Japan's economy contracted 6.8%

    Japan's GDP contracted at a 6.8% annualized rate in Q2,the higher sales taxe hit consumers who've seen litlle growth in incomes and rising consumer prices which rose 3.6% in June year/year.

Source: Bloomberg

Tencent Aims to Undercut Alibaba With Billion Chat Users

Tencent Holdings Ltd. (700) faces the prospect of losing its position as Asia’s most-valuable Internet company this year after Alibaba Group Holding Ltd. (BABA) goes public. The Shenzhen-based company isn’t going to concede quietly.
Tencent is taking on Alibaba in almost every business related to the Web, from games to security to search. In the latest escalation of the battle, Tencent is expanding in messaging services and using the technology to drive customers to its e-commerce partners -- in a direct challenge to its rival.
The fight exposes a rare vulnerability for Alibaba, which is planning an initial public offering that may be the largest in U.S. history. Tencent has an enormous lead in messaging, with about a billion users for its QQ and WeChat products, compared with Alibaba’s last target of 100 million for its offerings. Tencent is projected to report a 52 percent surge in profit when it announces second-quarter results today, bolstered by messaging.
“Tencent is using Mobile QQ and WeChat to take traffic away from Alibaba and direct people to e-commerce platforms backed by itself,” said Bill Fan, a Hong Kong-based analyst at China Securities Co. “Instant messaging hasn’t been Alibaba’s strong point, but it sees the viral effect that Tencent’s app is having so it’s trying to develop similar services.”
Tencent’s two technologies let people trade messages over mobile phones and tablets, akin to the WhatsApp service that Facebook Inc. (FB) agreed to acquire this year for $19 billion. QQ, which began as an instant-messaging service on desktop computers and was repurposed for use on mobile devices, has about 848 million monthly active users. WeChat, known as Weixin in China, has 396 million.
The success of the messaging services has helped boost Tencent’s market value to about $161 billion, making it the most valuable Internet company in Asia. Alibaba will compete for that title after it goes public. The latest estimate is that after the IPO the company could be valued at $187 billion, according to a survey of 11 analysts by Bloomberg. Tencent shares declined 0.2 percent as of 9:52 a.m. in Hong Kong trading, while the benchmark Hang Seng Index was unchanged.
Alibaba is trying to close the gap in messaging. In September, it started offering a service called Laiwang. Still, Tencent has continued to expand the features available through its apps to maintain its lead.

 

“In the latest version of QQ, we have upgraded it to a platform for food, drinking and entertainment, and the number of cities we cover is also expanding,” said Dowson Tong, president of the company’s social network group that oversees QQ, in a recent interview. 

Tencent has integrated games more tightly into its messaging services to capitalize on the China online gaming market, which IResearch projects will expand to 225 billion yuan by 2017. QQ and WeChat helped triple Tencent’s mobile-game revenue to 1.8 billion yuan in the first quarter from the previous three months. That trend likely continued in the second quarter. Tencent’s profit rose to 5.59 billion yuan in the three months ended June, according to the average of 11 analysts’ estimates compiled by Bloomberg. That would make the second successive quarter with profit growth of more than 50 percent. Earnings climbed 61 percent in the three months ended March 2011.
QQ was the first iconic product billionaire Ma Huateng created at Tencent in 1999, two years after AOL Inc. (AOL)’s messaging service took off. As more Chinese accessed the Internet, instant messaging became the most popular online app. Ma restructured QQ’s divisions in 2012 to take it mobile and the effort paid off.
Last year, 83 percent of China’s Internet users subscribed to Mobile QQ and 80 percent to WeChat, compared with Laiwang’s 23 percent, according to a survey among almost 4,000 people by Shanghai-based IResearch in June.
Tencent is now leveraging its vast user base to go after a bigger share of the China e-commerce market, which IResearch estimates will more than double from last year to 21.6 trillion yuan ($3.5 trillion) in 2017.
The company in March took a 15 percent stake in JD.com Inc., a direct competitor to Alibaba, and folded its own e-commerce assets into the venture. This year, Tencent has also agreed to buy 19.9 percent of Craigslist-like 58.com Inc. and take a 20 percent stake in Dianping.com, a website similar to Yelp Inc. that users review restaurants in China.
Tencent has been working closely with JD.com and Dianping, directing traffic from Mobile QQ and WeChat to the websites, said Tong.
Those steps are beginning to yield results. A new single-click link to JD.com from Weixin produced an eightfold increase in daily transaction volumes compared with an earlier access that took two clicks, JD.com said in June. This month a similar integration with JD.com was provided to users of Mobile QQ.
Still, Tencent and its partners are far behind in e-commerce. Alibaba, which operates platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers, accounted for 76.4 percent of total mobile retail transactions in China, according to its IPO filing to the U.S. Securities and Exchange Commission.
The fact that Tencent wrapped its e-commerce assets into JD.com shows it wants to limit its investment in the segment, said Yao Yue, a Shenzhen-based analyst with Morningstar Inc.
“Even if Tencent’s instant messaging apps can direct a lot of traffic to JD.com, at the end of the day it still depends on who has the better shopping service, and Alibaba’s Taobao is dominant,” said Yao.
Alibaba hasn’t been able to achieve the same success in mobile messaging so far. The company in 2004 started Aliwangwang, a PC-based instant messenger for buyers and sellers, that is now used for negotiating prices, customer services and delivery notifications on its Taobao marketplace. It also has a mobile version called Wangxin.

Laiwang was started by Alibaba to broaden its reach, after billionaire founder Jack Ma alluded to Tencent being ahead in the messaging race at a Credit Suisse conference in March 2013.
“We also invested heavily, but we are not that lucky and not creative, so creative like Tencent, which has WeChat, such a powerful thing,” Ma said at the conference.
Ma has vigorously tried to promote Laiwang and said the company wouldn’t pay bonuses to staff who didn’t get 100 clients for the app before Nov. 30 last year, according to a post on the company’s microblog.
In an attempt to generate revenue from Laiwang, Alibaba said in January it would offer games on the app. A month later Alibaba’s Ma said the company’s achievement on mobile applications wasn’t satisfactory.
Alibaba spokeswoman Florence Shih declined to comment on the company’s mobile strategies, citing pre-IPO restrictions.

Source: Bloomberg


 

In Iraq many welcomed the nomination of Haider al-Abadi as new Prime Minister

The WSJ reports,"tensions eased slightly in Iraq on Tuesday as local factions called for calm and many welcomed the nomination of a new prime minister—including the country's most powerful Shiite militia—offering early signs of a potentially peaceful way forward in forming a new government.

The reprieve comes a day after a high-stakes political confrontation that raised the prospect of violence as Nouri al-Maliki, who sought a third term as prime minister, aggressively rejected the nomination of Haider al-Abadi and vowed to dispute it in the courts. Deployment of security forces in Baghdad also raised concerns that Mr. Maliki might resort to the use of force.

But on Tuesday, a spectrum of voices came out in support of the president's decision and his nominee, Mr. Abadi, and Mr. Maliki himself urged security forces not to take sides in the political confrontation. Mr. Maliki stays on in his position as caretaker prime minister until Mr. Abadi, a member of Mr. Maliki's own Dawa party, tries to form a government within a 30-day time frame outlined in the constitution.

In a statement, Mr. Maliki's office said he met with security chiefs and urged them "to distance from the political crisis." A picture showed him sitting at the head of a long table with some 30 uniformed police and army personnel, whom the statement said he instructed "not to interfere, and to leave this matter to the people, the politicians and the law."

But in the same statement, Mr. Maliki continued to defend the constitution as the only way to preserve Iraq, a reference to his own bid to serve a third four-year term as prime minister, which he views as a constitutional right. He warned otherwise of a "setback" that would be "no less dangerous than that of Mosul," the northern city seized by Islamic militants on June 10—the event that sent Iraq into its worst political and military crisis in years and began to polarize national opinion on Mr. Maliki.

The caretaker prime minister, who alienated the Sunni political community and alarmed Shiites with an increasingly personal bid for power, showed no sign on Monday of backing down, using two television appearances to slam the president's decision and vow to push through his constitutional right.

In a sign of the broad rejection of—and warning against—his defiance, support poured in from international governments in the hours that followed for Mr. Abadi as he begins the difficult process of forming a cabinet. U.S. President Barack Obama interrupted a vacation to make a brief announcement to praise what he said was a positive step toward a more inclusive government in Iraq.

In the semiautonomous Kurdish region of Iraq, where a push by the group calling itself the Islamic State toward the regional capital Erbil drew in U.S. airstrikes, officials also said they supported Mr. Abadi. In part, some officials said, that was just because it meant getting closer to seeing the end of Mr. Maliki's tenure".

Gloom Saps German Shares, Euro

   The WSJ reports,"the euro slid and German shares deepened their recent slump Tuesday as fears intensified that a downturn in Germany's economy could threaten the euro zone's economic recovery.

The moves came after an unexpected slump in German economic sentiment became the latest sign that the economic standoff with Russia over the conflict in Ukraine is hurting Europe's largest economy.

Germany's ZEW index of economic expectations, a survey of analysts and investors, fell to 8.6 in August from 27.1 in July, its lowest level since December 2012. And there may be more bad news this week as data on Thursday are expected to show a contraction in Europe's largest economy.

Germany's DAX stock index closed 1.2% lower, compared with a fall of just 0.2% in the pan-European Stoxx Europe 600 index.

The euro fell 0.3% against the dollar to $1.3336, close to the nine-month low it touched last week.

Germany's main stock index has fallen out of favor during the Ukraine crisis, as investors worry about the country's close trade links with Russia.

In bond markets, yields on safe-harbor German 10-year debt edged lower to 1.06%, not far above the all-time low of 1.02% also hit last week. Lower yields mean higher prices.

"The question to what extent the European economy will be affected by these tensions has increasingly become an issue amongst investors," said Lutz Karpowitz, a currency strategist at Commerzbank.

Growth data for the euro zone are due on Thursday. Economists expect Germany to lag behind the paltry 0.1% quarter-on-quarter expansion they predict for the currency bloc as a whole, with a 0.1% loss of output. 

"The ZEW index is good at predicting turning points of the economic trajectory and the uninterrupted decline since the end of last year has well flagged the loss of momentum of the economy in the second quarter," said Christian Schulz, senior economist at Berenberg".

Gold rises on concerns over Ukraine, Russia stand-off

Gold prices rose on Tuesday as signs emerged that the stand-off between Russia and Ukraine was hurting confidence in the euro zone economy, and as U.S. bond yields held near their lowest in 14 months.

Spot gold was up 0.3 percent at $1,314.80 an ounce at 1351 GMT, while U.S. gold futures for December delivery were up $6.00 an ounce at $1,316.50.

Anxieties over the Ukraine crisis and how this might impact future business hit economic sentiment in Germany, the ZEW think-tank said on Tuesday as it reported a fall in investor morale to its lowest level since December 2012. [

That helped push the euro lower, while boosting German Bund futures. While jitters over Ukraine have fuelled some buying of gold as a safe store of value, the resulting strength in the dollar has kept it within a narrow range, analysts said.

"While gold may rise and fall with the ebb and flow of geopolitical news, we're still stuck in this range between $1,280 and $1,340, as we have been for the last month and a half," Mitsubishi analyst Jonathan Butler said.

"Unless we see another major change, I don't think the current news is going to lead us to break out of that range," he said. "We'll be watching geopolitical situation carefully."

Russia said a convoy of 280 trucks had left for Ukraine on Tuesday carrying humanitarian aid, amid Western warnings against using help as a pretext for an invasion.

Elsewhere, Iraq's new prime minister-designate won swift endorsements from uneasy mutual allies the United States and Iran as he called on political leaders to end crippling feuds that have let jihadists seize a third of the country.


Source:  Reuters

Oil hits 9-month low on ample supply despite conflicts

- Brent crude oil fell below $104 a barrel on Tuesday, its lowest level in nine months as steady supplies dispelled concerns over potential disruptions in producers such as Iraq and Libya.

The International Energy Agency (IEA) said that while the situation in several producer countries was "more at risk than ever", supplies were ample and the Atlantic Basin was even reported to be facing a glut. 

OPEC output hit a five-month high of 30.44 million barrels per day (bpd) in July with a rise of 300,000 bpd led by Saudi Arabia and Libya, the IEA said.

"In terms of the physical side of things, particularly for Brent, there are pretty high inventories at the Atlantic Basin at the moment and that's holding back gains," said Ankit Pahuja, a commodity strategist at investment bank ANZ.

September Brent crude was down 94 cents at $103.74 per barrel by 1349 GMT after touching $103.35, its lowest level since November 2013. The contract closed on Monday at $104.68, off 34 cents.

U.S. crude was trading down 79 cents to $97.29 a barrel.

Brent is down about 10 percent from a June peak of $115 per barrel despite concerns over supply disruptions.

Production in Iraqi Kurdistan remains largely unaffected and July exports from the south of Iraq held at near record levels of around 2.5 million bpd.

In Libya, despite clashes between armed factions in Tripoli and Benghazi, output remains around 450,000 bpd, a National Oil Company spokesman said on Monday.

The IEA said Libya's output rose by 190,000 bpd in July to 430,000 bpd.

Sanctions placed on Russia by the United States and European Union over the crisis in Ukraine have also failed to impact oil markets for now.

"Short‐term supply disruptions do not seem on the cards, while on the other hand the sanctions (which are not limited to the oil sector) are expected to trim Russian demand," the IEA said.

A Russian convoy carrying food, water and other aid set off for eastern Ukraine on Tuesday, but Kiev said it would not allow the vehicles to enter the country.

Oil markets awaited weekly U.S. oil stocks data, due to be published later on Tuesday and on Wednesday.

U.S. commercial crude oil stocks were forecast to have fallen 2.2 million barrels in the week to Aug. 8, a preliminary Reuters survey of six analysts showed on Monday.