Global Markets, Global News

While it is not good news, there is now confirmation that recession fears are not just a passing blip on the stock market radar. Asian shares fell across the board by hefty amounts this week, notably in Japan where indexes fell the most so far in 2019. Even Australia finally sold off stocks. Trade talk worries are further hurting China stocks along with indications of lower growth. The White House is playing hardball, by selling fighter jets to Taiwan.

The European Union is dissing the Belt and Road venture as politically risky despite one old member, Italy, offering Trieste as a recipient. Germany is a key loser with both growth indicators down and corporate policy under the gun. Deutschland is no longer uber Alles in the case of bankrupt Germania Airlines, Volkswagen's outlook after its emissions fraud, how Monsanto poisoned Bayer AG, and what to do about Deutsche Bank and Commerzbank. Luckily we are in a different German niche.

The price of Dr. Copper, which is a traditional way to judge economic growth (because the metal is so widely used), also turned down. Haven stocks like utilities, REITs, gold, and high yielders run by rockstars rose. Meanwhile stocks in growth-dependent sectors like financials, pharmaceuticals, energy, autos, airlines, and were mostly lower. The US indexes again all were lower.

Political news was still hard to fathom, notably the FBI report which only partially exonerates President Trump for misdeeds over Russia, but not over obstruction of justice. The Thailand poll seemed to give solace to the military rules of that country against populist opponents. The Israeli election was again thrown into confusion by a rocket from Hamas out of the Gaza Strip, which kept PM Netanyahu from his planned victory dance with AIPAC and his meeting with Pres Trump today. He flew back because 7 Israelis in Tel Aviv were wounded by the rocket attack, undermining Israeli boasts that they can shoot them down.

We have news from Chile, Hong Kong, Japan, South Africa, The Netherlands, Switzerland, Israel, Italy, Germany, Egypt, Britain, Canada, and Sweden, Norway, Finland, and Denmark (getting all 4 Scandinavian countries gives me a gold star.)

*To begin with, the stock which finally lost traction today was Antofagasta of Chile, whose primary listing in London. It was tipped as a buy by Citigroup analysts there but fell all the same. ANFGF.

Energy and Autos

*Delek Group will hold its conference call on April Fool's day at 8:30 am. According to Globes Israel, a news site quoting Bloomberg, Delek is considering buying into an Egyptian gas liquefaction facility, either Royal Dutch Shell's Idku or Damietta LNG plant or Union Fenosa's Damietta stake. With Noble Energy, the Israeli firm signed to sell $15 bn of Israeli offshore gas to Dolphinus Holdings. But a deal on the Nile Delta would mark a new breakthrough for the Israeli group which discovered the appropriately-named Leviathan gas field offshore Israel. Bloomberg was told “no comment” but the Cairo Petroleum Ministery, but that may not hold.

Delek is headed by Yitzchak Tshuva, a so-called Mizrahi Israeli, who was raised speaking Arabic, and he has long worked both officially and unofficially to make deals with Israel's neighbors who speak his native language. Tshuva also is boosting the output at Leviathan.

Tshuva also plans to spin off some holdings of its Delek Drilling sub (listed in Israel but without an ADR) on the London Stock Exchange with partners. To prepare for this, DD is doing deals both in marine and land exploration is Israel and the UK.

One of the Israeli deals is being done in partnership with SOA, a firm headed by an Israeli Arab who owns licenses to drill in the Judean foothills. It has offered its boss, Said Sansour, as much as $1 mn for a third of his 75% rights to drilling licenses for Ofek and Akko. The aim is to craft a venture with both Jewish and Muslin Israeli participation. Mr. Tshuva offers a better way for the Jewish State to treat its Arab citizens and neighbors based on economics and interests rather than religion.

*The heirs to Giovanni Agnelli who control the stock of ostensibly Dutch Fiat Chrysler (FCAU , sold) are seeking an exit via a deal with another auto company. Peugeot would be a good fit but it did a deal with Ford. Volkswagen is under a cloud over emissions and EBIT macht frei. I think the Elkann clan's 25% stake held via Exor needs a new leader after the death of Sergio Marchionne because a disproportionate part of their wealth is bound up with Fiat. Maybe another family group Tata Motors (TTM, sold) will become the target. Exor is Dutch and the top Elkann is American but Fiat is still considered to be Italian.

*Japanese Nissan CEO Hiroto Saikawa in 2012 put his chop on the $40 mn retirement package given to board member Carlos Ghosn who is now being blamed and jailed for allegedly hiding his deferred compensation. Nissan also agreed to pay him a bonus depending on results and allow him to use residential properties, a key accusation against the Brazilian-Lebanese-French chairman.

*Schlumberger Ltd CEO Paal Kibsgaard at an energy conference said that SLB will stop taking on management contracts for new oilfields because of hefty upfront charges. Instead, it will focus on monetizing existing deals. SLB stock fell sharply at the opening here today but now has recovered and its only down 0.56%. It is the largest oilfield services firm on earth and is incorporated in the Dutch Antilles, but run from Paris and Houston.

*Hoegh LNG Partners, Ltd. is a winner today from Norway, up 0.3%. It was recommended by Joe Shaefer with whom we trade newsletters. It is a yield play.

*US oil drilling is slowing according to Baker Hughes. But Canada is not able to supply Japan because of lockouts on the West Coast including, of course, our Pembina Pipeline, PBA, of Canada.

*The sun is shining in India and Azure Power is up 0.3%. AZRE is a pure solar play boosted by the country's huge oil deficit, regardless of the price of oil


*Tencent's 31% shareholder, Naspers, today announced plans an H2 $134 bn Dutch Euronext market spinoff of a 10% stake in TCEHY plus holdings in Russia's Mail.Ru, German Delivery Hero, India's MakeMyTrip, and US online marketer Letgo. NPSNY will keep 75% of the new Euronext stock. Naspers shares currently trade at a discount from the valuation of its Tencent stake alone. While exact terms of the Dutch listing are still a work in progress, (we don't even know what it will be called!) it will become the largest consumer tech stock in the European space—and we own lots of it already. I have been selling Tencent shares to buy more Naspers since last summer, and I'm glad I did!

Dow-Jones Marketwatch figures that NPSNY is aiming for Europe because it will get a lot of passive money and because it wants to be a big fish in a smaller pond. But then the writer spoils his article by saying Naspers is the largest tech company you never heard of. We heard of it thanks to Harry!

Harry Geisel explains why: “Naspers was originally De Nationale Pers Beperkt, (est. 1915) which produced a newspaper for the country's White Afrikaners, a propagandist for the National Party which took control of South Africa in 1948. In the 1980s it began to expand beyond the press into video entertainment, online ads and payments, and even food delivery.

“I saw Naspers shift from defending apartheid to the decent and progressive company it is today. I was surprised that they bought control of the Natal Witness, the only independent South African newspaper and then did not touch its editorial side. When Black Economic Empowerment laws were enacted, they made an important move different from other large firms. They did not offer cheap loans to politically well-connected blacks to buy their shares. Instead, they created a program offering loans to buy NPSNY shares only available to their own colored employees.”

Naspers last year raised nearly $10 bn with a sale of 2% of its stake in Tencent which dates back to 2001. But it is unable to unlock the value by selling it because this would cause huge capital gains bills. Moreover, despite being undervalued, many investors in South Africa have to sell down their NPSNY stakes because of diversification rules.

Tencent's diversification moves and those of Masayoshi Son of Japan, the head of Softbank and a separate SON private capital arm in which the Saudis invested, means that there is a lot of competition in finding good startups. The future Dutch variant of Naspers of South Africa is a likelier winner.

While NPSNY fell in Johannesburg trading it is up over 1% here. It recently opened a Silicon Valley office to find mobile, payments and other startups to invest in. The share yields just under 7.5% and recently spun off its African pay TV arm to shareholders which has rocketed up.

*Abhimanyu Sisodia writes:

While the launch of the Nintendo Virtual Reality Switch extension was largely aimed at children (or their parents), today NTDOY announced plans this summer to launch new products for serious gamers like me. First will be a sophisticated model making Switch compatible with an at-home PS4 or other consoles. There also will be a cheaper portable console taking on Sony or Microsoft (although it still is behind on the technology). Nintendo is expanding to products for both addicted and casual gamers.

*Vivian adds: the very modest moves are a hint that gaming is not going to remain the key tech in 2019 which casts a cloud over other entrants, like Tencent, which hopes to make enough on ads and buying startups to make up for the problems which result from market weariness and Beijing's hostile scrutiny.

*A rare China winner is Holly Systems, HOLI, up 04.%. It makes robots which build railroads, a likely way for Beijing to boost the Chinese economy without also giving funds to heavily indebted local governments.

*Nokia won a 5G order from Telekom Austria, a long-term pal. The value of the deal was not given but it involves both radio transmission and a cloud core network. Despite this, NOK shares are down another 0.8% today on the NYSE and have been crashing all day over concerns about the issues over how material to its stock the way it wrongly accounted for the merger with Alcatel-Lucent will be. NOK is also losing altitude as it trades at a very high p/e ratio. We have owned it since it took over ALU. This may be a buy opportunity but I am waiting a bit to see how the dust settles.

*AT&T, the US 5G “E” entrant, in fact, is slower than some 4G networks which rather makes a case for either Huawei or Nokia or Ericsson. More on the latter below. But our horse in this race is NOK.

*With newer tech stocks limping today, good old Microsoft is now rated outperform by Royal Bank of Canada. And Apple is being bit into heavily because it will announce a streaming service and a news aggregator today for its iPods and iPads which briefly took the DJIA into the black, but


*Eisai (ESALY of Japan) fell sharply last week after partner Biogen's Alzheimer drug failed phase III trials. UBS put a sell on Eisai today at $53.55. I am not sure this is the right move. BIIB is obviously badly hurt but given Japanese demographics and its experience with cognitive problems, ESALY is not going to stop working in this area where it has an edge against Swiss drug firms like Novartis and Roche. Another product for cognitive decline from Israeli Neuronix lost an FDA vote today.

*Arch Oncology, of California, developer of AO-176, gained a $50 mn financial round in which our Swiss Roche was a participant alongside non-pharma private equity groups. Moreover, it is a female-headed firm under CEO Julie Cherrington. Other start-ups RHHBY went for include Forty Seven, also in California, which has another way of attacking tumors, called Hu5F9-G4, according to today's fiercebiotech blog.

*Novartis, (NVS) will spinoff Alcon, formerly ACL, on April 9 about 8 years after it unfairly bought out the US listed eye drug firm via a Swiss backdoor deal with Nestle. The gaggle of US class action law firms ready to fight for shareholder rights did not object to this deal which was opposed by the Alcon board. Luckily ACL turned out to have been a bad idea and it is now being spun off. But I note that the new Alcon will be HQ's in Switzerland just in case.

*Danish Novo Nordisk bought back DKK 1.393 bn of its shares last week in the market sell-off under a program allowing it to buy up to DKK 15 bn between this Feb. and next Feb. It has so far spent DKK1.608 bn so last week was the big one.

*Teva fell to the equivalent under $15.92 briefly in Israeli and European trading today and is still in the dumps.


*Internet Wealth Builder tipped Swedish-Swiss ABB (formerly Asea Brown Boveri), which was picked up by Nancy Zambell for WallStreet'sBestDividend Stocks, published by the Cabot Group. We own ABB the easy way as it is a key holding of Investor A/B, the Wallenberg banking group's holding company which we own as a proxy for the non-existent Scandinavia Fund.

This closed-end fund existed when I started GI and we owned it until it was bought out at the typical discount price for CEFs by the piratical Vix group. We then went into Swedish holdings companies and alternate between Investor and Industrivarden depending on their appeal. Investor of course also owns Ericsson, why we don't own it outright.

*SPDR Gold is rising again, up 1.1%. GLD.

*IPE , our TIPS SPDR ETF, is also an alternative to stocks and bonds and also rising.

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Ayelet Wolf 3 years ago Member's comment

What's your latest take on $TEVA? Also do you have an opinion on $BVXV?