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With hedge fund manager, CNBC regular and long-time veteran of the Russian markets Tim Seymour at the helm, Emerging Money (http://www.emergingmoney.com) provides education, trading analysis and comprehensive views of emerging markets around the world. As economies in the BRIC group and beyond... More
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  • Asian currency ETF, China Mobile, Indian ADRs, Russian Oil, China Mobile and first US ETF focused on China "A Shares" 1 comment
    Oct 25, 2010 1:55 PM | about stocks: FXI, OGZPY, AYT, INFY, PEK, SIFY, WIT

    Earnings season is in full swing, so fundamentally driven traders have plenty of news to mull. And on the macro side, the currency wars seem likely to continue despite the G20.

    RUSSIA: Gazprom OGZPY as been a major underweight despite being one of the most important companies in the world. Could sentiment finally be turning around for this linchpin of the global energy sector? Comments on increasing gas demand from China, news of increase in Turkmen gas transit through Russia coupled with short covering are creating a combined effect. The underweight was just too uncomfortable and the lagging performance too easy for global players to decide now is the time to put some money in Russia -- the big move up in gas prices in last month and coming winter are helping too. The stock has now moved up through the 200-day moving average, indicating a key technical support level.

    INDIA: Sify Technologies SIFY is only thinly covered by U.S. analysts, but in the past this Indian Internet service firm has bounced after releasing its quarterly earnings in the past. The next profit report comes out next Monday. In the absence of analyst support, the problem is figuring out whether the markets will applaud any given number or retreat; in the meantime, expect this otherwise somewhat quiet ticker to get a little volatile as traders look for clues. Also, look for signs that the strong rupee hurt the company's results. If so, this could hurt INFY and WIT.

    CHINA: China Mobile CHL reported generally disappointing earnings of its own last week, but analysts in the Pacific Rim are still trying to figure out whether the company's 3G subscriber numbers are good news or bad news going forward. The 3G smartphone customer growth number is critical for Chinese (and global) wireless carriers because this area is generally much more profitable to serve (and expensive to build out).

    Nonetheless, CHL still only added 1.86 million 3G customers last month, bringing this giant phone network's total data customer base to only 15 million -- in the 1.3 billion Chinese market. This is one of the big boys that has caught the same disease as some of the U.S. tech titans: trying to reinvent itself every day means a cost base and expenditures that are highly questioned. Having said that, an entry level at $50.50 is not a bad base, given the company's historic trading valuation.

    ETFs in the Spotlight

    AYT : Of the eight Asian currencies this unique ETF tracks, only two -- the rupee and the yuan -- have specialized ETFs of their own. The rest, including the high-flying rupiah, baht and ringgit, give this fund its special flavor. AYT lets U.S. investors trade the above five currencies plus the Korean won, the Philippine peso and the Taiwanese dollar. It is arguably too diversified a portfolio to make much strategic sense -- these currencies compete with each other and so will tend to cancel out each other's strongest advances -- but the fund is up over 6% year to date.

    PEK : This fund is the first U.S. ETF to invest exclusively in the "A shares" that are restricted to citizens of mainland China. Previous China ETFs like FXI focused on the "H shares" that also trade in Hong Kong, and so missed out on the lion's share of the action in Shanghai. In addition, funds like PEK may even trade at a premium compared to their Hong Kong-based peers, simply because (as yet) Chinese investors have few options beyond the A shares, and so are pouring the bulk of their money in these securities.

    Disclosure: no positions
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    I would not expect a significant effect of gas supplies to China for the following reasons:


    In 2009 indigenous gas production and consumption in China amounted to 85.2 and 88.7 billion cubic meters respectively. Besides, the consumption rates are growing and dramatically surpassing the extraction rates. According to the forecasts by Chinese and foreign experts, China’s gas demand will rise to 150 billion cubic meters in 2010 and to 280 billion cubic meters in 2020. (see OGZPY.PK) buys gas for "European" prices adjusted ("minus") transportation cost. This is less then earlier (aproximatly $300 for 1000 cubic meter). China want to pay less. Finally, if gazprom will be able to sell gas for "European" price then it'll get only difference between cost of transportation from Turkmenistan to Europe and from Turkmenistan to China. I think it's immaterially.


    The second Asia project - Sakhalin will be completed in 2012. But according to the rumors, average cost of Sakhalin's gas is equal 300-350 for 100 cubic meter. It's very expensively too.


    So I would not bet to Asian projects of Gazprom.
    6 Nov 2010, 07:49 PM Reply Like
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