Chinese Stocks Take Off

       The WSJ reports,"China's stocks are soaring as people scoop up investments in one of the world's cheapest markets, encouraged by signs Asia's biggest economy has turned the corner and is starting to motor again.

The Shanghai Composite Index jumped for a sixth day to the highest in nine months on Tuesday, bringing the gain to 6.6% so far in July and leaving the market in position to record its best month since December 2012. The index is catching up with a rally in Hong Kong that sent the city's main stock index to a three-year high last week.

An index of mainland companies traded in Hong Kong entered a bull market Monday, rising more than 20% from a low in March.

"People have given up on expecting China to collapse," said Arnout van Rijn, Asia-Pacific chief investment officer at Robeco Group in Hong Kong, which manages assets worth $290 billion. Mr. van Rijn increased his exposure to Chinese stocks this year.

Because of a slowing growth on the Chinese economy in the first quarter and H1,"for most of the year, Chinese stocks put in lackluster performances, missing out on a rally that swept through the U.S., Europe and most of Asia, as markets encountered a variety of bumps. In March, the country experienced its first default on a corporate bond, adding to fear that widespread credit problems could emerge as companies dealt with slowing economic growth.

Now, sentiment has turned around. Government measures unveiled in the past month are spurring optimism the economy will rebound, aided by overhauls aimed at debt-laden state-run enterprises. Banks are raising cash to help with bad loans.

Property prices are showing signs of stabilizing, and large developers are among the leaders of the stock rally.

Investors have moved in to take advantage of valuations driven lower by the downturn, leaving China's market among the cheapest in the world.

The Hang Seng China Enterprises Index, which tracks Chinese companies listed in Hong Kong, is currently trading at 7.2 times forward earnings, a common valuation measure, compared to an average 11.9 over the past 10 years and the current 16.6 for the S&P 500.

The recent rally has been led by widely-traded behemoths like PetroChina Co., China's largest listed oil company by capacity, which is up 23% year to date in Hong Kong."

The buying in China has been widespread. According to HSBC Holdings PLC, mutual funds now hold record amounts of Chinese equities. EPFR, a data provider, says Chinese equity funds recorded net inflows of cash in both June and July, reversing four months of outflows.

Local investors have bought as well as alternatives such as the property market have stagnated. Yields on wealth-management products, once popular as a source of high returns, have fallen sharply in recent months.

The optimism has spread to other markets as well. China's currency hit a three-month high this week, rebounding from a first-half tumble. The bond market, too, has rallied: Yields on top-rated corporate bonds were at 5.39% on Monday, down from 6.31% at the start of the year.

Not all investors are convinced. Paul Chan, Invesco's chief investment officer for Asia, excluding Japan, cut his allocation to Chinese equities to "underweight" from "overweight" for the first time in more than four years this month. Invesco has $802.4 billion in assets under management.

Mr. Chan says economic growth and increases in earnings per share in mainland China are likely to lag behind those in the rest of the Asian-Pacific region.

Other investors say a rapid accumulation of debt by China in recent years is still an overhang for the economy. Standard Chartered  PLC estimates that total debt amounted to 251% of gross domestic product hit at the end of June. An additional concern is that China's recent efforts to stimulate the economy aren't sustainable, and that effects will only be temporary.

For now, though, investors are welcoming Chinese efforts to overhaul state-run companies. The government has allowed six to introduce pilot programs aimed at introducing more private investors and improving management".

Argentina: Country's Stocks and Bonds Sell Off Ahead of Wednesday's Default Deadline

       The WSJ reports,"Investor confidence that Argentina would reach a deal with holdout creditors is falling as a default deadline draws closer, sparking a selloff in the country's stocks and bonds.

Argentina and its holdout creditors have until Wednesday to agree to a deal to avert what would be a second default in 13 years. Analysts and investors in the past few weeks have been relatively upbeat on the prospects for an agreement, expecting Argentina to agree to pay the holdouts at the last minute.

But those prospects seemed to dim following the news that Monday would come and go without further talks. On Monday, the court-appointed mediator said Argentina had arranged for a meeting on Tuesday, but wouldn't meet face to face with the holdouts.

"The market has been optimistic, expecting that Argentina will do what they think Argentina should do" and come to an agreement, said Siobhan Morden, head of Latin America strategy at Jefferies LLC. "The market is starting to crack. I think we're still heading lower."

Argentina's dollar bonds due 2033 fell as low as 81.375 cents on the dollar, a five-week low and down from as high as 90 cents on the dollar as recently as Thursday. They later rebounded to about 84 cents in very thin, choppy trading, traders said. The bonds closed at about 85.5 cents late Friday.

Ms. Morden said 57% of investors polled by Jefferies now expect an Argentine default. Should that happen, those investors expect Argentina's benchmark bonds to fall to an average of 68 cents, she said.

The price on Argentine credit-default swaps, contracts designed to pay out when a country defaults on its debt, on Monday implied an 80% chance of default in the next five years, according to research firm Capital Economics.

Argentina's benchmark Merval stock index hit a one-month low before trimming its losses to end the day down 1%. The index is down 11.3% in the last 10 trading sessions.

U.S. District Judge Thomas Griesa blocked interest payments for $539 million due on Argentina's 2033 bonds in June after the country deposited the money. Judge Griesa has ruled that Argentina must pay hedge funds led by Elliott Management Corp. affiliate NML Capital Ltd. and Aurelius Capital Management LP when it pays investors who own bonds the country issued after its 2001 default.

Argentina has until Wednesday to get that money to bondholders or run the risk of being declared in default.

Argentine officials met twice last week with their court-appointed mediator, Daniel Pollack, but declined to hold face-to-face talks with representatives for the hedge funds, which are suing to collect on debt Argentina stopped paying 13 years ago.

Argentina's finance secretary and a set of other officials are set to travel to New York on Monday and meet with Mr. Pollack at 11 a.m. on Tuesday.

"I again urged direct, face-to-face conversations with the bondholders," Mr. Pollack said about the call with Argentina's representatives on Monday. "But that will not happen tomorrow."

Jim Craige, a portfolio manager with Stone Harbor Investment Partners LP in New York, said it was looking less likely that Argentina would reach a deal, particularly after the country's negotiators flew back to Buenos Aires on Friday, to return to New York late Monday.

"They could have gotten on an airplane earlier," Mr. Craige said. "They should have never left [Friday], and probably should be here for an early Monday meeting if they were really interested in getting this done. In order to negotiate, you have to actually sit down at the table and hammer out a deal."

Mr. Craige said his firm owned some Argentine bonds governed by local law, and not subject to the U.S. court ruling, but that he'd consider selling those if conditions in the country worsen after a potential default.

The Argentine government has argued that it can't default because it deposited the money, which is now the property of bondholders. The government has asked the judge to suspend his ruling to give it more time to negotiate".

Argentina's long-running legal battle with hedge funds stems from its default on some $100 billion in public debt in 2001 amid a deep economic crisis. The country offered holders of the defaulted bonds new securities valued at about 33 cents on the dollar in 2005 and 2010. Between the two swaps, investors agreed to exchange almost 93% of defaulted bonds eligible for restructuring.

However, the hedge funds decided not to tender their bonds and instead sued for full repayment. Those so-called holdout creditors have won about $1.6 billion after years of litigation in U.S. courts.

Argentina has largely run out of legal options after the U.S. Supreme Court on June 16declined to hear its appeal in the case, leaving in place Judge Griesa's decision that Argentina must treat its different groups of creditors equally".

EU agrees economic sanctions on Russia

The European Union reached agreement on Tuesday on the bloc's first broad economic sanctions on Russia over its role in Ukraine, diplomats said, marking a new phase in the biggest confrontation between Moscow and the West since the Cold War.

The measures will shut major state-owned Russian banks out of European capital markets and target the defence sector and sensitive technologies, including oil, but exclude the vital gas sector, on which Europe is heavily dependent.

In contrast to the United States, the 28-nation EU, with bigger economic interests at stake, hesitated for months to take decisive action against Moscow.

But the mood changed radically after the downing of a civilian flight in an area of Ukraine controlled by pro-Russian separatists earlier this month, killing all 298 people on board, including 194 Dutch citizens.

Washington believes flight MH17 was shot down in error by the separatists with a missile supplied by Russia. Moscow has denied any involvement and sought to deflect the blame to Kiev.

The president of the European Commission, Jose Manuel Barroso, and European Council President Herman Van Rompuy said the sanctions were means as a "strong warning" that Russia's actions in Crimea were not unacceptable and would bring "heavy costs" to its economy.

"The European Union will fulfil its obligations to protect and ensure the security of its citizens. And the European Union will stand by its neighbours and partners," the EU's top two officials said in statement.

Several European diplomats, speaking on condition of anonymity, said sanctions could be ratcheted up further if necessary.

EU ambassadors clinched their agreement as intense fighting between Ukrainian troops and pro-Russian rebels in eastern Ukraine killed dozens of civilians, soldiers and rebels.

It is expected to be finalised on Wednesday and the measures published in the bloc's Official Journal. [ID:nL6N0Q42JK]

Dutch Foreign Minister Frans Timmermans, whose call for justice swayed EU peers last week, said the capital market restrictions "will have a far-reaching and immediate effect".

The sanctions will initially last a year but will be reviewed after three months on Oct. 31 to determine their impact on Moscow's behaviour, diplomats said.

"We have to keep a consistent review of the political aspect and provide legal certainty," one senior EU diplomat said.

The deal, which does not require endorsement at a special EU summit, followed an agreement to widen sanctions on Moscow between U.S. President Barack Obama and the leaders of Britain, France, Germany and Italy in a telephone conference on Monday.

Previously, Washington and Brussels have imposed sanctions on specific individuals over Moscow's actions towards Ukraine, but the EU in particular had shied away from measures designed to hurt vital sectors of the Russian economy, not least because of the threat to EU economies.

The EU does more than 10 times as much trade with Russia as the United States does, relying in particular on Russian natural gas to fuel its industry and power its cities.


BALANCE

Some member states are nervous about the risk to their own economies, and EU leaders struggled to strike a balance between inflicting pain on Russia and preventing fragile EU nations from sliding back into recession.

In a letter to EU leaders last week, European Council President Herman Van Rompuy said the proposed sanctions package

"should have a strong impact on Russia's economy while keeping a moderate effect on EU economies".

There was a consensus on only targeting future contracts, he said, which would leave France free to go ahead with the delivery of helicopter carrier warships is it building for Russia.

Another principle was that EU measures targeting energy technology could hit Russia's oil sector but not its natural gas. Russia is the world's biggest exporter of gas and second biggest exporter of oil; Europe depends on it far more for gas, which arrives mainly by pipeline and is harder to source from elsewhere than oil that arrives mostly by ship.

Probably the most high-impact measure will ban Europeans from buying new bonds or shares issued by banks owned 50 percent or more by the Russian state, which analysts say will affect their ability to finance the economy.

Syndicated loans were not included "at this stage", one senior EU diplomat said, adding that European banks will not be able to purchase targeted debt anywhere in the world.

"It applies to primary markets and to secondary markets, bonds and shares of targeted, well-defined, state-owned Russian banks," he said.

Apart from agreeing on the economic measures, ambassadors also signed off on a new list of Putin's associates and companies that will face asset freezes and visa bans under previous measures, the criteria for which were toughened the day before the plane crash.

The list is expected to be made public on Wednesday, adding to the 87 people and 20 organisations already hit with asset freezes for playing a role in threatening Ukraine. 
Source: Reuters

U.S. natgas futures end up 1.6 pct on contract expiration

U.S. natural gas futures ended up 1.6 percent on Tuesday as some short traders closed out their positions ahead of the expiration of the August contract.

After falling for seven of the last eight trading days, the front-month August futures on the CME NYMEX closed up 6.1 cents, or 1.6 percent, at $3.808 per mmBtu.

August traded between $3.72, which was a fresh eight-month low, and $3.83 on Tuesday, moving out of oversold territory for the first time in 17 days. That was the longest the front month had remained in oversold territory in more than four years.

The Relative Strength Index, climbed to 33.1 from 22.1 on Monday. An RSI under 30 is considered oversold.

The September contract, which becomes the front month on Wednesday, ended up six cents at $3.82.

The front month has lost more than 20 percent since hitting a four-month high of $4.71 in mid June owing to record production and stock builds, and to a lack of hot summer weather and lower-than-normal air conditioning demand.

After falling for six straight weeks last week, the longest stretch of weekly declines in more than four years, the front month was up 1 percent so far this week, down 15 percent for the month and off 10 percent for the year.

In early estimates, analysts forecast utilities added about 93 billion cubic feet of gas to storage last week. [EIA/GAS]

MDA Weather Services forecast cool weather will linger over the eastern two-thirds of the United States over the next 15 days.

That is in line with U.S. weather models predicting cooler-than-normal temperatures over the next two weeks, with 184 cooling degree days, versus a normal of 199 for this time of year, according to Thomson Reuters Analytics.

On the NYMEX, the premium of front-month gas over spot Appalachian coal edged up to $1.29 from $1.23 on Monday. A gas premium over $2 makes it economic for utilities to burn coal.

On the IntercontinentalExchange, next-day gas at the Henry Hub , the benchmark supply point in Louisiana, lost seven cents to average $3.75, a fresh eight-month low.

Next-day New York gas lost about 23 cents to $2.31, while Chicago citygates lost eight cents to a new eight-month low of $3.79, and the Southern California Border lost three cents to $4.12.

In power markets, next-day Mid Columbia in the Pacific Northwest held steady at $46 per megawatt hour, while PJM West in the Mid-Atlantic lost about $4 to a nine-month low of $34.
Source: Reuters

Chinese Huawei’s Smartphone Shipment Soars 62%YOY to 34M in 2014 H1

Huawei has shipped 34.27 million smartphones globally in the first half of this year, surging 62% as compared with the same period of last year, according to stats released by Huawei  Consumer Business Group. Of which, more than 20.56 million smartphones were sold out in the second quarter of this year globally, up 85% YOY.

The telecom gear and smartphone maker said its total shipment for handsets, mobile broadband and other gadgets has reached 64.21 million during the reporting period.

Huawei attributes this growth to the popularity of its flagship products like Ascend P7 and Mate 2 (4G), as well as the robust sales surge in emerging overseas markets. In Q2 2014, Huawei recorded rapid growth in Middle East and Africa, Latin America, Asia-Pacific regions, with smartphone shipment in these areas rocketed 550%, 275% and 180% in YOY growth respectively, according to the firm.

The company’s annual smartphone shipment for 2013 stood at 50 million. The group generated a revenue of more than 135.8 billion yuan (around US$22 billion) in the first half of this year, rising 19% YOY, citing its latest fiscal report.

As more Chinese handset makers like Xiaomi, Meizu are making efforts to develop feature-rich smartphones at lower prices, Huawei is trying to tap the premium handset market, where Apple and Samsung have continued to dominate.

Source: TechNode

Chinese Android Phone Maker Meizu Raises more than US$300 million

Source: TechNode

Meizu, the Chinese smartphone maker, disclosed today that the company had raised more than RMB2 billion (more than US$300 million) at a valuation of more than RMB20 billion (more than US$3 billion).

The very first round of funding had been closed by the end of the June, according to the company, which began in early this year, although for years the founder of the company, Huang Zhang (aka J.W.) rejected the idea.

The company disclosed it today must have something to do with that Xiaomi, whom Meizu founder publicly hates, launched its latest flagship phone today. Meizu Mr. Huang accused Xiaomi stealing its business secrets. Though it’s unknown to what extent Mr. Huang’s story was accurate or objective, Xiaomi’s way of doing the Android phone business, from hardware design to custom operating system development, was similar to Meizu’s.

Meizu and Xiaomi would launch their third-gen Android phones in September 2013. While Xiaomi has launched its flagship phone and a fitness band, Meizu said today that the company would launch four 4G phones, both high-end and low-end, in the second half of this year.

Source: 

Copper weighed by rising output, economic data awaited

 Copper prices slipped on Tuesday, as prospects of growing supplies overshadowed encouraging signs of health in the global economy, while zinc hovered at three-year highs on expectations of a tightening market.

Three-month copper 
Data earlier this month showed manufacturing in the world's top metals user, China, expanded at its fastest clip in 18 months in July, while the U.S. economy has gathered pace, with the outlook for its labour market brightening.

The copper market is expected to register another year of surplus this year, in a move that is seen weighing on prices. Late last week, the world's top copper producer Freeport-McMoRan Incclinched a deal with the Indonesian government to allow the miner to resume copper concentrate exports.

The base metals complex could struggle to eke out significant gains for the remainder of the week ahead of key economic indicators due later in the week and international political risk, analysts said.

This week, second-quarter economic growth in the United States, a U.S. jobs report and an official reading on China's factory health are expected to show fresh signs that a global economic revival has taken hold.

"Investors surely want to wait for the big events.. such as the outcome of the FOMC (Federal Open Market Committee) and the U.S non-farm payroll data this week. No one wants to bet big," said Naeem Aslam, chief market analyst at Ava Trade.

"On top of that Russian sanctions are very much back on the forefront, and the new sanctions by the European Union, which could be announced as soon as tomorrow, are also weighing on the sentiment."

EU diplomats will try to agree on Tuesday on broader economic sanctions against Russia for its actions in Ukraine. Measures being considered include targeting capital markets, defence and sensitive technology. [ID:nL6N0Q34UN]
Benchmark zinc traded at a session peak of $2,416 a tonne, hitting its highest since August 2011 for a second consecutive day, boosted by uncertainty about supplies as the market is expected to move into a deficit. It later traded at $2,381 a tonne in official rings, down 1.2 percent.

Several top zinc mines are drying up, including Century in Australia, while a recovery in the construction industry would revive demand from galvanisers.

"The direction is right. It's probably gone a lot quicker than I expected, which opens it up for some profit-taking ... I wouldn't expect to see a significant sell-off," said ANZ strategist Daniel Hynes in Sydney.

In other metals, LME lead rose to $2,307, the highest since late February 2013. Prices moved into positive territory for the year in July and are now up almost 4 percent in 2014. It traded at $2,278 a tonne in official rings, down 1 percent.

Tin untraded in official rings, was bid at $22,725 a tonne, up 0.3 percent. Aluminium , also untraded, was bid at $1,985 a tonne, down 1.4 percent. Nickel traded at $18,595 a tonne, down 1.1 percent.

In industry news, Goldman Sachs Group Inc's metals warehousing unit is exploring its first foray into China and privately held C Steinweg has expanded capacity there, sources said, as a financing scandal in a major Chinese port fuels a scramble for market share. 

Source: Reuters

Brent Crude Oil nears $107 as supply offsets global tensions

 Brent crude oil fell towards $107 a barrel on Tuesday as ample supply outweighed concerns over political tensions in the Middle East, Africa and Europe.

Despite conflicts in Ukraine, Iraq and Libya, global oil production has exceeded demand, leaving pockets of excess supply in Africa and Europe.

"The likelihood of a supply disruption remains extremely low as the ability of other regions to respond, particularly the U.S. energy sector, remains high," analysts at Goldman Sachs led by Jeffrey Currie said in a note to clients.

Brent crude was down 30 cents at $107.27 a barrel by 1400 GMT, after dropping nearly 0.8 percent in the previous session. U.S. crude dropped $1.20 to $100.47 a barrel, its lowest since mid-July.

Crude exports from second-largest OPEC producer Iraq stayed near record levels as oil output in the south remained untouched by the conflict with Islamist militants.

Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland, said West African physical crude markets were over-supplied.

"There are still a lot of cargoes from West Africa looking for a home," Jakob said. "But from the support side there is a lot of geopolitical input."

In Libya, oil production fell to around 450,000 barrels per day (bpd) last week as escalating violence threatened a hard-won deal to restore oil exports.

Libya's capital Tripoli has slipped into chaos, but analysts said the OPEC producer's low output, at way below 1 million barrels per day for close to two years, has already been factored into oil prices.
U.S. and European leaders agreed on Monday to impose wider sanctions on Russia's financial, defence and energy sectors, although these were not expected to impact Russian oil exports.
The European Union will try to reach a final deal on Tuesday on stronger sanctions, which would include restrictions on energy technology.

But further sanctions against Russia could damage the euro zone's economic recovery.
A firm dollar also kept a lid on oil by making the commodity expensive for holders of other currencies.

The dollar held close to a six-month high against a basket of major currencies <.DXY> on Tuesday, ahead of a policy review this week by the U.S. Federal Reserve.

In the United States, traders watched for weekly data on gasoline stocks, which have been weighing on U.S. crude prices.

A Reuters survey said U.S. gasoline stocks could have risen by 1 million barrels last week, adding to bloated supplies. U.S. commercial crude oil inventories probably dropped in the week to July 25, the survey showed.
Source: Reuters

Chinese Baidu top search engine reaches 500 million monthly active users

Source:TECHINASIA
Baidu (NASDAQ:BIDU), China’s top search engine, released its Q2 earnings report overnight. The financials were dull (see here; PDF), but the conference call with Baidu execs yielded some interesting user numbers and a few new milestones. With a strong focus on mobile – now that China’s mobile internet users outnumber its PC web users – Baidu CEO Robin Li hailed the fact that the company’s “mobile revenue, which is largely comprised of mobile search revenue, accounts for 30 percent of our total revenue.” (With thanks to SeekingAlpha for the call transcript). Li also revealed that Baidu’s mobile search service grew to over 500 million monthly active users (MAUs) in June, which is a new high. He partly attributed the growth to a recently redesigned mobile search homepage, as well as to new content partnerships that result in more embedded information available at a glance in search results. See: Baidu’s image-recognition software isn’t perfect, but it’s super smart 200 million MAUs on maps Here are a few more stats that Li revealed in the call: The Mobile Baidu app reached 70 million daily active users. Baidu Maps surpassed 200 million MAUs for the first time. 130 million Android app downloads per day on the Baidu App Store and its sister site, 91 Wireless. Baidu’s consumer cloud storage service grew to “nearly 200 million registered users in Q2, from 160 million registered users in Q1.” Li ended his comments by talking about Baidu’s new R&D center in Sunnyvale, California, and how it adds to the web giant’s growing expertise in big data, artificial intelligence, and ‘deep learning’. He explained the importance of deep learning to the search engine and its other products: Deep learning already touches on much of what we do, from speech recognition to image-based search, and from ad ranking to big data analytics. It will fundamentally improve our ability to understand natural language, to provide more accurate translation, and to make more intelligent recommendations. Baidu’s CEO made no mention of losing more market share to arch-rival Qihoo (NYSE:QIHU) in the newest data from CNZZ for a search engine’s share of desktop PC page-views in China. Baidu’s share is down to 59.6 percent in new numbers for June, while Qihoo is still growing and has reached 26.1 percent. However, CNZZ’s data does not cover mobile search and there’s no adequate information on the web for market share just on mobile in China. Qihoo is behind in terms of mobile search tech and has only quite recently added advanced features common on Google or Baidu for several years, such as location-aware search results. The newest available data from Enfodesk claims that Baidu’s total search share (mobile plus PC) is at 72.9 percent in Q1 2014 – a number that’s growing due to its investments in mobile.

Read more: Baidu’s search engine reaches 500 million active users on mobile http://www.techinasia.com/baidu-mobile-search-engine-hits-500-million-active-users/

JD.com and Tencent offer XBox consoles in China

         The WSJ reports,"BEIJING—Internet conglomerate Tencent Holdings Ltd.  will use its alliance with JD.com Inc.  to offer early advance sales of MicrosoftCorp.'s  Xbox One consoles in China, as the online retailer ramps up efforts to compete with electronic-commerce major Alibaba Group Holding Ltd.

Beijing-based JD.com said Monday that users of Tencent's WeChat and mobile QQ messaging software would be able to reserve the new Xbox with a deposit of 499 yuan ($81), days before the company begins taking preorders from other Chinese consumers on July 31. Microsoft has said the consoles would be delivered in September.

JD.com didn't disclose a price for the console. The new Xbox costs up to $500 in the U.S.

JD.com said it would presell the consoles to users who connect to its retail outlet through Tencent's QQ and WeChat social-media networks.

"Launching Xbox One sales in China through JD.com's Weixin and Mobile QQ entry points underscores the strength of these platforms with young and sophisticated Chinese consumers," said Shuang Du, a JD.com vice president. Weixin is the Chinese name of Tencent's WeChat mobile social-media app. The preorders will be available only through the Chinese version of the software.

JD.com's use of WeChat offers a glimpse into how Tencent can leverage its sprawling investments to cross-promote its services and pursue the country's more than 500 million smartphone users. Unlike in the U.S., where Internet companies have generally focused on no more than a few core competencies, Chinese companies have long wanted to focus on many areas.

Tencent is increasingly competing with China's Alibaba, which is by far the top e-commerce service in China in terms of market share. The latest move came less than five months after Tencent purchased a 15% stake in JD.com, China's second-largest e-commerce player. The two companies also offer a range of competing services from investments to taxi-hailing mobile apps. Alibaba declined to comment.

Xinhua: China's 8 questions to Mr Abe

by Xinhua writer Li Zhihui
BEIJING, July 28 (Xinhua) -- On the 100th anniversary of the beginning of WWI, in Europe old rivals have apologized and forgiven one another.
Asia however, is home to a defeated country with an unfathomable attitude toward history, currently trying to wriggle out of the constraints of its pacifist constitution.
Japanese Prime Minister Shinzo Abe has put China and other countries on their guard with worries about the possibility, however small, of a third world war.
We can never undo the catastrophe of 100 years ago, but we can be wise and responsible for ourselves and coming generations. For the sake of peace, Mr. Abe, you deserve the chance to clarify the following questions.
You said the definition of aggression has yet to be established by academia or the international community.
After WWI, Japan captured China's Qingdao; in 1931. Your country invaded northeast China and launched the war of aggression against China in 1937. Millions of Japanese troops were sent to China before Japan was defeated in 1945.
Question one: From which perspective do you define these wars as not being aggression?
Japan accepted the Potsdam Proclamation and surrendered unconditionally in 1945. The proclamation states that the authority and influence of those who deceived the people of Japan into embarking on world conquest must be eliminated for all time.
Question two: Is the Potsdam Proclamation, achieved only after millions of people lost their lives, still working for Japan today'?
The 1972 Japan-China joint communique reads, "The Japanese side is keenly conscious of the responsibility for the serious damage that Japan caused in the past to the Chinese people through war, and deeply reproaches itself."
As we see the Japanese government whitewashing the atrocities of their predecessors and portraying the war as a military conflict, in which Japan was forced to engage, to liberate Asia from white colonialism, a third question arises:
Can such actions be rightly called self reproach?
In 1978, convicted war criminals were enshrined at Yasukuni and no Japanese emperor has visited the shrine since. You, however, insisted on visiting the shrine and even reported your work to the war dead. You claim your visit was a prayer for peace and swear that no more war will be waged.
Question four: Would it not be better to swear before the neighbors who suffered at Japan's hand than to swear before the souls of the murderers who cause that very suffering?
The Japanese public is deeply worried about an economy driven by "Abenomics". Alongside a shaky economy, you are promoting nationalism and challenging the order of global peace.
A fifth question calls for clarification of whether and how the situation in Japan today is similar to - or how is it different from - that before WWII?
You talk about your political dream to unlock Japan from "a box created 40 or 50 years ago."
Does that mean bringing Japan back to wartime militarism?
You have been emphasizing the U.S.-Japan alliance, but the fact is, this alliance is nothing more than two sides using one another to achieve their own ends.
Question seven: How long do you think this alliance of strange bedfellows can last?
Question eight: Japan greatly benefited from WWI and started WWII. While the whole world is making efforts to avoid a third world war, what is Japan doing?
Europe's summer of 100 years ago shall not be repeated in today's Asia. China does not weigh history as a burden, but cannot forget the great suffering of the Chinese people by Japan's hand since WWI.
Acknowledging honestly the nature of the war and truly atoning for it are prerequisites for Japan in receiving the forgiveness of its neighbors.
Mr. Abe, you say you want to meet Chinese leaders and ease bilateral relations, but up till now, we have neither heard sincere words nor perceived any mollifying action. Before any meeting at the highest level can take place, Mr. Prime Minister, you have a lot of questions to answer.

Forecasts for higher prices misjudge the shale boom. By John Kemp

 “The world of energy may have changed forever,” according to Professor James Hamilton of the University of California. “Hundred dollar oil is here to stay.”

Hamilton, who is one of the most respected economists writing about oil, made his bold prediction in a paper on “The Changing Face of World Oil Markets”, published on July 20.

“Old hands in the oil patch may view recent developments as a continuation of the same old story, wondering if the high prices of the last decade will prove another transient cycle with which technological advances will eventually catch up,” he wrote. “But there have been dramatic changes over the last decade that could mark a major turning point.”

The shale revolution will turn out to be only a pause in the upward trend in prices, Hamilton argues, as growing demand from emerging economies and stagnant supplies from conventional oil fields push prices higher in the long term.

“Rather than a force pushing oil prices back to historical lows, it seems more accurate to view the emerging tight oil plays as a factor that can mitigate for a while what would otherwise be the tendency for prices to continue to rise.”


IGNORING SHALE

The problem with Hamilton’s analysis is that it largely ignores the impact of the shale revolution on the economics of oil production and understates the tremendous variability in real oil prices in response to changes in technology.

The professor devotes just 400 words out of almost 4,000 to discussing the production of crude oil and gas from shale formations.

Most of that discussion focuses on the high cost of drilling and fracturing shale wells; the rapid decline in production; the alleged unprofitability of shale wells; and question of whether the conditions that produced the shale revolution in North American can be replicated in other parts of the world.

But this part of the paper is also the weakest, and it highlights the fundamental limitations with Hamilton’s entire argument about the increasing difficulty and costs of producing crude oil.


PEAKING OIL

Since 2008, the dramatic increase in oil and gas production from shale formations in North America, and the abundance of shale resources around the world, has discredited theories about peaking oil production.

The simple theory that supplies will run out has been reframed as a more sophisticated one about rising prices.

Peak oil supporters now point to the increasing cost of oil production, diminishing energy return on investment and the diminishing energy return on energy invested to claim that it is becoming harder and more expensive to sustain, let alone increase, crude output.

Prices must continue to rise in real terms, they say, to reflect the increasing cost of producing crude and to restrain demand. Price increases will prove to be just as disruptive as physically running out of the stuff.

Hamilton’s paper lends influential support to this view. He notes that oil demand is now being driven by rising incomes in emerging markets, even as high prices restrain consumption in the advanced economies.

He also claims that much of the growth in oil production since 2005 has come in the form of he calls “lower quality” natural gas liquids, which have a much lower energy content and energy density than conventional crude.

Production of conventional crude oil has stagnated, despite surging prices and unprecedented spending on exploration and production activity.

“Depletion of older reservoirs and the high cost of developing new resources” explain why conventional oil output has not responded to climbing prices, Hamilton concludes.


SHALE SCEPTIC

The paper is sceptical about whether shale oil can alter the supply outlook fundamentally because of its high production costs and the difficulty of replicating the boom outside the United States. But this is the least convincing part of Hamilton's argument.

The paper confuses the struggling economics of dry gas wells with the much more attractive economics of wet gas and oil plays.

If oil wells were not extremely profitable, North Dakota and Texas would not be experiencing a drilling boom, with demand for both rigs and petroleum engineers at the highest level for three decades.

In focusing on decline rates, Hamilton ignores the ultimate amount of oil and gas recovered from shale wells, which in many cases is higher than from conventional wells.

The second section of the paper suggests that much of the increase in oil output since 2005 has in fact been “low quality” natural gas liquids rather than true crude, but then the fifth section acknowledges production from shale has increased U.S. crude output by a net 2.3 million barrels per day.

In fact, statistics from the U.S. Energy Information Administration show the shale boom has produced a dramatic increase in both natural gas liquids and true crudes. It is simply not true to imply that the oil industry is finding only

“low quality” hydrocarbons.

One of the biggest problems of the paper is that it confuses the period between 2005 and 2008, when output was struggling to meet demand, with the more recent period from 2009 through 2014, when output from shale has grown quite quickly and global oil demand growth has slowed.


PRICE FORECAST

Even if shale continues to boost overall U.S. oil production, “it is abundantly clear that it would not return real oil prices to their values of a decade ago”, Hamilton argues.

According to the BP Statistical Review of World Energy, the real price of crude oil, adjusting for inflation, has ranged from as much as $120 per barrel to as little as $10 since 1861.

(http://link.reuters.com/myj52w)

The price is currently close to the top of its historical range, while in the 1990s and early 2000s it was near the bottom.

So oil prices could retreat from their current highs by $20, $30 or even $40 per barrel and still remain quite high in historical terms.

By comparing current exceptionally high prices with the very low ones that prevailed “a decade ago”, Hamilton risks using a misleading baseline.

North American shale is currently the marginal source of supply in the world oil market, and most producers claim they can break even at $70 or even $60 per barrel.


TECHNOLOGY

Prices have varied enormously over the 155-year history of the oil industry, mostly in response to large discoveries and changes in technology.

The collapse in oil prices during the late 1920s and 1930s was largely due to the discovery and development of massive new fields in East Texas.

Low prices from the 1940s through the 1960s owed much to the massive discoveries in the Middle East around the Persian Gulf and in North Africa.

Massive new fields in Siberia and Alaska, as well as the development of deep offshore drilling in the North Sea, eventually contributed to price declines in the late 1980s and through the 1990s.

But the history of oil prices is as much about the history of technology as field discoveries.

In a very basic sense, production costs have been rising since the industry was born. As in all extractive industries, the easiest oil was developed first, and more expensive oil has been developed later. Hamilton’s argument that costs are increasing could have been made at every stage in the oil industry’s history.

The first wells in Pennsylvania tapped oil buried less than 100 feet below the surface. By the mid years of the 20th century, wells were being bored thousands of feet below ground. Then in the 1970s the industry turned to offshore drilling, which was even more tricky and expensive. Now it is mastering the art of drilling horizontally rather than vertically.

But productivity has also increased as companies have learned to target the highest yielding formations and drill faster and more accurately. Hamilton’s paper is silent on all these matters, and that is ultimately what makes it unconvincing.

The paper is also silent about climate change, policies to restrict the consumption of fossil fuels, and the growing challenge to oil-based fuels from natural gas even in the transport market, all of which could depress real prices in the medium to long run.

So while Hamilton concludes that $100 oil is here to stay, in real terms, the outlook is far less certain. In fact, a betting man, looking at the price history, might conclude prices are currently abnormally high and due for a fall.

The BRICS Development Bank. Why should the y adopt a Pro-Poor Agenda

This paper was written by Lysa John.
© Oxfam International July 2014.

SUMMARY:

In July 2014, a new multilateral and Southern-led development bank was launched by the leaders of Brazil, Russia, India, China and South Africa—better known as the BRICS. The BRICS Development Bank will provide a fresh source of finance for developing and emerging economies to meet their development needs. Little has been made public regarding the proposed Bank's core mandate or activities but while governments negotiate the technicalities of the Bank, it is critical that they also provide a solid vision of the principles, priorities and objectives on which the Bank's activities and operations will be premised. This policy brief recommends that these include commitments to: ending extreme poverty and inequality, with a special focus on gender equity and women's rights; aligning with environmental and social safeguards and establishing mechanisms for information sharing, accountability and redress; leadership on the sustainable development agenda; the creation of mechanisms for public consultation and debate; and the adoption a truly democratic governance structure.

BACKGROUND: 

The association of five major emerging national economies, Brazil, Russia, India, China and South Africa (BRICS) has a special responsibility towards helping the world achieve its goal of ending extreme poverty, reducing inequality and achieving sustainable development, as they collectively represent some of the world's greatest challenges and achievements. Despite remarkable strides made in reducing poverty within India and China, BRICS countries still house nearly half of the world's poor and—with the exception of Brazil—have experienced a rise in inequality in recent years. The creation of a BRICS Bank, and with it the promise of reforming the global development architecture, offers a real and concrete opportunity for governments of these countries to ensure development financing is sensitive to the needs of those who are poorest and most marginalized. In a press release issued during the 2013 Durban BRICS Summit, Oxfam said: 'BRICS leaders are blazing a trail in reforming the global financial architecture. But the devil is in the detail. If the BRICS Bank fights poverty and inequality it could be a big success. But if it focuses only on big-ticket schemes that fail to directly benefit poor people it could do more harm than good.'¹

There are currently very few documents within the public domain that clearly articulate a mandate and framework for the proposed BRICS Bank, particularly from a pro-poor and pro-equity perspective. Furthermore, civil society engagement with BRICS-related processes has been relatively low, although there is interest to engage much more substantively. This policy brief aims to move beyond the BRICS governments' current focus on technicalities around capital contribution and governance, and instead provide a solid vision for the principles, priorities and objectives on which the Bank's activities and operations should be premised. It seeks to demonstrate how the BRICS Bank could be used as an instrument to promote pro-poor development and reduce inequalities, both within the BRICS countries and in other partner countries where projects will be implemented

Hague court orders Russia to pay over $50 bln in Yukos case. Russia's stocks plummet.

 The Hague's arbitration court ruled on Monday that Russia must pay a group of shareholders in oil giant Yukos $51.6 billion for expropriating its assets, a big hit for a country teetering on the brink of recession.

The arbitration panel in the Netherlands said it had awarded shareholders in the GML group just under half of their $114 billion claim, going some way to covering the money they lost when the Kremlin seized Yukos, once controlled by Mikhail Khodorkovsky, a decade ago.

"The award is a slam dunk. It is for $50 billion, and that cannot be disputed," said Tim Osborne, director of GML. "It's now a question of enforcing it."

Russia's Finance Ministry called the ruling "flawed",

"one-sided" and "politically biased" and said it would appeal the decision. It comes as Russia and the West are in their biggest stand-off since the Cold War over Moscow's actions in Ukraine. 
Russia argued that the court ignored tax violations by Yukos and said it was senseless and speculative to value Yukos so long after the events. Lawyers, however, said there were only limited grounds on which to appeal.

The panel of judges, which has been reviewing the case since 2005, concluded that officials under President Vladimir Putin had manipulated the legal system to bankrupt Yukos. 
"Yukos was the object of a series of politically motivated attacks by the Russian authorities that eventually led to its destruction," the court said. "The primary objective of the Russian Federation was not to collect taxes but rather to bankrupt Yukos and appropriate its valuable assets."


ECONOMIC IMPACT

The ruling hits Russia at a time when it faces international sanctions about its role in Ukraine and anger over the downing of a Malaysian airliner over eastern Ukraine, where Moscow-backed rebels are fighting a separatist campaign. The country is also grappling with slowing economic growth.

"This decision affects the assessment of the long-term financial stability of Russia and could become the basis for arguments for revising Russia's ratings by international rating agencies," said Credit Suisse economist Aleksei Pogorelov.

The $50 billion represents about 2.5 pct of Russia's total GDP worth, or 57 pct of Russia's Reserve Fund, which is earmarked to cover budget holes.

The ruling hit Russian stocks. The RTS index <.IRTS> of Russian shares was down 3.1 percent by 1400 GMT. 
The European Court of Human Rights (ECHR) in Strasbourg is expected on Thursday to announce a separate decision on Yukos's multi-billion-dollar claim against Russia, ruling on 'just satisfaction' or compensation, a Yukos spokeswoman said.

Yukos's application in the ECHR, which is on behalf of all Yukos shareholders, argued that Yukos was unlawfully deprived of its possessions by the imposition of bogus taxes and a sham auction of its main asset. 

RECLAIMING ASSETS

GML may now face a battle to claim the money from Russia.

"The question is whether Russia will pay that award, which I very much doubt," said Jan Kleinheisterkamp, an Associate Professor of Law at the London School of Economics. "This means that ultimately the shareholders will start to chase Russian assets abroad, which is a very tedious and usually not very fruitful business."

Antonios Tzanakopoulos, a law professor at Oxford University, said if assets were to be seized, they would have to be purely commercial in nature to be expropriatable, meaning it would not be possible to get an order that an embassy building or a docked Russian warship should be handed over.

Russia must pay the compensation to subsidiaries of Gibraltar-based Group Menatep, a company through which Khodorkovsky, once Russia's richest man, controlled Yukos.

Group Menatep now exists as holding company GML, and Khodorkovsky is no longer a shareholder in GML or Yukos.

"We didn’t go into this for a pyrrhic victory to make a point ... We still believe that we will ultimately collect on this award," said Osborne.

Former Russian presidential advisor Andrei Illarionov said if Russia avoided payment it could face asset arrests around the world.

Chris Weafer, senior partner at Macro-Advisory consultancy in Moscow, said GML may try and target revenues from Russia's energy exports.

The ruling leaves Russia with few options to fight back, experts said. The arbitration court's rules call decisions on awards “final and binding”.

"The Kremlin's lawyers will be looking at any way to appeal this," said Weafer.

Tzanakopoulos said any appeal would effectively amount to a new arbitration procedure, which both parties would have to agree to. Russia could, and would be likely to, challenge enforcement claims in the many national courts around the world where such proceedings would be launched, he said.

Experts said fighting the decision could be a lengthy and uphill process.

"Appeals are difficult - it is a private arbitration," said one Moscow-based lawyer who declined to be named, adding that any counter-action would likely be a "long shot".


NO CASH FOR KHODORKOVSKY

Any funds claimed will be shared among the shareholders. The biggest ultimate beneficial owner is Russian-born Leonid Nevzlin, a business partner who had fled to Israel to avoid prosecution. He has a stake of around 70 percent.

Khodorkovsky ceded his controlling interest in Menatep, which owned 60 to 70 percent of Yukos, to Nevzlin, after he was jailed. Khodorkovsky, who is not a party to the legal action, was arrested at gunpoint in 2003 and convicted of theft and tax evasion in 2005.

"It is fantastic that the company shareholders are being given a chance to recover their damages," Khodorkovsky said in a statement, adding he would not seek to benefit financially from the outcome.

Khodorkovsky's company, once worth $40 billion, was broken up and nationalised, with most assets handed to Rosneft , a company run by Igor Sechin, a Putin ally.

Putin pardoned Khodorkovsky in December after he had spent 10 years in jail. He now lives in Switzerland.

"I am very pleased the international tribunal in the Hague decided that Russia violated international laws and illegally nationalised Yukos," said Nevzlin.
The other four ultimate beneficial owners, each of whom owns an equal stake, are Platon Lebedev, Mikhail Brudno, Vladimir Dubov and Vasilly Shaknovski.

Rosneft, which is not a defendant in the case, said it expected no claims to be made against the company and that the ruling would not have a negative impact on its "commercial activity and assets".

Rosneft bought the bulk of Yukos assets through auctions after the company was declared bankrupt. Its shares were down 2 percent.