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Category - Global Middle Class

    How Low Will Retail Go? Look at the Railroad

    This article by Stephen Mihm for Bloomberg may be of interest to subscribers

    And that is the likely fate of conventional retail. Like the railroad, there’s an extraordinarily surfeit of retail space built with little consideration of what the market will actually sustain; recent declines in the retail revenue per square foot in brick-and-mortar stores suggests that things are getting worse, fast. And like the railroad, there’s a new way of doing business on the block, except that instead of changing how we move people and goods, online retailing promises a new way of delivering them to the end consumer. 

    If the per capita retail footprint declined as much as the railroads did, it would fall all the way down to 2.82 square feet per capita. That’s a lot of empty malls and defunct big box stores, but retail won’t disappear any more than the railroads have gone extinct.

    In fact, in 2014, the inflation-adjusted revenue that railroads earn per mile of track is 2.7 times what it was a century ago. More startling still, the so-called “ton miles” of freight carried on the nation’s railroads (a ton mile is one ton of freight carried one mile) has tripled since 1960, even as the total size of the operational railroad system has declined dramatically.

    That points to the likely future of conventional retail: a drastic reduction in the per capita footprint, with the remaining stores capable of earning far more money per square foot. It’s not the brightest of futures. But it’s also not the end of the world.

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    Reckitt Benckiser Sees Pricing Squeeze After Worst Year Ever

    This article by Thomas Buckley for Bloomberg may be of interest to subscribers. Here is a section:

     

    In an effort to sharpen Reckitt Benckiser’s focus on brands such as Strepsils and Mucinex cold remedies, Kapoor has moved to separate the company’s home-care and health businesses. Reckitt also became a leader in infant nutrition with the acquisition of Mead Johnson Nutrition Co. last year.

    On Monday, it increased its forecast for synergies from the deal to about $300 million from $250 million. This year’s savings will only “slightly exceed” additional infrastructure expenses associated with the new health and home-and-hygiene business units, the company said.


    Morgan Stanley analysts led by Richard Taylor described the company’s outlook as conservative.

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    The Biggest Headaches for South Africa's Incoming President

    This article by Mike Cohen for Bloomberg may be of interest to subscribers. Here is a section: 

    Investigations by the nation’s graft ombudsman and Auditor- General found that graft is endemic in the state, with tens of billions of rand stolen or squandered each year. Zuma appointees head almost all the law-enforcement agencies, which have been slow or loathe to act against some of his closest allies who’ve been implicated in the free-for-all. The new president will need to replace several key officials, reassert confidence in the independence and integrity of the criminal prosecution system and show that the government is intent on ensuring all those found guilty of corruption are held accountable.

    2. State-owned companies in chaos
    The looting spree largely targeted state companies, especially power utility Eskom Holdings SOC Ltd., which is at risk of running out of cash. While Ramaphosa has already overseen the appointment of a new board at Eskom, it still needs to appoint a permanent chief executive officer, fill several other top management posts and urgently raise new funding. South African Airways and oil and gas company PetroSA Ltd. are among the other entities that have been hobbled by a lack of leadership and oversight.

     

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    South Korea's Economy Shudders After Growth Spurt

    This article by Kwanwoo Jun for the Wall Street Journal may be of interest to subscribers. Here is a section:

    South Korea’s surprisingly weak economic performance in the last three months of 2017 isn’t cause for concern but does support the case for a cautious stance on central bank policy, according to economists and bank officials.

    The economy ended its streak of outperforming expectations in the last quarter by recording its first quarter-on-quarter contraction since the global financial crisis.

    That resulted in growth for the year—at 3.1%—coming in just below the government’s 3.2% target, but above 2016’s expansion of 2.8%. Markets on Thursday brushed aside the result, with the Kospi jumping 1% to reach record highs.

    Still, the result will temper recent optimism about the economic outlook, while likely dispelling any idea at the Bank of Korea about raising rates until much later in the year. In November, the central bank raised rates for the first time in more than six years.

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    Latest thinking

    Thanks to a subscriber for Howard Marks’ latest memo for Oaktree which may be of interest. Here is a section:

    Asia Outlook Rising Momentum, inflation emerging

    Thanks to a subscriber for this report from Deutsche Bank which may be of interest. Here is a section: 

    2018 Navigating Vietnam

    Thanks to a subscriber for this report from VNDirect which may be of interest. Here is a section:

    Russia Kicks Off Currency Buying Spree With $4.5 Billion Program

    This article by Olga Tanas for Bloomberg may be of interest to subscribers. Here is a section:

    Russia’s Finance Ministry will buy about $4.5 billion in foreign currency over the next three weeks, increasing purchases after changes aimed at further limiting the economy’s dependence on oil.

    The amount of additional budget revenue earned in January from oil and gas is expected at 257.1 billion rubles ($4.5 billion) as a result of higher crude prices, the Finance Ministry said on Wednesday. Under a so-called budget rule, the entire windfall will be spent on buying foreign currency in the domestic market, with daily purchases at 15.1 billion rubles from Jan. 15 to Feb. 1, it said in a statement.

    The operations will help insulate the economy from the ups and downs in crude and shield the ruble’s exchange rate from volatility. The government is absorbing all revenue earned when Russia’s Urals export blend is above $40 a barrel, channeling the excess income into its sovereign wealth fund.

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    Billionaire Ambani Bails Out Brother by Buying Wireless Assets

    This article by Santanu Chakraborty for Bloomberg may be of interest to subscribers. Here is a section:

    Billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd. agreed to acquire spectrum, mobile-phone towers and fiber assets of his brother Anil Ambani’s Reliance Communications Ltd. helping the younger sibling cut debt at the embattled wireless carrier, the two companies said in separate exchange filings.

    Reliance Jio emerged the highest bidder for assets and the sale is expected to be closed in a phased manner between January and March 2018, according to a statement from RCom on Thursday.

    The companies didn’t disclose a value for the transaction. The deal will include a cash payment and transfer of deferred spectrum installment payable to India’s Department of Telecommunication.

    Mumbai-based RCom is seeking to cut total borrowings by $6 billion by March. RCom posted its first annual loss last March after Jio stormed into the market by offering free calls and data. That escalated a price war that has forced consolidation in the sector. RCom this week said it expects to get about 250 billion rupees ($3.9 billion) from the sale of its spectrum across four frequencies, its optical fiber network, and its more than 40,000 telecom towers. Entire proceeds will be used for repayment of RCom’s debt.

    Reliance Jio is only paying for good quality assets that will enhance its depth of network, especially in rural areas, and raise data usage capacity, Shobhit Khare, a co-founder at Inertia Wealth Creators LLP, said via phone.

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