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from Breakingviews:
Samsung investors should worry less about Apple
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Samsung investors are worrying too much about Apple. The company’s shares have slid on concern the iPhone’s maker might be buying Japanese memory chips to cut its dependence for parts on its South Korean rival. But Apple’s diversification only reflects how smartphone demand is outpacing parts supply. Apple still needs Samsung and Samsung’s valuation has fallen too far.
The gadget-maker’s shares fell 6 percent on May 16 on reports from Taiwan that Apple was putting in big orders for memory chips with Japan’s Elpida Memory. Apple might like to diversify: Samsung is not only a major supplier of parts, but its biggest rival. Samsung toppled Apple in the first quarter as the world’s most popular smartphone maker, according to research firm Gartner. Because Apple is Samsung’s biggest single customer, investors worry a shift by Apple will hurt Samsung’s 45.3 trillion won in quarterly revenue.
They can relax: sales of memory to Apple account for less than 1 percent of Samsung’s overall sales, according to Citigroup. Samsung makes more selling it logic chips and screens, but even those add up to only about 5 percent of total sales. Samsung’s parts by contrast make up an estimated 25 percent of the iPhone. Apple’s Elpida purchases most likely result from a shortage of supplies as it ramps up production of the iPhone 5. Samsung can’t easily dedicate more capacity to its U.S. rival.
from Breakingviews:
Samsung moves on from Japan to nibble at Apple
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Japanese may have pioneered the model of a vertically integrated electronics manufacturer, but Samsung looks to have perfected it. The Korean company started by pulling apart Japanese TV sets, then reverse-engineered the manufacturers’ business model. By avoiding their missteps, it’s driving them out of TVs and carving up the smartphone market with Apple. Now, as more business is coming from emerging markets, Apple needs to watch out for Samsung’s still-growing appetite.
from Global Investing:
Where will the FDI flow?
For years the four mighty BRIC nations have grabbed increasing shares of world investment flows. But the coming years may not be so kind. These countries bring up the bottom of the Economic Freedom Index (EFI) for 2012. Compiled by Washington D.C.-based think-tank The Heritage Foundation the EFI measures 10 freedoms -- from property rights to entrepreneurship -- and according to a note out today from RBS economists, there is a strong positive link between a country's EFI score and the amount of FDI (foreign direct investment) it can secure. So the more "free" a country, the more FDI inflows it can expect to receive -- that's what an RBS analysis of 2002-2008 investment flows shows.
So back to the BRICs. Or BRICS if you add in South Africa (part of the political grouping though not yet included in the BRIC investment concept used by fund managers). The following graphic shows Russia languishing at the bottom of the EFI, China just above Russia and India third from bottom. Brazil is sixth from bottom while South Africa ranks two places higher.
from Ian Bremmer:
The hope and beauty of a North Korean stalemate
President Obama’s recent trip to South Korea may have gained attention for his “open mic” slipup with outgoing Russian President Medvedev over missile defense, but that’s just a media distraction from the importance of Obama’s visit to the Korean peninsula. After Kim Jong Il’s death in December, the U.S. took an early lead in negotiations with North Korea – doing so because Obama and his team thought it could be an easy diplomatic win. With the promise of aid and food, the U.S. could let new leader Kim Jong-un quietly drop the consistently belligerent stance the country has taken in what passes for its foreign policy.
It’s now clear that easy win is not going to happen. Despite Kim’s titular status, we still don’t really know who is in charge in North Korea. While there have been no major coups, protests, or blowups, there have been plenty of smaller events, like military executions due to insubordination, that point to a high likelihood of purges happening in the regime. Now factor in that North Korea has gotten decidedly more, rather than less, militant on the nuclear arms front. Its announcement of a satellite test is a thinly veiled attempt to launch a long-range ICBM. The global community is perceiving it as such – with South Korea threatening to shoot the missile down. The vitriol coming out of the North Korean propaganda machine is as hardline and aggressive as we’ve seen in many years.
from Global Investing:
The haves and have-nots of the (energy) world
Nothing like an oil price spike to bring out the differences between the haves and have-nots of this world. The ones who have oil and those who don't.
With oil at $124 a barrel, the stock markets of big oil importers India and South Korea posted their first weekly loss of 2012 on Friday. But in Russia, where energy stocks make up 60 percent of the index, shares had their best day since November, rising more than 4 percent. The rouble's exchange rate with the dollar jumped 1.5 percent but the lira in neighbouring Turkey (an oil importer) fell.
from Global Investing:
The missing barrels of oil
Where are the missing barrels of oil, asks Barclays Capital.
Oil inventories in the United States rose sharply last week, with demand for oil products such as gasoline at the lowest in 15 years and crude stockpiles at the highest since last September. Americans, pinched in the wallet, are clearly cutting back on fuel use.
But worldwide, the inventories picture is different -- Barclays calculates in fact that oil stocks are around 50 million barrels below the seasonal average. And sustainable spare capacity in the market is less than 2 million barrels per day. What that means is that the world has "extremely limited buffers to absorb any one of the series of potential geopolitical mishaps." (Barclays writes)
from Global Investing:
Interest rates in emerging markets – - harder to cut
Emerging market central banks and economic data are sending a message -- interest rates will stay on hold for now. There are exceptions of course.
Indonesia cut rates on Thursday but the move was unexpected and possibly the last for some time. Brazil has also signalled that rate cuts will continue. But South Korea and Poland held rates steady this week and made hawkish noises. Peru and Chile will probably do the same.
from Breakingviews:
Korean spending spree sets right tone
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
South Korea’s spending spree looks wise. The government plans to spend 70 percent of its budget in the first half of 2012, and will likely throw in an additional Keynesian deficit-spending package. With presidential elections in December, that might seem a sop to voters. But Korea can afford it. And it has so far resisted the less sensible course of weakening the won to boost exports. The rest of Asia should follow its lead.
from Breakingviews:
China could be North Korea’s ally of last resort
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Conventional thinking has it that South Korea will one day absorb its impoverished cousin. But if the North collapses, it could be Beijing that has more interest in propping it back up. Like bailing out a bank, doing so would require China to inject liquidity and capital in return for more accountable management in Pyongyang.
from Ian Bremmer:
Fallout is just beginning in North Korea
By Ian Bremmer
The opinions expressed are his own.
There are many surprising things about Kim Jong-il’s sudden death, not the least of which is that it took two days for the rest of the world to hear about it. Yet most surprising is the sanguine reaction of the global and especially the Asian markets. On Monday, or actually Sunday as we now know, the world woke up to its first leaderless nuclear power. Coming as close as anyone could to filling his seat was his youngest son, who is in his late twenties. There’s no way these facts were accurately priced into markets that took just a relatively minor dip as a first response. The news from North Korea appears to have been taken far too lightly, and just a few days out, it’s disappearing from the front pages.
While Kim Jong-un’s status as heir apparent seems to tie a nice bow around the situation, let’s get real for a moment. The son of the elder Kim only appeared on the North Korean stage after a stroke necessitated succession planning in Kim Jong-il’s regime in 2008. Consider that founder of the country Kim Il-sung put his son, Kim Jong-il, in front of the citizenry as his heir for more than a decade before his 1994 death. That decade was precious time; time Kim Jong-il spent consolidating power and putting his own people into high government office— and he was over 50 years old when his father passed away. Kim Jong-un has been deprived of that head start; he’s got to rely on whatever ground his dead father managed to clear for him since his 2008 stroke. A couple of years at his father’s side -- and a promotion to four star general -- is scant time for the younger Kim to have developed a real plan for ruling, or real allies in government.
