Daily Archives: Dec 3, 2014

By John-Paul Rathbone and Andres Schipani

Socialist Venezuela would never sell out its friends to Wall Street, right? Yet it appears that is exactly what Caracas wants to do. Pressed by the oil price collapse, rattled by fears of default, facing rising social tension as imports collapse due to lack of foreign exchange, and seemingly unable to put its economic house in order, the country is trying to raise desperately-needed cash by selling debts owed to it by the Dominican Republic and Jamaica on to Goldman Sachs. Chavismo turns to the vampire squid?

The idea has been circulating for a while in the investment banking community. But now details have emerged in the press, as reported by El Nuevo Herald, and Petroleum Argos. Essentially, the trade involves Venezuela securitizing debts owed under its $3.5bn a year subsidised oil program, called PetrocaribeRead more

By Amit Bhandari, Gateway House

Petroleum prices touched a new four -year low of $72.5 per barrel after the Organization of Petroleum Exporting Countries (OPEC) decided last week against reducing production . The 35 per cent price drop is a huge relief for India, where petroleum products comprise a third of the import bill. Cheaper oil means narrower current account and fiscal deficits, and reduced prices at the pump for consumers shopping for food-grains, vegetables, cement and steel.

Can this happy situation last? Will 2015 be the year in which high oil prices do not disadvantage India? Judging by history, it may be.

Before oil prices began to rise in 2003, a 20-year run of price stability fuelled global growth. But cheap oil killed off investments in exploration and production. OPEC gained market share, from 30 per cent of global production in 1983 to over 40 per cent by the end of 1990s. Read more

“Today it is clear that Ukraine’s non-aligned status, proclaimed in 2010, cannot guarantee our security and territorial integrity. We must abolish it. This position has led to serious losses. That is why we have decided to return to the course of Nato integration.”

So said Petro Poroshenko, Ukraine’s president (pictured), in a speech to the new parliament in Kiev last week. It came just a fortnight after Moscow described the possibility of Ukraine joining Nato as a “red line” in its relations with the west and demanded, in the words of a Russian presidential spokesman, a “100 per cent guarantee that no-one would think about Ukraine joining Nato.” Read more

For Tony Fernandes, CEO of AirAsia, the recent fall in the price of oil was an early Christmas present. By the end of the day last week that the airline boss had taken to twitter to express his delight, the price of Brent crude had fallen further to $69.78 a barrel, its lowest price in four years.

Fernandes’ enthusiasm can be easily understood. Airlines spend more than 30 per cent of their operating costs on fuel: the oil price fall means higher profits for the industry, which can now lower fares to attract more customers.

Stock market investors have also been buoyant toward airlines. US airlines have seen their stocks surge over the past two months, while China’s three largest airline companies gained over 10% last week. Meanwhile, airlines in the Asia-Pacific have been reported to be waiting for oil prices to fall more before “hedging” their fuel needs for the next year in an attempt to capitalise on the price slide. Read more

** FT News **

* Anger as Russia scraps $50bn gas plan | South Stream pipeline decision dismays eastern European states

* Israel’s governing coalition collapses | Move paves way for 2015 elections and suggests PM thinks he can win a fourth term Read more

Mexico will be able to boost imports of cheap US shale gas by 45 per cent now that the first phase of a major new $2.5bn gas pipeline is up and running, Enrique Peña Nieto, Mexico’s president, said after inaugurating the Los Ramones project.

Pemex, the state oil company, is billing it the “biggest transport infrastructure project in Mexico in the last 40 years”. The pipeline will bring US gas in the first phase to the northern Mexican state of Nuevo León, and when it is fully finished, a year from now, down to the centre of the country, some 1,021km in all. Read more

Some might call it investing Nirvana. Combine a company with a steady – inevitable, even – growth in its customer base with a trend towards higher spending. Sell it as a rare route into the growing wealth of the ethnic Chinese middle class. The enterprise in question is even called Nirvana – and it sells funeral services.

Nirvana Asia, a southeast Asian undertaker, opened the books on its $300m initial public offering in Hong Kong on Tuesday. Late in the first day of a week-long roadshow, bankers reported bids had already covered the shares on offer.

The deal would create in Hong Kong a mini-sector of what bankers like to call “deathcare services” following the listing last year of Fu Shou Yuan, a China-focused group in the same business, which enjoyed a 45 per cent opening day bounce. Read more