Fri, 26th May 2017

Anirudh Sethi Report


Archives of “medvedev” Tag

Russia Won’t Renew Gas Contract With Ukraine

The bitter divorce between Ukraine and Russia continues.  Russianprime minister Dmitry Medvedev reportedly said Saturday that Kyiv can forget signing any natural gas delivery deals with state-ownedGazprom solely on its terms.

“We won’t extend the transit contract with Ukraine on disadvantageous terms,” Medvedev said in the interview with Slovenian newspaper Delo, published on Saturday. He is heading to the country on Sunday for a two day official visit.

Ukraine’s deal with Gazprom will expire on Jan. 2, 2020. If it isn’t extended, there will be no legal framework for gas deliveries to and through Ukraine, the PM said.

The country is an important transit hub for Russian natural gas heading for the European Union. Some 40% of Russia’s E.U.-inbound gas comes from Ukraine. But a bitter split between Kyiv and Moscow have threatened the security of that transit route, with Russia now inking deals with Turkey to build a new pipeline into Europe.

Ukraine and Russia have been locking horns since 2014 following the ouster of pro-Russia president Viktor Yanukovych in February. A pro-Western government was installed, led by Arseniy “Yats” Yatsenyuk, and Kyiv quickly moved to sign trade deals with Europe, something Russian president Vladimir Putin was successful at getting Yanukovych to side-swipe in favor of a below-market price for Gazprom gas.

De-escalation Delayed: NATO Chief Warns Again “High Probability” Of Russian Intervention In Ukraine

Deja vu all over again. Just as he stole the jam from the market’s donut last week, NATO Chief Rasmussen has done it again:


He also adds he sees no sign of troop withdrawal. So, despite the market’s confidence that it’s fixed and Putin has folded, it seems NATO is not so sure. Un-De-Escalation begins.

Rasmussen added “We see a military build-up that could be used to conduct illegal military operations in Ukraine.”

Furthermore Reuters reports the leader of East Ukraine’s rebels Zakharchenko is said to be “mulling a counter-attack on government forces in 2-3 days”

This counter-offensive, of course, has been spun as Russia-supported by NATO and thus excuse for NATO involvement – which, as a reminder, includes Canada’s commitment to provide military support to Ukraine.

Last week Rasmussen popped the bubble…

Indian economy to grow at 6.1% in FY14: World Bank

World Bank today scaled down India’s growth forecast to 6.1% for the current fiscal from 7% projected six months ago.

The decline in the growth forecast is largely due to the decline in agriculture sector which is expected to grow at 2% during 2013-14 against the previous estimate of 2.7% despite normal monsoon projection.

However, the multi-lateral funding agency said that India is regaining economic momentum and growth is expected to recover gradually to its high long-term potential. Read More 

Russia’s Putin and party suffer election blow

Russian voters have dealt Vladimir Putin’s ruling party a heavy blow by cutting its parliamentary majority in an election that showed growing unease with his domination of the country as he prepares to reclaim the presidency.

Incomplete results showed Putin’s United Russia was struggling even to win 50 percent of the votes in Sunday’s election, compared with more than 64 percent four years ago. Opposition parties said even that outcome was inflated by fraud.

Although Putin is still likely to win a presidential election in March, Sunday’s result could dent the authority of the man who has ruled for almost 12 years with a mixture of hardline security policies, political acumen and showmanship but was booed and jeered after a martial arts bout last month. Read More 

Russia Retaliates Against US: Puts Radar Station On Combat Alert, Prepares To Take Out European Missile Defense Systems

Full must watch address to the public: for English closed captioning hit the CC button.

“First, I am instructing the Defense Ministry to immediately put the missile attack early warning radar station in Kaliningrad on combat alert. Second, protective cover of Russia’s strategic nuclear weapons, will be reinforced as a priority measure under the programme Read More 

HSBC bets on Russia, cools on India in BRIC beauty contest

Russia is our favourite,” said Nick Timberlake, HSBC’s emerging markets chief. “We’re being offered a huge opportunity. It is not quite as good as it was after Russia’s debt default in 1998, but it’s excellent value.”

The bank is the top global investor in the BRIC quartet of Brazil, Russia, India, and China, with $90bn of assets in emerging markets. It has raised the Russia weighting of its BRIC funds to over 30pc. India has slipped to 20pc.

“There has always been a discount on Russian equities because of political risk, but this widened too far,” said Edward Conroy, co-head of the bank’s Russia Fund. Moscow’s bourse is leveraged to the global cycle. It plunged 73pc in the credit crisis, but should rebound like a coiled spring as confidence revives.

Moscow stocks are trading at a forward price/earnings ratio of 5, compared to Turkey (7.2), Poland (9.6), China (10), and India (11.7). “Russia is unloved and undervalued. We think valuations will revert. It is more than just a commodity play,” he said.

Russia has the luxury of a clean balance sheet. Sovereign debt is 11pc of GDP. Mortgage debt is under 4pc. Such restraint has become a trump card in a post-bubble world where sovereign states are suspect. The Kremlin can borrow to rebuild Russia’s crumbling Soviet infrastructure, so long as OPEC stops the price of oil falling far.

HSBC is targeting consumer equities as rising pensions and the Medvedev welfare net unleash pent-up demand, rather than the energy shares that dominate Moscow’s exchange. Among the fund’s top picks are Magnit, the number two grocery chain with branches in southern Russia and the Volga, a play on 20pc annual growth in food retailing. It also likes food processor Cherkizovo, a catch-up play on meat consumption – now 62 kilos per capita (below Soviet levels of 78, the EU at 79, or the US at 117). “Cherkizovo has a return on equity of 20pc: that discount that is too big to justify,” said Mr Conroy.

Russian companies were hit hard by the global crisis because the lack of domestic bond market forced them to borrow abroad. Funding froze suddenly. Russia has learned the lesson. Home-grown bonds are driving recovery.

Yet critics remain wary. State spending has grown so fast that it now takes $90 oil to keep the budget in balance. The Reserve Fund has been raided, falling from $100bn to $30bn. The population will contract from 142m to 127m by 2050, according to the US Population Bureau.

India is a polar opposite: iffy in the short-run, irresistible in the long-run. Sanjiv Duggal, head of HSBC’s India Fund, said the country is near the “inflexion point” where per capita income (PPP) hits $3,000 a year, leading to a step-change in consumption growth. “The next ten years will take India to where China is today. It is a decade behind.”

Bombay’s bourse is the most costly of the BRICs on a P/E basis, but Mr Duggal said real estate is “under-owned” given that the ratio of house prices to incomes is near a modern low of 4.7. Maruti Suzuki is a way to gain exposure to the middle class blast-off story, claiming half India’s car market and 20pc sales growth; so is United Spirits, overtaking Diageo as the world’s top drinks producer by volume.

India weathered the credit crisis well thanks to a closed economy and a tough bank rules that impose a 30pc reserve ratio. Yet policy settings are now ultra-loose, with real interest rates of -5pc, a state and federal budget deficit above 10pc GDP (with subsidies), and a public debt at Western levels of 80pc. This scores badly in the BRIC beauty contest.

Meanwhile, the jury is out on whether China can manage a soft-landing using credit curbs after letting rip with $2.1 trillion of lending over the last 18 months. Optimists say Shanghai’s bourse has already purged excess, falling 55pc since late 2007.

Mr Timberlake said Beijing’s control over the banks gives it the tools to prevent the slowdown going too far. “They have taken their foot off the brake over the last few weeks,” he said.

He sees vast potential for a further leap forward as 1pc of the population – twice London – moves from country to city each year, shifting up the income ladder. “There are 400 cars per thousand in the West, and 28 per thousand in China. This is a huge structural story,” he said.

The catch-up sectors are health-care, travel, cosmetics, insurance, and luxuries like chocolate. China already has 450,000 dollar millionaires. Chinese have bought more Mercedes this year than Americans.

As usual, the US will lead events. The BRICS are strong enough these days to decouple if the US slowdown is just a soft patch: they will recouple fast if America stalls.

Read Links and Update yourself

  • China turns tables on AAA debt time bomb nations (Bloomberg)
  • Gold at new record high after Saudi reserves double (FT)
  • Germany and France examine two-tier euro (Telegraph)
  • So that’s why investors can’t think for themselves (WSJ)
  • Failed AAA-deal rated Rembrandt spurs outcry (Bloomberg)
  • Medvedev sees chance for new world order (FT)
  • Amid the crisis, Wall Street touted BP stock (Reuters)
  • Gold reclaims its currency status as the global economy unravels (Telegraph)