A bear in a China shop has emerged, John-Paul Smith, senior stock analyst with Deutsche Bank. In a report published in mid-December, Smith said the same preludes to a stock market collapse which hit Russia in 1998 can be detected in Chinese markets today.

Symptoms of trouble ahead include excessive growth in corporate borrowing levels. He said in a Bloomberg interview Dec. 12 (only published this week): "There is potential for a debt trap in industrial companies which could trigger an economy-wide financial crisis as early as next year." That means 2014.

Smith, a British Oxford-grad historian, has been bearish on China and emerging markets since he moved to DB from Pictet Asset Mgm. in 2010. He made his negative calls on Russia earlier, while at Morgan Stanley after visiting Russia.

Last year his Cassandra prophecies panned out but he is not switching course (as he did over Russia in 1999 after the market drop.) He still thinks China is at risk of crisis.

He expects growth in the PRC to fall to below 5% over the next few years. Only then will the incentives for a turnaround in production and financing make the market cheap as Russia was in 1999.

China's total credit out, including off-balance sheet financing through non-banks, is now well over twice the country's gross national product, according to Fitch Ratings. Smith adds: "It is really at the corporate and the micro level in China that the fate of the financial market and the economy [will be] determined. China is not a safe haven as most commentators appear to believe."

Smith tends to be premature both in his forecasts of doom or recovery. He thinks China's slowdown could cause a 10% fall this year in emerging market stocks overall. "If I am wrong on China," he told Bloomberg, "I am wrong on everything."

More global updates follow including hot news (needed in this weather) from Finland, Britain, Mexico, Israel and Spain, plus Singapore, Brazil, Belgium, and Hong Kong.

*Patti the Biotech maven leads today with a report about Israel's Compugen's spending plans on cancer immunotherapy. CGEN will target new biomarkers to find checkpoint and product candidates for oncology antibodies. These will add 60% to the R&D spending levels of last year, to c$16 mn, for the small cap biotech research firm. It has $50 mn in available cash.

Being in California, Patti is glad that the San Francisco R&D center will be the site of more research, which will require that CGEN move to a larger site this summer.

CGEN shares rose sharply in Tel Aviv on Sunday and again in the US yesterday, because Yediot Ahronoth, a Hebrew-language Israeli newspaper, had the news last Friday, well before we did. Leaks are unfair to ADR owners and must stop.

*Yesterday I was rude about closed-end fund Mexican Equity & Income (MXE) for forcing shareholders to take most of their 2013 capital gains in shares rather than cash--and then have to pay taxes on the gains which may mean they must sell shares. MXE has good points too. Its best feature is that it doesn't track the Mexican index like exchange-traded funds and at least one other Mexico CEF.

Mexican pension reform will cost billionaire Carlos Slim, the second richest man in the world, on his low-return pension funds (AFOREs). His Inbursa funds, with which MXE's manager, Pichardo Inversion competes, lag the whole Mexican fund universe, returning only 7.1% over the last 5 years. They are invested almost entirely in short-term 6-mo bills, missing the rise in longer-term peso bonds, as well as in stocks. If the Mexican AFORE reform includes incentives based on performance, Slim's outfit will lose out.

Apart from Slim's AFORE for Mexicans, US funds (except for MXE) have market-weighted his main holding, America Movil L shares (AMX) and sometimes doubled up into America Movil A shares (AMOV-Q). Both went nowhere in 2013. AMX fell from $23.55 at its start to $23.37 at its end. AMOV went from $23.62 to $23.32. In the latest Forbes, Dolia Estevez wonders if 2014 will be the year Slim's Telecoms empire crumbles.

Under new Mexican regs the telco will have to share with other operators the so called "last mile" of its near monopolistic Mexican network connecting customers' phone and internet. Slim's group controls 80% of Mexican landlines via Telmex and 70% of wireless telecom through Telcel.

The independent Institute of Federal Telecommunications (IFT) is taking on the Mexican monopoly to boost competition and cut the Slim's high rents. These cause Mexican telephone services to be grossly overpriced and hold back the whole economy.

Back when I started Global Investing 25 years ago I published an analyst's revelation of how Slim gained control of the Mexican telecoms market by charging his eventual customers fees paid to the government for the acquisition. Apart from suspected kickbacks, Slim took his time connecting customers to the network. They only got service 18 to 25 months after paying their connection fee. In the interval Slim has become the second richest man on earth. (More on closed-end and exchange-traded funds below.)

*Ecopetrol is being dumped. EC was rated neutral by Citigroup last month because of higher planned investment this year and a reduced oil production target. I can't find any other reason. In a December regulatory filing in Bogota, EC said it will spend $10.6 bn to extract 819,000 barrels of oil/day, vs earlier estimates of 828,000 bbls/d. C has a target price of $39 for the stock, above the present $37 level, dropped from its earlier estimate of $48.

*Finnish financial group Sampo is reportedly plotting to buy Britain's RSA Insurance, according to UBS. SAXPF is moving to stop a breakup of RSA after it had to cancel a capital increase because of accounting irregularities at its Irish sub which caused capital writedowns.

SAXPF wants the Nordic and Baltic RSA business and may spin out the rest, according to The Financial Times. UBS also raised its RSA price target to GBP 1.13 because the insurer is expected to suspend its dividend. The Guardian, another UK newspaper, says the breakup price may hit GBP 1.29. Sampo is known for never overpaying, however.

*Spain's Telefonica denied press reports that it is plotting to sell the Telecom Italia Brazil unit in a regulatory filing to the Italian Consob regulator. The shares of both firms rose. We have a horse in this race to consolidate Brazilian telecoms, Portugal Telecom, PT, which now owns Oi. TEF is up a further 1.75% today while PT is up 1.3%.

*Another Spais stock we own, Santander (SAN), is gaining because of hints that Spain (and Ireland) are firmly recovering. Its shares are up 3.4%.

*Global Logistic Properties (GLP) of Singapore signed leases with Brazilian fashion retail Riachuelo for its Gaurulhos logistics site near São Paulo. The charge for the lease, of 106 thousand sq meters, was not released. CGEN is spinning out real estate management companies, along with partners from the pension world, because it is running out of cash.

*After my puzzlement yesterday on why Tencent floated up despite the Chinese low purchasing managers data on service companies, TCFZF also fell. I guess others noticed.

*Delek Group will go back to being a financial holding if it manages to spin off its Israeli offshore natural gas holdings into a new company listed in both Israel and Wall St. Its first sale of Leviathan gas to a Palestinian ute (Palestine Power Generation Co of Jenin) is good news for Israel; but a co-listing on the NYSE and the TASE is not so good for Israelis, while great for us.

*One reason for the self-exile is that Israel remains a country with powerful unions and lefty politics. The current victim is Israel Chemicals, ISCHF, whose union aims to block exports of potash and bromine from the Dead Sea works being exported via the Red Sea port of Eilat. ISCHF says the boycott hasn't affected its shipments.

*Teva seems to be moving toward sacking Dr. Philip Frost as chairman of its board and naming Erez Vigodman as CEO. The share was added to coverage at RBC Capital Market with a hold. The share is up on optimism, +1.4% today despite some lawyers trolling for class action litigants because TEVA failed to tell us that CEO Dr Jeremy Levin would be sacked.

*I got an English notification of part of the news of Van Herk investing in Galapagos NV reported based on Dutch sources yesterday. I got it right.

*The Wall Street Journal warns that exchange-traded bond funds failed to track their net asset value last May and June during the first round of worries about the taper. Institutional investors are supposed to buy and sell packages of the underlying bonds while (in reverse) selling and buying the ETF to keep the prices aligned. But when markets go wrong, thinly traded bonds are not easily traded by the institutions. So the ETFs moved to discounts althouh the bonds were not traded. I think this may also happen in 2014 and also affect foreign bond ETFs. So of this may help generally discounted bond closed end funds, two of which reported to close-Nov. yesterday.

*Aberdeen Asia Pacific Income Fund, FAX, one of my poor picks for 2013, reported that it closed Nov. 53% invested in sovereign and state securities, 5% in supranationals, 40% in corporate bonds, and 2.2% in cash. It also had $600 mn in leverage which is puzzling: why borrow if the fund has cash on hand? The whole point of a closed-end bond fund is that it is supposed to be fully invested as there is no redemption risk as with an open-end mutual fund. Aberdeen is puzzling.

By country, the fund was 41% in Australia where there are lots state-govt and federal bonds, 37.3% in A$s; it was nearly as heavily in US issues but they were not for US borrowers. Instead the $ pile included 11.2% in South Korean risk; 10% in Chinese; 5.8% in Indonesian; 5.6% in Hong Kong; 5.3% in Malaysian; 5.1% in Filipino; 4.4% in Thai and Indian risks (even); 3.1% in Singaporean; and dribs and drabs in Sri Lanka, New Zealand. There also were bonds issued in other western currencies like the C$, sterling, and euros used by Pacific Rim borrowers.

*Stablemate Aberdeen Global Income Fund, FCO, is also leveraged and also had cash on hand, in that case 2.9%. FCO is nearly as exposed to emerging markets, at 18.5% by geography but more diversified by currency: 27% US$; 20% A$; 19% NZ$; and 12% C$ as well as 13.3% sterling, and 2.7% Euroland. Under 6% of its emerging markets exposure is in local emerging market currencies.

Its largest stakes are in UK gilts, followed by Australian govt bonds, New Zealand ones, and Canadian and Brazilian ones, both at 2.1%.