PAGE | 23PAGE | 22Ecuador to diversify exports to Qatar

BUSINESSBUSINESSIran optimistic

on Opec deal

Sunday 27 November 2016

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Alternative financing to gain momentum Satish Kanady The Peninsula

Lower oil prices has altered the fiscal landscape of GCC countries as the huge fiscal

surplus registered in erst-while years has flipped into deficits. GCC governments are expected to raise between $260bn – $ 400bn in debt cumulatively through 2020 by issuance of local and international debt/bonds. This is a signif-icant jump relative to $72.1bn raised cumulatively

during the period 2008-2014, Marmore MENA Intelligence noted. Between 2016 and 2017, GCC coun-tries are expected to post a fiscal deficit of $302bn.

According to Mar-more’s report on 'Financing Options in GGC,' the budg-etary deficits have forced the government to fix their deficits through debt issu-ance in both the domestic and international markets. The sudden spurt in debt issuance by the govern-ment and its related entities might be overwhelming for the domestic financial

markets as evidenced by the spurt in short-term banking rates. Domestic banks that enjoy support from the governments have also been affected as the deposit mobilisation proc-ess has slowed down.

Subscription of domes-tic bonds issued by the governments has con-strained the ability of banks to extend credit facilities as the loans-to-deposit ratio for banks across the region has reached the stipulated limits. Consequently, the banks themselves are issu-ing bonds to increase their

capital ahead of various upcoming regulatory requirements. Though, the banks are well capitalized they may not be able to act as the dominant source of funding avenue.

In the case of Qatar, Oman and UAE where the loan-to-deposit ratio is much higher than 100 per-cent it would be difficult for banks to subscribe to state debt. They could take on government debt only at the expense of private credit growth.

GCC countries, though comparable to most of the

developed world in many aspects, fall short when it comes to the development of financial markets. The year 2015 saw the damp-ening of optimism and lower appetite for IPOs in the GCC countries as com-pared to the year 2014. There were only 6 IPOs in 2015 in the GCC region as compared to 1,144 IPOs glo-bally in 2015 and 16 IPOs in GCC region, a year ago. This is largely attributed to the fall in price of oil which started in the second half of 2014. This led to a decrease in investor

confidence and many IPOs were cancelled.

Private equity in the region is still at a nascent stage, though it showed some good progress between 2002 and 2008. Issuance of corporate bonds, including sukuks, in the GCC are also largely restricted to the bigger companies. Other financ-ing forms such as project bonds have gained promi-nence. Generally, these project bonds offer long-term investors attractive yields and significant credit spreads.

Credit allocation

Subscription of domestic bonds issued by the governments has constrained the ability of banks to extend credit.

Issuance of corporate bonds, including sukuks, are largely restricted to bigger companies.

22 SUNDAY 27 NOVEMBER 2016 BUSINESS

The Peninsula

Qatalum has won Envi-ronmental Excellence Award by the Gulf Aluminium Council at the Arab International

Aluminium Conference ‘ARABAL’ 2016 hosted in Dubai from November 22 to 24.

This award was conferred in recognition of Qatalum’s contin-ual effort to preserve the environment through using the latest advanced technologies to reduce the environmental impact of its operations. ARABAL is the premium trade event for the Middle East's aluminium indus-try and the only conference attended by every primary smelter in the region.

The conference is hosted annually in one of the regional States. Qatalum, one of the stra-tegic sponsors of the event, was represented by a high-level del-egation from its executive management, led by CEO, Kha-lid Mohammed Laram. "ARABAL

is a significant platform for Qata-lum to highlight the company’s vision and aspirations, as a lead-ing global smelter, supported by advanced technology and an ongoing commitment towards environment preservation".

"Through the participation in such events, Qatalum aims to promote the industrial sector in Qatar, which comes at the fore-front of the State's efforts to diversify its economy," he added.

The ARABAL 2016 Confer-ence was hosted under the patronage of H H Sheikh Ham-dan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance.

"This year's conference has witnessed an exceptional level of cooperation, knowledge and exchange of experience among experts and industry participants from the Gulf and beyond. We will spare no effort to cooperate with our peers and partners in order to enhance the quality of our products and continue our competitive efforts in the global markets," added Laram.

The CEO participated in the Industry Keynote Panel on the first day of the conference. Dis-cussions covered a number of topics, including energy prices and policies, primary activities, such as expansion, products, financial aspects, raw materials and downstream development. Alongside the conference, more than 48 exhibitors and 500 par-ticipants from over 20 countries

were present. This year, the con-ference focused on recent market analysis under the title: “Global Challenges – Seeking Solutions” discussing the ever growing importance of sustain-ability and environmental consideration in the aluminium industry.

On the second day of the

conference Dr Mufeed Odeh, Sustainability Consultant at Qatalum, made a presentation on the environmental consider-ations for the sustainable aluminium industry.

He focused on means to con-trol the emissions associated with energy generation and dis-posal of by-product in a

sustainable manner. Olaf Wigs-toel COO at Qatalum, delivered a speech on the overlapping between operations and technol-ogy and the use of cutting-edge knowledge and technologies in industry operations to reduce overall business costs while rais-ing efficiency, productivity and profits.

Mohammad Shoeb The Peninsula

Ecuador, the largest exporter of high quality roses to Qatar, is working aggres-

sively to diversify its exports product portfolio to the local market.

As part of the export pro-mote initiative, several leading companies, which are produc-ing and supplying a wide-range of items, including agro-food products such as chocolates, cof-fee, snacks among others, participated in a one-day exhi-bition organised by Ecuadorian Embassy in Qatar, in collabora-tion with Qatar Chamber here recently.

“We have the largest varie-ties of flowers, including roses, in the world. In Qatar if you go to flower shop and ask about the source country, they may tell you that its coming from Hol-land or some other country. But it is not true. They are coming from Ecuador,” said Xavier Lar-rea (pictured), Head of Commercial Office of PROECUA-DOR, Dubai, a government entity dedicated to export promotion.

“We compete with many African countries such as Ethi-opia, Kenya in the local market because these countries are also trying to improve their products’ quality. But Ecuadorian flowers, especially the roses, are high in demand in Qatar and around the world given the fact they are much better in quality and big-ger in size due to several geographical factors,” he added.

He explained that Ecuador, due to its location on the equa-tor, the country receives 12 hours of sunlight throughout the year. In addition, roses are mainly grown on volcanic mountains which are rich in minerals. And

also high altitude helps them to receive more oxygen and direct sunlight that help roses grow bigger, making it more resilient to handling and longer life after cut.

Ecuador, the oil-rich econ-omy, has successfully diversified its export product range as part of a long term strategy to have more sustainable development. Some of its major export items include oil, bananas, flowers, chocolates, cocoa, snacks, palm oil, quinoa, textiles, cosmetics, leather footwear, software, shrimp, broccoli, and other fresh and frozen vegetables in a long list of other finished products.

Ecuador’s flowers sector’s global exports in 2014 stood at over $691m, which was a signif-icant percentage of the total value of country’s exports.

According to data provided, the country exported nearly 5 million tonnes of bananas with the total value exceeding $2.17bn, accounting for more than two percent of the coun-try’s GDP, the second highest contributor after oil. Other major export oriented sectors include aquaculture (export value

$2.4bn) , metalworking ($431.18m) white fishery and derivatives ($330.36m) and tim-ber ($278.33m).

“As a government entity we are trying to stop the export of commodities. Instead we encourage export of finished and value added products. In addi-tion, some of our companies have captive customers such as airlines. Emirates airline has agreed to serve high-quality Ecuadorian chocolates to its pre-mium passengers, and some of our companies are also working to have similar deals with Qatar Airways”, said Xavier.

Ecuador, the world’s largest exporter of bananas, have wit-nessed one of the fastest GDP growth rate in Latin America under the leadership of Presi-dent Rafael Correa. Under his leadership, the country’s GDP has doubled to over $100bn in 2015 from $51bn in 2007, according to World Bank data.

After the global crisis of 2009, the economy began to recover and grew by 3.5 percent in 2010, reaching 7.8 percent in 2011, and continued to maintain a robust growth rate.

The Peninsula

The Qatar Financial Cen-tre (QFC) Authority participated in the 32nd

Ministerial Session of the Com-mittee of Social and Economic Cooperation (COMCEC) under the Chairmanship of Recep Tayyip Erdoğan, President of Turkey and Chairman of the COMCEC.

CEO Yousuf Mohamed Al Jaida, represented the QFC Authority’s during a special session entitled “Governors Perspective on Designing National Strategies to Develop Islamic Finance.” The session

elaborated on the role of National Islamic Finance strat-egies in boosting the Islamic Finance industry through dis-cussing legal, infrastructure, regulatory and supervisory framework. It also addressed compliance with Islamic law and other government related components of a possible national Islamic finance strategy.

Commenting on the QFC’s participation in the special ses-sion, Yousuf Mohamed Al Jaida stated: “This was a very inter-esting session, particularly as it was at the international stakeholder level. We always

welcome dialogue on Islamic Finance. Qatar was one of the first countries in the world to identify the significance of Islamic banking. Indeed, at the QFC, firms can take advantage of an Islamic Finance-friendly tax system that enables them to carry out Sukuk transactions without excessive tax.”

The event saw participa-tion from ministers and delegations from the Islamic finance world, representatives of international organisations, NGOs, think-tanks, private sector organisations and academia from around the globe.

The Peninsula

The first instance circuit of the Qatar International Court (Justices Robertson,

Hamilton and Arestis) has deliv-ered its judgement in a case claiming brought by a policy holder claiming a compensa-tion of over QR617,000 against an insurance company operat-ing within the Qatar Financial Centre (QFC).

The Claimant had sought recovery of what he alleged to be emergency medical costs in the sum of QR617,400.95 incurred whilst on a family trip to the US. The Defendant declined to pay the aforemen-tioned sum on the basis that the insurance policy in question- although worldwide in scope- only covered treatment in the US that fell within the pol-icy definition of “emergency”. The circumstances of this case

were not, the Defendant con-tented, such as to constitute an emergency and thus there was no liability on behalf of the Defendant to pay out. During the course of the trial the Court considered, amongst other things, various pieces of medi-cal evidence including oral testimony from an eminent medical expert from the UK.

The Court, which expressed considerable sympathy with the position the Claimant and his family found themselves in, nevertheless concluded that whilst the treatment received was undoubtedly required, it did not fall within the policy definition of emergency and so the costs of the treatment were not recoverable from the Defendant. The Court ordered the Claimant to pay the Defend-ant’s reasonable costs in the case which, if not agreed, are to be assessed by the Registrar.

Qatalum wins Environmental Excellence Award

Qatar Financial Centre participates

in ministerial session of COMCEC

A Qatalum official receiving the award.

Top honourThe company won Environmental Excellence Award for its continual effort to preserve environment.

Arab International Aluminium Conference ‘ARABAL’ 2016 was hosted in Dubai last week.

Ecuador to diversify exports to Qatar

The Peninsula

Alfardan Premier Motors Co, the exclusive retailer of Jaguar Land Rover in

Qatar has wrapped up its Jag-uar Land Rover Experiential Event that took place at The Pearl-Qatar from November 24 to 26.

The event is part of Jaguar Land Rover’s Global Drive Experience tour and included a variety of driving activities to offer prospective clients an exclusive drive experience with professional drivers.

Ben Wilkinson, Experien-tial Marketing Manager for Jaguar Land Rover MENAP, said: “We are constantly look-ing for ways to deliver outstanding and engaging driv-ing experiences to our audiences across the region. Hosting the Jaguar Land Rover Global Drive Experience tours in our key MENA markets is a great opportunity to showcase our latest innovations in terms

of technology, performance and expertise.”

“Hosting this event in Qatar as part of the global Jaguar Art of Performance Tour and Land Rover Experience Drive Tour is a great honour and a perfect opportunity to build on the experiences we offer our cus-tomers here in Qatar all year long,” said Hussein Adra, Mar-keting & Customer Relationship Manager for Alfardan Premier Motors.

Jaguar activities were based on the Art of Performance tour - a global initiative developed to enable a premium, modern experience of “new generation Jaguars”delivering high-end engaging, entertaining experi-ences to customers.

The main highlight of the Qatar Jaguar Driving Experi-ence was the Jaguar Smart Cone Challenge, a new technology solely owned by Jaguar which encourages customers to com-pete against each other on distance, time and accuracy.

The Peninsula

The Lord Mayor of the City of London, Andrew Parmley, arrived in

Qatar yesterday to help improve financial and profes-sional services ties between Qatar and the UK. The two-day visit will aim to boost bilateral trade and investment between the two countries which currently stands at over £5bn per year.

Acting as ambassador for the UK’s financial and profes-sional services, Lord Mayor Parmley will be in Doha to meet the Minister of Finance, Governor of the Qatar Cen-tral Bank, CEO of the Qatar Investment Authority, CEO of the Qatar Financial Centre, CEO of the Qatar National Bank and speak at a recep-tion hosted by the British Ambassador.

He will emphasise how the City of London can sup-port Qatar’s 2030 National Vision-driven infrastructure programme and their host-ing of the World Cup in 2022. He will also visit Kuwait on his Gulf states visit.

Alfardan Premier

Motors wraps up

JLR drive tourPanelists at the Ministerial Session of COMCEC.

Lord Mayor of

City of London

arrives in Qatar

Qatar International

Court dismisses

insurance claim

23SUNDAY 27 NOVEMBER 2016 BUSINESS

The Peninsula

Despite uncertainty surrounding the future of the Trans-Pacific Partnership (TPP), Vietnam’s

export outlook is positive hav-ing concluded trade deals with South Korea and the European Union. However, the country’s real GDP is expected to moder-ate in 2016 caused by a major agricultural drought, lower com-modity prices squeezing producers and weaker external demand, QNB’s ‘Vietnam Eco-nomic Insight ’ noted yesterday.

Vietnam’s real GDP is pro-jected to pick up to 6.2 percent in 2017 and 6.4 percent in 2018 as demand for the country’s exports picks up again reflect-ing the influence of new trade deals as well as continued growth in investment and con-sumer spending.

TPP, a trade deal spanning twelve pacific-rim countries including the US and Japan, was widely heralded to be a major boon to Vietnam’s exports. How-ever, the future of TPP now looks highly uncertain. This is expected to dampen Vietnam’s export outlook but concluded bilateral trade agreements with the European Union and South

Korea in 2016, provide some offset.

In particular, increased trade from these agreements will boost demand exports in 2017 and 2018, supporting a rebound from weaker external environ-ment in 2016. QNB estimates that these bilateral deals will add 0.6 percentage points per year to demand growth in 2017 and 2018. Moreover, we anticipate that Vietnamese exporters will increase their market share in their main trade markets as a result of central bank currency devaluation as well as China’s economic rebalancing, which is moving up the manufacturing value-chain and away from low value manufacturing that

competes with Vietnamese exporters.

Inflation is expected to rise to 2.8 percent in 2016, supported by higher prices for food, hous-ing and currency depreciation. In 2017, inflation should reach 3.7 percnet and remain stable thereafter in 2018, reflecting a pickup in global commodity prices, the recovery in house prices and strong domestic demand

QNB expects the deficit to

widen in 2016 to 6.1 percent of GDP from 5.9 percent in 2015 on slower growth in revenues on account of weaker export growth and continued invest-ment and social spending.

The deficit budget is expected to be stable around 6.1 percent in 2017 and 2018 as rev-enue growth from higher commodity prices and stronger economic activity will be matched by continued expend-iture growth to meet investment

and social spending objectives As a result, the public debt is

expected to reach 62.2 percent of GDP by 2018.

The country’s current account surplus is expected to widen in 2016 to 0.8 percent of GDP primarily as result of slower import growth. But the current account should recede to around 0.4 percent in 2017 and 2018, as oil prices climb, making imports more costly, and thereby partly offsetting export growth.

QNB sees positive export outlook for Vietnam

London Agencies

Homes in London are less affordable than ever as low mortgage

rates drive up prices by allowing buyers to borrow more.

It now costs the average Londoner 14.2 times their annual gross salary of 33,720 pounds ($42,048) to pur-chase a home.

The highest level on record and more than dou-ble the ratio for the UK as a whole, according to data compiled by Hometrack.

The annual rate of house-price growth in the capital was 9.1 percent in October, which is almost the lowest in three years, the property researcher said to reporters during an interaction.

Home prices in London have surged 86 percent since 2009 as the supply of new stock failed to meet demand from Britons and overseas investors, accord-ing to the information available from reliable data,

The spiraling values led Chancellor of the Exchequer Philip Hammond to set aside more than 3bn pounds on Wednesday to help con-struct more than 90,000 affordable homes in the UK capital by 2021.

Home prices in London have surged 86 percent since 2009 as the supply of new stock failed to meet demand from Britons and overseas investors.

The average price of a house in London is now 482,800 pounds, according to Hometrack.

“Overseas buyers look-ing for a safe haven, robust demand from domestic investors seeking protection from ultra low interest rates and huge demand from potential homeowners has caused prices to surge,” Richard Donnell, a director at Hometrack, said by tele-phone dur ing an interaction

He also added that, “The jump is way in excess of the increase in peoples’ earn-ings, hence lots of people are simply priced out of London now.”

The researcher defines London as the 46 boroughs in and around the UK capi-tal. Hometrack’s valuation model for houses and apart-ments is used by 17 of the top 20 UK lenders, according to the information available on firm’s website.

Bangkok AP

Fishing boats used high-tech systems to find vast schools of fish for decades, deplet-

ing stocks of some species and leading to the complete collapse of others. Now more than a dozen apps, devices and moni-toring systems aimed at tracking unscrupulous vessels and the seafood they catch are being rolled out — high-tech solutions some say could also help prevent labor abuse at sea.

Illegal fishing, which includes catching undersized fish, exceed-ing quotas and casting nets in protected areas, leads to an esti-mated $23bn in annual losses, according to the United Nations.

Meanwhile, overfishing close to shore has pushed boats farther out, where there are few laws and even less enforcement to protect workers from abuse. Slavery has been documented in the fishing sectors of more than 50 countries, according to U.S. State Department reports.

Earlier this year, US Secre-tary of State John Kerry said using technology at sea could eventually mean "there is not one square mile of ocean where we cannot prosecute and hold peo-ple accountable..."

However, Phil Robertson (pictured) , deputy Asia director of Human Rights Watch, cautions that catching human traffickers goes beyond finding boats.

"Technology is all about

knowing where the fishing boats are on the ocean, but that does precious little for crews being physically abused and worked to the bone on those vessels," he said. Nonprofit anti-trafficking organisation Project Issara is tap-ping into near-ubiquitous smartphones with an app that allows Burmese and Cambodian migrant workers around the world to share information about their working conditions. Their reviews reach nonprofits, gov-ernments and businesses which can monitor and learn from the feedback.

A worker runs a gadget over a fish just after it's pulled from the boat, giving it a bar code that creates a permanent record of where it was caught. It's a

simple swipe with profound potential.

Thomas Kraft at Norpac Fisheries Export established one of the industry's first bar-code systems that give each fish a tag that can provide details about location, boat, species, and weight.

He's been using the technol-ogy in locations worldwide and says it could easily be expanded to include crews on individual boats to help fight against labor abuse.

Eyes on the Seas uses satel-lite trackers, radar signals, drone images, even radio signals to cre-ate a dynamic world map. Analysts using algorithms and observations can identify boats that appear to be

illegally fishing in protected areas or pulling near each other to offload illicitly caught seafood.

They can then contact national authorities with detailed evidence about where a boat is and what it appears to be doing. Eyes on the Seas can spot boats even if they turn off their basic safety satellite trackers, which

may be a deterrent for would-be bad actors, but confidential data used in the system means it can-not be publicly available.

Like Eyes on the Seas, this tool provides a nearly-live view of fishing boats at sea around the world. But the data it uses to identify boats comes almost exclusively from Automatic Iden-tification Systems, satellite trackers used in large vessels that are easily switched on and off. Rolled out earlier this year, Glo-bal Fishing Watch is on the web and open to the public in beta form, with tracks for 35,000 fish-ing boats going back more than four years. Oceana, SkyTruth and Google partnered to build the site, with support from Leonardo DiCaprio Foundation.

Homes less

affordable

than ever

in London

Growth factors Vietnam’s real GDP is projected to pick up to 6.2% in 2017 and 6.4% in 2018 as demand for the country’s exports picks up again.

QNB estimates that these bilateral deals will add 0.6 percentage points per year to demand growth in 2017 and 2018.

Tokyo Bloomberg

The world’s biggest pension fund posted its first profit in four quarters as stocks

rebounded, providing some respite for the Japanese state money manager after critics lambasted it for taking on too much risk.

The Government Pension Investment Fund returned 1.8 percent, or 2.4 trillion yen ($21bn) in the three months ended September 30, boosting assets to 132.1 trillion yen, it said in Tokyo on Friday. Domestic and foreign equities added 3.1 trillion yen as they recovered from their Brexit rout, out-weighing a loss of 706.9bn yen on bond holdings.

The profit comes after the fund lost more than 15 trillion yen over the previous three quarters, wiping out all invest-ment gains since it overhauled its strategy in 2014 by boosting shares and cutting debt. As Jap-anese stocks extend their advance and US equities climb to fresh records after Donald Trump’s election win, the pros-pect of further strong performance may help quash complaints at home that GPIF’s investing approach is too

dangerous.“It’ll take some pressure

off,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. “This quarter will probably be good too. But before we all get too excited, we need to be wary about whether this can con-tinue for long.”

Prime Minister Shinzo Abe said in parliament that, "The fund’s short-term losses aren’t a problem for Japan’s pension finances."

GPIF’s purchases of stocks are a “gamble,” opposition law-maker Yuichiro Tamaki said.

World’s biggest pension

fund gains $21bn

First profit

$21bn

3.1 trillion yen

The Government Pension Investment Fund returned 1.8%, or 2.4 trillion yen ($21bn) in the 3 months ended on September 30.

Domestic and foreign equities added 3.1 trillion yen as they recovered from their Brexit rout

Tech solutions to tackle fishing and labour abuse at sea

The logo of French group L'Oreal, the world's largest cosmetics maker on L'Oreal headquarters in Clichy, near Paris. California company Olaplex has filed a complaint against the French cosmetics manufacturer L'Oreal for patent infringement of a hair product.

Patent woes

Dubai Reuters

Iran is optimistic about Opec reaching an agreement and plans to announce its own

decision about any output curbs at the group’s meeting next week, Iranian Oil Minister Bijan Zanganeh (pictured) said on the ministry’s official website SHANA.

“The proposal of Algerian Energy Minister (Nouredine Bouterfa) on the production of each country was presented today and carefully studied,” Zanganeh was quoted as saying

on Saturday after meeting Bouterfa in Tehran.

“We are to present our views about this proposal at the ... November 30 Opec meeting. The general trend and public statements suggest that Opec can reach a viable agreement for its production and market management,” Zanganeh said.

“If we can agree, and I am optimistic, (oil) prices will increase and this is also what the world economy demands.”

The Organisation of the Petroleum Exporting Countries is moving closer toward final-ising its first deal since 2008 to

limit oil output, but Iran has been a stumbling block because Tehran wants exemptions as it tries to regain oil market share after the easing of Western sanctions in January.

Iran optimistic on Opec deal

Actelion

shares jump

on J&J interestSHARES in Swiss bio-tech firm Actelion shot nearly 17 percent higher as it confirmed it had been approached by Johnson & Johnson about a pos-sible buyout.

In a brief statement Europe's largest biotech firm "confirmed yes-terday that it has been approached by John-son & Johnson about a possible transaction," adding that there was no certainty a transac-tion would be completed. The US company mean-while said "it is engaged in preliminary discussions with Actelion Pharma-ceuticals Ltd regarding a potential transaction" and would make no fur-ther comments until it was appropriate to do so.

Johnson & Johnson shares rose 0.8 percent to $114.01 in midday trad-ing in New York. Actelion shares soared in Zurich to close 16.8 percent higher at 184.50 Swiss francs.

Based in Allschwil outside the city of Basel, Actelion specialises in rare diseases and earns most of its revenue from treatments for pulmonary arterial hypertension.

T he c omp a ny reported 1.79bn Swiss francs ($1.76bn, ¤1.66bn) in sales in the first nine months of 2016.

Canada plans

new fuel rules

to cut emissions

CANADA will require reduced carbon foot-prints for all fuels so that the country can achieve a 30-megatonne cut in greenhouse gas emissions by 2030, the country’s environment department said yesterday.

The government will not mandate spe-cific changes to fuels and will focus just on reducing their emissions, officials said after a government announcement in Toronto.

Precise steps are to be determined after consultations, including with Canada’s provinces and relevant industries, and the government will release a discussion paper in February 2017, accord-ing to Environment and Climate Change Canada.

Canada’s Liberal government ran on a plat-form to do more for the environment.

The country’s new fuel measures would help it meet the emis-sions reduction targets of the Paris agreement on climate change, which Canada’s Parliament rat-ified last month.

The government’s stance contrasts sharply with that of US President-elect Donald Trump, who has pledged to ease the regulatory burden on all fossil fuel producers.

Canada’s new meas-ures, the “Clean Fuel Standard,” will aim to reduce fuels’ carbon intensity, a measure of emissions relative to the amount of energy derived, according to the environ-ment department.

Separately Canada announced on Monday it will virtually eliminate the use of traditional coal-fired electricity by 2030.

NEWS BYTES

24 SUNDAY 27 NOVEMBER 2016 BUSINESS

Specialist trader Meric Greenbaum works with his daughter on the floor of the New York Stock Exchange (NYSE) in New York City.

Learning market rules

Amsterdam Reuters

Royal Dutch Shell expects to pump out all the fossil fuel reserves listed on its balance sheet, its

chief executive said, dismiss-ing concerns that production limits in the wake of the Paris climate accord could hit the energy giant’s valuation.

In an interview with Dutch newspaper, Het Financieele Dagblad, Ben van Beurden (pictured) said the issue of “stranded” reserves - deposits in the ground that cannot be used because of carbon emis-sions limitations - would have no impact on balance sheets.

“The company is valued on producable reserves that we can produce in the next 12 or 13 years,” he said. “We should cer-tainly be able to produce those under any climate outcome. Even if global temperatures can only rise by 2 degrees.”

The Paris Climate Agree-ment, which came into force this month, commits almost 200 countries, including China, the United States and the Euro-pean Union, to limiting temperature increases to 2 degrees and weaning the world economy off fossil fuels.

The Anglo-Dutch energy giant, the world’s third largest by market capitalisation, has bet heavily on a lower-carbon future, with investments in

wind and renewables capped by the $50bn acquisition of British Gas in February.

Van Beurden was also scep-tical that revaluation of reserves after the climate deal could trigger a financial shock, say-ing that the oil price’s collapse from $120 to $30 a barrel showed the industry’s ability to weather much larger shocks.

No valuation hit

from climate

accord: Shell CEO

Fossil fuel Ben van Beurden said the issue of “stranded” reserves - deposits in the ground that cannot be used because of carbon emissions limitations - would have no impact on balance sheets

The Anglo-Dutch energy giant has bet heavily on a lower-carbon future.

Brussels Reuters

Uber will seek to convince Europe’s top court next week that it is a digital

service, not a transport com-pany, in a case that could determine whether app-based startups should be exempt from strict laws meant for regular companies.

The European Commission is trying to boost e-commerce, a sector where the EU lags behind Asia and the United States, to drive economic growth

and create jobs. The US taxi app, which launched in Europe five years ago, has faced fierce oppo-sition from regular taxi companies and some local authorities, who fear it creates unfair competition because it is not bound by strict local licens-ing and safety rules.

Supporters however say rigid regulatory obligations pro-tect incumbents and hinder the entry of digital startups which offer looser work arrangements to workers in the 28-country European Union looking for more flexibility, albeit without

basic rights. Uber found itself in the dock after Barcelona’s main taxi operator alleged in 2014 that it was running an illegal taxi service. The case concerns its UberPOP service which the company halted after the lawsuit.

Uber says it is a digital plat-form that connects willing drivers with customers and not a transport service. The Span-ish judge subsequently sought guidance from the Luxembourg-based European Union Court of Justice.The case has drawn glo-bal interest.

A worker checking the production in the packaging section of the newly opened Lego factory in Jiaxing, China. Lego's first Asian factory opened in China, the company said.

Lego ventures into Asia

New York AFP

Global stocks ended the week higher, with US indices all finishing at

new records, while oil prices fell sharply amid continued scepticism about chances for a deal at next week's Opec meet-ing. All three major US equity indices hit fresh records Friday, with the Dow closing at a new high for the fourth straight ses-sion. Analysts said trading volume in the holiday-short-ened session was light, allowing stocks to drift higher based on the positive sentiment that has sparked several records since Donald Trump's election November 8.

"This is all about Trump and the new presidency," said Hugh Johnson of Hugh Johnson Advi-sors. "The strategists and economists have been trying to refine their forecasts based on the changes he represents. Most are raising their forecasts for the US economy in 2017 and 2018."

London's benchmark FTSE 100 index added 0.2 percent, as unrevised official data showed Britain's economy grew by 0.5 percent in the third quar-ter. The update came two days after the UK government said Britain's economy would grow far slower than expected next year as state borrowing jumps mainly as a result of a projected financial fallout from Brexit.

Frankfurt's DAX 30 edged up 0.1 percent and Paris added 0.2 percent. Brent oil prices fell 4.3 percent to $46.90 a barrel ahead of next week's meeting of the Organization of the Petroleum Exporting Countries in Vienna. The gathering is an attempt to codify a broad agreement struck in Algeria in

September to cut production and protect prices.

Disagreements about how to share the burden of supply cuts have spilled into public view in recent days, with Iran insisting it be allowed to increase output to pre-sanc-tions levels and non-Opec member Russia willing only to freeze, not reduce, production. Those moves "may still repre-sent positioning ahead of the November 30 Opec summit," said Citi Futures analyst Tim Evans. "But we think it does underscore how fragile the sit-uation may be."

CMC Markets chief market analyst Michael Hewson also expressed doubts. "There appears to be some skepticism setting in that we'll see any meaningful deal come out of next week, with the positions of Iran and Russia likely to be particular sticking points," he said. The dollar lost a bit of steam Friday as many US inves-tors took advantage of a long holiday weekend. The dollar's advance has come hand in hand with a rally across world mar-kets since Trump's election win.

Sao Paulo Bloomberg

Brazil’s real posted the sec-ond-biggest loss in emerging markets amid

speculation that economic reforms may be derailed by fresh political turmoil, while stocks rose.

The real fell for a fourth day, weakening 0.5 percent to 3.4141 per dollar, after declining as much as 2 percent earlier in the day.

The benchmark Ibovespa gained 0.3 percent as gains in iron-ore producer Vale SA off-set declines in the state-controlled oil company, Petroleo Brasileiro SA.

Investors were discouraged by allegations that President Michel Temer, tasked with rein-ing in a budget deficit and

rebuilding confidence in Latin America’s largest economy, may have tried to pressure a minis-ter in a business dealing to benefit another government official.

Newspapers reported that former Culture Minister Marcelo Calero, who resigned last week, recorded a conversation in which the president allegedly urges him to approve the con-struction of a building where Temer’s top congressional liai-son, Geddel Vieira Lima, had a stake. Geddel said Thursday he is resigning.

"This political crisis could weaken the government exactly at a time when it is necessary to approve the fiscal adjustment measures,” said Luciano Ros-tagno, the chief strategist at Banco Mizuho and one of the most accurate Brazil inflation

forecasters in Bloomberg sur-veys. "This would make the fiscal adjustment more difficult, as the environment would be unfavorable for the reforms debate."

Vale gained 4.5 percent as iron ore prices rose for a fifth consecutive day, bringing this week’s gain to 16.5 percent for the world’s largest iron-ore pro-ducer. Petrobras fell 1.8 percent as oil fell. Frequent flier services company Smiles SA slumped 2.7 percent, the biggest decline on the Ibovespa.

One-week implied volatil-ity in the real climbed the most in two weeks, rising 0.8 percent-age point to 17.4 percent. Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, rose 0.02 percentage point to 12.6 percent.

Global stocks rise but

oil slides on scepticismMomentum builds

0.5%

0.2%

London's benchmark FTSE 100 index added 0.2%, as unrevised official data showed Britain's economy grew by 0.5% in third quarter.

Frankfurt's DAX 30 edged up 0.1% and Paris added 0.2%.

Uber in landmark court battle

Real posts second-biggest loss

SUNDAY 27 NOVEMBER 2016 BUSINESS

26 SUNDAY 27 NOVEMBER 2016 BUSINESS VIEWS

South Africa moved closer to a junk credit rating after Fitch Ratings Ltd. changed the outlook on its assess-ment to negative from stable and warned that

continued political instability could result in a downgrade.The ratings for foreign currency and local currency

were kept at BBB-, the lowest investment-grade level and on par with Hungary and Russia. S&P Global Ratings, which shares Fitch’s assessment, will publish its report on December 2.

Political risks to the standards of governance and pol-icy making have increased and will remain high at least until the ruling African National Congress’ leadership election in December next year, Fitch said Friday in an e-mailed statement. Continued political instability that adversely affects standards of governance, the economy or public finances could lead to a downgrade, the com-pany said.

“It does strengthen the narrative that things are pretty troubling right now and that the country really needs to turn things around,” said John Ashbourne, the Africa economist at Capital Economics Ltd. in London. “Moody’s is the most likely to change because it’s a bit of an outlier but I think these agencies all look at the same thing so they all probably look at things similarly.”

The rand weakened as much as 0.5 percent before reversing the decline to trade 0.3 percent stronger at 14.11 per dollar. A weakening currency and low economic growth are among the factors driving an increase in South

Africa’s level of debt as a percentage of gross domestic product, Moody’s Inves-tors Service said Friday, without making any announcement on the

country’s rating or outlook. The nation’s debt to GDP ratio stands at 44 percent, data compiled by Bloomberg show.

Political tur-moil in Africa’s most-industrial-ized economy, including now-dropped fraud charges against Finance Minister Pravin Gordhan, has overshad-

owed the state’s efforts to boost investor and business confidence, including recent proposals to stabilize the labor market. The slowest output growth this year since a 2009 recession will complicate Gordhan’s pledge to nar-row the budget deficit to 2.5 percent of gross domestic product by 2020, from a projected 3.4 percent this year, and to limit government debt.

Gordhan, 67, who has led efforts to stave off a down-grade while wrangling with President Jacob Zuma over the management of state-owned companies and the national tax agency, said Friday he was “optimistic” about Moody’s review after Fitch left its rating unchanged.

Gordhan was reappointed at the end of last year to the position he held from 2009 until 2014 after Zuma was forced to change his decision to replace former Finance Minister Nhlanhla Nene with a then little-known law-maker, which sent the rand and bonds plunging.

“The in-fighting within the ANC and the government is likely to continue over the next year,” Fitch said. “This will distract policy makers and lead to mixed messages that will continue to undermine the investment climate, thereby constraining GDP growth.”

After a number of false starts since the term was first coined five years ago, the idea of a 'Great Rotation' out of bonds into stocks is again gaining

traction.Almost $2 trillion has been wiped off

the value of global bonds since Donald Trump was elected as the next US presi-dent on November 8, sparking a reassessment of growth and inflation views. In contrast, U.S. stocks have hit record highs.

According to Bank of America Merrill Lynch, the week to November 16 saw the biggest equity inflows in two years at $28 bn and the biggest bond outflows in 3-1/2 years at $18bn-the widest weekly dispar-ity between stock and bond flows ever.

Whether this marks the start of a 'Great Rotation,' a phrase first used by Bank of America in 2011, remains to be seen but there are two reasons why this time it could be the real thing.

For starters, say analysts, a tighter U.S. jobs market and signs of stronger eco-nomic growth suggest inflation risks are rising. Second, for the first time since the financial crisis there is a shift towards fis-cal expansion -- highlighted by the economic policies favoured by Trump and by Britain's budget statement this week that unveiled a $29bn on fund for infra-structure projects.

That change implies higher borrowing by governments and

another source of inflationary pres-sures that support a view that an era of ultra-low yielding bonds may be in the past.

The only caveat is that this notion of investors shifting their hundreds of bil-lions invested in bonds into stocks as a

three-decade bond bull run comes to an end, propelling equity markets higher, has had several false starts before.

"I've been asked this question many times before - about whether we're seeing a great rotation," said Luca Paolini, Pictet Asset Management's chief strategist. "We now see some significant inflation risks that were non-existent before. This is what's different."

In Germany, signs of a pick-up in infla-tion pushed yields sharply higher from record lows between late April and June last year - only to fall back as data sug-gested the region continued to battle with deflationary pressures.

US 10-year bond yields rose more than 100 basis points during the so-called "taper tantrum" of 2013 as investors posi-tioned for a scaling back of U.S. monetary stimulus. They subsequently fell back too, hitting record lows earlier this year, helped by a perception that any Federal Reserve monetary tightening would be glacial to support growth.

A Fed rate hike next month, widely expected, would mark the first increase in a year.

But as inflation expectations are over-hauled so are perceptions about the rate outlook - money markets are starting to price in one or more Federal Reserve rate hikes next year, a sea change from before the election when they priced in a less than 50 percent chance of a 2017 Fed hike.

It's against this backdrop that early indicators of a rotation can be seen. JPMorgan notes that over the past week, a record inflow into US equity exchange traded funds (ETFs) was accompanied by a record outflow from bond ETFs.

Within equity markets a sharp rotation out of so-called "bond proxies" - dividend-paying sectors such as utilities, telecoms and healthcare which are favoured by investors for their yield - and into more cyclical sectors such as banks, industrials and commodities-related sectors is already underway.

The fading allure of dividends could be a precursor to a broader asset-class switch

out of bonds and into stocks, which are more geared to economic growth and an inflation pick-up. This trend has taken hold across global equity markets.

Basic resources and energy are now the best performing equity sectors within the MSCI all-country World indices , both up about a fifth this year. Healthcare, utili-ties and food and beverage stocks are the biggest laggards and the only three in the red for 2016.

"It's too early to tell but this is the best chance I've seen in a long time," said Michael Antonelli, an institutional sales trader at R W Baird & Co, referring to a great rotation.

"Money chases performance and it is thus and ever shall be so we need equity funds to start knocking the cover off the ball," he added, alluding to an opportunity for equity funds to make strong gains.

One sign that a great rotation is taking hold is if investors continue to offload bonds on a large scale.

"We know in general that a lot of capi-tal has gone into fixed income, so how investors react to this sell-off is really important," said Michael Metcalfe, head of macro strategy at State Street Global Mar-kets. "

Any rotation is likely to be driven by the US, where bonds have seen some of the steepest selling in years. In Europe and Japan, still subdued inflation and ultra-

loose monetary policy is expected to provide some support to bonds.

Serene Cheong Bloomberg

Rivals of Opec seeking to reach its most-prized oil customers are finding that

the long way around is better than any shortcut to success.

As the group seeks to imple-ment a deal to limit output, the glut that was exacerbated by its prior strategy of keeping taps open has spawned a market structure that’s benefiting com-petitors in sales to Asia. Cargoes from Europe’s North Sea will reach South Korea in coming

months, while US Eagle Ford shale crude as well as Mexican oil arrived at Yeosu port in November. Japanese and Thai refiners have bought West Texas Intermediate from BP Plc.

Shipments to Asia from loca-tions farther than the Middle East are turning more attractive because of a deepening market structure known as contango, where near-term supplies are cheaper than those for future months. Sellers benefit from this because the value of a cargo rises as it makes the longer journey to its destination. For buyers, abun-dant output across the Atlantic Basin has made North American and European oil cheaper rela-tive to crude from Opec nations .

“The wider contango has given Opec’s rivals a shot at load-ing up a vessel and sending oil from all corners of the globe to Asia, even if it sails for up to two months,” said Nevyn Nah, a Sin-gapore-based analyst at industry

consultant Energy Aspects Ltd. “Opec’s fight for market share amid rebounding output from members such as Nigeria and Libya, as well as increased pro-duction from places like Russia and former Soviet Union regions, has exacerbated the market oversupply.”

The premium of later sup-plies of Brent, the benchmark for more than half the world’s oil, over near-term cargoes is cur-rently at about $5 a barrel versus a contango of $2 at the end of April. That’s in contrast to more than two years earlier, when later shipments were at a dis-count, or backwardation, of more than $7. Crude was then trading at more than $100 a bar-rel before a global glut dragged down prices by more than 50 percent.

Two million barrels of oil on a Very Large Crude Carrier will take about 55 days to traverse the 15,000 nautical miles from

the US Gulf Coast across the Atlantic to South Korea, a month more than supplies from the Middle East. The value of crude can rise by as much as a dollar per barrel during the time differ-ence because of the contango, data compiled by Bloomberg show. That would also help com-pensate for higher shipping costs from the longer voyage.

The value of Brent crude loading in three months is about $1 per barrel higher versus car-goes for two months ahead. The expense to time-charter a vessel for 30 days is lower at 80 to 85 cents per barrel, according to Bloomberg calculations based on data from ship broker Howe Robinson Partners.

Oil is trading more than 50 percent below its 2014 highs, amid speculation over whether the Organization of Petroleum Exporting Countries will be able to implement a plan to cut output and stabilize markets reeling

from a glut. A decision is expected next week after a Vienna meeting between minis-ters from group nations including biggest member Saudi Arabia as well as non-Opec producers such as Russia.

“Opec’s potential production cut could tighten the market in Asia. And, if you can’t get enough medium and heavy sour crude, then the best would be to look for alternatives in the Atlantic Basin,” said Ehsan Ul-Haq, an analyst at industry consultant KBC Energy Economics.

If the Saudi-led plan to curb supplies goes through, the Middle Eastern Dubai oil benchmark could turn costlier relative to Brent, which “in turn facilitates the flow of Atlantic Basin crude to Asia,” he said.

Brent futures for January set-tlement traded at $48.90 a barrel on the London-based ICE Futures Europe exchange by 11:40 a.m. Singapore time.

South Africa closer to Junk status as Fitch cuts outlookArabile Gumede & Thembisile DzonziBloomberg

The rand weakened as much as 0.5 percent before reversing the decline to trade 0.3 percent strongr at 14.11 per dollar. A weakening currency and low economic growth are among factors driving an increase in debt levels.

Is this the 'Great Rotation'? Some banks think so Dhara Ranasinghe &Vikram Subhedar Reuters

As inflation expectations are overhauled so are perceptions about the rate outlook - money markets are starting to price in one or more Federal Reserve rate hikes next year.

The value of Brent crude loading in three months is about $1 per barrel higher versus cargoes for two months ahead. The expense to time-charter a vessel for 30 days is lower at 80 to 85 cents per barrel.

For Opec's rivals, success lies in oil market far away