Newsletter - February 2, 2022
Oil / Commodities
- Oil steadied ahead of an OPEC+ meeting that may endorse another modest lift in production, with traders speculating that the actual increase delivered by members may again fall short of the headline figure. WTI was little changed near the highest level since 2014 after rallying 17% in January. Global benchmark Brent pushed toward $90 a barrel, with prices steeply backwardated in a reflection of market tightness. The OPEC+ is expected to ratify another 400,000 barrel-a-day increase in supply for March. If so, that would stick with the established pace at which they have been easing output curbs imposed at the height of the pandemic. Still, there have been consistent signs in recent months that the alliance has not been able to meet its collective production target in full. Crude’s recent surge has been driven by the steady revival in demand from the impact of the pandemic, lower stockpiles and sporadic interruptions to supplies. Tension over Ukraine have also boosted prices in recent weeks, but Moscow claims it has no plans on sending troops.
o https://www.bloomberg.com/news/articles/2022-02-01/oil-holds-near-seven-year-high-as-traders-count-down-to-opec?srnd=premium-asia
Tech
- Google is bringing big stock splits back to the market to lower its share price and increase access to its stock. The company said late Tuesday it will increase its outstanding shares by a 20 to 1 ratio, aiming to entice the numerous small investors who have flocked to the stock market during the pandemic. The stock split would reduce the price of Class A shares to roughly $138 per share based on Tuesday’s closing price of $2,752.88. Another motivation could be gaining entry to the Dow Jones Industrial Average, whose price-weighted index has been a barrier for years to the likes of Google and Amazon, which has a four-figure stock price. the Dow’s archaic weighting system is based on share price rather than market cap and Google’s pre-split form was just too big to add to the gauge without overwhelming all the other members. The decision could also ease Google’s path to becoming a $2 trillion market cap stock. The stock split will take form of a one-time special stock dividend, with the company giving $0.001 for each share of the company’s Class A stock, Class B stock, and Class C stock.
- Google posted fourth quarter sales and profits that topped analysts’ projections, showing the resilience of its ads business in the face of major economic upheaval as the pandemic persists. Google’s ad revenues grew by 33% during the holiday quarter, despite disruptions to its biggest categories, travel and retail, due to the spread of omicron and supply chain crunches. The company has also declared a 20 for 1 stock split. Google has continued to profit from the major trends that emerged during the pandemic, as people increasingly turned to online shopping and as marketing and business software budgets shifted to the internet. Google posted robust gains for two critical divisions, cloud and YouTube. But the company’s main contributor remains its search business, which is seeing gains from a deep investment in e-commerce. Since the start of the pandemic, Google has made up for declining in-person retail by luring more merchants to sell items on its shopping service and run product ads on search. Even during the holiday quarter when omicron cases spiked, consumers continued to rely on online shopping and travel services by clicking on those ads. More ad budgets are rolling in and Google will continue to benefit from the trend. Key rivals including Meta Platforms and Snap also rose after the results. Retail ads remain the biggest contributor to Google’s growth. YouTube launched a new shopping initiative during the fourth quarter to some of its young star creators. YouTube Shorts have also garnered 15 billion daily views. Of all divisions, YouTube is the most exposed to changes Apple has made to limit targeting on iPhones. In their third quarter report, Google said YouTube had seen a modest impact on revenue from Apple’s move to limit ad targeting on iPhones. Compared with rivals like Meta Platforms and Snapchat, Google is less reliant on third-party trackers Apple has banned, and has likely even been a beneficiary. Google has directed a hefty portion of its investment and new personnel to its cloud division in recent years as well to catch up to rivals Microsoft and AWS. The company has also continued to invest heavily in nascent businesses, including Waymo and Verily. Google ended the year with cash of $139.6 billion.
o https://seekingalpha.com/news/3793448-alphabet-will-continue-to-see-benefits-from-digital-ad-trend-monness-crespi-hardt-says
- Google CEO Sundar Pichai made his first public comments on web3, saying he is watching the blockchain space and looking at how Google can add value to development of the technology that is being embraced by many of its Silicon Valley peers. Investors have ploughed money into companies working on web3, a vision of the internet model built around cryptocurrencies and digital ownership. Pichai cited a recent announcement Google’s cloud division made to win more contracts with companies working on digital assets. Google has also started its own team working on blockchain, but Pichai did not mention cryptocurrencies, which the company does not accept for its ads or payment services.
o https://www.cnbc.com/2022/01/27/google-cloud-blockchain-team-to-seek-new-business.html
- AMD rallied as much as 12% in late trading after giving a surprisingly strong sales forecast, suggesting it is making further share gains on archrival Intel in computer processors. The chipmaker’s first quarter sales outlook also outpaced Wall Street estimates, and AMD is reaching a level of profitability that is nearly identical to Intel’s – AMD’s gross margin is estimated at about 51% this year, which is nearly on par with Intel’s projection for 51% to 53%. Fourth quarter sales and earnings also topped analysts’ estimates. The company’s sales have increased by more than threefold from five years ago. And the company sees more secular growth over the next five years with people needing more computing. AMD’s outlook helped soothe concerns that the chip industry is slowing after a pandemic-fuelled boom. AMD predicted sales gains of about 31% this year. Under Su’s leadership, AMD has developed leading edge components. That has led more chip customers to ditch Intel in favour of AMD. But Intel CEO Pat Gelsinger is now claiming his company is offering better PC processors than AMD. While Fourth quarter is not available from industry researchers yet, AMD has picked up more than 2 percentage points of market share from Intel in the third quarter. AMD data center sales, including chips used by companies such as Google and AWS, doubled last year compared with 2020. And AMD’s demand from cloud customers continue to increase, especially as it deploys its new Epyc processors to their data centers. AMD is also the second largest maker of graphics chips used in add-on cards by PC gamers. It competes in that market with Nvidia and will face fresh opposition from Intel, which ahs begun offering products for that segment for the first time in years. AMD also benefits from continued demand for Xbox and PlayStation consoles, which continues to outpace all prior generations. The company now expects to close its acquisition of Xilinx in the first quarter after having received regulatory approval from China. The merger will make AMD one of the largest makers of programmable processors and increase its ability to compete directly with Intel. Su expects very strong demand for its products in 2022, led by strength in its server products.
o https://seekingalpha.com/news/3794586-advanced-micro-devices-ceo-su-says-demand-very-strong-in-2022-highlights-server-strength
- MicroStrategy posted a fourth quarter loss after taking a $146.6 million impairment charge to write down the value of its Bitcoin holdings. The enterprise software market took the write-down after the SEC said in January that it could not strip out Bitcoin’s wild price swings from the unofficial accounting measures it had touted to investors. The company posted net losses of $90 million, while average analyst estimates expected profit of $1.49 per share. The company has been unprofitable in five of the last six quarters after it added Bitcoin investments to its balance sheet. It was profitable for eight of nine quarters prior to the Bitcoin strategy. The company announce it spent about $25 million on Bitcoin between December 2021 and January 2022, paying an average price of $37,865 per coin. Bitcoin traded at about $38,807 on Tuesday. MicroStrategy held more than 125,000 Bitcoin as of January 31st, which were acquired at an average price of $3,200 per token, or an aggregate purchase price of $3.78 billion.
- Latest trading data on ARKK shows the bulls are eclipsing the bears for now. Traders poured almost $294 million into ARKK in the most recent session for which data is available. The biggest intake since June was enough to erase this year’s withdrawals, with the ETF now posting about $142 million in inflows since the end of December. ARKK had the worst monthly selloff in its history on concern that tighter Federal Reserve policy could drag down some of the most expensive and speculative pockets of the market. But after making nearly $1 billion in 2022, traders may be wrapping up their bearish bets and closing positions. Short interest as a percentage of shares outstanding on ARKK dropped from a record of 10.6% last week to less than 9%. U.S. stocks ended a volatile January with the biggest back-to-back rally since 2020 amid a surge in beaten-down tech stocks. The Nasdaq jumped 6.6% in two sessions, after its members took a walloping for the bulk of the month which left the gauge still 8.5% down.
- A group of U.K. lawmakers is urging the government to seriously consider forcing tech
- companies including Meta Platforms and Google to refund victims of fraud on their sites. The report also called for changes to the draft Online Safety Bill to make platforms more responsible for combating financial fraud. The U.K. government should also consider requiring the tech giants to conduct KYC checks on advertisers to block potential fraudsters according to the report. Consumers reported 30,000 potential scams to the Financial Conduct Authority in the year to March 2021, up 77% in a year.
- Singer-songwriters Graham Nash and India Arie on Tuesday announced plans to remove their music from Spotify in protest of its support for controversial podcaster Joe Rogan. The moves come after Neil Young and Joni Mitchell both removed their music from the platform last week. In response, Spotify has publicized its internal content rules and Rogan pledged more balance and research. The combined exodus further escalates a dispute over the streaming service’s support for Rogan, which has spread COVID misinformation, and intensifies questions about Spotify’s responsibility for monitoring content distributed on its platform to hundreds of millions of listeners. Rogan was criticized last month after his interview with Jordan Peterson, in which he said it is very strange that anyone would call themselves Black if they were not from the darkest place of Africa. Spotify has invested billions in podcasting and advertising technology to turn its money-losing music platform into a profitable audio service in recent years. It struck a deal in 2020 with Rogan worth more than $100 million. In contrast, many musicians say their streaming royalties are far too meagre.
o https://www.bloomberg.com/news/articles/2022-02-01/spotify-exodus-grows-as-graham-nash-signals-music-withdrawal?srnd=premium-asia
- PayPal plummeted after saying growth in spending on its platform continued to slow during the fourth quarter as economies around the world reopened and consumers flocked to in-store shopping. Total volume payments climbed just 23% in the final three months of 2021 as the tech giant’s former parent eBay continues to move payment offerings away from PayPal. That was the smallest increase in two years and fell short of analyst expectations, which the company attributes to muted year-end e-commerce growth, driven by both supply chain challenges as well as pullback in spending by lower-income consumers. To gin up activity on its platform, PayPal has been adding new services, including a high-yield savings account as well as the ability to buy and trade cryptocurrencies. The efforts seem to be bearing fruit – transactions per active account jumped to 45.4 in the quarter, topping the 42.9 average of analyst estimates. In recent quarters, PayPal said it will notch 750 million active accounts on its platform by 2025. To achieve that goal, the company has been spending more on marketing campaigns to lure new customers to PayPal’s many offerings. But on Tuesday, the company abandoned the guidance after a review of its business uncovered 4.5 million accounts it now believes were illegitimately created. PayPal now believes it will add just 15 million to 20 million net new active accounts this year, a significant slowdown from the 49 million it added in 2021. Going forward, the company vowed to focus marketing efforts on encouraging existing users to become even more active. The company said it expects current year revenues to climb 17%, compared to analyst estimates of 18%.
- AT&T said Tuesday that it would spinoff its interest in WarnerMedia as part of its merger with Discovery, with the deal expected to close in the second quarter. As part of the spinoff, AT&T will get $43 billion in a combination of cash and other considerations, and AT&T shareholders will own 71% of the new company, Warner Bros. Discovery. Discovery shareholders will ownt he remaining 29% of the company on a fully diluted basis. A split-off, which was pervioussly contemplated, is a relatively rare option, exchanging shares in a subsidiary for shares in the parent company. It would also heavily reduce AT&T’s outstanding shares and those would require a heavy discount to move. In addition, AT&T said it will have an annual dividend of $1.11 per share following the close of the deal, down from $2.08 per share which would give it a 4.3% yield as of Monday’s closing price of $25.50. AT&T’s shares sunk in pre-market trading on Tuesday, down nearly 5% to $24.24. After the spinoff is complete, each AT&T shareholder will receive 0.24 shares of the new Warner Bros. Discovery common stock for each AT&T share they own.
o https://seekingalpha.com/news/3793941-att-sinks-after-it-says-it-will-spin-off-warnermedia-as-part-of-discovery-merger
Electric Vehicles
- Ford is planning a major reorganization to prepare for the electric future, using Tesla’s success as a roadmap and accelerating EV spending by as much as $20 billion. The effort calls for Ford to spend an additional $10 billion to $20 billion over the next five to ten years converting factories worldwide to EV production from making ICE vehicles. That would be on top of the $30 billion that Ford has already committed to EVs through 2025. As part of the reorganization, the company has evaluated spinning off a small portion of its EV business to capture some of the immense value investors are giving electric start-ups. The potential move would involve lower volume models, allowing the company to focus its efforts on mass market EVs. Ford also must manage the slow decline of vehicles powered by ICEs, which now generate all of the profit necessary to fund the company’s EV aspirations. One way to maintain the segment’s revenues is to boost services sold to car owners – a business that could generate $20 billion per year in sales.
- Faraday Future Charman Brian Krolicki is stepping down after an internal investigation found the EV start-up may have misled investors about pre-orders. Before the start-up’s merger last year with a SPAC, it claims to have more than 14,000 reservations for tis FF91 model, which were potentially misleading. Only several hundred were paid, while the rest were indications of interest. The probe also found some investors had been misled about the involvement of founder and former CEO Jia Yueting in day-to-day management. The company said it plans to put its FF 91 SUV into production this July.
- EV sales hit a new monthly record in Norway, indicating the Nordic country is on track to reach its 2025 goal of no new fossil fuel cars being sold. Last year, Norway became the first country in the world to see EVs overtake fossil models among new vehicles, helped by generous government incentives. The oil-rich nation may see all new cards become emissions-free as soon as April based on current trends. Almost 84% of nearly 8,000 new passenger vehicles sold in January were EVs. That is up from 53% in the same month last year and compares with 65% for all of 2021. 19 of 20 most popular car brands were fully electric, led by the Audi Q e-tron, Hyundai IONIQ 5 and BMW iX. Only 387 cars with an ICE were sold.
- French start-up Verkor selected the port of Dunkirk for a planned battery factory to supply Renault, the latest in a series of EV industry projects to be built in the country. Construction is scheduled to begin in 2023 with the start of deliveries targeted in 2025. The site’s capacity will grow to 50 gWh by 2030 from 16 gWh by mid-decade. The initial phase, which could supply enough packs for around 300,000 vehicles, may require an investment of around 1.5 billion euros. The plant will be the third project of its kind planned in France as the nation and the EU push for local battery production to rival Asian dominance of the sector. Renault owns around 20% in Verkor.
- Tesla is disabling a feature of its so-called FSD system that permitted its vehicles to slowly roll through intersections without coming to a complete halt when no other cars or pedestrians were present. Tesla released an OTA update for the fix after discussions with the NHTSA. The recall covers more than 53,000 2016 to 2022 Model S and Model X, and 2017 to 2022 Model 3 and 2020 to 2022 Model Y vehicles. The recall reversed a feature Tesla added in October for beta users of FSD. The option let the owner chose from among models named “chill”, “average” and “assertive”. The assertive mode permitted the vehicle to follow other cars more closely, perform more frequent lane changes and roll throughs tops at four-way intersections. The rolling stop function permitted the car to travel through an all-way stop intersection at up to 5.6 miles per hour if no other cars, pedestrians or bicyclists are detected by the system. It only engages when there is sufficient visibility and the roads intersecting have speed limits of 30 mph or less.
- Exxon’s most recent Energy Outlook report expects dramatic growth in energy consumption from heavy trucking out to 2050, and only a tiny sliver of this being met by oil alternatives. California’s Advanced Clean Truck rule, which five other states have also adopted, sets rising quotas for zero-emission truck sales over the next 15 years. In turn, meeting the EU’s upcoming fuel efficiency standards is likely to require electric trucks to be part of the sales mix. The industry is also responding, with Volvo, Daimler Trucks and VW subsidiary Traton expecting between 35% and 60% of their global sales to be electric and fuel cell by 2030. And China’s heavy truck market remains the largest in the world, with the mix of electrified version gradually increase monthly as of 2021. Of 10,000 new energy heavy trucks ales last year, 62% were normal battery EVs, 31% were EVs with swappable batteries ad 7% were fuel cell vehicles. Analyses are indicating that electric trucks are already approaching cost competitiveness in urban applications and should get there for long-haul applications around 2030. The same trend has been observed in China’s bus market before – once it was clear that electric buses were a viable option, sales went from 4,300 in 2013 to over 100,000 in 2018. There are now nearly 700,000 electric buses on the road in China, around 30% of the fleet, and those e-buses are displacing about 230,000 barrels per day of oil demand. If the same happens for heavy trucks, it should cause a major rethink in the conventional wisdom about how robust oil demand will be in this segment in decades ahead.
- BlackRock, Daimler Truck and NextEra Energy aim to spend $650 million to build and operate battery charging and hydrogen refuelling stations for trucks across the U.S. The network will be built along critical freight routes along the east and west coasts and in Texas by 2026. Each company will contribute equally for the proposed JV, with construction beginning next year. The plan will initially focus on electric medium- and heavy-duty vehicles, followed by hydrogen fuelling stations for fuel-cell trucks, with sites also available for passenger vehicles. The proposed JV comes as President Joe Biden tries to speed EV adoption with an infrastructure bill that sets aside $7.5 billion for nationwide charging.
- While Chinese EV sales are expected to climb to 6 million this year, several factors pushing up prices suggest the switch from gasoline cars will not all be one-way traffic. BYD will follow Tesla’s footsteps in increasing prices of some models by as much as 7,000 yuan from February 1st due to significant increase in raw material costs and winding back of government subsidies. Xpeng and FAW-VW have also bumped prices in recent months in Tesla’s shadow. The price of key battery ingredients like lithium hexfluorophosphate and lithium phosphate surged as much as 400% last year. The situation is so severe that industry watchdogs met earlier this month to discuss ways of reining in expenses to avoid discouraging the switch to EV, which continues to play a crucial role in meeting China’s goal of lowering emissions to net zero by 2060. The range of intelligent functionality like ADAS and OTA updates is also working to push up development and manufacturing costs, which flows through to sticker prices. In the meantime, government subsidies introduced in 2009 are progressively being withdrawn. They have been cut 30% this year and will be phased out completely next year, potentially adding thousands of yuan to the cost of an EV. EV tax breaks may also become a thing of the past – an exemption on the 10% vehicle-purchase tax is due to expire at the end of 2022. While the Ministry of Industry and Information Technology is pushing for an extension, any compromise is more likely to come in the form of a reduced 5% discount. Insurance costs are also rising, with some drivers’ premiums surging a whopping 80% due to new EV-specific policies covering a wider range of components including the motors, batteries and control systems, as well as more circumstances where accidents may occur, such as when cars are being charged.
o https://www.bloomberg.com/news/articles/2022-01-31/it-s-not-all-one-way-traffic-for-china-s-ev-makers?srnd=hyperdrive
Consumer / Retail
China Market
Market Update
- Following the Fed’s hawkish comments last week, investors have brought forward expectations of tightening, pricing in five quarter-point hikes this year. Further out, however, they are predicting fewer rate increases, with anticipation that the Fed will end the cycle with the policy rate at about 1.65% while long-term inflation anchors around 2%. Bridgewater believes the market is discounting a smooth reversion to the prior decades’ low level of inflation without the need for aggressive policy action, and warns the opposite may happen instead, as the massive shot of money and credit during the pandemic has now produced a self-reinforcing cycle of high nominal spending and income growth that is unlikely to cool without aggressive monetary tightening. Because of the extreme difference in expectations, Bridgewater sees potential for large market moves, which implies significant risks from holding assets.
o https://www.bloomberg.com/news/articles/2022-02-01/bridgewater-sees-market-turmoil-on-aggressive-fed-tightening?srnd=premium-asia
- Growing Republican criticisms risks complicating passage of a once-bipartisan bill intended to make the U.S. economy more competitive against China. House Democrats are planning a vote this week on their version of the legislation, which would then be merged with a bipartisan $250 billion Senate version passed in June. While Democrats have the votes to push the legislation through the House, GOP opposition in that chamber is likely to spill over into the Senate, where Republican support is needed for the passage, as the two chambers try to merge the two bills into one piece of legislation. Both bills are meant to address the need to bolster U.S. manufacturing, research and development, and ease dependence on China for semiconductors. The House legislation includes $52 billion to support domestic chip research and production amid a global shortage, as well as authority for $45 billion to improve the nation’s supply chains to prevent shortages of critical goods. It would also set up programs to increase science, technology, engineering and mathematics education and training. The bill is set for a procedural vote on the House floor on Wednesday with a vote on passage likely on Friday. But Republican leaders in the House were urging their members to vote against it when it comes to the floor.
- A reduction in the Fed’s balance sheet could hurt liquidity within the Treasury market, boost volatility and affect how different parts of the U.S. rates market are valued relative to one another according to Goldman Sachs. Quantitative tightening is likely to widen the gap between pricing of the most-traded benchmark securities and other, older securities, and also tighten the gap between Treasury yields and swap rates at the shorter-end of the yield curve. The bank’s strategists also expect bigger yield gaps between futures and cash securities and higher yield dispersion metrics. Fed officials, who are currently paving the way for widely expected interest-rate hikes beginning March, have yet to announce specific plans for balance-sheet reduction, but they did release a set of principles alongside the authority’s policy decision indicating that it is looking to embrace the broad model it used last time it engaged in quantitative tightening back in 2017-2019.
- U.S. shares recovered Wednesday thanks to corporate earnings outlook and signs that Federal Reserve officials are favouring measured monetary policy tightening; the latest Federal Reserve commentary hinted at a calibrated approach to raising interest rates to fight high inflation, with no officials backing the idea of a half-point rate increase in March yet, potentially soothing some investors worries that the economy will take a hit from tighter monetary policy
o https://www.bloomberg.com/news/articles/2022-02-01/bullard-backs-march-liftoff-second-quarter-balance-sheet-shrink
- U.S. equity futures pushed higher, with contracts on the tech-heavy Nasdaq 100 up 1% after strong Google and AMD earnings; economically sensitive sectors like energy and banks also helped U.S. stocks to their best three-day rally since 2020
- With the regular session’s gains, the S&P 500 has now surpassed the midpoint of last month’s peak-to-trough decline, indicating to some chartists a full recovery may be underway after the three-day rally
- Data on job openings and manufacturing showed a resilient economy that the Fed is trying to cool after inflation spiked to the highest in four decades; however, bank officials have indicated they are aware of the threat to stifling growth
- Oil steadied near a seven-year high ahead of a meeting of OPEC and its allies on boosting output
- S&P 500 futures increased 0.5%, while the S&P 500 rose 0.7% to 4,546.54
- Nasdaq 100 futures rose 1%, while the Nasdaq 100 climbed 0.6% to 15,019.68
- 10-year Treasury yield was at 1.79%
- WTI crude was at $88.35 a barrel, up 0.2%
- Gold was at $1,797.56 an ounce
Summary
- Micro Observation – U.S. equities have posted a strong three-day rally to close off January’s market rout following the Fed’s shift to an increasingly hawkish stance to counter inflation. Strong corporate earnings reported by Google and AMD after market close on Tuesday have also alleviated angst of a slowing economy.
o AMD – The chipmaker topped analyst estimates on all of profit, sales and current year outlook, citing more secular growth over the next five years buoyed by increasing need for more computing. AMD’s outlook helped soothe concerns that the chip industry is slowing after a pandemic-fuelled boom. The company is also gradually taking market share from Intel as it continues to bolster its server processor competencies with new generation Epyc chips. Demand for AMD graphics chips, in which it rivals against market leader Nvidia and now Intel, is also bolstered by consumer gaming demand, as well as console demand stemming from the new Xbox and PlayStation consoles. The highly anticipated completion of the AMD-Xilinx transaction is also expected to close in the current quarter after receiving China’s regulatory blessing last week. The transaction will make AMD one of the largest programmable processors and increase its ability to compete directly with Intel.
o GOOG/GOOGL – The company reported strong sales growth across all of its businesses, including “Other” segment which entails sales of hardware devices. Ad revenues remain the core driver of Google’s business, which also grew in the final quarter of 2021 indicating continued strength despite concerns over slowing consumption amidst a protracted supply crunch. The biggest announcement is the 20-to-1 stock split announced Tuesday, which intends to increase investors’ accessibility to the stock. The strategy is likely to bolster its outlook in joining the Dow Jones Industrial index, as well as fast-track its market valuation to $2 trillion.
- Macro
o Backing from Federal Officials on a measured monetary policy tightening process that entails gradual quarter-point rate hikes have seemed to assuage investors’ concerns and contributed to the latest rally in equities. Federal Officials including Federal Reserve Bank of St. Louis President James Bullard has said he would like to raise interest rates in March but played down the benefits of a larger-than-expected move, like a 50 bps increase.
o Oil continues to rally ahead of the OPEC+ meeting on Wednesday, to which many are expecting another loosening of production volumes following pandemic-era curbs. The group is expected to increase productions by another 400,000 barrels per day beginning March, while signs remain that the alliance might not be able to meet its collective production target in full anytime soon. The rally continues to be buoyed by unwavering demand from a recovering economy, lower stockpiles and sporadic interruptions to supplies due to geopolitical tensions from Ukraine to Kazakhstan.