Divergent visions could split Iraq's Sunni revolt

The militants dismantling Iraq's borders and threatening regional war are far from united

- theirs is a marriage of convenience between ultra-hardline religious zealots and more pragmatic Sunni armed groups.

For now, they share a common enemy in Shi'ite Islamist Prime Minister Nuri al-Maliki, whom Iraq's Sunni minority accuse of marginalising and harassing them.

But each anticipates they will square off someday over the future shape of Iraq's Sunni territories.

The question looms over who will triumph: the al Qaeda splinter group the Islamic State of Iraq and the Levant (ISIL), which aims to carve out a modern-day Caliphate, or myriad Iraqi Sunni armed factions, who fight based on a nexus of tribal, family, military and religious ties and nostalgia for the past before the U.S. invasion in 2003.

Many experts and Western officials believe ISIL, due to its internal cohesion, and access to high-powered weapons and stolen cash, will overpower its Sunni rivals.

They point to the lessons of Syria's three-year-old civil war, where a unified ISIL leadership steam-rolled other groups and entrenched itself as the force to be reckoned with in western Syria. They warn that even the Sunni revolt against al Qaeda last decade in Iraq would not have succeeded without the decisive punch of American firepower.

Cracks are already showing in the loose alliance of ISIL and fellow Sunni forces, suggesting the natural frictions that exist between the jihadists and other factions will inevitably grow.

In the Iraqi town of Hawija, ISIL and members of the Army of the Men of the Naqshbandi Order, which includes former Iraqi army officers and is rooted in Iraq's ousted Baath party, fought turf battles from Friday to Sunday when ISIL demanded their rival pledge loyalty to them, according to locals. At least 15 people died before the clashes ended in stalemate.


FRICTION MAY GROW

Such confrontations could become the new Sunni reality if there is no swift political resolution to the crisis that began two weeks ago when ISIL stormed Mosul, seizing it in hours and then dashed across northern Iraq grabbing large swathes of land.

The charge, which saw the army abandon positions en masse, has defined the dynamics between ISIL and the other insurgents.

According to a high-level Iraqi security official, who specialises in Sunni militant groups, ISIL has about 2,300 fighters, including foreigners, who have led the speedy assault from Mosul through other northern towns, including Hawija, west of oil-rich Kirkuk; Baiji, home of Iraq's biggest refinery; and Saddam Hussein's birthplace Tikrit.

The high-level official told Reuters that as ISIL has raced on from Mosul, the north's biggest city which they dominate, other Iraqi Sunni groups have seized much of the newly-gained rural territory because ISIL is short on manpower.

The different groups appear to be following ISIL's lead in the bigger communities it has captured like Tikrit and Baiji.

But as the new order settles in Iraq's Sunni north, the high-level security officer predicted: "They will soon be fighting each other."

Mustafa Alani, an Iraqi security expert with good contacts in Gulf Arab governments, also expects friction to grow.

"How long can this honeymoon last?" he said. "ISIL is not acceptable among the people, either socially or politically."

If the rebel alliance does fracture, battles could drag Sunni regions of Iraq into a state of permanent internecine war.

A Sunni politician sketched out the future.

"ISIL will take a stand in favour of (its) Islamic law, and the people of the region will refuse because they will want to protect their rights," said Dr. Muhannad Hussam, a politician with the nationalist Arabiya list.

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"NO ONE WILL WIN"

"I am afraid for the Sunni areas. They will be burned. No one will win."

He said that other insurgent groups, even if they could not defeat ISIL, would eventually adopt guerrilla tactics and still be able to hurt ISIL, regardless of the jihadists' superior arms. "They can fight as gangs, not as a military," he said.

"They are tied to the land and ISIL is not. ISIL can't fight an enemy from all sides."

British Defence Minister Philip Hammond, touring Gulf Arab states to discuss Iraq, told reporters in Qatar on Wednesday ISIL could lose control of Sunni areas if local people could be persuaded to withdraw the tacit support they were giving it.

Some Gulf Arab countries had been sending messages to moderate Sunni leaders in Iraq about a political solution, he said without elaborating.

For now, the front rests on two strong pillars: the groups' common membership of the Sunni minority, and a conviction that Sunnis have been marginalized and persecuted by Maliki.

Both factors have helped ISIL win the cooperation if not the hearts of war-weary Sunni communities. Many of ISIL's current partners initially collaborated with its parent organisation al Qaeda before revolting between 2006 and 2008, disgusted by its ultra-hardline agenda.

Then, when they rebelled against al Qaeda they were bolstered by U.S. firepower, winning promises of reconciliation with Maliki and his Shi'ite-led government. But Maliki failed to deliver on those pledges and security forces continued to carry out mass arrests in the face of militant threats.

As violence has exploded in the last two years, ISIL has seized on such communal grievances.


LOOTING, SMUGGLING

ISIL has multiple internal strengths -- ruthlessness, self-funded wealth estimated in the tens of millions of dollars from sophisticated extortion rackets, kidnap ransoms, smuggling of oil and other goods, diplomats and counter-terrorism experts say, and eye-catching social media skills.

It and other groups have looted and dismantled captured Syrian factories and sold off the equipment, the diplomats said.

It also has open lines of communication to support bases in neighbouring Syria, where it is a powerful force in that country's civil war. Its bastion in the town of Raqqa gives it proximity to Turkey -- a conduit for foreign recruits -- as well as access to Syrian oil reserves, which it sells. They have tapped similar markets in Iraq.

Its achievement in dismantling much of the border drawn by European colonialists nearly a century ago is a source of prestige in the trans-national community of Islamist sympathisers that provides a steady flow of foreign recruits.

And yet, self sufficient though it may be in material terms, in Iraq in recent months it has consciously teamed with other Iraqi factions. It has drawn strength by partnering with them, or by choosing not to hunt them down over past grudges and mainly resisted the urge to eliminate alternative voices.

Such militias include the Islamic Army, the 1920 Revolution Brigades, the Mujahadeen Army, the Rashadeen Army and Ansar al-Sunna. These formations bring together Islamists, military veterans, tribal figures and professionals, who were marginalized after the fall of Saddam Hussein's regime.

Another leading group is the Army of the Men of the Naqshbandi Order, a Baathist offshoot created by Ezzat Ibrahim al-Duri, a former lieutenant of Saddam's.

ISIL co-existed with such factions first in the vast desert areas west of Baghdad, where tribes rose up in late December, and then in the sudden advance this month in the north.

The Sunni revolt against Maliki in the desert cities of Fallujah and Ramadi since early this year allowed for ISIL to enter the urban areas and seize ground. Since then they have fought the Iraqi government in Anbar, sometimes on the same side and other times in competition with their Sunni cohorts.

In Mosul, the north's biggest city, ISIL has mostly tolerated the different factions. Its members brag they are converting their fellow fighters." Other groups are pledging loyalty," one pro-ISIL Sunni fighter claimed.

An Islamic Army member explained the equation was simple:

"The people of Mosul are fed up with the oppression of Maliki's forces."


ISIL AIMS TO PROVOKE IRAN

In Tikrit and Baiji, where militants are laying siege to Iraq's biggest refinery, a similar dynamic is in play.

ISIL has the best arms, while tribal fighters, including members of the Islamic Army and Mujahadeen Army, are bolstering ISIL's numbers in the offensive on Baiji's refinery, a second Iraqi security official said.

Anna Boyd, an expert on al Qaeda at IHS risk consultancy, said that the decision by ISIL to partner with other groups over the past year suggests that its leader Abu Bakr al-Baghdadi is conscious of the pitfalls of factionalism.

Aware of its fractious reputation, ISIL in Syria has attempted 'soft power' initiatives to present a more acceptable face. It has run charity events and provided food and medical aid, sometimes putting on tug-of-war contests in town squares.

But its brutality has also left a record of infighting. In Syria ISIL initially formed alliances of convenience with other rebels but by late 2013 felt strong enough to attack several rival factions including the Nusra Front, an al Qaeda affiliate.

Now, in Iraq, Baghdadi's solution may be to keep raising the levels of violence against Shi'ites to goad Shi'ite power Iran to intervene and compel other Sunni factions to cling with him.

Such a development would attract more recruits from conservative Sunni Gulf Arab states, where ISIL's gory video messages are believed to have an attentive audience on Twitter.

"The risk is that, despite its tendency to feud with other Sunni groups, its military gains ... are such that they will inspire support for ISIL beyond Iraq and Syria," said Boyd.

ISIL is careful to keep an upper hand with its Sunni peers.

Upon the capture Sunday of the town al-Alam, just outside Tikrit, an ISIL leader touring the area was asked why the group had bothered to seize the Sunni community.

The ISIL leader explained the town fell in a broader strategic region, where other armed factions also held sway, and ISIL needed to impose some cohesion. “We are working on coordinating our works and unifying these groups,” he said.

Source: Reuters

Argentina deposits debt payment, but U.S. court blocks payout

 Argentina has deposited the next payment needed to avoid a default on its restructured bonds, but a U.S. federal court decided on Thursday not to let the payment go through

Both moves increased the stakes in a 12-year legal chess game between Argentina and creditors who refused to accept the downgraded terms offered by the country's 2005 and 2010 debt restructurings and are suing for full repayment.

Argentina will have the month of July to negotiate with its holdout creditors before falling into technical default. The next payment is due on Monday, but with that payment blocked by the courts, Buenos Aires will have a 30-day grace period to strike a deal with holdout creditors.

If it fails, Latin America's No. 3 economy would be pushed into another painful default at the end of next month.

Economy Minister Axel Kicillof said Argentina owes a $832 million coupon payment on restructured bonds on Monday.

"Of that total, $539 million was deposited in the accounts ... of the Bank of New York Mellon at the Central Bank of Argentina," Kicillof said, adding that the rest of the $832 million had been deposited by way of other financial institutions.

"We affirm our commitment to honor our debt to all creditors," he said.

But in order to pay holders of the country's restructured bonds, Argentina needed a stay to be issued by U.S. District Judge Thomas Griesa in New York. He denied the Argentina's stay request about an hour after Kicillof said the deposit had been made.

Argentina's debt servicing costs are set to more than double in 2015 as it's economy stagnates, inflation soars at about 30 percent and foreign reserves slide to critically low levels.

Central bank reserves, which fell 30 percent last year and stand at eight-year lows of about $29 billion, are seen falling in the second half of 2014 after Argentina's main farm exports, soy and corn, are harvested and sold.

But Argentina's financial markets slipped only slightly on the news of Griesa's rejection, as investors bet that the country will use the 30-day grace period to strike a deal with the holdouts.

Griesa has ordered Argentina to pay the holdouts $1.33 billion plus accrued interest, at the same time it pays the 93 percent of bondholders who accepted the 2005 and 2010 restructurings. Argentina had asked him for a stay on that order in order to allow Monday's coupon payment to go through.

The restructured bonds, stemming from Argentina's $100 billion 2002 default, offer less than a third of the original value of the debt. The holdouts have sued in the U.S. courts to be repaid 100 cents on the dollar.

The debt drama is being played out in New York this week, where Griesa's order includes an injunction against Bank of New York Mellon and other payment agents from transferring money from Argentina to its restructured bondholders.

Also in Manhattan, lawyers for the holdouts and Argentina raced against the clock to clinch a deal for settling the 7 percent of defaulted bonds that were not restructured.

Griesa appointed a mediator to oversee the talks.
Source: Reuters

Reuters: INTERVIEW-Norway's $890 bln oil fund cuts bond stakes in long-term bet

Norway's $890 billion oil fund, the biggest of its kind, needs an overhaul to boost its long-term performance and preserve wealth for future generations long after North Sea energy income has dried up, its chief told Reuters.

The fund should gradually scale down the share of its holdings in bonds, which are producing near zero real returns, in favour of assets such as infrastructure and property, and emerging markets including China, chief executive Yngve Slyngstad said in an interview.

In a revamp that could span many years, the fund - which owns 1.3 percent of global shares - will play a more active role in its biggest investments, he said.

It also wants to expand beyond listed stocks into startup companies and those undergoing restructuring after running into trouble, said Slyngstad, who took the reins in 2008 just as the global financial crisis wiped out nearly a quarter of the fund.

Built from oil and gas tax income and acting like an endowment for the nation, the fund manages $175,000 for each of Norway's 5.1 million people and could grow to $1.2 trillion by the end of the decade, according to projections in the government's budget.

However, performance has fallen short of the government's expectations over the years. With its big bond portfolio a major obstacle to better returns, Slyngstad said he would ask the government for permission to cut it over time to 20 percent of the total from 35 percent now.

"By being invested in bonds, it is quite certain that on a long-term horizon you won’t protect your purchasing power," said Slyngstad, an Oslo native with a goatee beard.

"We have a 4 percent real return expectation from the government. If you add in two percent inflation, then that’s a 6 percent nominal return," he said. "You will not get that in the bond market in the foreseeable future ... We now have a real return in the bond market that is uncomfortably close to zero."

Although the fund has more than doubled in size under Slyngstad, its real annual return has been 3.6 percent since it was set up in its present form in 1998, drawing criticism that it is too focused on Europe and missed exceptional growth elsewhere.

Slyngstad - who once retreated to a cabin for six months to study the works of the German philosophers Heidegger and Hegel - said the fund's job is to capture global growth well beyond its traditional European base.

Cutting the bond portfolio will take years but the fund has already shortened the duration of its holdings and moved heavily into some of the biggest emerging markets.

The fund has prepared for when global interest rates, held by central banks at ultra-low levels since the financial crisis, start moving back up towards more normal levels.

"We have a slightly shorter average maturity in our bond portfolio than the market because there is exceptional monetary policy in place, which at one stage should end, if it’s exceptional," said Slyngstad, who was the fund's head of equities before taking the top job.

"Rather than looking at where the debt is issued and in what currencies, we’re starting to look at what the global GDP looks like," he said. "That’s why our bond holdings in countries like Mexico and Brazil are becoming quite large."

In China the fund has just $1.5 billion, a tiny figure compared with the size of the economy, and Slyngstad said he was keen to increase this once the Beijing authorities ease restrictions on foreign investment.


REAL ESTATE, EQUITY

Slyngstad said real return assets such as property and infrastructure are needed to balance the bond and stock portfolios. However, the infrastructure market's relative immaturity is an obstacle.

"To go into an asset class, it has to be quite large, so for now the market itself is the constraint," Slyngstad said. "The UK, Australia and Canada have the longest history, the longest tradition and the most competence (for infrastructure governance), so it’s more likely that initiatives in these countries will develop first."

Only 1.2 percent of the fund's assets are in real estate and it expects to increase that by one percentage point each year over the next three years. Slyngstad declined to say how big the holding would eventually grow. For now its mandate is up to 5 percent, but he added that a balanced global fund would keep 20 percent in the property market.

In equities, the fund could also expand the scope of its activities to unlisted firms even though it prefers companies quoted on stock exchanges because they were more transparent, Slyngstad said.

“It will be natural for us over time to participate more in the full lifecycle of a company, whether it’s early start ups, before they are created, or when it’s off the exchange in a difficult situation, restructured and going back again," Slyngstad said.

“Private equity is just equity. It looks different because it’s more leveraged and not priced every day. But it’s the same thing," Slyngstad said. "We don’t regard private equity as a separate asset class."


GOVERNANCE

The fund also plans to build bigger stakes in individual companies and plans more involvement with the firms to maximise returns and tackle governance issues such as protecting workers'

rights and the environment.

It has already put pressure on cotton seed producers in India and cocoa producers in west Africa to stop employing children and sold out of many Malaysian palm oil producers due to environmental concerns.

"We typically identify 400-500 companies in our portfolio that are especially exposed to various governance issues, whether it's child labour, water management or other issues," Slyngstad said, declining to name any of the firms.

It also expects to have 2,600 direct meetings with companies and plans to take a bigger role in nominating board members at firms where it is among the top shareholders, Slyngstad said.

"If we are exceeding 5 percent ownership, we expect to be involved in the (board) nomination process to assure ourselves that it’s a good process," Slyngstad said.

Source: Reuters

Alibaba picks New York Stock Exchange for U.S. IPO

Chinese e-commerce company Alibaba Group Holding Ltd has decided to list on the New York Stock Exchange, it said on Thursday, dealing a blow to the rival Nasdaq bourse.

Alibaba, which handles more than 80 percent of online retail transactions in the world's second-largest economy, will list under the symbol "BABA," the company said in an updated initial public offering prospectus.

The Chinese company is expected to make its debut this summer in what could be the largest U.S. tech IPO. It is expected to eclipse Facebook Inc's $15 billion initial share sale in 2012.

Alibaba would be the largest Chinese company to list on U.S. exchanges by far, with an estimated valuation north of $200 billion. Securing its debut marks a major victory for the New York Stock Exchange, which was acquired by IntercontinentalExchange Inc for $11 billion in November.

“We participated in a comprehensive and deliberate exchange selection process, and we are pleased to welcome Alibaba Group to the New York Stock Exchange,” an NYSE spokesman said.

The two U.S. exchanges compete fiercely for new listings. Nasdaq had easily scored the most tech IPOs every year from 1999 until 2012, when NYSE had as many, according to Thomson Reuters data. The NYSE pulled ahead last year, and it won the most coveted tech debut of the year, Twitter Inc .

The reversal has been attributed partly to Nasdaq's high-profile bungling of Facebook's market debut in 2012 and partly to changes NYSE made to its listing standards in 2008 to make it easier for smaller, growing companies to qualify.

Nasdaq, meanwhile, has made inroads against NYSE on blue-chip listings, with wins in recent years such as Kraft Foods Group Inc and Texas Instruments Inc .


The NYSE, however, led the Nasdaq in terms of overall listings in the first half of this year, the busiest period for stock debuts since 2011. The NYSE accounted for $19.8 billion of U.S. IPO proceeds, or 61 percent of the total.
Source: Reuters

Militants take Iraqi gas field town, president calls parliament session

June 26 (Reuters) - Militants took a town an hour from Baghdad that is home to four natural gas fields on Thursday, another gain by Sunni insurgents who have swiftly taken large areas to the north and west of the Iraqi capital.

Iraq's presidency said a session of parliament would be held on July 1, the first step to forming a new government that the international community hopes will be inclusive enough to undermine the insurgency.

The overnight offensive included Mansouriyat al-Jabal, home to the gas fields where foreign companies operate, security forces said. The fighting threatens to rupture the country two and a half years after the end of U.S. occupation.

The insurgents, led by the hardline Islamic State in Iraq and the Levant (ISIL) but also including other Sunni groups blame Prime Minister Nuri al-Maliki for marginalising their sect during eight years in power and he is fighting for his job.

Three months after elections, a chorus of Iraqi and international voices have called for the government formation process to be started, including Iraqi's most influential Shi'ite Grand Ayatollah Ali al-Sistani.

The presidency issued a decree on Thursday for a parliament session on July 1, state television said. Parliament will then have 30 days to name a president and 15 days after that to name a prime minister although the process has been delayed in the past, taking nine months to seat the government in 2010.

Maliki has dismissed the call of mainly Sunni political and religious figures, some with links to armed groups fighting Maliki, for a "national salvation government" that would choose figures to lead the country and, in effect, bypass the election.

Iraq's Shi'ite religious cleric Moqtada al-Sadr, a foe of Maliki's, called for all Iraqis to deplore the Sunni insurgency and rally behind the army but said that a new government was needed "with faces from all spectrums and away from sectarian quotas."

Head of the Mehdi Army, a Shi'ite militia which fought U.S. troops in Baghdad, Sadr vowed in a speech on Wednesday night to

"shake the ground under the feet of ignorance and radicalism just as we did under the feet of the occupier."

Northern Iraq's largest city Mosul fell to Sunni insurgents on June 10 and took Tikrit city two days later. Kurdish forces moved into Kirkuk on June 11 and now control the oil city.

Army air strikes hit south Mosul overnight, killing one and wounding six people.

Source: Reuters

Meet the man behind Pleco, the revolutionary Chinese language learning app that’s older than the iPhone

Learning Chinese is not for the faint of heart. Not only does the non-native Mandarin speaker have to master the language’s infamous tones, he or she will must memorize hundreds of thousands of (practically speaking) non-phonetic characters, get acquainted with a wide range of accents, and grapple with a deceptively simple grammar system. At the same time, even the most gifted linguist will admit that one of the biggest challenges posed by Mandarin isn’t the mechanics of the actual language, but the grunt work required to learn it well. Looking up characters in a paper-bound Chinese dictionary is a multi-step process that can take tens of minutes if you’re not careful. Also, relying on a single Chinese-English dictionary for reference is a surefire way to commit language suicide. For such a long-lasting, quickly-evolving language, you’ll need at least three dictionaries handy in order to get a rough idea of what a specific character, word, or phrase means – and even then you’ll usually have to apply some brainpower to figure out how it’s used properly. Enter Pleco – the best Chinese dictionary app on the planet. To some of our readers, a dictionary app might not seem like the most exciting of subjects, but those who know and use Pleco understand how crucial it is to one’s language learning regimen. It’s one of those rare brand names (if you can call it a brand) that will elicit sheer glee from its users upon the very mention of its name. A Swiss Army knife app featuring 25 dictionaries, almost anyone that’s used it can recall a moment when Pleco “saved their life.” While the app has won legions of fans, few are aware just how revolutionary it was and continues to be. Pleco was first launched as an app for Palm in 2001 – before the big boom in Chinese language learning and the world’s mass adoption of mobile handsets. It pioneered the notion of a Chinese dictionary as a powerful, always-on tool for a wide range of learners, and was the first cross-platform Chinese dictionary to merge handwriting input with character searches across multiple dictionaries. Want to know what 熊貓 means but don’t know how to pronounce the characters? Just trace them in the input field and you’ll find the word next to “panda,” its definition, alongside “xiongmao,” its romanized phonetic pronunciation. Now the app features optical character recognition (“hover-to-translate”), mixed character-pinyin search (trust us, that’s a big deal), voice input, flashcards, and many other bells and whistles that make learning Chinese that much easier for hardcore students. When you consider that for centuries, the only way to look up the word for “panda” was to count the number of strokes for the radical component of 熊, consult a series of charts, and then hope that the suggested definition remotely made sense, the convenience of Pleco marks a major turning point in the history of Chinese language learning. Moreover, more than ten years after it first appeared on Palm, Pleco remains a mostly one-man operation. For 32-year-old Mike Love, a programmer based in New York, Pleco is a full-time hobby that doubles as a business. While many of the apps that dominate our smartphones were created by Silicon Valley dreamers with pipe-dream ambitions and half-baked business plans, Love has added tremendous value to language learners around the world simply by building a better dictionary. Think of him as the pastor overseeing the long-awaited wedding between the Chinese language and mobile electronic devices.

Source: TECHINASIA

UK-based Skyscanner acquires Chinese travel search startup Youbibi for an undisclosed amount

It’s not often that we get news of international internet companies acquiring Chinese startups, so when it happens, we pay attention: today, Edinburgh-based travel booking firm Skyscanner announced it has acquired Shenzhen’s Youbibi. Neither firm has disclosed the financial terms of the deal. Skyscanner officially launched in 2001 as an aggregation and comparison service along the lines of Priceline. It opened an office in Beijing in 2012. Since then, the company claims to have surpassed one million visitors each month (the company provided no data on bookings). The company also formed a partnership with Baidu to provide the Chinese search engine with data for international flight listings – about one year after Baidu purchased a majority stake in booking aggregator Qunar. Youbibi, meanwhile, launched in 2010 and currently sees 100,000 monthly visitors to its site. Like Skyscanner and the China’s Qunar, it aggregates and compares ticket and lodging prices on other websites, but specializes in the local market. Skyscanner’s acquisition of the company marks a deliberate attempt to ramp up its domestic offerings in China. A company spokesperson told Tech in Asia: Skyscanner is a global brand and we are very much focused on being local to each of our key markets. In China, it is important for us to build our product around a specialist team of Chinese engineers, based in China to enable us to continuously build and develop our product within China, by Chinese developers, specifically for Chinese travelers. It’s our model to focus any acquisitions on smaller start-up companies that share our focus on innovative product development. While certain firms like CTrip and Qunar have emerged from China’s domestic online travel booking industry to grow into giant-sized companies, the space remains fragmented even as revenues increase. According to iResearch, online travel agencies in China generated RMB2.99 billion (almost US$480 million) in revenues for Q1 2014, up 17 percent year-on-year. The research firm estimates that Ctrip occupies about 51 percent of the domestic online travel agency market, followed by eLong at 9 percent, and the Ctrip-backed LY.com at 6 percent.

Source: TECHINASIA

Alibaba invests big in media company

Chinese e-commerce firm Alibaba has invested heavily in Hong Kong-listed China Vision Media Group Ltd. (CVMG), becoming the media company's biggest shareholder, CVMG announced in a statement on Wednesday.

Alibaba paid 6.24 billion HK dollars for 59.32 percent of CVMG's shares, the statement said.

Liu Chunning, Alibaba Group vice president, will serve as president of CVMG, while Dong Ping, the media group's former president, will become adviser to the company. Chinese action movie star Jet Li will act as CVMG's independent non-executive director, according to the statement.

The company will be renamed "Alibaba Film Group Co., Ltd." accordingly, a previous statement said.

CVMG has previously obtained investment priorities in the movies of Hong Kong film directors Wong Kai-wai and Peter Ho-sun Chan, as well as Hong Kong actor Stephen Chow. It also signed deals with an entertainment company in March to invest in five films.

Source: Xinhua

WSJ: Rebalancing China’s Economy? Fuhgeddaboudit

If there is one economic tonic that’s prescribed over and over for China, it’s this: rebalance the economy.

In layman’s terms, that means China should rely less on investment in infrastructure and capital-intensive industries and more on domestic consumption. (Any journalist covering China’s economy has written that prior sentence enough times to make his or her wrists hurt.)

Why? Excessive investment has led to the construction of subways, bridges, airports and real estate projects that have no reason for being. The investment focus has also made the air over every major Chinese city foul with pollution. If people spent more and saved less, the theory goes, they would spend more on services and high-tech goods, which produce more employment and less pollution than, say, steel mills.

At least one major bank thinks the rebalancing theory is wrong.

“We believe the obsession with rebalancing China’s economy is leading to misguided policy recommendations that are too blunt and may carry unintended consequences,” including, perhaps, reducing savings, write HSBC economists Qu Hongbin and John Zhu in a new report.

Sure, China’s investment rate is ultra-high at around 48% of GDP, they acknowledge. Sure the household consumption rate is ultra-low at roughly 34%–about half the level of the U.S. ( Some economists think that China’s consumption rate is lower than U.S.’s ever was, in its entire history.)

But Messrs. Qu and Zhu argue that China is a poor country and investment is still necessary. “There are still more useful infrastructure projects to be built before the country gets overrun by bridges to nowhere,” they write.

And, they argue, who says a consumer-based economy is so great, especially one powered by debt? The U.S. hasn’t exactly been a beacon to the rest of the world in the last couple of years when it comes to the economy.

In some ways, though, HSBC’s analysis isn’t all that much different than those of the rebalancers. Messrs. Qu and Zhu argue that China has to invest more wisely so that it gets value from its investment – the same as those pushing more domestic spending.

But rebalancing will happen naturally as China’s population ages, they say. People all over the world save less when they reach old age because they aren’t earning much income and they  still have plenty of expenses. For now, HSBC says, China should amp up its investment.

So, Chinese consumers, keep a lid on those credit card bills.

WSJ: Hedge Fund Industry Surpasses $3 Trillion for First Time

The WSJ reports,"the hedge-fund industry exceeded the $3 trillion barrier in May for the first time ever, according to one research firm, as new allocations and performance gains pushed total assets to a new record".

Some $22 billion flowed into hedge funds last month, bringing the year-to-date inflows to $93 billion, according to data provider eVestment. That’s the largest five-month total to start a year since 2007. Performance gains also added $37.8 billion in assets last month, leaving the total tally just north of $3 trillion.

"Cash has flowed into these hedge funds despite relatively muted performances over the past several years. Many hedge-fund managers have underperformed their benchmarks as the stock market has surged to record after record. Hedge funds suffered back-to-back monthly declines in March and April for the first time since April and May of 2012, according to researcher HFR Inc. These funds rebounded in May and posted gains across all main strategies", HFR said earlier this month.

"And yet, capital continue to flow toward hedge managers who purport to be better positioned for a potential market downturn.

Much of the cash coming to hedge funds has been allocated to stocks. Some $11.5 billion were added to equity strategies last month, or a little more than half of the monthly inflow, eVestment says. That brings the year-to-date total to equity funds to $59.4 billion, the best start to a year since mid-2007, eVestment said.

EVestment is the first to put total assets in the hedge-fund industry at more than $3 trillion. Other research firms have stuck to more conservative estimates. Data firm HFR pegged the industry at $2.7 trillion in April, the same month that trade publication HedgeFund Intelligence measured it at $2.6 trillion".

U.S. clarifies what lightly processed oil drillers can export

 U.S. energy markets marked a seismic shift on Wednesday after federal officials provided more clarity on what companies glutted with oil can ship to thirsty markets abroad, leading to expectations for a potential surge in shale oil exports.

News that companies can export a type of ultra-light crude if it has been minimally refined pushed crude oil prices higher, and triggered a realignment in energy stocks, with refiner shares sagging while those in several oil and gas producers jumped.

The U.S. Department of Commerce's Bureau of Industry and Security told Pioneer Natural Resources and Enterprise Product Partners on Tuesday that removing highly flammable gases from light oil, known as condensate, was sufficient processing to qualify the condensate as a "refined product."

Under U.S. law refined products are allowed to be exported, but most crude oil is not.

Higher oil prices are arguably unwelcome at a time U.S. gasoline prices are already high, putting a strain on consumers and the economy. The White House on Wednesday said the Commerce Department's ruling was not a change in policy.

"As the Commerce Department has said, oil that goes through a process to become a petroleum product is no longer considered crude oil," spokesman Josh Earnest told reporters in daily briefing.
The U.S. shale oil boom of the last five years has led energy companies and politicians to push for a reversal of the 40-year export ban. Drillers say the ban, at a time of sharply rising production, has led to a glut of domestic oil that could soon force them to slow down output.

The Wall Street Journal on Tuesday first reported that the Commerce Department, under growing pressure, had given export approval to the companies via a private ruling.

However, a Commerce Department official told Reuters on Wednesday that its ruling was a commodity class determination.

"They do not constitute a change in policy but are a description of what the regulations are and how they apply to a particular item," said Kevin Wolf, an assistant secretary of commerce for export administration.

Still, U.S. oil prices, which rose 58 cents to $106.66 per barrel, highlighted the greater scrutiny of a regulatory gray area. Regulations prohibit the export of condensate that has been produced directly from an oil field but allow it if the same type of oil emerges from a natural gas plant or a refinery.

ASIAN BUYERS

Energy-hungry Asian countries, which get most of their oil from the Middle East, would welcome extra U.S. supplies.

The shale oil boom is expected by some estimates to make the United States the world's top crude producer, surpassing both Saudi Arabia and Russia - an outcome unimaginable a decade ago.

It has also led to a glut of light oil in Texas and Louisiana that is difficult to process there because refiners have invested billions of dollars to process heavier oils from Mexico and Venezuela.

It was not immediately clear how much condensate the companies would be able to ship, and when.

But Enterprise has the infrastructure in place to export processed condensate from its massive Houston storage facility, spokesman Rick Rainey said, and can start exporting the very light crude oil any time.
The condensate in question has long been run through equipment known as stabilizers, which shave off volatile natural gas liquids, in order to meet pipeline specifications. Stabilizers are common in the Eagle Ford shale region of Texas.

A lawyer who works for the oil refining industry downplayed the significance of the ruling.

"The decision to allow condensate exports frankly is not that big of a deal," said the lawyer who did not want to be identified, because his firm represents a variety of oil industry interests. "It doesn't look like many other companies will be able to use these decisions to their advantage," because a distillation unit is a piece of equipment requiring substantial capital investment, permitting, and specific crudes.

Citigroup oil analyst Ed Morse, however, deemed the ruling significant.

"The flood gates of exports will be opened now," he said, adding that some 200,000 to 300,000 bpd of U.S. condensate could be exported by the end of the year and that the volume could double in 2015.

Shares in Pioneer jumped 5.15 percent on Wednesday, those in Enterprise advanced by 1.35 percent and shares in several other U.S. oil and gas producers, especially those more weighted to condensate, also rose.

But shares of U.S. refiners, especially those most levered to light crude oil, dropped on fears of a rise in crude oil costs. Valero Energy Corp slumped 8.3 percent, and Alon USA Energy shed 6 percent.

Source: Reuters

CANADA STOCKS-TSX steady as energy share gains offset weak U.S. data

Canada's main stock index was little changed on Wednesday as gains in shares of energy producers and Valeant Pharmaceuticals <VRX.TO> helped overcome the impact of data showing a bigger-than-expected drop in U.S. economic growth in the first quarter.

Figures indicated the U.S. economy recorded its worst performance in five years in the quarter. The market also set aside worries about the situation in Iraq. Militants attacked one of Iraq's largest air bases and seized control of several small oilfields. 

The Toronto market, which hit a record closing high last week, is up about 10 percent so far in 2014. Most of the gains have come from the energy sector, which is up about 21 percent since the start of the year.

“The increased geopolitical concerns seem to be helping commodities this month,” said Youssef Zohny, portfolio manager at Stenner Investment Partners, a subsidiary of Richardson GMP.

“The TSX has had a very good run this year," he added. “We expect it to continue to outperform other global markets, but it's likely vulnerable to some profit-taking in the short term."

The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> closed up 12.28 points, or 0.08 percent, at 14,974.65. Five of the 10 main sectors on the index were higher.

Energy shares climbed 0.2 percent, supported by higher U.S. crude oil prices. Suncor Energy Inc <SU.TO> added 0.3 percent to C$44.70, and Canadian Natural Resources Ltd <CNQ.TO> rose 0.6 percent to C$48.25.

The industrial sector advanced 0.3 percent. Canadian National Railway Co <CNR.TO> gained 1.1 percent to C$68.04, and Canadian Pacific Railway Ltd <CP.TO> added 0.9 percent to C$191.58.

In corporate news, Valeant said it had called a special meeting for its shareholders to approve the issue of new shares, another step in its pursuit of Botox maker Allergan Inc <AGN.N>. Valeant shares jumped 4.3 percent to C$134.93.

Source: Reuters

U.S. Ambassador Baucus says China hacking threatens national security

 Cyber theft of trade secrets by China is a threat to U.S. national security, U.S. Ambassador to China Max Baucus said on Wednesday in the first major public address of his tenure, warning that Washington would continue to pressure Beijing.

Baucus' remarks come as commercial ties between the world's two largest economies have been strained over cyber espionage charges and revelations by former National Security Agency contractor Edward Snowden of U.S. spying. 
In May, Washington indicted five Chinese military officers for hacking U.S. companies, prompting Beijing to suspend a Sino-U.S. working group on cyber issues. It adamantly denies the charges.

Such behaviour is criminal and runs counter to China's World Trade Organization commitments, Baucus told business leaders at an American Chamber of Commerce in China luncheon two weeks ahead of annual high-level bilateral talks in Beijing.

"Cyber-enabled theft of trade secrets by state actors in China has emerged as a major threat to our economic, and thus, national security," Baucus said.

"We won't sit idly by when a crime is committed in the real world. So why should we when it happens in cyber space?" he said. "We will continue to use diplomatic and legal means to make clear that this type of behaviour must stop."

Tensions over cyber security rose in late 2012 after Washington banned Chinese communications equipment makers Huawei Technologies Co Ltd and ZTE Corp <000063.SZ> from building U.S. telecoms infrastructure.

Beijing responded by pressuring big state-owned firms to stop buying U.S.-made hardware, emphasising security risks following Snowden's revelations, people in the industry said.

U.S. equipment and software providers such as IBM Corp and Cisco Systems Inc have already seen their China sales drop after the Snowden leaks.

INVESTMENT TREATY A PRIORITY

Like a string of ambassadors before him, Baucus, a former Montana senator who arrived in Beijing in March, has made it his immediate priority to boost the two countries' commercial and economic links. He has stressed that stronger economic ties will help resolve a host of thorny political and security challenges.

Baucus said a bilateral investment treaty would help China rebalance its economy by opening up its service industries to more foreign investment and that moving forward negotiations would be among his top priorities as ambassador.

"I believe that the U.S.-China bilateral investment treaty ... today could do for China's investment regime what the WTO accession did 15 years ago," Baucus said.

The investment treaty talks, which were launched in 2008, will likely be at the centre of the Strategic & Economic Dialogue that will bring U.S. Secretary of State John Kerry and Treasury Secretary Jacob Lew to Beijing in July.

Disputes over cyber security topped the agenda at last year's meeting, initiated in 2008 to help manage a relationship that is growing more complex with China's emergence as major economic and military power. However, the annual talks have yielded few substantive agreements.

Lew has said he will push China to speed up economic reforms and do more to allow markets to determine the value of its yuan currency.
Washington's aim for the investment treaty is to loosen Beijing's restrictions in key sectors from service industries to agriculture, and ensure that foreign companies receive treatment equal to Chinese private and state-owned enterprises.

China heavily restricts dozens of industries and U.S. firms have long complained they are forced to meet unfair burdens such as ownership caps and are pressured to transfer technology in exchange for market access.

Source: Reuters

China to introduce more forex derivatives, strengthen supervision

China's foreign exchange regulator said it will increase the number of foreign exchange derivate products available in the market to facilitate export growth and help companies hedge currency risk.

The State Administration of Foreign Exchange (SAFE) said in a statement on its website that it would strengthen supervision of derivatives trading by banks to ensure that the trade helps reduce risks for companies, and expand the variety of tools available, focused on foreign exchange options.

The statement said it would add principal swap transactions for currency swaps and lower the entry threshold for companies and bank branches.

SAFE has been moving to help Chinese firms cope with an increasingly volatile domestic exchange rate after the People's Bank of China (PBOC) set off a steep depreciation in the value of the yuan earlier this year, then followed up by widening the intraday trading band to 2 percent on either side of the official daily fixed rate.

That depreciation led to significant currency derivative losses by Chinese companies, in particular airlines, many of which had bet heavily on the yuan continuing to appreciate.

Source: Reuters

Rising debt payments pressure Argentina to solve crisis

 Argentina's debt servicing costs are set to more than double in 2015 as foreign reserves slide to critically low levels, boosting pressure on the nation to resolve its 12-year-old battle with creditors and regain access to international credit markets.

Debt payments in foreign currency will rise to $9.4 billion next year, $6 billion of which is due in October to pay holders of its Boden 2015 debt, according to government data analyzed by Reuters. Argentina has agreed this year to make payments to the Paris Club, the World Bank and Repsol SA that will cost about $1.5 billion in 2015, according to Bank of America estimates. That could bring the total bill to $10.8 billion, compared with about $5 billion this year, including payments on the recent agreements.

Foreign reserves, which fell 30 percent last year and stand at eight-year lows of about $29 billion, are seen falling in the second half of 2014 after Argentina's main farm exports, soy and corn, are harvested and sold in the first half.

"Payments will increase next year and it's going to be tight to pay," said Bank of America economist Marcos Buscaglia in New York, who sees reserves falling to $26.7 billion by the end of 2014.

Official data on total debt payments is open to interpretation, economists say, as it includes a medley of inter-public-sector and international loans that are usually rolled over and therefore would not affect reserves.

Reuters has stripped out most of these loans but not all, such as those held by the pension system for which a clear breakdown of bond holdings in dollars is not readily available.

Latin America's No. 3 economy, which slid into a recession in the first three months of this year, has been burning up its reserves to pay debt and finance imports. [ID:nL2N0P41AZ]

Analysts say there are short-term fixes that Argentina can use to tide over cash flow problems as long as it soon regains access to global credit markets it has been shut out of ever since its default on $100 billion of bonds in 2002..

To do that, it needs to reach a deal with the "holdout" investors who have refused its attempts to restructure their bonds and who last week scored another victory against the country in U.S. courts.

"All the deals sealed in 2014 increase a lot the debt services that Argentina will face up to 2019," Buscaglia said.

“If Argentina can tap markets, it will be a manageable schedule.”

President Cristina Fernandez says rulings that Argentina pay one group of holdouts $1.33 billion in cash would prompt new claims of up to $15 billion - an "absurd" sum she says it can’t pay.

After years of refusing to negotiate with the holdouts, Argentina says it is now ready to talk. If it does not pay or reach a deal, U.S. courts will prevent it from servicing debt held by the more than 90 percent of creditors who agreed to restructure.

The next payment is due on June 30 and Argentina has a month-long grace period, meaning it could be in technical default by the end of July.


DIRE CASH-FLOW

Argentina's cash-flow situation looks more dire if only liquid net reserves are considered. Those are the headline figure minus gold, IMF special drawing rights or bank reserve requirement deposits, depending on definitions.

Analyst estimates for net reserves range between $14.7 billion and $21 billion. There is no official estimate.

"Argentina is near bankruptcy with net foreign exchange reserves at only three months of import coverage," said Siobhan Morden, head of Latin America strategy at Jefferies in New York, which estimates net reserves at $16.5 billion.

A common rule of thumb is that a country should have reserves to cover at least three months' worth of imports in order to protect it from external crisis. Argentine imports stood at $5.9 billion in May.

"This metric shows their stock is quite low and they still have quite significant dollar liabilities. These are serious financing constraints on paying these holdout liabilities," Morden said.

That said, Argentina still has options to deal with the impending credit crunch. It could roll over much of its Boden 2015 bonds, which are governed by local law, as long as investors remain keen on high-yielding Argentine debt. It would still have to pay the interest but at least not all the amortization costs.

Elections at the end of 2015 are expected to bring in a more investor-friendly government and that plus a shift over recent months toward more pragmatic policies has improved investor appetite. The market quickly absorbed billions in Argentine bonds issued last month to compensate Repsol for the taking of its YPF subsidiary.

"Only in the worst case scenario would Argentina pay (the amortization of the Boden 2015) with reserves," said Gustavo Ber, an analyst at local consultancy Estudio Ber. "Many investors could be interested in rolling over the debt."

Argentina's central bank could borrow from foreign banks or raise the foreign currency deposits requirement for local banks to get its hands on foreign currency.

The government could also raise import restrictions to stop capital outflows and devalue the currency again to boost exports, though these measures would risk fuelling one of the world's highest inflation rates and hurting consumption. Restrictions on imports of energy or intermediate goods for manufacturers could also further hurt the economy.

"You may have trouble by 2017 if this situation persists for three years in a row," said analyst Mauro Roca of Goldman Sachs.

"But a lot could happen before then.

"It's important to resolve the situation with holdouts and then Argentina can forget the reserves because once it has access to international markets it will be able to finance itself that way," Roca said.

Source: Reuters