And Europe’s markets continue to fall… but there’s good money to be made elsewhere… especially in one particular corner of South-East Asia.
In a week when the IMF declared that the total losses from the credit crunch could reach $1 trillion, global markets have actually been doing rather well…In Asia this morning, Japan’s Nikkei Index was up 2.92%, Hong Kong was up by 1.6 per cent and India rose by 1.5 per cent. That followed what we saw in America yesterday…the Dow Jones was up 0.4 per cent, Mexico rose 0.7 per cent and Brazil closed up a fraction by 0.08 per cent.
Here at Profit Hunter, we’re always happy to see a market rise, but as we’ve said before, we don’t believe that the turmoil in global markets is anywhere close to being over…and here in Europe this morning, the markets seem to be agreeing with us – they’ve been falling fast.
An opportunity we could do without…
As the financial crisis rumbles on, though, people seem to be spotting “opportunities” all over the place. “Look at Iceland” says a colleague, “interest rates in the country are now at 15 per cent – you could make a killing just sticking your money in a bank there and living on the interest.” But when things sound too good to be true, they usually are. And when interest rates are at ludicrously high levels, you can bet that there’s a damned good reason for that. Iceland’s currency the krona, has already lost 25 per cent of its value against the euro this year…not our idea of a brilliant investment opportunity.
Russians profit from the weak dollar
From one floundering currency to another…The Moscow Times reports that the falling U.S. dollar has seen Russia’s steel elite buy-up almost 10% of the United States’ steelmaking capacity. With cash to burn from record profits, they’ve been betting that demand in the world’s largest economy will survive the global credit crunch.
Russia’s steel magnates built their fortune fortunes on the privatisation of Soviet-era steel giants and in the past few years, they’ve poured nearly US$9 billion into acquiring US mills to expand global presence. At today’s knockdown prices, they believe they are getting a bargain.
Look at Alexei Mordashov, - his acquisitions have made his company, Severstal, one of the top five steelmakers in the US. Mordashov says the weak US dollar is making Russian firms more competitive in the US. In the last two years, the US dollar has lost nearly 15% of its value against the rouble.
It isn’t just the falling dollar that’s giving Russia’s steel companies a leg up as they expand abroad, though. You see, having absorbed their own mines during a carve-up of the country’s mineral assets in the late 1990s, Russia’s steelmakers aren’t hobbled by the surging cost of raw materials. Russia’s push into the U.S. steel industry highlights one of the big economic trends of our time – the growing influence of the natural resources - in rich developing countries.
Russia’s steel barons have avoided the political scrutiny hampering other Russian attempts to invest overseas, so far, by buying at a time when parts of the US steel industry are on their knees.
Qatar looks set to take on the Russians
Over here in Europe, though, there’s been a growing sense of unease about the growing dependence on Russia for our energy needs. We source a huge part of our natural gas needs from the Russians and with the eastern giant’s energy industry so closely tied to its international politics, Europe is getting nervous – and in their search for an alternative source of gas supplies, an increasing number of European countries are turning to Qatar.
Qatar is already the largest single supplier of natural gas to Asia and is now ready to go head-to-head with Russia here in Europe. If anyone is going to be able to break the Russian’s stranglehold on gas exports to Europe, it’s the Qataris. They are already the world’s largest exporter of liquefied natural gas (LNG), and have unveiled plans to more than double its gas production.
On Wednesday, Qatar’s minister of state for energy and industrial affairs, Mohammed Saleh Al Sada, said gas production would be raised to 77 million tonnes by 2010, up from the present output of 31 million tonnes as new fields come online and further investment boosts output.
With the world’s third-largest gas reserves – behind only Iran and Russia – Qatar is seeking to maximise the benefits of its resources and to further diversify its client group.
Qatar’s planned charge into Europe is going down particularly well with the former Communist Bloc states of Eastern Europe – and you can’t really blame them. Poland currently imports 70% of its gas needs from Russia, so they were particularly peeved about having had supplies disrupted when Russia turned off the taps on its pipeline running through the Ukraine last year.
So now Polish officials have started talks with Qatar over forming a strategic partnership in a LNG terminal being built on the Baltic coast by the Polish Oil and Gas Company, in addition to supplying gas for processing and distribution.
The Hungarians are in an even worse state. They currently import 80 per cent of their LNG requirement from Russia and they’re keen on breaking that dependence as well. And then there is Spain. They don’t get their gas from the Russians – they get the bulk of it from Algeria. But they’ve had a series of disputes over pricing and the Algerians are demanding greater direct access to the Spanish market, which isn’t going down too well with the Spaniards…so now they’re scouting around for alternatives. Last year, Qatar supplied 13% of Spain’s gas needs, and that’s a figure both of them are looking to increase.
And Asia looks set to benefit…
If the Qataris do actually break Russia’s dominance in the European gas market, we are going to see a rapid acceleration in the transfer of wealth to the Middle East – and you already know how bullish we are on the region. But it is also going to mean a fresh tide of money into emerging Asia. As I mentioned yesterday, Qatar’s sovereign wealth fund, the Qatar Investment Authority, has been looking to aggressively expand its investment portfolio in Asia as a hedge against the falling dollar. We are betting that a good deal of that money will end-up in our favourite Asian economy – Vietnam.
For some time now, I’ve been telling investors about the over-whelming benefits of Vietnam, and why I believe there is no better economy to be in.
I’ve put together a report showing you why this is the case…
Learn more about this by clicking here now.
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