Tag Archives: china
Tibet Opens Up As New Domestic Tax Haven
http://www.ft.com/cms/s/0/657d21a0-00e4-11e3-8918-00144feab7de.html#ixzz2cmpNISU2 By Simon Rabinovitch in Shanghai Cayman Islands, step aside. Private equity funds looking to cut their tax bills have a new option some 3,600 metres above sea level at the foot of the Himalayas. The only catch is, they will be playing a role in China’s strategy to tighten its grip on Tibet. The government of Shannan prefecture, which lies in Tibet between Lhasa and the Buddhist kingdom of Bhutan, has started offering generous tax breaks and other sweeteners in an attempt to make itself a home for private equity funds and investment companies. Cities across China regularly compete for investors, but lawyers and advisers say the package of incentives available in Shannan, known as Lhoka in Tibetan, is unusually aggressive and is beginning to attract interest. The enticements for private equity funds to set up shop in Tibet are part of the Chinese government’s push to develop the region’s economy at the same time as establishing firmer control over it. Some scholars have called for a more flexible approach to the country’s restive Tibetan minority, but top leaders have vowed to take a hard line against anyone seen as agitating for independence. Of the 300,000 people in Shannan, more than 90 per cent are of Tibetan ethnicity. The investment companies that have been lured there are almost entirely managed by Han Chinese, consistent with the government’s strategy of encouraging Han to populate areas inhabited by minority groups. Tibet has set the corporate tax rate for investors at just 15 per cent, well below the national norm of 25 per cent. Companies that pay more than Rmb5m ($820,000) in tax can have as much as 40 per cent returned to them. The Tibetan government has also introduced a flat tax of 20 per cent on the incomes of some partners in private equity firms, a steep discount on the national rate where the highest bracket pays 45 per cent tax. And, unlike many other regions of China, it does not require that funds registering in Tibet invest in local companies; simply having Tibet as a domicile is enough. “Many places throughout China, especially big cities like Beijing and Shanghai, have been offering preferential policies to private equity firms. But over the past year, lots more investors have been mentioning Tibet and talking about moving there,” said Wang Jinghe, a lawyer with Dacheng law offices in Shanghai. Mr Wang said foreign private equity firms with renminbi funds in China would in theory be allowed to base themselves in Tibet but he had not heard of any doing so. Foreign visitors need special permits to enter Tibet and these can be difficult to obtain. Zero2IPO, a research and advisory firm, had no record of Chinese private equity funds establishing themselves in Tibet until last year when three registered there. Figures are not yet available for this year, but anecdotal evidence points to a growing flow towards Tibet. At the start of the year Dingxin Growth Fund established what analysts say is the biggest private equity fund to date in Tibet, a Rmb400m vehicle, though its mandate is to invest in property in other regions of China. “Every lawyer we spoke to suggested that we consider basing ourselves in Tibet,” the manager of a newly established fund told the Financial Times. Tibet is also emerging as a haven for investors who want to limit their taxes when selling off shares. Conant Optical, an eyewear maker listed on China’s venture capital stock exchange, announced on August 8 that its founder’s investment company had moved from Shanghai to Shannan in Tibet and reduced its overall stake. Golden Securities, an investment magazine, said in an article on Friday that it was “an open secret” that Tibet was the place to go to register shareholdings before selling them. The magazine said: “It’s not hard to see that Shannan has become a hotspot for listed companies that are cutting their holdings.” The government of Shannan reported that its tax revenues in the first half of 2013 reached Rmb726mn, a 110 per cent increase over the same period a year earlier. Continue reading
EM Storms Could Spread To Europe
http://www.ft.com/cms/s/0/03acf9f0-098b-11e3-8b32-00144feabdc0.html#ixzz2cXAczb6b By Ralph Atkins in London Periphery eurozone bond markets could be next in line for sell-off At the start of this year, emerging market turmoil was on few investors’ worry lists. Top preoccupations were US fiscal woes, the rumbling eurozone debt crisis and a possible “hard” landing for China’s economy. Nobody really considered what would happen if all those threats did not materialise. The financial storms hitting India and other developing economies this week are the answer. With the US economy having successfully avoided possible global upsets and growing steadily, the US Federal Reserve wants to wind down its asset purchases, or “quantitative easing”, from as early as next month. As a result bond prices have fallen, and yields risen correspondingly, in developed markets – and the strong flows of capital into emerging markets that had been attracted by higher yields there have gone firmly into reverse. Worst hit have been countries most reliant on capital inflows – those with gaping current account deficits to finance. In India, where the deficit exceeded 5 per cent of gross domestic product last year, the rupee has tumbled to a record low against the dollar. Equity prices have fallen precipitously, while 10-year bond yields have approached 10 per cent, the highest for five years. The good news is that this has not yet spun into a full-blown emerging market crisis, and the Fed can control the pace at which it “tapers” asset purchases. European shares are benefiting as an alternative contrarian trade for investors looking for underrated assets. The bad news is that we are still at the start of the process of exiting global QE and the effects will spread – including, perhaps, to weaker European economies. Much of what is happening in emerging markets is the result of national factors – India’s troubles have been exacerbated by seemingly cack-handed political decisions. It is also true that global investors fell out of love with emerging market equities long before Ben Bernanke, Fed chairman, first hinted at tapering on May 22. Thus the extent to which tapering is causing the emerging market tensions is disputed. But it seems obvious that tapering talk has at least exacerbated the sell-off. Outflows from Bric (Brazil, Russia, India and China) bond funds have been equivalent to almost a third of assets under management since May 22, according to EPFR, a funds data provider. That compares with just 4 per cent from the start of the year until Mr Bernanke spoke. Moreover, there has been a clear relationship between the size of current account deficits and the extent to which countries have been hit by the financial turmoil – strengthening the argument that it is reversed QE flows that are the main culprit. Indonesia, where the current account also deteriorated sharply last year, has seen some of the sharpest equity price falls. South Africa, Turkey and Brazil have, like India, seen steep rises in bond yields and tumbling dollar exchange rates. Ominously, the lesson of economic history is that when capital inflows go into reverse, the turnround is often abrupt and painful. Nor are surplus countries immune. When emerging market fund managers have to finance sudden large outflows they are forced to sell higher-quality, more liquid assets – and the effects spread. For Europeans, this week’s events are eerily reminiscent of the damage wreaked on the Baltic states that were running massive current account deficits when the global financial crisis erupted in 2007. Eurozone bond yields have remained steady for the (not entirely positive) reason that fickle foreign investors have already fled the region’s weakest markets. For a while, weaker members of the eurozone were protected by the currency union. But then the eurozone itself was almost torn apart as strong capital flows from the continent’s north to the southern periphery went into reverse. Fixed exchange rate regimes sometimes lull investors into a false sense of security by delaying an inevitable correction. This week’s emerging market turmoil will encourage the shift in investor sentiment back towards developed economies, especially those returning to internally driven, self-sustaining growth. The risk for Europe, however, is that periphery eurozone bond markets could be next in line for a sell-off. If German 10-year Bund yields are rising – they have this week exceeded 1.9 per cent, compared with less than 1.2 per cent in early May – yields below 4.5 per cent on Italian and Spanish equivalents look less compelling. For now, eurozone bond yields have remained steady for the (not entirely positive) reason that fickle foreign investors have already fled the region’s weakest markets. But we are at the start of a long process in which US monetary policy will evolve – with effects nobody can predict with confidence. Continue reading
A Big Yield and Growth in Global Agriculture
By Selena Maranjian August 8, 2013 Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some global agriculture stocks to your portfolio but don’t have the time or expertise to hand-pick a few, the IQ Global Agribusiness Small Cap ETF ( NYSEMKT: CROP ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best , you can use this ETF to invest in lots of them simultaneously. The basics ETFs often sport lower expense ratios than their mutual fund cousins. The IQ ETF’s expense ratio — its annual fee — is 0.75%. The fund is fairly small, too, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in. This ETF is too new for us to be able to infer much from its performance. (It did underperform the world market last year.) It’s the future that counts most, of course, and as with most investments, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver . Why global agricultural small caps? It’s a win-win-win proposition: It’s smart to diversify your holdings geographically, so that one region’s downturn doesn’t derail your performance. Agriculture is a solid defensive sector, as the planet’s growing population will always need to eat. And small caps, while they can be more risky than larger companies, also offer more growth potential. (This ETF holds some more established mid caps as well.) More than a handful of global agricultural companies had strong performances over the past year. GNC Holdings ( NYSE: GNC ) surged 36%, offering health and wellness products in the U.S. and abroad from more than 8,000 retail outlets. It’s near a 52-week high and yields 1.1%. The company benefits from more than 2,000 store-within-a-store locations in drugstores and elsewhere, and is expanding beyond that model in China, building stand-alone retail locations. In its recently reported second quarter, revenue rose 9% and EPS nearly 18%. The company faces online competition , but it is finding some success with its Gold Card membership program , which has more than 8 million members. Other companies didn’t do quite as well over the last year, but could see their fortunes change in the coming years. Dole Food ( NYSE: DOLE ) , for example, climbed only 3%. The company has been strengthening its balance sheet (in part by selling Dole Asia), but earnings and free cash flow remain in the red. Its founder has made a buyout offer for the company, but with the company on more solid footing these days, it might not be shareholders’ best option. American Vanguard ( NYSE: AVD ) , specializing in agricultural chemicals, shed 9%. In June, it tempered near-term expectations, citing wet weather in the Midwest and Southeast. Its second quarter did indeed disappoint , with revenue up 2% and earnings per share down 3%. A more promising note is an agreement to co-market its Impact herbicide with Monsanto offerings. Management expects solid demand in the second half of the year. CVR Partners, L.P. ( NYSE: UAN ) slid 16%. A master limited partnership ( MLP ) focused on nitrogen fertilizer, it yields a hefty 10.5%. The company’s recent performance was whacked by a plant shutdown for repairs, but production there has resumed. (The company has just that one plant, so the shutdown was quite a big deal.) Its recent quarter was solid, with record production of urea ammonium nitrate (UAN) and a rosy outlook, as CVR’s UAN facility has been expanded. Bulls like both its growth prospects and its massive yield. The big picture Demand for agriculture isn’t going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies — and make investing in and profiting from it that much easier. This isn’t the only ETF that might intrigue you. You can learn more about a few ETFs that have great promise for delivering profits to shareholders by checking out The Motley Fool’s special free report ” 3 ETFs Set to Soar .” Just click here to access it now. The Fool just turned 20; our paying members are getting rich… And we’re in a mood to celebrate. That’s why our top stock pickers (just ranked #1, #2, and #3 over the last 5 years according to an industry watchdog) are about to roll out the next generation of Motley Fool signature stock picks. We’re talking about what could be the next Amazon (1,700% gains)… Priceline (up 3,300%)… or Netflix (up over 1,500%)… In fact, we believe so strongly in all this, we’re plunking down our own company money on a few of these stocks! And we want to invite you along to see it all – FREE, no strings attached. Just enter your email address, and we’ll be in touch. Continue reading
