TheChek News Flow

China set to invest £105bn in UK by 2025

China is set to invest £105bn in British infrastructure by 2025, with energy, property and transport the biggest recipients, according to research. The world’s second-biggest economy has already invested £11.7bn in Britain between 2005 and 2013, including a 10 per cent stake in Thames Water, Britain’s biggest water utility, held by the China Investment Corporation, the sovereign wealth fund. This is expected to rise rapidly as Chinese capital seeks a safe haven for outbound investment, according to a report by the London-based Centre for Economics and Business Research and the law firm Pinsent Masons, which is due to be launched by the Chinese International Contractors Association in Beijing next month. Richard Laudy, a partner at Pinsent Masons, described the prospect of greater Chinese investment as a "game changer" for the UK, adding: "We expect this to be the beginning of a major trend as a trickle of Chinese investment turns into a wave over the coming decade." The report expects the UK to rank third out of 144 countries for attractiveness to foreign investment from China, behind the US and Japan. Investment flows from China into Britain rose rapidly in the first half of 2014, with a total £2bn invested in UK infrastructure including property, the report found. This included Sanpower’s $790m investment in April into House of Fraser and the $187m real estate investment by China Construction Bank into Old Broad Street in the City of London. China General Nuclear Power Corp is also expected to take a minority stake in the EDF nuclear power project at Hinkley Point in Somerset, although the final agreement has not been signed. However,, despite successive attempts by the UK government to encourage China to invest in new-build infrastructure, almost all the investment so far has been in property or assets that are active and delivering safe returns, such as CIC’s 10 per cent stake in Heathrow airport. This would change with Hinkley Point. The chief obstacle to Chinese investment so far has been the shortage of new shovel-ready projects after the British government froze or cut large infrastructure projects during the financial crisis. China is competing against Canadian and east Asian pension funds and the sovereign wealth funds of the Middle East, which are also waiting to release vast sums of cash to invest in infrastructure. Nevertheless, Mr Laudy said the Chinese stood out from other investors for their appetite to take construction risk. He pointed to the billions of renminbi of investment in infrastructure projects in Africa and eastern Europe as examples of where Chinese groups sell equipment as part of the deal and win construction and engineering opportunities at the same time. Despite their willingness to deploy their vast engineering and construction capability in Britain, Chinese investors also face particular obstacles, the report found. Chinese wind turbine technology has not attracted UK financial backing because of its short track record, for example. There are also concerns that Chinese engineering qualifications may not be recognised in the UK. Consequently, Chinese companies are more likely to form partnerships with UK companies as a route into the European market. Beijing Construction Engineering Group has partnered with Carillion, the British construction company, on the £800m Manchester City Airport project, one of the largest Chinese investments in Britain. The Industrial and Commercial Bank of China agreed with this view. "As Chinese investment into UK infrastructure has just begun, Chinese enterprises may look favourably towards the formation of joint ventures as they can provide many potential benefits," said a spokesperson. "However, from cumulative lessons learned from international experiences, strategic alliances will gradually transform into independent investment."

Rousseff scores narrow victory in Brazil

Brazil’s incumbent president Dilma Rousseff has triumphed in the country’s closest election in a generation, winning by about 3 percentage points in a vote that has split the nation between rich and poor. She now faces the daunting task of reuniting a country divided by the most bitter campaign in recent memory, reviving a sluggish economy and pacifying hostile markets. By Sunday night the president from the centre-left Workers’ party, the PT, had 51.64 per cent of the valid votes compared with 48.36 per cent for her rival Aécio Neves of the pro-business PSDB, with 99.98 per cent counted. An elated Ms Rousseff said in her victory speech in front of cheering supporters: "I don’t think, in my heart, that these elections have divided our country. I believe that it provoked conflicting feelings but in pursuit of a common goal, to change our country." "I wish her success," said Mr Neves in his speech to concede defeat, the fourth loss in a row of the PSDB to the PT. "Muito obrigada! [Many thanks! ]" Ms Rousseff tweeted as soon as the result was known, alongside a hashtag "Dilma four more years" and a photo of her against a red background with hand aloft in a victory signal. Her government’s success in reducing unemployment in spite of the international financial crisis while expanding social welfare benefits won over voters fearful that a Neves victory might jeopardise these hard-won improvements. Brazil’s new middle class, a group of more than 30m people who emerged from poverty in the 2000s, were seen as critical in the election. Eager for change, as shown with mass protests against the 2014 World Cup, they appeared to give the president another chance to deliver on their demands for better public services, particularly in the areas of transport, education and health. She was particularly strong in the poor north and north east but also won the majority in Minas Gerais, one of the most important south-eastern states and the home base of Mr Neves. "It’s not that I’m against the rich but they have enough money now. Let them live in their world of fantasy and happiness and let’s help the poor who really need our help," says Dom Pedro, a 66-year-old insurance broker voting in central São Paulo. "Capitalism is ruining the world," he said, pointing to the global financial crisis and examples such as high unemployment in Spain. But winning the election might be the easy part for a leader who campaigned for a second term by painting the election as a vote of the poor and lower middle-class against the rich. During the bitter two-month fight, both sides engaged in name-calling, including each accusing the other of Nazism. The election was also overshadowed by a corruption case in state-owned oil company Petrobras in which a jailed former executive of the company and his underworld accomplice who were involved in the scheme have accused the PT of complicity. The case is likely to roll on through Ms Rousseff’s second term, with scores of politicians from her ruling coalition accused of involvement and Brazil’s Veja magazine at the weekend saying she had knowledge of the scheme. She has vehemently denied the charge. In Brazil’s industrial heartland of São Paulo, where Mr Neves easily won a majority, some voters were outraged by Ms Rousseff’s victory. "I don’t believe it, the people are stupid," shouted one resident from the window of his house in the neighbourhood of Pinheiros. But on São Paulo’s main Paulista Avenue on Sunday night, as soon as it was clear Ms Rousseff had won, thousands of PT supporters gathered in the rain, waving flags and letting off fireworks. "I’m so happy, I can’t believe it – it was so close," says Swami Stello, who works as a lawyer in the city. "The PT has its problems but when it comes to reducing inequality, they are the best party." More difficult still will be winning over sceptical markets amid concerns that her campaign has not prepared the public for tough changes that may be needed next year to reduce Brazil’s fiscal deficit and prevent a rise in public debt. "The campaign has made her burn a lot of bridges," said Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Centre for Scholars. Attention will now turn to who will comprise her next cabinet, particularly the crucial position of finance minister. She has already signalled that her present finance minister, Guido Mantega, will not continue in her next term, raising speculation that she might appoint senior minister and economic co-ordinator of her campaign Aloizio Mercadante to the role among other names. Mr Mercadante on Saturday said she was already vetting candidates and said the president was prepared to make the "necessary adjustments" in 2015. "She has said it’s going to be more of the same but with improvements, but whether that is improvements for the markets is the big question," said David Fleischer, political analyst at the University of Brasília.

Exit polls signal Ukraine’s shift to west

Ukraine’s parliamentary elections on Sunday cemented the country’s westward shift away from Moscow’s influence, with exit polls suggesting the new parliament would for the first time be dominated by parties staunchly backing EU integration. National exit polls from four reputable pollsters showed President Petro Poroshenko’s eponymous election bloc gaining between 22.2 per cent and 23.2 per cent of the vote, slightly lower than pre-election opinion polls had suggested. Prime minister Arseniy Yatseniuk’s Popular Front party looks to have done better than expected, on 19.7 per cent to 21.8 per cent, leaving Mr Yatseniuk well-placed to retain the premier’s job. Samopomich, a new pro-western party founded by Andriy Sadovy, the mayor of Lviv in western Ukraine, and composed largely of new political faces, was shown in third place on between 11 per cent and 14.2 per cent. The Radical party of Oleh Lyashko and the Opposition Bloc, including former associates of ousted president Viktor Yanukovich, were vying for fourth place, ahead of the party of ex-premier Yulia Tymoshenko and the nationalist Svoboda party. A constitutional majority – more than three-quarters of voters who took part in the vote – "powerfully and irreversibly supported Ukraine’s path to Europe", Mr Poroshenko said late on Sunday in an address to the nation. Election officials estimated voter turnout at 53 per cent, less than expected. And with voting not taking place in Russian-occupied Crimea and highly populated eastern regions now controlled by Moscow-backed separatists, the election could further strain the national fabric of the war-torn country. Sunday’s vote took place nearly a year after massive pro-EU and anti-corruption demonstrations erupted in downtown Kiev. The demonstrations unleashed a dramatic sequence of events that sparked the toppling of Moscow-backed Mr Yanukovich, Russia’s annexation of Crimea and the Russia-backed separatist uprising in east Ukraine. A complete overhaul of government through snap presidential and parliamentary elections was a central demand of the winter protests on the Maidan, or Kiev’s Independence Square. Protesters viewed EU integration as a chance to break from the Soviet past, years of dysfunctional politics and rampant corruption. Mr Poroshenko said on Sunday he hoped the election would produce a "united, powerful and efficient team to implement reforms and restore peace to Ukraine". The precise final shape of the parliament remains unclear, with half of the 450 seats elected via party lists, but the other half from single-mandate districts. After the annexation of Crimea and with parts of Ukraine’s easternmost Donetsk and Lugansk regions controlled by separatists, elections took place in only 198 out of 225 districts. That deprived about 4.6m people out of Ukraine’s nearly 37m voters of the chance to vote, according to Opora, an election watchdog. Voting was generally reported to have proceeded smoothly, although there were isolated incidents. Two new candidates from Mr Poroshenko’s list, the investigative journalists Serhiy Leshchenko and Mustafa Nayem – an initiator of the Maidan protests – had their car pelted with stones in central Ukraine. The leading pro-western parties were expected to hold swift coalition talks, aimed creating a new government capable of facing the daunting challenges of restoring growth to the war-torn economy, fighting corruption, and reaching agreement with Russia on restoring natural gas supplies. Political leaders of the Maidan protests featured strongly in the election, with Mr Poroshenko’s party list headed by Vitaly Klitschko, the heavyweight boxing champion who became mayor of Kiev after the February revolution. Taras Berezovets, a Kiev political analyst, said: "The backbone parties for a new coalition will be the parties of Poroshenko and Yatseniuk, plus Samopomich, whose surprise strong result shows voters want fresh faces," he added. But Mr Berezovets said a low turnout in Ukraine’s east and other Russian-speaking regions such as the Black Sea port city of Odessa demonstrated disillusionment among voters there. "A pessimistic mood is spreading amid economic recession and inability to end the conflict with Russia," he added. The poor turnout in the east and south may also have reflected the implosion of Mr Yanukovich’s Regions party, which was not contesting the election, after securing 30 per cent in the last parliamentary poll in 2012. Sunday’s vote took place against the backdrop of a shaky ceasefire in the conflict in east Ukraine, which has claimed more than 3,700 lives. Though fighting has continued in defiance of a September 5 ceasefire, it is of lower intensity. Pro-Russia separatists have started entrenching themselves deeper in Donetsk, Lugansk and other cities between the provincial capitals. Separatist leaders plan to hold their own elections in regions they control in November. Many voters in Ukraine’s breakaway east are deeply opposed to Kiev’s new pro-western leaders, blaming them for breaking cultural and business ties with Russia. But patriotism has surged in other parts of the country. "I used to vote Communist and considered Russians our brothers, but Putin’s aggression against our peaceful nation has changed my views," said Nina Federivna, a 78-year-old Kiev pensioner. "I just voted for the Samopomich party because I think their youthful new politicians are best capable of adopting the reforms needed to give our children a better future, a European future." Addressing separatists in eastern Ukraine, she said: "If you like Russia so much, pick up your bags, go there and leave us alone."

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India’s ONGC Plans $180 Billion Global Acquisition Spree: FT 2014-10-26 13:19:58.854 GMT

By Lucy Meakin Oct. 26 (Bloomberg) -- ONGC plans “huge” spree to take on Chinese rivals, boost foreign production sevenfold by 2030, Financial Times reports citing interview with chairman Dinesh Sarraf. * Group aims to increase international oil and gas output to 60M tons from 8.5M to meet rising domestic energy demand * Investments will come from “virtually everywhere” to meet goal; ONGC invested about $7B since 2013 in foreign assets inc. from Mozambique, Brazil * Expansion potentially aided by decline in oil prices as new deals become available, Sarraf says * ONGC considering offer to invest in Rosneft’s Vankor, Yurubcheno-Tokhomskoye oilfields in Siberia, plus assets in Arctic

Link to Company News:ONGC IN <Equity> CN <GO>

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To contact the reporter on this story: Lucy Meakin in London at +44-2076732493 or lmeakin1@bloomberg.net

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ECB Test Results Will Drive M&A Activity in Europe’s Bank Sector 2014-10-26 14:36:40.495 GMT

By Nicholas Brautlecht Oct. 26 (Bloomberg) -- Sector remains “chronically unprofitable,” must address EU879b exposure to non-performing loans, AQR task force at KPMG says in statement. * ECB review was of “unprecedented” rigor, should build confidence in balance sheets of banks * Review is “foretaste of the detailed, data-driven approach the ECB will adopt as single supervisor” * ECB will scrutinize certain qualitative measures, having “fundamental implications for banks” * NOTE: KPMG worked with banks, regulators in Comprehensive Assessment, completing nearly a third of Asset Quality Reviews * NOTE: ECB Finds $32 Billion Gap as 25 Banks Including Paschi Fail Test

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To contact the reporter on this story: Nicholas Brautlecht in Hamburg at +49-40-31112-260 or nbrautlecht@bloomberg.net To contact the editor responsible for this story: Angela Cullen at +49-69-92041-158 or acullen8@bloomberg.net