Jawbone Snaps Up Playground.fm

Looks like instead of being acquired, wrist and speaker hardware company Jawbone is doing some acquiring, scooping up social and personalized music playlist app Playground.fm, according to a well-placed source.

Last time we heard something about Jawbone, it had closed a new financing round of about $250 million at around a $3 billion valuation. Kara Swisher and Re/code had reported a similar range at the time. We had also learned that the company was seeing a $600 million revenue run rate, mostly from its diminutive speaker products.

We have no word on the size of the Playground.fm deal, but did hear that the team and investors were happy and that it was over eight figures. Our source says that the startup was in the process of raising a funding round when Jawbone came in with a successful offer.

Playground.fm is a free music service on iOS and iPad and touts itself as “human-powered”radio. The app pulls your Facebook and Spotify data in order to build you a personalized radio station.

The company also has some appealing patented tech and a talented founding team deep in the music space, including Mehul Trivedi, the original iOS audio engineer at Apple, former Atlantic Records DJ Austin Soldner and Vivek Agrawal, a former Product and Business Development lead at Topspin.

Perhaps Jawbone is working on its own streaming music service — a Jambox Radio, if you will? In the game to own the full stack in every vertical you tackle, a move like this would make sense: “Buy a Jawbone speaker, get unlimited music streaming.”

And it would seem logical that Playground.fm would want to cast its lot with a platform like Jawbone versus being just another music app all on its lonesome.

Update: Jawbone has confirmed on the record that they bought Playground.fm last year.

Source: TechCrunch

Xiaomi wants to sell 100 million phones in 2015, tall task to equal Lenovo

Xiaomi plans to sell 100 million smartphones next year, according to Sina Tech. Founder and CEO Lei Jun commented on the number at the recent IT Leadership Summit in Shenzhen. Lei also expects Xiaomi’s revenue to hit RMB 70 billion (US$11.2 billion) this year. Update March 31 @3:30: Xiaomi announced today it upped this year’s sales projection to 60 million smartphones from the previous 40 million. It’s already sold 11 million in the first quarter of this year. Xiaomi already announced this year’s goal of 60 million units, while last year it came up 1.3 million short of its target 20 million. That projection would put Xiaomi on pace with fellow Chinese smartphone maker Lenovo, which also recently announced the 100 million in 2015 goal. Both companies are gradually pushing their phones out to an international audience, but Xiaomi has some serious catching up to do. Lenovo sold more than twice as many phones as Xiaomi last year, according to IDC’s estimates. Lei bases his projections on a consistent 150 percent increase year-on-year, which the company achieved between 2012 and 2013. The biggest obstacle for Xiaomi and Lenovo, however, might not be competing smartphone brands, but domestic consumers. China’s smartphone shipments fell for the first quarter in over two years in Q3 2013, according to IDC, and both companies are still mostly dependent on the Chinese market. 

Source:  TECHINASIA

Second Japan nuclear operator to get government bailout

Hokkaido Electric Power Co , facing a third year of financial losses, will get a capital infusion from a state-owned lender, the Nikkei reported on Tuesday, the second nuclear operator to be bailed out since the Fukushima crisis.

The government-owned Development Bank of Japan will buy about 50 billion yen ($485.51 million) of preferred shares in the regional utility, equal to about 20 percent of shareholder equity, the Nikkei reported, without citing sources.Hokkaido Electric, which is the regional monopoly that supplies power to the country's northernmost island of the same name, is looking into the report, a spokesman said.
Tokyo Electric Power Co (Tepco) was bailed out by the government in 2012, after an earthquake and tsunami hit its Fukushima Daiichi nuclear plant north of Tokyo the previous year, causing the worst atomic crisis since Chernobyl in 1986.
All of Japan's 48 nuclear reactors are in shutdown and undergoing stringent safety checks with no schedule for restarts, forcing operators to import more costly fossil fuels.

Source: reuters

Japan factory output slides, outlook clouded by sales tax hike

Japan's factory output unexpectedly fell in February at the fastest pace in eight months in a possible sign that the benefits from last-minute demand before an impending sales tax hike may have run their course.

The data adds to growing concerns of a stumble in the economy, and comes on the heels of a separate survey showing manufacturing activity expanded at a slower pace in March.

The Ministry of Economy, Trade and Industry (METI) said industrial output fell 2.3 percent in February from the previous month, compared with a 0.3 percent rise expected by economists in a Reuters poll.

The weak result followed a solid 3.8 percent gain in January, which was driven by brisk production of cars and household appliances.

Manufacturers surveyed by the ministry expect output to rise 0.9 percent in March but decrease 0.6 percent in April, the METI data showed, suggesting a lack of confidence in domestic demand.

The data comes a day before the national sales tax rises to 8 percent from 5 percent on Tuesday.

Source: Reuters

Japan: Consumption tax rises to 8%

Japan's consumption tax has risen to 8 percent from 5 percent, the first increase in 17 years.

Many retailers and vending machines began charging higher prices from midnight on Tuesday.Rail operators will reprogram ticket vending machines during the night. New prices will take effect from the first service on Tuesday.
The government estimates that the sales tax will bring in about 5 trillion yen, or about 49 billion dollars, in fiscal 2014. That figure is expected to reach about 8 trillion yen, or about 78 billion dollars, in fiscal 2015.
The money will be spent on social welfare, including healthcare and pension programs, to deal with the aging population.
But some economists have warned that the tax increase may slow consumption.

Source: NHK

Frankfurt hub to help make RMB a global currency

Chinese President Xi Jinping said Saturday in Germany that a new renminbi hub in Frankfurt was an important step in the currency's internationalization.

German Economy Minister Sigmar Gabriel also said that the hub would help trade between the two countries.

The Bundesbank and the People's Bank of China signed an agreement on Friday to facilitate transactions in the Chinese currency in Frankfurt and to cooperate in clearing and settlement arrangements.

Source:  CCTV

China saw first case of corporate default on debt

China recently saw its first case of corporate default on debt. And earlier this week, concerns over more breaks in the capital chain triggered a three-day bank run in a small city in East China’s Jiangsu Province. Analysts say more defaults are expected as the government presses ahead with interest rate liberalization and industrial restructuring. 

Many corporate bonds come due this year and that increases the potential for a rash of debt defaults. Will Chinese banks be able to ride the storm out? The Industrial and Commercial Bank of China said at its 2013 annual results meeting that it has stringent control over debt products.

Yi Huiman, President of ICBC, says, "We have forged a good partnership with trust firms. We scrutinize any possible hidden risk. By the end of 2013, our agency business is not that big. The total amount is 11.7 billion yuan, 24 projects. Trust firms do their due diligence, but after our investigation of them, we think total risk is under control."

But debt is not all that upsets the stability of China's financial industry. Banks face loan repayment threats too. Northwest China's biggest private firm Haixin Steel, recently failed to pay back 3 billion yuan on time. That may be just the beginning of larger financial troubles because nearly 15 billion yuan in loans to Haixin are reportedly exposed to similar risks. ICBC last year clamped down on loans to industries with severe overcapacity by nearly 20 billion yuan. That brought the bank's bad loan ratio in those industries to 0.79% from 0.97% in 2012. ICBC's loans to local government financing vehicles also dropped by 94.3 billion yuan last year.

Despite reassurances from major Chinese banks, analysts say default woes and capital constraints will hit smaller banks hard. And it is a part of a painful process that's inevitable, as China introduces its tough economic reforms.

Tom Liu, CEO of Chinascope Financial Co., says, "In this super competitive environment, city commercial banks are feeling the pinch. When interest rates liberalize, the interest spread will come down, and that will eat into their capital. But because of their limited ability to access the equity market, a lot of them are not even listed. So they will take on risky assets, and that would mean higher NPL ratios."

However, Liu said the falls and rises of those businesses will help return innovation to the market. He adds, "That will have a profound effect on banks, because it will force not only the banks but the regulatory regime to allow banks to innovate."

Chinese Premier Li Keqiang previously said that a number of defaults are expected during the economic reform. This indicates debt defaults would not be a surprise to most market participants as China moves closer to a more efficient, and fairer economic playground.

Source: CCTV

China's Q1 GDP growth may slow to 7.2 pct

China's first quarter data will be released in around two weeks and the news may not be the best. Analysts predict GDP growth in the quarter to ease to 7.2 percent.

That forecast is based on the previous two months' weak figures, including investment, consumption and industrial data.

Wang Jun of the China Center for International Economic Exchanges expects GDP will be 7.2 or 7.3 percent but the consumer price inflation could stay above 2.5 percent.

Most economists agree on the first quarter's downward trend but are split on whether this means policy stimulus in the next few months.

Source: CCTV

IMF: Emerging Markets Can Manage Evolving Mix of Global Investors

The mix of investors in emerging markets stocks and bonds has evolved considerably over the past 15 years, which has made capital flows and asset prices in these countries more sensitive to events outside their own borders, according to new research from the International Monetary Fund.

In its latest Global Financial Stability Report, the IMF investigates the effects of changes in the mix of these global investors.

The role of bond funds—especially local-currency bond funds—has been on the rise since the early 2000s. Savers in advanced economies now increasingly channel their money through global mutual funds that invest both in advanced and emerging market economies. The participation of sovereign wealth funds and central banks in these financial markets is growing as well.

Back in the 1990s, by contrast, investing in emerging market economies mostly meant purchasing equity though funds specialized in these countries.

The IMF said that different investors behaved distinctively. During the sell-off of emerging market stocks and bonds in 2013 and early 2014, institutional investors such as pension funds and insurance companies with long-term strategies broadly maintained their emerging market investments. Retail-oriented mutual funds withdrew. Different types of mutual funds—such as those focused on bonds and equity—also have shown varying degrees of sensitivity to global financial turbulences.

“Knowing who the investors are is critical for understanding the evolving stability of capital flows into emerging markets, especially when the uncertainty over advanced economies’ monetary policy remains high,” said Gaston Gelos, Chief of Global Stability Analysis Division in the IMF’s Monetary and Capital Markets Department and the head of the team that produced the analysis.

No emerging market is an island

Changes in the mix of global investors in emerging market stocks and bonds are likely to make overall capital flows more sensitive to global financial conditions, according to the IMF.

The analysis found the share of more volatile bond flows had risen as more opportunities opened up to invest in emerging markets, and that larger direct foreign participation in local financial markets could transmit global volatility to local asset prices.

Investment from mutual funds is more sensitive to the ups and downs of global financial conditions than that of institutional investors. Many of the small investors putting money into mutual funds are less informed savers, who may panic-sell at signs of volatility. Mutual funds also invest in stocks and bonds that performed well in the short run, while selling those that did badly —a strategy called momentum trading. This may contribute to induce boom-bust cycles in asset prices, the IMF said.

Receiving more investment from institutional investors is generally good for capital flow stability during normal and moderately volatile times, because they tend to invest for the long term. However, the report cautions that these investors can pull more money out of a country and take longer to return after more extreme shocks—such as during the global financial crisis, or if a country’s government bonds are downgraded below investment grade.

Fundamentals matter

After two decades of investing, have global investors learnt more about emerging markets and become less prone to panics? There is little evidence for that, according to the IMF.

Economic conditions in a country affect investment and local asset prices, the IMF observed. For instance, in the months following the initial sell-offs in May and June 2013, global investors started to treat economies with better fundamentals differently from those with weaker ones.

But overall, there is no evidence that investor choices in times of stress in recent years were driven any more by countries’ economic fundamentals than they were in crises in the late 1990s and the early 2000s, according to the IMF.

The IMF also said investors’ tendency to mimic each other’s choices, known as herding behavior, has not declined either.

IMF: Implicit Subsidy of Government support to big banks

No Forward March for the ECB

    The Wall Street Journal"Euro-zone inflation fell to just 0.5% in March according to Eurostat's flash estimate released Monday, the lowest since November 2009. So-called core inflation, which excludes volatile prices for energy, food, alcohol and tobacco, came in at 0.8%, broadly in line with recent months' readings. The headline rate is far below the ECB's target of "below, but close to" 2%, and just shy of economists' consensus forecast of 0.6%.

But the ECB has good reason to stay its hand and will likely stand pat when policy makers meet Thursday.

First, the March number may be distorted and prove to be a trough in inflation, at least for the near term. Seasonal effects related to Easter, which fell in March last year but is in April this year, may mean that inflation will revive in April, as prices for air tickets and hotels rise. Meanwhile, the decline in energy prices—they were down 2.1% year —is expected to ease in coming months. Those two effects should lead to higher inflation readings.

Second, the ECB has maintained a consistent line in recent months. It has started to focus more on the welcome pickup in growth in the euro zone. And it also has noted that much of the downward pressure on inflation has been due to food and energy prices—about which it can do little—as well as the strength of the euro, which weighs on import prices.

Economic data have continued to suggest a gentle acceleration in the pace of growth, with the European Commission's Economic Sentiment Indicator for March coming in at 102.3, above the long-term average and at its highest level since 2011. Over time, the single currency's strength should fade, especially as the debate in the U.S. moves toward rate hikes, which will come far earlier than in the euro zone. The euro's trade-weighted exchange rate has eased in recent days, and is now up just 0.3% this year.

A flurry of speeches by ECB officials in recent days has led some to suggest that the central bank may actually be closer to taking action. In reality, policy makers have simply restated the options available to them.

The most significant measures that could be taken, such as imposing a negative rate on the central bank's deposit facility, or engaging in some form of quantitative easing, continue to have risks attached to them. In particular, QE seems likely to be a last resort. And ultimately, spurring the ECB into action would require a clear deviation from its baseline scenario, which foresees a very slow recovery in inflation back toward 2%, perhaps in 2016.

WSJ: Investors Breathe Life Into European Banks' Bad Loans

    The Wall Street Journal reports,"for years after the financial crisis, European banks resisted selling their corporate loans for fear of having to record heavy losses. But recently, some European lenders have reversed their stance as demand for these assets has jumped. One reason for the shift: Defaults and bankruptcy filings have declined in the U.S., leaving investors with fewer opportunities to buy distressed debt and sell it for a profit in a restructuring.

"The prices have risen to the point where some banks are looking to sell because they're seeing transaction prices that imply" a much smaller loss for certain assets, said Ari Lefkovits, a managing director at Lazard Ltd.  , who moved to London in August 2012 in part because of an anticipated uptick in European restructuring activity".

Centerbridge Partners LP, Oaktree Capital Management LP and Apollo Global Management LLC have been actively buying troubled debt from European banks, people familiar with the matter have said. These firms, some of which have raised big funds for distressed situations, often amass debt positions that give them significant control in a restructuring.

European banks had roughly $1.4 trillion in nonperforming loans on their books in 2013, up from $715 billion in 2008, according to PricewaterhouseCoopers. In 2013, banks sold $90.5 billion worth of troubled debt to investors, compared with $64 billion in 2012, an increase of more than 40%, according to a recent PwC report.

A lack of distressed debt in the U.S. has been a catalyst for the higher prices in Europe, some say. Investors have found few opportunities in the U.S. in recent years as defaults and bankruptcy filings have fallen sharply. U.S. commercial bankruptcy filings fell 24% in 2013, according to Epiq Systems Inc.

Higher prices mean smaller margins, but some distressed-debt investors see value in squeezing out small profits on large blocks of troubled loans. Others buy up the debt hoping to take control of the companies, a strategy known as "loan to own."

European banks, meanwhile, are under pressure to unload bad assets as the European Central Bank conducts its Asset Quality Review. Results are expected to be announced publicly in the fall, and that has been motivating some banks to sell faster.

Italy's UniCredit SpA recently set aside about $12.9 billion to cover bad loans in the fourth quarter, more than double what it allocated a year earlier. The balance-sheet cleanup resulted in one of the largest losses ever recorded by a European bank, but stock investors welcomed the move to get rid of the troubled debt.

Similarly, Royal Bank of Scotland Group PLC said in November it created an internal "bad bank" that would free up as much as $18 billion of capital. This vehicle includes a portfolio of shipping-company debt it already started selling, people familiar with the matter said.

At the end of 2013, RBS sold its roughly $800 million debt position in New York-based Eagle Bulk Shipping for between 85 and 88 cents on the dollar to buyers including Oaktree, people familiar with the transaction said. Eagle Bulk and some of its creditors are in restructuring talks, some of these people said.

Still, not all European banks are looking to sell.

Banco Bilbao Vizcaya Argentaria SA, Société Générale SA, Crédit Agricole CIB and Banco Espírito Santo SA largely remain unwilling to part with troubled loans with rosier long-term outlooks that can be refinanced or extended, restructuring advisers and distressed-debt investors said.

Sino-French Economic Cooperation Zone set to boost trade

Chinese President Xi Jinping arrived in France on Tuesday evening for a state visit to mark 50 years of diplomatic ties between the two countries. As the French economy is struggling to improve, China could play a big role in its recovery.

The heavy machinery is beginning to arrive. It is the start of a construction project which will bring a major industrial and tech hub to this part of central France - designed to boost trade ties between France, China and the rest of Europe.

"When Chinese companies enter France, it represents them entering the European market as well. So this is a very attractive place for Chinese investors," said Wang Shouyu, president of Sino-French Economic Coorperation Zone.

Chateauroux is two hours from Paris by train - well connected, easily accessible and right in the middle of Europe.

But this old, historic city has seen its industrial economy decline. Rush hour in Chateauroux is not a particularly busy affair. So the city has high hopes for this collaboration with Chinese investors.

Much of the site remains quiet. This is still, for now, beautiful French countryside. The construction project proper is due to start next month. Come back in a decade and it's hoped there will be thousands of people working here.

The Sino-French Economic Cooperation Zone will target the automotive, aircraft equipment, IT, energy, medicine and education sectors, among others.

It will cover about 460 hectares.

The region hopes it will flourish with Chinese investment, and for Chinese firms a potential route into the heart of the European economy.

"This project is a platform which means we'll help Chinese companies to enter European markets. But also we'll help European companies to enter Asian markets. So it's a win-win situation," said Tong Yuxiao, CEO of Sino-French Economic Coorperation Zone.

This chateau will become a hotel. The zone will mix the old and the new, which is exactly what some financial experts believe the region's economy needs. Planners will also reuse a closed military base.

Organizers say this is a project aimed squarely at pulling down barriers to trade. If it succeeds the benefits will be felt far beyond these boundaries.

Source:  CCTV

High Velocity Peregrine Falcon. Exercise for taking aim to a diving stock

Motley Fool's take on Yandex

"Yandex surely isn't the biggest kid on the block. In terms of the global search engine game, Statistia reports that Google  has a 89% market share. The next closest competitor focused solely on search is Chinese-based Baidu  .

While Google is a serious competitor to any search engine worldwide, it's worth noting that investors might want to keep their eyes on Baidu as well. Though the company is tailored more toward China and other Southeast Asian countries, China shares a 2,600-mile border with Russia as well.

My take: Yandex seems to be doing well in its core markets.One thing to understand about Yandex is that, right now, it has no intentions of being like Google, which has operations in most of the world's countries. It's far more instructive to see how Yandex is doing in its core Russian and former-bloc states. And when we look there, signs point toward the company gaining and maintaining favor.

The company only recently began competing actively in Turkey, so the low market share isn't too concerning. And Yandex also has a considerable presence in Kazakhstan, but I couldn't come upon accurate market share numbers.

My Foolish takeawayJust last week, I wrote an article about how Baidu was the best buy among major global search engines. Though I still believe that Baidu is a solid buy, there's no denying that Yandex continues to become a more and more enticing purchase.

As it stands today, the company trades hands at 27 times earnings, and 34 times free cash flow. While those seem expensive, the company is growing rapidly in markets where Internet penetration is just picking up, and economies are expected to grow at decent clips over the coming years.

Needless to say, I'll be holding my Yandex shares".

Source: The Motley Fool

WSJ: WH Group Seeks Up To $6 Billion From Hong Kong IPO

        The  Wall Street Journal reports,"The Chinese pork producer that made headlines last year with the acquisition of Smithfield Foods Inc. started meeting investors Monday with plans to raise up to US$6 billion in its Hong Kong initial public offering, aimed at repaying the debt it took on to buy the Virginia-based company.

WH Group Ltd, which renamed itself from Shuanghui International Holdings, started a premarketing process for its US$5 billion-US$6 billion offering Monday and is seeking to sell shares at 20 times its 2014 forecast earnings, people familiar with the IPO said. Shuanghui spent US$4.7 billion, excluding debt, to buy Smithfield. With debt included, Smithfield's price tag was US$7.1 billion. Shuanghui borrowed US$4 billion from Bank of China  to fund the transaction.

One fund manager called the IPO valuation "fair." Global meat companies including U.S's Tyson Foods Inc.  and Hormel Foods Corp.  are trading at an average of 17.4 times forecast earnings".

WSJ: Japan,Germany, France and U.K. data

February Japanese industrial production fell 2.3% on the month against expectations of a 0.3% rise.

An ominous sign for Abenomics ahead of the sales-tax hike set to take effect Tuesday. Of course the fall in February’s industrial production numbers could be read as a payback for January’s surprisingly strong 3.8% rise. And weather also played a role. But the February number was still a big miss and a worrisome sign as the sales-tax hike, to 8% from 5%, is expected to have a chilling effect on domestic demand and could snuff out the economy’s fragile recovery. Still, some analysts noted that industrial production is more closely tied to exports, not domestic demand, and that a revival will require a stronger pickup in demand from the U.S. 

GERMANY: February retail sales rose 1.3% on the month against expectations of a 0.5% fall. Sales were up 2.0% on the year from a 0.9% rise in January.

German retail sales bucked expectations of a modest February reversal of January’s relatively robust numbers by posting a second month of strong growth. The figures portend a good first quarter GDP print, though March data could well be dented by concerns about the Crimean crisis.

FRANCE: 4Q GDP grew 0.3% on the previous quarter, unrevised from the earlier estimate, and grew 0.3% on the year.

Surprisingly enough, the French economy almost grew as much as Germany’s during 2013, paltry as that pace was. Signs of stability will be welcomed, though tax rises have dented consumption. (AM)

U.K.: February mortgage approvals were at 70,309 against expectations of 75,500; February net consumer lending rose GBP2.3 billion against GBP2.2 billion expected.

Britons are borrowing, not least to buy houses, albeit at nowhere near the pace from before the financial crisis. But the trend has generally been upward notwithstanding a dip in mortgage approvals during February, the first monthly decline in a year–January’s rate was an unusually strong surge, representing a six-year high. 

WSJ: Macro Horizons: Deflation Fears Loom Over Europe

  "Is Europe heading toward deflation? March euro-zone inflation data released Mondaycertainly suggest the European Central Bank ought to worry about Japan-style deflation. Investors will be looking for a response at Thursday’s ECB policy meeting. But Japan’s Abenomics might not be the answer either, to judge by some disappointing industrial production numbers for February. What’s more, the ECB’s policy makers might well point to data showing economic revival across the single-currency region–like Germany’s very strong retail sales data–as a reason to hold the ship steady, hoping that the drop in inflation is just a temporary phenomenon. 

March preliminary consumer price index rose 0.5% on the year against expectations of a 0.6% increase and from a 0.7% rise in February.

Euro zone consumer prices rose at their slowest annual pace in March since November 2009 and well below the European Central Bank’s target of just under 2%. The downward trajectory in inflation is a worry, raising concerns that deflation is about to take hold. The ECB’s policy meeting on Thursday will be watched closely for signs of fresh policy response".

Source:  WSJ

Bloomberg: Huawei Posts Record Earnings on Network Equipment Sales

Huawei Technologies Co., China’s biggest maker of phone network equipment, posted record sales and earnings on demand from wireless carriers for gear.

Revenue rose 8.5 percent to 239 billion yuan ($38 billion) in 2013, the Shenzhen, China-based company said in a statement today. Net income for the year was 21 billion yuan, it said, or 36 percent more than it reported the previous year.

Huawei is broadening its product lineup with smartphones, tablets and business-computing products and services as it fights cybersecurity concerns that have restricted access for its network equipment in the U.S. and Australia. The closely held company got 65 percent of revenue from outside China as it targets more sales to larger customers.

“Thanks to the favorable global macroeconomic and industry environment, as well as the effective execution of our company strategy, Huawei basically achieved our business targets for 2013,” Eric Xu, Huawei’s deputy chairman and rotating chief executive officer, said in the statement.

Sales at Huawei’s carrier network unit rose 4 percent to 166.5 billion yuan, while the consumer business boosted sales 18 percent to 57 billion yuan. The enterprise division increased revenue 32 percent to 15.2 billion yuan, according to the statement.

The company’s worldwide smartphone sales last year trailed only Samsung Electronics Co. (005930) and Apple Inc. (AAPL) as Huawei boosted its share of the global market to 4.9 percent from 4 percent the previous year, researcher International Data Corp. reported in January.

Source: Bloomberg

WSJ: Small Is Beautiful in Chinese Web Stocks

Until recently, the three giants had been mostly content to expand on their own turf: Alibaba Group Holding in e-commerce, Baidu BIDU -0.23% in search and Tencent Holdings TCEHY +3.53% in games and messaging. Now, a flurry of deal making—five significant acquisitions this month alone—has the trio stomping all over each other's turf and beyond China. Alibaba's planned $15 billion initial public offering in New York has heightened investor attention.

Tencent has taken the fight to Alibaba with an investment in JD.com, a direct rival in online retail. Tencent's investment in second-place search engine Sogou, owned by Sohu.com, S is a direct attack on Baidu. Alibaba's stake in Sina's Twitter  -like Weibo is aimed at Tencent's messaging prowess.

The battle has spilled abroad, with Alibaba and Tencent both investing in U.S.-based chat startups, and Tencent investing in a Korean gaming company. Tencent's WeChat also is working to develop an audience overseas to challenge Facebook's WhatsApp and others.

 

Foreign players such as Facebook and Twitter are boxed out by Beijing. And Google  withdrew in 2010. This has created a hothouse in which the largest domestic players hold even more sway. The small guys have little choice but to choose sides.

Since the start of 2013, Baidu has spent more than $2.4 billion on acquisitions, Alibaba over $1.9 billion and Tencent at least $1.3 billion, not counting the value of two businesses it traded to JD.

The deals aren't huge yet, especially relative to the size of the acquirers. But as the frenzy continues and competition intensifies, heavy spending on marketing and promotions is eroding profitability.

Operating margin at Tencent fell to 28% in the fourth quarter of 2013 from 39% two years earlier. Baidu's margin fell to 28% from 51% over the same period, and the company warned investors not to expect any profit growth this year despite rapidly rising revenue.

In this environment, potential acquisition targets may prove better investments. A few publicly listed companies are now conspicuous for their lack of affiliation with any of the major players.

Following Tencent's investment in Leju, the online unit of Chinese real-estate broker E-House (China) Holdings,  it wouldn't be surprising to see a rivals take an interest in much larger Internet real-estate site Soufun Holdings,  which has dominant market share in online-property advertising.

Each of the big three now competes in online video, and Alibaba this month acquired a controlling stake in ChinaVision Media Group, a film studio that can help provide content. Stand-alone site Youku Tudou  is wrestling with Baidu's video for the top spot by monthly users. Youku is money-losing due to the high cost of content, but its video library could be a valuable resource for one of the big three.

Travel is another hot spot. Baidu has a majority interest in bookings site Qunar Cayman Islands,  while Tencent holds a minority stake in rival eLong. But Ctrip.com International,  the largest travel site by revenue, is independent.

These companies range from market values of $4.5 billion for Youku to $6.1 billion for Ctrip, so deals for minority stakes would likely be in the same range as recent ones.

The biggest stand-alone player, with a market value of $11.4 billion, is Qihoo 360 Technology.  It provides security software and operates China's third-largest search engine behind Baidu and Sogou, now part-owned by Tencent. A strategic alliance with a bigger player is possible, perhaps cemented by the sale of a stake in one of its units.

The big three are well positioned to capture users and traffic on China's Internet. But as they compete to scoop up minnows, investors might want to look beyond the hunters to the prey.

WSJ: Asian Shares Enjoy End-Quarter Pickup

    The Wall Street Journal reports,"Asian stocks were mostly higher on Monday, at the end of a quarter that was characterized by poor performances in China and Japan and reviving fortunes in Southeast Asia.

The declines in the region's two largest economies, with Japanese stocks on track for their worst quarter in nearly two years, marked a reversal of a key investment trend from late last year when investors shifted away from Southeast Asian markets to North Asian countries that they expected to benefit from a pickup in the global economy".

But investors have shied away from Japan and China, with the Nikkei Share Average down 9.4% so far this year and the Shanghai Composite Index 3.7% lower. Sentiment has been soured in Tokyo by the potential economic impact of a hike in the local consumption tax, which will take effect on Tuesday. China however, has been bogged down by persistently poor economic data, as well as rising fears of debt defaults in the corporate sector.

Indonesia and the Philippines however have enjoyed healthy gains, up 11.6% and 8.7% respectively, with investors moving back into these markets after heavy selling last year as investors tried to prepare for the impact of the U.S. reversing its easy money policies. Indonesia in particular has rallied ahead of an election in July, as well as easing concerns over the country's current-account deficit.

On Monday, Asian stocks maintained the positive momentum from the previous week ahead of a wide range of economic events scheduled to occur over the coming days. On Tuesday, China will release its official manufacturing data and Australia's central bank will make a decision on interest rates, while at the end of the week attention will be on the U.S. labor report.

Australia's S&P/ASX 200 added 0.9% and South Korea's Kospi was up less than 0.1%. Japan's Nikkei gained 0.8% after the dollar pushed a total of 0.6% higher against the yen on Friday, stabilizing on Monday—the greenback was last at ¥102.84. The Philippines PSE added 0.7%.

In China, Hong Kong's Hang Seng Index added 0.2% and the Shanghai Composite Index was down 0.4%. 

EU-China strategic partnership can shape global order: Van Rompuy

The comprehensive strategic partnership between the European Union (EU) and China can play an important role in shaping the global order, president of the European Council Herman Van Rompuy has said.

In an exclusive interview with Xinhua prior to the visit of Chinese President Xi Jinping to Brussels -- the first ever by a Chinese president to EU institutions -- Van Rompuy underlined that neither the EU nor China had the potential to solve global problems alone.

"International financial turbulences, climate change or modern information technologies do not respect national borders," Van Rompuy said. However, much could be achieved "while working constructively together for the global good," he added.

Since November 2009, Van Rompuy has served as the first full-time president of the European Council -- the EU institution comprising the heads of its member states that oversees the general political direction and priorities of the Union.

The former Belgian prime minister and economist at the National Bank of Belgium was reelected for a second term as European Council president running until November 30 this year.

Xi's iconic visit to the capital of the European Union, from March 31 to April 1, will have "a very full agenda, commensurate with our global responsibilities," Van Rompuy said.

The Chinese president's trip will include meetings with Van Rompuy, European Commission President Jose Manuel Barroso and European Parliament President Martin Schulz. Topics ranging from sustainable development, G20, climate change to trade and investment relations are expected to be on the table.

"We will review the progress made in the negotiations on the bilateral investment agreement, which aim to ensure investment protection and market access for investors on both sides," Van Rompuy stated.

For the last nine years, the EU has been China's biggest economic partner. Official figures show bilateral trade in goods between China and the EU grew four-fold in a decade, reaching 434 billion euros (597 billion U.S. dollars) in 2012.

"The EU is the world's largest trading block and the biggest economy. We are thus in a unique position to promote an open global economy and an open trade and investment environment, together with China," Van Rompuy said.

During the talks, practical cooperation on security and defence issues will also be examined, such as joint naval exercises on counter-piracy in the Gulf of Aden, he said.

Source:  Xinhua

Sino-French trade sees rapid growth for a decade

For the past decade we've seen rapid growth in trade between China and France. From 2003 to 2013, bilateral trade volume jumped from 13 billion U.S. dollars to nearly 50 billion.

France is now the fourth biggest source of investment into China from the EU. Up until 2013, there are over 4,600 investment projects from France into China. Those projects combined are collectively worth nearly 13 billion U.S. dollars.

The number of French companies in China reached 163 last year, up 15.3% versus 2012.

Recent forays into France by Chinese firms have also garnered plenty of attention. Fosun Group's purchase of a 7% stake into a French leisure group and Chinese car maker Dongfeng's investment in Peugeot Citroen were some of the big deals.

Source:  CCTV

Britain faces problem with current account deficit

Revisions to economic statistics revealed the British economy is still on track for recovery but faces a problem with the current account deficit, economists said Friday.

The British GDP growth in the final quarter of 2013 remained unchanged at the third revision at 0.7 percent, a figure economists welcomed as healthy.

This contributed to the 2013 growth of 1.7 percent, 0.1 percent down on previous revisions, but still the best since 2007, and a huge improvement on 2012's 0.3 percent.

However, economists were worried about the size of the current account deficit, revealed in the revised statistics.

The current account deficit was 22.4 billion pounds (about 37.2 billion U.S. dollars) in Q4 2013, almost the same as the previous quarter's 22.8 billion pounds, a record, leaving the Q4 deficit 5.4 percent of GDP and at 71 billion pounds for 2013.

Simon Wells, chief British economist with HSBC Global Research, said, "Despite a fall in the trade deficit in Q4, the overall current account deficit remains huge. A further fall in the deficit on the income account, to a record low, meant the current account deficit was 5.4 percent of GDP in Q4."

Wells cautioned, "Unless the income position improves, the UK may find it harder to run its persistent trade deficit. This could eventually weigh on sterling and/or growth."

Wells said the income deficit jumped to a record 10.3 billion pounds in Q4 from 5.9 billion pounds in Q3, and a turnaround on the position up to the end of 2011 when the UK ran a surplus.

Improved global growth may provide a solution to that by lifting earnings on British investments abroad.

"In the mid-2000s, the UK earned positive income from its investments abroad but this has turned negative since the financial crisis," said Wells.

Forecasts for growth used by the government rely on an improvement in Britain's income position to narrow the current account balance, said Wells.

"But if the income account continues to deteriorate, the UK could find it harder to sustain its persistent trade deficit. Eventually, this could mean that lower sterling and/or slower growth may be needed to narrow the current account deficit, which was 4.4 percent of GDP in 2013 the widest since 1989," said Wells.

Further warnings about the recovery came from the household savings ratio, which was estimated at 5.1 percent in 2013 compared with 7.3 percent in 2012, showing that consumers had raided their savings and this had been a big driver of economic recovery.

David Kern, chief economist at industry representative body the British Chambers of Commerce (BCC), said the economic recovery remained on course.

He added, "It is good news that growth was better balanced in Q4, with a fall in the trade deficit and an increase in business investment. However there is little doubt that the further efforts are needed to place the recovery on a broader footing as we are still too reliant on consumer spending."

Business investment growth in Q4 was unchanged at 2.4 percent, the fourth consecutive quarter of expansion. But it remains 19 percent below its early-2008 peak.

Net trade contributed strongly to growth, with export growth revised up markedly to 2.8 percent quarter-on-quarter. The emerging recovery in the eurozone, Britain's largest trading partner, had helped.

"If recovery is to be sustainable, we have to ensure that there is more support for those looking to invest and expand into overseas markets," said Kern. (1 pound = 1.66 U.S. dollars)

Source:Xinhua

China Private equity funds can now directly enter stock markets

China is allowing private equity funds to directly open accounts and enter the equity markets.

According to China Securities Depository and Clearing Corporation, the newly revised Securities Investment Fund Law has brought private equity funds under its supervision.

They are banned though from opening new accounts for the purpose of new share subscriptions and share speculation purposes.

Source: CCTV

Strong Aussie dollar signals healthy economic recovery, too much appreciation not welcomed

The Aussie dollar on Friday morning hit 92.72 U.S. cents, its highest level in four months and a level which makes exporters uncomfortable.

Many importers and exporters believe that their ideal level for the dollar is 85 to 90 U.S. cents. When the Aussie dollar rises over 92 cents, the competitiveness of exporters is weakened, according to a survey of Citi.

"An optimal exchange rate from a trade perspective is one where importers and exporters can both find some advantage. Now that the currency has appreciated beyond this level, we're moving into positive territory for importers and headwinds for exporters," Citi's trade and treasury solutions head Scott Southall said.

The preliminary PMI figures for March, which measure activity in China's manufacturing sector which were released on Monday, showed that the industry had slowed down for the third straight month. But the weak data from China just dragged Aussie dollar temporarily to 90.5 cents, from then on the Aussie appreciation rallied for four days.

It seems strange that in spite of recent price fall of iron ore, copper and weak economic data of China, the Aussie dollar continued to rise unaffected. The market logic read the whole thing the other way round. The traders are betting that China will roll out some stimulus measures to stabilize its economy.

Last week Chinese authorities approved five railway projects worth 142 billion yuan (25.03 billion Australian dollars). Surely Beijing wants a soft landing of the economy and any sharp drop of economic activities will hurt the job market and cause instability of the society, which is totally unacceptable for the Chinese government.

On Wednesday, Reserve Bank governor Glenn Stevens expressed positive attitude towards Australian economic outlook at the Credit Suisse Asian Investment Conference in Hong Kong.

"We are going to have a boom in residential construction over the next couple of years. That is very much on track," Stevens said.

He also said there was early, encouraging evidence the handover from mining to non-resources industries in the Australian economy was underway.

Clearly, Stevens is confirmed that his low interest and low exchange rate policy is working well, especially in the property market. Also he is not worried about potential domestic housing bubble.

"There are some people who think that Australia is in a bubble, " Stevens said, "You can never be 100 percent sure. But the price to income ratio has been around four times ... for about 10 years, so a very long-running bubble, if it is a bubble. Most do not last that long."

Stevens' upbeat speech pushed Aussie dollar even higher, although he still believes that Aussie dollar is too high.

"The long-running equilibrium of the exchange rate is probably lower and we have been quite consistent in saying that," he said.

While some analysts said the Aussie dollar could climb higher in the near future, the expected strengthening of the U.S. dollar as the American economy recovers and Fed tapering will eventually push the exchange rate lower.

"Stevens explicitly used the word 'welcome' for tapering in his speech. He is very much assuming that the U.S. dollar does strengthen on the back of that normalization of Fed policy, so this could just be a temporary bout of Aussie strength. Given some time ... the Aussie will come back anyway," said Westpac's senior currency strategist Sean Callow.

Source: Xinhua