NBG share offering oversubscribed

  The share offering was substantially oversubscribed, confirming a strong interest by institutional investors in National Bank,” announced NBG. NBG officials stated that major foreign investors such as Fidelity, Pacific Investment Management Co.(PIMCO), and York Capital, were among the buyers of the stock.

Source: Emerging Markets

VimpelCom Rout Seen Extending as Ukraine Saps Currencies

VimpelCom Ltd. (VIP), the worst performer among the most-traded Russian shares in the U.S. this year, will probably keep falling as weakening currencies in two of its biggest markets erode earnings, according to IFC Metropol.

Ukraine’s hryvnia has sunk 31 percent since the nation’s bloody standoff with Russia began in November, while the ruble is down 4.6 percent. Those losses, the worst among major eastern European countries, are cutting into the wireless phone company’s dollar-based financial results.

The company yesterday lowered its 2014 sales and earnings targets after trailing analysts’ estimates in the first quarter, citing increased competition and currency declines. VimpelCom, which is listed on the Nasdaq Stock Market, fell 5.4 percent to $7.81 in New York. It was the worst performance on the Bloomberg gauge of the most-traded Russian shares in the U.S, which rose 0.2 percent. The wireless provider has plunged 40 percent this year, compared with the index’s 17 percent decline.

Revenue and earnings before interest, taxes, depreciation and amortization will drop by a “low to mid-single digit” percentage this year, the company said. It had previously predicted both would be “stable.”

The ruble has gained 5.8 percent from this year’s low on March 14 and traded yesterday at 34.618 per dollar. The hryvnia fell 19 percent during the period to 11.93.

The company, which is controlled by the Russian billionaire Mikhail Fridman, operates in more than a dozen countries. About 39 percent of its 2013 revenue came from Russia, its largest market, data compiled by Bloomberg show. Ukraine was the fourth-largest, accounting for 7 percent of sales.

VimpelCom sank to the lowest since July 2012 on trading volume about 2.9 times the average of the past three months. OAO Mobile TeleSystems (MBT), Russia’s biggest mobile phone company, gained 1.5 percent to $17.61 in New York. OAO MegaFon (MFON), the second-biggest, increased 2 percent to $27.35 in London.

VimpelCom’s revenue is expected to decline for third consecutive year in 2014, falling 6.6 percent to $21.1 billion, before resuming growth in 2015, according to the average estimate of 11 analysts surveyed by Bloomberg.

Source: Bloomberg

China to boost production-oriented service industries

China will accelerate the development of production-oriented service industries in a bid to step up industrial restructuring and prop up economic growth.

Priorities will be given to the development of research and design, commercial services, marketing and after-sales services, and will be driven by the market and innovation, according to an executive meeting of the State Council chaired by Premier Li Keqiang on Wednesday.

The move is expected to stimulate domestic demand, boost social employment and improve people's livelihoods, as well as stabilize economic growth, according to the meeting.

Wang Jun, deputy director of the China Center For International Economic Exchanges' consultancy department, said the move indicated the country has started to tap the potential of industrial restructuring to maintain economic growth, rather than direct stimulus to investment and industry.

It will help improve growth quality and efficiency in the long run, he said.

Zhang Zhiqian, researcher with the Investment Research Institute under China Jianyin Investment, also endorsed the move that seeks impetus from structural adjustment, as the dependency on expanding investment would lead to serious side effects including overcapacity and environmental issues.

China's economic growth continued to shrink in the first quarter, as downward pressure still existed. However, the country's rapidly-growing service industry has been emerging as a new engine for its slowing economy.

In the January-March period, China's tertiary sector increased 7.8 percent year on year to 6.29 trillion yuan (1.02 trillion U.S. dollars), making up 49 percent of the country's GDP in the first quarter. Its growth pace was also faster than the 3.5 percent of agriculture and 7.3 percent of the industry sector.

According to the meeting, design and application of new materials, products and techniques will be strengthened. Improvements will be made in information technology and energy saving services, as well as logistics services for manufacturers.

The move will help the sector to move up the value chain, and prompt integrative development of the country's tertiary, agriculture and industry sectors, the meeting said.

"The high-tech production-oriented service industries will accelerate the country's industrial upgrade and prompt 'Made in China' to evolve to 'Created in China'," Zhang said.

In addition, financial services for the manufacturing of construction equipment, delivery vehicles and production line will be promoted, while the country will encourage service outsourcing and the nurturing of high-end talents.

The central government will ease market access to attract social capital to the industries, encouraging Chinese enterprises of the sectors to invest overseas and lifting access restrictions gradually for foreign companies on architectural design, accounting audit and commercial logistics.

Enterprises of research and design, inspection and certification, and energy saving will be allowed tax breaks that have been enjoyed by high-tech companies.

According to the meeting, value-added tax will be promoted to the entire tertiary sector and favorable policies will be introduced to build a sound environment for companies in production-oriented service industries.

In addition, the country will continue to develop service industries concerning daily life, such as health, elderly care and information consumption, in a bid to improve people's well-being and build a new engine for healthy economic and social development.

A draft of the Food Safety Law was approved at the meeting, which requires full supervision, stricter punishment, accountability, increased risk monitoring and improved food safety standards.

The draft is still subject to deliberation of the Standing Committee of the National People's Congress, according to the meeting.

Source: Xinhua

Japan Inc. poised to rake in record profits this fiscal year

Japanese listed companies this fiscal year will likely match or surpass their record total profits from fiscal 2007, underscoring their recovery from the financial crisis and the March 2011 earthquake and tsunami.

The Nikkei tallied pretax profits for companies that have released results for the year ended March 31 as of Wednesday, excluding financial and power companies. Total profits swelled 36% last fiscal year and are seen climbing 2% this fiscal year.Combined fiscal 2014 pretax profits at 1,258 companies are projected at around 29 trillion yen ($281 billion), or 98% of fiscal 2007's figure. Although Toyota Motor and NTT expect profit declines, 62% of businesses are forecasting growth.
Companies that have boosted earnings globally are drawing particular attention. Mitsubishi Heavy Industries is focusing on areas where it can compete worldwide, and it expects its first record profit in 18 years this fiscal year on the back of its strong energy and aviation-related businesses.

Source: NewsOnJapan

WSJ: Interest Rates Sink Globally in Expectation of Stimulus

        The WSJ reports,"global bond rates dropped to their lowest levels of the year Wednesday, as central bankers signaled their determination to jolt the world's largest economies out of their malaise.

Investors piled into U.S., German and British government bonds—used to price everything from mortgages to car loans—driving down their yields. The yield on the 10-year U.S. Treasury dropped to as low as 2.523%, its lowest level in more than six months. In Germany, 10-year bund yields fell to their lowest point in a year.

The persistently sluggish economies in Europe and the U.S. have confounded central bankers and surprised investors, many of whom anticipated that this year would see relatively strong economic growth after years of monetary stimulus. In the U.S., despite rock-bottom interest rates, housing activity remains relatively depressed, companies have yet to pick up hiring and inflation has remained worryingly low.

"The global economy hasn't fired up despite all the heavy monetary stimulus,'' said Mary Ann Hurley, vice president of trading at D.A. Davidson & Co. in Seattle.

The prospect that central banks will continue to inject money into the world's bond markets, as well as enact policies to keep interest rates low, has acted as a green light for the world's bond buyers".

Bank of England Gov. Mark Carney on Wednesday said the U.K. central bank is in no rush to raise interest rates even though some U.K. economic data on manufacturing and employment have been stronger lately.

Mr. Carney's comments came a day after The Wall Street Journal reported that Germany's central bank, which has resisted the idea of further stimulus, is now willing to back an array of measures by the European Central Bank to fight stubbornly low inflation. Ten-year U.K. government bonds fell to their lowest yields since the end of October.

U.S. Federal Reserve Chairwoman Janet Yellen said last week that the U.S. central bank would continue to keep interest rates near zero for a considerable period.

Central banks have spent trillions of dollars buttressing financial markets and the global economy since the 2008 financial crisis. While the Fed has begun tapering its monetary stimulus, it is still buying $45 billion of Treasurys and mortgage bonds each month.

Investors came into this year anticipating rates would move higher as economies picked up steam and as the Fed pulled back stimulus efforts.

The yield on the 10-year U.S. Treasury was about 3% at the beginning of the year, and Wall Street strategists and economists were predicting rates would rise steadily beyond that.

"Bond bears have eggs on their faces this year," said Gary Pollack, who helps oversee $12 billion assets as head of fixed-income trading in New York at Deutsche Bank AG's private wealth management unit.

This year through Tuesday, U.S. Treasury bonds have handed investors a total return of 2.18%, according to data from Barclays PLC. The S&P 500 has returned 3.4% in the same period, while the Dow Jones Industrial Average has returned 1.7%, according to FactSet and including price gains and dividend payments.

German government bonds have delivered investors a return of 3.5% so far this year and U.K. government bonds 3.17%. Total return includes price appreciation and interest payments and is calculated in local-currency terms.

By the end of the day Wednesday, the 10-year U.S. Treasury note was 21/32 higher in price, yielding 2.544%. In Europe, the yield on the 10-year German government bond fell to 1.37%, while the yield on the 10-year U.K. government bond dropped to 2.583%.

Analysts say "Everybody at the start of the year bet on higher yields," 

S&P not very optimistic on Greek Banks

WSJ: Tencent Mints Money From Mobile

         The WSJ reports,"Tencent's first-quarter earnings were complicated by this year's deal-making frenzy, but underlying trends were promising. Net profit surged by 60% from a year earlier. This was partly due to one-time gains from the disposal of various investments, including two e-commerce units that Tencent traded to online shopping site JD.com as part of a complex deal where it took a 15% stake in JD. Revenue rose a healthy 36% from a year ago.

Crucially, Tencent's mobile strategy is paying off. Its flagship WeChat mobile-messaging service, similar to Facebook's  WhatsApp, and a second messaging app QQ Mobile, were major drivers of top-line growth. Revenue from games on the two platforms tripled from the previous quarter to more than 1.8 billion yuan ($288.9 million), or nearly 10% of total revenue. Analysts had expected a figure of just around 800 million yuan.

Tencent shares soared early this year on excitement over WeChat, as analysts theorized it alone could be worth more than $30 billion, or around a quarter of Tencent's market capitalization. Expectations that Tencent's mobile-payments platform would take a big slice of all of China's retail transactions was another justification for its lofty valuations.

The stock is now down over 18% from its high in March. New regulations on mobile payments snuffed out some of the excitement, as did the generalized pullback in global tech stocks. China's regulatory framework for Internet finance still hasn't been settled. And now that Tencent has outsourced much of its e-commerce operations to JD, the two companies need to show they can grow margins and take on the leading player in that space, rival Alibaba.

But with some froth taken out of Tencent's shares, investors can concentrate less on far-flung scenarios and take solace that mobile monetization has begun. That's a message worth receiving".

EUROZONE INDUSTRIAL PRODUCTION CONTRACTED BY 0.3 PER CENT IN MARCH

The Eurozone's industrial production contracted at a 0.3 per cent month-on-month pace in March, according to Eurostat.

Versus a year ago output was 0.1% lower. 

Economists had been expecting a fall of 0.3% on the month and of 0.9% in comparison with a year ago.

In terms of monthly rates of change production was lower across all sub-sectors, led by a 0.4% decline in energy and another 0.8% decrease, the largest one, in the production of intermediate goods.

In terms of quarterly rates of change industrial output was 0.2% higher after having expanded by 0.5% over the previous three months. 

Production levels diminished in all the main countries within the single currency area: Germany, France, Italy and Spain. 

Source: LiveCharts

WSJ: China Gets Upper Hand in Russia Gas Deal

            The WSJ reports,"Vladimir Putin is due in Beijing this month, and the conversation between the ex-superpower and the budding one is sure to involve energy. The Ukrainian crisis has Europe, which buys 75% of Russia's gas exports, talking loudly about finding new sources. That means Moscow needs to court new buyers. It also needs to find new avenues of capital, considering a net $51 billion—equivalent to 2.5% of GDP—flowed out of the country in the first quarter.

On both counts, China is Russia's best bet. With a goal of doubling its gas market by 2020, China is one of the fastest-growing energy markets in the world. Plus, Beijing offers an alternative to Western funding. It has already struck financing deals worth more than $300 billion for long-term oil supply with Rosneft, says Citigroup.That should convince Russia's state-controlled Gazprom  that it needs China National Petroleum Corp. more urgently than the other way around.

The two sides have been negotiating a 30-year gas-supply deal for about a decade, but have been stuck over the price. Gazprom wants something linked to the price of oil, the way it sells in Europe. Yet that rests on the premise that gas and oil compete as fuels. China has likely resisted the idea since in its critical power-generation sector, the alternative to gas isn't oil, but ultra-cheap coal.

The problem is the coal market is nowhere near as liquid as oil, so another option is to link to prices at gas hubs. CNPC had previously wanted to base its price off U.S. benchmark prices. But that is unrealistic given the U.S. gas market's relative isolation from the rest of the world. Gazprom said both sides agreed not to use that benchmark.

Until recently, market prices weren't conducive to a deal. Russia charged its European customers about $12.5 per million British thermal units two years ago. China paid about $10 per mmBtu for Central Asian gas. Russia could afford to say no to matching the lower price, perhaps because it thought China needed gas badly, partly to combat pollution.

In the past year, though, CNPC has gained the upper hand. Gazprom's European price has fallen to about $10.8 per mmBtu as of April, as it offers discounts to compete against Norwegian and African supplies. Meanwhile, U.S. gas exports are set to grow on the back of its shale revolution, possible given added impetus by a desire to reduce Russia's market power amid the Ukraine crisis. This gives China more options down the road. And as for China's desperation to tackle pollution, a gas deal wouldn't clear the skies overnight anyway.

Gazprom may also need to tap Chinese financing. It has to spend $80 billion to build the China pipeline and associated projects, according to James Henderson at the Oxford Institute of Energy Studies. That gives CNPC another bargaining chip".

Fitch Ratings: OAO Lukoil currency outlook at "BBB" with negative outlook

U.S. wholesale prices surge in April to 0.6%

U.S. wholesale costs posted the biggest increase in April since the fall of 2012 as they rose sharply for the second straight month, suggesting that price pressures might be building a bit after an extended period of extremely low inflation.

The producer price index jumped a seasonally adjusted 0.6% last month following a revised 0.5% increase in March, the Labor Department said Wednesday. Economists polled by MarketWatch had expected a 0.2% increase.

The index also showed wholesale costs appear to be accelerating. Producer prices have risen 2.1% in the past 12 months, up from 1.4% in March and just 0.9% in February.

Yet economists caution against reading too much into the PPI because the index underwent its first major makeover in years at the start of 2014. The index has been quite volatile in its new incarnation.

Excluding the volatile categories of food, energy and trade, core wholesale prices rose a smaller 0.3% last month, the Labor Department said Wednesday.

The price of goods jumped 0.6% in April as the wholesale cost of food and gasoline rose.

The price of services also increased 0.6%, led by higher costs for airline tickets. Grocery and liquor-store costs advanced as well.

Personal consumption, a new index designed to foreshadow changes in the consumer price index, surged 0.7% in April.

Source: marketwatch