioned. 

In the laboratory, mosquito eggs are collected from breeding cages containing 5,000 females and 1,600 males and injected with the wolbachia bacteria. Xi's facility has the capacity to breed up to five million mosquitoes a week.

While a female mosquito that acquires wolbachia by mating is sterile, one that is infected by injection will produce wolbachia-infected offspring. Dengue, yellow fever and Zika are also suppressed in wolbachia-injected females, making it harder for the diseases to be transmitted to humans.

Xi set up his 3,500 square meter (38,000 sq ft) "mosquito factory" in 2012 and releases the males into two residential areas on the outskirts of Guangzhou.

Xi said the mosquito population on the island has been reduced by more than 90 percent.
One villager on the island, 66 year-old Liang Jintian, who has lived there for six decades, said the study was so effective he didn't have to sleep with a mosquito net any longer.

"We used to have a lot of mosquitoes in the past. Back then some people were worried that if mosquitoes were released here, we would get even more mosquitoes," he said. "We have a lot less mosquitoes now compared to the past."

 

Zika virus has been making headlines because it poses a risk to unborn children but yellow fever, dengue, West Nile virus and especially malaria all kill and/or debilitate more people and have been with us for eons. There have been headlines recently to the effect that malaria is the biggest killer in human history. When looked at in those terms, the efforts to control the spread of these diseases represent a major contributing factor in the potential for economic growth in high population countries residing in prime mosquito breeding territories. 

“The opportunity is huge,” said Jasper Cheung, president of Amazon Japan. “We have already increased the selection that we can export by the millions over the last several weeks.”

Chinese shoppers are looking for authentic Made-in-Japan products, spooked by tainted baby milk and fake merchandise proffered on web stores in China. While that’s helping to drive an influx of shoppers to Japan -- 3.08 million Chinese tourists have visited the archipelago so far this year, up 41 percent -- it’s also boosting demand for Amazon.co.jp, Wandou and other web outlets featuring Japanese goods.

Rakuten Inc., the Japanese online store, also lets people shop for stuff from Japan in Chinese, as well as in Korean and English. Amazon’s Japan website has been available in English for years.

The new iteration of Amazon Japan’s shopping portal, in simplified Chinese, offers millions of products with more coming, the company said. Consumers in Asia’s biggest economy are demanding access to authentic brands and quality, from clothing and cosmetics to baby products and health goods. That’s why Costco Wholesale Corp. has a shop on Alibaba’s Tmall.com, while Macy’s Inc. and other U.S. retailers are tapping into China’s dominant online-payments system by accepting Alipay on their sites.

 

For billions of new consumers entering the middle classes their first taste of consumerism is likely to be via their mobile phones where they are aggressively marketed to via Wechat, Facebook, Instagram and a host of other social media sites. That puts dominant online marketplaces like Amazon, Alibaba, Ebay and Rakuten in a favourable position to compete for their business and China represents a major battleground. Uber’s experience in China highlights the difficulty of doing business in that country where one is competing with a domestic copycat operation. Amazon’s strategy of building out its Japanese operation may act as a hedge to domestic Chinese operations where it competes directly with JD.com and Alibaba.  

There’s also politics. What set the stage for the peace negotiations was, in part, the creation of the office of land restitution. The nation has always had a drastically unequal distribution of land, and displacement exacerbated that trend. Today, less than 1 percent of the Colombian population owns more than 60 percent of the land, one of the world’s most inequitable ratios. When the government showed a willingness to address this issue, FARC came to the negotiating table.

The government now says that giving back their land may make its citizens less restless, less inclined to support radical forces. This stability would help attract foreign investment. Unlike other Latin American countries, Colombia has been a loyal U.S. ally and reliably market-friendly. “What’s held back development has been the security situation. The war made many parts of the country ungovernable and, thereby, untapped,” Colgate University’s Ballvé says. With a peace agreement forthcoming, that will change. “The country has vast mineral and oil reserves in areas that will be newly coming online—in part, thanks to initiatives like the land restitution program.”

Although land restitution is key to long-term stability, it’s causing turmoil in the short term. Leading international human-rights organizations have documented intimidation campaigns targeted at those trying to return home. Families going back to their land have received death threats, and in 2015, 105 activist leaders were killed, a 35 percent increase from the previous year. Judges who issue land restitution decisions are given personal security details, says Sabogal, the director of the government office. Colombia’s landed elite used to employ right-wing paramilitaries to enforce their claims. Now they’re colluding with drug trafficking groups.

The evolution of chemically based narcotics such as fentanyl might be the best news to hit countries like Peru and Colombia in years. The cultivation of coca for processing into cocaine helped fuel civil unrest and funded rebel groups like FARC. With the increasingly legal availability of cannabis and the ability of Mexican cartels to manufacture both opioids methamphetamines the market for cocaine must be evolving. 

“Macau’s gaming industry and the whole economy will continue to adjust, but the decline may shrink to 7.2 percent this year and even resume growth in 2017,” Chief Executive Fernando Chui said in a televised session of the city’s legislature Wednesday. “It’s a good time for Macau to re-position after a 25-month gaming revenue drop.”

Gross domestic product in Macau declined 20.3 percent in 2015, worsening from the 0.9 percent drop the year before, as the world’s largest gambling hub was hurt by China’s anti-corruption campaign that scared off high-rollers. The casino industry, which accounts for half of Macau’s GDP, is in the midst of a casino building boom to boost revenue from mainstream gamblers and tourists.

Recreational Gamblers
Macau’s government is working with its six casino operators to “improve synergies” between gaming and non-gaming pursuits, Chui said. The city is trying to reduce its reliance on gambling and is targeting to raise the proportion of casinos’ non-gaming revenue to 9 percent by 2020 from 6.6 percent in 2014.

 

The outlook for the gaming sector and China are inextricably linked. Macau represents a much larger gambling market than even Las Vegas and that city also depends on the largesse of Chinese high rollers to drive profitability. With the outlook for growth improving in Macau that may be an initial sign that the Chinese tourist market is still healthy. 

Chinese consumer stocks are in the cross- hairs of Hong Kong’s short-sellers.

Bearish bets on Tingyi (Cayman Islands) Holding Corp. and Want Want China Holdings Ltd. soared to record highs since May, data compiled by IHS Markit Ltd. show. The instant noodles and snacks manufacturers, together with sanitary-napkin maker Hengan International Ltd., make up three of the four most-shorted stocks on Hong Kong’s benchmark index. Hengan this month spun off its food business into a separately listed unit that’s down 27 percent from its first close through Thursday.

Bears are betting that China’s shift toward an economy driven by middle-class spending will leave some consumer stalwarts behind. Even after valuations on Tingyi and Want Want fell to all-time lows at the start of the year, the stocks are still too expensive as Internet retailing helps foreign brands grab market share in China, according to Ample Capital Ltd.

Shoppers are showing a preference for healthier food, UOB Kay Hian Holdings Ltd. says. “Consumers have been changing their pattern to more nutritional products so their business growth is declining,” said Johnson Hu, a Shanghai-based analyst at UOB Kay Hian. “We don’t see that changing in the foreseeable future.”

Short interest in Want Want and Tingyi has risen to 7.6 percent and 4.9 percent of their outstanding shares as of Tuesday, Markit data show. Bearish bets in Tingyi surged to a record level this month, and those in Want Want are close to all-time highs last seen in May. The average of similar wagers for the 50 Hang Seng Index members was about 1.3 percent.

 

The evolution of online retail has had a dramatic effect on the ability of bricks and mortar stores in North America and now that pattern is likely to be repeated elsewhere as the convenience of online shopping trumps the toil of driving and walking to a store only to have to carry home the goods afterwards. The additional fact that diabetes is a major problem in both China and India suggests the potential for concerted drives to eat healthier more nutritious foods is more likely than not. 

Volatility in Brazil’s real dropped to the lowest level in a year as the central bank acts to limit gains in the world’s best-performing currency amid speculation that a new government will pull the nation from its deepest recession in a century.

Three-month implied volatility on the real declined 0.05 percentage point to 16.78 percent, the lowest level since July 22, 2015, at 12:25 p.m. in Sao Paulo. The currency advanced 0.3 percent to 3.2393 per dollar.

Brazilian assets have led gains globally this year amid speculation that Acting President Michel Temer will trim a budget deficit, end credit-rating downgrades and restore confidence. Concern that the currency’s rally would hamper exports at a time when Latin America’s largest economy already faces its worst recession in a century has led the central bank to sell almost $50 billion of reverse swaps to stem gains. While the offerings are unlikely to change the direction of the real, they can mute volatility, Morgan Stanley strategists led by Gordian Kemen wrote in a report published last week.

“The domestic reform narrative in Brazil is an important qualifier for the currency and for the decrease in its volatility," said Mike Moran, the head of economic research for the Americas at Standard Chartered Plc in New York.

The Brazilian Real is the best performing currency this year; gaining over 30% year to date. The chronic mismanagement of the economy that prevailed under Dilma Rousseff’s administration is now in the past and the new government has the opportunity to introduce unpalatable reforms early in its tenure so that it might benefit from the results by the time the next election needs to be called. Whether that eventually translates into improving governance and a sustained reduction in corruption and graft is an altogether different question, but we can conclude that at least for now governance is improving from a low base.

Too much property; curbs could turn permanent 
Unless property prices plunge suddenly and dramatically, we think that property-cooling measures may not be lifted. Singapore households have SGD840b of capital or 209% of GDP tied up in residential property. This has resulted in lower disposable income which has impeded consumer spending and muzzled entrepreneurship. Another less obvious implication of property “overinvestment” is that home-price appreciation fuels wage inflation, reducing Singapore’s cost competitiveness. We think turning property-cooling measures permanent could be an effective way to steer investments away from this asset class to more productive uses in the long run, which may be what the government is contemplating. As this would put developers at the losing end, we turn less bullish on the residential property sector and downgrade it to NEUTRAL. Wing Tai and CityDev are most exposed to Singapore’s residential market. Additionally, given the knock-on effects on loan demand, continue to sell banks, which are already grappling with asset-impairment risks and likely fewer lending opportunities. OCBC and DBS are least preferred. 

Wage pressures: we think government will step in 
Short-term relief to wage pressures is required, in our view, as wage growth has outpaced productivity gains. Wages now hit 43.4% of GDP. Historically, such levels preceded a recession, as in 1985, 1997 and 2000. Without intervention, retrenchments could rise. Although cutting CPF rates can offer a direct reprieve, it runs counter to concerns about retirement financial security and may be politically unpalatable. We think that the ideal solution may be for the government to co-pay wages and increase social spending. Businesses could receive a shot in the arm, especially those with high labour content. 

Boost consumption! 
At 37% of GDP, Singapore’s household consumption is one of the lowest among developed countries. What’s more, it has been declining. If a diversion away from property investments and wage relief are successful, we foresee a consumption boost. Such domestic-led growth should be more desirable amid rising anti-globalisation sentiment in parts of the world. Consumer staples could offer the best exposure to this, we believe. We recommend Sheng Siong.

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Singapore has seen living costs rise precipitously over the last decade with the result the island economy has seen its competitiveness come under pressure. Enhancing standards of living has allowed the PAP to stay in power since 1959 because it has not shied away from central planning supported by world class management of public resources. It will need to continue to deliver on succeeding in making tough decisions that deliver long-term positive results if its record is to be sustained through what is a difficult environment for its major trading partners. 

Clearly, Turkey’s democracy has taken a severe blow—cushioned only by the unequivocal stance of the opposition leaders and the media against the coup. Once again, the nation managed to break this pattern of ten-year coups. This offers the country a matchless opportunity for reconciliation. Granted, Erdogan has had an exceptionally rough weekend and his frustration with those responsible for or implicated in the coup is understandable. He is correct in calling “for their punishment under the full force of the law of the land.” It will, however, now be critical that he ensure that the rule of law is upheld and rises to the challenge of winning the hearts and minds across a deeply polarized nation. He has the tools for it in his repertoire and had successfully wielded them in the past—especially between 2003 and 2011, when he served as prime minister. In hindsight, this period is often referred to as AKP’s “golden age,” when the economy boomed, democracy excelled, and Turkey was touted as a model for those Muslim-majority countries aspiring to transform themselves into liberal democracies.

As he steers the country from the brink of civil war, Erdogan needs to rise above a majoritarian understanding of democracy and do justice to the aspirations of a public that heeded his call by pouring into the streets and squares to defeat the coup attempt. This is the least that the Turkish public deserves. This would also be a move in the right direction for Turkey’s neighborhood, which desperately needs a respite from the turmoil resulting from the war in Syria, the instability in Iraq, Russia’s territorial ambitions and now Brexit. This is the moment when a stable, democratic, transparent, accountable and prosperous Turkey needs to come to the fore on the world-stage. The United States needs it too. As much as the White House declared its faith in the strength of Turkey’s democracy and its support for the elected leadership, there is a clear chance for forging closer cooperation between the two countries. The first step in cooperation should be in bringing to justice the perpetrators of this coup, followed by measures to enhance Turkey’s capacity to address and manage the many challenges facing Turkey and its neighborhood.

 

With mass killings in Europe, civil unrest becoming a factor in the US election cycle, wars in Syria, Iraq and Yemen, an increasingly expansionary geopolitical attitude in Russia and China exhibiting an adventurous proclivity it is easy to conclude standards of governance are deteriorating. Yet we should not forget that Argentina has a new reform minded president, India and Indonesia are led by reform minded administrations and even Nigeria is making strides towards improving conditions albeit from about the lowest base imaginable. 

Global funds have injected a net $1.4 billion into the territory’s stocks this week through Wednesday, the most among eight Asian markets tracked by Bloomberg. Developing-nation currencies are recovering this month after plunging in the aftermath of the U.K.’s vote to leave the European Union in June. Futures are now pricing in less than even odds of a Fed rate increase in 2016.

“The market thought that, after Brexit, funds would leave Europe and go to the U.S., but it seems some are entering emerging markets because U.S. rate hikes will be delayed," said Cary Ku, an economist at Jih Sun Securities Co. in Taipei.

"Taiwan stocks’ higher yield also attracts foreign investors."

 

Despite the fact the Chinese Renminbi remains in a consistent, though somewhat oversold, downtrend against the Dollar, the majority of ASEAN currencies found medium-term support last year. For example the Indonesian Rupiah hit a low in October, the Thai Baht in October and the Taiwan Dollar in January and that was following multi-year declines in all cases. 

It’s a match made in milk heaven: Danone, the French dairy giant behind brands like Activa, Oikos and Dannon yogurt, announced Thursday morning that it will buy Silk Soy Milk maker WhiteWave Foods in a deal worth $10 billion.

Danone said Thursday that it will pay $56.25 per share to acquire WhiteWave, a price that marks a 24% premium to WhiteWave’s average closing price ($45.43) over the last 30 days. Including debt and other WhiteWave liabilities, the companies are valuing the deal at $12.5 billion. The deal is expected to close by the end of the year, pending all customary shareholder and regulatory approvals.

The acquisition is expected to be fully financed with debt. Danone said that it has received commitment from its banks for this debt, and that it expects to maintain a “strong” investment grade rating.

While the companies are calling the merger a “perfect match of vision, culture, and business,” the financial benefits are even more compelling: the acquisition will serve to almost double the size of Danone’s U.S. business, taking its North American footprint from 12% of Danone’s overall portfolio to 22%. Danone also said that merging with WhiteWave will make it one of the top 15 food and beverage producers in the U.S.

The companies are projecting $300 million in synergies by 2020, and Danone is saying that the merger will be accretive to its earnings within the first year of the deal’s closing.

 

Danone, despite being listed in France, has been relatively unaffected by the travails that have affected the majority of Eurozone shares this year. It is helped considerably by the fact that the vast majority of its revenue is sourced outside the EU and this acquisition brings its operations improved diversity. The result will be that about a third of revenues will come from the Americas, Asia and Europe respectively. 

At the beginning of the year, Vietnam installed a new Prime Minister, replacing a candidate widely viewed as having spearheaded reforms over the past decade. The Philippines also elected a new President in May, but he is widely viewed as taking a hard-line stance on issues such as crime and domestic and foreign policy (Washington Post, 10 May 2016).

By contrast, and perhaps more reassuringly, over in Indonesia the pro-reform ruling coalition has been benefiting from shifting political allegiances, and its initial minority presence in parliament has now turned into a majority. Then there’s Malaysia. Despite the troubles with sovereign wealth fund 1MDB, the results of a state election and two federal by-elections suggest that the ruling coalition remains in a strong position ahead of general elections in 2018. Last but not least, there’s Thailand, which will vote in a referendum on the draft constitution in August. If approved, this could lead to an election in 2H 2017, potentially paving the way for the country to emerge from over two years of military rule.

What will the above political shifts mean for structural reforms and the longer term economic outlook? In the following sections, we look at the reform agenda of each country in detail, and how the recent or upcoming political changes might impact these. Some of the desired reforms, such as the need for greater investment and in particular, infrastructure, recur across the region. Government balance sheets in some places will also need to be kept in check, and trade liberalization pursued. But policymakers are approaching all of these issues in their own unique ways, and change is afoot.

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The ASEAN region is unlikely to escape unscathed if European and UK demand for its exports deteriorates. However the majority of ASEAN companies do not have large investments in Europe and are more leveraged to the demand growth stories that continue to benefit from improving standards of governance at home. 

The victory of the “Leave” campaign stunned many investors who’d put wagers on riskier assets over the past week as bookmakers’ odds suggested the chance of a so-called Brexit was less than one in four. MSCI’s Asian measure dropped 3.7 percent on Friday, led by losses in Japan, South Korea, Australia and Hong Kong. A gauge of Asian currencies weakened the most since China devalued the yuan in August.

“This is just a knee-jerk reaction,” said Tony Chu, a Hong Kong-based money manager at RS Investment Management, which oversees about $17 billion. “Most stocks we look at in Greater China have little to do with the U.K. or the European economies.

We still like Internet-related stocks, consumption and health- care stocks. That’s where we see relatively better earnings prospects.”

The Shanghai Composite Index slid 1.3 percent on Friday, while volume increased less than other major Asian benchmark gauges. Foreign investors are limited by quotas from buying and selling mainland Chinese equities, with local individuals accounting for about 80 percent of trading.

Most Asian markets advanced on Monday. The Topix index rebounded 1.8 percent at the close, as the Shanghai gauge climbed 1.5 percent. Australia’s S&P/ASX 200 Index added 0.5 percent. Hong Kong’s Hang Seng Index dropped 0.2 percent, trimming an earlier loss of 1.4 percent.

To be sure, in the short term, fund managers are girding for higher volatility and a flight out of all but the safest assets. Asia can’t escape a global deterioration in risk sentiment, Harvest Global Investments Ltd. says.

 

Europe, and most particularly the Eurozone, represent the epicentre of global risk. The UK certainly represents a lightning rod for bearish sentiment and that pressure is falling primarily on the Pound. However, potential future issues reside with how the EU will deal with what is an existential threat. 

“The FARC are looking at their Plan B, and their obvious Plan B is the ELN,” he said by phone from Medellin. “Certainly in the 60-odd municipalities where they co-habit, we think it’s very likely that there will be a transfer of these criminal economies, gold and coca, to their revolutionary cousins.”

The Colombian government and the ELN announced the start of a formal peace process on March 30, although negotiations have yet to start. The ELN has no intention of sitting down to talk until first seeing how the FARC agreement pans out, Builes said.

The ability of Mexican drug cartels to import the raw materials for fentanyl directly from China and manufacture pills either in Mexico or the USA, therefore bypassing Colombia entirely, represents a major threat to the latter’s business model. More than any other factor that may have played a role in the FARC’s decision to agree to talks. Nevertheless, the market for cocaine might not be growing as quickly as it once did but it still represents a multibillion Dollar business. Logically, someone will ensure it keeps going regardless of deals with the government. This article by also be of interest. 

Industry insiders say the outlook depends on whether the incoming government of President-elect Rodrigo Duterte can help develop enough of the tailored education programs needed to produce skilled for a more sophisticated range of tasks.

Climbing the value ladder won’t be easy. TaskUs, a U.S.-based outsourcing with operations here, is among those that are trying. Innovation is the key to survival, said Bryce Maddock, chief executive of the company, which provides a range of back-office functions for tech startups, including the mobile dating site Tinder and the message service Whisper.

“We’re trying to ‘un-call center’ the call center,” said Mr. Maddock, who tries to battle the endemic turnover in industry hotspots like Manila by offering a modern workspace modeled on the casual vibe of Silicon Valley.

He says just a tenth of the company’s 5,000 employees are actually answering phones. Most are managing content on websites or handling customer relations via online chat.

The shift reflects an industrywide trend. TaskUS reflects an industrywide trend. A decade ago, nearly all Philippine outsourcing work was phone-based. Now, it’s just 60%, a figure that’s bound to keep declining, outsourcing executives say, even as the industry as a whole continues to expand.

 

It takes a village to run a successful ecommerce site so while automated systems are increasingly taking over the phone lines we still need humans to conduct search engine optimisation (SEO) and manage website content. These tasks are still heavily labour dependent so demand for call centre operatives is likely to remain on an upward trajectory but the sophistication of the work is likely to increase. 

Oil producers in Nigeria are facing a renewed wave of violence in the delta region that accounts for most of the country’s crude. Nigeria’s output dropped to the lowest in almost three decades as armed groups intensified attacks to rupture pipelines in recent months. Total volume of crude shut due to the attacks range from 700,000 to 800,000 barrels per day, according to the state-owned Nigerian National Petroleum Corp.

The weakness of the Dollar against commodity producing currencies and continued supply disruptions in both Nigeria and Canada are helping to boost demand among traders for the most important commodity and are at least partially offsetting the boost in supply from Iran since sanctions were lifted. 

Southeast Asian countries, with the exception of Thailand and Singapore, have better economic prospects than the rest of Asia, according to Nomura Holdings.

In a Tuesday media briefing, senior Nomura economists and researchers say that the countries they are positive about – Malaysia, the Philippines, and Indonesia -- are strong structurally and have the right policies in place.

Euben Paracuelles, Nomura’s Senior Economist on Southeast Asia, says they have a neutral outlook on Malaysia, but is positive overall noting the sentiments around the country.

“The economy is really quite resilient despite this combination of shocks from low commodity prices, fiscal consolidation [and] the political noise… because there was quite a bit of diversification in the economy in the last couple of decades,” Paracuelles says. 

He says Malaysia’s manufacturing sector is doing well because it has a competitive currency and the right product mix that can cater to the current US consumer demand and their recovering housing market.

With manufacturing making up 60% of the export sector, and commodities making up 30%, the manufacturing gains is enough to offset the loss in commodity profits, he adds.
For the Philippines, Paracuelles noted that the new president, Rodrigo Duterte, would “take a very pragmatic approach [for the economy].”

He says that it is unlikely for Duterte to reverse the current economic reforms, and the eight-point agenda he released after his win highlighted that policy continuity is key.

 

China is Asia’s regional heavyweight so when the Renminbi found at least short-term support in the region of the January low on Friday it removed some pressure from its neighbours and competitors to seek weaker currencies to maintain their relative positions. 

The Asia Dollar Index formed an upside weekly key reversal last week to confirm support above the January low and has followed through to the upside so far this week. A sustained move back below 106 would be required to question potential for additional upside. 

Governance in South Africa. I agree fully with your current assessment of the deterioration of governance in this country. My wife and I retired to St. Lucia, KZN some 14 years ago when Rand to GBP was 11, now almost 23. The present ANC administration under Jacob Zuma in the opinion of most thinking South Africans has been little short of disastrous. At the present time we have a power struggle going on in which the internationally respected finance minister is in danger of losing his job. We are also seeing a disturbing trend where sections of the population are fire bombing educational institutions. 27 schools in Limpopo province were torched a fortnight ago. In the face of this criminal behaviour the police seem unwilling or unable to take decisive action

And

Governance in South Africa Post Script Both India and South Africa held general elections 2 years ago. One just needs to look at the chart for INR/ 1ZAR to see how the two countries have diverged in terms of governance in that time

 

Thank you for sharing your perspective. I have had a warm regard for South Africa since holidaying in KZN in 2000 and again in 2002. Minority shareholder rights, a free press and an independent judiciary are all important considerations when considering what the status of governance is in a country. Black empowerment introduced a question about the continuity of South Africa’s standards of governance, albeit for laudable reasons, and the country has required closer attention to political events since. 

world. Zurich leads the way, followed by Sydney, London, Milan, Stockholm, Copenhagen, NYC, San Francisco, Amsterdam and Madrid. Tokyo is amongst the most expensive cities on most measures but surprisingly cheap hotel rooms (more akin to EM prices) help push it below many others. Our cheap date index sees Zurich, Copenhagen, Tokyo, Stockholm and Amsterdam as the most expensive cities to woo a partner. One might choose to settle down at a younger age in these countries or risk expensive courtships. London has dropped 2 places this year and out of the top 5. At the other end of the scale, cities in Malaysia, India and South Africa are the cheapest for a weekend away and around a third of the cost of the most expensive places. For those wanting a real cheap ‘cheap date’, India, Indonesia, the Philippines and South Africa are the places to go. Indeed in all of these places you can have at least 4 dates for the price of one in Zurich but please don’t tell the other 3 people! 

Don’t lose your phone while away in Brazil, India, Sweden, Denmark or Italy as a new iPhone is most expensive there. The US remains the place to buy a new one, followed by HK and Japan. Interestingly there are signs that perhaps Uber is making its mark on the world as taxi prices in many places are falling sharply. Indeed in San Francisco (where Silicon Valley resides), taxi prices have fallen more than anywhere in the DM world over the last 12 months (-30%). 

Bad habits cost you most in Melbourne, Singapore, Auckland, NYC and London as our ‘sin index’ of cigarettes and beers suggests. Singapore and Copenhagen really don't want you to own new cars as prices are nearly 4 times and 2 times the cost of NYC here. Buying a new car in India is half the price of NYC if you can find a way of driving it home. In addition to the aforementioned items this report also looks at the cost of various goods and services across the world. The index page provides the full list.

A link to the full report is posted in the Subscriber's Area.

Scrolling through the constituents of this index, the same group of countries crop up at the top and bottom of the most and least expensive. Part of the reason for this is because of relative states of economic development but the declines in many emerging market currencies is another consideration and helps to highlight how much competitiveness can be gained from a prolonged period of currency devaluation. 

I would also be grateful for an update of your view on the Vietnam market, which has broken out above its 200 day MA and is approaching the top of a multi-year trading range.  The government has announced the merger of the Hanoi and HCM stock exchanges as well as other market friendly initiatives which could perhaps be behind the recent outperformance of Vietnam vs other Asean indices.

Vietnam’s Communist Party is attempting to improve the governance of the economy and has been through a painful period where inflation has been running ahead of expectations. The Dong took the brunt of selling pressure but has been reasonably steady so far this year. Nevertheless, a sustained move below the MA would be required to question medium-term Dollar dominance. 

I was a little perturbed to see both of you mentioning Duterte's rise to power as if this was a move in the direction of good governance.  

The man is a complete maverick. He is a populist who has been compared to Donald Trump, but he sounds much more dangerous.  His main claim to fame is ridding his city Davao from crime, which was done by supporting death squads. He has said that he will kill 100,000 criminals.  He made fun of the rape of an American missionary in a prison by saying she was so beautiful that he should have been first in line to rape her.

Nobody has any real clue about what he will do in office.  He probably doesn't know himself.

Here is the best article I have been able to find about that.

 

Thank you for sharing your view and here is a link to an article from the Sydney Morning Herald referring to the episode when Duterte made a wholly inappropriate comment on the rape and murder of an Australian missionary during a prison riot in 1989. He also claims to have been the person to fire the first shot during the subsequent storming on the prison where a significant number of the perpetrators were killed. 

The scandal and crisis have taken on a quality of endlessness and many here are growing numb to each development.

A decision from Fitch Ratings to downgrade Brazil’s sovereign credit rating yet again was relegated to page 27 of O Globo newspaper. The detention of former Finance Minister Guido Mantega for questioning this week wasn’t even the top story for most papers.

By law, Temer would be in charge for 180 days or until the Senate permanently ousts Rousseff. She is charged with having illegally tapped state banks and taken loans to cover up budget deficits. Most analysts agree it will be very difficult for Rousseff to recover support in the Senate and avert a final ouster, not least because she will no longer have control over discretionary spending for legislators’ public works projects.

Rousseff is expected to remain in the official residence, but the Senate will determine whether she will lose other executive privileges, such as the right to use the presidential plane, or take a cut of her salary.

Temer aides say that as soon as Rousseff is notified of the Senate vote, he will take office and quickly nominate a new cabinet. Former central bank chief Henrique Meirelles is the front-runner to become his finance minister, they said.

While financial markets have rallied this year on the prospect of a more business-friendly Temer taking over, there are also concerns that an ongoing corruption scandal and wide- spread disillusionment with the political establishment could come back to haunt the 75 year-old constitutional lawyer.

A Datafolha poll published last month showed 61 percent of respondents support Rousseff’s removal from office, while Temer fared only slightly better with 58 percent calling for his ouster.

 

In addition to the corruption charges levelled against her Rousseff was also unlucky that her premiership occurred during a lengthy decline in commodity prices. With her ouster the potential for reform is still cloudy considering how much of the political establishment are embroiled in the corruption scandals. As a result the makeup of a new cabinet will have a significant bearing on how well the new administration is received by investors. The fact commodities prices have in all likelihood bottomed should act as a tailwind for the economy and leave some room for manoeuvre as the budget deficit is tackled.  

"Politics in Southeast Asia are always volatile and unpredictable," Alex Klein Tank, a managing director at Bangkok- based Civetta, said. "But we stick with the fundamentals and I don’t think the growth trajectory on the Philippines will be derailed by the election."
     
Civetta’s long-only equity fund has about 40 percent of its portfolio invested in the Philippines. It holds shares of four companies: EEI Corp., a Quezon City-based construction company; San Miguel Pure Foods Co.; 8990 Holdings Inc., a low-cost housing developer; and Xurpas Inc., a mobile e-commerce company, Klein Tank said in a telephone interview. The fund, which returned 15 percent this year through April 30, may add to its holdings if there is weakness in coming weeks, he said.
     
"Foreign hedge funds get nervous, but things will go back to normal and countries like the Philippines will continue to grow," Klein Tank said.

 

Above all else Duterte is anti-crime and has been a vocal critic of ineffectual governance so his accession to the Presidency is a potential positive if he can impose stronger standards in government. 

The power struggle at the top of Turkish politics may come to a head later on Wednesday, with Prime Minister Ahmet Davutoglu planning to tell President Recep Tayyip Erdogan he needs to respect the premier’s office and let him get on with the job, a person familiar with the matter said.

Davutoglu is considering calling an emergency convention of the ruling AK party, in which delegates would vote on the leadership, should he not receive a favorable response, the person said, asking not to be named due to the sensitivity of the matter. Davutoglu has been facing intensifying opposition within the party from a group of hardline Erdogan supporters, the person said.

A party summit could be held in about 45 days should Wednesday’s meeting not end in agreement, the person said.

Tensions between the two men, and the rift among their supporters in the party, are more explosive than generally acknowledged, the person said.

Erdogan, who served as prime minister for more than a decade until 2014, has transformed the typically ceremonial role of the president to a new center of power and is seeking to formalize that by rewriting the constitution. Davutoglu, his handpicked successor, is seeking to establish his own credentials as an independent policy maker.

 

There is no evidence to contradict the view that Erdogan is an aspiring despot. The increasingly assertive position taken by the prime minister is a medium-term positive subject of course to whether he is successful. 

In the first quarter of 2016, each of the four trends reversed. Recent weeks have brought rebounds in inflation hedges, emerging market currencies, diversifying markets, and global value stocks relative to growth. Do these last few weeks represent “the turn”? Perhaps. The question, however, is irrelevant because the answer is simply impossible to know. But what we do know is that if we want peak exposure to these markets when the turn comes, we must begin to “average in” in the face of adversity. 

We also know that these out-of-favor markets average a 3.0% yield premium versus a U.S.-centric 60/40 portfolio, which represents a powerful performance advantage to those who can patiently wait for mean reversion’s inevitable grip on the market. Once the market turns, history has shown the upswing will be fast and vigorous.  

Real Potential
In the 5 and 10 years following December 1998, assets other than U.S. and developed-market equities and U.S. notes and bonds outperformed 60/40 by an annualized 8.8% and 6.2%, respectively. Developed value stocks also outperformed their growth counterparts by nearly 6% a year in the 5 years following December 1998. Are these markets poised to repeat this strong outperformance? Only time will tell, but we believe the potential is very real. Our view today is that real return–diversifying asset classes5 could improve on a traditional 60/40 allocation by approximately 3.5% a year over the next 10 years. Real return–oriented diversifiers and value strategies may not experience the same magnitude of outperformance as they did starting in 1999, but we’re confident they will outperform in the years to come. Now is the time to rotate into these markets.  

 

The MSCI Emerging Markets Index is market cap weighted so it is heavily influenced by what happens to Chinese, South Korean, Taiwanese, Indian and South African shares. These five countries account for 67.25% of the Index. It’s an awfully big world out there and the emerging market universe is much more diverse than these five countries which raises the question of how good a barometer it is.