Investment

The inflation is making the West difficult to go further on Russian oil

European Union and the United States have barred the import of Russian oil to cut off the revenue source for Kremlin and force Vladimir Putin to reconsider the war in Ukraine. However, it seems like this measure hasn’t worked.

When EU and the US looked at the data, they found that Russia is making just as much money from oil export as it was before the invasion of Ukraine. At the same time, global inflation is surging, and it generates Politian pressure on leaders like US president Joe Biden, British Prime Minister Boris Johnson, and French President Emmanuel Macron.

In the recent G7 meeting, these leaders tried very much to reach a consensus on that to do next. However, on oil, only few options are available. several measures were being discussed. For examples, price caps on Russian oil imports and centralized purchasing, insurance bans on ships. Unfortunately, these tools have downsides, and they could push the oil price and inflation rate even higher. These prospective measures may come with significant costs directly to consumers in the US and Europe.

Nevertheless, there is an uptick in exports to Asia. China is currently taking advantages of huge price discounts. Russia is selling barrels of its Urals crude for about USD 35 cheaper than the Brent global benchmark. The Kremlin is still getting a pretty good price for their oil export. The West need to go further to get Russian oil off the market quickly, since any delay will give market participants time to come up with creative ways to skirt the rules.

To make it harder for China, India, and other countries to keep importing Russian oil, EU intends to phase in a ban on insuring ships. Such a move may push China and India to find replacement barrels, the price of oil could easily go rocket high.

Therefore, Treasury Secretary Yellen suggested that using price caps to push down the price of Russian oil and depress Putin’s revenues while allowing more oil supply to reach the global market.

Image source: https://cdn.cnn.com/cnnnext/dam/assets/220624114155-india-crude-oil-freight-file-restricted-exlarge-169.jpg

Investment

The global economy is on the edge of a precipice

The global economy is on the edge of a precipice, and it may be the biggest crisis since the Second World War.

The invasion of Ukraine has compounded the effects of the Covid-19 pandemic. It brings the cost of the food and fuel to skyrocket which weighing on the economic recovery and fanning inflation.

Rising interest rates are putting more pressure on countries, companies, and households. Climate changes, market turbulence and ongoing supply chain constraints also make the situation become more worse.

To lower economic stress, the IMP is calling for government officials and business leaders meeting in Davos to discuss reducing trade barriers.

However, earlier this month, Indian government decided to ban the export of wheat and it triggered the price of grain soaring. Some countries are heading in the opposite direction of IMF and implementing restrictions on trade in food and agriculture products that could probably exacerbate the shortages and push the prices even higher.

Image source: https://www.pexels.com/photo/american-and-chinese-flags-and-usa-dollars-4386371/

Investment

“Fragmentation” is underway

“Fragmentation” – one the many buzzwords heard around Davos this week. “Fragmentation”, it is referring to a breakdown of the kind of free-wheeling, border-crossing trades and investments which have built the global economic order over the past three decades. It also means “deglobalization” – rebuilding fences between nations and nations.

Deglobalization won’t happen overnight but it is not a new issue. Supply-chain disruption, war in Ukraine, growing political divides and trade disputes are renewing concerns about a return of an era of isolation.

Here are the micro-deglobalization playing out in real time:

China’s ride-hailing giant Didi officially delisted its share from NYSE

Starbucks and McDonald’s pulled out of Russian market

Airbnb said it would pull all of it listings in China

Malaysia moved to restrict exports of Chicken to its neighbors

Microsoft slowly scale back their China practice

These supply chains have been built over 30 years, so it’s just really difficult to move them into another country. The US baby formular shortage is a huge public health crisis that indicates the peril of relying too much on domestic production for essential goods. It is far more complicated if governments around the world are doing deglobalization.

Image source: https://www.pexels.com/photo/antique-antique-globe-antique-shop-antique-store-414916/

Investment

Thousands of UK “Fish-and-Chips” shops would be closed in a year. Here is the reason.

Fish-and-chips shops in the United Kingdom are under a great pressure as the key ingredients – cods and sunflower oil keep soaring because of the war in Ukraine.

Nearly third of the fish-and-chips restaurants will be expected to be closed in the next few months. The prices of the main ingredients started rising at the end of 2021. And the costs go even further upward when Russia invaded Ukraine. It’s because nearly 40% of the industry’s cod and haddock come from Russian waters and 50% of its sunflower oil imported from Ukraine.

Business owners are struggling with higher costs as supply chain have been exacerbated by the war in Ukraine. The shops owners cannot make enough margins to survive. It’s too difficult for the shops to raise prices as customers expect the fish and chips to be in a reasonable price.

Business owners also fear that the UK government will impose harsh import tariffs on Russian products. It will push Business to stock up on alternatives and make business in UK become more difficult.

Image source: https://www.pexels.com/photo/fried-food-with-two-cup-of-drinks-on-table-2053891/

Investment

Decoupling, one of the biggest risk to the global economy

Global Markets may still underestimate the impact of China’s strict zero-Covid policy. Until now, nearly 400 million people across the mainland China are under full or partial lockdown. 

Investors probably do not aware of this zero-Covid policy as much more attention remains focused on the Russian-Ukraine war and the US Federal Reserve rate hikes.

However, more and more analysts are ringing warning bells as Shanghai, a city of 25 million and one of China’s premiere manufacturing is under the indefinite lockdown. The quarantines left the largest port in the world understaffed. Food supplies stuck in shipping containers, incoming cargo is now stuck at Shanghai marine terminals and cargo airlines were cancelled all flight in and out of the city. Sony, Apple supplier plants, Quanta Factory and Tesla factory in and around Shanghai, are idle.

The impact on China is major and the ripple effect on the global economy is also significant.

The ongoing disruption to manufacturing and shipping in China may help accelerate the US president Joe Biden to reduce US dependence on products and supply chains from China. Some US economic leaders believe that decoupling is underway. However, it is extremely difficult. Globalization is not something that is easy to be reversed because it would be incredibly costly. 

Investment

The most stupid thing Didi did: Chose US stock market for its USD 4.4
billion IPO.

Just after Didi raised its IPO which valued nearly USD 68 billion in US stock marking on June 30 2021, Chinese government and Chinese Regulators blocked Didi on Chinese App stores and Chinese Market. It made Didi Global Inc. plunged below IPO price.

Didi is a Chinese ride-hailing company in Chinese and bases in Beijing which provide Chinese customers with taxi hailing, private car hailing and social ride-sharing services. Didi currently has around 550 million users and around 10 millions of registered drives over 400 Chinese cities.

Some analysts believe the crackdown of Didi in its home country means that Chinese government wants more control on Chinese big data as well as a new battlegrounds of US-China trade wars.

Didi is now facing scrutiny over its data security by Chinese regulators. This cybersecurity probe by Chinese regulators also bring out a very strong message to other China’s tech giants: Do not even think about listing in stock market outside China and Hong Kong, especially in US stock market.

For those Tech Giants business owners in China, running the whole business not just needs to be given business consideration, but also a nation security consideration and patriotism consideration.

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