How China Drives the Global Economy

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

Unless investors get spooked over the weekend, the S&P 500 Index will post its second-best month since the post-World War II era, according to a report published today by GaveKal Research. The last time markets rallied so strongly, Gerald Ford had recently moved into the White House and Muhammad Ali “rumbled in the jungle” with George Foreman.

A few weeks back, we noted that Citigroup’s Panic/Euphoria model signaled an extremely negative sentiment level, indicating that higher equity prices should follow. Read: Can Markets Find the Road Back to Positive Territory?

 

Other contrarian signals that can often be used as a guide when investor sentiment swings to extremes are cover stories reflecting bullish or bearish sentiment. A current example is the October 31 edition of TIME magazine, which features “The China Bubble” with a photo comparing China’s economy to the delicate nature of a blown-up piece of bubble gum. In addition to the European debt crisis and the “Occupy” movement, the media has latched onto the slowdown in China. However, many contrarian investors find these types of magazine covers signal a possible attractive entry point.

We’ve stated many times we don’t believe the Chinese economy is a bubble, but that does not mean a significant slowdown wouldn’t affect the global economy, especially natural resources. This is because China’s economic transformation over the past few decades has cast the country into the forefront of demand. PIRA Energy Group says that, in 1990, China’s share of oil and GDP was less than 5 percent; its share of world energy was just under 10 percent. Since then, China’s share of energy, GDP and oil has risen dramatically, with each expected to be approximately 28 percent, 21 percent and 16 percent, respectively, by 2025.

Despite the moonshot trajectory of China’s 20-year growth, Bernstein Research says the country still has a lot of catching up to do to reach the level of the developed world. Take oil consumption, for example, where China’s consumption of 2.5 barrels per capita in 2010 is still very low compared with the 22.1 barrels per capita that the U.S. consumed. Bernstein estimates the growth in consumption will increase to 3.6 barrels per capita in 2020, this amount is only a fraction of the consumption in the U.S. and half of Europe’s.

Looking out over the next five years, a portion of China’s oil demand will come from transportation fuels. Bernstein thinks the country is at an “inflexion point” and the demand for cars and the fuels necessary to make them go should grow “more quickly than GDP.” During the last 10 years, the number of vehicles has grown at an annual rate of 17 percent, and since 2007, more new vehicles are on the roads than “put on to the roads over the [previous] 30 years,” states Bernstein.

Although car sales have slowed in recent months because of the government’s monetary tightening policies and the ending of a stimulus program for car buyers, the long-term desire for auto-mobility remains. Bernstein expects the number of vehicles to double in China, from 78 million to 155 million units over the next five years.

While demand in China plays catch-up to the developed world, developed world companies are tapping this resource to find growth. These are companies such as Caterpillar, which reported a “record-breaking third quarter” this week, with sales and revenues increasing in every part of the world. Most notably, the industrial bellwether saw a 38-percent jump in sales and revenues in the Asia-Pacific region.

During the company’s conference call, CEO Doug Oberhelman said that he supported the actions taken by the Chinese authorities to slow its economy. In his view, this was “the best thing that could have happened to the construction equipment industry.” He thought China was previously growing at an unsustainable pace, and now this slowdown is “extremely healthy” in the long-term, he added.

Health can be a relative term when comparing equities. Right now, China appears to be a “healthy” place to invest compared to U.S. stocks. Bloomberg data shows that companies in the MSCI China Index had a higher revenue per share, a higher earnings per share, a higher dividend yield and a lower price-to-earnings ratio than the stocks in the S&P 500 Index.

Chinese Companies Have Attractive Valuations Compared to S&P 500
	Revenue Per Share *	Earnings Per Share*	Price-to-Earnings Ratio	Dividend Yield
	MSCI China Index	24.0%	27.1%	9.3	3.5
	S&P 500 Index	8.7%	16.8%	13.7	2.1
Source: Bloomberg * Trailing 12 Month Year-over-Year Growth, as of latest third quarter earnings Note: MSCI China Index represents investable Chinese companies traded in Hong Kong or China B Share markets

 

China’s economy is expected to grow by 9.1 percent this year and 8.4 percent next year, according to Barclays Capital. This is quite significant when you consider that the global economy is anticipated to grow at a much slower pace of 3.7 percent in 2011 and 2012. While our investment team continues to closely monitor China’s economic health, it appears that the companies in the country still have some room to grow.

 

Index Summary

• The major market indices were higher this week. The Dow Jones Industrial Average gained 3.58 percent. The S&P 500 Stock Index rose 3.78 percent, while the Nasdaq Composite was higher by 3.78 percent.
• Barra Growth underperformed Barra Value as Barra Value finished 4.04 percent higher while Barra Growth increased by 3.55 percent. The Russell 2000 closed the week with a gain of 6.82 percent.
• The Hang Seng Composite finished higher by 12.21 percent, Taiwan rose 4.98 percent, and the KOSPI increased 4.96 percent.
• The 10-year Treasury bond yield closed 11 basis points higher at 2.33 percent.

 

Domestic Equity Market

The domestic stock market as measured by the S&P 500 Index was 3.78 percent higher this week, driven by improving investor sentiment as European leaders put forth a package of measures intended to rework their bailout fund, recapitalize European banks and reduce Greece’s debt.

All ten sectors of the S&P 500 increased. The best-performing sector for the week was materials, which increased 7.87 percent. Other top-three sectors were financials and energy. Consumer staples was the worst performer, up only 0.22 percent. Other bottom-three performers were utilities and consumer discretion.

Within the materials sector, the best-performing stock was Allegheny Technologies, up 23.79 percent. Other top-five performers were Cliffs Natural Resources, U.S. Steel Corp., Freeport-McMoRan Copper & Gold and AK Steel.

 

Strengths

• The real estate services group was the best-performing group for the week, up 24 percent on the strength of its only member, CBRE Group. The company, formerly known as CB Richard Ellis Group, reported earnings in-line with the consensus estimate and revenue above the consensus. The stock had been weak recently due to investor concern over potential weakness in commercial real estate due to a potentially slowing economy. However, the stock surged this week as investor sentiment improved.
• The coal & consumable fuel group gained 18 percent, with all three group members contributing to the gain. Consol Energy reported quarterly earnings and sales above the consensus estimates. Peabody Energy reported results roughly in-line with the consensus.
• The diversified metals & mining group outperformed, up 17 percent. The group was led by its largest member, Freeport-McMoRan Copper & Gold, which benefited from higher copper and gold prices during the week.

Weaknesses

• Household appliances was the worst-performing group for the week, down 10 percent on weakness of the group’s only member, Whirlpool. The appliances manufacturer reported earnings and revenue below the consensus estimate.
• The personal products group lost 7 percent on weakness in member Avon Products, which reported quarterly sales and earnings below the consensus estimate.
• The internet retail group underperformed, down 6 percent, led down by members Amazon.com and Netflix. Amazon reported earnings below the consensus estimate. Netflix, on the other hand, beat estimates on earnings, but disclosed that the company had lost 800,000 subscribers during the third quarter due to a price increase. The company also guided fourth quarter earnings well below analyst expectations.

Opportunities

• There may be an opportunity for gain in M&A (merger & acquisition) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

Threats

• A mid-cycle slowdown in the domestic economy would be negative for stocks.
• An escalation in concerns over sovereign debt obligations in Europe would be negative for stocks.

 

The Economy and Bond Market

 

Treasury yields were higher this week as European leaders reached an agreement in principle to recapitalize the region’s banks, address the Greek debt situation and expand the European Financial Stability Facility. This agreement largely removed the threat of another full-blown financial crisis and money shifted back toward riskier assets.

Another piece of good news that supported riskier assets this week was the release of third quarter GDP data. GDP rose 2.5 percent in the third quarter, matching expectations but also quieting some critics expecting the U.S. to fall back into a recession.

 

Strengths

• The resolution of the immediate crisis in Europe was the most significant positive event this week.
• GDP rose 2.5 percent in the third quarter as consumer spending rose 2.4 percent.
• September durable goods orders, excluding the volatile transportation sector, rose 1.7 percent. This is the largest rise six months.

Weaknesses

• Consumer confidence fell to the lowest level since March 2009, which was the bottom of the global financial crisis. Concerns surrounding jobs and real incomes drove the survey down.
• Global news flow continues to point toward an economic slowdown as U.K. factory orders fell to the lowest level this year, the Bank of Canada sharply reduced its fourth quarter GDP forecast and expectations are for growth to slow below four percent in Brazil next year.
• Inflation risks remain as the Reserve Bank of India raised interest rates by 25 basis points due to stubbornly high inflation.

Opportunities

• With the European news behind us for the time being, investors will refocus on economic data such as next week’s ISM manufacturing report, the Federal Reserve Open Market Committee (FOMC) meeting and October unemployment data.

Threats

• While the current European plan to deal with the crisis is a positive step forward, many details still need to be worked out. Moreover, the plan does not deal with potential problems in other European countries such as Portugal, Spain and Italy.

 

Gold Market

This visual shows the rise of dividends in the gold sector. Both Newmont and Eldorado have sweetened their dividends recently by linking them to the gold price. Newmont will pay an extra $0.35 per share should the gold price rise above $1,700 an ounce. Similarly, Eldorado has promised to increase its dividend by 50 percent should the gold price average $1,500 to $1,649 an ounce.

For the week, spot gold closed at $1,743.75, up $101.37 per ounce, or 6.17 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, rose 12.18 percent. The U.S. Trade-Weighted Dollar Index slid 1.71 percent for the week.

 

Strengths

• With another eventful week, the performance for our gold-oriented funds was in line with the benchmarks and peers. Silver led the precious metals up 17 percent for the week, while gold gained 6 percent. In the silver space, Sabina Gold & Silver surged 38 percent and Silver Wheaton gained 24 percent. Gold stocks gained about 12 percent on average, roughly twice the lift in bullion, which reflects positively upon putting money to work in the stocks.
• Other noteworthy gains for the week among stocks were seen from CB Gold, up 172 percent, and Jaguar Mining, which gained 41 percent. CB Gold recently announced positive drill results and sold a 10 percent stake in the company to Lumina Capital for $10 million on Thursday. CB Gold was not alone in the news for the Colombian space, with IAMGOLD announcing that it would spend around $23 million buying minority stakes in three Colombian-focused exploration companies: Bellhaven Copper & Gold, Tolima Gold, and Colombia Crest Gold.
• Indian demand for gold remains strong despite increasing prices for the precious metal. India’s festival of lights brought a healthy amount of buying into the market while traders noted that people preferred to purchase gold coins this time instead of spending on jewelry.

Weaknesses

• Agnico-Eagle’s share price this week continues to reflect a negative sentiment from last week’s write off of Goldex, Agnico-Eagle’s lowest-grade operating mine. The stock is down 27 percent over the past 20 days despite reporting a record nine-month gold production of 757,668 ounces compared to 731,138 ounces in 2010.
• Agnico-Eagle’s production growth per share has outpaced both Barrick Gold and Newmont Mining for the most recent quarter while its peers both have negative production growth per share over the trailing year. In addition, Agnico-Eagle’s average gold equivalent grade relative to Barrick and Newmont is 192 percent and 230 percent higher, respectively. This implies there is more certainty that a dollar of revenue will fall to the bottom line as profit with Agnico.
• Argentina issued a presidential decree on Wednesday stating that the country will require all oil, gas and mining companies to repatriate export revenue. For the most part, share prices for companies with Argentinean exposure were punished more than the news would justify. This provided an opportunity to buy on the perceived bad news and take a handsome profit the following day. President Cristina Fernandez won a landslide re-election days earlier and has initiated a strong move to put a brakes on dwindling central bank reserves. Freezing money from leaving the country would also stop any new investment from coming in, thus compounding the problem.

Opportunities

• With clarity coming from a debt agreement reached at the EU summit this week, commodities surged with the good news and the U.S. dollar continued to lose ground against the euro. The trend of a weaker dollar is likely to be a continued theme over the next month as the market begins to focus on debt issues here in the U.S. The Congressional super committee, which is charged with figuring out how to cut $1 trillion or so from the federal budget over the next decade, appears to be at an impasse.
• In the middle of earnings season, MiningWeekly highlighted that mining M&A activity could pick up in the fourth quarter, as companies have been reporting higher levels of cash than in the past. This is mainly attributable to the increase in the price of gold. Ernst & Young says that, “cashed up companies [may] take advantage of recent declines in valuations.” M&A activity dropped 6 percent during the first three quarters of 2011, as markets were reacting to speculation regarding China’s slow economic growth. Recently announced takeovers include: Agnico-Eagle buying Greyd Resources, New Gold acquiring Silver Quest Resources, and Endeavour adding Adamus Resources to its portfolio. With recent evidence of M&A activity in the industry, there may well be more to come.
• Barrick and Newmont announced on Wednesday a dividend increase for the fourth quarter as the price of gold increased cash levels for both of the world-leading gold producers. Barrick and Newmont increased their dividends by 25 and 17 percent, respectively. Newmont recently unveiled its plan to link dividend payments to the gold price in April (see chart above), and has since increased it in September. The company has pledged a $0.20 per share increase for each $100 an ounce rise in the realized price of gold. Eldorado Gold has also announced an enhanced dividend policy that links its payout to the gold price and the number of ounces sold. It is anticipated that its next payout will be 67 percent higher.

Threats

• Julius Malema led hundreds of South African young black youth on a march to the Johannesburg Stock Exchange on Thursday to petition for the government to do more to tackle chronic unemployment stifling the continent’s biggest economy. The Youth League demanded the State take 60 percent control of the mines and all mineral processing plants situated close. The nationalization of South African mines was one of the group’s requests handed over in a memorandum to the South Africa’s Chamber of Mines.
• Australia finalized details of its anticipated 30 percent mining tax and aims to introduce legislation into parliament as soon as possible, Mineweb reported. The tax is to be imposed on large iron ore and coal mines, which principally export their products to China. It has been forecasted that the mining tax will raise $7.7 billion (Australian) in its first two years and $535 billion by 2035 for the government’s pension system.
• The failure of socialistic policies in Europe, whereby countries borrow to finance government payrolls, is still falling on deaf ears. In the U.S., Senator Harry Reid noted that it is more important to protect government jobs versus private sector jobs. This is quite ironic considering that the U.S. Bureau of Labor Statistics shows government workers currently have the lowest unemployment rate of any industry or class at 4.7 percent. Meanwhile, the national unemployment rate is running at 9.1 percent.

 

Energy and Natural Resources Market

 

Strengths

• The commodities complex, including industrial metals and crude oil, gained across the board as markets welcomed a deal by the eurozone leaders this week. West Texas Intermediate (WTI) crude oil gained nearly 7 percent and copper jumped more than 14 percent this week as investors’ risk appetite exploded. Commodity-related equities also rallied which drove gains in the Global Resources Fund (PSPFX).
• Macquarie Research highlighted that U.S. durable goods orders, excluding transportation equipment, rose 1.7 percent in September. This was greater than the consensus expectation and is the strongest reading in the last six months.
• Scotiabank noted that copper inventories in Asia are falling at a rate of 50,000 tonnes per week, creating upward pressure on the copper price. The rapid decline means there’s potential for zero inventories by Christmas.
• Rising oil prices have led to a rise in corporate earnings for energy companies. Major producers including Exxon Mobil, Royal Dutch Shell and France’s Total reported strong earnings results for the third quarter this week. Both Exxon Mobil and Royal Dutch Shell reported earnings 40 percent greater than a year ago, while Total’s profit rose 13 percent over the same time period, according to Resource Investing News.

Weaknesses

• Despite positive numbers across the board for the week, the Alerian MLP Index and the Baltic Dry Ships Index were laggards in the sector. However, each saw positive gains, up 3.1 percent and 3.8 percent, respectively.
• A Macquarie report this week noted that the latest SteelBenchmarker assessment by World Steel Dynamics has again highlighted the pressures facing the steel industry. The benchmark World Export hot rolled coil (HRC) price fell 4.2 percent over the past 14 days to $656 per tonne, the lowest since December 2010.
• Non-OPEC oil supply outages have been running twice the level seen in 2010. Further evidence of the supply-side deterioration was seen in the extremely poor set of August numbers for U.K. domestic production. At 808,000 barrels per day, total production is at its lowest levels since 1978.

Opportunities

• Data compiled by Bloomberg this month shows that traders have rising bullish expectations for the agriculture sector. Options traders are snatching up protection against declines in agricultural stocks at the fastest rate in four years. Puts to sell the Market Vectors Agribusiness ETF outnumber calls by more than 2-to-1, the largest discrepancy in almost a year. Over the past month, $2.7 million has been invested in the agribusiness ETF, second-most among all U.S.-listed global equity ETFs.
• China will be reporting its October HSBC Manufacturing Purchasing Managers Index (PMI) on Monday, October 31. The flash PMI announced this past Monday showed expansion in the Chinese manufacturing sector for the first time since mid-summer and the country contributed more than half of global incremental oil demand for the month of September, according to the Financial Express. An accelerated PMI could have a meaningful effect on commodities.
• A shortfall in diesel fuel supply is spreading across China. The Xinhau news agency is reporting that private gas stations are scouring the country for diesel supplies and lines are growing longer at filling stations in major cities. Diesel fuel shortages are common in the winter but longer and heavier-than-usual refinery maintenance mixed with a reduction in retail prices could create the perfect recipe for a squeeze once again this year. PetroChina imported 120,000 tonnes of diesel fuel in October to meet the increasing demand while China National Petroleum Corp. (CNPC) is running its refineries at full capacity. Refinery runs have increased 5.7 percent on a year-over-year basis and the company has encouraged refineries to reduce naphtha output to allow for higher diesel production. Further, CNPC has said that it will raise refinery runs to the second-highest level on record next month in order to maximize diesel output.
• Resource Investing News says rising production costs are putting downward pressure on fertilizer profits. Fertilizer production is very energy intensive, with production requiring significant amounts of sulfur, ammonia and natural gas. Analysts worry that rising input costs and shrinking margin profits may negatively impact the entire industry. However, Potash Corporation of Saskatchewan anticipates improving margins over the near future due to “economy of scale” in terms of potash production. According to Potash, “with demand expected to rise, we believe our expanding potash capability provides a unique growth opportunity. The powerful levers of selling more volumes at higher prices, with the potential for lower per tonne operating costs, offer significant gross margin potential in the years ahead. Beyond the opportunity for margin expansion, the potential for lower per-tonne mining taxes and improved earnings from our equity investments provid es significant growth potential.”

Threats

• September PMI data across Emerging Europe will be released on November 1. Roubini Global Economics (RGE) is forecasting further weakening in manufacturing conditions, reflecting a decline in export orders and weakening growth outlook in the eurozone.
• On Wednesday, Freeport McMoRan declared force majeure on shipments of copper concentrates from its Grasberg copper mine in Indonesia as an increasingly acrimonious labor strike over pay and conditions continued into its fifth week. Mineweb suggested that this would mean that the company is not anticipating a protracted period of disruption at the mine.
• In the midst of earnings reporting season, Resource Investing News reported that many analysts are skeptical about producers being able to reach their production targets. As an example, Exxon Mobil will need to pump out 5 million barrels a day to reach its 4 percent growth target for 2011. For the September quarter, Exxon Mobil reported producing 4.28 million barrels a day. Analysts have speculated that one problem for the producers is that companies must sign production-sharing contracts with local governments in some countries. This means oil producers receive a smaller output when countries cash in on rising crude prices. Such agreements are prevalent in Africa, which accounts for 20 percent of Exxon Mobil’s crude oil supply.

 

Emerging Markets

 

Strengths

• China’s Flash PMI in October came in at 51.1, its first reading above 50 in four months. A PMI reading above 50 indicates the economy is in expansion mode and Asian markets have reacted positively to the news.
• China’s resources tax policy has been revised to be based on sales. It was previously based on production, which could have an adverse effect on corporate earnings when natural resources prices are down. Also, the tax was confirmed to be at 5 percent instead of the prior proposed rate between 5 and 10 percent.
• China has created 9.93 million jobs during the first nine months of this year and the country’s unemployment rate now sits at 4.1 percent. This is evidence of China’s robust labor market.
• After September’s slower inflation figures, China is probably passed the inflation inflection point. From October 17 to October 23, vegetable prices dropped 2.5 percent, and pork prices, the major driver of this year’s inflation rates, were down 1.8 percent on a week-over-week basis. Declining inflation should relieve the People’s Bank of China from further monetary tightening.
• China’s Premier Wen Jiabao said that the country’s economic policy will be fine-tuned as needed. China’s industry ministry said it is studying “stimulative policies” for smaller companies as a global slowdown threatens growth.
• China’s Shanghai Composite Index rose 6.74 percent with increasing volume for the week, reclaiming the 50-day moving average for the first time since the end of July. It was also the first uninterrupted “up week” in a year. However, the index is still down 12 percent year-to-date and its price-to-earning ratio is at the low of 2008.
• According to Citigroup, emerging market equity funds reported a second week of inflows as investors became more optimistic about the eurozone debt crisis. Funds investing in developing-nation stocks took in $1 billion for the week ended October 26. Adrian Mowat, JPMorgan Chase & Co.’s Hong Kong-based chief Asian and emerging-market strategist, said that, “we are now calling for emerging markets to outperform the developed markets. Everything in emerging markets got considerably cheaper in the last year.”
• Russia left borrowing costs unchanged after inflation slowed to 6.9 percent. Economic growth expanded the most in three years last quarter as lending to households spurred demand, Russia’s Economy Ministry said this week.

Weaknesses

• Korea’s third-quarter GDP expanded 0.7 percent from the prior quarter. This is down from the 0.9 percent growth seen during the previous quarter but slightly better than the consensus estimate. Consumer confidence in Korea slightly increased but is still trending lower.
• Barclays Capital highlighted that Thailand’s flood is the worst in more than half a century, and may have wiped out as much as 14 percent of paddy fields in the world’s biggest rice exporter, potentially erasing the predicted global glut of rice. The crisis has severely affected large and small farmers alike. Many are also looking at more damage because they have been unable to move their animals in time to save them. One of the government’s recent measures has been a temporary waiver of the 2 percent import tariff on soybeans, a major ingredient in feed production, in order to help the livestock industry keep costs under control.
• Brazil’s September jobless rate remained unchanged in September at 6 percent, higher than expected. It had been anticipated that it would fall to 5.8 percent.
• Colombian policymakers held borrowing rates at 4.5 percent as they gauge the impact of the European debt crisis on global growth.
• Faced with a widening current account deficit, the Turkish Central Bank tightened monetary policy. The bank scaled back its weekly repo auctions and will instead provide funds via its overnight lending facility.

Opportunities

• BM&FBovespa SA CEO Edemir Pinto said that there are 40 companies waiting to list on Brazil’s stock exchange once market volatility eases after the country’s central bank cuts interest rates to boost growth, Bloomberg reports. Pinto, head of Latin America’s largest securities exchange, said the worst of the recent financial turmoil is over and investors will return to Brazilian stocks. He maintains his forecast for 200 new share sales by 2015.
• The yield on 10-year bonds issued by Poland fell below the yield on Italian debt of the same maturity on the expectations of a rating upgrade to A- from S&P.
• Russia’s 18-year quest to join the World Trade Organization (WTO) moved closer to fulfillment this week after Georgia agreed to a Swiss proposal for a compromise between the two governments.
• This chart from BCA Research shows that China’s infrastructure spending per capita is still much lower than the amount the U.S. has invested in its roads, rails, telephones, living spaces and passenger cars. Therefore, BCA forecasts China’s infrastructure build-out will continue, in turn boosting demand for natural resources and machinery.

Threats

• Sales of residential properties in Shanghai fell 14.9 percent during the first nine months to 10.63 million square meters, the Shanghai Statistics Department said. Facing increasingly tight liquidity conditions, swelling inventory and slowing sales, more Chinese developers have moved to cut prices by 30 percent in order to lure customers, Phoenix News reported from Hong Kong.
• RGE reported that a recession in developed markets, continued deleveraging in the eurozone and risk-aversion stemming from the eurozone debt crisis will hit Africa mostly through trade channels and higher financing costs. Despite sub-Saharan Africa’s overall resilience, limited financial integration on a global scale and depressed developed markets could hold back the region’s expansion. As a result, RGE has reduced growth forecasts to 4.8 percent in 2011 and 4.7 percent in 2012. In particular, RGE is expecting southern Africa, which has expanded 3 percent year-to-date, to keep lagging behind West and East Africa. This is due to the region’s weaker demographics, slower population growth and less convergence potential as the region has a higher per-capita GDP in comparison to its West and East counterparts.
• Argentina’s President Cristina Fernandez de Kirchner was re-elected in a landslide win this week, securing nearly 54 percent of votes. Ms. Fernandez’s current popularity is mostly due to the health of the economy, which has boomed thanks to high prices for exports such as soya. Days later, after regaining control, President Fernandez implemented a controversial law requiring all oil, gas and mining companies to repatriate all export revenue.
• PIRA Energy Group forecasts flat-to-declining oil production in Russia. Monthly production data to be released by the Russian statistical agency next week will give investors a more detailed view of the near-term trends.

 

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