Today three leading emerging markets are in focus over political and populist moves threatening their economies. First, Mexico's President-elect Lopez Obrador allowed an open-list all-comers referendum to veto a new airport for Mexico City, which needs one. There are environmental issues but the main reason people voted against the half-completed site was NIMBY, a phenomenon not unique to Mexico.

This took down Mexican shares across the board—and not just our cement stock—on Monday.

Then a battle between the Central Bank and the Administration broke out, not in Washington or Rome or Warsaw, but in India. Its central bank, the Reserve Bank of India is under pressure from PM Narendra Modi who wants to influence RBI policies and spending.

Modi is trying to get the RBI to fund government spending to boost its chances in next year's election by using reserves. The no. 2 at the bank calls this “potentially catastrophic” as it will weaken the economy and allow bank stuffed with dud loans to continue to lend more. It will also weaken bank regulations, politicize monetary policy, and weaken the rupee.

Also, China decided to further increase stimulus after the last round turned out to be a dud. It is still being targeted by fierce tariffs by the Trump Administration. However, Beijing is not going all out in boosting stimulus to offset its new regulatory zeal, not only against the financial sector (where it is needed, given the volume of dud loans made by state and local government banks) but also against private sector firms. The notable victims this year have been its Internet companies. But it is already in hock nationally, with debt 120% over income so it cannot really cut taxes or spend money.

Three reporting companies from Australia, Japan and Britain today (to say nothing of vital changes at two of my US shares, GE and IBM) plus Fiat, FCAU, which we sold in time, mean I will not chat much more about our technical issues, but for the record they are now firmly being healed thanks to the intervention yesterday of my company lawyer with their company lawyer, a way to overcome IT messes that is so 20^th century! We are also gaining from our now full-time employed former webmaster coming on my payroll for a weekday's work. I hope the tech issues will soon be nothing but a Hallowe'en joke.

*BP plc nearly doubled its Q3 profits in dollars to $3.8 bn, a new 5-yr quarterly high, boosted by more extraction, upstream and refining earnings, and Russia. Operating cash flow excluding the remaining payments for the Deepwater Horizon disaster in the US Gulf of Mexico hit $6.6 bn, including an increase of $700 mn in working capital, a herald of better times ahead. (BP paid out another half bn bucks post-tax for the disaster.)

It produced daily oil and gas at a level of 3.6 mn barrels of oil equivalent (BOE) helped by both demand and new projects. Its upstream production rose 6.8% y/y (excluding 1.2 boe from Rosneft and other portfolio changes). Rosneft output rose 2.8% to 1.2 mn boe.

New fields were brought on ahead of schedule this month, Thunder Horse NW in the Gulf of Mexico and Western Flank B in Australia. Our UK oil major also is growing its network of gas stations in Mexico and acquiring BHP's US-Canada network for $10.5 bn.

Moreover, contrary to its earlier plan, BP will fund the BHP buy entirely from cash and will not use stock for the deferred amount it will owe. This is very good for shareholders, including us. It will use proceeds from the associated $5 to 6 bn to reduce debt. BP raised its dividend by 2.5% to $10.25 helping me survive the cut by GE. BP gained over 2.8% so far today.

*Nintendo reported a whopping 12% gain in its FY 2018-9 Q2 profits (June-Sept) over last, to ¥34 bn ($300 mn) thanks to the Switch. We sold half our holdings in Tencent to buy NTDOY because our India reporter is keen on the software which sold well to other young gamers, despite hesitation from our Japan reporter. (It did take a year before Abhimanyu persuaded your editor. ) Profits in H1, not broken out by quarter, rose to ¥64.6 bn ($572 mn) on sales of ¥389 bn, up only 4% from prior year. Gaming did it.

The Switch device and its games sold well, with 5 mn units being bought, a 25% rise from the prior year. The games also work on smart devices which bring in older players in the US and other markets, not just Japan. Our India reporter now lives in a college town and is well plugged into what appeals to the country's middle class young.

Miners and Industrials

*Orocobre of Australia produced 7% more lithium y/y in its Q2 but 39% less sequentially because of a 2-week shutdown for its $40 mn upgrade program (planned) and very low evaporation rates in Argentina's winter this year (not planned). Its production fell to 2,293 metric tonnes in the Sept. quarter. Despite this, sales were $32 mn, up 32% over last year thanks to higher prices ($14,699 per metric tonne FOB). Cash costs per tonne were only US$4,640 so gross cash margins hit $10.059/tonne, up 62% y/y. It added two new harvest ponds to extract lithium from liquids.

OROCF which is primarily listed in Australia, and controlled by Toyota of Japan via a sub, and with the Province of Jujuy also owning shares, is upping production to 42,500 tonnes per year and has spent $10 mn of the $40 mn approved and the $285 mn total cost.

It is in the process of getting approval for an environmental protection contract for the stage 2 expansion of the Nahara lithium hydroxide plant in Japan for Veolia, the French waterworks firm we used to own. This will be done before other new projects start there.

OROCF has cash on hand of $308.7 mn thanks to the capital increase of its partner Advantage Lithium of Canada for the Cachari joint venture,of which it owns a quarter. It is moving toward a phase 3 definitive feasibility study to be completed early next year. It also plans to recycle carbon dioxide used at its Olaroz facility to make battery-grade lithium carbonate, replacing as much as half the chemical now transported 1800 km (1200 miles) from near Buenos Aires by truck. This can cost less than $2 mn.

It has a new local CEO, Martin Perez de Solay who will eventually succeed Richard Seville. The big question mark is China where spot prices in the last quarter fell below the seaborne contract market price. (Cf above). OROCF fell 2.9% here.

*Chilean rival SoQuiMich, which also mines lithium, gained 1.25% in part from this, and in part from its new Chinese shareholder being allowed. Tianjin Lithiumowns 24% of SQM bought from Canada's NTR, Nutrien Ltd. It only wants to produce fertilizer, not lithium, after the merger of Potash and Agrium.

*UBS Group raised Antofagasta to neutral from underperform. The Chilean copper miner is listed in London. UNFGF crashed and some (like me) consider this a herald of economic woes ahead.

*Brazilian Cosan rose 2.6% on Belisario's victory, while some extractive firms actually fell. CZZ. Citigroup downed Vale (sold too soon) to neutral from buy.

*Cemex recouped 1.74% on US markets today despite the airport veto because CX stated that Mexican cement demand would still be high.

*It didn't match the rise in recovering CRH  of Ireland, up 4-5% after completing a buyback program.

Tech and Tel

*Mercado Libre was rated overweight by Piper Jaffrey but the Argentine version of Amazon had its TP lowered to $340, still up 12% from where MELI is now. It operates mainly in Brazil and is listed in US$ so it is relatively immune from Buenos Aire's woes. Its stock rose 8.5% today to $311.7+

*South Africa's Naspers fell 10.8% today in European trading in the wake of Chinese uncertainty over Tencent, to a delicious $33/sh. It has been nearly 2x as high in the last 12 mo. That's where my high GI divvie just booked will be spent. It inched up here but I am still determined. Since this amounts to averaging up, it will not get into the model portfolio. The tech wreck is being copied from the US and NPSNY is listed here.

*Tencent TCEHY fell despite the new Chinese stimulus measures today, in part because there was no hint that its financial and entertainment businesses would be tolerated by Beijing. Baidu, Alibaba, and Tencent are the target of short sellers and Tencent has had to delay the spinoff of its Tencent Music arm. I think the best we can hope for is that the linking of the BAT stocks breaks as that of the FAANGs already has.

*Azure Power of India raised $400 mn from equity and debt issues in the last quarter, of which $185 mn came from the NYSE secondary and the rest from other sources. Solar power installation maker AZRE is now aiming to produce over 2 gigawatts of solar projects in India at a price level of about 17% below the lowest competing bids in the market.

*Auto electronics maker Veoneer of Sweden is up 1.3% on the assumption, perhaps wrongly, that Chinese car ownership is going to raise some more now that consumer spending it's being fostered.

*Also gaining from auto hopes is Japan's robotics firm Fanuc, up 3.7% to $16.25, still below our purchase price. In fact, FANUY is not as much of an auto supplier as assumed.

*Chinese robotic manufacturer Hollysys Automation rose 4.6% today perhaps because the railway bridge to Hong Kong is still standing, perhaps because there will be more trains to build as China pushes consumer spending. HOLI.

Other China stocks like CEA (airline) and AIA Group of Hong Kong (AAIGF insurance) rose.

*Israeli's Tower Semiconductor was maintained as a buy by Jefferies brokers and rose 5.87% to $4.80 today, still well down. TSEM was my worst recent pick.

Health

*Swiss Novartis is in a health crisis over its US sub Genentech. After its pipeline review, it cut a fifth of its 430 drug pipeline projects. That is 90 products, a high even for major drug culls as were done by other firms.

But the reason is not only worries about their marketability. Four staffers here (of Chinese heritage) supplied trade secrets to a Taiwan maker of biosimilar drugs, JHL Biotech. The drugs included Avastin, Herceptin, and Rituxin—all cancer meds.

*While Roche gained 2.7% today and drug shares generally were up, NVS only gained 0.5% because of uncertainty.

*GlaxoSmithKline sub ViiV put out good results yesterday on its 2-drug regimen for HIV using injections. I overreacted to the idea of oral medication but the viral suppression was also very good with monthly jabs of cabotegravir and rilpivirine. These are meds which await regulatory approvals and I don't want to lead anyone living with HIV astray. GSK also discovered leakage of trade secrets in its Philadelphia site, to Renopharma, of Mainland China, discovered by an FBI investigation.

*I cannot make out why the Mexican airport veto is hurting Grupo Bimbo. GRBMF lost 4.1% today.

Fundos

*Fibra Uno, our Mexican REIT, fell 5.2% on fear of populism which may interfere with its main tenants, foreign company offices and shopping malls.

*Japan Smaller Cap Fund, JOF, is up 1.45% today after it reported on H1 numbers (to Aug. 31) showing its NAV per share fell 9.6% but its price fell 12.8% in the quarter. It closed the quarter at a discount of over 14% of the NAV. A small cap fund requires research and savvy and cannot be replaced by a robot.

*Thanks to its buyback plans, Mexican Equity & Income overcame negativism about AMLO and rose 1% more.