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Alibaba Posts Strong Sales Growth Amid SEC Accounting Probe

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  • Alibaba Posts Strong Sales Growth Amid SEC Accounting Probe

Alibaba recorded better than expected profits and revenues in its third quarter as the Chinese ecommerce group played down concerns about China’s flagging economy and an ongoing investigation, ahead of the annual Singles Day online shopping spree.

The company said that preparations for Singles Day on November 11, the world’s largest online shopping day, have not been affected by an investigation into its accounting practices by the US Securities and Exchange Commission disclosed in May.

Among its questions, the SEC has asked about the large unaudited numbers Alibaba publishes on sales on Singles Day, which analysts took to mean the measure it uses for total sales across its platforms, gross merchandise value.

Alibaba did not report gross merchandise value in the second quarter for the first time, but during a conference call with analysts on Wednesday, Daniel Zhang, chief executive, said that “GMV so far looks good and growth is on track”.

Joe Tsai, Alibaba executive vice-chairman, also told analysts that there was “no factual basis” to a story in the New York Post newspaper alleging that a high-level whistleblower was helping the SEC in its investigation. The SEC has said that its investigation did not mean Alibaba had breached any laws.

Shares in the group initially climbed more than 4 per cent in pre-market trading in New York but dropped lower after the market opened.

Alibaba said sales in the quarter to the end of September rose 55 per cent to Rmb34.3bn ($5.1bn) compared with the year before, topping Wall Street estimates of Rmb33.9bn. Earnings per share on an adjusted basis rose to Rmb5.26 from Rmb3.61 a share a year ago, which beat expectations of Rmb4.69.

Alibaba makes its money through selling space to merchants on its marketplaces, in the form of fees and advertising revenues. Alibaba’s revenues growth has continued to be strong, despite an economic slowdown across China, mainly from a 47 per cent increase in online marketing services revenues, the group said.

In the period Alibaba reported 439m annual active buyers, a rise of 14 per cent compared with last year.

“We operate a superior marketplace,” said Mr Tsai, adding that Alibaba has fewer limits than its competitors on the amount of advertising load that consumers will accept on an ecommerce website.

“There is no church and state when it comes to content and ads, because they come to the site with very high commercial intent,” he said.

He also cited technological advances in using data to increase click-through rates.

“Our ability to personalise every single user interface, so every person coming to the platform can see different products, and different recommendations; that drastically increases our ability to generate relevant clicks … and drive volumes,” said Mr Tsai.

Net income dropped to Rmb7.1bn, from Rmb22.7bn, the company said, blaming the fall on a large non-cash revaluation gain last year from its interest in Alibaba Health.

Alibaba said that revenue rose 41 per cent in its core ecommerce business to Rmb28.5bn. Meanwhile, its cloud computing unit notched sales growth of 130 per cent to Rmb1.5bn.

Mr Zhang added: “Beyond the strong performance of our core commerce business, we are pleased with the continued rapid growth of our cloud computing business. We also see huge potential in our newly integrated digital media and entertainment unit.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Prices Decline on Rising India COVID-19 Cases, U.S Inflation Concerns

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Global oil prices extended a decline on Friday following a 3 percent drop on Thursday as coronavirus cases rose in India, one of the world’s largest oil consumers.

Brent crude oil, against which Nigerian oil is priced, declined by 35 cents or 0.5 percent to $66.70 a barrel at 5 am Nigerian time on Tuesday while the U.S West Texas Intermediate (WTI) fell by 28 cents or 0.4 percent to $63.54 per barrel.

The commodity super cycle rally just hit a hard stop and the energy market doesn’t know what to make of Wall Street’s fixation over inflation and the slow flattening of the curve in India,” said Edward Moya, senior market analyst at OANDA.

The crude demand story is still upbeat for the second half of the year and that should prevent any significant dips in oil prices,” he added.

Prices dropped over a series of key economic data that stoke inflation concerns and forced experts to start thinking the Federal Reserve could raise interest rates to curb the surge in inflation.

An increase in interest rates typically boosts the U.S. dollar, which in turn pressures oil prices because it makes crude oil more expensive for holders of other currencies.

This coupled with the fact that India, the world’s third-largest oil consumer, recorded more than 4,000 COVID-19 deaths for a second straight day on Thursday, dragged on the oil outlook in the near term.

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Brent Crude Rises to $69 on IEA Report

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Oil prices rose after the release of the International Energy Agency’s (IEA)  closely-watched Oil Market Report, with WTI Crude trading at above $66 a barrel and Brent Crude surpassing the $69 per barrel mark.

Prices jumped even though the agency revised down its full-year 2021 oil demand growth forecast by 270,000 barrels per day (bpd) from last month’s assessment, expecting now demand to rise by 5.4 million bpd. The downward revision was due to weaker consumption in Europe and North America in the first quarter and expectations of 630,000 bpd lower demand in the second quarter due to India’s COVID crisis.

The excess oil inventories of the past year have been all but depleted, and a strong demand rebound in the second half this year could lead to even steeper stock draws, the IEA said yesterday, keeping an upbeat forecast of global oil demand despite the weaker-than-expected first half of 2021.

However, the upbeat outlook for the second half of the year remains unchanged, as vaccination campaigns expand and the pandemic largely comes under control, the IEA said.

Moreover, the global oil glut that was hanging over the market for more than a year is now gone, the agency said.

“After nearly a year of robust supply restraint from OPEC+, bloated world oil inventories that built up during last year’s COVID-19 demand shock have returned to more normal levels,” the IEA said in its report.

In March, industry stocks in the developed economies fell by 25 million barrels to 2.951 billion barrels, reducing the overhang versus the five-year average to only 1.7 million barrels, and stocks continued to fall in April.

“Draws had been almost inevitable as easing mobility restrictions in the United States and Europe, robust industrial activity and coronavirus vaccinations set the stage for a steady rebound in fuel demand while OPEC+ pumped far below the call on its crude,” the IEA said.

The market looks oversupplied in May, but stock draws are set to resume as early as June and accelerate later this year. Under the current OPEC+ policy, oil supply will not catch up fast enough, with a jump in demand expected in the second half, according to the IEA. As vaccination rates rise and mobility restrictions ease, global oil demand is set to soar from 93.1 million bpd in the first quarter of 2021 to 99.6 million bpd by the end of the year.

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OPEC Expects Increase In Global Oil Demand Raises Members’ Forecast on Crude Supply

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The Organisation of Petroleum Exporting Countries (OPEC) yesterday lifted its forecast on its members’ crude this year by over 200,000 bpd and now expects demand for its own crude to average 27.65mn bpd in 2021.

This is almost 5.2mn bpd higher than last year and around 2.7mn b/d higher than an earlier estimate of the group’s April production.

According to the highlights of the organisation’s latest Monthly Oil Market Report (MOMR), OPEC crude is projected to rise from 26.48 million bpd in the second quarter to 28.7 million bpd in the third and 29.54 million bpd in the fourth quarter of the year.

The report also indicated a fall in Nigeria’s crude production from 1.477 bpd in February to 1.473, a difference of just about 4,000 bpd before rising again in April to 1.548 million bpd, to add 75,000 bpd last month.

OPEC stated that its upward revision of members’ crude was underpinned by a downgrade in the group’s forecast for non-OPEC supply, which it now expects to grow by 700,000 bpd to 63.6mn b/d against last month’s report’s projection of a 930,000 bpd rise to 63.83mn bpd.

The oil cartel projected that US crude output would drop by 280,000 bpd this year, compared with its previous forecast for a 70,000 bpd decline.

On the demand side, OPEC kept its overall forecast unchanged from last month’s MOMR, stressing that it expects global oil demand to grow by 5.95 million bpd to 96.46 million bpd this year, partly reversing last year’s 9.48mn bpd drop.

Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing month-on-month by 1.7 percent and 1 percent, respectively.

On the global economic projections, the cartel said stimulus measures in the US and accelerating recovery in Asian economies might continue supporting the global economic growth forecast for 2021, now revised up by 0.1 percent to reach 5.5 percent year-on-year.

This comes after a 3.5 percent year-on-year contraction estimated for the global economy in 2020.

However, global economic growth for 2021 remains clouded by uncertainties including, but not limited to the spread of COVID-19 variants and the speed of the global vaccine rollout, OPEC stated.

“World oil demand is assumed to have dropped by 9.5 mb/d in 2020, unchanged from last month’s assessment, now estimated to have reached 90.5 mb/d for the year. For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d,” it said.

The report listed the main drivers for supply growth in 2021 to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d year-on-year.

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