China: land reclamation has “already stopped”
Ongoing land reclamation in the South China sea has been halted, according to Chinese Foreign Minister Wang Yi.
The Chinese have been fortifying reefs and constructing military bases in the ocean over the past few months, provoking reactions from other countries such as Vietnam and Malaysia who believe the territory belongs to them.
Beijing confirmed yesterday that land reclamation had “alrady stopped” and that ASEAN and China wished to resolve the issue through dialogue. China requesting that the US allow the countries to sort the issue amongst themselves.
According to the United States, China has reclaimed more than 1,200 hectares of territory over the past 18 months. Vietnam, Malaysia, the Philippines and Taiwan together claimed only 100 acres in the last 45 years.
Whilst China are saying the motive is democratic, economic problems suggest that they are freeing up time to divert their issues to more pressing problems at home.
China have just announced a devaluation of the national currency, which is the last in a series of attempts over the last few months to prop up the volatile economy.
China’s surprise Yuan devaluation sees commodity currencies dive
The Aussie dollar fell almost 2 per cent against the USD after China’s surprise devaluation of the Yuan. Prior to the announcement the AUD/USD was trading at 0.7440, a level it hadn’t traded at since the 20th July this year.
As the devaluation was announced strong selling saw the AUD/USD pair trade at a low of 0.73.
China’s appetite for iron ore and coal drove a decade long mining boom in Australia with companies investing almost A$400bn on projects between 2003 – 2012. The continued Chinese slowdown has stifled demand for natural resources seeing commodity markets and related currencies nose dive.
The New Zealand dollar sold off in a similar fashion to the Aussie. China was New Zealand’s top export market in the June quarter with sales worth $2.2 billion in the year to June, however New Zealand’s exports to China are down almost 30% in the year to June and with the weaker Yuan making imports more expensive it looks to be a trend set to continue. The NZD/USD was trading at 0.6630 prior to the announcement crashing to a low of 0.6535 NZD to the USD dollar.
China devalues yuan, hits FTSE
The Chinese central bank has devalued the yuan by almost 2%, its lowest rate against the dollar in almost three years.
The bank said the move was a “one-off depreciation” of 1.9%, which triggered the biggest one-day loss in 20 years.
The move is the latest in a string of changes by the Chinese authorities to stimulate the volatile stock market. Over the weekend, China reported exports figures at a six year low, falling 8.3% in July, far worse than expected.
The midpoint for the yuan is now set at 6.2298 to $1, up from 6.1162 yuan on Monday. The People’s Bank of China usually manages the rate through this midpoint, which is has previously been determined by themselves. From now on the midpoint will be calculated by overnight market developments in order to make it more market based.
The move has hit the FTSE 100 this morning, which was down 0.6% before opening.
Burberry (LON:BRBY) was the top faller in the wake of the Chinese news, falling 2.2%. The devaluation will affect the cost of imports, from which the company heavily relies.
Chinese Meltdown: UK Stocks to avoid
China meltdown: the UK stocks to avoid
They’re calling it the Great Fall of China…
In July, Chinese shares had their worst month in 6 years.
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Russian economy shrinks 4.6%
Russia’s Gross Domestic Product has dropped by 4.6% according to figures released today, worse than the 4.4% expected by the Economy Ministry.
The Russian economy has shrank the most since 2009, and the country are currently in recession due to a currency crisis and the drop in oil prices; Russia’s first recession in six years.
Russia have been severely affected by the drop in commodities prices, as Russia relies on oil and gas for about half of its budget revenue. This, combined with sanctions imposed by the West, mean the economy is expected to sink by around 9% before it begins to recover.
However, the Economy Ministry say that the economy has reached its “lowest point”.
Ernesto Ramirez Rigo, International Monetary Fund Mission Chief for Russia, said: “External shocks, added to pre-existing structural weaknesses, are certainly weighing on Russia’s growth prospects.
“Maintaining a prudent fiscal policy and reviving slow-moving structural reforms could help unlock Russia’s growth potential.”
Start-up Stockflare make investing accessible for all
Start-up company Stockflare aims to make the stock market more attainable for everyone, and is offering an investment opportunity on Crowdcube. With most traditional stockbrokers looking for people with £500,000+ to invest, the company feel that the 1.6 billion people with anything less than that are just not catered for in the current financial market, and have set out to make investment opportunities available for everyone.
CEO Shane Leonard is a 20 year City veteran, previously working at Credit Suisse & Citigroup and passionately believes that investing is for everyone, not just for the ultra rich. With a clear, easy to use website he has created a platform in which anyone can easily search, understand and invest in stocks, turning complex financial data into easy to understand analysis.
Unlike other sites aimed at providing insight or a trading platform for investors, Stockflare is completely free to join and has no advertising or monthly subscription. The site provides easy to understand analysis of every stock in the world, a search tool designed to help the user find the right stocks for them and alerts if something happens to the stocks that they should be aware of.
Furthermore, they are about to launch an investment service in partnership with US broker platform, letting anyone in the world open an investment account with as little as $50 and buy US shares, at the cost of $3 a trade – a very low price compared to similar platforms. The money comes from helping people to find investment ideas via Stockflare, and integrating with the best low-cost brokerage partners in each market to help them purchase it; each of the future brokerage partners will then pay a percentage of the revenue to them.
So far, Stockflare have 10,000 users across the world; over 40% of users are based in the US, with the UK being the second most important market. These users have all been achieved through word of mouth or prominent blogger recommendation, and the company have engaged in next to no marketing to date. To that end, Stockflare are hoping to use the money raised on Crowdcube to begin properly marketing the company and have recently hired several advisors with a strong marketing and PR background, including Kate Simon, currently the head of Marketing at TransferWise, Martin Campbell, formerly head of PR & Communications at Virgin Direct and Richard Ireland, previously the Head of Digital Marketing at Zopa, one of the leading peer-to-peer FinTech businesses in the UK.
Stockflare are offering two types of shares; investments of £1,000 or more will be A-shares which have full voting rights, and those of less than £1,000 will be B-shares, which do not. The company aim to provide investors with a way to exit their investment within three years, preferably by floating on the stock market.
Stockflare are currently crowdfunding for £300,000. For more information on their crowdfunding campaign, visit Seedrs.com
Warren Buffet signs $37.2 billion deal – his biggest yet
American multibillionaire investor Warren Buffet has just signed his biggest deal ever, agreeing to buy Precision Castparts, the US maker of parts for the aviation industry, for $37.2 billion.
The agreement consolidates Buffet’s aim to move his business into the industrial sector. His company Berkshire Hathaway Inc will acquire all outstanding shares in Precision Castparts for $235 per share in cash. The deal towers over his biggest acquisition previously, the Northern Santa Fe railroad for $27 billion in 2009.
Buffett said Berkshire would use about $23 billion of its own cash and borrow the rest to finance the deal.
“We will have about $40 billion in cash once we get through this. I like to have a lot of cash at all times.”
“This takes us out of the market for an ‘elephant’ for 12 months or so … but we will be buying a few small things in the next six months,” Buffett told CNBC.
He attributes the possibility of deal to the recent fall in oil prices, saying that:
“When you get a chance to buy a wonderful company, there is usually some reason why you are getting that chance. perhaps a slump in oil and gas helps us in this case.”
The company’s shares were trading at $230.85 before the bell on Monday.
Diversity low in FTSE 100, according to Green Park
Diversity in business has been a contentious topic, with company boardrooms traditionally ruled by one demographic: white men. Several government initiatives have been launched to improve the diversity of Britain’s top companies, with ex-business secretary Vince Cable setting a voluntary target for company boards to make sure 25% of their positions were held by women, after a report by Lord Mervyn Davies suggested that the numbers were severely imbalanced. Furthermore, in 2014 the 2020 campaign was launched to ensure that, by 2020, every FTSE 100 board had at least one ethnic minority member.
This year’s Green Park Leadership report shows that, whilst figures are improving, the numbers are not yet encouraging. This is the second of these reports by the company, who are committed to greater transparency in business and hope to provide robust benchmarks for companies. They provide intelligence and insight, strategic advice and recruitment support to leading companies, and are acting to try and change the lack of diversity in UK businesses.
Green Park’s survey was conducted on the FTSE 100 companies and published in April 2015. At the very top, the results are alarming; out of all the companies in the FTSE 100, only 3 chair were non white. 96 of the Chief Executive positions were white, as well as 95 Chief Financial Officers. According to the figures, there has actually been a decline in executive positions held by ethnic minorities, suggesting that opportunities for advancement are unfortunately declining rather than increasing.
By sector, transport and utilities are the worst for diversity; out of 6 companies, there with no non-white members in top leadership positions. The construction and property sectors are almost as bad, with just 2.2% of top positions held by those from ethnic minorities. However, health and natural resources came out on top, with 15.9% and 11.7% respectively.
The natural resources sector is also one of the highest for women’s representation too, with 14.1% of their top positions held by females. The best for women is the utilities industry, at 29.7%.
If fact, news for women is far brighter across the board than for ethnic minorities. Following the Davies report, the percentage of women on boards has doubled and has now hit the 25% target, with 26.1%. The report showed that out of the ethnic minority leaders who did hold top positions, they were more likely to be women.
Whilst Green Park’s report has shown some progress for diversity, the low figures for ethnic minorities clearly highlights the need for diversity campaigns. Britain is, after all, applauded for its diversity, tolerance and accessibility for people of all backgrounds – so why doesn’t this show on the boards of the country’s top companies?
Miranda Wadham on 10/08/2015
The Markets and Carney disagree over when rates will rise
In last week’s Bank of England press conference, Mark Carney said he saw rates raising in early 2016, a dovish adjustment to comments made in May that suggested lift off could be as early as this year.
The change in stance from the governor caused an initial knee jerk reaction in sterling that fell against the dollar.
However, markets that reflect the timing of the rate hike are still pricing in a chance of a rate hike by December.
Short Sterling futures for expiry in December are fractionally off pricing in a 0.25% increase in UK Interest rates by the end of the year.
Using the same method, interest rates are expected to be 1% by the middle of 2016.
The futures market highlights the conflict in opinion of the first rate hike but share consensus by the middle of next year rates will have increased, possibly by as 0.5% to 1%.
The uncertainty over when rates will initially rise is very much a product of comments by Mark Carney who said the timing of a rate hike is data dependent and his apparent willingness to change guidance at the drop of a hat.
Greek bailout to be finalised on August 11
A final bailout agreement for Greece is on the brink of being finalised, after significant concessions were made by Alexis Tsipras.
According to sources, the country hopes to negotiate final agreement with creditors by August 11th.
Finance ministers and creditors have been in talks over the weekend, which stretched into early Monday morning. A source has told Reuters that they are confident an 86 billion euro deal will be reached by the early hours of tomorrow.
“Efforts are being made to conclude the negotiations, the horizon is by Monday night or early Tuesday,” said a Greek official who declined to be named.
“When the new bailout comes to parliament for a vote it will be one bill with two articles – one article will be the loan agreement and the MoU (memorandum of understanding) and the second article will be the prior actions,” the official said, referring to measures Greece needs to take for the bailout accord to take effect.
The new bailout agreement comes just a week before their first 3 billion euro repayment, due on Aug 20.