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>>> Regime Change in Ukraine and the IMF’s Bitter “Economic Medicine”
By Prof Michel Chossudovsky
Global Research, March 24, 2014
http://www.globalresearch.ca/regime-change-in-ukraine-and-the-imfs-bitter-economic-medicine/5374877
Interim Prime Minister Arseny Yatsenyuk meets President Obama at White House, March 2014 (White House photo)
In the days following the Ukraine coup d’Etat of February 23, leading to the ousting of a duly elected president, Wall Street and the IMF–in liaison with the US Treasury and the European Commission in Brussels– had already set the stage for the outright takeover of Ukraine’s monetary system. The EuroMaidan protests leading up to “regime change” and the formation of an interim government were followed by purges within key ministries and government bodies.
The Governor of the National Bank of Ukraine (NBU) Ihor Sorkin was fired on February 25th and replaced by a new governor: Stepan Kubiv.[right]
Stepan Kubiv is a member of Parliament of the Rightist Batkivshchyna “Fatherland” faction in the Rada led by the acting Prime Minister Arseny Yatsenyuk (founded by Yulia Tymoshenko in March 1999). He previously headed Kredbank, a Ukrainian financial institution largely owned by EU capital, with some 130 branches throughout Ukraine. Ukraine Central Bank Promises Liquidity To Local Banks, With One Condition, Zero Hedge, February 27, 2014).
Kubic is no ordinary bank executive. He was one of the first field “commandants” of the EuroMaidan riots alongside Andriy Parubiy co-founder of the Neo-Nazi Social-National Party of Ukraine (subsequently renamed Svoboda) and Dimitry Yarosh, leader of the Right Sector Brown Shirts, which now has the status of a political party.
Kubiv was in the Maidan square addressing protesters on February 18, at the very moment when armed Right Sector thugs under the helm of Dmitry Yarosh were raiding the parliament building.
A few days later, upon the establishment of the interim government, Stepan Kubiv was put in charge of negotiations with Wall Street and the IMF.
The new Minister of Finance Aleksandr Shlapak [left] is a political crony of Viktor Yushchenko –a long-time protegé of the IMF who was spearheaded into the presidency following the 2004 “Colored Revolution”. Shlapak held key positions in the office of the presidency under Yushchenko as well as at the National Bank of Ukraine (NBU). In 2010, upon Yushchenko’s defeat, Aleksandr Shlapak joined a shadowy Bermuda based offshore financial outfit IMG International Ltd (IMG), holding the position of Vice President. Based in Hamilton, Bermuda, IMG specialises in “captive insurance management”, reinsurance and “risk transfer.”
Minister of Finance Aleksandr Shlapak works in close liaison with Pavlo Sheremeto, the newly appointed Minister of Economic Development and Trade, who upon his appointment called for “deregulation, fully fledged and across the board”, requiring –as demanded in previous negotiations by the IMF– the outright elimination of subsidies on fuel, energy and basic food staples.
Another key appointment is that of Ihor Shvaika [right], a member of the Neo-Nazi Svoboda Party, to the position of Minister of Agrarian Policy and Food. Headed by an avowed follower of World War II Nazi collaborator Stepan Bandera [see image below], this ministry not only oversees the agricultural sector, it also decides on issues pertaining to subsidies and the prices of basic food staples.
The new Cabinet has stated that the country is prepared for socially “painful” but necessary reforms. In December 2013, a 20 billion dollar deal with the IMF had already been contemplated alongside the controversial EU-Ukraine Association Agreement. Yanukovych decided to turn it down.
One of the requirements of the IMF was that “household subsidies for gas be reduced once again by 50%”.
“Other onerous IMF requirements included cuts to pensions, government employment, and the privatization (read: let western corporations purchase) of government assets and property. It is therefore likely that the most recent IMF deal currently in negotiation, will include once again major reductions in gas subsidies, cuts in pensions, immediate government job cuts, as well as other reductions in social spending programs in the Ukraine.” (voice of russia.com March 21, 2014)
Economic Surrender: Unconditional Acceptance of IMF Demands by Western Puppet Government
Shortly after his instatement, the interim (puppet) prime minister Arseny Yatsenyuk casually dismissed the need to negotiate with the IMF. Prior to the conduct of negotiations pertaining to a draft agreement, Yatsenyuk had already called for an unconditional acceptance of the IMF package: “We have no other choice but to accept the IMF offer”.
[Neo Nazi Svoboda Party glorify World War II Nazi Collaborator Stepan Bandera]
Yatsenyk intimated that Ukraine will “accept whatever offer the IMF and the EU made” (voice of russia.com March 21, 2014)
In surrendering to the IMF, Yatsenyuk was fully aware that the proposed reforms would brutally impoverish millions of people, including those who protested in Maidan.
The actual timeframe for the implementation of the IMF’s “shock therapy” has not yet been firmly established. In all likelihood, the regime will attempt to delay the more ruthless social impacts of the macroeconomic reforms until after the May 25 presidential elections (assuming that these elections will take place).
The text of the IMF agreement is likely to be detailed and specific, particularly with regard to State assets earmarked for privatization.
Henry Kissinger and Condoleeza Rice, according to Bloomberg are among key individuals in the US who are acting (in a non-official capacity) in tandem with the IMF, the Kiev government, in consultation with the White House and the US Congress.
The IMF Mission to Kiev
Immediately upon the instatement of the new Finance Minister and NBU governor, a request was submitted to the IMF’s Managing director. An IMF fact finding mission headed by the Director of the IMF’s European Department Rez Moghadam was rushed to Kiev:
“I am positively impressed with the authorities’ determination, sense of responsibility and commitment to an agenda of economic reform and transparency. The IMF stands ready to help the people of Ukraine and support the authorities’ economic program.” Press Release: Statement by IMF European Department Director Reza Moghadam on his Visit to Ukraine
A week later, on March 12, Christine Lagarde, met the interim Prime Minister of Ukraine Arseniy Yatsenyuk at IMF headquarters in Washington. Lagarde reaffirmed the IMF’s commitment:
“[to putting Ukraine back] on the path of sound economic governance and sustainable growth, while protecting the vulnerable in society. … We are keen to help Ukraine on its path to economic stability and prosperity.”(Press Release: Statement by IMF Managing Director Christine Lagarde on Ukraine
The above statement is wrought with hypocrisy. In practice, the IMF does not wield “sound economic governance” nor does it protect the vulnerable. It impoverishes entire populations, while providing “prosperity” to a small corrupt and subservient political and economic elite.
IMF “economic medicine” while contributing to the enrichment of a social minority, invariably triggers economic instability and mass poverty, while providing a “social safety net” to the external creditors. To sell its reform package, the IMF relies on media propaganda as well as persistent statements by “economic experts” and financial analysts which provide authority to the IMF’s macroeconomic reforms.
The unspoken objective behind IMF interventionism is to destabilize sovereign governments and literally break up entire national economies. This is achieved through the manipulation of key macroeconomic policy instruments as well as the outright rigging of financial markets, including the foreign exchange market.
To reach its unspoken goals, the IMF-World Bank –often in consultation with the US Treasury and the State Department–, will exert control over key appointments including the Minister of Finance, the Central Bank governor as well as senior officials in charge of the country’s privatization program. These key appointments will require the (unofficial) approval of the “Washington Consensus” prior to the conduct of negotiations pertaining to a multibillion IMF bailout agreement.
Beneath the rhetoric, in the real World of money and credit, the IMF has several related operational objectives:
1) to facilitate the collection of debt servicing obligations, while ensuring that the country remains indebted and under the control of its external creditors.
2) to exert on behalf of the country’s external creditors full control over the country’s monetary policy, its fiscal and budgetary structures,
3) to revamp social programs, labor laws, minimum wage legislation, in accordance with the interests of Western capital
4) to deregulate foreign trade and investment policies, including financial services and intellectual property rights,
5) to implement the privatization of key sectors of the economy through the sale of public assets to foreign corporations.
6) to facilitate the takeover by foreign capital (including mergers and acquisitions) of selected privately owned Ukrainian corporations.
7) to ensure the deregulation of the foreign exchange market.
originalWhile the privatization program ensures the transfer of State assets into the hands of foreign investors, the IMF program also includes provisions geared towards the destabilization of the country’s privately owned business conglomerates. A concurrent “break up” plan entitled “spin-off” as well as a “bankruptcy program” are often implemented with a view to triggering the liquidation, closing down or restructuring of a large number of nationally owned private and public enterprises.
The “spin off” procedure –which was imposed on South Korea under the December 1997 IMF bailout agreement– required the break up of several of Korea’s powerful chaebols (business conglomerates) into smaller corporations, many of which were then taken over by US, EU and Japanese capital.. Sizeable banking interests as well highly profitable components of Korea’s high tech industrial base were transferred or sold off at rock bottom prices to Western capital. (Michel Chossudovsky, The Globalization of Poverty and the New World Order, Global Research, Montreal, 2003, Chapter 22).
These staged bankruptcy programs ultimately seek to destroy national capitalism. In the case of Ukraine, they would selectively target the business interests of the oligarchs, opening the door for the takeover of a sizeable portion of Ukraine’s private sector by EU and US corporations. The conditionalities contained in the IMF agreement would be coordinated with those contained in the controversial EU-Ukraine Association agreement, which the Yanukovych government refused to sign.
Ukraine’s Spiraling External Debt
Ukraine’s external debt is of the order of $140 billion.
In consultations with the US Treasury and the EU, the IMF aid package is to be of the order of 15 billion dollars. Ukraine’s outstanding short-term debt is of the order of $65 billion, more than four times the amount promised by the IMF.
The Central Bank’s foreign currency reserves have literally dried up. In February, according to the NUB, Ukraine’s foreign-currency reserves were of the order of a meagre US$13.7 billion, its Special Drawing Rights with the IMF were of the order of US$16.1 million, its gold reserves US$1.81 billion. There were unconfirmed reports that Ukraine’s gold had been confiscated and airlifted to New York, for “safe-keeping” under the custody of the New York Federal Reserve Bank.
Under the bailout, the IMF –acting on behalf of Ukraine’s US and EU creditors– lends money to Ukraine which is already earmarked for debt repayment. The money is transferred to the creditors. The loan is “fictitious money”. Not one dollar of this money will enter Ukraine.
The package is not intended to support economic growth. Quite the opposite: Its main purpose is to collect the outstanding short term debt, while precipitating the destabilization of Ukraine’s economy and financial system.
The fundamental principle of usury is that the creditor comes to the rescue of the debtor: “I cannot pay my debts, No problem my son, I will lend you the money and with the money I lend you, you will pay me back”.
The rescue rope thrown to Kiev by the IMF and the European Union is in reality a ball and chain. Ukraine’s external debt, as documented by the World Bank, increased tenfold in ten years and exceeds 135 billion dollars. In interests alone, Ukraine must pay about 4.5 billion dollars a year. The new loans will only serve to increase the external debt thus obliging Kiev to “liberalize” its economy even more, by selling to corporations what remains to be privatized. Ukraine, IMF “Shock Treatment” and Economic Warfare By Manlio Dinucci, Global Research, March 21, 2014
Under the IMF loan agreement, the money will not enter the country, It will be used to trigger the repayment of outstanding debt servicing obligations to EU and US creditors. In this regard, according to the Bank for International Settlements (BIS)”European banks have more than $23 billion in outstanding loans in Ukraine.” Ukraine Facing Financial Instability But IMF May Help Soon – Spiegel Online, February 28, 2014
What are the “benefits” of an IMF package to Ukraine?
According to IMF’s managing director Christine Lagarde the bailout is intended to address the issue of poverty and social inequality. In actuality what it does is to increase the levels of indebtedness, while essentially handing over the reins of macro-economic reform and monetary policy to the Bretton Woods Institutions, acting on behalf of Wall Street.
The bailout agreement will include the imposition of drastic austerity measures which in all likelihood will trigger further social chaos and economic dislocation. It’s called “policy based lending”, namely the granting of money earmarked to reimburse the creditors, in exchange for the IMF’s “bitter economic medicine” in the form of a menu of neoliberal policy reforms. “Short-term pain for long term gain” is the motto of the Washington based Bretton Woods institutions.
Loan “conditionalities” will be imposed –including drastic austerity measures– -which will serve to impoverish the Ukrainian population beyond bounds in a country which has been under IMF ministrations for more than 20 years. While the Maidan movement was manipulated, tens of thousands of people protested they wanted a new life, because their standard of living had collapsed as a result of the neoliberal policies applied by successive governments, including that of president Yanukovych. Little did they realize that the protest movement supported by Wall Street, the US State Department and the National Endowment for Democracy (NED) was meant to usher in a new phase of economic and social destruction.
History of IMF Ministrations in Ukraine
In 1994 under the presidency of Leonid Kuchma, an IMF package was imposed on Ukraine. Viktor Yushchenko –who later became president following the 2004 Colored Revolution– had been appointed head of the newly-formed National Bank of Ukraine (NBU). Yushchenko was praised by the Western financial media as a “daring reformer”; he was among the main architects of the IMF’s 1994 reforms which served to destabilize Ukraine’s national economy. When he ran in the 2004 elections against Yanukovych, he was supported by various foundations including the National Endowment for Democracy (NED). He was Wall Street’s preferred candidate.
Ukraines’ 1994 IMF package was finalized behind closed doors at the Madrid 50 years anniversary Summit of the Bretton Woods institutions. It required the Ukrainian government to abandon State controls over the exchange rate leading to an massive collapse of the currency. Yushchenko played a key role in negotiating and implementing the 1994 agreement as well as creating a new Ukrainian national currency, which resulted in a dramatic plunge in real wages:.
Yushchenko as Head of the Central Bank was responsible for deregulating the national currency under the October 1994 “shock treatment”:
?The price of bread increased overnight by 300 percent,
?electricity prices by 600 percent,
?public transportation by 900 percent.
?the standard of living tumbled
According to the Ukrainian State Statistics Committee, quoted by the IMF, real wages in 1998 had fallen by more than 75 percent in relation to their 1991 level.(http://www.imf.org/external/pubs/ft /scr/2003/cr03174.pdf )
Ironically, the IMF sponsored program was intended to alleviate inflationary pressures: it consisted in imposing “dollarised” prices on an impoverished population with earnings below ten dollars a month.
Combined with the abrupt hikes in fuel and energy prices, the lifting of subsidies and the freeze on credit contributed to destroying industry (both public and private) and undermining Ukraine’s breadbasket economy.
In November 1994, World Bank negotiators were sent in to examine the overhaul of Ukraine’s agriculture. With trade liberalization (which was part of the economic package), US grain surpluses and “food aid” were dumped on the domestic market, contributing to destabilizing one of the World’s largest and most productive wheat economies, (e.g. comparable to that of the American Mid West). Michel Chossudovsky IMF Sponsored “Democracy” in The Ukraine, Global Research, November 28, 2004, emphasis added)
The IMF-World Bank had destroyed Ukraine’s ‘bread basket”.
By 1998, the deregulation of the grain market, the hikes in the price of fuel and the liberalisation of trade resulted in a decline in the production of grain by 45 percent in relation to its 1986-90 level. The collapse in livestock production, poultry and dairy products was even more dramatic. (See http://www.imf.org/external/pubs/ft/scr/2003/cr03174.pdf). The cumulative decline in GDP resulting from the IMF sponsored reforms was in excess of 60 percent from 1992 to 1995.
The World Bank: Fake Poverty Alleviation
The World Bank has recently acknowledged that Ukraine is a poor country. (World Bank, Ukraine Overview, Washington DC, updated February 17, 2014):
“Evidence shows Ukraine is facing a health crisis, and the country needs to make urgent and extensive measures to its health system to reverse the progressive deterioration of citizens’ health. Crude adult death rates in Ukraine are higher than its immediate neighbors, Moldova and Belarus, and among the highest not only in Europe, but also in the world.”
What the report fails to mention is that the Bretton Woods institutions –through a process of economic engineering– played a central role in precipitating the post-Soviet collapse of the Ukrainian economy. The dramatic breakdown of Ukraine’s social programs bears the fingerprints of the IMF-World Bank austerity measures which included the deliberate underfunding and dismantling of the Soviet era health care system.
With regard to agriculture, the World Bank points to Ukraine’s “tremendous agricultural potential” while failing to acknowledge that the Ukraine bread-basket was destroyed as part of a US-IMF-World Bank package. According to the World Bank: “This potential has not been fully exploited due to depressed farm incomes and a lack of modernization within the sector.”
“Depressed farm incomes” are not “the cause” they are the “consequence” of the IMF-World Bank Structural Adjustment Program. In 1994, farm incomes had declined by the order of 80% in relation to 1991, following the October 1994 IMF program engineered by then NUB governor Viktor Yushchenko. Immediately following the 1994 IMF reform package, the World Bank implemented (in 1995) a private sector “seed project” based on “the liberalization of seed pricing, marketing, and trade”. The prices of farm inputs increased dramatically leading to a string of agricultural bankruptcies. Projects : Agricultural Seed Development Project | The World Bank, Washington DC, 1995.
The IMF’s 2014 “Shock and Awe” Economic Bailout
While the conditions prevailing in Ukraine today are markedly different to those applied in the 1990s, it should be understood that the imposition of a new wave of macro-economic reforms (under strict IMF policy conditionalities) will serve to impoverish a population which has already been impoverished.
In other words, the IMF’s 2014 “Shock and Awe” constitutes the “final blow” in a sequence of IMF interventions spreading over a period of more than 20 years, which have contributed to destabilizing the national economy and impoverishing Ukraine’s population. We are not dealing with a Greece Model Austerity Package as some analysts have suggested. The reforms slated for Ukraine will be far more devastating.
Preliminary information suggests that IMF bailout will provide an advance of $2-billion in the form of a grant to be followed by a subsequent loan of $11 billion. The European Investment Bank (EIB) will provide another 2 billion, for a total package of around $15 billion. (See Voice of Russia, March 21, 2014)
Drastic Austerity Measures
The Kiev government has announced that the IMF requires a 20% cut in Ukraine`s national budget, implying drastic cuts in social programs, coupled with reductions in the wages of public employees, privatisation and the sale of state assets. The IMF has also called for a “phase out” of energy subsidies, and the deregulation of the foreign exchange markets. With unmanageable debts, the IMF will also impose the sell off and privatisation of major public assets as well as the takeover of the national banking sector.
The new government pressured by the IMF and World Bank have already announced that old aged pensions are to be curtailed by 50 %. In a timely February 21 release, the World Bank had set the guidelines for old age pension reform in the countries of “Emerging Europe and Central Asia” including Ukraine. In an utterly twisted logic, “Protecting the elderly” is carried out by slashing their pension benefits, according to the World Bank. (World Bank, Significant Pension Reforms Urged in Emerging Europe and Central Asia, Washington Dc, February 21, 2014)
Given the absence of a real government in Kiev, Ukraine’s political handlers in the Ministry of Finance and the NUB will obey the diktats of Wall Street: The IMF structural adjustment loan agreement for Ukraine will be devastating in its social and economic impacts.
Elimination of Subsidies
Pointing to “market distorted energy subsidies”, price deregulation has been a longstanding demand from both IMF-World Bank. The price of energy had been kept relatively low during the Yanukovych government largely as a result of the bilateral agreement with Russia, which provided Ukraine with low cost gas in exchange for Naval base lease in Sebastopol. That agreement is now null and void. It is also worth noting that the government of Crimea has announced that it would take over ownership of all Ukrainian state companies in Crimea, including the Black Sea natural gas fields.
The Kiev interim government has intimated that Ukraine’s retail gas prices would have to rise by 40% “as part of economic reforms needed to unlock loans from the International Monetary Fund”. This announcement fails to address the mechanics of full fledged deregulation which under present circumstances could lead to increases in energy prices in excess of 100 percent.
It is worth recalling, in this regard, that Peru in August 1991 had set the stage for “shock treatment” increases in energy prices when gasoline prices in Lima shot up overnight by 2978% (a 30 fold increase). In 1994 as part of the agreement between the IMF and Leonid Kuchma, the price of electricity flew up over night by 900 percent.
“Enhanced Exchange Rate Flexibility”
One of the central components of IMF intervention is the deregulation of the foreign exchange market. In addition to massive expenditure cuts, the IMF program requires “enhanced exchange rate flexibility” namely the removal of all foreign exchange controls. Ukraine: Staff Report for the 2012 Article IV Consultation, See also http://www.imf.org/external/pubs/ft/scr/2012/cr12315.pdf.
Since the outset of the Maidan protest movement in December 2013, foreign exchange controls were instated with a view to supporting the hyrvnia and stemming the massive outflow of capital.
The IMF sponsored bailout will literally ransack the foreign currency reserves held by the National Bank of Ukraine (NBU). Enhanced exchange rate flexibility under IMF guidance has been endorsed by the new NBU governor Stepan Kubic. Without virtually no forex reserves, exchange rate flexibility is financial suicide: it opens the door to speculative short-selling transactions (modelled on the 1997 Asian crisis) directed against the Ukraine’s currency, the hrynia.
Institutional speculators, which include major Wall Street and European Banks as well as hedge funds have already positioned themselves. Manipulation in the forex markets is undertaken through derivative trade. Major financial institutions will have detailed inside information with regard to Central Bank policies which will enable them to rig the forex market.
Under a flexible exchange rate system, the Central Bank does not impose restrictions on forex transactions. The Central Bank can however decide –under advice from the IMF– to counter the speculative onslaught in the forex market, with a view to maintaining the parity of the Ukrainian hryvnia. Without the use of exchange controls, this line of action requires Ukraine’s central bank (in the absence of forex reserves) to prop up an ailing currency with borrowed money, thereby contributing to exacerbating the debt crisis.
[the graph below indicates a decline of the hryvnia against the US $ of more than 20% over a six months period]
USD- UA Hryvnia Exchange Rate (120 days)
Source themoneyconverter.com
It is worth recalling in this regard that Brazil in November 1998 had received a precautionary bailout loan from the IMF of the order of 40 billion dollars. One of the conditions of the loan agreement, however, was the complete deregulation of the forex market. This loan was intended to assist the Central Banking in maintaining the parity of the Brazilian real. In practice it spearheaded Brazil into a financial crash in February 1999.
The Brazilian government had accepted the conditionalities. Marred by capital flight of the order of 400 million dollars a day, the money granted under the IMF loan –which was intended to prop up Brazil’s central banks reserves– was plundered in a matter of months. The IMF loan agreement to Brasilia enabled the institutional speculators to buy time. Most of the money under the IMF loan was appropriated in the form of speculative gains accruing to major financial institutions.
With regard to Ukraine, enhanced exchange flexibility spells disaster. Contrary to Brazil, the Central Bank has no forex reserves which would enable it to defend its currency. Where would the NBU get the borrowed forex reserves? Most of the funds under the proposed IMF-EU rescue package are already earmarked and could be used to effectively defend the hrynia against “short-selling” speculative attacks in the currency markets. The most likely scenario is that the hrynia will experience a major decline leading to significant hikes in the prices of essential commodities, including food, fuel and transportation.
Were the Central Bank able to use borrowed reserves to prop up the hrynia, this borrowed money would be swiftly reappropriated, handed over to currency speculators on a silver platter. This scenario of propping up the national currency using borrowed forex reserves (i.e. Brazil in 1998-99) would, however, contribute in the short-term to staving off an immediate collapse of the standard.
This procedure provides “extra time” to the speculators, who are busy plundering the Central Bank’s (borrowed) currency reserves. It also enables the interim government to postpone the worst impacts of the IMF’s “enhanced exchange rate flexibility” to a later date.
When the borrowed hard currency reserves of the Central Bank run out –i.e. in the immediate aftermath of the May 25 presidential elections– the value of hrynia will plunge on the forex market, which in turn will trigger a dramatic collapse in the standard of living. Coupled with the demise of bilateral economic relations with Russia pertaining to the supply of natural gas to Ukraine, energy prices are also slated to increase dramatically.
Neoliberalism and neo-Nazi ideology join hands: Repressing the Protest Movement against the IMF
With Svoboda and Right Sector political appointees in charge of national security and the armed forces, a real grassroots protest movement directed against the IMF’s deadly macroeconomic reforms, will in all likelihood be brutally repressed by the Right Sector’s “brown shirts” and the National Guard paramilitary led by Dmitri Yarosh [left image, center with the microphone], on behalf of Wall Street and the Washington consensus. In recent developments, Right Sector Dmitry Yaroch has declared his candidacy in the upcoming presidential elections. (Popular support for the Yaroch is less than 2%).
“Russia put Yarosh on an international wanted list and charged him with inciting terrorism after he urged Chechen terrorist leader Doku Umarov to launch attacks on Russia over the Ukrainian conflict. The ultra-nationalist leader has also threatened to destroy Russian pipelines on Ukrainian territory.” (RT, March 22, 2014)
Meanwhile, Ukraine’s State prosecutor who also belongs to the Neo-Nazi faction, has implemented procedures which prevent the holding of public rallies and protests directed against the interim government.
<<<
>>> From Now On, No Compromises Are Possible For Russia
March 10, 2014
http://www.testosteronepit.com/home/2014/3/10/from-now-on-no-compromises-are-possible-for-russia.html
By Valentin Mândrasescu, Editor of The Voice of Russia’s Reality Check. Former commodity trader, economist, journalist. Nomadic lifestyle. When not in Moscow, he can be found travelling across Eastern Europe.
When, on February 21st, Washington decided to default on the agreement signed between Ukrainian President Viktor Yanukovich and the so-called “democratic opposition,” including Neo-Nazis, it finally crossed the red line.
Washington has defaulted on all of its key agreements made with USSR/Russia during the last 30 years. Gorbachev was promised that Eastern Europe would not be taken into NATO. Country by country, it became part of NATO, and Yugoslavia was dismantled despite Russia’s objections. The US acted as the winner of the Cold War and guided its policies by the famous principle of “Vae victis!” Woe to the vanquished!
The “hawks” in Washington think they can push Russia around indefinitely, that Russia, in order to become an “accepted partner” in the West, would still try to negotiate, be diplomatic and peaceful.
Washington’s defaulting on an explicit agreement regarding Ukraine’s future and the prospect of NATO troops on the ground in Ukraine finally convinced Vladimir Putin and a big part of the Russian elite that there is no point in negotiating with the US. It means that from now on, no compromises are possible.
For America, the situation in Ukraine is a geopolitical game, another opportunity to hurt Russia’s interests. For Russia, it’s not a geopolitical game. It’s a matter of national identity, it’s an ethnic matter. Almost every Russian I know has relatives in Ukraine. Roughly a third of Russian senators and members of the government were born in Ukraine.
Dmitry Yarosh, the leader of the biggest neo-Nazi group in Ukraine, issued a statement in which he called on Russia’s most wanted Chechen terrorist, Doku Umarov, to commit acts of terrorism in Russia. “Many Ukrainians with arms in the hands” had supported Chechen militants in their fight against Russians, the statement said, but “it is time to support Ukraine now.”
What would have happened to a warlord somewhere who called on Al-Qaeda to commit acts of terrorism in the US? He would have been killed by a drone strike without international warrant or court decision. If the US does this, then other countries are entitled to act in a similar manner.
The fact that the neo-Nazi leaders and their soldiers haven’t been disarmed despite the EU-brokered agreement signed on February 21st proves that they and not the “official government” are actually in control of the situation. But the US doesn’t care about the fate of the Russians who don’t want to live in a neo-Nazi-led state. The US wants to dislodge Russia from the region, and nothing else matters.
There are rumors circulating in the expert community in Moscow – and I have strong reasons to believe they’re true – that the decision to tackle the Crimean issue was taken by Putin personally. He has full support from a number of top officials, especially from the army and the secret services, who have no assets and no business abroad that can be seized by the US. Also, in 2013, the Parliament passed a law barring Russian officials from owning assets, except real estate, outside Russia. So, the officials whose assets will be frozen by the US sanctions are criminals under Russian law anyway – and Putin might even welcome the move.
The hard-liners in the Kremlin have received a tremendous boost from the US. Now, everyone who advocates for a softer stance on Ukraine and everyone who advocates for an “agreement with the US” is looked upon as too stupid to understand that Washington won’t honor its end of the bargain or as paid by Washington to lead Russia into another agreement that will once again be broken. America has lost most if not all of its ranking sympathizers or allies in Russia because they are either actively shunned or because they have to be silent.
Putin’s ratings are at two-year highs. Even his fiercest critics understand that his involvement in Ukraine has tremendous popular support. He will no longer have to cater to the needs of the pro-Western community. He is now supported not only by his usual conservative electorate, but also by the communists and nationalists who like his decisive actions and his disregard for America’s objections.
From the economic point of view, everyone should get ready for tough actions from Moscow. Sergei Glazyev, the most hardline of Putin’s advisors, sketched the retaliation strategy: Drop the dollar, sell US Treasuries, encourage Russian companies to default on their dollar-denominated debts, and create an alternative currency system (reference currency) with the BRICS and hydrocarbon producers like Venezuela and Iran.
Of course, some “anonymous sources” told RIA Novosti and Reuters that Glazyev was speaking “as an academic” and not in his official capacity, but it must be pointed out that those sources didn’t dare identify themselves. On the other hand, Glaziev’s projects more often than not become the cornerstone of Putin’s external policy, including the Customs Union and the Eurasian Union.
The Western media ignore another key supporter of hardline economic measures, Putin’s ally and trusted friend, Rosneft president Igor Sechin. At last October’s World Energy Congress in Daegu, South Korea, Sechin suggested that it was “advisable to create an international stock-exchange for the participating countries, where transactions could be registered with the use of regional currencies.”
Until February 21st, Moscow was content with the slow expansion of its economic sphere of influence. Now, the hard-liners have the possibility to go all in and pursue their radical projects and strategies.
Here, in Moscow, almost everyone is certain that we’ll see a rerun of the “Georgian war” and that Crimea will be attacked by Ukrainian army at some point before March 16th. If you’re a trader, sitting on the fence for a week or putting on some hedges may be a very good idea. By Valentin Mândrasescu, exclusive for Testosterone Pit.
The US offered Ukraine $1 billion in aid, the EU $15 billion. The IMF is working on its aid package. All to shift losses from lenders, bondholders, hedge funds... to taxpayers in other countries. But it won’t rescue the economy. Because it’s a cesspool of corruption and plundering oligarchs. Read... Aid for the Ukraine “Will Be Stolen” – Former Ukrainian Minister of Economy
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>>> Emerging Market Currency Devaluation Will Mark End Of Tapering
Feb. 17, 2014
About: VWO, Includes: GDX, GLD
http://seekingalpha.com/article/2026531-emerging-market-currency-devaluation-will-mark-end-of-tapering?source=yahoo
The interesting news these days is all about currency devaluation in the emerging markets. Due to the tapering of the Federal Reserve, we now have an unintended consequence. All of the cheap money supplied by the Federal Reserve that went to the emerging markets is now coming home. Some of the emerging market countries are already feeling this pressure of currency outflows. As a result, they are raising interest rates at a very fast pace which collapses their economies. Although emerging market equities have better valuations than developed market equities, we still see a monthly outflow of $12 billion out of emerging market funds (VWO). All of this money is now flowing back into U.S. bonds and more recently into precious metals.
Here is a summary of all currency devaluations of the emerging markets.
Kazakhstan devalued the currency just recently from a USD to KZT exchange rate of 153 to 185. That's a 20% devaluation in just a few days. Their foreign currency reserves are at record lows of $24.5 billion. Their reserves have been dropping since 2011. This is why Kazakhstan is importing a lot of gold these days to increase its reserves.
Turkey has kind of the same problem as Kazakhstan. Turkey also kept importing gold to raise their reserves and protect itself from currency devaluation. The lira has been devalued by more than 50% since the start of the crisis in 2008.
Venezuela devalued its Bolivar another 30% from 4.3 to 6.3 against the U.S. dollar.
Argentina devalued its peso already since 2009 and it is getting to a critical inflection point where we will see defaults and hyperinflation. The reason for all of this is again a low amount of foreign currency reserves.
Nigeria will be the next to devalue its currency in 2015, as the country's foreign currency reserves are at record lows.
Sudan has already devalued its currency by more than 50% against the U.S. dollar.
Other than these extremes, we see trouble in some other emerging market currencies of countries like Russia. You can easily see on this chart below that since the start of QE in 2009, the ruble strengthened. But since the taper talk in 2013, the ruble started to weaken considerably.
We see exactly the same trend in the Brazilian real.
And in the Indian rupee.
The conclusion is that ever since the Federal Reserve started tapering, all of these emerging market currencies started to witness outflows. There are exceptions like Vietnam which has stronger fundamentals, but the overall trend is down. As a result, these countries are raising interest rates 2 or 3% overnight to curb inflation. But this on itself will crash the economies of these emerging markets. The emerging markets that have the least foreign exchange reserves are particularly vulnerable and should be avoided by investors. Especially when Janet Yellen stays on her course of tapering. But I expect an abrupt end to tapering when the emerging markets continue their decline. Gerald Celente reports that in January 2014 alone, we already saw $3 trillion of global assets being wiped out, and this cannot continue. We will see some kind of stimulus in the middle of this year, and that will be very beneficial to one particular asset: gold.
Inflation in these emerging markets has spurred this particular rising trend in gold. If these people all had gold in their possession, they would benefit greatly from this. They wouldn't be affected by this devaluation. This is why we have seen a surge in the gold price since the end of December 2013. I believe this trend will continue as emerging market countries will need to keep buying gold to protect themselves against currency devaluation. Investors can benefit from this trend by buying gold (GLD) or gold mining shares like the Market Vectors Gold Miners ETF (GDX).
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>>> LyondellBasell Industries N.V., together with its subsidiaries, manufacturers and sells chemicals and polymers; refines crude oil; produces gasoline blending components; and develops and licenses technologies for the production of polymers. The company?s Olefins and Polyolefins segment offers olefins, including ethylene, propylene, and butadiene; polyolefins that comprise polypropylene (PP), high density polyethylene, low density polyethylene, and linear low density polyethylene; aromatics, which include benzene; and specialty polyolefins, such as catalloy process resins, as well as PP compounds and polybutene-1 resins. Its Intermediates and Derivatives segment provides propylene oxide (PO); PO co-products, including styrene monomers, tertiary butyl alcohol, and its derivative isobutylene; PO derivatives, which consists of propylene glycol, propylene glycol ethers, and butanediol; acetyls, such as methanol, acetic acid, and vinyl acetate monomers; and ethylene derivatives, including ethylene oxide, ethylene glycol, ethylene glycol ethers, and ethanol. This segment also provides gasoline blending components, such as methyl tertiary butyl ether and ethyl tertiary butyl ether. The company?s Refining segment offers gasoline and components, ultra low sulfur diesel, jet fuel, lube oils, and alkylate. Its Technology segment develops and licenses chemical, polyolefin, and other process technologies, as well as associated engineering and other services. This segment also develops, manufactures, and sells polyolefin catalysts. LyondellBasell Industries N.V. operates in the Americas, Europe, Asia, and internationally. The company was founded in 2005 and is based in Rotterdam, the Netherlands. <<<
Vipshop -- >>> China's Online Shoppers Loving Vipshop 'Flash Sales'
By MARILYN MUCH
INVESTOR'S BUSINESS DAILY
02/04/2014
http://news.investors.com/020414-688780-vipshop-flash-sales-site-a-hit-in-china-online-shopping.htm?ven=yahoocp&src=aurlled&ven=yahoo
When it comes to feeding the consumer appetite for bargains, China's Vipshop Holdings follows a tried and true recipe that's helped nurture a healthy growth spurt.
Vipshop (VIPS), which started in 2008 and went public in March 2012, is somewhat of a rare breed among retail websites. It sells quality branded apparel, accessories, home goods and other lifestyle products at a 30% to 70% discount to the original retail price using a "flash sales" model. Every morning at 10 Beijing time, it launches new flash sales on a finite quantity of products or services online for a limited time.
To provide shoppers with a greater opportunity to buy featured discounted products, each customer is limited to purchasing two pieces of the same item and each shopping cart can hold only 20 items at one time, except for food products.
As with other popular flash-sale sites, which sell everything from high fashion to hotel rooms, the idea is to create an impulse-driven shopping experience while helping to move excess inventory sourced from a variety of vendors.
As of the end of 2012, Vipshop had an impressive lineup of goods with exclusive rights to sell selective products from more than 700 brands.
Preferred Products
Vipshop features products from more than 5,800 brands, including international labels such as such as Nike (NKE), Disney (DIS), Hanesbrands (HBI) and Lee (owned by VF Corp. (VFC); and domestic brands like Hstyle. Its top three selling brands are Adidas, Nike and Kappa, a domestic sporting goods brand.
Vipshop's approach has played well with customers. In 2012, sales more than tripled to $692 million. It ended that year with close to 27 million registered users.
It has also scored a big hit with investors. Vipshop's stock price has rocketed nearly 450% over the past 12 months to around 100.
Vipshop has been profitable the past five quarters. It earned 26 cents per American Depositary Share (ADS) in the most recent third quarter, up from one cent a year earlier. Sales rocketed 146% to $383.7 million as it saw a 132% rise in active customers to 4 million and a 116% rise in total orders to 11.7 million.
Analysts polled by Thomson Reuters expect full-year 2013 earnings to reach $1.04 per ADS, up from a 4-cent loss in 2012. They see a 107% surge in 2014 and a 59% rise in 2015.
China-based UBS analyst Erica Poon Werkun forecast a 62% revenue compound annual growth rate from 2012 to 2017, driven mainly by growth on active customers, in her January initiation note on Vipshop, which she rates a buy.
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Australia -- >>> Here's where the highest yields are hiding
If you aren't looking beyond US borders, then you're missing out on some of the world's most productive securities.
By Michael Vodicka
http://money.msn.com/top-stocks/post--heres-where-the-highest-yields-are-hiding
I think it's one of the market's biggest missed opportunities. Every day, millions of U.S. investors are missing out on the world's highest-yielding securities.
That's because the vast majority of the world's highest-yields aren't found in the United States.
As the chief strategist of High-Yield International, my job is to scour the globe for the world's highest yielding stocks, funds and ETFs. And at last count, my research shows that over 79% of the world's highest-yielding stocks are based in international markets. (You can read more of my research about these stocks here.)
That includes companies like global shipping giant Navios Maritime Partners (NMM -0.59%), which yields 9.3%. And Bermuda-based outfits like SeaDrill (SDRL -0.31%), which pays an impressive 7.9%. If you're like most people, then you'll probably never take advantage of foreign stocks like these.
That's a shame, because the average stock in the United Kingdom yields 3.8%. Brazil's average yield is 4.4%, Australia yields 4.3% and New Zealand pays 4.5%.
By contrast, stocks here at home yield a paltry 2%, on average.
Most U.S. investors dismiss the idea of investing abroad. They tend to think other countries are "riskier" than the United States.
But that's not always the case, especially with one special country I'll tell you about in a moment, where average yields are double those found in the United States.
A safer way to invest
In the past couple of years, America's total debt load has topped $17 trillion -- and that burden is projected to grow even larger, reaching a total of $25 trillion by 2020.
Like a taxi meter spinning faster and faster, we are slipping $1.9 billion deeper into the hole every day -- at a rate of $80 million per hour.
Our credit rating was even knocked down from its golden "AAA" status by Standard & Poor's.
Now compare that to a country like Australia. From the mid 1990s through 2007, the Australian government steadily paid down its debts, reducing the nation's debt-to-GDP ratio to less than 10%.
Although Australia took steps to help stimulate its economy amid the financial crisis, the government kept spending under control. As a result, Australia's public debt-to-GDP ratio is still just 29% -- several times lower than the United States' debt ratio.
But what's more, amid all the pain caused by the Great Recession, Australia has truly lived up to its nickname the "Lucky Country," avoiding recession entirely and emerging from the global downturn largely unscathed.
Throughout the entire economic slowdown, Australia's GDP only experienced a single quarter of negative economic growth, and that was at the height of the financial crisis in 2009. The country's growth quickly re-accelerated to a 3% clip in 2010.
That's part of the reason Australia is one of only eight countries that still sports a perfect "AAA" credit rating by all the major ratings agencies.
Yields that are 2X higher than U.S. stocks
But Australia is much more than just a safe place for your money. The country also offers some of the highest yields on the planet.
The average dividend yield of all stocks on the Australian Stock Exchange stands at 4.3%, more than double the 2% average yield offered by stocks in the S&P 500.
Take Telstra (TLSYY +0.30%), Australia's equivalent to AT&T (T -1.34%). The telecom offers phone and Internet service around the country.
You'd expect a telecom to pay a substantial dividend. AT&T pays a yield of 5.2%, making it one of the S&P's highest-yielding stocks.
But Telstra pays a yield of roughly 5.8%.
It's the same story with APA Group (APAJF 0.00%). This company is the largest natural gas infrastructure firm in Australia, owning more than 10,000 kilometers of natural gas pipelines, two major natural gas storage facilities and two power plants.
If that business sounds familiar, it's basically the same as a master-limited partnership (MLP) here in the United States. MLPs are known for their high-yields. The largest U.S.-based MLP, Enterprise Products Partners (EPD +0.37%), yields 4.2%.
APA Group? It pays more than 6.6%, working in basically the same business.
But Australia is by no means the only country that offers fat dividend yields like these. The fact of the matter is there is simply a much stronger dividend culture abroad. Individual investors play a larger role in those markets, and they have always demanded more dividends.
Don't get me wrong, I don't recommend putting your entire portfolio into international high-yielders. But I think most U.S. investors are unaware of what they're missing. Put simply, if you want to earn the most income possible, then you have to start considering international income stocks.
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>>> Petrobras Sells Peru Unit to PetroChina
By Eric Volkman
November 13, 2013
http://www.fool.com/investing/general/2013/11/13/petrobras-sells-peru-unit-to-petrochina.aspx
Brazilian oil major Petrobras (NYSE: PBR ) is set to be a bit less sprawling following a deal it's struck to divest of one of its South American assets. The company has agreed to sell 100% of its subsidiary Petrobras Energia Peru to units of PetroChina (NYSE: PTR ) , both companies announced in separate press releases. The price is roughly $2.6 billion.
The assets under the wing of Petrobras Energia Peru comprise stakes in three blocks. The first is a 100% holding in a mature play that saw production of 16,000 barrels of oil equivalent per day in 2012. The second is a 46% interest in a pre-operational natural gas and condensate field, and the last in a 100% stake in an exploratory block. According to Petrobras, "significant" natural gas and condensate discoveries have been made there.
The consummation of the sale is subject to certain conditions, as well as approvals from the relevant regulatory bodies.
For Petrobras, the deal is part of a broader attempt at rationalizing its operations. So far this year, it is estimated that the company has sold around $7.4 billion worth of assets.
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>>> China Prepares Big Bang Financial Reforms
Sep 26 2013
http://seekingalpha.com/article/1714992-china-prepares-big-bang-financial-reforms?source=yahoo
•The nub of the problem
•What China proposes to do about it
•What's missing?
•Relevant precedents
•Risks involved
There's growing speculation that China will soon undertake substantial reforms to its financial system to address growing risks from escalating debt. First, the central government will take over some local government spending functions, such as social security and part of healthcare. Second, it'll allow local governments to issue bonds to replace the so-called local government financing vehicles (LGFVs). The changes are expected to be announced at a key meeting of Communist Party leaders in November.
If true, they'll represent the biggest reforms in China since 1998. They'll have enormous ramifications, including: i) the intention of reducing risks in the financial system but whether it does so remains to be seen ii) it'll slow bank loan growth, which was due to slow anyway iii) most importantly, it'll reduce infrastructure spending and put further pressure on commodity inputs which principally rely on Chinese demand (such as steel, copper, aluminium and iron ore).
The overall aim will be to cut corporate and local government debt, while also reducing investment. The problem is that other parts of the economy will need to pick up the slack if GDP is to stabilise at current levels. Namely, central government spending and household consumption. Also, China will need currency depreciation for exports to cushion the adjustment from corporate deleveraging. That's why you can probably expect cuts in interest rates and currency depreciation in the not-too-distant future. Without these two things, there'll be greater short-term economic pain than the new leadership would like.
Today's post will look at the likely policy changes in detail because they'll have a huge impact not only on China, but on Asia as well as developed world. We'll also investigate some of the risks involved with the proposed reforms.
The nub of the problem
To understand why China may announce these significant reforms over the next few months, it's important to recognise some of the serious issues that the country faces.
Put crudely, and as is widely reported, China has a debt problem. But those who compare this debt issue to the U.S. subprime crisis - a very common comparison - don't know what they're talking about. For whereas the U.S. problems originated form excessive household debt, China's debt problems are at the local government and particularly corporate sector levels. Household leverage remains low while central government leverage is also reasonable.
China's debt issues are more similar to those of Japan in 1990 and South Korea in 1997-1998. Both of these countries also had serious corporate indebtedness. One succeeded in addressing the problems quickly (South Korea) while the other didn't (Japan).
There are other differences between the Chinese issues of today and those of the U.S. pre-crisis. Chinese debt exploded from 2009 due to a 4 trillion yuan stimulus package designed to prevent the country from sliding into a recession/depression as much of the developed world did at that time.
The stimulus was principally debt-funded. State-owned banks lent money to state-owned companies (SOEs) which were deemed less risky than privately-owned businesses. Also, local governments financed public infrastructure works via off- balance sheet borrowing (LGFVs).
As you can imagine, the spending wasn't very productive and led to overcapacity in numerous sectors. The situation was made worse by:
1) The government keeping rates too low for far too long.
2) The explosion in lending to the so-called less risky SOEs turned out to be a serious mistake. It turned out many of them were risky, particularly when they earned negative returns on their investments. More significantly, it crowded out lending to small businesses, which led to significant strains in this sector.
3) A lack of proper funding channels for local governments. Local governments can't issue bonds. This means they relied on off-balance sheet vehicles, offering higher rates, to fund long-term infrastructure projects.
4) Financial innovation via wealth products became the go-to for loans to small business. These products had zero transparency and made financial guarantees which were subsequently shown to be highly dubious.
Because of all this, China now has a debt issue. Ratings agency Fitch puts total credit to GDP at almost 220%. More importantly, credit now accounts for more than a third of GDP. That means the economy is heavily reliant on increasing credit for GDP to remain at current levels.
Where China does bear similarity to the U.S. and other countries who've experienced financial distress is with its rapid accumulation of debt. Credit to GDP will have risen by almost 90 percentage points for the five years ending 2013, nearly twice that of other countries prior to financial crises.
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>>> Prince Charles, heir to Dracula's blood line
http://www.telegraph.co.uk/news/uknews/prince-charles/9656769/Prince-Charles-heir-to-Draculas-blood-line.html
The Romanian tourist board is to use links between the British Royal family and Count Dracula to lure in UK tourists, it has emerged.
By Victoria Ward and Andrew Hough
Nov 2012
Until now its lonely mountains have been synonymous with the legend of the vampire, the cruel ruler who drank his victims’ blood, terrified his enemies and could turn into a bat at will.
But Transylvania should also be known as the ancestral home of the Prince of Wales, defender of faiths, with a love of gardening and classical architecture, according to the Romanian National Tourist Office.
Links between the Royal Family and Vlad the Impaler, the 15th century nobleman whose deeds inspired the vampire legend, are being exploited in an attempt to lure tourists to the eastern European country.
Vlad the Impaler (Getty)
The Romanian National Tourist Office is trumpeting the lineage in a brochure distributed at the World Travel Market, a leading industry event which opened in London on Monday.
Related Articles
Transylvanian manager of Prince Charles' homes defends Romania
The Prince himself appears in a video being used to promote the country in which he claims distant kinship with Vlad Tepes, the 15th–century Wallachian ruler on whom the Irish novelist Bram Stoker based his Dracula.
“Transylvania is in my blood,” he jokes in an interview first shown on satelite television last year. “The genealogy shows I am descended from Vlad the Impaler, so I do have a bit of a stake in the country.”
The Romanian National Tourist Office is using the video on Youtube and new brochures try and boost UK visitors by more than seven per cent.
The Prince visits Viscri, Transylvania, back in 2006 (Rex)
The video climaxes with a reference to the Prince of Wales, “who can trace his ancestry back to Romania’s dark and distant past”.
Other literature highlights a short visit by Prince Harry to the country in Easter this year, saying he travelled with Wizz Air, which operates 20 flights a week to four Romanian cities from London Luton Airport.
A spokesman for the Romanian National Tourist Office said the country, which incorporates the region of Transylvania, was looking to use these links with the British Royal Family to increase UK tourists over the coming years.
Maria Iordache, UK director of the organisation, said 118,000 UK tourists visited Romania in 2011.
“It will be more in 2012. We have experienced a 7 per cent increase in UK visitors in the first quarter, which is traditionally a quiet period for tourists from the UK. For the summer and the autumn the percentage increase will be even better.”
According to Royal Highness, a book published in 1982 by Sir Iain Moncreiffe, the former chairman of Debrett’s, the Prince is a great grandson 16 times removed to Vlad III.
He can trace his lineage back through his great grandmother Queen Mary, the consort of George V, to Vlad IV, the half brother of the notorious ruler.
Another link to the country originated with Princess Marie of Edinburgh, a granddaughter of Queen Victoria and Prince Albert, who went on to marry King Ferdinand 1 of Romania and ruled Romania after the First World War.
It has been claimed that porphyria, an iron deficiency which is thought to lie behind the vampire myth, has run in the Royal Family.
The Prince has made no secret of his love for Romania and is believed to travel there frequently.
In 2006, he purchased a farmhouse in Viscri, a village in rural Transylvania, which is available as a guest house at certain times of the year.
The Prince's farmhouse in Viscri
The prince is patron of the Mihai Eminescu Trust, which works to restore the cultural heritage, economy and nature of Transylvania’s Saxon villages and their surroundings.
In addition to restoring some 180 medieval houses and several churches, the charity has supported traditional rural technologies such as the construction of wood-fired kilns for handmade bricks and tiles, and organic farming.
Transylvanian-born Vlad the Impaler is said to have dispatched more than 100,000 Turkish warriors in battle.
The vampire legend is said to have been inspired by his predilection for eating bread dipped in his victim’s blood. Dracula means “son of the devil” in Romanian.
The country’s alleged links to British royalty, however ghoulish, could prove a welcome boost to its tourist industry.
Thousands of tourists visit the town of Castle Bran, Transylvania, where Vlad III lived, every year.
Castle Bran, Transylvania (Alamy)
Simon Press, from World Travel Market which hosted the exhibition, said: ““Romania has a great deal of tourism potential. It is a beautiful country already receiving many tourists for its nature and culture.
“The link to the British Royal Family and the clear fondness the Royal Family has for the country will only help to promote the country across the Commonwealth and particularly in the UK.”
THE LINK TO AN IMPALER
Vlad the Impaler. Died 1507.
- Half brother of:
Vlad IV, known as Vlad the Monk. (1431 - 1495)
-Father of:
Radu IV Prince of Wallachia from (1495 – 1508)
- Father of:
Mircea the Shepherd. Prince of Wallachia. (1479 - 1560).
- Father of:
Princess Stanca Basarab of Wallachia. (1518 - 1601).
-Mother of:
Zamphira Logofat de Szazsebes. (Died 1602).
- Mother of:
Adam Racz de Galgo. (Living 1609).
- Father of:
Peter Racz de Galgo. (1583-1672).
- Father of:
Christina Racz de Galgo.
- Mother of:
Catherine (Katalin) Kuun de Osdola.
- Mother of:
Ágnes Kendeffy de Malmoviz (born 1727).
- Mother of:
Baron Gregor, Inczédy de Nagy-Várad (died 1816).
- Father of:
Baroness Ágnes Inczédy de Nagy-Várad (1788-1856).
- Mother of:
Countess Claudine Rhédey von Kis-Rhéde (1812-1841).
- Mother of:
Francis, Duke of Teck. (1837–1900).
- Father of:
Princess Mary of Teck, later the Queen consort of King George V (1867-1953).
- Mother of:
George VI (1895 –1952).
- Father of:
Queen Elizabeth II (1926).
- Mother of:
Prince Charles (1948)
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Novozymes -- >>> Novozymes cites more efficient ethanol production, Danish firm Novozymes says its new enzyme helps produce more fuel from less corn
Associated Press
Nov 5, 2012
http://finance.yahoo.com/news/novozymes-cites-more-efficient-ethanol-144652943.html
BLAIR, Neb. (AP) -- Danish biofuel firm Novozymes says it has developed a new enzyme that will help ethanol producers make more fuel while using less corn.
Novozymes, which has a major enzyme plant in Blair, says its Avantec enzyme makes corn ethanol production 2.5 percent more efficient.
Novozymes officials say the development should help ethanol producers at a time when corn prices are high and profit margins remain narrow.
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Beyond the BRICS -- >>> 5 strong stocks from stealth markets
4/25/2013
By Jim Jubak
http://money.msn.com/investing/5-strong-stocks-from-stealth-markets?page=2
The once-hot markets known as the BRICS -- Brazil, Russia, India, China and South Africa -- are cooling off. So you'll find the best plays in economies just starting to emerge.
Whatever happened to the BRICS? Remember them?
The stock markets of Brazil, Russia, India, China and South Africa were supposed to leave the rest of the world in the dust. The BRICS were the best new idea since hand-pulled noodles.
Lagging performance is what happened.
In 2012, the U.S. Standard & Poor's 500 Index ($INX -0.31%) returned 16%. Year to date, as of April 24, the return was 10.61%. The five-year average annual return was 5.05%
And for the BRICS? (For the purposes of these numbers, I'm using iShares MSCI BRIC Index (BKF -0.56%, news), which tracks four of these countries but not South Africa.) The return in 2012 was 15.2%, and the year-to-date return in 2013 is a loss of 4.87%. For five years, the average annual return was a loss of 5.75%.
Is China's boom over?
Who needs an asset class that underperforms and that is also thought to come with greater risk than developed markets like the U.S.? It's no wonder investors have turned away.
But I don't think this is the time to throw out the emerging-market baby with the BRICS bathwater. Here's why.
Even better than emerging markets
A funny thing (that's funny peculiar, not funny ha-ha) has been going on while the BRIC stocks have been underperforming the U.S. market. Other emerging markets -- a group without a catchy name but that I'll call the emerging-emerging markets -- has been outperforming both the BRICS and the U.S. markets.
Take a look at these numbers.
The iShares MSCI Turkey index ETF (TUR +0.17%, news) was up 65.63% in 2012 and is up 6.68% year to date. The five-year average annual return has been 8.84%.
The iShares MSCI Mexico index ETF (EWW -0.93%, news) was up 32.84% in 2012 and is up 5.76% year to date. The five-year average annual return has been 5.05%.
The iShares MSCI Indonesia index ETF (EIDO -1.17%, news) was up 4.55% in 2012 and is up 15.14% year to date. The five-year average annual return has been -- well, the ETF hasn't been in business that long.
The iShares MSCI Philippines index ETF (EPHE -0.02%, news) was up 47.93% in 2012 and is up 19.07% year to date. There's no five-year track record for this ETF, either.
What's going on? And what should you as an investor do about it?
What's going on is remarkably easy to explain.
Jim Jubak
.
Hitting a BRIC wall
First, economic growth rates in the BRIC countries, while high by developed-economy standards, have been trending downward.
India's gross domestic product is projected to have grown by just 5% in the fiscal year that ended on March 31. That would be the slowest growth in a decade. In Russia, GDP growth fell to an annual 0.1% in February, below even the 0.9% year-over-year growth in January and February. Brazil's growth rate slowed from 7.5% in 2010 to 0.9% in 2012, and the consensus is for 3% growth in 2013. China shows the highest GDP growth in the group, but even there, growth looks like it will slow for 2013 from the 7.8% recorded in 2012. And 2012's growth was the slowest in 13 years.
Second, the BRIC countries seem to have hit tough economic barriers that suggest growth will stay at these levels for a while and might even drop lower. In the case of China and Brazil, the barrier is something economists call the middle-income trap.
This trap sets in when a country that has used cheap labor to fuel development based on low-priced exports finds that its living standards have improved so much (and its supply of cheap, usually rural labor has dried up) that it is no longer the low-cost export platform in a range of core industries. At that point, a country can get stuck in place or after wrenching change -- as in South Korea and Japan -- break out of that trap.
China faces that transition now. Brazil's problem is similar, but has the added wrinkles of a heavily commodity-dependent economy and a grossly inefficient public sector.
Russia seems now to be confronting its overreliance on energy exports to prop up an inefficient economy. With oil prices below the levels that the government needs to balance its budget and subsidize services and consumer goods, the economy seems headed for a crisis.
India? Well, what can we say about India? The infrastructure is shoddy, the school system produces too many graduates who aren't ready for work, and endless rules keep foreign investment to a minimum. Only India's stifling bureaucracy is truly world-class.
Third, the financial ratings of these countries are headed in the wrong direction. China's credit rating was cut to A+ from AA- by Fitch Ratings in early April. In March, Moody's affirmed Russia's Baaa1 credit rating, the third-lowest investment grade rating, but no credit company has upgraded Russia in five years. Rumors say that the ratings companies are about to downgrade Brazil. Moody's gives India a Baa3 rating, the lowest investment grade, and that company is the only one of the Big Three ratings companies to give India a stable rating.
Where the growth will be
Now contrast this picture with the story at the emerging-emerging economies. It's not so much that growth in these countries is stronger than among the BRIC economies, but that there's good reason to believe that the trajectory is higher rather than lower.
Indonesia's growth slowed to 6.23% in 2012 from 6.5% in 2011. Growth in the core consumer sector remained a strong 5.75%. And the country's central bank has plenty of room to cut interest rates if it needs to prop up growth with its benchmark rate at a historic low of 5.75%.
Mexico is a direct beneficiary of the strength of the U.S. economy because the country has been picking up manufacturing business from China on cost and proximity to the U.S. market. The World Bank projects growth to drop to 3.5% in 2013, from 3.9% in 2012, but then to recover in 2014 with help from U.S. growth and reforms that will open up Mexico's oil and media sectors to new competition.
The financial direction of these countries is exactly the opposite of that of the BRICS. In the same week that Fitch downgraded China, Standard & Poor's upgraded Colombia to its lowest investment grade, BBB. In March, Standard & Poor's revised its credit outlook on Mexico, suggesting that the country could get an upgrade from its current BBB rating in the next few months. And also in March, Standard & Poor's upgraded Turkey to BB+ from BB, leaving the country one step below investment grade.
In absolute terms, countries like Mexico and Turkey and Colombia may not have stronger economies than those of Brazil or China, (and they're certainly not as big). But in relative terms they are on an upswing while the BRIC countries seem like they've run head-on into problems.
Making the moves
So what do you do as an investor?
First, I think you need to recognize that this sentiment -- BRICs no, emerging-emerging yes -- won't last forever. All it really needs to turn around is better news from China that would revive dreams of more robust commodity growth. That would give a huge boost to China, Brazil, and Russia at the least.
Second, however, you need to recognize that, at the moment, sentiment is running very strongly toward emerging-emerging markets over the BRICS. A recent survey by The Economist of 700 investors and executives gave first place among markets likely to offer the best returns in the next year to the United States. China, last year's top pick, dropped to No. 2. Russia took a big tumble to rank behind Japan. Southeast Asian economies as a group took over the No. 3 slot from Brazil. Brazil's percentage ranking in the survey fell to 31% in 2013 from 35% in 2013. India's tumbled to 31% from 48%. Latin America's moved up to 21% from 19%.
You should also note that a large percentage of respondents to the survey worried that emerging-emerging markets were getting overheated.
Third, because that fear of overheating is real and because a slowdown in China will lead to a slowdown in export sectors in all global economies, I'd stick with domestically oriented companies in BRIC and emerging-emerging markets.
That makes your stock-picking task harder, since most of the BRIC and emerging-emerging market stocks we're familiar with are large exporters such as Brazil's iron ore giant Vale (VALE). So you have to do some deep digging to come up with domestic emerging-emerging market stocks that you have any shot at buying in New York as ADRs (American Depositary Receipts) that trade with reasonable volume.
5 to run with
Let me give you five: four you can buy in New York and one that trades only in local markets, but that I think you'll be able to buy it through the international desk at most brokers.
From Mexico I'd suggest Grupo Televisa (TV), which looks like it has dodged the worst damage in the proposed reform of Mexico's very concentrated media sector.
From Panama, but actually from all of Latin America, I'd suggest Copa (CPA), an airline that flies throughout Central and Latin America and to the United States via a sharing agreement with United Airlines, a subsidiary United Continental Holdings (UAL).
From Japan, but actually from all over Southeast Asia, I'd suggest Seven & I (SVNDF). The owner of the global 7-Eleven empire, the company has 46,600 stores worldwide, but only 15,600 of those are in Japan. The company also operates 1,351 stores in Mexico, 6.296 in Thailand, 1,328 in Malaysia, 689 in the Philippines, 57 in Indonesia, and 561 in Singapore. (Note that it trades with better volume in Japan as 3382.JP.)
From Singapore, I'd suggest Singapore Telecommunications (SGAPY). Singapore is in the midst of a huge build-out of its high speed network and that means lots of new traffic even for incumbents such as Singapore Telecommunications. The stock does yield almost 3.7% (and Singapore does not have a withholding tax on dividends for overseas investors).
And finally from Singapore, but really for all of Southeast Asia, I'd suggest the Singapore Stock Exchange, trading there as SGX.SP. Singapore is going to win a share of financial traffic that will move from New York, London and Tokyo in the next decades. And the city-state does have some significant advantages over Shanghai and Hong Kong that will make this a viable alternative market.
These five picks certainly don't exhaust the emerging-emerging universe. But they should be enough to get you started and suggest directions for your own research.
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Canadian National Railway -- >>> Railroads Cash in by Picking up Pipeline's Slack
By Aimee Duffy
November 14, 2012
http://www.fool.com/investing/general/2012/11/14/railroads-cash-in-by-picking-up-pipelines-slack.aspx
Two years ago, Canadian National Railway (NYSE: CNI ) was shipping approximately zero railcars full of oil or petroleum products. Those days are long gone, however, and through the first nine months of this year, petroleum and chemicals shipments accounted for 16% of the company's revenue. It's quite the turnaround, and highlights just how important oil has become to railroads.
Riding the rails
Over the last year, oil has made itself at home on North American freight trains, and crude shipments have increased by about 360,000 barrels per day. According to the Association of American Railroads, petroleum and petroleum product shipments reached 20,906 carloads in October, a 54.5% increase year over year.
Canadian National isn't the only winner, obviously. American railroad giant Union Pacific (NYSE: UNP ) is doing its part, too. The company experienced a 15% pop in third-quarter earnings because of price increases and an uptick in shipments of petroleum products and automobiles.
Union Pacific is happily experiencing the effects of America's oil and gas boom from all angles, shipping necessary materials to drilling sites, and then turning around and carting oil back out to markets. The company's petroleum products shipments increased 95% in the third quarter.
Oil wins, too
As it turns out, railroads are just as important to oil as oil has become to railroads. Producers would be struggling big time if it wasn't for access to railcars and terminals. Though millions of miles of pipeline crisscross our nation, they are highly concentrated in regions that have historically generated much of this nation's oil production. There are not, for example, pipelines all over North Dakota in the same way that they are all over Texas. What North Dakota does have, however, are railroads.
Continental Resources (NYSE: CLR ) , the largest leaseholder in North Dakota's Bakken Shale, is shipping 65% of its oil out of the play via rail. That's over 40,000 barrels per day! Without question, Continental has been saved by rail in the short term. The company's CFO, John Hart, credits rail for solving the immediate needs of oil producers in the Bakken by allowing them to reach previously unreachable markets on the West and East Coasts, but maintains that there is still a need for pipelines in the region.
Few would argue that point, as oil production in the Bakken is expected to climb from over 600,000 barrels per day right now, to potentially more than 1.5-million barrels per day in the coming years. Current pipeline capacity in the region is tight, and while additional capacity is expected to come online between the end of this year and next, it is not ready yet, and rail is expected to be a meaningful alternative in the near-term.
Fear of commitment
There is a chance that rail will continue to be the transport of choice among some oil producers even if pipeline capacity ramps up in the Bakken. During a conference call regarding its third-quarter earnings, Plains All American (NYSE: PAA ) CEO Greg Armstrong agreed that the preferred method of oil transport is via pipeline, but he also raised a valid point about the benefits of shipping via rail cars.
The economics of the Bakken, combined with its distance from markets, make producers wary of signing 10-year shipping contracts with pipeline companies; bearing in mind it takes years to bring pipeline projects to fruition. Therefore railroads, according to Armstrong, will remain crucial to Bakken producers, perhaps more so than the other American oil plays.
After all, transportation via rail does not require long-term commitments. Rail shipments are also able to reach markets faster than pumping crude through a pipeline. Despite higher costs, there is greater flexibility shipping via rail right now, and it is an advantage that may not erode as quickly as some think.
One thing that really stands out about Plains All American is the variety of transportation assets the company possesses. Plains operates not just pipelines, but trucks, trains, and barges as well. The partnership plans to have 6,000 railcars in service by the end of next year, shipping oil and natural gas liquids all over the country. It is definitely a company worth considering given the state of the American energy scene right now.
Foolish takeaway
The growth in American energy production presents a variety of ways for investors to cash in. Obviously producers like Continental Resources benefit, but so do railroads and midstream companies that are positioned to take advantage.
The surge in oil and natural gas production from hydraulic fracturing and horizontal drilling is creating massive bottlenecks in takeaway capacity. However, this problem for producers creates a massive and immensely profitable opportunity for midstream companies. Energy Transfer Partners helps alleviate the gluts in supply with 23,500 miles of transformational pipelines.
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New Oriental Education -- >>> School's Out, And So Are Chinese Education Stocks
Forbes
8/06/2012
http://www.forbes.com/sites/simonmontlake/2012/08/06/schools-out-and-so-are-chinese-education-stocks/?partner=yahoofeed
By now, I’m sure you’ve heard all about the rigors of China’s national sports system that snatches up supple young kids and grinds out Olympic champions. How these young athletes are isolated from their family and pushed to the brink by grim-faced coaches who focus solely on medals, not child welfare. Here’s a typical account from a Chinese gymnastics camp. Actually, this story predates the Beijing Olympics, but could easily run again with a few tweaks (and possibly has). And, while doping allegations against record-breaking swimmer Ye Shiwen are pure speculation at this stage, press coverage of her training regime hits on some familiar themes. The sub-headline in this story by Britain’s Daily Mail hammers it out: ‘How Chinese children are taken away from their families and brutalized into future Olympians’.
No doubt, being selected for China’s elite sports academies is the end of a carefree childhood. But non-athletes in China have it equally hard. From grade school onwards, students face intense pressure to succeed in standardized tests that can make or break their academic career. Flunk a test and you don’t get into a good middle or high school. That makes it harder to ace the university entrance exam. Aiming for overseas universities? More tests, more prep. At every step of the way, afterschool and weekend crammer classes await. Most parents dig deep to give their child (usually only one) the best chance at success, which is why education ranks second only to property in discretionary spending in China ($140 billion in 2011).
This should mean rich pickings for China’s for-profit education companies, several of which are listed on U.S. exchanges. Instead, they’re struggling to prop up crumbling share prices. The falls are precipitous: shares in New Oriental Education (EDU) are down 53% since the start of the year, slashing its market cap to $1.7 billion. New Oriental is China’s most famous tutoring school. Its founder Michael Yu was previously worth over $1 billion. Not any more. Over the same period, Ambow Education (AMBO), which coaches both university and grade-school students, has lost 60% of its stock value.
Many Chinese stocks have suffered sell-offs this year as it becomes clear that the economy is slowing down, perhaps more sharply than anticipated. But nobody seems to think that Chinese parents are about to stop paying for afterschool classes. You could argue that education is the last household expense to get the chop if times are tough. What ails these stocks is a lack of confidence in their bookkeeping. U.S. investors are running scared from Chinese stocks seen as tainted by accounting scandals. Last year it was ChinaCast Education, a scandal-ridden tutoring outfit. Now New Oriental and Ambow are in the dock of public opinion, accused of playing fast and loose with their profits (both deny the charges). Investors have begun class-action lawsuits, cheered on by short-sellers like Muddy Waters.
A structural problem also plagues education stocks. New Oriental said recently that it’s being investigated by the S.E.C. over its corporate structure, which has features common to many Chinese companies that listed on Nasdaq since 2000. Known as a V.I.E., it’s a way around China’s restrictions on foreign ownership in sectors like book publishing, online commerce and private education. Many private companies use it to list overseas, but it’s not watertight, says Paul Gillis, a professor of accounting at Peking University who blogs on this and other issues pertinent to investors in Chinese stocks. “It’s workaround to do what is prohibited under Chinese law.”
Which is fine, as long as companies don’t run into trouble and investors don’t expect Chinese courts to enforce proxy shareholder rights. So, right now, investors are spooked by the risk. But they also want exposure to China’s dynamic online economy, which means holding V.I.E.-structured stocks like Baidu and Sina. Gillis says the S.E.C. has pushed for greater disclosure of these structures so that investors understand what they’re buying. What used to be a brief passage in a prospectus now runs to five pages of legalese. Of course, this doesn’t protect investors from cases of outright fraud like ChinaCast. Nor does it solve the puzzle of what to do with illiquid Chinese stocks that are now worth less than their IPO price. Some may get taken private. Or delisted, which is even more embarrassing.
This raises a wider question about China’s transition to market capitalism. Why are entrepreneurs going overseas to raise capital when there’s so much sloshing around at home? The short answer is that China’s stock exchanges can’t keep up with the pace of private enterprise. Regulators operate an informal quota that restricts the number of domestic IPOs. “So many good companies want to list in China. They have the luxury to be selective,” says Xu Dingbo, associate dean at the China Europe International Business School in Beijing. For their part, domestic retail investors are fearful that too many IPOs will drag down the overall market. So they don’t mind when private companies go overseas, trying to get higher valuations by sating foreign demand for Chinese growth stories. Now that pipeline to Nasdaq has run dry. But China’s capital markets aren’t ready to pick up the slack.
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Westport Innovations -- >>> Westport Announces Second Agreement with General Motors for Advanced Engineering Development for Light-Duty Vehicles
Press Release: Westport Innovations Inc
http://finance.yahoo.com/news/westport-announces-second-agreement-general-120000945.html
VANCOUVER, June 27, 2012 /PRNewswire/ - Westport Innovations Inc. (WPT.TO) (WPRT), the global leader in natural gas engines, today announced that it has entered into an additional agreement with General Motors (NYSE:GM/TSX:GMM) for a second advanced technology development program. Westport and GM are now developing two different combustion, controls and emissions approaches to natural gas engines, with the first cooperative technology project being announced in June 2011.
Both GM and Westport will continue to bring their extensive expertise to develop natural gas engine controls, emissions and performance strategies. This new program will optimize advanced natural gas technologies and applications for maximum CO2 reduction and fuel efficiency in light-duty vehicles.
"The expansion of our advanced natural gas technology collaboration with GM provides the potential for greater fuel efficiency and reduced greenhouse gas emissions for the industry and the consumer," said Ian Scott, President of Westport Light Duty. "Our continued growth in light-duty is an important part of Westport's overall commitment to innovative natural gas transportation solutions."
Westport continues to be recognized as an advanced gaseous fuels technology partner to global automotive manufacturers. To support OEM programs that will enable personal and commercial vehicles to run on natural gas, Westport Light Duty has recently established The Michigan Technical Center in Plymouth, and has opened an assembly centre in Louisville, Kentucky.
"We have an abundant, inexpensive, and domestic resource in the United States, and there is great potential for natural gas vehicles to realize better efficiency, environmental benefits, and cost savings," said John Lapetz, Vice President of Westport LD and Managing Director North American Vehicle Programs.
About Westport Innovations Inc.
Westport Innovations Inc. is a leading global supplier of proprietary solutions that allow engines to operate on clean-burning fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen, and renewable natural gas (RNG) fuels such as landfill gas and helps reduce greenhouse gas emissions (GHG). Westport technology offers advanced LNG fueling systems with direct injection natural gas engine technology for heavy-duty vehicles such as highway trucks and off-road applications such as mining and rail. Westport's joint venture with Cummins Inc., Cummins Westport Inc. designs, engineers and markets spark-ignited natural gas engines for North American transportation applications such as trucks and buses. Westport LD division is one of the global leaders for natural gas and liquefied petroleum gas (LPG) fuel in passenger cars, light-duty trucks and industrial applications such as forklifts. To learn more about our business, visit our website or subscribe to our RSS feed at www.westport.com, or follow us on Twitter @WestportDotCom.
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Feihe International -
From the I-Hub 'China Growth Stocks' board -
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=74549477
>>> ADY also not sure if you guys saw this Joe N submitting this article....
preview of my Seeking Alpha article that will be published later today or tomorrow .....
AstroBaby's 890% Growth Sets Feihe Free
Less than four years ago, Feihe International's stock (ADY) was trading above $40.00 and as this once again booming Chinese company celebrates its 50th anniversary, it finds itself trading under $4.00, but rapidly rising off the $2.22 52-week low set back in January.
About this time last year, institutional and retail shareholders in most Chinese stocks decided to throw in the towel and run for cover as "hit-piece" authors and short-sellers were popping up daily in attempting to further drive nerve-riddled investors to sell their Chinese stocks. It was like throwing darts in cashing in on the downside of most Chinese names, no different than those on the long side of the trade throwing darts in 2009. Both sides experienced a "no lose" trade.
Feihe and many other legitimate Chinese companies became a casualty as a result of many other Chinese companies that turned out to be operating many aspects of their business in a fraudulent manner. Carson Block and his firm Muddy Waters along with Alfred Little and Maj Soueidan's GeoInvesting, all quickly rose to fame as notorious short-sellers that sniffed out fraud, which resulted in many halts and subsequent delistings. Several other copy-cats threw up websites in also attempting to cash in on the fear and while they didn't arrive to the party until after midnight, hefty profits were still able to be stuffed into their pockets. If one of these short-sellers even mentioned a company's stock symbol, it was a mad rush for the exits. That's how shaken shareholders reacted and still do today to some degree.
What most onlookers didn't realize or ever catch due to their state of shock is that Alfred Little actually came out on August 19th of last year and disclosed he was actually "long" Feihe http://seekingalpha.com/article/288467-feihe-international-rapidly-improving-balance-sheet-growing-market-share-and-strong-earnings and the stock closed at $6.46 that day, 69% higher than yesterday's $3.82 closing price. Lesson to be learned here regardless of the short term movement is when one of the above named short-sellers with extensive on-the-ground due diligence teams in China tells the market they're going "long" a particular stock in China that's been beaten to a bloody pulp, you'd better pay attention, as enormous future gains are most certainly possible if not probable.
Did Alfred jump in too early ?
Well at the time of Alfred's disclosure last August, the bear camp still believed that Sequoia Capital would be looking to redeem their preferred shares totaling $65 million dollars and most everyone thought there was no way Feihe would be able to repay or roll over this debt, as most doubters thought Feihe would do as most other Chinese companies would do and convert the preferred shares into common shares at $2.00 to $3.00, essentially adding over 100% dilution to existing shareholders. If they tried to pay off the debt from operations it would cause a death spiral to their business resulting in far less money for sales and distribution which would result in far lower sales. Alfred Little was the only one who thought something different would happen. He opined that Feihe would sell assets and not only pay off Sequoia, but would still retain all seven of their production facilities, all by the way GMP compliant and updated over the last few years.
Let's take a look at the story now and see how it played out .....
Well as the saying goes, time will tell and Alfred Little appears to be correct. Feihe not only sold their dairy farms for $131 million dollars, they have repaid Sequoia with the final payment only days away. As of the end of March, Feihe is still owed $77 million dollars from the dairy sale and its total debt consisting of short & long term bank notes should be around $60 million dollars, a far cry from the close to $150 million in debt early last year. In speaking with management, they have clearly stated that capital expenditures will be very low and that most if not all debt should be retired by Q1 of next year. Basically in a year's time, Feihe will transpire from a once BK/Dilution candidate to a debt free company that lowered their share count from 21 million shares to 19 million, all the while increasing their sales as evidenced by their 2nd best quarter ever, quarter ending 12-31-11 with $87 million dollars in revenue.
So why invest in Feihe ?
Well after five confirmed channel checks, all with boots on the ground in China, the one thing that is for certain is that Feihe is a 100% legitimate business operating in China. Two of those checks are by large short sellers, one by an independent research company and two by investor relations personnel, neither working for, nor ever have for Feihe and one worked for Feihe's competitor. Doris Zhang of Feihe's Public Relations Department has made it crystal clear that the company will not be disappointing investors this year as far as guidance is concerned and will tend to low-ball expectations, opposite of the manner in which they disappointed investors last year. Feihe's valuation certainly fits the bill here with net tangible assets after debt conservatively over $9.00 a share and then add in some value for a business doing $300 million in revenues a year. Feihe is certainly worth considerably more than $3.82 a share, especially when you factor in the projected EPS of $1.00 in 2012. Consider their sector peer, Synutra International (SYUT) that currently carries a $330 million dollar market cap. Both Synutra and Feihe are virtually the same size operation, yet Feihe trades with a $70 million dollar market cap and a far better balance sheet. Synutra carries over $200 million in debt and its net tangible assets valuation after debt is $1.54 a share, so either Synutra is vastly overvalued or Feihe is severely undervalued.
Next, I was looking closely at Feihe's business and how they can continue to grow? This was very interesting, as I'm always looking for a catalyst. In my research, I found that Feihe's Super Premium AstroBaby line is gaining real traction with 890% growth in Q4 YOY, not only in their main-stay Tier 2 & 3 cities, but in the Tier 1 cities as well. I also discovered that just after the Chinese New Year ended, Feihe posted 200 new job openings, including sales representatives in multiple regions. This is certainly not the act of a company in dire straits financially and I nearly forgot to mention Feihe's credit facilities. Feihe has a total credit line as of December 31st of $111 million dollars with $31 million dollars used and $80 million dollars in available credit with their interest rates being Tier 1 rates paying 5.8% to a high of 6.2%. From the 10K http://www.sec.gov/Archives/edgar/data/789868/000114420412019060/v305692_10k.htm , Feihe saw their Super Premium infant formula traction translate into a 33% increase in their selling prices, rising from $7.94 per kilo to $10.57 per kilo. The Super Premium AstroBaby line has also conducted clinical trials performed by governmental agencies which have resulted in successful tests and found to be closest to breast milk in terms of babies physical growth and digestive systems.
2012 is the year of the dragon in China, which symbolizes power and wealth and estimates are for a 5% increase in babies born this year. An estimated 16 million plus babies will be born this year, coupled with relaxed government restrictions on the one child policy that allows couples who are both only children to have two kids of their own. In addition, rural couples whose first child is a girl over four years old are allowed a second child. With disposable income rising quickly, Chinese parents have more money to spend on children. Estimates call for the baby food market to double by 2015 according to researcher, Euromonitor International.
Safety is always a concern in China, especially in the dairy industry and here, Feihe has excelled. Feihe is considered a leader in quality and takes great pride having been in business for 50 years and not being involved in any food scandals. The 2008 melamine debacle gave the milk industry a black eye for sure, but for Feihe, who was one of the only companies not tainted in any way, they saw their share price soar to $42.00 a share. Before the Sequoia redemption when you look at the last 6 years of trading, Feihe never traded under $6.50 a share, with the bulk of that time trading above $10.00. I also noticed that over 90% of the trading days witnessed volume less than 100K. While the share price went from $8.50 to the $2's, no high-volume sell-offs took place. Feihe just launched on March 1st, an end to end tracking system designed and put in place by U.S. giant, Cognizant (CTSH), a $22 billion dollar company, so now consumers can track the source of milk powder from beginning to end, ensuring both quality and safety, plus an elimination about worry of counterfeit products. In March, new licenses were needed to be obtained to sell dairy products in China and all facilities had to be compliant and updated, which Feihe easily demonstrated and thus their new licenses were issued. Over 40% of existing dairies have been shut down due to the new regulations and being a highly regulated business, I'm sure even more of the weak players will fold up as China catches up to western standards.
I have an extremely reliable source that tells me Alfred Little is planning to come out with something very positive on Feihe after the last payment to Sequoia has been made at the end of this month. I can guarantee you that if true, many new eyes will be on the stock for sure. There are still plenty of shorts in the stock that I believe are now trying to make their way out as unscathed as possible.
These are the facts, you decide.
Disclosure: I am long ADY
Additional disclosure: While I believe ADY heads to much higher prices from here, I'm a trader and my objective is to trade in and out on the way up, although many times in 2009, Chinese stocks ran away from me on the upside and I was left in the dust. That scenario is certainly possible once again as sentiment changes.
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Shengkai Innovations -- >>> 5 Reasons To Buy Shengkai Innovations
April 16, 2012
by: Markus Aarnio
http://seekingalpha.com/article/500781-5-reasons-to-buy-shengkai-innovations?source=yahoo
Shengkai Innovations (VALV) is primarily engaged in the design, manufacture and sale of ceramic valves, high-tech ceramic materials and the provision of technical consultation and related services. The company's industrial valve products are used by companies in the electric power, petrochemical and chemical, metallurgy and other industries as high-performance, more durable alternatives to traditional metal valves.
I see at least 5 reasons to buy the stock currently.
1. The stock trades at almost one quarter of its cash balance
The company has currently 16.7 million shares. As of December 31, 2011, the company had cash and cash equivalents of approximately $69.0 million ($4.13 per share). The company has no short-term or long-term debts.
2. The company is expecting to be cash flow positive
The company stated at their quarterly report published at February 9th 2012.
We expect the company to continue to run with positive but significantly reduced cash flow from operations.
I see this as a positive sign because this shows that the company has a high priority of preserving cash although they are forecasting significantly lower revenues.
3. Demand for industrial valves will expand
The demand for industrial valves will expand from its present level of just under $50 billion/yr to over $100 billion/yr by 2030. The main driver will be the energy needs of the developing countries.
4. The stock is currently trading near its 52 week low
The company's 52 week high is $7.70 and the low is $1.04. The stock is currently trading at $1.13.
5. The trading volume has increased substantially during the last 6 trading days
The total trading volume during the last 6 trading days has been well over 10 million shares. The company only has 16.7 million shares outstanding. The CEO owns currently 49.44% of the shares.
Conclusion
The stock has had a very wide trading range of $1.10 - $2.04 during the last 5 trading days. The last time the stock had this high 6 day trading volume was in the summer of 2011. I like the current price ($1.13) as a good entry point for the stock.
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>>> Guanwei Recycling Corp Could Be The Next 3 Bagger
April 9, 2012
by: Dutch Trader
http://seekingalpha.com/article/486631-guanwei-recycling-corp-could-be-the-next-3-bagger?source=yahoo
about: GPRC, includes: CLNT, CREG, HEAT, NFEC, TBET
The last week was an interesting week in U.S.-listed China stocks.
Going private candidate Tibet Pharmaceuticals (TBET) was halted by Nasdaq, because Nasdaq requested additional information. On Friday the firm filed a FORM NT 10-K (notification of late filing) so I expect trading to continue next week.
Another phenomenon was the heavy trading in certain Chinese small caps with some home runs.
Company Ticker
Cleantech Solutions Int. CLNT
SmartHeat HEAT
China Recycling Energy CREG
NF Energy Saving NFEC
We would like to see more, but which stocks could bring us those returns in the short term? I think I know one.
Guanwei Recycling Int. (GPRC)
Heavy trading occurred last Thursday with a high of $1.85. The stock closed at $1.17.
Guanwei Recycling Corp. is China's largest manufacturer of recycled low density polyethylene (LDPE). Adhering to the highest "green" standards, it has generated rapid growth, producing LDPE from plastic waste procured mostly in Europe for sales to more than 300 customers in 10 different industries in China. The company is one of the few plastic recyclers in China that has been audited by German authorities, most recently Umweltagentur Erftstadt, for compliance with German pollution and environmental standards. This allows the company to procure high quality plastic waste directly from Germany and other European countries (Spain and Holland), with no middlemen, and permits highly economic production of the highest grades of LDPE.
With diluted earnings per share of $0.64 for fiscal year 2011, the company has a P/E-ratio below 2. Book value stands at $1.65.
The company just recently got its 10-K behind it and blew away earnings. Another positive note is that an analyst at Global Hunter has a target price of $7 for the company.
I was reading that Global Hunter changed its policy with regards to Chinese stocks, stating it wouldn't cover them unless these companies would agree to be thoroughly checked out by GeoInvesting, China 360 and other firms like that. Many companies wouldn't agree to this, not to mention the extra expenses involved, but GPRC stepped up to the plate and said "no problem." It passed its review with flying colors and Global Hunter covers GPRC.
This stock could hit $3.00 in the short run. Sentiment seems to be improving, especially for U.S.-listed China stocks that have been hit hard. The coming weeks will be crucial and if trading activity resumes high there can be many opportunities for traders and investors. Guanwei Recycling is one of them.
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>>> Chinese Small Caps Red Hot SmartHeat and Guanwei Recycling See Huge Gains
The Paragon Report Provides Stock Research on SmartHeat and Guanwei Recycling
Press Release: Paragon Financial Limited
Apr 12, 2012
http://finance.yahoo.com/news/chinese-small-caps-red-hot-122000119.html
NEW YORK, NY--(Marketwire -04/12/12)- Chinese small cap stocks have been red hot recently. Chinese based companies have been some of the biggest movers in the market recently, with gains for these companies ranging from 20 percent to as high as 180 percent over the past week. The Paragon Report examines the outlook for China's small cap stocks and provides investment research on SmartHeat Inc. (NASDAQ: HEAT - News) and Guanwei Recycling Corp. (NASDAQ: GPRC - News).
Access to the full company reports can be found at:
www.ParagonReport.com/HEAT
www.ParagonReport.com/GPRC
While a few of these companies had their own reasons for the sudden spikes, there has been one common factor. The China Securities Regulatory Commission (CSRC) nearly tripled the quotas for qualified foreign institutional investors to 80 billion Yuan from the previous limit of 30 billion Yuan. This will allow offshore investors to inject an extra $50 billion Yuan ($7.95 billion) into the country.
Although the dollar amount was not a significant sum it was still symbolically important as it appears that China is loosening its grip on their tightly controlled capital markets. The "move is a sign of a push for greater capital account opening," said Dariusz Kowalczyk, a senior economist at Crédit Agricole in Hong Kong. "It is also a step toward attracting more foreign investment."
The Paragon Report provides investors with an excellent first step in their due diligence by providing daily trading ideas, and consolidating the public information available on them. For more investment research on China's small cap stocks register with us free at www.ParagonReport.com and get exclusive access to our numerous stock reports and industry newsletters.
SmartHeat Inc., a market leader in China's clean technology, energy savings industry, announced financial results for the fiscal year ended December 31, 2011. Mainly due to goodwill impairment of $8.96 million taken in Q4 2011, the company experienced an operating loss of $8.82 million in Q42011 compared to an operating loss of $2.54 million in Q3 2011 and a net loss for Q42011 of $9.59 million compared to net loss of $4.0 million for Q3 2011. If not for one-time impairments to goodwill and inventory taken in Q4 2011, their operating loss would have resulted in operating income of approximately $3.77 million in Q4 2011 compared to operating loss of $2.54 million in Q3 2011.
Guanwei Recycling Corp., China's leading clean tech manufacturer of recycled low density polyethylene (LDPE), reported record sales and profits in 2011. Continuing strong domestic demand for the high quality, competitively priced recycled plastic manufactured at its zero discharge facility, also is expected to produce another year of record growth in 2012.
The Paragon Report has not been compensated by any of the above-mentioned publicly traded companies. Paragon Report is compensated by other third party organizations for advertising services. We act as an independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at: http://www.ParagonReport.com/disclaimer
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NetEase -- >>> Top Social Media Stock Picks By Legendary Fund Managers
April 11, 2012
by: Ganaxi Small Cap Movers
includes: GOOG, GRPN, LNKD, NTES, RENN, SINA, TRIP, UNTD, YNDX, Z, ZNGA
http://seekingalpha.com/article/490721-top-social-media-stock-picks-by-legendary-fund-managers?source=yahoo
Legendary fund managers or gurus, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, are well-known for their savvy pickings of winning stocks year after year. Generally, their investment horizon and holding periods stretches into many quarters and years, sometimes even decades. In this article, we examine, based on our research of their latest available Q3 institutional 13-F filings, the social media companies that they are most bullish and bearish about.
Taken together, these guru managers are bullish on the social media group in general, adding a net $1.33 billion in Q4 to their $5.94 billion prior quarter holdings in the group. The following are the social media group companies that guru fund managers are bullish about, and that are also trading at a discount to their peers in the group (see Table):
Google Inc. (GOOG): GOOG is the Internet's premier search engine. Guru funds together added $1.12 billion to their $3.60 billion prior quarter position in Q4, and taken together guru funds hold 2.3% of the outstanding shares. The top guru fund buyer was Chase Coleman's hedge fund Tiger Global Management ($414 million), and the top guru fund holder was Tiger cub Stephen Mandel's hedge fund Lone Pine Capital ($846 million).
GOOG currently trades within striking range of its all-time highs, and at 12-13 forward P/E and 3.5 P/B, a discount compared with averages of 16 and 1.4 for its closest peer Yahoo! Inc. (YHOO), while earnings are projected to grow at a stellar (for a company this size) 18.0% annual rate from $36.06 in 2011, to $50.17 in 2013, compared with the sub-10% annual earnings growth rate for YHOO. The stock has been an excellent long-term performer, up almost six-fold since its IPO in 2004. Given its market leadership, strong growth, and attractive valuation, It is likely that it will continue outperforming the market going forward.
Netease Inc. (NTES): NTES is a Chinese provider of an interactive online gaming community, internet portal and wireless value-added services. Guru funds together added $127 million to their $409 million prior quarter position in Q4, and taken together guru funds hold 7.3% of the outstanding shares. The top guru fund buyer was Tiger cub Stephen Mandel's hedge fund Lone Pine Capital ($61 million), also the top holder at $419 million.
NTES shares are up strongly since it reported a good Q4 in mid-February, beating analyst earnings ($1.09 v/s $1.04) and revenue estimates ($341 million v/s $321 million). Its shares currently trade near all-time highs, at a current 14.2 P/E on a TTM basis, and at 3.6 P/B, compared to averages of 23.4 and 2.1 for its peers in the internet content group.
TripAdvisor Inc. (TRIP): TRIP is an online travel research company, aggregating reviews and opinions of members about destinations and accommodations such as hotels, resorts, restaurants, vacation packages and travel guides. Guru funds together added a new $90 million position in Q4, and taken together guru funds hold 1.9% of the outstanding shares. The top guru fund buyer was Columbia Wanger Asset Management ($50 million).
TRIP was spun-off from online travel services company Expedia in December of last year, when Expedia split into two companies, with the baseline online travel services business remaining under the Expedia name, and the TripAdvisor being spun-off as the only publicly traded, pure-play travel advertising services company. The baseline Expedia business was growing in single-digits, while TripAdvisor growth rates have been above 30% and are expected to continue being high for the foreseeable future - given that the stock is currently attractively priced at 21 forward P/E compared to the average of 26.1 for its peers in the internet content group, and the expected 20%-30% growth going forward.
We wrote about TRIP in February, shortly after it reported a disappointing Q4 that took it down into the mid-$20s, opining that investors may want to look at the pullback as an opportunity to load up on this high growth name at discount prices before growth and prices ramp up again. TRIP prices have since appreciated over 20% in the last two months since that time.
The following are some additional Social Media stocks that guru funds accumulated in Q4 (see Table):
LinkedIn Corp. (LNKD) operates an online professional network via its proprietary social networking platform that enables members to create, manage and share their professional identities online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities, in which guru funds together added a net $135 million in Q4 to their $68 million prior quarter position in the company;
Zynga Inc (ZNGA), that develops, markets and operates online social games such as CityVille, FarmVille, FrontierVille and others, making them available worldwide on various platforms, including Facebook, MySpace and Yahoo, as well as the iPad, iPhone and Android devices, in which guru funds together initiated a new $6 million position in Q4; and
Groupon Inc. (GRPN), a provider of discount deals from local retailers that went public in Q4, in which guru funds together initiated a new $2 million position in Q4;
The following are the social media group companies that guru fund managers are most bearish about (see Table):
Sina Corp. (SINA), a Chinese internet portal offering media content and services for China and global Chinese communities, in which guru funds together cut a net $93 million in Q4 from their $344 million prior quarter position in the company;
Yandex NV (YNDX), a Russian provider of internet search and web content, including news, mail and maps, in which guru funds cut a net $30 million in Q4 from their $1.44 billion prior quarter position;
Renren Inc. (RENN), often called the Facebook of China, a Chinese operator of a social networking platform that enables users to communicate and share information via Renren.com, in which guru funds cut out completely in Q4 their $26 million prior quarter position in the company;
Real estate information marketplace Zillow Inc. (Z), in which guru funds cut out completely in Q4 their $3 million prior quarter position; and
Leading nationwide ISP United Online Inc. (UNTD), that is also a provider of online social networking, in which guru funds cut a net $1 million in Q4 from their $10 million prior quarter position.
General Methodology and Background Information: The latest available institutional 13-F filings of over 85+ legendary or guru hedge fund and mutual fund managers, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, were analyzed to determine their capital allocation from among different industry groupings, and to determine their favorite picks and pans in each group. The hedge fund and mutual fund managers included in this select group include only high profile names who by virtue of their long-term market-beating returns have earned their standing in the investment community and are worthy of our attention. They include well-known names such as those mentioned above, as well as perhaps relatively lesser-known names that also have a stellar long-term history of beating the markets, such as Seth Klarman, John Griffin, Prem Watsa, Robert Karr and Lee Ainslie. Each guru has been carefully selected based on their long-term performance and standing in the investment community. Furthermore, the credentials of most of the 85-odd guru funds that justify their inclusion in this elite group were detailed in our previous articles that can be accessed from our author page
These legendary or guru fund managers number less than one percent of all funds and yet they control over ten percent of the U.S. equity discretionary fund assets. The argument is that institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When high alpha generating or guru Institutional Investors by virtue of their fund performance, low volatility and elite reputation in the investment community, invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence or even go as far as constructing a model diversified portfolio based on the guru funds best picks.
This article is part of a series on institutional holdings in various industry groups and sectors, and other articles in the series for this and prior quarters can be accessed from our author page.
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China -- >>> China's High Flying Micro Caps
April 9, 2012
by: Markos Kaminis
http://seekingalpha.com/article/484991-china-s-high-flying-micro-caps?source=yahoo
includes: CHRM, CREG, HEAT, NFEC, OSN, VALV
Several China-based micro caps took to flight this week. If you followed the biggest movers list, you probably took note of the trend. A slew of micro-cap stocks dominated the list, a good number of them based in China. So with the intensifying concern about China's economy these past few months, can these stocks really keep it up? The answer may be yes, given that there appears to be a common denominator connecting the moves.
Four Chinese micro-cap stocks and one small-cap stock marked moves of over 20% Thursday, and another made a huge two-day move this week before giving back some of its gains Thursday.
Company
Symbol
Market Cap
% Move
NF Energy Saving
Nasdaq: NFEC
12.5 Million
+180% (2 days)
SmartHeat
Nasdaq: HEAT
24.3 Million
+130% (3 days)
China Recycling Energy
Nasdaq: CREG
80.4 Million
+74% (2 days)
Shengkai Innovations
Nasdaq: VALV
25.5 Million
+34% (1 day)
Charm Communications
Nasdaq: CHRM
447 Million
+27% (1 day)
Ossen Innovation
Nasdaq: OSN
27 Million
+22% (1 day)
While a few of the Chinese stock movers this week had their own reasons for rise, there was also one common denominator that seems to be behind the action. I think that much is clear, since some of the companies had no real company specific driver. Also, the businesses of Ossen Innovation (NASDAQ: OSN), Charm Communications (NASDAQ: CHRM), Shengkai Innovations (NASDAQ: VALV), China Recycling Energy (NASDAQ: CREG), SmartHeat (NASDAQ: HEAT) and NF Energy Saving (NASDAQ: NFEC) vary from advertising services, to rare earth metals, to energy savings and industrial products.
The common factor tying them all was China's decision to open up to more foreign investment. Specifically, a few select institutions will be allowed to invest in China's capital markets. The move opens the spigot for $50 billion more in foreign funds (over the $30 billion allowed before) to find the shares of China's micro-cap and small-cap companies suddenly in need of capital.
I expect China is opening up for purely selfish reasons, not because of some new regime openness to the west, as you may have read elsewhere. It's evident in the anecdotal, through simple review of corporate communications. The Chairman of NF Energy Saving stated in a recent news release, "These achievements were despite the difficulties the company encountered in raising additional financing to pursue its expansion and development efforts…" The Chairman and CEO of SmartHeat said, "Our decrease in sales and deliveries in the fiscal year of 2011 compared to the fiscal year of 2010 resulted primarily from a continued slowdown in China's general economy…," which is no secret any longer.
SmartHeat , a proudly self-described "highly profitable clean technology, energy savings company," makes plate heat exchangers. The company also got significant lift from its improved quarterly performance posted this week. The stock was up 130% over 3 days.
NF Energy Saving mapped its way to a 180% gain over two days, marking a 96% gain Thursday alone. The company engages in the "energy technology business" in China, including consulting, engineering and design work. The company also makes energy saving flow control equipment and intelligent flow control equipment.
Each of these companies could benefit from the newly opened capital stream. Of course, the capital will flow smartly into companies where it can add value, like perhaps the two outlined here. So, in this case, it might be wise to follow the money, or the stock performance. Those stocks that the market believed would benefit early probably will, though you will want to apply a little more due diligence before choosing. Unfortunately, I expect that as the days increase since the capital spigot news broke, an increasing number of China-based firms will appreciate on speculation. In the end, the Chinese government may get the spark it sought more broadly than deserved, but over time, the stocks that deserve it will attract the capital and keep it based on performance.
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China -- >>> Steel Companies Bring Out Your Inner John Templeton?
December 27, 2011
by: Emerging Money
includes: CHOP, OSN, SUTR By Jonathan Yates
http://seekingalpha.com/article/316178-do-chinese-steel-companies-bring-out-your-inner-john-templeton?source=yahoo
Sir John Templeton, selected as the stock picker of the century by Money magazine, created his fortune by purchasing U.S. stocks during the Great Depression priced at $1 a share or less. In a four-year period, he posted a return well into the triple digits.
Such a situation now exists with Chinese steel stocks such as China Gerui Advanced Materials Group Ltd (CHOP), Ossen Innovation Co. (OSN) and Sutor Technology Group Limited (SUTR) trading in the low single digits with low single-digit price-to-earnings ratios.
As detailed in a recent article in The Wall Street Journal by John W. Miller, "Steel Prices Shine, Lifting U.S. Makers," the global steel industry is recovering.
The largest steel consumer in the world, as with so other many commodities, is China.
CHOP, OSN and SUTR have fallen along with many other Chinese stocks for a variety of factors, including a perceived slowdown in the country's construction boom.
All three stocks are down substantially for 2011 -- the plunge has been about 90% for Ossen Innovation -- which means there is room for recovery.
Sir John Templeton, as detailed in articles on emergingmoney.com, took a very rational approach to stock picking. Suffering though the American economy was during the Great Depression, he knew it was not going under.
The same could hold true for single-digit Chinese steel companies with low price-to-earnings ratios such as China Gerui Advanced Materials, Ossen Innovation and Sutor Technology.
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Brasil Foods -- >>> Brasil Foods - An Emerging Titan With Hefty Expectations
March 28, 2012
by: Stephen Simpson
about: BRFS, includes: HRL, SFD, TSN
http://seekingalpha.com/article/463721-brasil-foods-an-emerging-titan-with-hefty-expectations
Being a titan always seems to come with strings attached - Atlas had to bear the weight of the world, Prometheus ended up chained to a rock, and Brasil Foods (BRFS) carries the burden of sky-high expectations. While it is indeed a good thing to be the second-largest food company in Brazil and one of the ten largest in the world, Brasil Foods' current valuation practically demands excellence if shareholders are going to see market-beating returns from this point.
Disappointing Q4 Results Highlight A Key Vulnerability
On the whole, Brasil Foods had a pretty mixed fourth quarter. Revenue did rise 11%, but higher production costs and salaries pulled EBTIDA down 4% compared to the prior year.
Revenue broke out as 9% domestic growth and 14% export growth (on 1% volume growth); the former being slightly ahead of most projections, while export revenue missed most projections. Gross margin dropped more than a full point, and a 25% year-on-year increase in labor costs helped push EBTIDA margins down about two points from the prior year.
All in all, Brasil Foods is not suffering from added competition from Marfrig, JBS, or ex-Brazil food rivals like Hormel (HRL) or Nestle (NSRGY.PK) within Brazil. What's hurting Brazil is its export market. Roughly half of the company's export sales (or nearly 20% of overall sales) come from poultry sales in Japan and the Mideast, but sales have slowed here due to high inventory levels. As these sales also carry higher margins, the improvements in domestic margins (up about 40bp year on year) were overshadowed.
Challenging International Environment Will Impact The First Half
It's going to take a few quarters for the inventory levels of poultry in Japan and the Mideast (especially Saudi Arabia and Egypt) to work itself out, so what had been a tailwind will be a headwind for at least a couple of quarters. At the same time, sanctions on Iran and a Russian on again/off again ban on certain Brazilian meat exports aren't helping either and are all but completely out of company management's control.
Brasil Foods isn't just ignoring the long-term ramifications of this problem. Management knows that commodity volatility isn't good for the business and is looking to beef up its overseas processed foods business. Although the company passed on Sara Lee (SLE), there are other options out there and management seems to appreciate the virtues of more exposure to packaged/processed foods (like Hormel) as opposed to commodity protein.
That's not to say that Brasil Foods should expect a free ride. Other major protein producers like Tyson (TSN) and Smithfield (SFD) appreciate the virtues of more packaged/processed sales and they are targeting many of the same growth markets as Brasil Foods (including Latin America and China).
The Question Of Value
As it stands today, it looks like very demanding growth expectations are already built into this stock. After all, this is a food company and it carries a double-digit EBTIDA multiple. In fact, there are not many food companies around the world that look as expensive as Brasil Foods on a trailing basis.
That said, trailing valuation numbers are not the full picture of a company's value. For starters, the company still stands to wring hundreds of millions of dollars of synergies now that its merger has been finalized. Keep in mind, too, that sell-side analysts are still well below management's own guidance; while the company has targeted R$50 billion of revenue in 2015 (along with mid-to-high teens margins), the current sell-side estimate average is below R$37 billion.
That sounds like a bold target, and it clearly is as 2011 revenue was about half that. Still, this is a company that sells relatively little to the U.S., Western Europe, and China - and if the company can meet the notoriously strict standards of Japan, it doesn't seem so outrageous to think that it can penetrate other markets.
Investors should always consider a full range of options, and some Chinese food producers (like Mengniu and China Food) offer pretty attractive stories in their own right. That said, I am disinclined to get out of the Brasil Foods story just yet. I acknowledge that valuation and expectations are running high and that first half growth could be sluggish. I also acknowledge that Brazil is not the most stable of markets. All of that said, I believe this is an excellent management team and a company that could run up the charts in terms of its global ranking as a food company.
With fair value in the low-to-mid $20s, I'm inclined to continue holding Brasil Foods and would suggest buying shares if the stock sold off back into the teens.
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>>> FEMSA Delivers Strong 3Q
By Zacks Equity Research
Oct 31, 2011
http://finance.yahoo.com/news/FEMSA-Delivers-Strong-zacks-314786013.html?x=0&.v=1
Fomento Economico Mexicano S.A.'s (NYSE: FMX - News) third-quarter 2011 net income from continuing operation surged 16.6% to MXN 5,896.0 million ($481.1 million) from MXN 5,057.0 million ($395.0 million) in the year-ago period, primarily resulting from an increase in comparable income from operation, inclusion of 20% economic interest in Heineken Group and favorable currency translations.
Total revenue grew 18.8% year over year to MXN 50,807.0 million ($4,145.9 million). The increase was mainly attributable to revenue growth at Coca-Cola FEMSA and FEMSA Comercio.
Total revenue at Coca-cola FEMSA grew by 18.1% to MXN 30,332.0 ($2,475.1 million) million in the quarter, primarily driven by increased per unit average price and volume growth in Mexico, Columbia and Argentina.
FEMSA Comercio registered a revenue growth of 19.7% to MXN 19,410.0 million ($1,583.9 million), mainly due to the opening of 185 net new stores in the quarter, reaching 1,137 net new stores in the last one-year period coupled with an increase of 9.2% in same-store sales.
FEMSA’s gross profit recorded a growth of 17.8% year over year, while gross margin contracted 30 basis points (bps) to 41.8%. The decline was primarily the result of a raw-material cost pressures at Coca-Cola FEMSA, which partially offsets the gross profit improvement at FEMSA Comercio.
Operating expenses as a percentage of total revenue remains flat year over year at 29.1% primarily due to lower expenses related to selling at Coca-Cola Femsa, fully offset by higher costs at FEMSA Comercio. However, FEMSA posted a 16.0% year-over-year growth in operating income to MXN 6,459.0 million ($527.1 million).
At the end of the third quarter, the company had cash and cash equivalents of MXN 35,386.0 million ($2,944.1 million) compared with MXN 25,842.0 million ($2,031.2 million) in the year-ago period. Long-term debt (including current maturities) at the end of the quarter was MXN 27,650.0 million ($2,300.5 million), reflecting a capitalization ratio of 14.3%.
FEMSA currently retains a Zacks #2 Rank, which translates to a short-term 'Buy' rating. However, we maintain a long-term 'Neutral' recommendation on the stock.
<<<
I-Box List -
Link to the 'Best US Stocks' lists - http://investorshub.advfn.com/boards/board.aspx?board_id=22049
and Additional US stock lists - http://investorshub.advfn.com/boards/board.aspx?board_id=22339
BEST FOREIGN -
**********************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67398569 (Charts)
Ambev (ABV) - Beverages (Brazil)
Brazil Foods (BRFS) - Food products (Brazil)
British American Tobacco (BTI) - Tobacco products (UK)
Canadian National Railway (CNI) - Railroads (Canada)
Coca-Cola Femsa (KOF) - Coca-Cola beverages (Mexico)
Enbridge (ENB) - Oil and gas pipelines (Canada)
Fomex (FMX) - Beverages (Mexico)
Fortis (FRTSF.PK) - Electricity and natural gas utility (Canada)
Nestle (NSRGY.PK) - Food products (Switzerland)
Syngenta (SYT) - Agro chemicals (Switzerland)
TransCanada (TRP) - Oil and gas pipelines, electric power plants (Canada)
AGRO -
**********
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67398715 (Charts)
Agrium (AGU) - Fertilizers (Canada)
Chemical + Mining of Chile (SQM) - Fertilizers, chemicals, lithium (Chile)
Potash of Saskatchewan (POT) - Fertilizers (Canada)
Syngenta (SYT) - Agro chemicals, seeds (Switzerland)
Yari Intl (YARIY.PK) - Agro chemicals (Norway)
BIOPHARMA -
******************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67398777 (Charts)
Novartis (NVS) - Pharmaceuticals, healthcare products (Switzerland)
Novo Nordisk (NVO) - Pharmaceuticals (Denmark)
Prolor (PBTH) - Biotech (Israel)
Roche (RHHBY.PK) - Pharmaceuticals, diagnostics (Switzerland)
Shire (SHPGY) - Pharmaceuticals (UK)
Teva (TEVA) - Pharmaceuticals (Israel)
CONSUMER -
******************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67398837 (Charts)
Ambev (ABV) - Beverages (Brazil)
Brazil Foods (BRFS) - Food products (Brazil)
British American Tobacco (BTI) - Tobacco products (UK)
Coca Cola Femsa (KOF) - Coca Cola brand beverages (Mexico)
Fomex (FMX) - Beverages (Mexico)
Nestle (NSRGY.PK) - Food products (Switzerland)
SABMiller (SBMRF.PK) - Beverages (UK)
ENERGY -
**************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67398920 (Charts)
BG Group (BRGXF.PK) - Natural gas (UK)
Canadian Natural Resources (CNQ) - Oil and gas (Canada)
Core Laboratories (CLB) - Oil and gas services (Netherlands)
Cenovus Energy (CVE) - Oil and gas (Canada)
Encana (ECA) - Oil and gas (Canada)
Enbridge (ENB) - Oil and gas pipelines (Canada)
PetroChina (PTR) - Oil and gas (China)
Petroleo Brasileiro (PBR) - Oil and gas (Brazil
Suncor Energy (SU) - Oil and gas (Canada)
TransCanada (TRP) - Oil and gas pipelines, electric power plants (Canada)
Tullow Oil (TUWLF.PK) - Oila and gas (UK)
FINANCIALS -
*****************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67398987 (Charts)
Ace Limited (ACE) - Insurance (Switzerland)
Arch Capital Group (ACGL) - Insurance (Bermuda)
Bank of Nova Scotia (BNS) - Banking (Canada)
Banco Santander Chile (SAN) - Banking (Chile)
Itau Unibanco (ITUB) - Banking (Brazil)
Royal Bank of Canada (RY) - Banking (Canada)
Toronto Dominion Bank (TD) - Banking (Canada)
INDUSTRIAL -
******************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67535405 (Charts)
Dongfeng Motor (DNFGF.PK) - Automotive manufacturing (China)
Westport Innovations (WPRT) - Alternative fuel engine technologies (Canada)
MINING+ METALS -
*************************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67399069 (Charts)
Agnico-Eagle Mines (AEM) - Mining, gold and other minerals (Canada)
Barrick Gold (ABX) - Gold, copper, oil/gas (Canada)
BHP Billiton (BHP) - Diversified natural resources (Australia)
Chemical + Mining of Chile (SQM) - Fertilizers, chemicals, lithium (Chile)
First Quantum Minerals (FQVLF.PQ) - Mining and metals (Canada)
Goldcorp (GG) - Gold, metals (Canada)
Randgold Resources (GOLD) - Gold mines in Africa (UK)
Rio Tinto (RIO) - Diverse mineral resources (UK)
Teras Resources (TRA.V) - Gold, metals (Canada)
Vale (VALE) - Metals, fertilizer (Brazil)
MISC -
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http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67535632 (Charts)
Novozymes (NVZMY.PK) - Industrial enzymes, microorganisms, and bio ingredients (Denmark)
SERVICES -
***********************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67535823 (Charts)
Accenture (ACN) - Business management services (Ireland)
New Oriental Education (EDU) - Private education services (China)
Telefonica SA (TEF) - Telecommunication services (Spain)
Wire Card (WRCDF.PK) - Business services(Germany)
TECHNOLOGY -
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http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67536129 (Chart)
NetEase (NTES) - Internet software/services (China)
Nice Systems (NICE) - Software for business, security (Israel)
Open Text (OTEX) - ECM software (Canada)
Sohu.com (SOHU) - Internet portal, gaming, wireless services (China)
TRANSPORTATION -
**************************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67399311 (Charts)
Canadian National Railway (CNI) - Railroads (Canada)
LAN Airlines (LFL) - Regional airline (Chile)
UTILITIES -
***************
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=67399355 (Charts)
CPFL Energia (CPL) - Electric Utility (Brazil)
Enersis (ENI) - Electric utility (Chile)
Empresa Nacional (EOC) - Electric utility in S. America (Chile)
Fortis (FRTSF.PK) - Electricity and natural gas utility (Canada)
International Power (IPRPY.PK) - Power generation (UK)
Best Foreign -
Ambev (ABV) - Beverages (Brazil)
Brazil Foods (BRFS) - Food products (Brazil)
British American Tobacco (BTI) - Tobacco products (UK)
Canadian National Railway (CNI) - Railroads (Canada)
Coca-Cola Femsa (KOF) - Coca-Cola beverages (Mexico)
Enbridge (ENB) - Oil and gas pipelines (Canada)
Fomex (FMX) - Beverages (Mexico)
Fortis (FRTSF.PK) - Electricity and natural gas utility (Canada)
Nestle (NSRGY.PK) - Food products (Switzerland)
Syngenta (SYT) - Agro chemicals (Switzerland)
TransCanada (TRP) - Oil and gas pipelines, electric power plants (Canada)
Foreign - Financials -
Ace Limited (ACE) - Insurance (Switzerland)
Arch Capital Group (ACGL) - Insurance (Bermuda)
Bank of Nova Scotia (BNS) - Banking (Canada)
Banco Santander Chile (SAN) - Banking (Chile)
Itau Unibanco (ITUB) - Banking (Brazil)
Royal Bank of Canada (RY) - Banking (Canada)
Toronto Dominion Bank (TD) - Banking (Canada)
Wire Card (WRCDF.PK) - Financial services (Germany)
Foreign - Energy -
BG Group (BRGXF.PK) - Natural gas (UK)
Canadian Natural Resources (CNQ) - Oil and gas (Canada)
Core Laboratories (CLB) - Oil and gas services (Netherlands)
Cenovus Energy (CVE) - Oil and gas (Canada)
Encana (ECA) - Oil and gas (Canada)
Enbridge (ENB) - Oil and gas pipelines (Canada)
PetroChina (PTR) - Oil and gas (China)
Petroleo Brasileiro (PBR) - Oil and gas (Brazil
Suncor Energy (SU) - Oil and gas (Canada)
TransCanada (TRP) - Oil and gas pipelines, electric power plants (Canada)
Tullow Oil (TUWLF.PK) - Oila and gas (UK)
Foreign - Consumer -
Ambev (ABV) - Beverages (Brazil)
Brazil Foods (BRFS) - Food products (Brazil)
British American Tobacco (BTI) - Tobacco products (UK)
Coca Cola Femsa (KOF) - Coca Cola brand beverages (Mexico)
Fomex (FMX) - Beverages (Mexico)
Nestle (NSRGY.PK) - Food products (Switzerland)
SABMiller (SBMRF.PK) - Beverages (UK)
Foreign - BioPharma -
Novartis (NVS) - Pharmaceuticals, healthcare products (Switzerland)
Novo Nordisk (NVO) - Pharmaceuticals (Denmark)
Prolor (PBTH) - Biotech (Israel)
Roche (RHHBY.PK) - Pharmaceuticals, diagnostics (Switzerland)
Shire (SHPGY) - Pharmaceuticals (UK)
Teva (TEVA) - Pharmaceuticals (Israel)
Foreign - Agro -
Agrium (AGU) - Fertilizers (Canada)
Chemical + Mining of Chile (SQM) - Fertilizers, chemicals, lithium (Chile)
Potash of Saskatchewan (POT) - Fertilizers (Canada)
Syngenta (SYT) - Agro chemicals, seeds (Switzerland)
Yari Intl (YARIY.PK) - Agro chemicals (Norway)
Foreign - Utilities -
CPFL Energia (CPL) - Electric Utility (Brazil)
Enersis (ENI) - Electric utility (Chile)
Empresa Nacional (EOC) - Electric utility in S. America (Chile)
Fortis (FRTSF.PK) - Electricity and natural gas utility (Canada)
International Power (IPRPY.PK) - Power generation (UK)
Additional Foreign - Small + Mid cap -
Core Laboratories (CLB) - Oil and gas services (Netherlands)
Dongfeng Motor (DNFGF.PK) - Automotive manufacturing (China)
First Quantum Minerals (FQVLF.PQ) - Mining and metals (Canada)
LAN Airlines (LFL) - Regional airline (Chile)
New Oriental Education (EDU) - Private education services (China)
NetEase (NTES) - Internet software/services (China)
Nice Systems (NICE) - Software for business, security (Israel)
Novozymes (NVZMY.PK) - Industrial enzymes, microorganisms, and biopharma ingredients (Denmark)
Open Text (OTEX) - ECM software (Canada)
Prolor (PBTH) - Biotech (Israel)
Randgold Resources (GOLD) - Gold mines in Africa (UK)
Sohu.com (SOHU) - Internet portal, gaming, wireless services (China)
Teras Resources (TRA.V) - Gold, metals (Canada)
Westport Innovations (WPRT) - Alternative fuel engine technologies (Canada)
Wire Card (WRCDF.PK) - Financial services (Germany)
Best Foreign -
Ambev (ABV) - Beverages (Brazil)
Brazil Foods (BRFS) - Food products (Brazil)
British American Tobacco (BTI) - Tobacco products (UK)
Canadian National Railway (CNI) - Railroads (Canada)
Chemical + Mining of Chile (SQM) - Fertilizers, chemicals, lithium (Chile)
Enbridge (ENB) - Oil and gas pipelines (Canada)
Fomex (FMX) - Beverages (Mexico)
Fortis (FRTSF.PK) - Electricity and natural gas utility (Canada)
Nestle (NSRGY.PK) - Food products (Switzerland)
Syngenta (SYT) - Agro chemicals (Switzerland)
TransCanada (TRP) - Oil and gas pipelines, electric power plants (Canada)
Foreign - Misc Sectors -
Accenture (ACN) - Business management services (Ireland)
New Oriental Education (EDU) - Private education services (China)
NetEase (NTES) - Internet software/services (China)
Nice Systems (NICE) - Software for business, security (Israel)
Novozymes (NVZMY.PK) - Industrial enzymes, microorganisms, and biopharma ingredients (Denmark)
Open Text (OTEX) - ECM software (Canada)
Sohu.com (SOHU) - Internet portal, gaming, wireless services (China)
Telefonica SA (TEF) - Telecommunication services (Spain)
Westport Innovations (WPRT) - Alternative fuel engine technologies (Canada)
Foreign - Energy -
Canadian Natural Resources (CNQ) - Oil and gas (Canada)
Core Laboratories (CLB) - Oil and gas services (Netherlands)
Cenovus Energy (CVE) - Oil and gas (Canada)
Encana (ECA) - Oil and gas (Canada)
Enbridge (ENB) - Oil and gas pipelines (Canada)
PetroChina (PTR) - Oil and gas (China)
Petroleo Brasileiro (PBR) - Oil and gas (Brazil
Suncor Energy (SU) - Oil and gas (Canada)
TransCanada (TRP) - Oil and gas pipelines, electric power plants (Canada)
Tullow Oil (TUWLF.PK) - Oila and gas (UK)
Foreign - Consumer -
Ambev (ABV) - Beverages (Brazil)
Brazil Foods (BRFS) - Food products (Brazil)
British American Tobacco (BTI) - Tobacco products (UK)
Coca Cola Femsa (KOF) - Coca Cola brand beverages (Mexico)
Fomex (FMX) - Beverages (Mexico)
Nestle (NSRGY.PK) - Food products (Switzerland)
Foreign - Mining + Metals -
Agnico-Eagle Mines (AEM) - Mining, gold and other minerals (Canada)
Barrick Gold (ABX) - Gold, copper, oil/gas (Canada)
BHP Billiton (BHP) - Diversified natural resources (Australia)
Chemical + Mining of Chile (SQM) - Fertilizers, chemicals, lithium (Chile)
First Quantum Minerals (FQVLF.PQ) - Mining and metals (Canada)
Goldcorp (GG) - Gold, metals (Canada)
Randgold Resources (GOLD) - Gold mines in Africa (UK)
Rio Tinto (RIO) - Diverse mineral resources (UK)
Teras Resources (TRA.V) - Gold, metals (Canada)
Vale (VALE) - Metals, fertilizer (Brazil)
Foreign - Misc Sectors -
Accenture (ACN) - Business management services (Ireland)
New Oriental Education (EDU) - Private education services (China)
NetEase (NTES) - Internet software/services (China)
Nice Systems (NICE) - Software for business, security (Israel)
Novozymes (NVZMY.PK) - Industrial enzymes, microorganisms, and biopharma ingredients (Denmark)
Open Text (OTEX) - ECM software (Canada)
Sohu.com (SOHU) - Internet portal, gaming, wireless services (China)
Telefonica SA (TEF) - Telecommunication services (Spain)
Westport Innovations (WPRT) - Alternative fuel engine technologies (Canada)
Foreign - Transportation -
Canadian National Railway (CNI) - Railroads (Canada)
Dongfeng Motor (DNFGF.PK) - Automotive manufacturing (China)
LAN Airlines (LFL) - Regional airline (Chile)
Foreign - Misc Sectors -
New Oriental Education (EDU) - Private education services (China)
NetEase (NTES) - Internet software/services (China)
Nice Systems (NICE) - Software for business, security (Israel)
Novozymes (NVZMY.PK) - Industrial enzymes, microorganisms, and biopharma ingredients (Denmark)
Open Text (OTEX) - ECM software (Canada)
Sohu.com (SOHU) - Internet portal, gaming, wireless services (China)
Telefonica SA (TEF) - Telecommunication services (Spain)
Westport Innovations (WPRT) - Alternative fuel engine technologies (Canada)
Foreign - Financials -
Ace Limited (ACE) - Insurance (Switzerland)
Bank of Nova Scotia (BNS) - Banking (Canada)
Banco Santander Chile (SAN) - Banking (Chile)
Itau Unibanco (ITUB) - Banking (Brazil)
Royal Bank of Canada (RY) - Banking (Canada)
Toronto Dominion Bank (TD) - Banking (Canada)
Wire Card (WRCDF.PK) - Financial services (Germany)
Name | Symbol | Assets |
---|---|---|
Nestle SA | NESN | 2.82% |
ASML Holding NV | ASML | 2.20% |
Roche Holding AG | ROG | 2.13% |
LVMH Moet Hennessy Louis Vuitton SE | MC.PA | 1.58% |
Novartis AG | NOVN | 1.55% |
AstraZeneca PLC | AZN.L | 1.27% |
SAP SE | SAP.DE | 1.25% |
Unilever PLC | ULVR.L | 1.23% |
Novo Nordisk A/S B | NOVO B | 1.09% |
Siemens AG | SIE.DE | 0.96% |
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