FT Friday 23rd May 2014

  1. UKIP on course for election ‘earthquake’


Whilst the results of yesterdays European and local council elections are yet to be confirmed, exit polls suggest that the winner of the day will be Nigel Farage and UKIP. In a result that is not particularly unexpected, the win for UKIP will put huge pressure on the established three major parties and how they will look to combat the nationalist insurgency. Whilst many had expected UKIP to make gains in traditional Conservative heartlands, the fact that UKIP has also taken votes in traditional Labour areas demonstrates the wide-ranging support for populist politics. With the general election set for 2015, talk will be of an electoral pact between UKIP and the Conservatives, something that was quickly dismissed by the party Chairman, but will have significant support among the backbenches. The Lib Dems are expected to have a dismal night, but party giant Vince Cable has rejected any talk of a leadership issue and claimed there was greater respect for Nick Clegg after his decision to tackle UKIP head on.


  1. Billions of shale barrels in Home Counties


With a great deal of shale gas being reported in the north of England already, the Government will announce on Friday a study that claims there could be a minimum of 40 years domestic supply of gas in the south of England. The expected gas is in the traditional Tory heartland of the Weald Basin, which includes the counties of Sussex, Hampshire, Kent and Surrey. The coalition government has been a massive proponent of hydraulic fracturing, or fracking, which involves pumping water, chemicals and sand deep underground at high pressure to fracture the shale rock and release the gas trapped inside. Environmentalist groups claim that this process can have untold effects on water supply, and the search of hydrocarbons is a distraction from finding sustainable green energy sources.  


  1. Credit Suisse sells $5bn in bonds


Credit Suisse, which just this week became the first large global bank to admit to criminal charges in two decades has sold $5bn worth of bonds in its first significant debt sale in over three years. Observers were keen to see how the market would react to the sale and whether investors would demand greater interest from the bank as a result of the recent $2.6bn paid over helping US citizens avoid paying tax. It appears that the market remains favourable to Credit Suisse however as the yield was similar to the offering made by rival Deutsche Bank this week and the three-year fixed-rate bond listing was oversubscribed. This suggests that investors are not too worried about the future position of the Swiss giant.


  1. Asia’s nationalist power game

The election of Nahendra Modi in India means that nationalist governments are in control of the four most powerful countries in Asia. Abe in Japan, Xi in China and Putin in Russia complete the quartet. Whilst the past decade international relations has been typified by Asian calls for multilateralism in the face of US hegemony, the rise to power of these four could see a return to great power politics in Asia. China’s recent assertiveness in the South China Sea since Xi came to power demonstrates its desire to push the USA out of Asia by testing the alliances and security guarantees that it has made in the region. Both Korea and Japan have strong strategic pacts with the USA, but for how long will the superpower be willing, or even able to sustain this in uncertain. The first foreign visit of the new Indian PM Modi could be to Japan, as he looks to them for investment and technological capabilities to drive the promised economic recovery. Both states plan to increase their military capabilities over the next decade over fear of Chinese intentions. Russia and China have grown closer as a result of the gas pipeline deal, but China has emerged as the senior partner in this as a result of Putin’s isolation and Russia’s social and economic problems, particularly the declining population in Siberia bordering China. Increased nationalism, military build-ups and the creation of alliances has echoes of the bloody European history of the 19th and 20th centuries and could spell trouble for peace in Asia.


  1. Beijing admits strain in ties with Africa


The Governor of China’s central bank, Zhou Xiaochuan, has the made the first admission of a Chinese top official that problems exist surrounding the increased investment of China into the African continent. Chinese trade with Africa has risen from $1bn in 1980, to $10bn in 2000 to reach $200bn in 2013. Africa has long been accused of pursuing a neo-colonial process in Africa seeking only the continents resources and benefitting Chinese companies. Several incidents have arisen as a result in recent years and local people complain of poorly constructed engineering projects, the use of Chinese rather than local labour, and the unequal salaries awarded to locals and Chinese. The comments were however made by Zhou after he signed a $2bn deal with the African Development Bank, which is a move away from traditional Chinese investment in Africa conducted on a case-by-case basis. 


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