Archives for October 2014

Alibaba Executive Chairman Jack Ma (Michael Loccisano / Getty Images / AFP)

The personal fortune of Jack Ma, the founder and executive chairman of Alibaba, jumped to $19.5 billion from $7.1 billion last year, after his e-commerce company conducted the world’s biggest IPO, Forbes magazine has said.

Alibaba, described as a mixture of Amazon, eBay and PayPal, raised almost $22 billion in a record initial public offering on the New York Stock Exchange in September.

READ MORE: Alibaba sets IPO record at $168 billion

Earlier this year Ma topped a similar list compiled by China-based luxury magazine Hurun, which estimated his wealth higher at $25 billion.

Jack Ma, a former English teacher, started Alibaba 15 years ago with $60,000 pulled together from his friends. The company is now valued at more than $240 billion dollars after listing in the US. Ma reaped more than $800 million from selling shares through the IPO, according to the company’s filings. Alibaba has more than 80 percent of China’s online e-commerce market.

The number of Chinese billionaires surged 44 percent in a year to 242 in 2014, according to the Forbes ranking. This year the richest Chinese had to make at least $700 million to get into the top ten.

Robin Li, head of the internet company Baidu, knows as the Chinese Google, came second in the Forbes list with $14.7 billion up from $11.1 billion in 2013. NASDAQ traded shares of Baidu hit record highs above $231 per share in September. Third place is taken by Ma Huateng of big Chinese online firm Tencent. His fortune jumped to $14.4 billion from $10.2 billion last year.

“The fortunes of Chinese web entrepreneurs are starting to surpass US tech icons like Paul Allen, Eric Schmidt, Jerry Yang and Sheryl Sandberg,” said Russell Flannery, senior editor and Shanghai Bureau Chief of Forbes Asia.

“That is telling us that China will compete with, if not surpass, the US for the lion’s share of new wealth to be made in an era when e-commerce and mobile services are going to become a lot more pervasive,” he added.

While internet entrepreneurs lead the ranking, billionaires from China’s traditional sectors, like real estate, were hit by the overall economic slowdown and problems in the property market.

Last year’s number one tycoon, the chairman of Dalian Wanda Group, Wang Jianlin, fell to 4th position with $13.2 billion against $14.1 billion a year ago.

Last week official data showed real estate prices in China fell 1.3 percent year on year in September, the sector’s fifth consecutive monthly drop. The property market in China has come down this year as the government’s cooling measures have come into effect.

Article source: http://rt.com/business/200091-alibaba-china-rich-forbes/

“German industry is at increasing disadvantage owing to the growing energy price disadvantage that it faces. Average industrial electricity prices in Germany have risen approximately 60 percent since 2007, while prices in the United States and in China have increased less than 10 percent,” market research firm IHS wrote in a study published earlier this year.

Forty percent of the cost of industrial energy in Germany is taxed, the highest rate in the EU.

Chancellor Angela Merkel decided to scrap all nuclear power in the wake of the Fukushima disaster in 2011, and has been pursuing an aggressive renewable strategy.

Consumers are paying for this transition. In 2013 they paid €20 billion for energy from renewable sources, whereas on the global market they could have received the same amount of kilowatts for €3 billion.

Germany’s green revolution

Germany hopes to raise the amount of green energy it uses from a quarter at present to as much as 60 percent by 2035, and will spend €550 billion on developing renewable energy over the next 26 years.

Now, a quarter of Germany’s energy is environmental sources like wind and solar, which is subsidized by big business. Germany subsidizes renewables to the tune of $16 billion per year, an innovation that comes at a cost to both companies and consumers.

Energy prices are skyrocketing and hurting consumers in Germany, where they are above the European average. Electricity in the country costs about 1.2 euro cents per unit more than the average price across the European Union.

BASF, which has 33,000 employees, is one of the main contributors of Germany’s $1.5 trillion economy, which has recently showed signs of slowing, cutting its 2014 growth forecast to 1.2 percent.

Germany is one of the top six renewable power countries in the world, along with China, the US, Brazil, and Canada.

Article source: http://rt.com/business/200019-germany-basf-energy-green/

Coral eating starfish at Australia’s Great Barrier Reef (AFP Photo / Katharina Fabricius / Australian Institute of Marine Science)

Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase have joined the list of banking giants opting out of a major Australian coal export project, Rainforest Action Network activists say.

The four banks have become the latest global financiers not to participate in funding the Abbot Point coal port expansion. The area located in Queensland in Australia is close to the Great Barrier Reef, a world heritage site.

Rainforest Action Network, a US environment group, confirmed getting commitments from each of the banks ruling out funding the project, the Guardian reports.

Abbot Point expansion is being coordinated by Indian mining concern Adani in partnership with Australia’s GVK. The companies received government approval to build a new port terminal to be linked by a 300 kilometer railway to Queensland’s Galilee Basin coal field.

The move by banks follows a lengthening list of statements by Deutsche Bank, Barclays and HSBC who declared they will keep away from the world’s largest new coal development.

Thomas Jacquot, a credit analyst with rating agency Standard Poor’s, said the pullback of more banks would add to the difficulties already faced by the mine developers, reports the Sydney Morning Herald.

“The maths look challenging,” Mr. Jacquot said. “I’m ultimately very curious because the coal market is very depressed.”

Adani Group and GVK are attempting to secure an estimated $26.5 billion in external financing necessary for the planned expansion of coal export facilities and associated mine and rail infrastructure at Abbot Point.

Blair Palese, chief executive of climate activist group 350.org, told the Guardian that coal projects such as Adani’s were facing a “perfect storm” of falling coal prices and reluctant investors.

The Abbot Point project’s viability will partly depend on whether Australian banks join the financing.

Mining in the undeveloped Galilee Basin has been the subject of a campaign by anti-coal activists, who pressed institutional investors and big banks to avoid investment and help combat climate change.

“Stopping Abbot Point is a top priority for us, because this single project is the key to whether one of the largest stores of carbon on the planet, the Galilee Basin, stays in the ground where it belongs, or is sold on the global market and released into our atmosphere,” Amanda Starbuck, a director at San Francisco-based Rainforest Action Network, told Reuters.

Environmental organizations all over the world have expressed concerns about the consequences of coal exploration in the region. According to estimates, the volume of greenhouse gas emissions from nine coal mines of Galilee Basin may result in over 700 million tons of CO2 per year.

The Great Barrier Reef is one the world’s largest coral reef systems and the biggest single structure made by living organisms. It has an area of more than 340,000 square kilometers and can be seen from outer space. The Great Barrier Reef has been listed a World Heritage Site by UNESCO.

Article source: http://rt.com/business/200031-banks-great-barrier-reef/

AFP Photo / Sajjad Hussain

Four Indian food suppliers have been given access to Russian markets, and Israeli meat and dairy products are expected on Russian shelves as early as in the end of 2014.

A full list of Indian companies allowed to export meat and dairy products to Russia is expected by the end of the year, says Deputy Economic Development Minister Aleksey Likhachyov.

Within a few weeks, Russian experts will inspect and certify a number of food processing plants in India, RIA quotes Likhachyov as saying.

“Four companies have already been certified. Rosselkhoznadzor [Russian Federal Veterinary watchdog] has planned a series of inspections in order to permit access to products of particular companies,” Likhachyov said after a meeting of the Russian-Indian working group on priority investment projects.

“Some of the decisions related to the access of agricultural products to the Russian market will be adopted before the Russian-Indian intergovernmental commission scheduled for November 5,” he added.

First batches of Israeli products could arrive in Russia before the end of the year, said Deputy Prime Minister Arkady Dvorkovich after a meeting in Jerusalem.

He said Russia is also interested in agricultural technology from Israel. It would mean creating dairy, cattle breeding, and vegetable growing businesses in Russia. The Deputy Prime Minister added that Israeli and Russian companies can use the full range of state support.

Russia began talks with alternative food suppliers after banning agricultural and food products from the US, EU, Norway, Canada and Australia in response to anti-Russian sanctions over the Ukrainian conflict.

READ MORE: Russia bans agricultural products from EU, USA, Australia, Norway, Canada

The value of banned food in 2013 was about $9.1 billion according to figures from the Federal Customs Service.

Latin America countries, China and Serbia have already increased its food exports to Russia.

Article source: http://rt.com/business/200047-russia-india-meat-milk/

China out / AFP Photo

​The two largest Chinese state-owned train makers CSR Corp and China CNR Corp are reportedly in merger talks that would create a new mega-company to compete in overseas markets with German, Canadian, and Japanese locomotive makers.

Details of the merger remain unclear, but a draft plan is in the works, both Bloomberg and Chinese media report, citing government officials. Together, the two companies have a market value of $26 billion.

A “major” announcement is expected within a week.

The merger would be aimed at reducing overseas competition between the two companies, which in turn should help them win more contracts and fulfill China’s hungry appetite to export transport hardware.

China is home to the world’s largest high-speed rail network, which keeps the growing population and economy connected. The two companies have won contracts worth over $7.2 billion (44.3 billion yuan) for 258 bullet trains within China, Bloomberg News reported.

The two are currently competing for a $68 billion project to supply bullet trains in California in the US. The 1,287 km track will run from Los Angeles to San Francisco and will require 95 trains.

Last week CNR announced it had won a $537 million (3.49 billion yuan) contract to supply 284 cars for Boston’s metro, a first for any Chinese company in the US. CNR proposed the cheapest deal, which was almost half the tender price of Canadian transport giant Bombardier.

Both deals are milestones for the China rail industry, which is for the first time selling its rolling stock abroad and competing with the likes of Germany’s Siemens, Canada’s Bombardier, and Japan’s Kawasaki.

Trading in shares of the two companies was suspended on Monday, spurring speculation that the two state-owned companies will announce the merger, the South China Morning Post reported.

Shares in both companies have jumped nearly 15 percent in Hong Kong in the last two weeks.
There was a similar merger rumor involving the two train makers in September that never came to fruition, which also halted trading. Both companies denied the merger plans in September.

Article source: http://rt.com/business/199971-china-rail-merger-26-billion/

RIA Novosti / Vitaliy Ankov

Russia’s GDP growth accelerated to 1.1 percent last month which marked an economic revival from the flat growth in August, the Ministry of Economic Development has said.

In month-to-month terms, Russia’s GDP grew 0.4 percent in September, marking a turnaround from the decline a month earlier, Oleg Zasov, head of the Macroeconomic Forecasting Department of the Russian Ministry of Economic Development, said Monday.

The optimistic figures come at a time when the Russian economy is being hit by falling oil prices and a cheapening ruble.

Between January and September Russia’s GDP increased 0.8 percent, in the third quarter it grew by 0.7 percent, Aleksey Vedev, deputy head of Russia’s Ministry for Economic Development, told TASS.

“The results of the third quarter are satisfying,” he said, “Given the fact that there was a high base in the fourth quarter of 2013, the forecast growth of 0.5 percent seems to be an achievable goal. And with optimistic circumstances it may be even higher,” he concluded.

On a less positive note, real disposable income and investment in Russia fell, as the ruble kept on losing value against the US Dollar.

Projections for the capital outflow this year remain at $100 billion.

“The planned revision of the forecast is appointed for December 1, now we are making preliminary calculations and collecting data. Our forecast still remains the same,” Vedev said.

Talking about oil prices, Vedev expects a price of $90-110 per barrel in 2015-2017.

“It’s early to say that we have entered a phase of low oil prices. We share the opinion of the Energy Ministry: it is most likely that in the next three years the price will be around $90-110 a barrel”, he said at a briefing.

According to the Ministry’s baseline forecast, the average price of Urals, Russia’s key export blend, in 2014 is expected to be $104 a barrel, and in 2015-2017 $100 per barrel.

Article source: http://rt.com/business/199763-russia-gdp-september-growth/

AFP Photo / Yiannis Kourtoglou

Less than two years after Cyprus stuck a €10 billion bailout deal to save its finance industry, banks will no longer require state support, the Finance Ministry said on Monday.

The announcement followed the European Central Bank’s fourth and final stress test on big European banks before taking over as the supervisor of more than 123 banks.

The stress test, or Comprehensive Assessment, has that Cyprus’ banking sector is much more stable than had been thought.

“We believe that the unprecedented scale of the Assessment, as regards the level of tests and the number of credit institutions participating, will strengthen the trust of the markets on the durability and soundness of the European banking systems in general, and the Cypriot credit institutions in particular,” the document from the ministry said, as quoted by TASS.

Only one Cypriot bank failed the balance sheet audit. Hellenic Bank, the island’s second biggest lender, was found to lack €176 million in capital needed to fend off another euro crisis. Since the beginning of the year it has raised €200 million, which means it doesn’t have to submit a plan to the ECB in two weeks time.

The other leading banks; Bank of Cyprus, Central- Co-op, and RCB, a subsidiary of Russian VTB Group, all passed the test.

Bank of Cyprus and Co-Op both showed capital shortfalls at the end of 2013, but were able to raise enough capital in the meantime to not be marked as vulnerable.

Cyprus received a €10 billion ($12.7 billion) bailout in 2013 from Europe and the International Monetary Fund to re-capitalize its banks, which went bust due to their great exposure to Greek debt.

Before the bailout, depositors lost savings overnight, ATMs were shut down, and capital controls were introduced. Now bankers believe that crisis recovery is not far from reach.

“Actions taken by our banks over the past months led to a significant increase in capital, thus enhancing the resilience of the banking sector, as it is also confirmed by the analysis of the results,” the Association of Cyprus Banks said.

On Sunday, the European Central Bank (ECB) gave an healthy prognosis to the majority of large banks in the eurozone in the “stress test” audit. Only 25 out of 123 failed the balance sheet test, none of which were outside the eurozone.

Article source: http://rt.com/business/199735-cyprus-banks-government-support/

Reuters / Remote / Stringer

Business confidence in Germany, the EU’s largest economy, declined for a sixth consecutive month in October. The data is ominous for the eurozone on a whole, which is failing to grow, and may dip back into recession by the end of the year.

Germany’s Ifo Business Climate Index in manufacturing, which looks at the confidence of the country’s 7,000 firms, fell to 103.2 in October from 104.7 in September, the lowest result since December 2012.

“Expectations with regard to the six-month business outlook continued to cloud over. The outlook for the German economy deteriorated once again,” the President of Ifo, Hans-Werner Sinn, said.

Bad news for the German economy is bad news for the rest of Europe. At $1.5 trillion, Germany accounts for nearly 30 percent of the gross domestic product of the entire 18-member eurozone.

READ MORE: Eurozone crisis might not be over, SP warns

READ MORE: German economy in ‘choppy waters’, as growth forecast slashed to 1.2%

The standoff with Russia over Ukraine may be a big factor in the downturn, since Russia is Germany’s largest export market.

As a result, German industry has been struggling; August factory orders fell to their lowest levels since August 2009, before the financial crisis hit Europe.

Consumer confidence also is on the decline as unemployment continues to climb for the second consecutive month.

On Sunday, the European Central Bank (ECB) gave an overall green light to the majority of large banks in the eurozone in a “stress test” audit. Only 25 out of 123 failed the balance sheet test. Only one out of 24 German banks failed the test. The ECB showed that Münchener Hypothekenbank had a €229 million shortfall to deal with a recession scenario at the end of 2013. Since then the bank has raised €408 million which is enough for it not to have to re-jig its plan for the ECB.

Article source: http://rt.com/business/199628-german-business-index-october-low/

RIA Novosti / Mihail Kutusov

Russia’s Central Bank has launched a new financial tool known as currency repo, or repurchase agreement, that’ll provide up to $50 billion by the end of 2016. It is expected to support the Russian ruble that has lost more than 20 percent since January.

Russia’s key regulator is launching a new instrument on Monday, with the first auctions scheduled for October 29.

“These operations are aimed at further empowering credit institutions to manage their own short-term currency liquidity,” the bank said in a press release.

Put simply, the Central Bank of Russia is providing the country’s financial institutions with the much needed dollars that it will buy them back later, with interest. This is to relieve the pressure on the ruble that has been falling dramatically because of the political turmoil over Ukraine and cheapening oil.

READ MORE: 6 useful things you need to know about the rapid descent of the Russian ruble

Unlike currency interventions, repurchase agreements don’t eat into the country’s reserves, which should make it a more favorable tool.

The Central Bank has already spent $13 billion in October to slow the ruble’s devaluation, but it hopes to abandon its intervention strategy and move on to a free floating ruble next year. Foreign exchange reserves will be used just for a “particular balancing” of the exchange rate, President Vladimir Putin said Friday to the Valdai discussion club in Sochi.

The periods of repo auctions will be either 7 or 28 days. The price of lending money will be 2.12 percent for 7 days and 2.37 percent for 28 days. Foreign currency repo transactions will be weekly settled in dollars and euro at the Moscow stock exchange. The Central Bank has set the aggregate maximum amount of debt in foreign currency repo transactions for the banks until the end of 2016 at $50 billion.

Some Russian analysts believe the new tool should help relieve pressure on the ruble.

“If the Central Bank makes the right estimates, we will immediately feel relief”, Evgeniy Nadorshin, chief economist for Russian financial group AFK Sistema, told RBC. “Anyway, a total of $50 billion should be enough to relieve the tension in the foreign exchange market.”

Oleg Kuzmin, chief economist for Russia and the CIS at Renaissance Capital, believes if banks receive $35-40 billion before the end of the year, the situation on the currency market will be fully stabilized. The foreign exchange repurchase mechanism will be needed before the peak period in December when Russian companies and banks pay off their foreign currency debts amounting to around $35 billion.

Article source: http://rt.com/business/199695-russia-ruble-support-repo/

Reuters/Ralph Orlowski

Nearly one in five leading European banks have failed the stress test conducted by the European Central Bank, which revealed a $31.2 billion (€24.6 billion) capital gap in 25 banks showing they’re not ready to withstand a three-year recession.

The results of the EU-wide stress test were reported on Sunday by the European Banking Authority (EAB) and the European Central Bank (ECB).

With nine banks failing the test, Italy represented more than €10 billion of the capital shortfall. Other balance sheets that weren’t up to snuff were three banks in Greece, three in Cyprus, two in Slovenia, two in Belgium, and one each in Austria, Germany, France, Spain, Portugal and Ireland.

Of the total 25 banks that failed the test, 12 have since come up with the necessary additional capital to pass. The other 13 have two weeks to submit a blueprint of how they plan to boost their capital, to be presented to the ECB for approval in early November. Approved banks will then have nine months to fix their capital holes.

The main goal of the stress test was to identify which banks need to boost core equity capital out of the 123 top lenders. The assessment weight a lender’s key risks, including liquidity, leverage and funding, as well as asset quality and the ability of banks’ balance sheet to resist stress scenarios.

“The Comprehensive Assessment allowed us to compare banks across borders and business models,” ECB Supervisory Board Chair Daniele Nouy said in a statement. “The findings will enable us to draw insights and conclusions for supervision going forward.”

Ten banks have taken measures to brush up their finances from their balance sheets at the end of 2013. The worst affected was the Italian bank Monte dei Paschi, which had a capital shortfall of €2.1billion.

“This unprecedented in-depth review of the largest banks’ positions will boost public confidence in the banking sector,” said ECB Vice-President Vitor Constancio, adding that “this should facilitate more lending in Europe, which will help economic growth.”

The asset quality review was conducted is the European Central Bank prepares to become the official supervisor of Europe’s top 130 lenders in a banking union, due to begin in on November 4.

Eight banks failed a similar stress test examination in 2011 with a combined deficit of €2.5 billion ($3.2 billion).

Article source: http://rt.com/business/199536-25-eu-banks-fail/