Articles List

Articles List

Growth Will Accelerate As Manufacturing And Public Investment Improve

We expect Mexico's economic recovery to grain traction in the coming months, following erratic economic activity in Q413 and Q114. We believe that accelerating manufactured goods exports growth and stronger household spending levels will be the main drivers of faster real GDP expansion. In addition, a recovery in public investment, following significant delays in 2013, will also contribute to stronger growth in 2014 and 2015.

Russian SMEs Vital To SAP Cloud Strategy

German software group SAP has announced plans to open its first two data centres in Russia, in an investment worth EUR20mn. This move is in line with BMI's view of the expected take-up of cloud-based IT software solutions by Russian businesses keen to leverage technology to improve their productivity and cost efficiencies.

Automakers Will Increasingly Look To Partner Lithium Producers

Although the growth in global lithium production has stagnated in the face of a well supplied market, we believe growing demand for li-ion batteries from the automotive and energy storage industry will create a surge in lithium demand in the coming years. While brine producers enjoy a cost advantage, most of these deposits are located in politically volatile regions, which we believe, will push more automakers to enter into partnerships with lithium producers to secure supplies of the raw material.

Yuan Weakness In Context

We continue to hold a bearish view on the Chinese yuan, yet are generally positive on most other FX markets across the region. We continue to hold a bullish view on the Indonesian rupee via our local currency bond view (which is up 13.0% in total return terms so far), and believe that the lows seen in the Deutsche Bank Asian Currency Index back in August 2013 may prove to be the low point for the cycle, particularly in carry-adjusted terms. We remain bearish towards the New Zealand dollar, on the other hand, which we believe is pricing in far too hawkish a monetary tightening cycle.

Upside Risks To Latin American Wheat Production

We see upside risks to our wheat production forecasts for both Argentina and Brazil for the upcoming 2014/15 harvest, as high prices encourage plantings. Compared with soybean and corn, wheat production is much lower in South America, but can still have a significant impact on regional food price inflation dynamics and the global wheat market. The improvement in production bolsters our view that the global wheat market will remain in surplus for the 2014/15 season, and we continue to forecast prices to average below spot levels.

Closing In On Top Africa Producer Spot

Over our forecast period new projects in Angola will drive oil production levels to challenge Africa's top producer, Nigeria, as Angola's oil industry is becoming an increasingly attractive investment destination. Total's decision to invest in the 200,000b/d ultra-deepwater Kaombo project supports our view that oil production growth from Angola will outperform that of Nigeria.

China Coal: Tough Times Ahead, Majors In Better Position

China's coal mining industry is set to encounter headwinds over the coming years as weak prices, along with the government's drive to consolidate the sector, force more marginal operations out of business. Major miners such as Shenhua Energy are better placed to withstand these challenges as they are often blessed with greater operating efficiencies due to their economies of scale. In contrast, the smaller players suffer from high delivery costs and funding constraints, making them especially vulnerable to a further slump in coal prices. These dynamics should aid in the country's plan to consolidate production amongst the largest producers over the medium term.

Ukrainian Crisis Enters New And Dangerous Phase

The Ukrainian crisis entered a new and dangerous phase over the weekend, after the Ukrainian government vowed to unleash a large-scale anti-terrorist operation against armed pro-Russian separatists in the eastern oblasts of the country. Russia's alleged support of separatists is pushing the country towards civil war: a strategy designed to coerce the Ukrainian government into accepting a federalised country rather than face an economic and political meltdown. While the Ukrainian government is unwilling to discuss the possibility of a federalised state granting significant autonomy to the eastern and southern oblasts, the situation is deteriorating so rapidly that this may eventually become the least unattractive option.

State Energy Plan Discourages Nuclear Power

The government of Japan prepared a final version of a draft energy policy that encourages the use of atomic power and curtails specific objectives for the use of renewable power, reports Bloomberg.

Jet Fuel: Smoother Landing For Prices Expected

The prices of jet fuel are expected to trend downwards, alongside an expected softening of crude oil prices in the next five years. Nonetheless, this decline will be tempered by a better outlook for both air transport and shipping with economic recovery in the US and Europe, though a more cloudy outlook for Asia underpins our projections for prices in Singapore to experience a faster rate of decline than in Rotterdam and New York.

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