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from Global Investing:

Value or growth? The dichotomy of emerging market shares

Investors in emerging markets are facing a tough choice. Should one buy cheap shares in the hope that poor corporate governance and profitability will improve some day? Or is it better to close one's eyes and buy into expensively valued companies that sell mobile telephones, holidays and handbags -- all the things high-spending emerging market consumers hanker after?

At the moment, investors are plumping for the latter, growth-at-any price investment strategy. Result: a lopsided emerging equity index in which consumer discretionary shares are up more than 5 percent this year, energy shares have lost 7 percent while MSCI's benchmark emerging equity index is down 3 percent.

All markets have their share of cheap and expensive. But the dichotomy in emerging markets is especially stark. Analysis by Bank of America/Merrill Lynch of the biggest 100 emerging market companies revealed last week that the 20 most expensive stocks in this bucket are trading 11 times book value and 31 times earnings (both on trailing basis) while forward earnings-per-share (EPS) is seen at almost 30 percent. The top-20 companies all belong to the private sector and most are in the consumer-facing industries.  This year they have gained more than 50 percent.

Meanwhile the bottom 20 companies in the top-100 are mostly state owned enterprises and they come from the "old economy" -- banks, energy and materials. They are also cheap, trading less than 1 time book value and around 8 times trailing earnings. BofA/ML equity strategist Ajay Kapur writes:

from Data Dive:

The problem with moving away from coal power

On Tuesday, the US government announced it would stop investing coal power plants around the world in an effort to combat climate change. Here are the details from Reuters:

The U.S. Treasury said it would only support funding for coal plants in the world's poorest countries if they have no other efficient or economical alternative for their energy needs.

from Breakingviews:

UK’s nuclear rebirth comes at a fair price

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

David Cameron really is rolling out the red carpet for French investors - and no matter that they are state-backed. The first power plant of the UK’s nuclear reset will be built in the county of Somerset by a consortium led by EDF, the French government-controlled utility. UK taxpayers will guarantee the price paid for energy it produces from 2023. And EDF says it will meet its target of a 10 percent return on investment, in spite of making concessions during negotiations. The investor consortium - which includes two Chinese nuclear power groups, CGN and CNNC - will take on any extra cost and fund the plant’s decommissioning programme. This deal strikes the right balance, assuming energy markets do not suffer major turmoil.

from Counterparties:

The 40-year energy myth

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

This week marks the 40th anniversary of the 1973 oil embargo, when Middle Eastern producers, the members of OPEC, temporarily banned imports to the US to protest its support of Israel in the 1973 Yom Kippur war. “Crude-oil prices spiked, fuel lines snaked behind gas stations and years of stagflation followed”, writes the WSJ. Every president since has made a push to reduce the country’s dependence on foreign oil -- despite the fact that US consumers cannot divorce themselves from global oil prices.

from Photographers' Blog:

Uncovering Nuclear Britain

By Suzanne Plunkett

It sounds like the road trip from hell: a journey around all Britain’s functioning nuclear power stations.

After all, when the UK has so much to offer the traveller – from the bright lights of London to the ancient ruins of Stonehenge – why would anyone go out of their way to visit the far-flung places where the country has stowed its grim industrial reactor halls?

from Breakingviews:

Solvay pays up to tap into fracking market

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Solvay is paying up to tap into fracking. The $13 billion Belgian chemicals group is staking $1.3 billion on Chemlogics, a U.S. specialist in compounds for extracting oil and gas. The price looks high. But there should be tax savings, a sales boost, and a chance to ride the shale revolution.

from Breakingviews:

Apollo’s energy IPO gives new life to quick flips

By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Apollo’s latest sale gives new life to the quick flip. Leon Black’s shop is taking EP Energy public less than 18 months after leading a $7.2 billion takeover of the oil and gas company. That contrasts starkly with the trend of longer buyout holding times. The prospect of a twofold return shows that private equity can still dig into its old bag of tricks.

from Breakingviews:

Big Oil’s growth addiction is counterproductive

By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Big Oil has a growth addiction. The industry pours billions of dollars into projects with marginal returns to keep production rising. But the oil majors’ huge size means even huge new fields barely move the needle. Petroleum bosses would do better to follow Royal Dutch Shell, and ditch output targets. The best option may be to plan for shrinkage.

from Breakingviews:

Middle East turmoil perpetuates OPEC charade

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Turmoil in the Middle East and North Africa has been awful for the people of the region. The same cannot be said for OPEC, the oil cartel. The long list of crises – violence in Iraq, fear of sectarian spillover from the Syrian conflict, oil worker strikes in Libya and sanctions against Iran – has conspired to keep crude prices high.

from Breakingviews:

Fracking may change U.S. foreign policy for good

By Rob Cox and Christopher Swann
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

 

Fracking may be changing U.S. foreign policy. The abundant supply of hydrocarbons made accessible by hydraulic fracturing has nudged the United States the closest it’s been to energy independence in a generation and also creates a buffer for the global oil price. While all of this is relatively recent, the shift may give Uncle Sam new latitude in handling knotty affairs in Syria and throughout the Middle East.

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