And 2015's Top Stock Market is...Jamaica!

♠ Posted by Emmanuel in at 12/29/2015 07:28:00 PM
You aren't smokin' ganja--Jamaica's stock market is tops in the world for 2015.
Channeling Steve Harvey announcing Miss Universe 2015 in the post title, I don't believe that I made a mistake in this instance. In the rest of the world, 2015 was a rather forgettable year when investing in nearly anything made you next to no money (or lost you money). Stocks, bonds, was all a big blah. But wait, there was one exception: while other stock markets worldwide were busy going nowhere (or down), Jamaica's rallied over 80% this year:
Amid the middling returns of the world’s best known indexes -- the Dow Jones Industrial Average dipped about 1 percent, the Euro Stoxx 50 lost 6 percent in dollar terms-- foreign acquisitions, stronger investor safeguards and a rebounding economy helped the Jamaica Stock Exchange surge more than 80 percent in 2015.

With a market capitalization of about $5.3 billion (the Dow has $5.23 trillion), Jamaica lives on the fringe of frontier status. And although the exchange’s benchmark index lost 5 percent last year and 13 percent in 2013, investors should pay attention, according to Carl Bennett, a vice president of investor relations at Bank of New York Mellon. “I’m really impressed with what they’ve done to attract capital to the market,” he said, pointing to new measures to combat insider trading and market manipulation.

With economic growth forecast to accelerate for a third straight year, reaching 1.4 percent in 2015 according to estimates compiled by Bloomberg, the Caribbean island of 2.8 million people is slowly emerging from recession while struggling with one of the world’s highest debt burdens. The government has restructured local bonds twice since 2010, accepting an International Monetary Fund-led financing package in 2013. That didn’t deter individual Jamaicans and institutional investors from pouring money into local stocks this year, said Jovano Johnson, an equity trader at Kingston-based Mayberry Investments Ltd.
To be sure, economic growth reaching 1.4% in 2015 is hardly spectacular for a developing country. It also has one of the world's highest debt service burdens. Nor has the country definitively solved its high crime rate. Still, following the saying that every dog has its day, even the perpetual laggard Jamaica's stock market has done well because everyone else's isn't really doing any better by comparison.

Call it a case of Jamaica's situation not possibly getting worse resulting in a stock market rally of sorts. The real question is if this momentum can be continued.

Miss Universe and US Hegemony in Beauty Pageants

♠ Posted by Emmanuel in at 12/25/2015 05:18:00 PM
"Yay, the Americans declared me winner of an 'international' event!"
Given my nationality, I suppose I shouldn't complain too much about the outcome of the 2015 Miss Universe pageant. Still, one thing that struck me is that, despite the obviously commercial nature of these pageants--to paraphrase Robert Cox, they wouldn't be held if they didn't make money for someone--American hegemony is all too apparent for what is ostensibly an "international" competition. For a long time, the franchise was owned by real-estate, er, impresario Donald Trump. Then, late this year, it was sold together with the Miss USA property as legal settlement after the the broadcaster NBC had a falling out with Trump in the aftermath of calling Mexicans "rapists" and offending the entire Latin America.

The interesting thing is that alike Mr. Trump, the new owner--events organizer IMG (sports, media, and fashion), is very much an American organization. If Miss Universe were truly an "international" event, then its participation would be truly representative. Yes, the contestants represent several countries the world over which do not mind young women parading in skimpy outfits. But no, the judges are actually...very, very Amerocentric. The global headline-grabbing gaffe of an American host declaring the runner-up as winner brought this to light as far as I'm concerned:
The panel of judges included [celebrity blogger Perez] Hilton, Miss Universe 2012 Olivia Culpo, comedian Niecy Nash, and former football star Emmitt Smith.
Come to think of it, it's all too frequent that finals judges are American for a supposedly "universal" event. Call it another example of American hegemony that has gone unnoticed. By virtue of the event's organizers being American, so too are the judges of "global" beauty standards. In other words, the winner must invariably cater to what Americans would consider as attractive. 

Oh well, I suppose it's better to sort out hiring a host who has no problems reading cue cards first. And it's still better than having Mike Tyson as one of the celebrities promoting a beauty pageant. Speaking of whom, maybe Manny Pacquiao can be invited to judge again.

What is the selection criteria for being a judge for one of these things anyway? It seems that professionalization has not yet reached the ranks of beauty contest judges.

It's Officially Over: WTO Kills Doha Round (2001-Never)

♠ Posted by Emmanuel in , at 12/23/2015 03:53:00 PM
Never again: nobody will be meeting to discuss Doha anymore.
During the last WTO meeting, its members decided to discontinue reaffirming the Doha Development Agenda's mandate, effectively killing it off. What's especially notable is that the country which was most adamant in launching it and styling it as a "development agenda" instead of a "round"--the United States--has been wishing to kill it off for quite some time now:
The World Trade Organisation is facing the biggest shake-up of its agenda in a generation after its members in effect abandoned the long-stalled Doha round. For the first time since the round was launched amid great fanfare in 2001, the WTO’s 164 members, ending a conference in Nairobi at the weekend, declined to “reaffirm” Doha’s mandate.
They also opened the door to discussing new issues and focusing more on delivering smaller packages of trade reforms. Agreements included a global ban on farming export subsidies that Roberto Azev√™do, the WTO’s director-general, called the “most significant” achievement on agriculture in the organisation’s history. The new line in Nairobi, said one senior trade official, amounted to “the death of Doha and the birth of a new WTO”.

It also marked a victory for the US and EU, who alongside other developed economies have argued that clinging to the long-stalled Doha negotiations was making the institution irrelevant in a changing global econom. Instead of aiming to complete these vast, cross-cutting rounds like before, the WTO is moving towards more tractable issue-focused negotiations, which probably makes more sense in this day and age when there are so many different parties with differing interests. Moreover, delegates the world over tired of meeting on something which became moribund quite some time ago:
Doha was launched in 2001, two months after the September 11 attacks, with much rhetoric about gestures of global unity but too little support from businesses to keep it going. It was also oversold as a “development round”, with the aim of helping poorer countries trade their way out of poverty, with a particular focus on agriculture.

Three problems rapidly became evident. One, behind the mask of solidarity between developing countries lay deep divisions, for example between agricultural net importers and exporters, preventing constructive proposals for liberalisation. Two, countries such as China transformed beyond recognition during the round, becoming global export powerhouses yet continuing to plead developing country status. Three, the US in particular proved to be largely spineless in taking on its own farm lobby, which demanded improbable amounts of market access abroad in return for subsidy cuts at home.
The mistake globophobes make it to assume that because the Doha Round is dead, so is the WTO. Actually, it's just attempts to push through vast, broadly inclusive trade rounds that's over, not the WTO which is actually moving forward on sectoral interests such as the Information Technology Agreement (ITA). Whatever you think of it, the WTO goes on after Doha.

More on How Aging Societies Hinder Growth

♠ Posted by Emmanuel in at 12/22/2015 04:45:00 AM
There's an interesting article on Bloomberg drawing on recent work from HSBC on how aging populations in different countries are likely to be a drag on their growth. Japan is, of course, today's most prominent example of the difficulties encouraging growth against a backdrop of demographic disaster. However, the situation of Japan will hardly be unique over the coming decades as the forces of depopulation replicate themselves all over the world. Worryingly, it is not only developed but also developing countries which will likely experience this phenomenon:
From such advanced economies as the U.S. and Japan to developing countries, such as China and India, the change in the shape of population pyramids is poised to crimp productivity growth over the next decade, HSBC contends. "The population structure in many economies does not lend itself to an increase in productivity, with a higher share of older (or younger), less productive workers," wrote the economist. "The change is huge, suggesting that the make-up of these populations will be less conducive to productivity growth in the future than it has been in the past."

Pomeroy adds that along with peak productivity, the 45- to 54-year-old age bracket also boasts the highest consumer spending in the U.S. People aging out of this category present another channel by which the graying process will drag on growth. And health care, a segment that will be in high demand among the elderly, is a sector with notoriously poor productivity growth.
Another thing is that investment growth tends to track labor force growth. With labor forces the world over shrinking--Japan being today's case in point--the trends look worrisome.
Investment growth, meanwhile, tends to track the growth of the labor force rather closely:
It would likely take a breakdown in this historical relationship—in which capital supplanted rather than complemented labor—to allow for the possibility that productivity growth could offset the deleterious effect of lower hours worked on GDP.

"Unless something changes and we see more investment from either public or private sources, the rest of the developed world may succumb to a similar fate to Europe today, where the dearth of investment is hampering output growth," concludes Pomeroy.

Like Pakistan's...or Zambia's? China's H-Shares

♠ Posted by Emmanuel in , at 12/15/2015 04:31:00 PM
How the mighty have fallen: a few months ago, Bloomberg noted that Hong Kong-listed stocks were even cheaper than Taliban-infested Pakistan's on a price/earnings ratio basis. As you can see above, that remains true. However, among these HK stocks, there are even worse performers: mainland China shares listed in Hong Kong or H-shares ("Hang Seng China"). Slightly cheaper than Lebanon's but still marginally dearer than those of Laos and strife-torn Zambia (whew!), I guess international buyers aren't too keen on mainland China's prospects circa year-end 2015.

At the beginning of the year, the H-shares were flying high. Now they're eating dirt:
It was all going so well for Chinese stocks in Hong Kong. Just seven months ago, the Hang Seng China Enterprises Index was surging to the highest levels since 2008 and strategists couldn’t raise their targets quick enough. Now, the gauge of so-called H shares is tumbling at the fastest pace among global peers, analysts are downgrading their forecasts and valuations have dropped to levels approaching those of Zambia.
With most of the H shares being dominated by (state-owned) financial concerns, the hope was that lower rates and cross-border opening would benefit these shares:
Even by the volatile standards of emerging markets, it’s a dramatic fall from grace for stocks that bulls had expected to surge as China cut interest rates, opened up cross-border capital flows and revamped state-owned companies. Investors have instead been driven away by weak economic growth and an anti-graft campaign that led to the disappearance or arrest of some of China’s most high-profile corporate executives. "I was fooled," said Hao Hong, the chief China strategist at Bocom International Holdings Co. in Hong Kong. "Cheap is not enough."
They are turning into something of a joke if you consider their "peers," crisis-hit Zambia and Laos with stocks that can be counted on one hand:
Selling by investors, meanwhile, has dragged down the H-share index by 37 percent from this year’s high in May, the steepest drop among equity gauges in the world’s 50 biggest markets. It now trades at 6.9 times earnings, lower than every benchmark index apart from Zambia, the southern African country facing a economic crisis, and Laos, which only has four listed equities. The Hang Seng China gauge is valued at the biggest discount versus the MSCI All-Country World Index since 2003, according to data compiled by Bloomberg.
The interesting though is that mainland stock markets like that in Shanghai have not fared as badly, but that's a story for another day.

China's 'Extraordinary Rendition' of Executives

♠ Posted by Emmanuel in , at 12/13/2015 01:32:00 PM
Detaining executives without due process or explanation: Does the PRC's actions constitute economic terror?
Leave it to the Communist Party to find a way to roil Asian markets one way or another. Having (sort of) learned their lesson not to suddenly and drastically devalue their currency as per the events of this past August, they are now devaluing slowly but surely. But, you do have to wonder about its continuing habit of locking up corporate executives without an undisclosed location. In honor of the American's "extraordinary rendition" of anyone anywhere in the world without due process for detention and interrogation, well, China's powers-that-be are practicing exactly the same thing on corporate types.

With world markets unsettled by China's economic slowdown, falling commodity prices, and the impending rise in US rates, the timing could not have been worse for the PRC to make the the head of one of its largest non-state-owned conglomerates vanish. Imagine what would happen if the head of, say, General Electric was detained and held incommunicado indefinitely and you wouldn't be far off:
The baffling disappearance of Chinese executives in recent weeks has drawn attention to the ruling Communist Party’s practice of holding people incommunicado either as targets of investigations themselves or to help with probes of others.

The most recent example came last night, when Caixin magazine reported that Guo Guangchang, the billionaire chairman of Fosun International Ltd. couldn’t be contacted. Fosun suspended its shares today and its bonds plunged by a record before the company said Guo was assisting justice authorities with a probe. Other high profile cases in recent weeks included two members of Citic Securities’ executive committee who became unreachable earlier this month, along with Yim Fung, the chief executive officer of Guotai Junan Securities Co.

The Chinese word for unreachable -- shilian, which means “lost contact” -- has become a euphemism in China for the party holding executives and officials for questioning or arrest, often indefinitely and at an undisclosed location. That practice has long been criticized by human rights activists who say the lack of transparency and accountability opens the door to abuses such as torture.
Despite being extraordinarily curious to non-Chinese observers, these acts have become so ordinary as to even have terms as to whether the detainees are party or non-party members:
The detentions, known as “shuanggui” if the party detains one of its members and “shuangzhi” if a non-party member is held as part of a probe, has featured prominently in President Xi Jinping’s campaign to root out corruption that he says is now rife in the ranks of the party’s more than 87 million members. People can be detained even if they are not the target of a probe themselves. reported today that Guo was helping with a corruption investigation into former Shanghai vice mayor Ai Baojun. Fosun didn’t specify the subject of the probe, other than to say Guo will be able to participate in the company’s decisions on “substantial issues.”

The Central Commission for Discipline Inspection, the agency leading the anti-corruption campaign, didn’t respond to a fax seeking comment. The main problem with the practice is that it isn’t transparent, said Zhu Lijia, a professor of public policy at the Chinese Academy of Governance. “Nobody really knows what happens inside the room, and that’s dangerous without regulations,” Zhu said.
The larger point is this: markets hate uncertainty, and detaining prominent industrialists is hardly the way to increase market confidence. For one thing, we don't even know if Guo Guangchang is being charged with corporate malfeasance. Stay tuned. 

12/14 UPDATE: The elusive Guo Guanchang has made a public reappearance. Supposedly, Fosun in not under investigation. If so, it makes you wonder why the PRC would inflict so much harm on an unsuspecting company:
Fosun said on Sunday it was not the focus of the investigation. Liang Xinjun, chief executive, added that Mr Guo was “assisting the judicial authorities with an investigation, but it is not because the company has problems”. When Mr Guo entered the conference room in Shanghai on Monday, employees applauded for an extended period, according to a person present at the meeting. 

A European executive whose company works closely with the Chinese conglomerate said that all of the group’s portfolio companies had sent representatives to the conference. “They weren’t expecting Guo to be there and there was relief when he showed up. Fosun suggested that he had been helping with an investigation but that neither he personally nor the company is under investigation,” the executive said. “They are not expecting any more public updates, either from Fosun or from the investigation. He has done his bit now and it is over.”

Did China Get Its $234B Worth in Stock Intervention?

♠ Posted by Emmanuel in , at 12/09/2015 03:20:00 PM
OK, so the title is a bit of a trick question insofar as the intent of official actors in intervening in stock markets was not to make money but to calm investor sentiment. Still, we are in the dark somewhat over how much the Chinese government spent to prop up equities, and if this effort was money-making. BAML recently estimated that the amount poured into PRC stocks was $234 billion. What is more astounding to me though is that it bought nearly every other China-listed stock out there. Such is the reach of the PRC:
According to Bank of America Merrill Lynch, the Chinese government spent at least 1.5 trillion yuan ($234 billion) in the third-quarter alone, buying shares in at least 1,365 stocks – or 49% of the total number of listed shares – to shore up its stock markets. It has since covered most of its losses.
Merrill derived these numbers based on top-10 shareholder information disclosed by companies. It looked at holdings by China Securities Financial Corp. (the official bailout fund), domestic sovereign fund Huijin, the broker-funded Stabilization Fund, as well as the five mutual funds funded by the securities regulator CSFC. Merrill also included in its estimates the 120 billion yuan ETF bought by the CSFC – this number is based on local media reports.

Beijing seems to have recuperated most of its losses. While the government agencies have lost an estimated 224 billion yuan as of the end of September, by November 11, they collectively gathered 44 billion yuan in capital gains – or about 3% – according to strategist David Cui.
As is usually the case, you have to wonder for how long official actors will keep their money in place to ultimately make sense on whether official actors "gained" from this action over the entire investment period. Also, if they devalue the yuan again, they will likely have to intervene more to keep PRC stocks from falling like they did in August. There are so many things you have to consider when intervening that turning a "profit" doesn't really seem to be a sensible objective in the bigger scheme of things. 

OPEC, From Cartel to Stand-Up Comedy Club

♠ Posted by Emmanuel in at 12/07/2015 01:30:00 AM
There was a time when OPEC was feared. Nowadays, it's a laughingstock.
Oftentimes the most humorous things in life are unintentional. People want to be taken seriously, but their actions seem to belie should I put this...comic tendencies.Today's case in point is the once-mighty Organization of Petroleum Exporting Countries (OPEC). At the height of its powers in the early Seventies, it was instrumental in sending oil prices through the roof worldwide as motorists bore the brunt of its will.

Let's just say there was more third world solidarity forty-some years ago than there is today. United they stood; nowadays, they fall divided as divisions that always existed now tear OPEC apart: Latin America (Venezuela) versus the Middle East (Saudi Arabia); Shia (Iran) versus Sunni (Saudi Arabia, Iraq, etc.) Of course, you also have to account for the increased production of non-OPEC members, but still, OPEC countries cannot get their act together by any means. The party line--or what passes for it nowadays--is that OPEC cutting members' production won't matter when two-thirds of it is in the hands of non-OPEC members pumping out the stuff as furiously as OPEC:
The group considered cutting production but decided that a reduction “even of 5%” wasn’t likely to push prices higher if non-OPEC producers, which make up about two-thirds of global production, join in cutting, said OPEC President Emmanuel Ibe Kachikwu, Nigeria’s petroleum minister. Instead, the group will maintain its current production—about 31.5 million barrels a day—and “closely monitor market developments in the coming months,” according to a statement released at the end of the meeting. “We just felt comfortable to wait and watch,” said Mr. Kachikwu.
The group, which gave up individual production quotas several years ago in favor of an aggregate production ceiling, also appeared to have largely done away with those restraints, as well. The ceiling, which has been set at 30 million barrels a day, has been breached routinely by the group.
Allowing Indonesia which has long since become a net oil importer to re-join OPEC was just the comic warm-up. The most recent meeting in Vienna was the pinnacle of inaction, which spurred all sorts of comments from member states that struck me as excuses of the most hilarious variety to pretend all is well when it isn't the case.

Take Nigeria's representative again who says observers shouldn't worry so much about the "semantics" of it all. What's more, it's supposedly doing right by customers by keeping oil prices low:
Emmanuel Ibe Kachikwu, the Nigerian minister, reinforced the message, saying the market shouldn’t worry about the “semantics” of targets or real production. “We aren’t going to go back to a cartel and work against the customers -- that time has passed,” said United Arab Emirates Minister Suhail Al Mazrouei.
How touching; OPEC is concerned about the welfare of oil users (probably for the first time ever if true, which I doubt). His Iraqi counterpart ups the hilarity quotient by suggesting that this erstwhile cartel shouldn't establish a production ceiling since other, non-OPEC producers don't have one (which again defeats the purpose of having a cartel):
Most of the market “doesn’t have any ceiling,” Iraqi Oil Minister Adel Abdul Mahdi told reporters. “Americans don’t have any ceiling. Russians don’t have any ceiling. Why should OPEC have a ceiling?”
Because it should act as a global swing producer? The final word probably belongs to bigwig Saudi Arabia's oil minister, who explains that OPEC still "matters" somehow despite doing no appreciable actions to act together in their common interest:
OPEC will “continue its pivotal role in production and investment no matter how much prices fall,” Saudi Arabian Oil Minister Ali al-Naimi said in an interview with Al Eqtisadiah newspaper published Saturday. 
I guess us oil users should just enjoy low oil prices that should hold a little while longer, though I still think they should be lower still since crude oil price falls don't fully reflect at prices at the pump, but that's another story for another day. Meanwhile, it's OPEC comedy hour...

How many OPEC oil ministers does it take to establish an output ceiling? Take my oil cartel, please [BADA-BOOM], etc., etc.

Brazil's So Broke Olympians Don't Get Air-Conditioning

♠ Posted by Emmanuel in , at 12/05/2015 02:11:00 PM
It must get hot wearing these Olympic outfits when there's no A/C.
It wasn't supposed to be like this. Brazil during the tail end of the Lula years was riding high on elevated commodity prices as China fueled a seemingly endless demand for what Brazil was selling...then the party stopped when the PRC's economy slowed down, ending a commodity supercycle in which Brazil was one of the biggest beneficiaries. With the 2014 World Cup and the forthcoming 2016 Summer Olympics, Brazil has essentially been left holding the bag with costly international sporting events it can barely afford as perma-recession has taken hold.

As bad as things are, perhaps the ultimate humiliation for Brazil is yet to come. Imagine one of the southern hemisphere's major energy exporters not even being able to provide Olympic athletes with air-conditioning. Due to cost overruns--is anyone really surprised when these Games are concerned--budget slashing has to happen somewhere. As it so happens, Brazil is keen on shifting the burden on the Olympic committees:
Shifting the cost for air conditioning and other amenities from the host city to each nation’s Olympic committee – or to the athletes themselves – is a big deal, said Nick Symmonds, a two-time Olympic runner. “The world wants to tune in and watch the world’s greatest athletes compete at the absolute highest level," Symmonds said. "If you don’t provide them with good food, a good place to sleep and comfortable temperature, they won’t be able to recover and bring the A-plus product that the world is demanding. To cut the budget on athletes’ hospitality and comfort, that’s just going to cheapen the games.”

[Rio 2016 spokesperson Mario] Andrada said air conditioning is an “absolute necessity” in some areas, though not bedrooms. The 17-day event, which kicks off on Aug. 5, takes place in Rio’s winter, and the average daytime temperature is in the mid-20s Celsius (mid-70s Farenheit). Some days are much hotter, though, with highs last August creeping into the mid-90s.

Others worry that the cuts will further underscore the chasm between athletes from wealthy countries and those from poorer ones. (Already some top athletes, including the NBA players who join the USA Basketball squad, choose luxury hotels over accommodations in the Olympic Village.) Those who can afford extra for air conditioning or who travel with laptops or iPads (the host committee has scrapped plans to provide TVs in individual bedrooms) will have it; others may not.
It all goes back to the notion of "economic diversification." Brazil has some world-leading manufacturing concerns like Embraer which makes smaller-capacity regional passenger jets, but for the most part, it remains over-reliant on commodity exports. Even in calendar year 2015, it lives by high commodity prices and dies by low commodity prices. Interestingly, its newfound austerity will further disadvantage fellow athletes from developing countries by forcing them to do with al fresco accommodations.

Is Brazil being shamed? They now say they will provide free A/C, but you never know:
Throw away the floor fans. Rio de Janeiro Olympic organizers have changed their minds and said Friday that athletes will have free air conditioning in their bedrooms at the athletes village. The decision to have free air conditioning comes after The Associated Press reported this week that about 10,000 Olympic athletes would have to pay for it because of budget cuts.

“The sports department found a solution that could allow us to have the air conditioning,” said Mario Andrada, the spokesman for the 2016 Games. “So were buying air conditioning for all the athletes’ bedrooms and social rooms.”
This may be true, but even suggesting that no one gets free air-conditioning suggests evident desperation is at work here.