Meet Iran, World's Hottest Stock Market

♠ Posted by Emmanuel in , at 5/17/2020 09:26:00 PM
Infidel, witness the power of the Tehran Stock Exchange.
Your first reaction may be, "They have a stock market in Iran"? Fret not, dear readers, they do have one. What's more, it's been on fire despite the ongoing US embargo that's brought its economy to a near-standstill in terms of international trade. Speaking of which, one of the things Iran still trades--albeit in reduced amounts--is oil. With oil prices near multi-decade lows at the moment due to the sheer lack of demand for it as the world has come to a halt, you would be right to expect that this newly-discovered Iranian stock market is faring very poorly at the moment.

And that's where you are precisely wrong. As it turns out, the stock market is one of the few domestic money-making opportunities left in Iran. They cannot trade internationally, and that which they can trade--oil--is worth #$%^. Sounds like a boom scenario for the local bourse, no?
The Tehran Stock Exchange has seen gains of 225% in the last year, with sharp increases even as the country struggled with one of the first serious coronavirus outbreaks outside of China. Encouraged by a government eager to privatize state-owned firms, average people now have access to the market and can trade shares, earning returns they’d never see in a savings account or a certificate of deposit.

But these rapid gains increasingly have analysts and experts worried about a growing stock market bubble, one that could be particularly dire and wipe away the earnings of the average people flooding into the market.

“We have witnessed a very strange incident,” said Hossein Tousi, a member of Iran’s Chamber of Commerce , speaking to, an Iranian economic review website. “As all markets have fallen, crude prices have fallen sharply, but in our market, the situation is upside-down. It is clear that it is a bubble.”
To be sure, you would still be worse off in US dollar terms since the rial has depreciated mightily since Trump's reintroduction of sanctions. It's worth less than a fourth of what it was pre-Trump. Decades of isolation have made Iranian leadership characterize foreigners' skepticism of outsized stock market gains as (surprise!) a Western plot to destabilize Iran. This is not a bubble, they say:
The exchange lists a half-million active traders out of some 12 million people who registered to buy and sell stocks. “An everyday 5% percent is very sexy,” said Abdollah Rahmani, a retired bank employee who trades stocks. ”What other market makes such a profit?”

Even President Hassan Rouhani, beleaguered since U.S. President Donald Trump unilaterally withdrew America from his 2015 nuclear deal with world powers, has pointed to the market as a rare bright spot for the country. Iran’s rial currency has fallen to 160,000 to 1 against the U.S. dollar, as opposed to the 35,000 to $1 in 2015.

“As Iran’s bourse has developed, (our enemies) become nervous and asked why the market is developing while markets in the world are in chaos,” Rouhani said at a Cabinet meeting last month. This rise “is because of efforts by all companies, business people and fortunately offering shares of big companies to the stock market.”
This stock mania traces its roots to nationalization post-1979 revolution and then privatization once more a few years thereafter as public management of the commanding heights was not found to be conducive to economic development:
The stock market rise in part takes root in how Iran’s economy has changed in the decades since its 1979 Islamic Revolution. Immediately after taking power, Iran’s Shiite theocracy seized large private industries, putting them in large trusts, or bonyads. The bloody 1980s war with Iraq saw Iran further nationalize its economy.

In the 1990s, Iran began a privatization effort. The stock market became one way to accomplish this, with former hard-line populist President Mahmoud Ahmadinejad giving out so-called “Justice Shares” in firms to the poor. Some 50 million Iranians now hold those shares.
When day trading is the only economic activity left in a country, and that country's stock market is the only one up significantly in the whole wide world, you are right to be skeptical. Economic theory holds that shares rise in the expectation that corporate earnings will increase rather than decrease, and Iran remains in the direst of straits. Maybe the next question we should have is, "Do they have short-selling in Iran"?

Japan’s Ongoing Repatriation of PRC Production

♠ Posted by Emmanuel in ,, at 5/10/2020 09:32:00 PM
"Sorry mate, but Japan Inc. is coming home."
One of the current themes of the global COVID-19 pandemic concerns "deglobalization." In economic terms, previously elaborate supply chains stretching across continents have proven brittle to disruptions caused by closed borders and transportation shutdowns. Of course, no country has benefited more from the broadening of these global production networks in recent decades than the People's Republic of China. At least that was the situation way back when relocating operations in China made sense given its low-cost labor and vast numbers of newly-minted consumers.

Nowadays, though, those attractions have waned. Labor isn't as cheap in China anymore, and the number of Chinese entering the global consumer class isn't rising at the same rate as before. So, it was perhaps inevitable that--China fearmongering notwithstanding--multinational corporations would seek to repatriate their production facilities so they can make their wares nearer home. Perhaps no other country has a more active program for doing so than Japan, which has allocated significant amounts of public funds for this very purpose:
Japan has earmarked ¥243.5 billion [about USD 2.3 billion] of its record economic support package to help manufacturers shift production out of China as the coronavirus pandemic disrupts supply chains between the major trading partners. The extra budget, compiled to offset the devastating effects of the pandemic, includes ¥220 billion for companies shifting production back to Japan and ¥23.5 billion for those seeking to move production to other countries, according to details posted online.

The move coincides with what should have been a celebration of friendlier ties between the two countries. Chinese President Xi Jinping was supposed to make a state visit to Japan this month, but the summit, which would have been the first of its kind in a decade, was postponed a month ago as the virus began to spread through Japan. No new date has been set.
Again demonstrating this move as being more about business than politics, Japan-China relations are actually improving nowadays, but that's not been a barrier to Japan, Inc. seeking to repatriate MNC production:
Amid the coronavirus pandemic, Japanese Prime Minister Shinzo Abe has proposed building an economy that is less dependent on one country, China, so that the nation can better avoid supply chain disruptions. The call touched off a heated debate in the Chinese political world.

In Zhongnanhai, the area in central Beijing where leaders of the Chinese Communist Party and the state government have their offices, "there are now serious concerns over foreign companies withdrawing from China," a Chinese economic source said. "What has particularly been talked about is the clause in Japan's emergency economic package that encourages (and funds) the re-establishment of supply chains."

Had the pandemic not struck, Chinese President Xi Jinping's maiden state visit to Japan would have been wrapped up by now with Xi proudly declaring a "new era" of Sino-Japanese relations. He would have cheered on Abe as Japan prepared for the next big event, the 2020 Olympics.
Japan's largest producers' organizations are leading this reshoring drive:
At the table were influential business leaders such as Hiroaki Nakanishi, chairman of the Japan Business Federation, the country's biggest business lobby better known as Keidanren. "Due to the coronavirus, fewer products are coming from China to Japan," Abe said. "People are worried about our supply chains."

Of the products that rely heavily on a single country for manufacturing, "we should try to relocate high added value items to Japan," the leader said. "And for everything else, we should diversify to countries like those in ASEAN."
After the aforementioned production repatriation fund was announced on April 7, Chinese leadership called an emergency meeting to discuss its implications for PRC production going forward:
The next day, April 8, China's Politburo Standing Committee, the party's top decision-making body, held a meeting in Beijing. Speaking at the meeting, President Xi said that "as the pandemic continues its global spread, the world economy faces a mounting downside risk." He added, "Unstable and uncertain factors are notably increasing."

Xi, who doubles as the party's general secretary, stressed the need to stick to "bottom-line thinking" -- which means assuming the worst -- and called for "preparedness in mind and work to cope with prolonged external environment changes." The seven-member Politburo Standing Committee usually meets once a week, and it is rare for the holding and content of these meetings to be reported.
It's just another way the virus is changing the world of global commerce. Slowly but surely, de-Chinafication is unfolding outside of today's news headlines.

Trump Blocks US Public Pension's PRC Investments

♠ Posted by Emmanuel in ,, at 5/09/2020 04:42:00 AM
US public pensions being invested in China post-Covid-19? Getouttahere!
 A core idea in investing is that of "portfolio diversification": It's better not to put all your eggs in one basket so that they all do not break if that basket falls. For instance, we are witnessing an historic AmeriCollapse with a 14.7% unemployment rate and 20.5 million jobs lost in the wake of Trump's bumbling response to the COVID-19 outbreak Stateside.  So, wouldn't you want to put at least some of your money elsewhere the economy isn't so dire like, say, China whose exports are on the mend?

The unsurprising answer from the Trump administration is, "@#$% no!" A few months ago, it was decided that more US public pensions would be invested abroad for "portfolio diversification" reasons. More specifically, this investment would track the MSCI All Country World Index. Curiously, the world's second largest economy, China, was only very recently included in this "World Index." The PRC's share of the MSCI gauge has steadily increased since its May 31, 2018 inclusion.

Now, let's put two and two together: US public fund managers were scheduled to begin buying foreign stocks--including an ever-increasing amount of PRC equities whose weighting was increasing in the MSCI index--just as Trump's blame game on China for everything that has gone wrong with the world since COVID-19's emergence intensified. When Trump caught wind of the imminent public pensions investment in Chinese stocks, he's [surprise!] tried to scotch the proceedings:
The Thrift Savings Plan (TSP) – the federal government’s retirement savings fund – is scheduled to transfer roughly US$50 billion of its international fund to mirror an MSCI All Country World Index, which captures emerging markets, including China. The Federal Retirement Thrift Investment Board (FRTIB) overseeing the fund made a decision in 2017 that the money should be moved by mid-2020. Opponents of the transfer in recent weeks have engaged in a last-minute effort to stop it [...]
Senator Marco Rubio, a Florida Republican, applauded reports of the move in a statement Thursday. “It’s outrageous that five unelected bureaucrats appointed by the previous administration have ignored bipartisan calls from Congress to reverse this short-sighted decision, and I applaud President Trump for directing his administration to take swift action preventing this from going forward,” he said.
Now, the Washington Post reports that assorted China bashers began alerting Trump administration figures to this process:
Roger Robinson, who served on the National Security Council under President Ronald Reagan, said he began meeting with top White House officials last summer to alert them that the Thrift Savings Plan’s new investment strategy could be seen as undercutting national security by subsidizing Chinese companies involved in weapons manufacturing and other interests detrimental to the United States. “The Thrift Savings Plan issue is a microcosm of the broader problems of U.S.-sanctioned Chinese companies and other corporate bad actors in our capital markets and Beijing’s noncompliance with federal securities laws,” said Robinson [...]
In response, Trump intends to appoint China-phobes to the said board and scotch the MSCI investments--especially since its index contains [heaven forbid!] PRC-listed stocks:
President Trump’s intensifying showdown with China over its handling of the coronavirus pandemic is expanding to a new battlefield: the retirement portfolios of 5.9 million federal employees and U.S. service members.

In recent days, White House officials have moved to seize control of a little-known board that administers the $557 billion federal retirement program for most active and retired federal employees and military members, with some aides eager to halt the flow of billions of dollars into an index fund that includes Chinese companies, according to two White House officials and an outside Trump adviser involved in the discussions.

Trump on Monday nominated three members to replace the majority on the Federal Retirement Thrift Investment Board, made up of five investment experts who oversee the retirement plan. All of their four-year terms have expired, and Senate Majority Leader Mitch McConnell (R-Ky.) and House Speaker Nancy Pelosi (D-Calif.) have not replaced those serving in the two seats they control.

With its new nominees, the White House is taking steps to block the plan’s $40 billion international fund from investing in a fund that contains about 11 percent of China-based stocks, according to people familiar with the strategy. “Obviously, the president doesn’t want this investment to take place and is looking for other alternatives,” said a senior administration official who was not authorized to speak about the nominations. “These individuals will be key to making that happen.”
The Trump administration is hiring those peddling protectionism...who would've thunk it?

Coincidence? UK Tops W European Obesity; COVID-19 Deaths

♠ Posted by Emmanuel in , at 5/05/2020 09:17:00 PM
Flat on his bum Boris Johnson is the perfect metaphor for the UK's COVID-19 response.
Is it a coincidence that a certain European island country tops the region's obesity and COVID-19 death league tables? I think not. Probably the worst insult you can hurl at the British is that they are the Americans of Europe. Now that's a lot of baggage--which they mostly carry around the waist, as it turns out. Especially nowadays, that transcontinental dietary "special relationship" isn't working out so well. Just as the US has the fattest people among all OECD nations, the United Kingdom has the portliest Western Europeans. First, let's face the fats:
The UK is the most obese country in western Europe, according to the Organisation for Economic Co-operation and Development. Its annual Health at a Glance report, published on Friday, shows that 26.9% of the UK population had a body mass index of 30 and above, the official definition of obesity, in 2015. Only five of the OECD’s 35 member states had higher levels of obesity, with four outside Europe and one in eastern Europe.

The OECD’s report, which says obesity in the UK has increased by 92% since the 1990s, illustrates the scale of the public health challenge, with fears it could bankrupt the NHS. Tam Fry, chair of the National Obesity Forum, said: “One could weep over the figures, the result of successive governments who have, for the last 30 years, done next to nothing to tackle obesity.
The British have also done next to nothing to deal with this obesity problem. Their lardy PM Boorish Johnson [sic] has even suggested a rollback of the UK's too little, too late sugary drinks tax. (Is being outrageously fat an indicator of Britishness from Johnson's point of view, too?) This sort of happy-go-lucky, what-me-worry-about-my-waistline attitude is actually not very funny at all given the health consequences and the associated strains placed on public finances. The right-wing Daily Telegraph has even featured an op-ed that suggests the UK finally do something about its obesity epidemic in light of the rising COVID-19 death toll there:
The same ailments keep emerging: diabetes, heart disease and high blood pressure. Data from the first 2204 Covid ICU admissions show 73 per cent were overweight, a condition linked to those diseases. Not only does carrying more visceral weight put greater pressure on the lungs, excess body fat causes the immune system to dysfunction, instigating the cytokine storm that floods lungs causing pneumonia-like complications.

For decades successive governments have been negligent in tackling obesity head on. Whether it’s subservience to the food and drink industry that contributes almost £30bn to the economy, or an aversion to becoming a Nanny State, obesity has ballooned without concerted intervention. More than half of the British diet is ultra-processed food with 60 per cent of the population overweight.
I don't want to say this, but I fully expected to see what's since become true: Just now, the UK has exceeded Italy and now tops European COVID-19 fatalities after you tot up fatalities in Northern Ireland:
Britain has the worst coronavirus death toll in Europe, official figures showed on Tuesday, prompting calls for an inquiry into the handling of the pandemic. The government’s tally of fatalities across the UK reached 29,427 for those who tested positive for coronavirus, exceeding the 29,029 recorded in Italy – until now Europe’s worst-hit country.

Italy’s total does not include suspected cases, however. Newly released data from the Office for National Statistics showed that 29,648 deaths were registered in England and Wales with Covid-19 mentioned on the death certificate by 2 May. With the addition of the official death figures for Scotland and Northern Ireland, this was calculated to take the UK’s toll to 32,313.

The true figure is likely to be significantly higher due to missed cases and a lag in reporting.
It's not politically popular to tell your people that they're too goddamn fat. It's even more difficult to tell your people to slim down when you select "leaders" like the obese Trump or Johnson. The truth remains though is that the US and UK were in literally poor shape to deal with COVID-19.  

The Rise of European CoronaProtectionism

♠ Posted by Emmanuel in ,, at 5/02/2020 08:11:00 PM
 I almost forgot to post this one: The "hollowing out of the industrial base" is a favorite belief of arch-protectionists like Trump's pseudo-economist, Peter "Death by China" Navarro.  However, this belief knows no geographic boundaries or ideological predispositions. American or European, right or left, you'll find the same idea repeated ad nauseam. What's more, it's a sign of the times that the drumbeat for this kind of protectionism grows louder.

In the wake of 2020's Great Coronavirus Global Shutdown, European countries long since affected by the loss of the commanding heights of industry--coal, oil, steel, and so forth--see a further looming Chinese threat. With Western markets slumping, any number of European companies may be purchased at bargain bin--if not fire sale--prices. Hence European authorities want to prevent the Chinese swooping in to buy these virus-cheapened firms:
The EU plans to help block foreign takeovers of European companies struggling with the virus downturn. It wants to allow governments to invest in weak companies, which could include some form of ownership. While it called them "measures of last resort", the European Commission says it is consulting member states. A focus for the regulator is to counter unfair competition from state-owned firms, which are the backbone of economies such as China's.

It is now looking at further protection for businesses based in the EU, in light of the significant financial impact coronavirus lockdowns are having on them. "This in principle falls outside the scope of EU state aid control and can in particular be important for interventions by member states to prevent hostile takeovers of strategic companies by foreign purchasers," a spokesman for the European Commission said.
The justification you could have seen from a mile away: national security [duh]:
"As in any crisis, the industrial and corporate assets are under stress. The resilience of our industries, their capacity to continue to respond to the needs of EU citizens and the preservation of strategic assets and technology, is key," the spokesman added. The EU is worried that foreign investors may try to acquire European companies "in order to take control of key technologies, infrastructure or expertise". It says this "raises concerns as regards security".
How utterly predictable. In fact, you probably guessed this post's contents just by seeing its title--which is as hoped. CoronaProtectionism it is.