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Ray Dalio’s Bridgewater reportedly raising millions for new China fund

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Bridgewater Associates Chairman Ray Dalio attends the China Development Forum in Beijing, China March 23, 2019.

Thomas Peter | Reuters

BEIJING — American hedge fund manager Ray Dalio is launching a new China fund through a local subsidiary, according to a report in China’s Securities Times, citing sources.

The fund aims to raise more than 3 billion yuan ($468.8 million), according to the report on Tuesday.

Dalio’s Bridgewater Associates is the largest hedge fund in the world, with $223 billion in assets under management as of a July 9 filing with the U.S. Securities and Exchange Commission. Over half, or nearly 59%, of those assets belonged to non-U.S. clients, according to the document.

In 2018, the firm’s Shanghai-based wholly-owned subsidiary, Bridgewater (China) Investment Management, launched its first onshore China product for investors in the mainland.

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Ethiopian PM Abiy Ahmed joins frontline as conflict against rebels intensifies

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Ethiopian Prime Minister Abiy Ahmed Ali and his wife Zinash Tayachew take part in a memorial service for the victims of the Tigray conflict organized by the city administration, in Addis Ababa, Ethiopia, on November 3, 2021.

Ethiopian Prime Ministry Office | Anadolu Agency | Getty Images

Ethiopian Prime Minister Abiy Ahmed has reportedly traveled to lead his security forces from the frontlines in the war effort against advancing Tigrayan rebels.

Abiy, who won the Nobel Peace Prize in 2019, announced on social media on Monday that he would personally “mobilize to the front to lead the defense forces,” and urged Ethiopians to “rise up for (their) country.”

State-affiliated news outlet Fana reported on Wednesday that Abiy had left for battle, with Deputy Prime Minister Demeke Mekonnen Hassen taking charge of the government in his absence.

Abiy will be joined by Olympic heroes Haile Gebrselassie and Feyisa Lilesa, both of whom have declared their intent to assist in the fight against an alliance of rebel groups led by the Tigray People’s Liberation Front (TPLF).

The prime minister served in the Ethiopian army during the 1998-2000 border war with Eritrea and obtained the rank of lieutenant colonel. As leader, he later ended nearly two decades of tension between the neighboring countries by signing a landmark peace deal in 2019.

Upon assuming office in 2018, Abiy sought to stabilize the country by centralizing power in the federal government, a move that alienated the TPLF, which benefited under the previous devolved system and put it on a collision course with the new administration that has been exacerbated in recent years.

A year of fighting between Ethiopian National Defence Forces and the TPLF and other rebel groups has caused a humanitarian crisis and killed thousands, while displacing more than 2 million people, according to the U.N.

A genuine fight, or a ‘PR stunt’?

Earlier this month, nine anti-government factions announced the formation of an alliance dubbed the United Front of Ethiopian Federalist and Confederalist Forces, threatening to march on the capital Addis Ababa.

The TPLF has said it is advancing toward the capital, a claim denied by the Ethiopian government. A media and communications blackout across much of the north of the country has rendered it difficult for such claims to be independently corroborated.

Robert Besseling, CEO of geopolitical risk consultancy Pangea-Risk, told CNBC on Wednesday that Abiy’s dramatic move to the front was likely a “PR stunt to stir up patriotic or ethnic sentiment to counter the Tigrayan advance.”

He said there are very few federal troops on the frontline for Abiy to command, with government-supporting militias in the northern Amhara holding back opposition groups.

People hold lit candles in a memorial service for victims of the Tigray conflict organized by the city administration, in Addis Ababa, Ethiopia, on November 3, 2021.

Minasse Wondimu Hailu | Anadolu Agency | Getty Images

“I also ask where the supposed ‘frontline’ is located and where Abiy intends to join it. That said, the move to the frontline will stir nationalism and probably boost recruitment of civilians to join the army and militias,” Besseling said.

“If the Tigrayans are held outside of Addis, Abiy will claim credit and receive a political dividend.”

With the prime minister heading to battle and citizens being urged to take up arms, the outcome of the conflict will also have significant ramifications for the country’s economic future.

Ethiopia’s export-driven industries, ESG profile and key policy reforms will remain on tenterhooks, according to a client research report published Wednesday by political risk consultancy Verisk Maplecroft.

Rebels unlikely to seize the capital

Pro-government forces were forced to withdraw from Tigray state in June this year after their control over the region deteriorated, despite early signs of success when fighting first broke out in November 2020.

However, Verisk Maplecroft suggested that there is little binding the nine anti-government groups comprising the rebel coalition beyond opposition to Abiy, meaning it could prove a “fractious and short-lived arrangement.”

“The military momentum is currently with the rebels, but we do not expect the immediate collapse of the Ethiopian military nor the fall of the capital,” the Verisk client note said.

Amhara militia men, in combat alongside federal and regional forces against the northern region of Tigray, receive training in the outskirts of the village of Addis Zemen, north of Bahir Dar, Ethiopia, on November 10, 2020.

EDUARDO SOTERAS/AFP via Getty Images

“The Ethiopian National Defense Force is regularly resupplied with military equipment by international allies from the Persian Gulf and likely retains the capacity to halt the rebel advance.”

Verisk Maplecroft believes the TPLF-led coalition has little genuine intention of assailing the capital since a static siege like this would limit its mobility, which has helped its cause in the fighting so far.

Instead, analysts believe threats to Addis will continue in a bid to draw Abiy to the negotiating table, a strategy that looks increasingly perilous in light of recent events.

Abiy designated the TPLF a terrorist organization in May this year, hampering prospects of a negotiated settlement, and has struck a defiant and combative tone in light of the rebels’ aggression.

Supply chains in jeopardy

Verisk Maplecroft analysts noted that consumer goods supply chains feeding into western markets are already feeling the effects of the conflict, with a number of multinational clothing companies suspending operations, and warned that the situation may deteriorate further.

“The TPFL and its allies will look to put pressure on the government to enter into negotiations by seeking to disrupt the flow of goods dependent on the country’s principal export route, the Addis-Djibouti railway and road network,” they said.

“If the rebels were to either seize or disrupt this transport corridor, the country’s export-orientated industries would find their only reliable export route cut-off. “

Export-oriented Ethiopian manufacturers will also lose tariff-free access to the U.S. market from Jan. 1 after the country was suspended from the African Growth and Opportunity Act (AGOA) earlier this month, on allegations of human rights violations by state forces.

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Olaf Scholz replaces Angela Merkel as German chancellor

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German Chancellor Angela Merkel (R) and German Minister of Finance Olaf Scholz attend a cabinet meeting at the German chancellery on August 19, 2020 in Berlin, Germany.

Pool | Getty Images News | Getty Images

A coalition deal has been announced in Germany after almost two months of talks following the country’s inconclusive federal election in September.

Olaf Scholz, the center-left Social Democratic Party’s candidate, will be Germany’s next chancellor, replacing Angela Merkel who has led Germany for 16 years.

The agreement between the SPD, the Greens and the Free Democratic Party, will see them govern together in a three-way coalition for the first time. The alliance has been described as a “traffic light” coalition in reference to the parties’ traditional colors.

Christian Lindner, the head of the pro-business FDP, is set to be the next finance minister, according to the deal which was announced Wednesday afternoon and will now be voted on by the different parties. The Green Party’s co-leaders, Annalena Baerbock and Robert Habeck, are poised to take on the roles of foreign minister and economy and climate minister, respectively.

“The first traffic light [in Germany] was erected in Berlin in 1924 in Potsdamer Platz. At that time, it was still an unusual technology. ‘Can it work?’ people asked skeptically,” Scholz told a press conference in Berlin on Wednesday, according to a Reuters translation.

“Today, the traffic light is indispensable when it comes to regulating things clearly and providing the right orientation and ensuring that everyone moves forward safely and smoothly. My ambition as chancellor is that this traffic light alliance will play a similarly groundbreaking role for Germany,” he added.

Debt brake remains

The draft coalition agreement covers a wide range of climate policies — including plans to adopt a climate protection program by the end of 2022, utilize all suitable roofs for solar energy and the intention to align an expansion of its power network with a new renewables target.

Germany will try to dedicate 2% of its land surface to wind power infrastructure and will continue to exclude nuclear power from its energy mix, a policy that deviates from the policy of its neighbor France. The agreement also stated that Germany would stop funding renewable energy once its coal exit was achieved.

It said immigrants shall be eligible to apply for German citizenship after five years in the country and Scholz confirmed Wednesday that Germany will keep its constitutional debt brake — this basically forces leaders to present budgets without structural deficits or a very limited deficit.

The new coalition said it would launch a parliamentary investigation into the Afghanistan evacuation operation. The country will remain part of NATO’s nuclear-sharing agreement under the new government, the deal noted, and the Greens will have the right to nominate the country’s European commissioner if the EU Commission’s president is not from Germany, as is currently the case with Ursula von der Leyen.

‘Traffic light’ coalition

The parties have vowed to modernize Germany, which is Europe’s largest economy, with a priority placed on the transformation into a greener, more digitalized economy, as well as infrastructure investment.

German businesses are anxious to see what this transformation means for them in reality, in terms of energy prices and business costs.

Outgoing leader Angela Merkel’s conservative alliance, the Christian Democratic Union and Christian Social Union, will now see itself go into opposition.

Holger Schmieding, chief economist at Berenberg Bank, described the alliance as a “continuity coalition.”

“New faces need not mean a major change in policies. We expect the new government to continue the gradual tilt towards more government spending on pensions and investment as well as a green transformation that has been the hallmark of the last eight years of Merkel’s 16-year reign as chancellor,” he said in a note Wednesday.

Like Merkel’s “grand” coalition of center-right CDU-CSU and center-left SPD, the new government includes parties from both sides of the political divide, he noted.

“In terms of numbers, the centre-left (SPD and Greens) is much stronger and the centre-right (FDP instead of CDU/CSU) much weaker in the new government than before. But on many issues, notably domestic and European fiscal policies, the FDP often advocated a harder line than Merkel did. As a result, we always expected the compromises struck between the new coalition partners to be quite similar to what a continuation of the old government would have delivered.”

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Cathie Wood says her firm is testing more aggressive strategy: ‘Ark on steroids’

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Cathie Wood — known for her innovation ETFs that garnered billions in inflows during the pandemic — said Ark Invest is internally testing a fund that takes the strategy a step further by simultaneously betting against major stocks in the benchmarks that are being disrupted.

“We’re testing out a portfolio, but it’s really Ark on steroids,” Wood told CNBC’s “Squawk Box” on Wednesday. Wood said she wants to test the strategy on Ark’s employees and did not say when the fund would be made available to retail investors.

“We think the benchmarks are where the big risks are long term, because they are filling up with value traps — those companies that have done very well historically but are going to be disintermediated and disrupted by the massive amount of innovation that’s taking place,” Wood said.

Wood has long waved the flag about the so-called value traps in the major averages. She categorizes these companies as those that catered to short term-oriented shareholders by leveraging their balance sheets to pay dividends and buy back shares. As a result, these companies did not invest enough in innovation.

“What we would be doing is shorting stocks that are in the big benchmarks and when we get into a risk-off situation, what happens is portfolio managers and analysts generally run back to those stocks, get closer to their benchmarks and they dump our stocks, which are either small parts of benchmarks or not in benchmarks,” she said. “Great opportunity for us, as we have experienced during these last few days, to pick up those stocks because it’s simply a risk-off move to get closer to benchmarks.”

With Wood’s flagship fund, Ark Innovation ETF, down nearly 15% in 2021 and the S&P 500 up 25%, this new strategy could see some big losses.

Wood acknowledged the new method could be quite volatile but believes over the next five years it will be a huge winner as her innovation companies further emerge and the older bellwethers fade away.

“In five years, the world will look nothing like it does today, and we’re invested in all the disruptors, the winners, that are going to disrupt the traditional world order,” Wood added.

Tesla is Ark Innovation’s top holding, with other names including Coinbase, Teladoc, Unity Software, Roku and Zoom Video. Wood has consolidated into her highest-conviction names in 2021 amid a rotation from growth into value. She continues to buy the dip in beaten-down names.

To put numbers to Wood’s theory, she said that innovation is currently priced in the public global marketplace at roughly between $10 trillion and $15 trillion. In 10 years, disruptive innovation will be about $200 trillion of that market capitalization.

“It will go from a little bit more than 10% of global equity market caps to what we believe could be more than half,” said Wood. “That’s how much disruption is evolving thanks to DNA sequencing, robotics, energy storage, artificial intelligence and blockchain technology.”

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