FT Thursday 22nd May 2014

  1. Mainstream braced for Farage onslaught

 

With European elections taking place today across the UK, there is a realistic chance that UKIP, led by Nigel Farage, could actually win. Level in opinion polls with Labour and ahead of the Conservative Party, a UKIP victory would create a massive shockwave in Westminster. The traditional big parties are all unsure over how to deal with UKIP, with the Conservatives split over Europe, Labour not willing to change its policy on immigration and the Lib Dems continuing to be punished for their decision to enter coalition and their U-turn over university tuition fees. Despite Nick Clegg’s decision to confront Nigel Farage in a two-part debate there is a realistic chance that the Lib Dems may face electoral wipeout and lose all of its European seats. While UKIP is expected to do well in European elections, the First Past the Post system in Westminster means that it remains unlikely that they will be able to make similar gains at the next general election scheduled for 2015. 

 

  1. Hard sell: why fund managers underperform

 

The difficulty that fund managers have in outperforming the market is down to poor selling rather than poor buying on their part. The problem is behavioral, as fund managers are inclined to “lock in” profits on an investment. The objectivity of purchasing stocks, is it undervalued, how will the company perform in the future, and other considerations tend to be missing when fund managers are considering whether to hold on to their investments. A stock that has risen in value represents a gain for the manger, and it is this gain that skews their opinion on whether the stock will rise further in the future. The risk of holding on to an investment is greater than making an initial purchase because there is already a bankable profit that can be lost. Whilst losing money on an investment is bad, losing a profit that they once had is more difficult to take psychologically and makes managers more risk averse when it comes to selling. 

 

  1. JD.com raises $1.8bn in Nasdaq IPO

 

In what has been billed as the undercard of the upcoming Alibaba IPO, Chinese ecommerce giant JD.com has raised $1.8bn with its initial listing on the New York based NASDAQ. Dubbed, the “Amazon of China” JD.com has a different business model to Alibaba in that it has warehouses and its own inventory of goods to sell. Alibaba by contrast works by putting buyers and sellers together. JD.com also has a significant share in the Chinese company Tencent,, which runs popular social network platforms such as WeChat. With China seen as the biggest growth market for ecommerce, there is a great deal of excitement over the future of JD.com and its main rival Alibaba.  

 

  1. Why topsy-turvy Asia is not the place it used to be

 

Since the 2008 financial crisis, Asia has benefitted from Western misfortunes. High growth has been a consequence of capital looking for greater return than is on offer in the West. This has driven demand, and credit for Asian economies has been cheap. Combined with relative political stability across the expansive region, Asia had been seen as an unstoppable miracle. In the last few months however, this has started to change. As the region becomes more developed, the focus of growth has stared to turn away from investment and into consumer-driven growth. Western capital is slowly starting to withdraw as a result of declining growth and political instability, and this may be difficult for many economies to take.

 

  1. Aluminium set for gains on Indonesia ban

 

A ban in Indonesia on bauxite export could have huge implications for the price of aluminium over the next 12-18 months. In a move designed to increase domestic output the Indonesia government has placed restrictions on export of the raw material used to make aluminium, of which it is the biggest supplier in the global market. This could have massive implications for China, the world’s biggest producer and consumer of aluminium, as there is no country in the world able to take up the Indonesian supply. At present the price has not changed, largely due to the fact that China and other countries have been aware that this ban was coming into effect and took necessary efforts to increase stockpiles. The price of Nickel has increased massively in the last few years as a result of an Indonesian ban, and there is an expectation from some that the price rise of aluminium could be up to 30%, making it extremely attractive for investors. 


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