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Sinopec is the Latest Beneficiary of Chesapeake’s Deflation

The asset bubble that is Chesapeake Energy Corp. (NYSE:$CHK) is continuing with its asset sales for the acreage it has amassed using massive leverage. In its most recent quarter, the company increased its output and made significant improvements in crude output but this was overshadowed by management tumult and a massive sale of its shale acreage to a Chinese firm at a price which is three times less than Chesapeake’s own estimates.

The China Petroleum and Chemical Corp (NYSE:$SNP), more commonly known as Sinopec, is purchasing half of Chesapeake’s  850,000 acres of oil and gas assets at the Mississippi Lime shale field for $1.02 billion. Through this deal, Asia’s biggest refiner will considerably increase its shale footprint in the U.S. And, as I said at the outset, Sinopec won’t be paying any premium for the privilege. While some analysts have identified that the sale is $200 million below estimated value, Chesapeake itself had the land valued at an estimated $7,000 to $8,000 per acre for the property in July 2012. Calculating from the mid-point of $7,500, the asset is being sold at less than one-third of what Chesapeake valued it at less than 8 month ago.

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Treasury’s Profitable Exit is AIG’s Opportunity Loss

A consortium of Chinese investors, both public and private, purchased an 80.1% stake in International Lease Finance Corp (ILFC), the aircraft leasing arm of American International Group (NYSE:AIG), for $4.2 billion. AIG plans to retain at least 10% of its stake in ILFC while the Chinese consortium will have an option for an additional investment that will increase its ownership to 90%. The transaction is expected to close by Q2-2013. The consortium includes New China Trust, China Aviation Industrial Fund and P3 Investments. Earlier, it was also announced that ICBC and New China Life Insurance might also join the deal but since then, Bloomberg  reported that neither of the two have any such plans.

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Starbucks Makes A Cost Effective Entrance Into India

It is going to be cheaper to get a sip of Starbucks (SBUX) coffee in India than in any other neighboring countries in South-East Asia, including ones with stronger currencies like Singapore or Malaysia. The reason behind this is its local sourcing arrangement with Tata Coffee. India is the only country where Starbucks will not have to import a majority of its beans for its local stores. And the company assures customers that the taste will be the same as it is worldwide.starbucksindia

McDonald’s (MCD) and other U.S. chains promise the same things but it is rarely the case. The menu and coffee blends will be tailored to local tastes in order to be successful. Moreover, India is a place where price sensitivity is far higher than it is in other places. Add to that the extreme worry over opening up foreign retailers’ ability to compete locally and this local sourcing scheme kills a number of birds both political and organizational. I’m sure Starbucks looked at the regional backlash against Wal-Mart’s (WMT) potential entry into India after the relaxation of foreign ownership rules for retailers and made the prudent decision to integrate itself into the local supply chain rather than forge a completely new one.

Read the rest at Seeking Alpha.

ConocoPhillips’ Asia Strategy Hedges Dollar Risks

ConocoPhillips (NYSE:$COP) is showing renewed interest in the lucrative Asia-Pacific oil market.  It is gearing up to resume its biggest Chinese operations as well as having made a “final investment decision” on the Malaysian offshore project as it divests from China’s neighbor Kazakhstan.   These represent an important diversification tool as the world heads towards a stagflationary, low-growth period. ETRM_LRG_oilrig_opt

There are three big deals to look at.

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Lack of China Growth Limits Nike’s Upside

nike-hyperdunk-china-pe-0Nike (NYSE:$NKE) broke above $50 per share, a significant resistance level, after announcing better than expected results coming from North America in their last earnings report.    Overall, global future orders are due to rise 6% through April, out of which the North American and Western European future orders are up 14% and 10% respectively.  But, Nike’s future growth is not predicated on North American growth, a saturated market, but rather China and other major emerging markets and there the picture is more muddied.  In this article we’ll go over the earnings report and lay out a potential trade based on Nike’s current performance and price.

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Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital.  (read more)

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