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Midlincoln Research/Midlincoln Analytics
Summary of events to watch this week
Upcoming Data Releases
Monday US ISM manufacturing
Tuesday Russian GDP
Wednesday Germany Final HICP
Thursday Australia Employment
Friday CBR REPO rate auction
Highlights and Media
it's not yet obvious, but developments in the Russian oil & gas sector such as emergence of state oil and gas companies, growing importance of Gazprom and especially of Rosneft could lead to further disbalances in Russian sector economics.
My favorite research piece back from 2011. Written following Emelianenko Monson fight and all the booing. Hugely timely notice of upcoming trouble.
The same topic again - venezualisation of Russia.
What thoughts come to your mind when you hear that the key founding shareholder of Russian social network "Vkontakte" has been accused of ....
If you try to estimate where the current center of financial mass is as a point on the surface of Earth — a weighted average of geographic coordinates of various stock exchanges weighted by the value traded at those exchanges — it’s 34.7 degrees of northern latitude and 23.9 degrees of eastern longitude. ...
The world so far looks somewhat similar to last year. Most factors affecting the business environment and financial markets are similar to last year's. Global economic growth ...
In a world pictured as a big village, a country is probably pictured as house. Just like an old house, with its known and unknown problems, with parts undergoing renovation and new construction and parts where constant ...
Market will most likely be negatively affected by the sentence (read this article in Russian or translate)...
In the ongoing discussion on the future of the Russian pension system's reform, some officials are offering to cancel investment or a private component of the pension and to retain only the basic component guaranteed ...
The start of 2012 was pretty gloomy for M&A bankers; 2011 had just finished on a very uncertain note, and politicians in Europe were unable to ...
Read or translate this article which is in Russian on former VTB buyback
In 1999, we saw the economy strongly shifting away from oil and gas toward industrial and service sectors. Import substitution boomed, local production flourished, Internet businesses started ....
First, I want to highlight the following statistics: Russia has only 26 companies in MSCI Russia index vs. MSCI South Africa 50 companies, MSCI India 73 companies, MSCI Brazil 78 companies, MSCI South ...
Russia's stock market evolution is difficult, but the progress is unpreventable. It is reflected in the changing composition of Russia's benchmark MSCI Standard index, which spans 90 percent of Russia's .....
Built in 1970 under Prime Minister Kosygin, AvtoVAZ played a major part in the collapse of the Soviet Union and is still a problem.
Russia was on a straight course to liberalization of its property, when in the middle of the road it realized that property liberalization should be delayed and for a .....
There are all kinds of small business owners in Russia. Some of them operate clubs and restaurants, some run Western-style advertisement, IT or legal consulting business
The crisis will fade away one day. On that day, companies will start forecasting year-on-year earnings growth instead of growing declines. The stock market will survive, but its landscape is likely to change significantly.
When the crisis cracked down on the Russian economy last November -- the first remedy suggested by most of the economists was a diversification of economy.
The stock market is all about information. Information and news are intangible things, like gases, in the air or space around us, mixing with other gases, changing their pressure and spread...
In the 90ties world faced 2 huge transformations- fall of apartheid in South Africa and the fall of the Soviet Union. On one occasion Nelson Mandela met with Boris Yeltsin in spring of 1999 in Moscow. Moscow was lying in ruins of asian financial crisis when Yeltsin and Mandela met. wo great revolutionaries of the 20th century met 5 years after the fall of apartheid in South Africa and almost 8 years after the fall of Soviet Union... read more
Russian politicos could probably be even thinking in terms of Soviet Union and Czech and 1968 if other things fail and Ukraine is astray and on its way to Europe.
At any rate if things take longer than Sochi Olympics, Russia is likely to become far more aggressive with its pressure in Ukraine.
The consumers sectors are also under pressure as giant Louis VuItton suitcase installation is removed from red square. Some Russians wonder however what is abbreviature of LV stands for - it might be Lenin Vladimir whose is still rests on red square while Russians still undecided which one to worship.
Oil price is likely to stay elevated as Israeli keep threatening Iran with the attack amid the country reached the nuclear deal that it will stop enriching uranium of 6 months. Also no new oil supply is expected from the deal while gold sales by Iran could increase.
Last week risk was supported by Chinese reform promise and promise of gradual liberalisation of yuan rate and credit rates in china. This week the credit crunch in china is in spotlight as well as actually in many other emerging as well as developed markets where rates are high due to pricing pressures such as China, Australia, Russia.
And if US rates are bound to increase, this will cause lots of leveraged players to go belly up.
DM stocks are somewhat supported while emerging market stocks are slumping as dollar strengthens, bonds weaken as US economy improves and tapering nears.
Iran deal can be damaging for the oil price, as the last bit of risk premium is knocked out from the price of oil with Iran reaching compromise with atomic energy agency.
European weaker economy as projected for 2014 can put stress again on peripheral parts of europe and Turkey as well.
Quite intense week in terms of data. Europeans have their say in currency wars this week. The euro is likely to be weaker, dollar stronger and risk appetite slightly smaller.
In Russia its a national unity day, which celebrates an event in history which lead to establishment of Romanov’s family. In the course of those historic events, Russians defeated Polish invaders and kicked them out from Russia.
Instead of focusing on discussion of whatever Fed can do on Wednesday i would like to highlight the irony with developing the oil and gas sector in Russia. Staking anything at all on success of developing Russia's hydrocarbons sector could lead to scarcity of toilet paper in Moscow once again.
Bunch of stats will be released in the US this week and the next which were delayed due to shutdown. Nominal per capital GDP highlighted for former CIS countries.
Its the second week of 3q results season with Google, Goldman Sachs, and Bank of America results coming up. Adding to the disturbance could be the beginning of Detroit bankruptcy hearings on Tuesday. This time, emerging markets are positively highlighted on the back of US debt ceiling debates as well as possible US default or downgrade. The major source of optimism for emerging markets is US dollar ...
October 7 2013 From Russia into Venezuela and Iran
This summer MSCI announced its decision to reclassify the MSCI Qatar and MSCI UAE Indices from Frontier Markets to Emerging Markets and the MSCI Morocco Index from Emerging Markets to Frontier Markets...
September 30 2013 Possible US Debt Downgrade, Putin’s fifth term and lower oil price
Turkish stocks looks especially well set if oil price declines, but global growth will feed through into emerging markets. Investors are likely to be picking up Turkey in this backdrop...
September 16 2013 Syria, Oil Price, Fed taper
This week is likely to be price negative for risk assets as risk appetite recedes as Fed prepares to taper...
September 9 2013 Moscow Election, Syria, CBR cut?
A vote on Syria can press on the negative side while Chinese data, higher oil price and possible rate cut could press on the upside. The result is somewhat neutral to small positive stock performance for Russian stocks...
September 2 2013 Come Back on the Labor Day?
One popular investors tactics is to sell in May and then to come back and buy on the labor day. This year it could have worked would Fed not decided to taper liquidity and would middle east tensions not escalate...
August 26 2013 Syria, Uralkali and possibly slower US and capital flight from GEM.?
As it look most of the numbers coming out this week are to signal weak set of economic inputs therefore but not bad enough for the Fed to delay tapering of stimulus which is a worst combination and is likely to imply weaker stock markets...
They should. Gold strength implies investors are searching for a path away from fixed income into gold e.g. Their next step could be going for equities on a much wider scale, as gold investing is sort of dull...
Russia is stagnating as result of weaker global backdrop for the emerging markets but mainly because of the increased regulation by the government which decided to drive the economy in manual shift mode back in 2009 and can’t switch into automatic mode since then. We are almost back in soviet economic setup where the achievement of certain economic sector was primarily the achievement the respective sector minister....
Iran in the next 10 years with its 80 mln people and 1.2% population growth rate will add another 10 mln in population and is set to overcome Germany in population. With its natural resource base e.g. Iran has largest gas reserves in the world, Iran can become an influential regional power, slightly less populous than Egypt and a lot less populous than Pakistan, but due to its natural resource base - much more influential and probably the most influential country in north Africa, central asia and the middle east.
China's government has ordered companies to close factories in 19 industries. The affected industries include steel, cement, copper and glass. Politburo asked panies to close outright some 1400 plants are about to be shut down. That could potentially improve global prices in material sectors that were badly hurt by CHinese overproduction. On the other hand measure is likely to affect badly Chinese GDP and some commentators are now talking about 3% average growth for China for the next 5 years. Ouch!
International markets are likely to be weaker as muni problems surface in the US and Chinese financials stocks decline and weaker US sectors report 2Q results. However Russian stocks that have been laggards this year could end up immune to international problems temporarily cheering to Navalny who is still free.
Is Detroit contagious? Bondholders are nervously awaiting a federal judge’s decision on Detroit’s request on July 18 for bankruptcy protection as it seeks relief from a staggering $18.5 billion debt. A federal bankruptcy judge has scheduled a hearing for August 28 to determine if the city is eligible for Chapter 9 shelter....
Our view of the markets was slightly bearish for the week and we were wrong, as US Fed Chairman Ben Bernanke decided to provide support to US bond prices, talking them up. Coincidentally last week main political event was the US China talks held on Wednesday and Thursday in Washington which were attended by Yang Jiechi, a key figure in setting China's foreign policy and Vice Premier Wang Yang. From the US side the meeting was hosted by Secretary of State John Kerry and Treasury Secretary Jacob Lew while President Joe Biden also attended...
Kazan University Games
The world university games opening ceremony was held yesterday in Kazan, the capital of Tatarstan republic. After opening show that went on for 4 hours, the athletes and guests were greeted by Vladimir Putin at about midnight.
Kazan games were on the list of events that was supposed to drive up infrastructure investment in Russia. The total money spent in preparation to the games topped 300bn Rub (c US$10bn). The things that were constructed included
11 large arenas as well as smaller gyms. Kazan saw construction of new airport terminal, rail way station and a bus transit hub, 65 km of roads as well as some metro lanes.
Daily Morning Meeting
Russian stocks are lower as president upset that he lost investors support adopts the law which undermines pension investing. Also investors behave just as would Stanislavski predict, not believing into manipulation, that Khodorkovsky will be freed before Olympics.
December 5 ADP report weighs on markets
Stocks tanked on Wednesday, India and Turkey were the only 2 exception, their stock markets managed to climb +1.5% and +0.5% respectively. The biggest loser is Nikkey down 1.5%, Indonesian and SA stocks are also among the biggest losers down 1.5 and 1.1% respectively.
Aussie central bank moves shows that global rates will be low until that either all central banks quit QE at the same time. This should supports the markets in long term
The last week’s trend is set to continue, DM stocks are somewhat supported while emerging market stocks are slumping. Turkey was leading on the way down yesterday. Finishing 2.4% down. Russian GDRs were the second worst index down 0.7%. Indian stocks finished 0.4% down. While Brazil was up almost a percentage point and Shanghai composite today is adding 0.9%. Asian stocks are higher today. Hang Seng is up 0.9%.
ECB makes surprising rate cut. US GDP is on healthy growth path up 28% in 3q slightly better than expected. MSCI announced that it removed 3 stocks from Russian universe. There are only 22 stocks will be left in MSCI Russia. Russia’s official equity universe, measured by benchmark shrunk to 22 stocks from 27 in the beginning of 2013. Welcome to Venezuela! S&P Frank’s downgrade adds to euro weakness from ECB decision.
Twitter IPO cements the trend - sell Exxon and buy tech stocks and this time its not like 1999. This time its for real.
Strangely the dollar might come a winner if it loses versus euro on weaker than expected growth numbers. Overall effect on risk appetite from that dollar weakness is complex but on a simplified view risk appetite is likely to be better.
Nov 6 2013 Downgraded european growth estimates weigh down on risk
In the news weaker eurozone growth projection announced by EU commision, and wage growth likely lagging cpi advances in Japan. ISM non manufacturing index in the US was slightly better in October,
Nov 5 2013 Risk appetite is just a notch weaker but should be supported
Stocks are slightly higher as S&P finished up 0.36%. iBovespa is the leader with 0.78% gain, Polish WIG is up 0.71% and the gauge of Russian GDRs in London up 0.5%. The weakest set of stocks included China where Shanghai composite was down 1%, Hang Seng is down 0.9% while Kospi lost 0.7%.
Stocks are weaker overall especially in dollar terms. Nikkey leads on the way down with 1.76% fall. Turkey was down 1.6% yesterday as well. Poland is down 0.9%, Russia finished 0.4% down for the RTS. Somewhat better supported was India stock market on the back of stronger performance of state banks shares
Stocks finished slightly stronger yesterday as Fed kept the QE on with aim to support bond rates and keep them low. Additionally positive was German inflation data which showed inflation weakened in October in the country.
Stocks in Hong Kong, SA and India were notably stronger, while stocks in Turkey, Indonesia and Poland dipped slightly.
All eyes are on the FOMC meeting. I think that the meeting will finally result with initiation of tapering by the Fed. But this view is quite contrarian.
Stocks prices are slightly higher iBovespa is the strongest gainer +1.7% on Monday, followed by Hang Seng and Nikkei. Indian stocks were laggards ahead of RBI meeting today. US stocks are unchanged ahead of retail sales data today. In Russia Magnit was supported on good numbers
Stock prices are down. India stocks down 1.2%. Brazil stocks are down 1% as banks fall. Chinese HSBC PMI is quite healthy pointing to 7.5% increase but despite that China stocks are down again 0.7% today versus yesterday
October 24 2013 We have some good news, oops sorry we have some bad news from China
Chinese banks shares are very weak on concerns that China banks are at stress. Major banks were writing off bad debt. On another note property prices were very strong implying some curbing of liquidity is possible by PBC.
MPC minutes in UK hinted at possible rate hike.
Stocks were mixed yesterday. While S&P 500 Index gained 0.5% and South African shares were up 1% Micex index declined 0.6% and Shanghai composite declined 0.4%.
Chinese communist party is recalibrating economy towards consumption. On the back of these efforts Chinese biggest refrigerator manufacturer Qingdao Haier jumped 10% yesterday.
Chinese communist party is recalibrating economy towards consumption. On the back of these efforts Chinese biggest refrigerator manufacturer Qingdao Haier jumped 10% yesterday.
Putin is again manipulating investors expectations, this time unable to match expectations on dividend front - demanding that state companies pay only at most 25% payout ratio, -- way below of average for GEM stocks.
Support at last as US debt deal is close to get through
Fitch places US on watch negative, European finance ministers are still divided on banks regulation and detroit bankruptcy hearings begin in the US
CBR was very generous and gave out 300bn Rub - roughly 9bn$ at a rate of 5.75% just 50bpts above the CBR repo rate for bonds.
The fear on the market was the banks will turn around and will buy dollars with this liquidity. As they did once in 1994 when CBR tried similar mechanism. But that did not happened this time and ruble was just a notch weaker.
Russian corporate governance is less of a problem this year as state companies start to pay chunky dividends and firms are required to file international accounting standards financials.
Furthermore companies with more than 50% free float are starting gradually to emerge on a horizon in Russia. While they remain stable and well managed i.e Lukoil, Magnit, Yandex.
Corruption, lack of trust and integrity
What remain a bigger problem in Russia is corruption, lack of trust and lack of integrity as manifested by various guilty court verdicts, laud corruption cases and very superficial service of public employees across many sectors, from government to state companies to schools to medical services....
Russian consumption boom is leveling off
International retailers and consumer companies which invested in Russia 10 years ago are reporting stellar profits and are sending money back home. Thus Achaun will pay its owners in France 300 mln$ in dividends on the back of financial year that saw almost 10bn$ revenues and 1bn$ in gross profit.
Mcdonald's will get 150mn$ in dividends from its Russian operations and Ikea which grossed 3.4$bn in Russia last year reported net income of roughly 220mn$.
PM Medvedev has commented on what is most likely being a bogus WB report that places Russian GDP into number 5 rankings in PPP dollars, surpassing Germany. I have seen the report previously in a PDF file in of FB chats, and it looked bogus to me. According to IMF world outlook database the difference between Russian and German PPP dollars GDP is at least 20%-30% with Russian GDP being 2.6 PPP $ trln while Germany 3.2 PPP $ trln. WB probably mixed things up. Here is the table from IMF data on PPP rankings as well as nominal
A catastrophe in Kazan is tragic. By coincidence it occurred at a time when the policy makers are discussing Kazan transport routes. Whether or not to build a rapid train track link and to launch fast train service between Moscow and Kazan. Alternative project is ironically focuses on connecting distant Russian parts by air and to invest into airport infrastructure and airlines.
Analysts had been speculating for long time ahead that something may happen in Iran this summer after the elections in the country. Especially if elections yield a president which will be unable to stop Iran’s nuclear arms effort. In particular some analysts specifically pointed to Ramadan as a possible time window for escalation in the middle east.
Alexey Navalny and his business partner Petr Ofitserov have been sentenced to 5 and 4 years jail terms respectively. Rumors are that the court decision could drive crowds out on the streets in Moscow this evening in the same manner as protests erupted in December of 2011. Back then the stocks that were the most vulnerable to protests included Novatek and Rosneft declining 17% and 10% respectively in a couple of weeks following eruption of protests. RTS declined 12% despite high oil price and fairly stable macro backdrop.
EMERGING MARKETS VIEW
MSCI emerging markets index finished the week more than 1% Down. Data as of December 9
Best and Worst in the BRICST
(MSCI Emerging Markets Index stocks only)
September 27 2013 Putin’s discount to widen Buy corruption trades - Rosneft, Surgut, Novatek, Megafon
September 20 2013 Turkey or Russia in the new round of currency wars
September 11 2013
August 7 2013
Search the News
(This news feed sources news from all over the internet not just midlincoln.com)
Last Week and earlier
December 4 Australia GDP at 2.3% below expectations
December 3 Australia RBA Overnight rate at 2.5%
December 2 US ISM manufacturing rose to 57.3%
Nov 28 Germany jobs fail to improve
Nov 19 Eurozone ZEW Showed Hope for Europe and in
Brazil Inflation in mid November rises lessthan expected easing pressure on rates somewhat.
BoE Minutes deliver dovish message on interest rates - rates are to remain low even if unemployment falls.
US price pressure is off even as sales rise. US CPI falls first time in 3 months
Thursday BOJ Rate kept constant, yen weakens
Turkey rates left unchanged but one month repo auctions are ceased
Nov 20 South Africa Rate is left unchanged which knocks out bits from rand
BoJ Monthly Economic Report for November is strong despite that Japan cuts outlook on exporters on GEM weakness
12 Nov 2013
13 Nov 2013
14 Nov 2014
Nov 5 Australia RBA holds Rates
Nov 6 Poland NBP Rate is on hold, expectations of rate hikes pushed into 2014
ECB Rate cut to 0.25% from 0.5%. Euro weakens
US GDP 3Q grows 2.8%
Friday US Employment Report Employers also added 60,000 more jobs in the previous two months than earlier estimated.
CBR Repo Rate is left unchanged. Repo rates are still deeply below inflation, fueling more inflation.
Oct 26 2013
Oct 22 2013
Oct 23 2013
Alcoa delivers strong set of numbers while the market frets over the Government shutdown
Sep 27 UK GDP 3Q estimate and final
Sep 24 IFO Business Climate Rises
Sep 23 German Federal Election
Sep 22 German Elections
Sep 17 US CPI Barely up in August
Sep 13 UN submit Syria report
Sep 12 A Plea for Caution From Russia - Putin’s article
Sep 1 China Economy Strengthens as Factory Gauge at 16-Month High in August
Aug 29 Brazil rate hike to 9%
Aug 22 US Leading Indicators
Q2 2013 Wal-Mart Gets Ready For Russia
Aug 10 A Japanese Crisis Nears
Aug 9 Global export leaders Germany and China have logged increased foreign trade, adding to signs of rising global demand. Experts surmise, however, that a full-blown economic recovery is not yet a reality.
Aug 8 China’s Iron Ore Imports Surge to Record High