A political party which occupies the right wing can engage in deals with its supposed enemies more easily than one from the center. That is the lesson of Nixon in China and Ariel Sharon in Gaza. (I misspelled his name in yesterday's blog but you know whom I meant.) Now it is Narendra Modi's turn. But before we hit the subcontinent let us glance at China.

Fitch and other raters think the China Natl Petroleum Corp $400 bn deal is good for OGZPY long term but it could hurt the Russian gas exporter's rating short term as it has to borrow money to develop the new fields. Russian companies may have difficulty raising money on international markets after the Ukraine dispute scuttled plans to borrow. Gazprom may also have to cut the dividend which last year exceeded its post-capex cash flow. The impact may also hurt lower-rated Russian sovereign debt after Putin agreed to remove the mineral extraction tax which would otherwise apply to the fields producing for China. Gazprom plans to list in Singapore thanks to its new Asian visibility and may raise capital with this.

China also produced a better (if still negative) purchasing managers index today.  We have ways to play this.

As promised yesterday, today we give you advice on buying into Pakistan, whose PM will probably be the first to attend an Indian inauguration, a major gesture from the BJP victor in Indian elections. Given Pakistani risks I'm reluctant to hop into any single US trader GDR from the Lahore stock exchange, and want a fund. There are, as I wrote for paid subscribers yesterday, 8 seasoned Global Depositary Receipt stocks US retail investors may legally buy. I think you should spread your risks.

My classmate Thalassa Ali, now a novelist, has given up being a broker and remarks that there are signs of prosperity in the country where she lived for decades: “terrible traffic due to everyone having a car or a motorcycle, and movie theaters jammed with customers.” And she is somewhat optimistic about Modi who “doesn't have to form a coalition government,” adding: “I am keeping my fingers crossed.” However she gave no stock advice.

Today there are no US-registered funds investing solely in Pakistan. Former closed-end Pakistan Fund gave investors their money back. There are funds out of Sweden and Switzerland, run by enthusiasts who have little reputation to lose, Tundra Fondes and Swiss Asia Frontier Capital Fund. They are too wild and unregulated for my taste.

And as I noted yesterday, many may have own a frontier emerging markets open-end fund, the successor of a closed-end fund we recommended before it converted. We don't cover open-end mutual funds, particularly not this one, Morgan Stanley Institutional Frontier Emerging Markets Fund, MFMIX, with a minimum initial investment level of $5 mn. In case you are not aware of my limits, I could not buy this fund today. But I do own about 1000 shares (with dividends reinvested) worth about $17,500. Pakistan is the fund's 4^th largest placement, after Kuwait, Dubai, and Qatar, but it is now nearly 10% invested in Pakistan, mainly because Lahore is up so sharply.

And that is before Nahendra Modi invited Pakistani Premier Nawaz Sharif to his inauguration, the first time since 1947 that this gesture was attempted.

The former Indian Prime Minister, Manmohan Singh and the deposed Pakistani self-appointed dictator-president, Gen. Pervez Musharraf, were both born across the Indo-Pakistan border of 1947, Musharraf in Delhi and Singh in Gah, in the Punjab near Islamabad. While the details are fuzzy, Musharraf and PM Sharif came to blows over a failed surprise attack on India in northern Kashmir, leading to Sharif's ouster and Musharraf's coup in 2001.

Between the two countries, the Radcliffe Line is fought over now mainly by high-strutting high-kicking border guards competing in a ridiculous nightly can-can dance, except in an icy glacier where neither country has much zest for battle and in Kashmir. But the bitterness remains. Pakistan's ISI (Inter Services Intelligence) is powerful and often behind attacks on both India and western troops in Afghanistan. The ISI probably protected Osama bin Laden in his hideaway in their key HQ city of Abbottabad near Islamabad, the capital. The army, while currently confined to barracks, has a history of coups and interference too. While the army is formally against the Afghan Taliban, the ISI probably helps it and also likely had a role in the terrorist attack on Mumbai 5 ½ years ago which murdered not just Hindus, but also any Jews the bombers could find at Nariman House including several rabbis and the resident Lubovicher rabbi's pregnant wife, plus Western hotel, restaurant, and cafe guests and their Indian staffers, taxi drivers, cops, and innocent by-standers. In the end 257 people were killed and over 700 wounded.

Apart from militarism and corruption, which are endemic, Pakistan also suffers from an oligarchic financial and business system. The Sharif, Bhutto, Gilani, and Imran Khan families rule over near-feudal rural fiefdoms and occasionally run Pakistan. Indian oligarchs are in business rather than agriculture and tend to stay out of politics.

Pakistani growth is well below that of India at under 4% forecast for this year. It suffers from murderous tribalism both in its northwest frontier region near Afghanistan and in feuds between Karachi and Lahore, and among speakers of Urdu (a variant of Hindi written with Islamic characters), Sindhi, and Punjabi. Ironically enough in its linguistic wars, minority speakers of the Pakistani language called Kashmiri are forced to learn Urdu.

Pakistan lacks India's flourishing service sector. While Pakistani wheat is in great demand because of problems in Ukraine, its cotton crop is being devastated by competing synthetics for clothing including one from one of our companies.

If you are willing to invest in such a country, here is a quirky way from respected Deutsche Bank management. More follows about this option for paid subscribers only along with notes about our companies from Hong Kong, Canada, Mexico, Venezuela, Austria, The Netherlands, Israel, and Japan.

*Before hitting the subcontinent, the way to play China's new role in developing Siberian gasfields is with Anton Oilfield Services Group, whose ADR trades as ATONY. It is up on the news and also on a better purchasing managers index.

*Up too is Canadian Solar, beneficiary in the wake of China showing it is serious about alternatives to coal, which have boosted the whole solar cell-photovoltaic sector. CSIQ.

*The Deutsche Bank Pakistan UCIT (a legal fund under the rules of the European Community) was incorporated a half dozen years ago in Luxembourg, a UCIT trading center, under a name only Germans could love, db XBAKLuxembourg Pakistan, and its cusip is LU0659579147. Unfortunately, Europeans have proven risk averse.

So 3 years ago this entity was listed as well in Singapore, another center of exchange-traded funds, and it there traded like a lead balloon, although it rose with the Lahore stock exchange boom.

Last year Deutsche Bank hit on another way to get its fund to lure in clients: it listed in a 3^rd market, Hong Kong, in the real Wild East. Formally called XDBMSCIPakistan ETF, this same fund now trades in 500 share lots in Hong Kong. And moreover we can buy it as HK:3016. Its bid is HK$15.28 and its ask HK$15.36. I bought overnight in Hong Kong with E-trade to test if this is doable.

As Harry Geisel wrote about Myanmar, sometimes you have to have “animal spirits.” He was quoting Maynard Keynes, by the way.

*The threat to Pakistani cotton comes from synthetic fiber firms like Lenzing of Austria, LNZNF, which produces upmarket cloth from wood. A Geisel recommendation, by the way.

*Tom Lyden of ETF Trends (helped by Max Chen) wrote that there are 3 ETFs specializing in Indian micro, small, and mid cap stocks: Market Vectors India Small Cap Index Fund (SCIF, expense ratio 0.93%, YTD gain 31.2%); EGShares India Small Cap Fund (SCIN, expense ratio 0.85%, YTD up 31.2%0); and iShares MSCI India Small Cap Fund(SMIN, expense ratio 0.74%, YTD up 23.8% ).

All three are mostly in mid-caps because funds risk moving markets against themselves if they buy smaller stocks.

*Not to be outdone, Deutsche Bank is creating a new China small cap ETF,Harvest CSI 500 China A-shares Fund, ASHS, which will invest in 500 China small caps in Shanghai and Shenzhen. No stock will beat a 1% stake in the total portfolio. It has a 0.82% expense ratio. Foreign retail investors are not allowed to buy A-shares in China which may only be bought by qualified foreign institutions for renminbi.

*Its central bank, the Reserve Bank of India, eased up allowing Indian imports to rise to 15 metric tonnes/mo from 5, because of a rising rupee after the election. However, other obstacles remain, a 10% import duty the most notable. Only jewelry companies are allowed to import gold and they must re-export 20% of the prior monthly import volume before they are allowed to import more the following month. The big test will come in the wedding season starting in August when Indians buy lots of gold. They will still have to pay about $50 more than the world gold price, Bloomberg estimates, down from the pre-election $100 surcharge. The prospects have revived the gold market and GLD moderately today.

*The successful $1.8 bn ipo on Nasdaq for JD.com is good for our Hong Kong owner of a 15% minority stake, Tencent, TCTZF, whose ADR shares my broker claims are still not trading in the USA, except as G87572171 valued at zero. This is an argument for owning the ordinaries, TCEHY, which are trading at $14.54. JD offset the rotten numbers produced by two existing internet Chinese firms: Weibo (WB) and Renren. RENN, sold, only wound up in the black with asset sales. I think that E-trade is making money out of the non-traded Tencent in an era of high-speed trading.

*Bloomberg today examined Teva and its boosted earnings estimates. The news service now expects that no generic will be launched for TEVA's 21% sales product against multiple sclerosis, when the patent expires May 24. It writes: “Every day that goes by without a copy of the daily Copaxone on the market allows Teva to convert patients to the new 3x/wk product. If generics are delayed another couple of months, Teva may wind up converting 70% of users” it wrote, quoting Ronny Gal of Bernstein brokerage. The analysts now think there won't be a copycat at all in 2014. Another broker at Bank of Jerusalem estimated that Copaxone generated half of Teva's profit last year.

Keena hora (no evil eye), the Bloomberg article credits TEVA management under Erez Vigodman with successfully blocking cheaper generics, perhaps until 2030, with legal and marketing smarts.

Another commentator, fiercepharma.com, noted that a trio of new drug launches YTD will also help Teva. They are: migraine patch Zecuity; DuoResp spiromax, a generic of Symbicort, Astra-Zeneca's asthma drug; and Adusuve inhaled to treat agitation in schizophrenia patients.

*We have some good news, some mixed news, and some bad news from Canada, our largest overweight. CIBC write up the likely Modi impact on fertilizer sales, noting that in Gujarat, the new PM's agricultural reforms boosted farm output with the “krishi mahotsavs” initiative which gave scientific guidance to farms on drip irrigation and efficient fertilizer use. It also subsidized fertilizers and improved storage and distribution of food produced.

The result was that Gujarat, accounting for only 5% of India's people, boasted 16% of the country's production and 22% of its exports. It is hard to sort out the agro side of the growth, but the land under cultivation grew 11.2% in the decade under Modi rule, vs 3.3% in the prior decade, and 2-3% in the rest of India in the last decade.

The CIBC analysts expect that Agrium, AGU, will benefit from more Indian demand for phosphates and potash, which it mysteriously called DAP and MOP.

*A small cap can be left in the cold. First Energy, a brokerage out of Calgary specializing in oil and gas stocks reported that Computer Modelling Q1 results were in line, at C$20 mn in revenues, held up by demand for oilwell services in the USA.Thanks to reader KH for sending me the report. CMG:Toronto increased its dividend and will split its shares 2:1 which should boost the share price, FE writes.

However it was hurt by non-payment of money it is owed by PDVSA, the Venezuelan state oil company which had stiffed all its creditors. It is duly up 1.4%.

*PDVSA singed a $2.2 bn financing deal to cover what it owes other oilfield service companies, including $1 bn for Schlumberger Ltd., SLB, which is Dutch incorporated, if managed from Houston. PDVSA is also in talks with Euroland oil companies to get more drilling under way. But CMG is too small for Caracas to care about.

*Bombardier is down some more, no longer over French rail carriages being too wide (the fault entirely of the French railways) but because the biggest C-Series customer, Republic Airways holdings, is doing a strategic review and may no longer complete its C$3 bn deal to buy full-size jets from the Quebec company. It may abandon them to fly smaller planes to feed regional passengers to major airlines. While Republic (of Indianapolis) has not canceled the deal but looking to flog the planes under firm order to someone else, which will put downward pressure on the price BDRAF can command when deliveries begin (enfin) in Q3 2016. For sure Republic will not exercise its options for 40 more planes. That's the bad news. Offsetting it, Bombardier landd a euros 247 mn (US$338 mn) contract from an undisclosed European railway for rolling stock. It is probably not the SNCF.

*Your editor finally managed to sell her Japanese-traded DeNA (2432) at ¥1295/sh, boosted by a happier outlook for the sector. And the yen is up.

Fund notes follow:

*Eduardo Garcia of www.sentidocomun.co.mx saved me pulling an all-nighter to cover Fibra Uno after my Pakistan purchase. He writes up the latest planned huge acquisition (worth NMP 23.5 bn or $1.82 bn) of the R15 portfolio announced this morning. The new deal dwarfs the late 2013 MRP purchase when FBASF spent $1.8 bn to buy 49 sites.

R15 is to be paid for with NMP 10 bn worth of shares, the same amount of cash (on hand and to be borrowed), and the assumption of NMP 3.5 bn of R15 debt. The buy consists of 15 stable operating sites and another 8 in advanced stages of construction and not producing income. The existing sites are 90% leased and the pending sites are only 70% covered by letters of intent to occupy.

The properties consist of 3 super-premium office blocks in Mexico City and Guadalajara; an industrial park in Mexico state; 11 super-premium and premium sites there and in Quintana Roo, Jalisco, Veracruz, and Sonora. The negotiations took 6 months. (Super-premium is Spanish for top-of-the-line.)

To finalize the deal, Fibra Uno will have to get okays from its corporate governance and technical committees, and then shareholders. The problem is that 25% of the portfolio being acquired belongs to related companies in the hands of Fibra Uno's CEO, André El-Mann. After a shareholder rebellion over compensation the company is stepping carefully in matters of transparency and corporate governance. Eduardo noted (my translation): “El-Mann is seeking to ingratiate himself with investors who objected when last year the company agreed to pay a higher commission to the fund adminstrator which is also its largest shareholder.” He adds: “Given the negative reaction, Fibra Uno rolled back the commission increase and created new commission and compensation plans.” In that March shareholder vote, the El-Mann contingent abstained. The same thing may not happen over R15.

“The question now is whether rigorous corporate management allows this operation to pass the review by minority shareholders that it is a good investment.” Mr El-Mann stated: ”We are excited about continuing to generate value for FBASF investors with acquisitions. It took several months of hard work by our team to set up this operation which we consider evidence of value creation by Fibra Uno.”