By Wayne Arnold

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

Trafigura’s move to Singapore could test Singapore’s fat-cat fatigue. The commodities trader is moving its HQ from Geneva to Singapore, where its CFO Pierre Lorinet will join Facebook founder Eduardo Saverin and a stream of bankers drawn by its low taxes and proximity to growing Asian markets. But a warm welcome may depend on new arrivals’ ability to create local jobs.

Hanging a shingle in Singapore has some obvious advantages, starting with its low corporate tax rate of 17 percent. Trafigura should be able to take advantage of tax incentives that cut its rate to 5 percent or lower. Like Switzerland, Singapore has no capital gains tax and allows companies to exempt income earned offshore. That could be particularly useful to a company like Trafigura whose $122 billion in business passes through 81 offices in 54 countries.

Personally, Lorinet and the 30-odd executives moving with him can look forward to their income tax rate going down from a maximum 51 percent in Geneva to below 20 percent.

Given Singapore’s growing role in global commodities trade, the only wonder is what took Trafigura so long. Situated along one of the world’s busiest shipping lanes, Singapore connects China with the Gulf, Africa and Indonesia. It is the world’s second-busiest port after Shanghai and Asia’s largest oil hub. Singapore’s international trade in commodities rose 46 percent last year to over $1 trillion, which explains why other traders including Anglo-American, BHP and Cargill have moved staff to Singapore.

The more companies move to Singapore, the more it will ask for something in return. Singapore’s attempts to lure well-heeled entrepreneurs, scientists and private bankers have helped push the population up by 65% in just 20 years. A third of its workforce is foreign. Angry with rising prices and income gaps, voters in last year’s elections handed the ruling People’s Action Party its lowest returns since independence in 1965. It has responded by raising the bar for foreigners setting up companies, and promised to lower limits on how many foreigners companies can employ.

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

After 50 years of isolation, Myanmar now faces the danger of being deluged by foreign cash. With U.S. sanctions suspended, it is open season for investment. While inadequate legal and financial infrastructure is unlikely to deter them, they’ll need to work with authorities to make sure their cash doesn’t fuel inflation, inequality and corruption.

Rich in gems, timber and natural gas, Myanmar needs just about everything else: modern consumer goods, hospitals and schools, roads and phone systems, banks, power plants and hotels. And though the global economy may be sputtering, Myanmar’s GDP is growing at roughly 10 percent. Clearing away sanctions altogether will take time, but the suspension frees foreign investors to seal deals in the hope that Myanmar doesn’t backslide on political reform.

Great care is required, though. Would-be investors may be surprised to find payments still conducted using pallets of cash. ATMs are not linked, credit cards still a novelty. With the economy dominated by state enterprises, banks have little experience in commercial finance. And the law still requires that imports be paid for in export receipts.

Myanmar appears keen to encourage foreign-owned ventures and reward them with tax holidays, but it has yet to publish finalised laws or implementing regulations. Its judiciary is not independent and official corruption is rife. Property rights are murky and land grabs increasingly common. Keeping corruption in check may require hiring independent auditors to keep public contracts above suspicion. And for UK and U.S. investors whose governments prosecute corruption abroad, venturing into Myanmar will mean laying a paper trail visible from London and Washington.

The IMF estimates that foreign direct investment will soar roughly 50 percent this year to $3.4 billion, equivalent to roughly 7 percent of GDP. But incoming foreign-exchange is managed by state banks, not the central bank, which has few tools to mitigate the inflationary impact of such inflows. Myanmar has floated its currency, the kyat, doing away with a system that valued it 120 times the black-market rate. The IMF reckons the kyat is still overvalued and demand from foreign investors is likely to push it even higher.

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.

The launch of the new iPhone in June may be a bigger worry for Samsung, particularly amid slowing growth in China. But global smartphone sales still grew by roughly 45 percent in the first quarter, with Samsung’s mobile sales soaring by 86 percent thanks to the popularity of its larger, 5.3-inch, Galaxy Note phone-tablet. Apple is following suit by swapping the iPhone’s 3.5-inch screen for larger 4-inch LCDs in the iPhone 5.

Investors are discounting Samsung too much. The company’s should grow by 62 percent in 2012, according to consensus forecasts, yet after this week’s decline, the shares trade at just 8.2 times projected 2012 earnings. That’s below Apple, and other peers like LG Electronics and SK Hynix. Investors should have more faith.

By Wayne Arnold

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

Asian bonds seem likely to gain from growing anxiety about Europe and China. The region’s robust finances have made its sovereign debt a safe haven as larger economies sputter. An indiscriminate sell-off would hurt everyone, but Indonesia, Japan and the Philippines all have qualities that should give them greater resilience.

Worse-than-expected economic data from China and the prospect of a Greek exit from the euro zone have sparked a stampede from risk assets. Investors fear global growth will slow, and that the sell-off will snowball. One way bleaker conditions in Europe could reach Asia is through its banks. European lenders pulled at least $135.8 billion in credit out of Asia in the second half of 2011, according to the Bank for International Settlements.

Asian sovereign bonds should benefit from weaker growth, lower inflation and lower interest rates. The safest are those that are also less vulnerable to outflows. Indonesia, for example, has public debt of less than a quarter of GDP – even Germany owes three times as much. It has relatively little short-term external debt and a much lower reliance on credit from European banks than other Asian economies. Yet the government’s 10-year bonds yield 4.7 percentage points more than Treasuries.

Japan, despite bonds that yield less than Treasuries and a government debt 1.5 times larger relative to its economy than Greece’s, is safer still. Foreigners own less than 7 percent of its bonds, which limits the potential for forced selling, and Japanese deflation has kept demand steady. By contrast, foreigners hold 80 percent of Australia’s government debt.

The most unlikely refuge is the Philippines. Though impoverished, its government has managed to build a $76 billion foreign reserve buffer, equivalent to almost six times its short-term external debt, and finances 95 percent of its public debt at home. Yet Philippine bonds still pay 4 percent more than U.S. Treasuries. Such trades are still risky – not everyone wants to go long the Philippine peso. But the worse things get elsewhere, the more palatable that risk may seem.

By Wayne Arnold

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

China’s stand-off with the Philippines over disputed islands in the South China Sea puts Manila in a difficult spot. While the Philippines has the support of U.S. military muscle, China is its number-three importer, and it needs China to help fund new mines and fill new casinos. Whoever gets to tap the oil and gas beneath the South China Sea, China would be the biggest buyer. That argues for a peaceful, face-saving solution.

What’s at stake is an atoll called Scarborough Shoal, roughly 200 kilometres from the Philippines and four times as far away from China. China has 13th century records it says establish its claim to the shoal, the entire South China Sea, its fish, and the 2 quadrillion cubic meters of natural gas it estimates lie beneath it – 30 percent of proved global reserves. Its trawlers already have free roam, and the sea’s claimants have agreed to exploit its hydrocarbons jointly. So China already has what it wants in function if not in form.

Manila has taken advantage of Washington’s recent tilt toward East Asia to reaffirm military ties. That buys it insurance and can mollify local nationalists. But Beijing is unlikely to react well to any real sabre-rattling: with its Politburo in transition, leaders can’t afford to seem weak on sovereignty. China hasn’t yet overplayed its hand, but that doesn’t mean it won’t.

Economic threats can be equally potent. China is already discouraging tours to the Philippines and threatening trade and investment. China’s $790 million in direct investment into the Philippines in 2011 was tiny, but stands to grow as Manila tries to double mining exports by 2016. China’s $6.1 billion in imports make it the Philippines’ third-largest export destination. And developers are building four casinos in Manila to lure Chinese gamblers.

Even if the Philippines managed to shoo China from Scarborough’s undersea riches, it would ultimately have to negotiate with China to buy them. Manila thus needs a way to defend its claim without demanding China abandon its own. As the Middle Kingdom expands, its economic heft will inevitably chafe its neighbours. Its challenge will be to create as little offence as possible; for neighbours it will be to avoid taking any.

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

China has emerged as a weak link in Asian trade. Asia’s exports to the United States are rebounding, offsetting a sharp slide in shipments to Europe. Recovering demand from the world’s largest economy would normally mean more exports to the world’s largest factory: China. But as Beijing reins in growth to rebalance its economy, it seems to need fewer raw materials, parts and machinery from its neighbours. 

Exports to the United States have become a relative bright spot for Asia’s economies as the American economy slowly picks up. China’s exports to the United States grew 12.8 percent in the first quarter, offsetting a slight decline in exports to Europe. Japan saw a similar 12.5 percent increase in exports to the United States, while those to Europe shrank 9.4 percent. South Korea’s U.S. exports jumped 24 percent, compared with a 17.7 percent slump in shipments to Europe. 

The surprise is China. Normally when export demand from the United States is strong, Asian exports to China also jump. As a rough estimate, two-fifths of everything China exports is made from imported components, and at least one-fifth of everything Asia exports to China is used to make something bound for global markets. So for example, when China’s exports to the United States recovered in 2010 to grow 28 percent, Korean exports to China expanded by 35 percent. 

But as China strives for more sustainable growth, it is reining in investment, which accounts for roughly half of its GDP. One of the biggest declines are imports of machinery and electronic equipment from Japan, which dropped more than 12 percent in the first quarter. Base metal imports from Australia slumped more than a fifth. As China gets its economic house in order, it may no longer prove as powerful an engine for Asia’s export growth as once hoped.

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.

Samsung, which made its name in televisions, is more of a smartphone company. Phones account for most of its sales, and earnings growth. It sells more of its Galaxy product than Apple does iPhones. Yet Samsung is still turning a profit on everything it makes. It has a larger share of the global TV market than Panasonic, Sharp and Sony combined, and is making money. It even makes money on LCD panels and memory chips.

Japanese companies say they are hurt by the rising yen, which erodes earnings abroad. Korea’s won has fallen 29 percent against the Japanese currency in the past decade. On average, though, the won has dropped only about 1.7 percent a year. The cheap won was probably most helpful to Samsung in the 1980s, when the price advantage gave it breathing space to make up ground on quality.

Samsung did learn from its neighbours’ mistakes, though. Japanese firms made their own parts, and avoided trading with rivals. Samsung is a major supplier of chips and screens to competitors like Apple. The Japanese cannibalised the TV market by developing both LCD and plasma-screen. Samsung bet on LCDs. The Japanese stuck to a more profitable home market for mobile phones. Samsung discovered a new world of profit overseas.

The problem for the Japanese – and Apple – is that Samsung can now outmuscle them. Sony spent only half the $2.4 billion Samsung shelled out on R&D last quarter. And though Apple’s investments are ample, it is having to turn to Sharp and Sony to reduce its reliance on Samsung for high-end components.

By Wayne Arnold

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

Thailand’s weak exports don’t dent its reconstruction tale. Rebuilding after 2011’s floods is likely to produce a V-shaped recovery. Falling European demand is a worry, but investment is booming and output should too once factories reopen. Government handouts will prop up rural consumption, which augurs well for earnings and stocks.

The world’s largest exporter of rice and rubber, Thailand is also the 14th largest vehicle producer and the second-biggest source of computer hard drives. So like Japan’s earthquake and tsunami last March, Thailand’s October floods had a wider impact than expected, throwing its own economy into reverse and disrupting electronics and automotive shipments worldwide.

Global investors are betting that Thailand will rebound even more sharply than Japan did. They’ve bought $2.7 billion in Thai stocks this year, according to Nomura, helping push the benchmark index up more than 17 percent. Yet stocks still trade below 10 times 2012’s estimated earnings, below their 10-year historical average.

Thailand is likely to deliver GDP growth this year of at least 5.5 percent. Automakers have resumed full production, according to Moody’s, but electronics plants are running at less than half pre-flood levels. Restarting them should result in a sharp rebound. Repairing them boosted investment by 8 percent in the first quarter.

Exports might appear the weak link. Gross exports are equivalent to 71 percent of Thailand’s GDP, and they are sliding, particularly to Europe. But part of the slump is because factories were shut. Once they’re up and running, exports should rebound.