Posts of June 2016

Brexit is Hardly a Done Deal

♠ Posted by Emmanuel in Europe at 6/28/2016 04:10:00 PM

Cheer up, young people: Isolationist oldsters may not have destroyed your future yet. For all the market carnage, political upheaval, widespread racial abuse and other things most regrettable brought by the UK referendum result concerning membership in the European Union, keep this in mind: There is still a long process to go were it to leave. On the balance, you could even make a convincing argument that the UK is more likely to stay in. Why? Let me try to explain as concisely as possible. Although there are many ways to prevent the UK from filing its [Lisbon Treaty] Article 50 request to begin the process of separating...

UK Dismemberment: On N Ireland Joining Ireland

♠ Posted by Emmanuel in Europe at 6/26/2016 04:29:00 PM

As in Scotland, leaving the UK is afoot in Northern Ireland after the UK referendum on EU membership. For the UK, the ultimate consequence of deciding not to remain in the EU may be its dismemberment since its constituent parts were very much for staying in the EU. In recent posts, we've covered the cases for Scottish independence (a second one--this time hinging on whether to remain in the EU) and London independence. On the face of it, London declaring independence from the EU is most unlikely as the very heart of England. However, the Scots certainly will have a better chance for leaving the UK to remain in the EU. However,...

Frankfurt, Paris...In Search of a Real EU Banking Center

♠ Posted by Emmanuel in Europe,Financial Services at 6/24/2016 10:36:00 AM

Hmm...with London out of the picture, I love Paris in the summer... With the non-London English and Welsh effectively taking the UK out of the EU, London's place as a banking center--at the very least an EU banking center--has been thrown into question. With big things afoot, where will London bankers and others now decamp that's truly European? The two early contenders are two cities which London actually vanquished in the 80s and 90s--Frankfurt, Germany and Paris, France. That said, those relocating from London will probably need to get used to a lower standard of living: London-based bankers considering a possible relocation...

It's Blitz 2: Central Banks Prepare for UK's EU Referendum

♠ Posted by Emmanuel in Currencies,Europe at 6/22/2016 04:58:00 PM

Nasty people like Harry Potter's uncle Vernon Dursley--EU "Leave" voter--keep central bankers up at night. With voting in the UK's EU referendum just a few hours away, the world's major central banks are on standby together with the London bankers into the small hours of Thursday evening and Friday morning. While the latter have making or at least not losing money on their minds, the former have keeping the international financial system intact in the event of a "Leave" vote. Which is, of course, a rather more pressing task. Of course, the Bank of England is directly in the line of fire. First in the line of fire outside...

Singapore'd: Can Pro-EU London Secede if UK Brexits?

♠ Posted by Emmanuel in Europe at 6/22/2016 12:30:00 AM

Time to get the $%^& out of the UK, not the EU? The London question. Now here's a fascinating thought for all: In a previous post, I wrote about the solidly pro-EU Scots wishing to remain in the European Union while the rest of the UK leaves in the event of a negative outcome to the upcoming referendum. Now, here's another thing we should apparently consider: London too is solidly for remaining in the EU. Its economy is rather larger than those of Scotland, Wales, etc. Population-wise, it is larger than those less-populated regions. So, if the small-minded Brexiteers get their way this coming Thursday, why not a London...

Baku F1 Race: Global Media is ~169 Years Late

♠ Posted by Emmanuel in Energy,Sports at 6/21/2016 12:30:00 AM

To paraphrase Jenson Button, it's "Baku baby, yeah." As a commentator on third world goings-on first and foremost, it behooves me that last Sunday's European Grand Prix on the streets of Baku, Azerbaijan has been portrayed as a coming out party for that particular country on the world scene. So Azerbaijan is seldom mentioned in the Western media outside of the context of human rights abuses--surprise, surprise--but its economic and strategic importance in geopolitics seems to be glossed over by these accounts. It is treated as some kind of Johnny-come-lately when its energy industry has been at the global forefront from...

Geneva Post-Banking Secrecy is...Gathering Dust

♠ Posted by Emmanuel in Europe at 6/20/2016 12:30:00 AM

Closed for business: a now-common sight in today's Geneva. One of the major side-effects of the global financial crisis has been a near-universal crackdown by revenue-hungry developed Western states on tax dodgers. Unfortunately for Switzerland, European countries' efforts to bring back taxable monies has resulted in a perhaps permanent diminution in its famed bank secrecy that renders it just like any other country's private banking system. It is certainly true that Swiss bank secrecy was never ironclad--witness the return of billions hidden by the Philippines' infamous dictator Ferdinand Marcos. However, when more powerful...

Scotland's Possibilities for Remaining in EU After a Brexit

♠ Posted by Emmanuel in Europe at 6/18/2016 03:13:00 PM

Sensible Scots are avowedly Europhile. What to do if the rest of the UK plumbs for Brexit? The Scottish National Party is interesting insofar as it is not a hardcore anti-foreigner, ultra-nationalist party. While it is rather antsy about surrendering too much power to London, it is much less about doing so to Brussels. Like the Economist poll tracker results above show, Scotland is avowedly in favor of staying in the common market. In no small part, this is due to the Scots actually being grateful about having the EU as a market for its energy exports unlike their sometimes ungrateful English and Welsh counterparts, but...

Globalization: Zidane Flogs Indian Real-Estate

♠ Posted by Emmanuel in India,Sports at 6/17/2016 11:20:00 AM

What does Zinedine Zidane have to do with selling kitschy Indian real-estate? Apparently nothing. It is fairly common in booming countries of Asia for real-estate developers to embark on mega-projects. In our high inequality countries, you should be utterly unsurprised that most of these projects cater to wealthy segments, often hawking properties at exorbitant prices. And therein lies the rub: with so much development concentrated at the upper end of the market, there will inevitably be fewer takers. Such is the problem now faced by real-estate developers in India. Now, using foreign sporting personalities to flog [to...

It's Blitz 1: All-Nighter for London Traders June 23

♠ Posted by Emmanuel in Europe at 6/15/2016 04:13:00 PM

You can bet no one will be snoozing in the City of London come the evening of June 23. What's probably a bigger political risk event than the 2008 global financial crisis, Greece exiting the euro, or Scottish independence for the UK? Unless you've been hiding in a cave somewhere, it's the upcoming June 23 referendum when voters decide whether to remain in the EU or leave it. Needless to say, I do not side with the xenophobic isolationists, but there are apparently several misguided souls who actually get to vote who do. While next to no sane business establishment supports the UK leaving the EU, its Prime Minister David...

Will MSCI Demote Peru From Emerging to Frontier Market?

♠ Posted by Emmanuel in Development,Latin America at 6/14/2016 06:39:00 PM

Stock market "trading"--something of a Peruvian novelty. Later today, the market indexing firm MSCI will issue guidance on whether to include Chinese equities in their emerging market indices. While that decision obviously has huge implications--China is the world's second largest economy, so it rankles not to be included in a simple index of EMs--there is another pending decision you should watch for if development is an area of interest. As China vies for inclusion, Peru is trying to stave off the capital markets equivalent of "relegation." (See MSCI's classification scheme here.) To be exact, Peru does not appear to...

Why Google Cars Beat Tesla + Old Mfgs Still Matter

♠ Posted by Emmanuel in Marketing at 6/12/2016 09:31:00 AM

Why tomorrow's king of the (virtual) road may be Google, not Tesla. There's a wide-ranging interview in Vox of automobile commentator Edward Niedermayer on that ever-popular topic, the future of the automobile. In contrast to many of today's journalists, Niedermayer is skeptical of Tesla. Especially with its myriad of quality control issues born of, well, not really having the experience of being a full-fledged car company, he views its business model as fundamentally flawed. (Also see Consumer Reports' scathing reappraisal.) As Tesla moves down the price range, these shortcomings may become more evident as those relying...

Polish Zloty, Hungarian Forint as Brexit Proxies

♠ Posted by Emmanuel in Currencies,Europe at 6/10/2016 12:31:00 PM

Praises be to the zloty? Its foreign exchange shows no imminent '"Brexit." What do the currencies of former Soviet bloc countries have to do with a UK referendum on whether to stay in the EU? After all, even if Poland and Hungary opt for using the euro in the future, doesn't the UK still have its own currency? Bloomberg, however, proposes the currencies of these countries as a proxy for whether the UK will stay in the EU. And, based on current exchange rates for the zloty and forint, it looks like the UK will indeed stay: Investors betting on Brexit may want to keep an eye on eastern European currencies, because Poland...

Crossfire Victim: L'Oreal, PRC & Hong Kong Democracy

♠ Posted by Emmanuel in China,CSR,Europe at 6/09/2016 10:17:00 AM

On the bright side for L'Oreal, they won't hire the Dalai Lama as a spokesperson since he has...no hair. I hate to say it but, if Hongkongers were optimistic about the remit of "one country, two systems," then they have been proven wrong again. What we recently had was a big brouhaha when Lancome, one of the brands of French cosmetics giant L'Oreal, decided to sponsor a concert by canto pop (that's Hong Kong's particular brand of Cantonese-language pop which you'll hear on its streets day in and day out) star Denise Ho. It would be an unremarkable marketing promotion exercise were it not for Denise Ho being an outspoken...

Will US Investors Take Up New $38B PRC Quota?

♠ Posted by Emmanuel in China at 6/08/2016 12:58:00 PM

The Chinese stock markets of Shanghai and Shenzen have been largely off-limits to foreign investors, with the partial exception of those from Hong Kong, Singapore, UK and France who have been granted Renminbi Qualified Foreign Institutional Investor (QFII) status. Recently, we received news that the Chinese are about to allow American investors to buy "A" shares as RQFII status is about to be extended to Americans as well. Here is a brief description of RQFII from China Daily: Qualified Foreign Institutional Investor (QFII) Scheme is a transitional arrangement that allows institutional investors who meet certain qualification...

Brexit Kronikles: Why are British Expats Held in Contempt?

♠ Posted by Emmanuel in Europe,Migration at 6/05/2016 03:37:00 PM

Unfortunately for UK expats in the EU, they don't have much say in a process affecting them greatly. There's an interesting article in The Economist on how the upcoming UK referendum on whether to remain or leave the EU is revealing how the country treats its expatriates. Famously a widely-traveling people, it turns out that the home nation does not have particularly high regard of its citizens living abroad. The evidence is from not giving expatriates a clear and well-organized way to cast their votes. This matters especially to expatriates working in other EU countries since, if the referendum results in leaving the grouping,...

Nigerian Nightmare 2016: Naira Inconvertibility

♠ Posted by Emmanuel in Africa,Currencies,Political Risk at 6/03/2016 01:01:00 PM

Among others, airlines are being negatively affected by Nigeria's ill-conceived currency peg. We've talked about the plight of any number of commodity-dependent countries amid a global plunge in the value of such exports. While Russia and Venezuela have received much airtime, save a thought for Nigeria which is doing nearly as bad as those others. With oil prices plunging, it has attempted to maintain a currency peg for its naira to the US dollar. This, of course, is an increasingly difficult balancing act since it must defend the peg by continually selling dollars it is earning less of as oil prices remain relatively...

Turf & Japan Shifting Investment from PRC to SE Asia

♠ Posted by Emmanuel in China,Japan,Southeast Asia at 6/01/2016 01:10:00 PM

Here is an interesting article concerning how geopolitical concerns affect foreign direct investment (FDI). Despite China being one of if not the largest recipient of Japanese FDI in past years, rising security concerns have made Japan rethink where it places its money. In a non-democratic society, it would be so easy to expropriate Japan-owned businesses if PRC leadership felt like it. This concern has been a recurrent one, especially after the 2012 riots in China against Japanese-owned businesses. Indeed, it's in the aftermath of the 2012 riots when the Japanese have actually begun putting there money where their mouths...