Posts Tagged ‘reuters’

China’s February factory PMI seen at lowest since 2009 as coronavirus slams production: Reuters poll

BEIJING (Reuters) – Activity in China’s vast manufacturing sector likely shrank at the fastest pace since the global financial crisis in February as the coronavirus suspended large movements of goods and people in most parts of the country.

FILE PHOTO: A worker welds a bicycle steel rim at a factory manufacturing sports equipment in Hangzhou, Zhejiang province, China September 2, 2019. China Daily via REUTERS/File Photo

China’s official manufacturing Purchasing Manager’s Index (PMI) is forecast to fall sharply to 46 – a level not seen since January 2009 – from 50 a month earlier, according to the median forecast of 25 economists polled by Reuters. The neutral 50-point mark separates monthly growth from contraction.

The gloomy readings highlight the colossal economic damage to the world’s second-largest economy from the coronavirus that has killed almost 3,000 people in mainland China and forced draconian travel restrictions and quarantine rules.

Nomura expects first-quarter growth to be at 2.0% year-on-year while Capital Economics estimates China’s economy would contract outright in year-on-year terms this quarter, for the first time since at least the 1990s.

Wary of the deepening economic costs, the country’s top leaders have urged local governments, factories and workers to re-start operations as soon as possible in less affected regions, but many officials are concerned about a resurgence of infections.

Official data showed that production levels at China’s small and medium-sized companies, a major employment sector, were just 32.8% by Wednesday, while a majority of migrant workers – including those in Hubei – are yet to resume work.

Nomura estimated that only around 30-40% of migrant workers have returned and expected the lockdown in Hubei to be extended into mid-March. Hubei has over 10 million migrant workers.

Many small factory owners have struggled with labor shortages.

“We are not able to find people. Most of the migrant workers at our factory have not returned and when they do, they have to be quarantined for two weeks,” said Zheng Siqi, who owns a metal label factory in the manufacturing city of Wenzhou.

Zheng had reopened her factory on Monday after obtaining local government approval, but production is just a quarter of its pre-suspension level.

Analysts say Beijing is aware of these pressures after rolling out a series of measures to support the economy. The central bank has said it would ensure ample liquidity through targeted reserve requirement ratio (RRR) cuts for banks and significantly lower funding costs for businesses.

“The leadership appears to be readying significant stimulus which should restore employment and output by the third quarter, but the hit to output during the first half of the year will still result in much slower annual growth,” said economists at Capital Economics.

President Xi Jinping has repeatedly reassured world leaders that the economic impact from the virus is temporary and that Beijing expects to hit growth targets for the year.

The private-sector Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) due on Monday – which analysts say focuses more on smaller export-driven firms – is also expected to show a similar contraction at 45.7, compared with an expansionary 51.1 in January.

The official PMI and its sister survey on the services sector will be released on Saturday.

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Article from GigaOm.

The notion that a lot of venture capitalists — and in particular Kleiner Perkins — have lost money on cleantech startups is now officially mainstream news, via a long article published in Reuters this week. The article isn’t inaccurate, but it misses a whole lot of nuances including  the big picture global trends of population growth and resource management, the long term play and some of the newer trends of the cleantech sector, and a few of the more successful companies in Kleiner’s cleantech portfolio.

We’ve been covering this roller coaster ride, and Kleiner’s plays for years. Back in the summer of 2010, I first wrote “Greentech investing: not working for most;” and in early 2012 I wrote pieces on “the perils of cleantech investing,” as well as “We can thank Moore’s Law for the cleantech VC bust.” Last year I wrote “Kleiner Perkins web woes, add greentech,” and Kleiner is not so great at investing in auto tech.

Cleantech Open western regional 2012

The article does have a pretty amazing tidbit in there, that Doerr dipped into his own pocket for the $2.5 million that Miasole needed to make payroll before it was sold to Hanergy. But here are 5 things I think the article missed:

1). The long-term larger risk, but bigger payoff: A lot of the manufacturing and infrastructure-based cleantech startups have been taking longer to mature and reach commercialization than their digital peers, and they’ve also needed more money. But when some of these rare companies actually do reach scale and are successful, they could be massive players with huge markets. It’s just a different kind of betting — think putting a $100 on 22 on the roulette wheel, versus $5 on a hand of poker. A combination of the two — a small amount of the high risk investments, with a larger amount of the low risk investments — could be a good play.

That was one of the reasons why it seems like investor Vinod Khosla is still investing in cleantech startups. Khosla Ventures’ biocrude portfolio company KiOR — which the firm mostly owns – has a potential market that is no less than an opportunity to displace oil in transportation. Imagine if a venture investor owned a big chunk of Exxon Mobil.


2). The bigger trend of population growth and resource management: Many venture capitalists might be steering away from the cleantech investing style of years prior, but the overall global trends that originally drove these early cleantech investments will only continue to grow. These planetary trends aren’t wrong, it’s just that a bunch of the investments that were made weren’t that smart. The world will have 9 billion people by 2050, and energy, water and food will have to be managed much more carefully. The climate is also changing, because too many people are using too many fossil fuel-based resources. Technologies — including IT — that manage these resources and replace them with more sustainable ones will have large markets, particularly in developing countries.WindGoogleLady

3). Beyond venture: For many cases, the cleantech investing model isn’t a fit for venture capital. But that doesn’t mean it’s not a good fit for other types of investors like private equity and project finance. Google has put a billion dollars into clean power projects, because those can deliver relatively safe and decent returns. Corporate investors — like GE or NRG Energy — are putting money into cleantech startups because it’s more than just a return, it’s a strategic investment. Cleantech innovation will also continue to come out of university and government labs and will be spurred along by government support of basic science research. Does cleantech innovation need a cleantech VC bubble to start changing the world?


4). Kleiner’s portfolio is more nuanced: The Reuters story accurately pointed out Kleiner’s struggling cleantech companies like Fisker, Miasole, Amonix, and others. And also rightly pointed out how the few cleantech companies it backed that went public — like Amyris and Enphase Energy — are now trading below their IPO prices. But the article didn’t mention the exit of solar thermal company Ausra, and also didn’t name some of the more successful and growing companies in Kleiner’s portfolio like Opower, Clean Power Finance, Enlighted, Nest, and RecycleBank. Opower is the energy software company to beat these days.

Honeywell & Opower's iPad smart thermostat app

Honeywell & Opower’s iPad smart thermostat app

5). Cleanweb: See a trend in Kleiner’s more successful and growing cleantech startups? They’re mostly software and digital based. The latest trend in cleantech VC investing is the so-called “clean web,” or using social, mobile, and software to management energy and other resources. Some of these companies are pretty interesting and inspiring, like crowd-funding solar site Solar Mosaic.

Finally, as a side note, it’s now in vogue to point out how cleantech investors have lost money. Many have. But I think investors that have paved the way for world-changing innovation, and taken large risks to do so, should in part be lauded.


Read more here.

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Here is an update on the Euro crisis from Reuters.

“Europe may be months, conceivably weeks away from an expanded debt crisis that cuts more countries off from access to the markets and forces fresh emergency action by rich governments or the European Central Bank.

The many potential triggers for an expanded crisis include a failed bond auction, any signs that Athens or donor nations were backing away from a 110 billion euro ($141 billion) bailout of Greece, and a freezing up of Europe’s interbank money market.

For now, Portugal, Ireland and Spain, widely seen as the next possible “dominos” after Greece, remain in significantly better shape. The interbank market is far from grinding to a halt as it did after Lehman Brothers collapsed in late 2008.

But the spread of investor jitters in the past 24 hours, affecting markets as distant as yen swaps in Tokyo, suggests market conditions could deteriorate as rapidly as they did during the global financial crisis of 2007-2009.

“In my view there is a 10-20 percent chance that at least one more country will need rescuing as it finds itself shut out of the markets,” said Marco Annunziata, chief economist at Italy’s UniCredit bank.

“If it happens, it is most likely to happen in the coming six months.”

Lena Komileva, head of G7 market economics at money broker Tullett Prebon, said the crisis over Greece’s solvency had morphed into a capital markets crisis, and the markets had begun to feed on their own momentum.

“Another credit event similar to Greece can happen within weeks,” she said.

German Chancellor Angela Merkel and top economic policy makers in the euro zone appeared to recognize this in their warnings about the risk of an expanded crisis on Wednesday.

“It’s absolutely essential to contain the bushfire in Greece so that it will not become a forest fire and a threat to financial stability for the European Union and its economy as a whole,” said European Monetary Affairs Commissioner Olli Rehn.


Greece became unable to finance its debt at affordable rates when its 10-year government bond yield soared near 10 percent in April. The euro zone’s other weak countries have not reached that stage; Portugal’s yield was below 6 percent on Wednesday.

Portugal sold 500 million euros in six-month Treasury bills on Wednesday at a yield of 2.955 percent, which was about four times the rate at the last such sale on March 3 but was well below maximum levels in the secondary market. This was seen as a moderately positive sign by analysts.

Spain is expected to succeed in selling 2-3 billion euros of government bonds on Thursday, although at a much higher yield than in its last auction, analysts said.

Nevertheless, every debt sale by weak euro zone states in coming months is likely to be viewed as a potential flashpoint for an expanded crisis. Portugal plans to offer more T-bills on May 19 and Spain plans another bond sale on May 20.”

Read the full article here.

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Here is some good market analysis from The Reuters Blog – Dealzone.

“Like SocGen before them, UBS strategists are looking forward to a pickup in M&A next year.

“We expect 2009 to mark the trough in global M&A transactions and for activity to pick up in 2010 and beyond. For FY2010, globally we expect M&A activity in the region of $2.5-2.7trl, an increase of 15% on current annualised run rate for 2009 and close to levels last seen in mid 2004-05. The biggest driver of an increase in activity is likely to be the increase in risk appetite in equity markets and in the boardroom, a return to earnings growth and profitability by World Inc and a backlog of pending asset disposals.”

“Credit conditions are also supportive and we expect private equity and bank lending to pick up at some point next year.”

“We do think investors can take advantage of the growing interest in M&A as the likelihood of deals gets priced into stocks. The average take-out premium historically has been 30-40%, much of which is earned around the announcement of a deal. Merger arbitrage post bid announcement has earned a levered IRR around of 9% this year.”

“Despite a 27% decline in global M&A activity in 2009, deal volumes in Asia remained strong. At the current run rate, 2009 activity in the region will be up on 2008, taking APAC’s share of global M&A to 25%, from 6% in 1995. A meaningful pick-up in global activity in 2010 will require a rebound from trough deal volumes this year in the Americas and Europe.”

Read the full story here.

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