On March 27, in just over 3,000 carefully crafted words, President Obama articulated the new US strategy for Afghanistan and Pakistan. Buried within the diplomatic language were some blunt realities: the war in Afghanistan is going badly for the US and Nato, al-Qaida and violent extremism have grown in strength and imperil the region, the Pakistan army and ISI have failed in their core task of containing terrorism and cannot be trusted, and the US needs regional partners to help extricate itself from the mess. It was as much as anything a recognition of the limits of American power, further constrained by the harsh economic conditions the administration has inherited.
Difficult circumstances have forced difficult choices, but this does not mean that the new strategy is bad policy. The focus on defeating al-Qaida is essential given the need to keep the US public onside, the lowering of expectations in Afghanistan is a necessary and wholly rational retreat from the overambitious “neo-con” idea of forging a liberal market democracy in Afghanistan’s mountainous deserts, the linking of Afghanistan and Pakistan an essential response to a security challenge which spans the Durand Line, and the embrace of regional partners crucial for achieving the degree of stabilisation in Afghanistan necessary to create an exit opportunity for US and Nato forces.
The glummest faces are in Islamabad. The milch-cow of the Bush administration’s unconditional military largesse has been slain and replaced by a framework of re-focused military aid, subject to tough conditionality and tied to counter-terror outcomes. The “Af-Pak” linkage recasts Pakistan as part of the problem and downgrades its stand-alone importance to the US. The emphasis on supporting “constructive diplomacy” between Pakistan and India is an important sop to Pakistani concerns in the region, but one which pointedly omitted the ‘K’ word as a signal that it will not be allowed to leverage the issue against the Americans’ main objectives in Pakistan. It is equally a nod to India that new opportunities are on offer and further recognition that if Pakistan implodes or falls to Islamic extremism, India will be the indispensable partner on the eastern edge of Islam’s volatile borders.
There is also an astute understanding that ultimately Pakistan’s future will depend on its people, not its elites. “To avoid the mistakes of the past, we must make clear that our relationship with Pakistan is grounded in support for Pakistan’s democratic institutions and the Pakistani people,” Obama said, a commitment backed up by a $7.5-billion investment of “direct” support to the Pakistani people, suggesting this aid may not be funnelled through corrupt Pakistani political leaders and ministries. Obama’s phraseology is a clear reference to the failure of past US policy which has consistently supported the small military-political elite and ignored the political, economic, and social progress of the Pakistani people as a secondary problem.
It is now crystal clear that the hearts and minds of the people of Pakistan is the new battleground. If the self-serving Pakistani elite fails to provide ordinary Pakistanis with security, meet their basic material needs and political aspirations, deliver a fairer federal dispensation and respond to the demands of an emergent middle class, then terrorists and extremists of every hue are poised to colonise that ground. This process is already underway in the FATA and NWFP, in Balochistan, and is unfolding across the rest of Pakistan including major cities such as Karachi and Rawalpindi. The recent high-profile attacks in Lahore, claimed by Baitullah Mehsud’s TTP, demonstrate not only the audacity and reach of groups which were once thought to be confined to the tribal areas, but also the apparent impotence of Pakistan’s security forces to halt their rise. The final bulwark against these terrorists is not therefore the police or even the army/ISI, but the moderation and political sophistication of ordinary Pakistanis. The emphasis in the Obama package on support for schools, roads, hospitals, employment opportunities, and democracy, and the commitment to ask other nations to provide similar support, reaches out directly to them.
There are however no simple levers to pull in Pakistan to achieve desired outcomes, and when squeezed its politico-military elite has usually reacted sharply with unpredictable, sometimes even irrational, counterpressure. The road ahead is thus strewn with bear-traps. One is that the US military surge planned for Afghanistan has reportedly brought the Afghan and Pakistan Taliban into a closer alliance and strengthened the links between the Taliban and al-Qaida and Punjabi terrorist groups. Another is that the Pakistan army/ISI, whose strategic objectives in Afghanistan will fail if the US surge is successful, may be tempted to step up their support for the Afghan Taliban and increase the pressure on US/Nato supply lines. A third is that, if mishandled, increased pressure on the Pakistan army/ISI will further fuel anti-Western or pro-Islamist sympathies within their ranks. This is why military aid must be nuanced and go hand in hand with efforts to reconnect the US and Pakistan militaries. It is also why empowering Pakistani policing rather than the armed forces should become a policy focus. Lastly there is a danger that the hopes raised by Obama’s civilian aid package will be dashed if — as is usual — the bulk of the aid fails to reach the intended recipients and is instead siphoned off by Washington’s beltway bandits, foreign nationals working in Pakistan, and local sub-contractors (including, of course, companies controlled by the Pakistan army). It is imperative therefore that this aid is subject to tight monitoring.
Pakistan is in a perilous state, already written off by many, but it has proven time and again to be more robust and resilient than the doomsayers will allow. It is likely that in four years the Obama strategy will not have achieved all it today seeks to do in either Afghanistan or Pakistan. However for ordinary Pakistanis, and for the burgeoning meritocratic middle-class which offers the possibility of real political evolution in Pakistan, the Obama strategy represents a moment of genuine hope. Now it is up to the regional players, including India, to seize this moment of opportunity in the interest of all the people of the region.
Shaun Gregory is the director of Pakistan Security Research Unit, University of Bradford, UK and author of a forthcoming book, ‘Pakistan: Securing the Insecure State’
NO QUICK GETAWAYS: US army operations along the Af-Pak border
Saturday, April 4, 2009
Economic crisis drives inventions
Geneva: Crisis is the mother of invention, if one believes the bright sparks behind the gizmos, contraptions, novelties and potions at the international inventions exhibition in the Swiss city of Geneva.
While others fret over the economic turmoil, many of the 710 exhibitors from 45 countries here relish it as a driver of innovation, whether they are trying peel shrimps, save coral reefs, build robots or cart skis around. “Look at World War II: when people had tough times, that’s when they found the simplest or cheapest solutions,” said the inventor of the “skikart” ski carrier on wheels.
He came up with the idea on his way back from an arduous skiing trip in Austria. “Necessity is the mother of invention,” grinned the greying South African, who was on the lookout for a business partner.
Calexium, a French internet peripherals firm, was touting an email server that does away with any size limits on attachments. “We’ve always financed ourselves, without the help of banks, so whether there’s a crisis or not. We’re more likely to take advantage of the economic climate, to judge by the strong interest of our dealers,” said company founder David Rene.
The Salon International des Inventions, the 37th of its kind, has gained a more professional aura in recent years. Of the 70,000 visitors expected through April 5, more than half are industrialists, distributors and businesspeople.
Some 48 inventions received awards. The ‘Grand Prix’ went to Romanian firm MBTechnology’s mobile scanner, which can speed up trade by helping customs officers search trucks or containers without the need to open them up. It weighs seven tonnes and can detect objects just four millimetres long through 18 centimetre thick steel. While some institutional participants stayed away this year, Vincent pointed to a flow of “inventors stimulated by the urgent need to find solutions”. AFP
An inventor shows his creation, the ‘crustacean peeler’, at an exhibition in France
While others fret over the economic turmoil, many of the 710 exhibitors from 45 countries here relish it as a driver of innovation, whether they are trying peel shrimps, save coral reefs, build robots or cart skis around. “Look at World War II: when people had tough times, that’s when they found the simplest or cheapest solutions,” said the inventor of the “skikart” ski carrier on wheels.
He came up with the idea on his way back from an arduous skiing trip in Austria. “Necessity is the mother of invention,” grinned the greying South African, who was on the lookout for a business partner.
Calexium, a French internet peripherals firm, was touting an email server that does away with any size limits on attachments. “We’ve always financed ourselves, without the help of banks, so whether there’s a crisis or not. We’re more likely to take advantage of the economic climate, to judge by the strong interest of our dealers,” said company founder David Rene.
The Salon International des Inventions, the 37th of its kind, has gained a more professional aura in recent years. Of the 70,000 visitors expected through April 5, more than half are industrialists, distributors and businesspeople.
Some 48 inventions received awards. The ‘Grand Prix’ went to Romanian firm MBTechnology’s mobile scanner, which can speed up trade by helping customs officers search trucks or containers without the need to open them up. It weighs seven tonnes and can detect objects just four millimetres long through 18 centimetre thick steel. While some institutional participants stayed away this year, Vincent pointed to a flow of “inventors stimulated by the urgent need to find solutions”. AFP
An inventor shows his creation, the ‘crustacean peeler’, at an exhibition in France
Oxford univ will come to Maha next yr To Start Short Courses In Lavasa
Pune: The University of Oxford, one of the most soughtafter academic institutions in the world, is all set to roll out its first set of courses in the country, that too in the city’s backyard, in 2010. The varsity will introduce short-term management courses for middle and senior-level executives at Lavasa city, a few hours’ drive away from Mumbai.
The courses, which start in June 2010, will be a crucial step for the university. “We will first assess the courses once they begin here, and progress further when they have succeeded,” John Hood, the university’s vice-chancellor, said during a visit to Lavasa city on Friday.
The courses to be offered will be full-time programmes of a few weeks’ duration. “We are looking at introducing 20 courses with a target of 5,000 students within the next five years,” said Rajgopal Nogja, Lavasa Corporation president.
The India Business Centre at Oxford, where various Indian business models are researched and taught, will contribute to designing these courses. “Parts of this research will be included in the curricula of the short-term courses that we are introducing here in India,” Hood said.
However, there are no plans of starting the fullfledged graduate and postgraduate courses that the university is best known for. “That’s because we will not be able to replicate the unique teaching model, which is a part of the collegiate atmosphere unique to Oxford,” Hood said.
Elaborating on the teaching methodology, Hood further said: “One-on-one attention to students facilitates them to rub shoulders with each other and scholars at a highly intellectual level. Therefore, we would not like to replicate this collegiate model anywhere else in the world,” Hood said.
“We have 5,000 scholars who collaborate regularly in all subjects taught at the university. This is how we have been able to grow educationally,” Hood noted.
Oxford V-C John Hood, who visited Lavasa recently, said the India Business Centre at the university will design the 20 courses that they are planning to launch in India
The courses, which start in June 2010, will be a crucial step for the university. “We will first assess the courses once they begin here, and progress further when they have succeeded,” John Hood, the university’s vice-chancellor, said during a visit to Lavasa city on Friday.
The courses to be offered will be full-time programmes of a few weeks’ duration. “We are looking at introducing 20 courses with a target of 5,000 students within the next five years,” said Rajgopal Nogja, Lavasa Corporation president.
The India Business Centre at Oxford, where various Indian business models are researched and taught, will contribute to designing these courses. “Parts of this research will be included in the curricula of the short-term courses that we are introducing here in India,” Hood said.
However, there are no plans of starting the fullfledged graduate and postgraduate courses that the university is best known for. “That’s because we will not be able to replicate the unique teaching model, which is a part of the collegiate atmosphere unique to Oxford,” Hood said.
Elaborating on the teaching methodology, Hood further said: “One-on-one attention to students facilitates them to rub shoulders with each other and scholars at a highly intellectual level. Therefore, we would not like to replicate this collegiate model anywhere else in the world,” Hood said.
“We have 5,000 scholars who collaborate regularly in all subjects taught at the university. This is how we have been able to grow educationally,” Hood noted.
Oxford V-C John Hood, who visited Lavasa recently, said the India Business Centre at the university will design the 20 courses that they are planning to launch in India
IITs won’t fix blunders in JEE papers Despite IIT-B Prof Finding Mistakes In ’08 Maths Section, Board Fails To Act On Advice
New Delhi: RTI applications of a computer science professor from IIT Kharagpur, Rajeev Kumar, might have forced a change in the procedure to determine cut-off marks in the JEE due to be held on April 12, but the administrators have remained silent on another serious deficiency pointed out by a mathematics professor from IIT Bombay, K D Joshi.
On the basis of the model answer sheet that was made public after the 2008 exam, Joshi wrote to the JEE administrators in August, saying there were five major mistakes in the maths section which could have cost a candidate 18 marks even if he had solved those problems correctly.
Since the model answersheet was disclosed after the admission process for 2008 had concluded, the administrators did nothing on Joshi’s shocking disclosure as a difference of each mark could have dramatically changed the ranks of the candidates and the options that would have been available to them in terms of branches and institutes.
If a candidate lost 18 out of 161 marks for no fault of his, the wrong evaluation of those questions seems all the more unfair considering that the cut-off in maths in JEE 2008, as reported earlier in TOI, was no more than five marks and that somebody with just 10 marks in that subject could get admission into IIT Kharagpur.
Though the Joint Admission Board of JEE 2009 discussed Joshi’s correspondence, as disclosed to TOI by its chairman Gautam Baruah, its information brochure gave no indication whether the model answersheet would be made public at least this time immediately after the exam so that any mistakes that are there could be corrected even before the damage is done with the announcement of results.
Consider the five blunders in the maths papers of JEE 2008 exposed by Joshi, one of the senior faculty members of the IIT system:
Question 7 of Paper 1: The accompanying instruction indicated that out of the four given choices, one or more could be correct and that the candidate would be given four marks for the complete correct answer or zero for an incomplete one. While the model answersheet said the complete correct answer was options B and D, Joshi discovered from his calculations that the correct answer was only D.
Question 23 of Paper 1: The instruction on the question paper said “only one” out of the four given choices was correct. This turned out to be misleading as the model sheet conceded that there were actually three correct answers. So, if a candidate rightly chose more than one correct option, the examiner was obliged not only to give him no marks but also penalize him by deducting one mark.
Question 7 of Paper 2: Though the model answer was given as option A, Joshi found that the “complete correct answer” was missing from the four given choices. Since the question itself had a mistake, a candidate after doing his calculations might have avoided answering it lest he attracted negative marking for a wrong answer.
Question 17 of Paper 2: Joshi found that due to omission of plus/minus sign, the officially correct option was not the “complete solution.”
Question 21 of Paper 2: The official answer was that Statement A in Column I matched with Statement R in Column II. With detailed calculations and drawings, Joshi showed that there was actually no match for Statement A in the other column. The candidate who figured that out would have however lost three marks.
On the basis of the model answer sheet that was made public after the 2008 exam, Joshi wrote to the JEE administrators in August, saying there were five major mistakes in the maths section which could have cost a candidate 18 marks even if he had solved those problems correctly.
Since the model answersheet was disclosed after the admission process for 2008 had concluded, the administrators did nothing on Joshi’s shocking disclosure as a difference of each mark could have dramatically changed the ranks of the candidates and the options that would have been available to them in terms of branches and institutes.
If a candidate lost 18 out of 161 marks for no fault of his, the wrong evaluation of those questions seems all the more unfair considering that the cut-off in maths in JEE 2008, as reported earlier in TOI, was no more than five marks and that somebody with just 10 marks in that subject could get admission into IIT Kharagpur.
Though the Joint Admission Board of JEE 2009 discussed Joshi’s correspondence, as disclosed to TOI by its chairman Gautam Baruah, its information brochure gave no indication whether the model answersheet would be made public at least this time immediately after the exam so that any mistakes that are there could be corrected even before the damage is done with the announcement of results.
Consider the five blunders in the maths papers of JEE 2008 exposed by Joshi, one of the senior faculty members of the IIT system:
Question 7 of Paper 1: The accompanying instruction indicated that out of the four given choices, one or more could be correct and that the candidate would be given four marks for the complete correct answer or zero for an incomplete one. While the model answersheet said the complete correct answer was options B and D, Joshi discovered from his calculations that the correct answer was only D.
Question 23 of Paper 1: The instruction on the question paper said “only one” out of the four given choices was correct. This turned out to be misleading as the model sheet conceded that there were actually three correct answers. So, if a candidate rightly chose more than one correct option, the examiner was obliged not only to give him no marks but also penalize him by deducting one mark.
Question 7 of Paper 2: Though the model answer was given as option A, Joshi found that the “complete correct answer” was missing from the four given choices. Since the question itself had a mistake, a candidate after doing his calculations might have avoided answering it lest he attracted negative marking for a wrong answer.
Question 17 of Paper 2: Joshi found that due to omission of plus/minus sign, the officially correct option was not the “complete solution.”
Question 21 of Paper 2: The official answer was that Statement A in Column I matched with Statement R in Column II. With detailed calculations and drawings, Joshi showed that there was actually no match for Statement A in the other column. The candidate who figured that out would have however lost three marks.
U.S. May Keep Losing Jobs After Unemployment Hit 25-Year High
April 4 (Bloomberg) -- The U.S. may suffer further job losses in the coming months after employers cut payrolls by 633,000 in March and the unemployment rate jumped to a 25-year high of 8.5 percent.
A host of companies -- from manufacturers such as Johnson Controls Inc. and Dana Holding Corp. to service providers like International Business Machines Corp. and even the U.S. Postal Service -- have announced plans to eliminate jobs in the face of depressed demand from their customers.
“We expect labor-market conditions to remain appalling for many months to come,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, wrote in a client note following yesterday’s report from the Labor Department.
The risk is that a continued hemorrhaging of jobs triggers another round of spending cuts by consumers, pushing the economy deeper into a recession just as it is showing signs of steadying after plunging in the fourth quarter.
“We are not out of the woods yet,” Federal Reserve Vice Chairman Donald Kohn said in a speech in Wooster, Ohio, yesterday. He added that the central bank and administration of President Barack Obama must remain “flexible and open” to taking further measures to help the economy.
Stocks rose yesterday for a fourth day as Fed Chairman Ben S. Bernanke said measures to unfreeze credit markets were working. The Standard & Poor’s 500 index climbed 8.1 points, or 1 percent, to close at 842.5. Treasuries fell on growing concern over the amount of borrowing needed to finance the budget deficit, pushing the yield on the 10-year note to 2.90 percent at yesterday’s close, up from 2.77 percent the previous day.
Total Losses
Since the recession began in December 2007, the economy has lost about 5.1 million jobs, the worst in the postwar era, Labor Department figures released yesterday in Washington showed. Some 3.3 million have been cut in the last five months, including 651,000 in February, when the jobless rate was 8.1 percent.
The job losses have been widespread, though they have been particularly large in manufacturing, construction and temporary- help services. Those three industries have accounted for nearly two-thirds of the jobs eliminated during the recession.
“In the past, businesses seemed to show a bit of caution in their payroll reductions,” said Joel Naroff, president of Naroff Economics in Holland, Pennsylvania, and Bloomberg’s best economic forecaster for 2008. “Now, the philosophy seems to be cut massively now and ask questions about whether too much has been done later.”
Protracted Slump
Companies in such industries as automobiles and home building may be more aggressive in paring payrolls because they don’t expect demand to recover anytime soon, said Vincent Reinhart, a former Fed official now at the American Enterprise Institute in Washington.
Yesterday’s report showed factory payrolls fell by 161,000 in March after dropping 169,000 in February. The decrease included a loss of 17,500 jobs in auto manufacturing and parts industries.
There were signs last week that the worst of the recession may have passed for some areas of the economy, as reports showed improvements in manufacturing and housing, the industries in steepest decline.
The Institute for Supply Management’s factory index climbed to 36.3 in March, a third consecutive increase that brought it closer to the breakeven point of 50. The number of contracts to buy existing homes in February rose 2.1 percent, according to the National Association of Realtors. Also, consumer purchases advanced for a second straight month in February, the Commerce Department said March 27.
Auto Industry
Still, the manufacturing slump that began more than a year ago may intensify should General Motors Corp. be forced into bankruptcy, economists said. As many as 1 million additional auto-industry jobs may be lost and unemployment would climb to 11 percent, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.
The auto slump has already rippled through the industry. Johnson Controls, a maker of car interiors and batteries, said last month it will shut 10 factories and cut about 4,000 jobs. Dana, the truck-axle manufacturer that exited bankruptcy in 2008, said it will boost its payroll reduction to 5,800 this year, 800 more than previously announced.
“We are taking the difficult actions necessary to survive,” Dana’s Chief Executive Officer John Devine said in a March 16 statement.
Service industries, which include banks, insurance companies, restaurants and retailers, cut 358,000 workers after a 366,000 decline in February. Financial firms cut payrolls by 43,000, after a 44,000 decrease the prior month. Retail payrolls decreased by 47,800 after a 50,800 drop.
In addition to cutting jobs, companies also reduced hours for those still on payrolls. The average number of hours worked fell to 33.2 per week, down six minutes from February and the lowest since records began in 1964.
A host of companies -- from manufacturers such as Johnson Controls Inc. and Dana Holding Corp. to service providers like International Business Machines Corp. and even the U.S. Postal Service -- have announced plans to eliminate jobs in the face of depressed demand from their customers.
“We expect labor-market conditions to remain appalling for many months to come,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, wrote in a client note following yesterday’s report from the Labor Department.
The risk is that a continued hemorrhaging of jobs triggers another round of spending cuts by consumers, pushing the economy deeper into a recession just as it is showing signs of steadying after plunging in the fourth quarter.
“We are not out of the woods yet,” Federal Reserve Vice Chairman Donald Kohn said in a speech in Wooster, Ohio, yesterday. He added that the central bank and administration of President Barack Obama must remain “flexible and open” to taking further measures to help the economy.
Stocks rose yesterday for a fourth day as Fed Chairman Ben S. Bernanke said measures to unfreeze credit markets were working. The Standard & Poor’s 500 index climbed 8.1 points, or 1 percent, to close at 842.5. Treasuries fell on growing concern over the amount of borrowing needed to finance the budget deficit, pushing the yield on the 10-year note to 2.90 percent at yesterday’s close, up from 2.77 percent the previous day.
Total Losses
Since the recession began in December 2007, the economy has lost about 5.1 million jobs, the worst in the postwar era, Labor Department figures released yesterday in Washington showed. Some 3.3 million have been cut in the last five months, including 651,000 in February, when the jobless rate was 8.1 percent.
The job losses have been widespread, though they have been particularly large in manufacturing, construction and temporary- help services. Those three industries have accounted for nearly two-thirds of the jobs eliminated during the recession.
“In the past, businesses seemed to show a bit of caution in their payroll reductions,” said Joel Naroff, president of Naroff Economics in Holland, Pennsylvania, and Bloomberg’s best economic forecaster for 2008. “Now, the philosophy seems to be cut massively now and ask questions about whether too much has been done later.”
Protracted Slump
Companies in such industries as automobiles and home building may be more aggressive in paring payrolls because they don’t expect demand to recover anytime soon, said Vincent Reinhart, a former Fed official now at the American Enterprise Institute in Washington.
Yesterday’s report showed factory payrolls fell by 161,000 in March after dropping 169,000 in February. The decrease included a loss of 17,500 jobs in auto manufacturing and parts industries.
There were signs last week that the worst of the recession may have passed for some areas of the economy, as reports showed improvements in manufacturing and housing, the industries in steepest decline.
The Institute for Supply Management’s factory index climbed to 36.3 in March, a third consecutive increase that brought it closer to the breakeven point of 50. The number of contracts to buy existing homes in February rose 2.1 percent, according to the National Association of Realtors. Also, consumer purchases advanced for a second straight month in February, the Commerce Department said March 27.
Auto Industry
Still, the manufacturing slump that began more than a year ago may intensify should General Motors Corp. be forced into bankruptcy, economists said. As many as 1 million additional auto-industry jobs may be lost and unemployment would climb to 11 percent, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.
The auto slump has already rippled through the industry. Johnson Controls, a maker of car interiors and batteries, said last month it will shut 10 factories and cut about 4,000 jobs. Dana, the truck-axle manufacturer that exited bankruptcy in 2008, said it will boost its payroll reduction to 5,800 this year, 800 more than previously announced.
“We are taking the difficult actions necessary to survive,” Dana’s Chief Executive Officer John Devine said in a March 16 statement.
Service industries, which include banks, insurance companies, restaurants and retailers, cut 358,000 workers after a 366,000 decline in February. Financial firms cut payrolls by 43,000, after a 44,000 decrease the prior month. Retail payrolls decreased by 47,800 after a 50,800 drop.
In addition to cutting jobs, companies also reduced hours for those still on payrolls. The average number of hours worked fell to 33.2 per week, down six minutes from February and the lowest since records began in 1964.
Asian Stocks Rally for Fourth Week on G-20 Plans, Growth Hopes
April 4 (Bloomberg) -- Asian stocks rose for the fourth- consecutive week, the longest rally in 18 months, as Group of 20 leaders agreed on measures to fight the global recession.
Toyota Motor Corp., which gets 37 percent of its sales from North America, gained 14 percent in Tokyo as U.S. auto sales rose from a 27-year low. HSBC Holdings Plc, Europe’s largest bank, rose 13 percent in Hong Kong as U.S. Treasury Secretary Timothy Geithner said economies are showing “traction.” China Petroleum & Chemical Corp., Asia’s biggest oil refiner, climbed 10 percent after Goldman Sachs Group Inc. recommended investors buy the stock.
“We’ve seen some tangible evidence that the global economy is on the path to recovery,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees about $6.1 billion. “This is all about sentiment and people are interpreting whatever they see in a positive way.”
The MSCI Asia Pacific Index rose 1.4 percent to 86.70 the past five days, the first time stocks have rallied for a fourth- straight week since October 2007. Consumer-related and financial companies led the advance on the gauge, which has jumped more than 20 percent from a five-year low on March 9, the level that technically indicates a bull market.
Hong Kong’s Hang Seng Index rose 3 percent, erasing its decline for the year. Japan’s Nikkei 225 Stock Average added 1.4 percent, while South Korea’s Kospi Index added 3.7 percent and Australia’s S&P/ASX 200 Index 1.7 percent.
Tighter Regulations
Governments from the U.S. to Japan are widening measures to ease the financial crisis, which has caused $1.29 trillion of losses worldwide, and to avert what the World Bank predicts will be the first global economic contraction since World War II.
Following an April 2 summit in London, G-20 policy makers proposed a regulatory blueprint that places stricter limits on hedge funds and other financiers, while pledging to triple the resources of the International Monetary Fund and to give China and other developing economies a greater say in the way the world economy is run.
Toyota, the world’s largest automaker, jumped 14 percent to 3,700 yen in Tokyo this week after industry group Autodata Corp. said 9.86 million new cars were sold in the U.S. in March, a million more than the average estimate of analysts in a Bloomberg survey.
Nissan Motor Co. jumped 19 percent to 464 yen. Toyota posted a 39 percent drop in U.S. sales last month, narrower than the 41 percent tumble analysts in a Bloomberg survey estimated. Sales at Nissan fell 38 percent, whereas analysts had projected a 42 percent slump.
‘Encouraging Signs’
HSBC surged 13 percent to HK$49.45. National Australia Bank Ltd., the nation’s largest lender, rose 8.3 percent to A$22.84 as the U.S. this week relaxed accounting rules to boost bank profits and ease the credit crisis. Woori Finance Holdings Inc., South Korea’s biggest financial company, rallied 12 percent to 8,050 won.
U.S. Treasury Secretary Geithner said ahead of the G-20 meeting that there are “encouraging signs” in markets. The U.S. Institute for Supply Management released in the week showed its factory index increased to 36.3 last month, a third- consecutive advance, while U.S. pending home resales gained 2.1 percent in February, exceeding some economists’ forecasts.
MSCI’s Asian benchmark gauge has pared losses this year to about 3.2 percent on signs government action to bolster growth is working. The gains drove average valuation of companies on the index to 17.7 times profit, the highest level since Nov. 30, 2007, data compiled by Bloomberg show.
Brokerage Upgrades
“I was pleasantly surprised by the G-20’s proposals but that doesn’t mean I’m buying into this rally,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which holds about $90 billion in assets. “Policy is certainly working in the right direction, but it’s a bit premature to say we’ve reached the bottom.”
China Petroleum climbed 10 percent in the week to HK$5.49 in Hong Kong. The stock was raised to “buy” from “neutral” at Goldman Sachs on optimism fuel-price reforms in China will boost earnings. OneSteel Ltd., the second-largest Australian steelmaker, rose 13 percent to A$2.69 after Macquarie Group Ltd. upgraded the stock to “neutral” from “underperform.”
Elpida Memory Inc. soared 15 percent to 845 yen in Tokyo after beating U.S. rival Micron Technology Inc. to partner with Taiwan Memory, the memory-chip company set up by the government, to reorganize the chip industry.
Toyota Motor Corp., which gets 37 percent of its sales from North America, gained 14 percent in Tokyo as U.S. auto sales rose from a 27-year low. HSBC Holdings Plc, Europe’s largest bank, rose 13 percent in Hong Kong as U.S. Treasury Secretary Timothy Geithner said economies are showing “traction.” China Petroleum & Chemical Corp., Asia’s biggest oil refiner, climbed 10 percent after Goldman Sachs Group Inc. recommended investors buy the stock.
“We’ve seen some tangible evidence that the global economy is on the path to recovery,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees about $6.1 billion. “This is all about sentiment and people are interpreting whatever they see in a positive way.”
The MSCI Asia Pacific Index rose 1.4 percent to 86.70 the past five days, the first time stocks have rallied for a fourth- straight week since October 2007. Consumer-related and financial companies led the advance on the gauge, which has jumped more than 20 percent from a five-year low on March 9, the level that technically indicates a bull market.
Hong Kong’s Hang Seng Index rose 3 percent, erasing its decline for the year. Japan’s Nikkei 225 Stock Average added 1.4 percent, while South Korea’s Kospi Index added 3.7 percent and Australia’s S&P/ASX 200 Index 1.7 percent.
Tighter Regulations
Governments from the U.S. to Japan are widening measures to ease the financial crisis, which has caused $1.29 trillion of losses worldwide, and to avert what the World Bank predicts will be the first global economic contraction since World War II.
Following an April 2 summit in London, G-20 policy makers proposed a regulatory blueprint that places stricter limits on hedge funds and other financiers, while pledging to triple the resources of the International Monetary Fund and to give China and other developing economies a greater say in the way the world economy is run.
Toyota, the world’s largest automaker, jumped 14 percent to 3,700 yen in Tokyo this week after industry group Autodata Corp. said 9.86 million new cars were sold in the U.S. in March, a million more than the average estimate of analysts in a Bloomberg survey.
Nissan Motor Co. jumped 19 percent to 464 yen. Toyota posted a 39 percent drop in U.S. sales last month, narrower than the 41 percent tumble analysts in a Bloomberg survey estimated. Sales at Nissan fell 38 percent, whereas analysts had projected a 42 percent slump.
‘Encouraging Signs’
HSBC surged 13 percent to HK$49.45. National Australia Bank Ltd., the nation’s largest lender, rose 8.3 percent to A$22.84 as the U.S. this week relaxed accounting rules to boost bank profits and ease the credit crisis. Woori Finance Holdings Inc., South Korea’s biggest financial company, rallied 12 percent to 8,050 won.
U.S. Treasury Secretary Geithner said ahead of the G-20 meeting that there are “encouraging signs” in markets. The U.S. Institute for Supply Management released in the week showed its factory index increased to 36.3 last month, a third- consecutive advance, while U.S. pending home resales gained 2.1 percent in February, exceeding some economists’ forecasts.
MSCI’s Asian benchmark gauge has pared losses this year to about 3.2 percent on signs government action to bolster growth is working. The gains drove average valuation of companies on the index to 17.7 times profit, the highest level since Nov. 30, 2007, data compiled by Bloomberg show.
Brokerage Upgrades
“I was pleasantly surprised by the G-20’s proposals but that doesn’t mean I’m buying into this rally,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which holds about $90 billion in assets. “Policy is certainly working in the right direction, but it’s a bit premature to say we’ve reached the bottom.”
China Petroleum climbed 10 percent in the week to HK$5.49 in Hong Kong. The stock was raised to “buy” from “neutral” at Goldman Sachs on optimism fuel-price reforms in China will boost earnings. OneSteel Ltd., the second-largest Australian steelmaker, rose 13 percent to A$2.69 after Macquarie Group Ltd. upgraded the stock to “neutral” from “underperform.”
Elpida Memory Inc. soared 15 percent to 845 yen in Tokyo after beating U.S. rival Micron Technology Inc. to partner with Taiwan Memory, the memory-chip company set up by the government, to reorganize the chip industry.
Satyam to Pick Winning Bid on April 13, Parekh Says
April 4 (Bloomberg) -- Satyam Computer Services Ltd., the software provider at the center of India’s biggest corporate fraud inquiry, will announce the winning bid for the company on April 13, director Deepak Parekh said today.
“We met the bidders yesterday,” Parekh said in a telephone interview. “The original date for the bids was April 9, now that has been moved to the 13th.”
Larsen & Toubro Ltd., India’s largest engineering firm, and Tech Mahindra Ltd., the software-services provider partly owned by BT Group Plc, may make their offers this month to buy a controlling interest in Satyam. Satyam’s state-appointed board is selling a 51 percent stake in the company to restore investor confidence and stem client and employee defections after founder Ramalinga Raju said Jan. 7 he inflated $1 billion in assets.
The company will be sold via an open auction if there is a bid that is 90 percent of the highest offer, the Hyderabad-based company said in a statement on April 2.
The highest bid will be treated as the winner if no other bid is at least 90 percent of it or will be treated as the floor price for an open auction. Bidders who quote 90 percent or more of the top bid will be allowed to raise their offers, with the highest price at the auction declared successful, Satyam said.
The bids will be opened at 9 a.m. in Mumbai, Parekh said.
Buyers “have sought additional data and today, tomorrow, we’ll put it up on the” company’s Web site, Parekh said. “We’ll announce the winner once we open the bids.”
Satyam Bidders
International Business Machines Corp. and one more bidder had begun due diligence on Satyam, CNBC-TV18 network reported on March 26, without saying where it got the information.
IBM, Fidelity Investments and buyout firm KKR Financial Holdings LLC are among the bidders, the Economic Times reported on March 14, citing people close to the development it didn’t identify.
Prashanth Balarama, a Bangalore-based spokesman for IBM and KKR spokeswoman Kristi Huller declined to comment on the report at the time.
Billionaire investor Wilbur Ross’ firm WL Ross & Co. is seeking to purchase Satyam, the Hindu Business Line reported March 31, citing unidentified people close to the development.
Ross said April 1 he was barred by Indian rules from Talking about any interest he has in buying Satyam.
Cognizant Technology Solutions Corp. may bid for Satyam, the Business Standard reported today, citing an unidentified banker familiar with the developments. Cognizant may team up with Wilbur Ross for the bid if the expected price is higher than what it is willing to pay, the newspaper reported.
Customers, Employees, Lawsuits
Buying Satyam will gain the winning bidder customers including Cisco Systems Inc. and Nestle SA and a workforce of about 50,000 people. Buyers face the challenge of valuing Satyam before the company restates its financial statements and making provisions for liabilities from investor lawsuits in the U.S.
Satyam wants to complete the sale before India’s general- elections start on April 16, the Financial Times reported March 31, citing unidentified people familiar with the matter. The company, which said on March 24 that it would name the winning bid by April 30, declined to comment, the FT said.
Satyam rose 0.6 percent to close at 39.9 rupees in Mumbai trading on April 2, valuing the company at 26.9 billion rupees ($534 million). The stock has declined 78 percent since Raju’s disclosure, compared with a 0.1 percent gain in the benchmark Sensitive Index in the period.
“We met the bidders yesterday,” Parekh said in a telephone interview. “The original date for the bids was April 9, now that has been moved to the 13th.”
Larsen & Toubro Ltd., India’s largest engineering firm, and Tech Mahindra Ltd., the software-services provider partly owned by BT Group Plc, may make their offers this month to buy a controlling interest in Satyam. Satyam’s state-appointed board is selling a 51 percent stake in the company to restore investor confidence and stem client and employee defections after founder Ramalinga Raju said Jan. 7 he inflated $1 billion in assets.
The company will be sold via an open auction if there is a bid that is 90 percent of the highest offer, the Hyderabad-based company said in a statement on April 2.
The highest bid will be treated as the winner if no other bid is at least 90 percent of it or will be treated as the floor price for an open auction. Bidders who quote 90 percent or more of the top bid will be allowed to raise their offers, with the highest price at the auction declared successful, Satyam said.
The bids will be opened at 9 a.m. in Mumbai, Parekh said.
Buyers “have sought additional data and today, tomorrow, we’ll put it up on the” company’s Web site, Parekh said. “We’ll announce the winner once we open the bids.”
Satyam Bidders
International Business Machines Corp. and one more bidder had begun due diligence on Satyam, CNBC-TV18 network reported on March 26, without saying where it got the information.
IBM, Fidelity Investments and buyout firm KKR Financial Holdings LLC are among the bidders, the Economic Times reported on March 14, citing people close to the development it didn’t identify.
Prashanth Balarama, a Bangalore-based spokesman for IBM and KKR spokeswoman Kristi Huller declined to comment on the report at the time.
Billionaire investor Wilbur Ross’ firm WL Ross & Co. is seeking to purchase Satyam, the Hindu Business Line reported March 31, citing unidentified people close to the development.
Ross said April 1 he was barred by Indian rules from Talking about any interest he has in buying Satyam.
Cognizant Technology Solutions Corp. may bid for Satyam, the Business Standard reported today, citing an unidentified banker familiar with the developments. Cognizant may team up with Wilbur Ross for the bid if the expected price is higher than what it is willing to pay, the newspaper reported.
Customers, Employees, Lawsuits
Buying Satyam will gain the winning bidder customers including Cisco Systems Inc. and Nestle SA and a workforce of about 50,000 people. Buyers face the challenge of valuing Satyam before the company restates its financial statements and making provisions for liabilities from investor lawsuits in the U.S.
Satyam wants to complete the sale before India’s general- elections start on April 16, the Financial Times reported March 31, citing unidentified people familiar with the matter. The company, which said on March 24 that it would name the winning bid by April 30, declined to comment, the FT said.
Satyam rose 0.6 percent to close at 39.9 rupees in Mumbai trading on April 2, valuing the company at 26.9 billion rupees ($534 million). The stock has declined 78 percent since Raju’s disclosure, compared with a 0.1 percent gain in the benchmark Sensitive Index in the period.
Thursday, April 2, 2009
IMF Makes Comeback as It Wields $1 Trillion for Global Rescue
April 3 (Bloomberg) -- The International Monetary Fund, dismissed as increasingly irrelevant when the world economy was booming, will now wield more than $1 trillion to help bring it back to life.
Leaders from the world’s most powerful nations, meeting in London yesterday, agreed to triple the money the IMF can lend to rescue crisis-stricken nations, to $750 billion. The agency will also get another $250 billion in Special Drawing Rights, an overdraft facility for its 185 members.
The Group of 20 is turning to the Washington-based agency to prevent the worst financial crisis since the Great Depression from swamping more developing nations. In the past six months, the IMF has approved loans totaling more than $55 billion to countries including Ukraine, Iceland and Pakistan. That is a turnaround from last year, when newly hired Managing Director Dominique Strauss-Kahn was forced to cut staff as lending sank to the lowest in a quarter century.
“A year ago the very same countries were forcing the IMF to go through a very damaging set of budget cuts,” said Simon Johnson, a senior fellow at the Washington-based Peterson Institute for International Economics and a former chief economist at the IMF. “Now the IMF has been asked to come to the rescue. I think the motif for the day is ‘Oops, sorry. Please come and help countries with massive amounts of money.’”
World Bank
The World Bank and other lenders to poor nations will receive another $100 billion, and a further $250 billion will be devoted to trade finance, the G-20 decided. The IMF and the World Bank were founded in 1944 to help rebuild the global economy after World War II.
“This is the biggest increase in resources in the history of our international institutions,” said U.K. Prime Minister Gordon Brown, who presided over the talks in London that led to the agreement.
G-20 leaders also called for stricter limits on hedge funds, executive pay, credit-rating firms and risk-taking by banks as part of what their statement called a “global plan for recovery on an unprecedented scale.” The leaders avoided the divisive question of whether to deliver more fiscal stimulus to their own economies.
Japan, the European Union and China agreed to provide the first $250 billion of the increase in IMF rescue funds, and Strauss-Khan said work would begin to secure the remaining $250 from other countries.
Managing Globalization
“If you look at the governance of globalization, if you look at the resources to deal with the crisis, at each stage of what the G-20 is working on, you find the IMF,” Strauss-Kahn said yesterday in London at a press conference. “The IMF is now back.”
The $250 billion increase in Special Drawing Rights will allow countries to tap IMF money without having to accept changes to economic policies often demanded as a condition of loans. The money is disbursed in proportion to the money each member-nation pays into the fund. Rich nations will be allowed to divert their allocations to countries in greater need.
The larger pool of SDRs will enable nations to boost their foreign-exchange reserves, augmenting global liquidity and helping defend against speculative attacks.
“It is the beginning of increasing the role of the IMF not only as lender of last resort, not only as a forecaster, not only as an adviser in economic policy in the traditional role, but also in providing liquidity to the world which is the role of a monetary institution like ours,” Strauss Khan told reporters at the G-20 summit.
Mexican Credit Line
Yesterday’s measures are the latest evidence of the IMF’s growing role. Mexico this week said it would seek a $48 billion line of credit from the IMF.
In the past six months, the fund has approved $16.4 billion for Ukraine, $15.7 billion for Hungary, $10.4 billion for Latvia, $2.5 billion for Belarus, $2.1 billion for Iceland, $7.6 billion for Pakistan and $516 million for Serbia. Turkey is negotiating an IMF loan accord, and Romania has expressed an interest in borrowing.
Increased IMF lending is improving its finances, which depend on interest it charges its members. The fund may turn a profit of almost $650 million next year, former IMF officials said last month. Two years ago, the fund was forecast to lose $360 million in 2010.
A year ago, the IMF was reducing its payroll to fit a diminished role. The fund said last April that 591 staff members had accepted incentives to quit, more the goal of 380 cuts in its 2,900 positions.
Improving Efficiency
The G-20 said yesterday it was seeking steps to improve the “long-term relevance, effectiveness and efficiency” of the IMF and World Bank, and it pledged to give emerging countries such as India, China and Brazil a greater say in how the agencies are run.
The G-20 also pledged a more “open, transparent, and merit-based” selection of people to lead the institutions. The head of the IMF has always been a European, while the World Bank chief is traditionally nominated by the U.S.
The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
Leaders from the world’s most powerful nations, meeting in London yesterday, agreed to triple the money the IMF can lend to rescue crisis-stricken nations, to $750 billion. The agency will also get another $250 billion in Special Drawing Rights, an overdraft facility for its 185 members.
The Group of 20 is turning to the Washington-based agency to prevent the worst financial crisis since the Great Depression from swamping more developing nations. In the past six months, the IMF has approved loans totaling more than $55 billion to countries including Ukraine, Iceland and Pakistan. That is a turnaround from last year, when newly hired Managing Director Dominique Strauss-Kahn was forced to cut staff as lending sank to the lowest in a quarter century.
“A year ago the very same countries were forcing the IMF to go through a very damaging set of budget cuts,” said Simon Johnson, a senior fellow at the Washington-based Peterson Institute for International Economics and a former chief economist at the IMF. “Now the IMF has been asked to come to the rescue. I think the motif for the day is ‘Oops, sorry. Please come and help countries with massive amounts of money.’”
World Bank
The World Bank and other lenders to poor nations will receive another $100 billion, and a further $250 billion will be devoted to trade finance, the G-20 decided. The IMF and the World Bank were founded in 1944 to help rebuild the global economy after World War II.
“This is the biggest increase in resources in the history of our international institutions,” said U.K. Prime Minister Gordon Brown, who presided over the talks in London that led to the agreement.
G-20 leaders also called for stricter limits on hedge funds, executive pay, credit-rating firms and risk-taking by banks as part of what their statement called a “global plan for recovery on an unprecedented scale.” The leaders avoided the divisive question of whether to deliver more fiscal stimulus to their own economies.
Japan, the European Union and China agreed to provide the first $250 billion of the increase in IMF rescue funds, and Strauss-Khan said work would begin to secure the remaining $250 from other countries.
Managing Globalization
“If you look at the governance of globalization, if you look at the resources to deal with the crisis, at each stage of what the G-20 is working on, you find the IMF,” Strauss-Kahn said yesterday in London at a press conference. “The IMF is now back.”
The $250 billion increase in Special Drawing Rights will allow countries to tap IMF money without having to accept changes to economic policies often demanded as a condition of loans. The money is disbursed in proportion to the money each member-nation pays into the fund. Rich nations will be allowed to divert their allocations to countries in greater need.
The larger pool of SDRs will enable nations to boost their foreign-exchange reserves, augmenting global liquidity and helping defend against speculative attacks.
“It is the beginning of increasing the role of the IMF not only as lender of last resort, not only as a forecaster, not only as an adviser in economic policy in the traditional role, but also in providing liquidity to the world which is the role of a monetary institution like ours,” Strauss Khan told reporters at the G-20 summit.
Mexican Credit Line
Yesterday’s measures are the latest evidence of the IMF’s growing role. Mexico this week said it would seek a $48 billion line of credit from the IMF.
In the past six months, the fund has approved $16.4 billion for Ukraine, $15.7 billion for Hungary, $10.4 billion for Latvia, $2.5 billion for Belarus, $2.1 billion for Iceland, $7.6 billion for Pakistan and $516 million for Serbia. Turkey is negotiating an IMF loan accord, and Romania has expressed an interest in borrowing.
Increased IMF lending is improving its finances, which depend on interest it charges its members. The fund may turn a profit of almost $650 million next year, former IMF officials said last month. Two years ago, the fund was forecast to lose $360 million in 2010.
A year ago, the IMF was reducing its payroll to fit a diminished role. The fund said last April that 591 staff members had accepted incentives to quit, more the goal of 380 cuts in its 2,900 positions.
Improving Efficiency
The G-20 said yesterday it was seeking steps to improve the “long-term relevance, effectiveness and efficiency” of the IMF and World Bank, and it pledged to give emerging countries such as India, China and Brazil a greater say in how the agencies are run.
The G-20 also pledged a more “open, transparent, and merit-based” selection of people to lead the institutions. The head of the IMF has always been a European, while the World Bank chief is traditionally nominated by the U.S.
The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
Citic, CICC Reap Fee Bonanza in China’s Protected Bond Market
April 3 (Bloomberg) -- Citic Securities Co. and China International Capital Corp. are reaping multimillion-dollar fees arranging bond sales in a year-old market where China’s 105 other brokerages are barred from competing.
The two firms underwrote a combined 33.7 billion yuan ($4.9 billion) of so-called medium-term notes in the first quarter, according to data compiled by Bloomberg. That compares with 20.8 billion yuan for the whole of 2008.
CICC, the Chinese partner of Morgan Stanley, and Citic, Asia’s largest securities firm by market value, are the only companies besides banks allowed to underwrite medium-term notes and commercial paper. Sales of the securities have swelled as a government moratorium on initial public offerings prompts companies to turn to debt markets, providing CICC and Citic with a cushion as IPO fees vanish.
“We’ll see quite a large increase this year in commercial paper and medium-term note issuance,” said Peng Xingyun, director of the monetary theory and policy research center at the Chinese Academy of Social Sciences in Beijing. “Companies need those two types of bonds to raise cash when selling shares isn’t an option.”
CICC and Citic ranked third and sixth, respectively, in underwriting medium-term note sales this year, Bloomberg data show. CICC worked on 21 billion yuan of deals, more than four times the total for 2008. Citic’s haul was 12.65 billion yuan, or 78 percent of what it garnered last year. The two didn’t arrange any commercial-paper deals, according to Bloomberg data.
Spokespeople for the firms, both based in Beijing, declined to comment.
Others Want In
China introduced medium-term notes, bonds that typically mature in three to five years, in April 2008. Sales of the bonds were suspended between July and September.
Arrangers charge 0.3 percent per year of maturity for underwriting medium-term notes. Fees are paid upfront. Assuming an average four-year maturity on the sales CICC and Citic managed in the first quarter, the two would have reaped 404 million yuan in combined fees.
Companies sold 167.1 billion yuan of the bonds in the first quarter, up from 100.2 billion yuan in the previous three months, according to ChinaBond, the nation’s biggest clearing house.
National Association of Financial Market Institutional Investors, supervised by the central bank, awards permits for underwriting medium-term notes and commercial paper. Sales of other types of bonds are overseen by China’s securities regulator and the nation’s top planning agency.
Rival securities firms have sought underwriting approvals, and “haven’t gotten the green light yet,” He Fei, an official at the association’s medium-term notes department, said in an interview. She declined to say which brokerages applied.
IPO Halt
As the two biggest underwriters of equity sales on China’s two exchanges in 2008, Citic and CICC have the most to lose from the ban on stock offerings.
The securities regulator hasn’t approved an IPO since September, and there have been no stock sales in 2009. Together, Citic and CICC had a 43 percent share of the market for equity offerings in 2008, when companies raised 232 billion yuan, data compiled by Bloomberg show.
Citic’s profit plunged 41 percent last year to 7.28 billion yuan, the company said Jan. 20, citing unaudited figures. The brokerage, which is scheduled to report earnings on April 30, has rallied 44 percent in Shanghai trading this year after falling 60 percent in 2008. CICC is privately held.
‘Great Advantage’
While fees for advising on stock sales are higher at around 3 percent, underwriting bonds requires less work, a banker with direct knowledge of the matter said, speaking on condition of anonymity. A deal typically takes about three months to complete, the person said. That compares with about a year for an IPO.
“Bond underwriting will be a key support for Citic’s profit from investment banking this year,” said Liang Jing, a Shanghai-based analyst at Guotai Junan Securities Co. who rates Citic as “add.”
Arranging bond sales accounted for about a third of the firm’s investment banking revenue last year, Liang estimated. Citic doesn’t break out bond underwriting revenue.
Being the only brokerages able to underwrite commercial paper and medium-term notes offers other advantages, said Tian Liang, a Shenzhen-based analyst at Pingan Securities Co.
“They can use bond underwriting to boost their asset- management portfolios and offer other products to clients,” he said. “Compared with other brokerages, CICC and Citic have a great advantage.”
The two firms underwrote a combined 33.7 billion yuan ($4.9 billion) of so-called medium-term notes in the first quarter, according to data compiled by Bloomberg. That compares with 20.8 billion yuan for the whole of 2008.
CICC, the Chinese partner of Morgan Stanley, and Citic, Asia’s largest securities firm by market value, are the only companies besides banks allowed to underwrite medium-term notes and commercial paper. Sales of the securities have swelled as a government moratorium on initial public offerings prompts companies to turn to debt markets, providing CICC and Citic with a cushion as IPO fees vanish.
“We’ll see quite a large increase this year in commercial paper and medium-term note issuance,” said Peng Xingyun, director of the monetary theory and policy research center at the Chinese Academy of Social Sciences in Beijing. “Companies need those two types of bonds to raise cash when selling shares isn’t an option.”
CICC and Citic ranked third and sixth, respectively, in underwriting medium-term note sales this year, Bloomberg data show. CICC worked on 21 billion yuan of deals, more than four times the total for 2008. Citic’s haul was 12.65 billion yuan, or 78 percent of what it garnered last year. The two didn’t arrange any commercial-paper deals, according to Bloomberg data.
Spokespeople for the firms, both based in Beijing, declined to comment.
Others Want In
China introduced medium-term notes, bonds that typically mature in three to five years, in April 2008. Sales of the bonds were suspended between July and September.
Arrangers charge 0.3 percent per year of maturity for underwriting medium-term notes. Fees are paid upfront. Assuming an average four-year maturity on the sales CICC and Citic managed in the first quarter, the two would have reaped 404 million yuan in combined fees.
Companies sold 167.1 billion yuan of the bonds in the first quarter, up from 100.2 billion yuan in the previous three months, according to ChinaBond, the nation’s biggest clearing house.
National Association of Financial Market Institutional Investors, supervised by the central bank, awards permits for underwriting medium-term notes and commercial paper. Sales of other types of bonds are overseen by China’s securities regulator and the nation’s top planning agency.
Rival securities firms have sought underwriting approvals, and “haven’t gotten the green light yet,” He Fei, an official at the association’s medium-term notes department, said in an interview. She declined to say which brokerages applied.
IPO Halt
As the two biggest underwriters of equity sales on China’s two exchanges in 2008, Citic and CICC have the most to lose from the ban on stock offerings.
The securities regulator hasn’t approved an IPO since September, and there have been no stock sales in 2009. Together, Citic and CICC had a 43 percent share of the market for equity offerings in 2008, when companies raised 232 billion yuan, data compiled by Bloomberg show.
Citic’s profit plunged 41 percent last year to 7.28 billion yuan, the company said Jan. 20, citing unaudited figures. The brokerage, which is scheduled to report earnings on April 30, has rallied 44 percent in Shanghai trading this year after falling 60 percent in 2008. CICC is privately held.
‘Great Advantage’
While fees for advising on stock sales are higher at around 3 percent, underwriting bonds requires less work, a banker with direct knowledge of the matter said, speaking on condition of anonymity. A deal typically takes about three months to complete, the person said. That compares with about a year for an IPO.
“Bond underwriting will be a key support for Citic’s profit from investment banking this year,” said Liang Jing, a Shanghai-based analyst at Guotai Junan Securities Co. who rates Citic as “add.”
Arranging bond sales accounted for about a third of the firm’s investment banking revenue last year, Liang estimated. Citic doesn’t break out bond underwriting revenue.
Being the only brokerages able to underwrite commercial paper and medium-term notes offers other advantages, said Tian Liang, a Shenzhen-based analyst at Pingan Securities Co.
“They can use bond underwriting to boost their asset- management portfolios and offer other products to clients,” he said. “Compared with other brokerages, CICC and Citic have a great advantage.”
Asian Stocks Rise, Extending Global Rally, on Recovery Optimism
April 3 (Bloomberg) -- Asian stocks climbed, extending a rally that drove the MSCI World Index to a two-month high, as world leaders agreed on measures to fight the global recession and manufacturing grew in China.
Toyota Motor Corp. jumped 7.5 percent in Tokyo after the company obtained low-cost loans from a government-backed bank. Harbin Power Equipment Co., China’s No. 2 maker of electricity- generation equipment, advanced 3.3 percent in Hong Kong as production in the country expanded for the first time in six months. National Australia Bank Ltd. rose 4.9 percent as the U.S. relaxed accounting rules to boost bank profits and ease the credit crisis.
“We’ve seen some tangible evidence that the global economy is on the path to recovery,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees about $6.1 billion. “This is all about sentiment and people are interpreting whatever they see in a positive way.”
The MSCI Asia Pacific Index gained 0.5 percent to 86.71 at 12:43 p.m. in Tokyo, taking its advance this week to 1.4 percent. The gauge has climbed 23 percent from a more than five-year low on March 9 amid speculation governments will succeed in easing the global financial crisis. A 20 percent gain is the technical level that indicates stocks may have entered a bull market.
Japan’s Nikkei 225 Stock Average added 0.3 percent to 8,747.28, cutting its decline this year to 1.3 percent.
Australia’s S&P/ASX 200 Index rose 1 percent. Markets advanced except in Hong Kong, Singapore, Thailand and Malaysia. The MSCI World Index added 0.1 percent to 853.75, set to close at its highest level since Feb. 9.
Accounting Standards
BHP Billiton Ltd. climbed 3.5 percent in Sydney even as oil pared its biggest advance in three weeks. Newcrest Mining Ltd., Australia’s largest gold producer, slumped 7.2 percent as demand for bullion as a haven declined.
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge climbed 2.9 percent yesterday as Group of 20 policy makers meeting in London pledged $750 billion to the International Monetary Fund to rescue recession-stricken nations. The agency will also get another $250 billion in Special Drawing Rights, an overdraft facility for its 185 members.
The U.S.’s Financial Accounting Standards Board also agreed to relax fair-value, or mark-to-market, accounting that requires banks to revalue assets each quarter to reflect market prices. Writedowns and credit-related losses at financial institutions have swelled to $1.29 trillion.
Toyota, the world’s largest automaker, surged 7.5 percent to 3,710 yen. The company said its finance arm will borrow from the Japan Bank for International Cooperation as a freeze in credit markets made other debt options more expensive.
Banks Climb
The automaker also rose after the yen earlier fell to 100.18 versus the dollar, a level not seen since Nov. 4. A weaker currency raises the value of exporters’ overseas sales.
National Australia Bank, the nation’s largest by assets, rose 4.9 percent to A$22.55. KB Financial Group Inc., which controls South Korea’s largest lender, rose 2.5 percent to 37,700 won in Seoul. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, rose 1 percent to 534 yen.
A measure of bank shares included in the MSCI Asia Pacific Index has rebounded 29 percent in the last month. The gauge is still down 24 percent in the last six months, the second-worst performer among the benchmark’s 10 industry groups.
The MSCI Asia Pacific’s rally in the past month has driven the average valuation of companies on the index to 17.7 times reported profit, the highest since Nov. 30, 2007, data compiled by Bloomberg show.
Fast Rally
“There’s growing optimism that the world economy has reached a bottom,” Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion, said in an interview with Bloomberg Television. “We’ve seen a fairly fast rally lately, and people will likely start getting wary of its pace.”
Harbin Power rose 3.3 percent to HK$5.66. Komatsu Ltd., a machinery maker that counts China as its fastest growing market, jumped 2.4 percent to 1,210 yen in Tokyo.
China’s Purchasing Manager’s Index, which was released yesterday, rose to a seasonally adjusted 52.4 in March from 49 in February, exceeding the threshold of 50 that divides expansion and contraction for the first time since September. statement. A reading above 50 indicates an expansion.
Growth in manufacturing may help President Hu Jintao achieve his target of 8 percent expansion for the world’s third- biggest economy.
BHP rose 3.5 percent to A$34.53. Crude oil dropped 1.5 percent in after-hours trading, after soaring 8.8 percent to $52.64 a barrel in New York yesterday, the most since March 12. Copper rose 2.2 percent to the highest since Nov. 4 as the prospect of growth in China boosts demand for industrial demands.
Rio Tinto Group, the world’s third-largest mining company, gained 3.3 percent to A$59.87. Jiangxi Copper Co., China’s largest producer of the metal, rose 2.3 percent to HK$8.98.
Newcrest Mining Ltd., Australia’s largest gold producer, slumped 7.2 percent to A$30.82. Bullion fell to the lowest in three weeks as investors shifted into risky assets from the relative safety of gold.
Toyota Motor Corp. jumped 7.5 percent in Tokyo after the company obtained low-cost loans from a government-backed bank. Harbin Power Equipment Co., China’s No. 2 maker of electricity- generation equipment, advanced 3.3 percent in Hong Kong as production in the country expanded for the first time in six months. National Australia Bank Ltd. rose 4.9 percent as the U.S. relaxed accounting rules to boost bank profits and ease the credit crisis.
“We’ve seen some tangible evidence that the global economy is on the path to recovery,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees about $6.1 billion. “This is all about sentiment and people are interpreting whatever they see in a positive way.”
The MSCI Asia Pacific Index gained 0.5 percent to 86.71 at 12:43 p.m. in Tokyo, taking its advance this week to 1.4 percent. The gauge has climbed 23 percent from a more than five-year low on March 9 amid speculation governments will succeed in easing the global financial crisis. A 20 percent gain is the technical level that indicates stocks may have entered a bull market.
Japan’s Nikkei 225 Stock Average added 0.3 percent to 8,747.28, cutting its decline this year to 1.3 percent.
Australia’s S&P/ASX 200 Index rose 1 percent. Markets advanced except in Hong Kong, Singapore, Thailand and Malaysia. The MSCI World Index added 0.1 percent to 853.75, set to close at its highest level since Feb. 9.
Accounting Standards
BHP Billiton Ltd. climbed 3.5 percent in Sydney even as oil pared its biggest advance in three weeks. Newcrest Mining Ltd., Australia’s largest gold producer, slumped 7.2 percent as demand for bullion as a haven declined.
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge climbed 2.9 percent yesterday as Group of 20 policy makers meeting in London pledged $750 billion to the International Monetary Fund to rescue recession-stricken nations. The agency will also get another $250 billion in Special Drawing Rights, an overdraft facility for its 185 members.
The U.S.’s Financial Accounting Standards Board also agreed to relax fair-value, or mark-to-market, accounting that requires banks to revalue assets each quarter to reflect market prices. Writedowns and credit-related losses at financial institutions have swelled to $1.29 trillion.
Toyota, the world’s largest automaker, surged 7.5 percent to 3,710 yen. The company said its finance arm will borrow from the Japan Bank for International Cooperation as a freeze in credit markets made other debt options more expensive.
Banks Climb
The automaker also rose after the yen earlier fell to 100.18 versus the dollar, a level not seen since Nov. 4. A weaker currency raises the value of exporters’ overseas sales.
National Australia Bank, the nation’s largest by assets, rose 4.9 percent to A$22.55. KB Financial Group Inc., which controls South Korea’s largest lender, rose 2.5 percent to 37,700 won in Seoul. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, rose 1 percent to 534 yen.
A measure of bank shares included in the MSCI Asia Pacific Index has rebounded 29 percent in the last month. The gauge is still down 24 percent in the last six months, the second-worst performer among the benchmark’s 10 industry groups.
The MSCI Asia Pacific’s rally in the past month has driven the average valuation of companies on the index to 17.7 times reported profit, the highest since Nov. 30, 2007, data compiled by Bloomberg show.
Fast Rally
“There’s growing optimism that the world economy has reached a bottom,” Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion, said in an interview with Bloomberg Television. “We’ve seen a fairly fast rally lately, and people will likely start getting wary of its pace.”
Harbin Power rose 3.3 percent to HK$5.66. Komatsu Ltd., a machinery maker that counts China as its fastest growing market, jumped 2.4 percent to 1,210 yen in Tokyo.
China’s Purchasing Manager’s Index, which was released yesterday, rose to a seasonally adjusted 52.4 in March from 49 in February, exceeding the threshold of 50 that divides expansion and contraction for the first time since September. statement. A reading above 50 indicates an expansion.
Growth in manufacturing may help President Hu Jintao achieve his target of 8 percent expansion for the world’s third- biggest economy.
BHP rose 3.5 percent to A$34.53. Crude oil dropped 1.5 percent in after-hours trading, after soaring 8.8 percent to $52.64 a barrel in New York yesterday, the most since March 12. Copper rose 2.2 percent to the highest since Nov. 4 as the prospect of growth in China boosts demand for industrial demands.
Rio Tinto Group, the world’s third-largest mining company, gained 3.3 percent to A$59.87. Jiangxi Copper Co., China’s largest producer of the metal, rose 2.3 percent to HK$8.98.
Newcrest Mining Ltd., Australia’s largest gold producer, slumped 7.2 percent to A$30.82. Bullion fell to the lowest in three weeks as investors shifted into risky assets from the relative safety of gold.
Wednesday, April 1, 2009
China Vies to Be World’s Leader in Electric Cars
TIANJIN, China — Chinese leaders have adopted a plan aimed at turning the country into one of the leading producers of hybrid and all-electric vehicles within three years, and making it the world leader in electric cars and buses after that.
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Doug Kanter for The New York Times
Chinese leaders have adopted a plan aimed at turning the country into one of the leading producers of hybrid and all-electric vehicles within three years.
The goal, which radiates from the very top of the Chinese government, suggests that Detroit’s Big Three, already struggling to stay alive, will face even stiffer foreign competition on the next field of automotive technology than they do today.
“China is well positioned to lead in this,” said David Tulauskas, director of China government policy at General Motors.
To some extent, China is making a virtue of a liability. It is behind the United States, Japan and other countries when it comes to making gas-powered vehicles, but by skipping the current technology, China hopes to get a jump on the next.
Japan is the market leader in hybrids today, which run on both electricity and gasoline, with cars like the Toyota Prius and Honda Insight. The United States has been a laggard in alternative vehicles. G.M.’s plug-in hybrid Chevrolet Volt is scheduled to go on sale next year, and will use rechargeable batteries imported from LG in South Korea.
China’s intention, in addition to creating a world-leading industry that will produce jobs and exports, is to reduce urban pollution and decrease its dependence on oil, which comes from the Mideast and travels over sea routes controlled by the United States Navy.
But electric vehicles may do little to clear the country’s smog-darkened sky or curb its rapidly rising emissions of global warming gases. China gets three-fourths of its electricity from coal, which produces more soot and more greenhouse gases than other fuels.
A report by McKinsey & Company last autumn estimated that replacing a gasoline-powered car with a similar-size electric car in China would reduce greenhouse emissions by only 19 percent. It would reduce urban pollution, however, by shifting the source of smog from car exhaust pipes to power plants, which are often located outside cities.
Beyond manufacturing, subsidies of up to $8,800 are being offered to taxi fleets and local government agencies in 13 Chinese cities for each hybrid or all-electric vehicle they purchase. The state electricity grid has been ordered to set up electric car charging stations in Beijing, Shanghai and Tianjin.
Government research subsidies for electric car designs are increasing rapidly. And an interagency panel is planning tax credits for consumers who buy alternative energy vehicles.
China wants to raise its annual production capacity to 500,000 hybrid or all-electric cars and buses by the end of 2011, from 2,100 last year, government officials and Chinese auto executives said. By comparison, CSM Worldwide, a consulting firm that does forecasts for automakers, predicts that Japan and South Korea together will be producing 1.1 million hybrid or all-electric light vehicles by then and North America will be making 267,000.
The United States Department of Energy has its own $25 billion program to develop electric-powered cars and improve battery technology, and will receive another $2 billion for battery development as part of the economic stimulus program enacted by Congress.
Premier Wen Jiabao highlighted the importance of electric cars two years ago with his unlikely choice to become minister of science and technology: Wan Gang, a Shanghai-born former Audi auto engineer in Germany who later became the chief scientist for the Chinese government’s research panel on electric vehicles.
Mr. Wan is the first minister in at least three decades who is not a member of the Communist Party.
And Premier Wen has his own connection to the electric car industry. He was born and grew up here in Tianjin, the longtime capital of China’s battery industry, 70 miles southeast of Beijing.
Tianjin has thrived in the six years since Mr. Wen became premier. It now has China’s first bullet train service (to Beijing), a new Airbus factory and an immaculate new airport. Tianjin has also received a surge of research subsidies for enterprises like the Tianjin-Qingyuan Electric Vehicle Company.
Electric cars have several practical advantages in China. Intercity driving is rare. Commutes are fairly short and frequently at low speeds because of traffic jams. So the limitations of all-electric cars — the latest models in China have a top speed of 60 miles an hour and a range of 120 miles between charges — are less of a problem.
First-time car buyers also make up four-fifths of the Chinese market, and these buyers have not yet grown accustomed to the greater power and range of gasoline-powered cars.
But the electric car industry faces several obstacles here too. Most urban Chinese live in apartments, and cannot install recharging devices in driveways, so more public charging centers need to be set up.
Rechargeable lithium-ion batteries also have a poor reputation in China. Counterfeit lithium-ion batteries in cellphones occasionally explode, causing injuries. And Sony had to recall genuine lithium-ion batteries in laptops in 2006 and 2008 after some overheated and caught fire or exploded.
These safety problems have been associated with lithium-ion cobalt batteries, however, not the more chemically stable lithium-ion phosphate batteries now being adapted to automotive use.
The tougher challenge is that all lithium-ion batteries are expensive, whether made with cobalt or phosphate. That will be a hurdle for thrifty Chinese consumers, especially if gas prices stay relatively low compared to their highs last summer.
China is tackling the challenges with the same tools that helped it speed industrialization and put on the Olympics: immense amounts of energy, money and people.
BYD has 5,000 auto engineers and an equal number of battery engineers, most of them living at its headquarters in Shenzhen in a cluster of 15 yellow apartment buildings, each 18 stories high. Young engineers earn less than $600 a month, including benefits.
When Tianjin-Qingyuan puts its entirely battery-powered Saibao midsize sedan on sale this autumn, the body will come from a sedan that normally sells for $14,600 when equipped with a gasoline engine. But the engine and gas tank will be replaced with a $14,000 battery pack and electric motor, said Wu Zhixin, the company’s general manager.
That means the retail price will nearly double, to almost $30,000. Even if the government awards the maximum subsidy of $8,800 to buyers, that is a hefty premium.
Large-scale production could drive down the cost of the battery pack and electric motor by 30 or 40 percent, still leaving electric cars more expensive than gasoline-powered ones, Mr. Wu said.
But Mr. Wu has plenty of money to pursue improvements. He interrupted an interview at his company’s headquarters on Thursday to take a call on his cellphone, politely declined an offer from the caller, and hung up.
The general manager of a state-controlled bank had called to ask if he needed a loan, he explained.
Skip to next paragraph
Enlarge This Image
Doug Kanter for The New York Times
Chinese leaders have adopted a plan aimed at turning the country into one of the leading producers of hybrid and all-electric vehicles within three years.
The goal, which radiates from the very top of the Chinese government, suggests that Detroit’s Big Three, already struggling to stay alive, will face even stiffer foreign competition on the next field of automotive technology than they do today.
“China is well positioned to lead in this,” said David Tulauskas, director of China government policy at General Motors.
To some extent, China is making a virtue of a liability. It is behind the United States, Japan and other countries when it comes to making gas-powered vehicles, but by skipping the current technology, China hopes to get a jump on the next.
Japan is the market leader in hybrids today, which run on both electricity and gasoline, with cars like the Toyota Prius and Honda Insight. The United States has been a laggard in alternative vehicles. G.M.’s plug-in hybrid Chevrolet Volt is scheduled to go on sale next year, and will use rechargeable batteries imported from LG in South Korea.
China’s intention, in addition to creating a world-leading industry that will produce jobs and exports, is to reduce urban pollution and decrease its dependence on oil, which comes from the Mideast and travels over sea routes controlled by the United States Navy.
But electric vehicles may do little to clear the country’s smog-darkened sky or curb its rapidly rising emissions of global warming gases. China gets three-fourths of its electricity from coal, which produces more soot and more greenhouse gases than other fuels.
A report by McKinsey & Company last autumn estimated that replacing a gasoline-powered car with a similar-size electric car in China would reduce greenhouse emissions by only 19 percent. It would reduce urban pollution, however, by shifting the source of smog from car exhaust pipes to power plants, which are often located outside cities.
Beyond manufacturing, subsidies of up to $8,800 are being offered to taxi fleets and local government agencies in 13 Chinese cities for each hybrid or all-electric vehicle they purchase. The state electricity grid has been ordered to set up electric car charging stations in Beijing, Shanghai and Tianjin.
Government research subsidies for electric car designs are increasing rapidly. And an interagency panel is planning tax credits for consumers who buy alternative energy vehicles.
China wants to raise its annual production capacity to 500,000 hybrid or all-electric cars and buses by the end of 2011, from 2,100 last year, government officials and Chinese auto executives said. By comparison, CSM Worldwide, a consulting firm that does forecasts for automakers, predicts that Japan and South Korea together will be producing 1.1 million hybrid or all-electric light vehicles by then and North America will be making 267,000.
The United States Department of Energy has its own $25 billion program to develop electric-powered cars and improve battery technology, and will receive another $2 billion for battery development as part of the economic stimulus program enacted by Congress.
Premier Wen Jiabao highlighted the importance of electric cars two years ago with his unlikely choice to become minister of science and technology: Wan Gang, a Shanghai-born former Audi auto engineer in Germany who later became the chief scientist for the Chinese government’s research panel on electric vehicles.
Mr. Wan is the first minister in at least three decades who is not a member of the Communist Party.
And Premier Wen has his own connection to the electric car industry. He was born and grew up here in Tianjin, the longtime capital of China’s battery industry, 70 miles southeast of Beijing.
Tianjin has thrived in the six years since Mr. Wen became premier. It now has China’s first bullet train service (to Beijing), a new Airbus factory and an immaculate new airport. Tianjin has also received a surge of research subsidies for enterprises like the Tianjin-Qingyuan Electric Vehicle Company.
Electric cars have several practical advantages in China. Intercity driving is rare. Commutes are fairly short and frequently at low speeds because of traffic jams. So the limitations of all-electric cars — the latest models in China have a top speed of 60 miles an hour and a range of 120 miles between charges — are less of a problem.
First-time car buyers also make up four-fifths of the Chinese market, and these buyers have not yet grown accustomed to the greater power and range of gasoline-powered cars.
But the electric car industry faces several obstacles here too. Most urban Chinese live in apartments, and cannot install recharging devices in driveways, so more public charging centers need to be set up.
Rechargeable lithium-ion batteries also have a poor reputation in China. Counterfeit lithium-ion batteries in cellphones occasionally explode, causing injuries. And Sony had to recall genuine lithium-ion batteries in laptops in 2006 and 2008 after some overheated and caught fire or exploded.
These safety problems have been associated with lithium-ion cobalt batteries, however, not the more chemically stable lithium-ion phosphate batteries now being adapted to automotive use.
The tougher challenge is that all lithium-ion batteries are expensive, whether made with cobalt or phosphate. That will be a hurdle for thrifty Chinese consumers, especially if gas prices stay relatively low compared to their highs last summer.
China is tackling the challenges with the same tools that helped it speed industrialization and put on the Olympics: immense amounts of energy, money and people.
BYD has 5,000 auto engineers and an equal number of battery engineers, most of them living at its headquarters in Shenzhen in a cluster of 15 yellow apartment buildings, each 18 stories high. Young engineers earn less than $600 a month, including benefits.
When Tianjin-Qingyuan puts its entirely battery-powered Saibao midsize sedan on sale this autumn, the body will come from a sedan that normally sells for $14,600 when equipped with a gasoline engine. But the engine and gas tank will be replaced with a $14,000 battery pack and electric motor, said Wu Zhixin, the company’s general manager.
That means the retail price will nearly double, to almost $30,000. Even if the government awards the maximum subsidy of $8,800 to buyers, that is a hefty premium.
Large-scale production could drive down the cost of the battery pack and electric motor by 30 or 40 percent, still leaving electric cars more expensive than gasoline-powered ones, Mr. Wu said.
But Mr. Wu has plenty of money to pursue improvements. He interrupted an interview at his company’s headquarters on Thursday to take a call on his cellphone, politely declined an offer from the caller, and hung up.
The general manager of a state-controlled bank had called to ask if he needed a loan, he explained.
Tata Motors Full-Year Sales Fall 14% on Slowing India Demand S
April 1 (Bloomberg) -- Tata Motors Ltd., India’s biggest commercial vehicle maker, said sales fell 14 percent in the year ended March as slowing economic growth damped demand for trucks.
Tata Motors sold 498,581 vehicles in India and overseas last year, compared with 582,390 a year earlier, the company said in a statement today. March sales totaled 54,485 vehicles in India and overseas, it said without giving a comparative figure for the year earlier.
Slowing growth in Asia’s third-biggest economy has hurt demand for Tata Motors’ vehicles, prompting Standard & Poor’s and Moody’s Investors Service to lower the company’s credit rating. Tata Motors, after incurring its first loss in seven years in the October-December period, will take orders for the world’s cheapest car, Nano, this month, as it seeks to boost sales by attracting motorcycle buyers wanting to trade up to four wheels.
“Demand for commercial vehicles isn’t likely to improve at least till September-October,” said Amish Shah, a Mumbai-based analyst at Antique Stock Broking Ltd. “Unless the industrial production picks up, movement of goods will remain lower and freight operators will have excess capacity.” Shah has a “sell” rating on Tata Motors.
Local sales of vehicles in March were 52,686 vehicles, 13 percent less than a year ago, Tata Motors said.
Sales of Tata Motors’ trucks and buses in the local market fell 19 percent in March to 29,006. Indica hatchbacks and Safari utility vehicles’ sales fell 4 percent to 23,680.
“The financial stimulus announced by the government, particularly for commercial vehicles, has had a positive impact, the retail market would still take some time to reach the corresponding period levels of the last fiscal,” Tata said in a statement.
India forecast the economy expanded 7.1 percent in the year ended yesterday, after growing at 9 percent and 9.7 percent in the previous two years.
Tata Motors fell 0.2 percent to 180 rupees at close of trading in Mumbai today.
Tata Motors sold 498,581 vehicles in India and overseas last year, compared with 582,390 a year earlier, the company said in a statement today. March sales totaled 54,485 vehicles in India and overseas, it said without giving a comparative figure for the year earlier.
Slowing growth in Asia’s third-biggest economy has hurt demand for Tata Motors’ vehicles, prompting Standard & Poor’s and Moody’s Investors Service to lower the company’s credit rating. Tata Motors, after incurring its first loss in seven years in the October-December period, will take orders for the world’s cheapest car, Nano, this month, as it seeks to boost sales by attracting motorcycle buyers wanting to trade up to four wheels.
“Demand for commercial vehicles isn’t likely to improve at least till September-October,” said Amish Shah, a Mumbai-based analyst at Antique Stock Broking Ltd. “Unless the industrial production picks up, movement of goods will remain lower and freight operators will have excess capacity.” Shah has a “sell” rating on Tata Motors.
Local sales of vehicles in March were 52,686 vehicles, 13 percent less than a year ago, Tata Motors said.
Sales of Tata Motors’ trucks and buses in the local market fell 19 percent in March to 29,006. Indica hatchbacks and Safari utility vehicles’ sales fell 4 percent to 23,680.
“The financial stimulus announced by the government, particularly for commercial vehicles, has had a positive impact, the retail market would still take some time to reach the corresponding period levels of the last fiscal,” Tata said in a statement.
India forecast the economy expanded 7.1 percent in the year ended yesterday, after growing at 9 percent and 9.7 percent in the previous two years.
Tata Motors fell 0.2 percent to 180 rupees at close of trading in Mumbai today.
India’s Exports Decline the Most in at Least 13 Years (Update1)
April 1 (Bloomberg) -- India’s exports fell the most in at least 13 years in February as recessions in the U.S. and Europe damped demand for the nation’s products.
Merchandise shipments dropped 21.7 percent from a year earlier to $11.9 billion, the government said in New Delhi today. That was the biggest decline since 1995, according to Bloomberg data. Imports fell 23.3 percent to $16.8 billion, narrowing the trade deficit to $4.9 billion.
Policy makers in India have injected about $85 billion into the economy by cutting taxes and interest rates ahead of elections to be held in April and May. Prime Minister Manmohan Singh joins leaders of the Group of 20 nations in London tomorrow to hammer out a solution to the world economy’s worst crisis since the Great Depression.
“India essentially only started feeling the pinch of the global downturn in the December quarter and the worst is yet to come,” said Sherman Chan, an economist at Moody’s Economy.com in Sydney. The economy is likely to grow by 6.3 percent in the 12 months to March, less than the government’s estimate of 7.1 percent, she said.
Global trade will plunge 9 percent this year, the most since World War II, the World Trade Organization said last week. Declining exports will slow economic growth in Asia to the weakest since the 1998 financial crisis, the Asian Development Bank said yesterday, cutting its forecast for the second time in four months.
Global Recession
Asia is being hit hard by the global recession as the region is almost twice as reliant on exports as the rest of the world. Japan’s overseas sales plunged a record 49.4 percent in February from a year earlier and China’s shipments tumbled 25.7 percent in the same month.
India’s overseas sales in the 11 months to Feb. 28 rose 7.3 percent to $$156.6 billion, today’s report showed. Imports in the same period increased 19.1 percent to $271.7 billion.
“The global economic downturn adversely affected foreign clients’ confidence and as a result new work from abroad fell at a considerable pace,” Gaurav Kapur, an economist with ABN Amro Bank NV, said in a report today. Output at factories and utilities also contracted in March on weak external demand, according to ABN Amro.
Efforts to protect India from the impact of the global slump started in October when central bank Governor Duvvuri Subbarao cut the key interest rate for the first time since 2004. The Reserve Bank of India has lowered the repurchase rate five times to an all-time low of 5 percent.
Stimulus Packages
Prime Minister Singh for his part has announced three stimulus packages to spur slowing demand. Initiatives have included tax cuts on consumer products and services and higher spending on roads, ports and utilities.
Declining overseas orders and shrinking local demand caused growth to slow for the third straight quarter. The $1.2 trillion economy grew 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003, after 7.6 percent growth in the previous quarter and 7.9 percent in the three months before that.
Slowing external demand suggests India’s economic growth “will moderate more than we had earlier thought,” Governor Subbarao said last week.
Oil imports fell 47.5 percent to $4.04 billion in February, while non-oil imports fell 10.2 percent to $12.7 billion, the statement said.
The collapse of the nation’s exports led to India’s current-account deficit widening to a record in the three months to Dec. 31, the central said in a report yesterday. The shortfall in the broad measure of trade and investment flows swelled to $14.64 billion in the three months through December, from $12.82 billion the previous quarter.
Merchandise shipments dropped 21.7 percent from a year earlier to $11.9 billion, the government said in New Delhi today. That was the biggest decline since 1995, according to Bloomberg data. Imports fell 23.3 percent to $16.8 billion, narrowing the trade deficit to $4.9 billion.
Policy makers in India have injected about $85 billion into the economy by cutting taxes and interest rates ahead of elections to be held in April and May. Prime Minister Manmohan Singh joins leaders of the Group of 20 nations in London tomorrow to hammer out a solution to the world economy’s worst crisis since the Great Depression.
“India essentially only started feeling the pinch of the global downturn in the December quarter and the worst is yet to come,” said Sherman Chan, an economist at Moody’s Economy.com in Sydney. The economy is likely to grow by 6.3 percent in the 12 months to March, less than the government’s estimate of 7.1 percent, she said.
Global trade will plunge 9 percent this year, the most since World War II, the World Trade Organization said last week. Declining exports will slow economic growth in Asia to the weakest since the 1998 financial crisis, the Asian Development Bank said yesterday, cutting its forecast for the second time in four months.
Global Recession
Asia is being hit hard by the global recession as the region is almost twice as reliant on exports as the rest of the world. Japan’s overseas sales plunged a record 49.4 percent in February from a year earlier and China’s shipments tumbled 25.7 percent in the same month.
India’s overseas sales in the 11 months to Feb. 28 rose 7.3 percent to $$156.6 billion, today’s report showed. Imports in the same period increased 19.1 percent to $271.7 billion.
“The global economic downturn adversely affected foreign clients’ confidence and as a result new work from abroad fell at a considerable pace,” Gaurav Kapur, an economist with ABN Amro Bank NV, said in a report today. Output at factories and utilities also contracted in March on weak external demand, according to ABN Amro.
Efforts to protect India from the impact of the global slump started in October when central bank Governor Duvvuri Subbarao cut the key interest rate for the first time since 2004. The Reserve Bank of India has lowered the repurchase rate five times to an all-time low of 5 percent.
Stimulus Packages
Prime Minister Singh for his part has announced three stimulus packages to spur slowing demand. Initiatives have included tax cuts on consumer products and services and higher spending on roads, ports and utilities.
Declining overseas orders and shrinking local demand caused growth to slow for the third straight quarter. The $1.2 trillion economy grew 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003, after 7.6 percent growth in the previous quarter and 7.9 percent in the three months before that.
Slowing external demand suggests India’s economic growth “will moderate more than we had earlier thought,” Governor Subbarao said last week.
Oil imports fell 47.5 percent to $4.04 billion in February, while non-oil imports fell 10.2 percent to $12.7 billion, the statement said.
The collapse of the nation’s exports led to India’s current-account deficit widening to a record in the three months to Dec. 31, the central said in a report yesterday. The shortfall in the broad measure of trade and investment flows swelled to $14.64 billion in the three months through December, from $12.82 billion the previous quarter.
India’s economy ‘more durable’ than China
By James Lamont, Alec Russell and Amy Kazmin in New Delhi
Published: March 31 2009 17:26 | Last updated: March 31 2009 23:20
Manmohan Singh
Democracies have a far better chance of sustaining economic reform than one party states Manmohan Singh, India’s prime minister, has told the Financial Times in a rare top-level assertion of his country’s stance over neighbouring China.
EDITOR’S CHOICE
Analysis: Mission for a mandate - Mar-31
Transcript: FT interview with Manmohan Singh - Mar-31
Shifting ties keep Indian race open - Mar-18
Indian inflation nears zero - Mar-19
Special report: India and globalisation - Mar-31
The architect of India’s market liberalisations and a well-respected economist, Mr Singh has placed the long-term success of the world’s largest democracy over the potential fragility of the fastest growing large economy under Communist party rule.
“The Chinese have certain advantages: the fact that it’s a single party government,” Mr Singh said in an interview with the Financial Times before travelling to the G20 meeting in London on Thursday.
“But I do believe in the long run in the fact that India is a functioning democracy, committed to the rule of law. Our system is slow to move but I’m confident that once decisions are taken they are going to be far more durable.”
Mr Singh’s comments come as China is asserting its leadership among emerging markets of the global economic policy debate. His remarks come as a tacit reminder to China that it lacks one of the key credentials to contribute to the global policy debate – democracy.
His defence of India’s, often cumbersome, democracy is intended to address concerns of local businesspeople and foreign investors, who often weigh the ability to formulate and implement policy in the world’s two fastest growing large economies. Indian executives often speak in awe of China, struck by its fast improving infrastructure and what they see as forthright policy-making from the centre.
India, meanwhile, faces criticism for its overburdened infrastructure and squabbling politicians as it has strived tries to match the, now diminished, double-digit economic growth of its neighbour.
On the eve of hotly contested parliamentary elections, the 76-year old Mr Singh said India’s financial reforms, which transformed India’s economy when he was finance minister in 1991, had been carried forward by successive governments in New Delhi, regardless of their composition, and did not face the threat of major reversals in the future.
“We’ve seen since 1991 there have been four or five governments in our country and none have dared to reverse the path of reform that we started,” Mr Singh said. “Democracy has its problems. It’s slow moving. The decision making process is slow. But once decisions are taken they are far more durable.”
Mr Singh was critical of neighbouring Pakistan for its response to the devastating terror attacks on Mumbai, India’s financial centre, last year that left nearly 200 people dead. He said ”no effective action has been taken to control terror” and accused Islamabad of either being ”unable” or ”unwilling” to crack down on militant groups like the one blamed for the atrocity, Lashkar e Taiba.
As he prepared to travel to the G20, Mr Singh voiced support for a group of experts, possibly outside of the International Monetary Fund, to assess efforts made by major economies to revive their economies from the ravages of the global financial crisis.
To avoid worsening the damage to emerging markets, he said major economies had a responsibility to assist in the “clean up” of the banking system’s balance sheets and encourage the resumption of credit flows.
Mr Singh warned against financial protectionism, saying that the withdrawal of capital resources from developing countries by large banking institutions was “worrisome”.
“The phenomenon of industrialised countries pressurising their banks to give preference to lending at home does present a problem. It is a form of financial protectionism which should be avoided,” he said.
The Indian prime minister was cautious about a Chinese proposal that the world should switch in to establish a new reserve asset in place of the US dollar currency. He said it was too early to discuss this at the G20 and described it as a complicated issue that would be determined by the power balance among nations.
“The power to issue money is an indication of the power of a country and no-one gives up power voluntarily ... There are virtuous technical solutions but I don’t see these are the issues that can be resolved through technical analysis.”
In an effort to moderate expectations about what the G20 meeting would achieve, Mr Singh said many of the issues before world leaders concerned the redistribution of power among nations and could not be solved in a short period of time.
“If you are talking about global reform, it requires a lot more work,” he said.
Published: March 31 2009 17:26 | Last updated: March 31 2009 23:20
Manmohan Singh
Democracies have a far better chance of sustaining economic reform than one party states Manmohan Singh, India’s prime minister, has told the Financial Times in a rare top-level assertion of his country’s stance over neighbouring China.
EDITOR’S CHOICE
Analysis: Mission for a mandate - Mar-31
Transcript: FT interview with Manmohan Singh - Mar-31
Shifting ties keep Indian race open - Mar-18
Indian inflation nears zero - Mar-19
Special report: India and globalisation - Mar-31
The architect of India’s market liberalisations and a well-respected economist, Mr Singh has placed the long-term success of the world’s largest democracy over the potential fragility of the fastest growing large economy under Communist party rule.
“The Chinese have certain advantages: the fact that it’s a single party government,” Mr Singh said in an interview with the Financial Times before travelling to the G20 meeting in London on Thursday.
“But I do believe in the long run in the fact that India is a functioning democracy, committed to the rule of law. Our system is slow to move but I’m confident that once decisions are taken they are going to be far more durable.”
Mr Singh’s comments come as China is asserting its leadership among emerging markets of the global economic policy debate. His remarks come as a tacit reminder to China that it lacks one of the key credentials to contribute to the global policy debate – democracy.
His defence of India’s, often cumbersome, democracy is intended to address concerns of local businesspeople and foreign investors, who often weigh the ability to formulate and implement policy in the world’s two fastest growing large economies. Indian executives often speak in awe of China, struck by its fast improving infrastructure and what they see as forthright policy-making from the centre.
India, meanwhile, faces criticism for its overburdened infrastructure and squabbling politicians as it has strived tries to match the, now diminished, double-digit economic growth of its neighbour.
On the eve of hotly contested parliamentary elections, the 76-year old Mr Singh said India’s financial reforms, which transformed India’s economy when he was finance minister in 1991, had been carried forward by successive governments in New Delhi, regardless of their composition, and did not face the threat of major reversals in the future.
“We’ve seen since 1991 there have been four or five governments in our country and none have dared to reverse the path of reform that we started,” Mr Singh said. “Democracy has its problems. It’s slow moving. The decision making process is slow. But once decisions are taken they are far more durable.”
Mr Singh was critical of neighbouring Pakistan for its response to the devastating terror attacks on Mumbai, India’s financial centre, last year that left nearly 200 people dead. He said ”no effective action has been taken to control terror” and accused Islamabad of either being ”unable” or ”unwilling” to crack down on militant groups like the one blamed for the atrocity, Lashkar e Taiba.
As he prepared to travel to the G20, Mr Singh voiced support for a group of experts, possibly outside of the International Monetary Fund, to assess efforts made by major economies to revive their economies from the ravages of the global financial crisis.
To avoid worsening the damage to emerging markets, he said major economies had a responsibility to assist in the “clean up” of the banking system’s balance sheets and encourage the resumption of credit flows.
Mr Singh warned against financial protectionism, saying that the withdrawal of capital resources from developing countries by large banking institutions was “worrisome”.
“The phenomenon of industrialised countries pressurising their banks to give preference to lending at home does present a problem. It is a form of financial protectionism which should be avoided,” he said.
The Indian prime minister was cautious about a Chinese proposal that the world should switch in to establish a new reserve asset in place of the US dollar currency. He said it was too early to discuss this at the G20 and described it as a complicated issue that would be determined by the power balance among nations.
“The power to issue money is an indication of the power of a country and no-one gives up power voluntarily ... There are virtuous technical solutions but I don’t see these are the issues that can be resolved through technical analysis.”
In an effort to moderate expectations about what the G20 meeting would achieve, Mr Singh said many of the issues before world leaders concerned the redistribution of power among nations and could not be solved in a short period of time.
“If you are talking about global reform, it requires a lot more work,” he said.
Tuesday, March 31, 2009
ECB urged to act as eurozone inflation falls
By Ralph Atkins in Frankfurt, Bertrand Benoit in Berlin and Daniel Pimlott in London
Published: March 31 2009 11:31 | Last updated: April 1 2009 03:29
Eurozone inflation has fallen significantly closer to negative territory, strengthening the case for further European Central Bank action to boost the economy and head off risks of deflation.
The annual inflation rate in the zone fell more than expected to 0.6 per cent in March (from 1.2 per cent in February), Eurostat, the European Union’s statistical unit, reported on Tuesday.
EDITOR’S CHOICE
Deflation fears grow in Spain - Mar-30
Little scope for extra stimulus, says OECD - Apr-01
ECB explores expansion of its economic armoury - Mar-27
Wolfgang Münchau: A new plan needed as the cycle grows vicious - Mar-29
This was the lowest figure since comparable records began in the early 1990s, and pointed to substantial undershooting of the ECB’s target of an annual rate “below but close” to 2 per cent.
The Organisation for Economic Co-operation and Development warned the ECB that mounting “disinflationary pressures” in the next two years implied that the “remaining scope for cutting policy [interest] rates should be used quickly, and quantitative easing policies implemented”.
On current trends, eurozone inflation could turn negative by June, economists said. Oil prices probably accounted for much of the March fall, but weakness of the eurozone added to the downward pressure. Spain, Italy and Ireland were “seeing quite a significant deceleration in underlying inflationary pressures”, said Nick Matthews, European economist at Barclays Capital.
With the eurozone recession broadening, Germany reported a pick-up in the rate of increase in unemployment. The number of jobseekers rose by a seasonally adjusted 69,000 in March to 3.4m – the highest since January last year – pushing the jobless rate up to 8.1 per cent from 8 per cent in February.
Further rises are expected in the coming months as companies stop taking advantage of wage subsidies that have prevented mass layoffs.
The Paris-based OECD expects advanced economies to contract by 4.3 per cent in 2009, with little or no growth in 2010. While the downturn will leave no advanced economies unscathed, the OECD believes that it will be less severe in the US and UK, which are less dependent on trade, even though their banking systems have proved more fragile.
The US is expected to suffer a 4 per cent decline in gross domestic product this year, followed by no growth in 2010, but the eurozone is forecast to contract by 4.1 per cent this year and 0.3 per cent next. Within the eurozone, Germany is expected to see the worst recession, with a 5.3 per cent decline in GDP in 2009.
The ECB is expected to cut the main policy interest rate by a further half point to 1 per cent on Thursday. To fight recession it has focused on flooding the banking sector with unlimited, low-interest liquidity. But it is considering further steps, including buying private-sector debt.
Published: March 31 2009 11:31 | Last updated: April 1 2009 03:29
Eurozone inflation has fallen significantly closer to negative territory, strengthening the case for further European Central Bank action to boost the economy and head off risks of deflation.
The annual inflation rate in the zone fell more than expected to 0.6 per cent in March (from 1.2 per cent in February), Eurostat, the European Union’s statistical unit, reported on Tuesday.
EDITOR’S CHOICE
Deflation fears grow in Spain - Mar-30
Little scope for extra stimulus, says OECD - Apr-01
ECB explores expansion of its economic armoury - Mar-27
Wolfgang Münchau: A new plan needed as the cycle grows vicious - Mar-29
This was the lowest figure since comparable records began in the early 1990s, and pointed to substantial undershooting of the ECB’s target of an annual rate “below but close” to 2 per cent.
The Organisation for Economic Co-operation and Development warned the ECB that mounting “disinflationary pressures” in the next two years implied that the “remaining scope for cutting policy [interest] rates should be used quickly, and quantitative easing policies implemented”.
On current trends, eurozone inflation could turn negative by June, economists said. Oil prices probably accounted for much of the March fall, but weakness of the eurozone added to the downward pressure. Spain, Italy and Ireland were “seeing quite a significant deceleration in underlying inflationary pressures”, said Nick Matthews, European economist at Barclays Capital.
With the eurozone recession broadening, Germany reported a pick-up in the rate of increase in unemployment. The number of jobseekers rose by a seasonally adjusted 69,000 in March to 3.4m – the highest since January last year – pushing the jobless rate up to 8.1 per cent from 8 per cent in February.
Further rises are expected in the coming months as companies stop taking advantage of wage subsidies that have prevented mass layoffs.
The Paris-based OECD expects advanced economies to contract by 4.3 per cent in 2009, with little or no growth in 2010. While the downturn will leave no advanced economies unscathed, the OECD believes that it will be less severe in the US and UK, which are less dependent on trade, even though their banking systems have proved more fragile.
The US is expected to suffer a 4 per cent decline in gross domestic product this year, followed by no growth in 2010, but the eurozone is forecast to contract by 4.1 per cent this year and 0.3 per cent next. Within the eurozone, Germany is expected to see the worst recession, with a 5.3 per cent decline in GDP in 2009.
The ECB is expected to cut the main policy interest rate by a further half point to 1 per cent on Thursday. To fight recession it has focused on flooding the banking sector with unlimited, low-interest liquidity. But it is considering further steps, including buying private-sector debt.
Australia, N.Z. Dollars Fall on Retail Sales Drop, Bollard Call
April 1 (Bloomberg) -- The Australian and New Zealand dollars slid on concern weakening economic growth will lead the two nations’ central banks to lower interest rates, sapping the appeal of their assets.
The currencies weakened against the greenback and the yen as U.S. lawmakers said the Obama administration is prepared to let General Motors Corp. and Chrysler LLC go bankrupt. New Zealand’s dollar dropped as central bank Governor Alan Bollard expressed concern about gains in long-term interest rates. Australian retail sales fell by the most since 2000, spurring speculation the central bank may lower its benchmark April 7.
“The retail spending data shows consumers are extremely cautious and really leaves the door open for a rate cut from the Reserve Bank of Australia next week,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney. “Bollard’s comments triggered the sell-off in” New Zealand’s dollar which may fall toward 55 U.S. cents, while Australia’s dollar may decline to 68 U.S. cents, she said.
Australia’s dollar weakened 0.2 percent to 68.98 U.S. cents as of 1:28 p.m. in Sydney from 69.13 cents late in New York yesterday. It depreciated 0.3 percent to 68.17 yen.
New Zealand’s dollar fell to 55.79 U.S. cents from 57.08 U.S. cents before Bollard’s comment and 55.95 cents late in New York. It bought 55.16 yen from 55.37 yen yesterday.
Gradual Recovery
“We are projecting interest rates to remain at relatively low levels for an extended period,” Bollard said today. “The economic recovery is expected to be very gradual.”
Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.
“There has been a panic rise in interest rates which stemmed from the view that the RBNZ wasn’t going to cut rates to as low as previously thought and hold them as low as thought,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “This removes the uncertainty around the easing track.”
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.71 percent from 3.93 percent before the comments. It had climbed as high as 4.12 percent on March 30, after the bank cut its benchmark on March 12 by less than some economists forecast.
Interest Rates
Traders raised bets for a 25 basis point cut by the RBNZ when it meets next April 30 to 100 percent from 72 percent at the start of the week, according to a Credit Suisse index based on swaps trading. Economists expect a reduction to 2.5 percent according to the median forecast of 13 economists surveyed by Bloomberg News. The bank has lowered its benchmark 5.25 percentage points since July.
The Australian dollar weakened 30 percent since a 25-year high reached July 15 as the country’s central bank cut interest rates by four percentage points. Four economists forecast the RBA will leave rates unchanged when it meets April 7, two expect a 25 basis point reduction and 10 predict a 50 basis point cut, according to a separate Bloomberg survey.
A decline in New Zealand’s cash rate to 2.5 percent, “further below the 3.25 percent in Australia, would argue for the Australian dollar above NZ$1.25,” wrote John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., in a note to clients today. The so-called Aussie advanced as high as NZ$1.2388, the most since March 25.
Retail Sales, Manufacturing
Australian retail sales declined 2 percent in February, the Bureau of Statistics said in Sydney today. The median forecast of 18 economists surveyed by Bloomberg News was for a 0.5 percent drop. Manufacturing contracted for a 10th month in March as new orders fell, the Australian Industry Group and PricewaterhouseCoopers said in a report today.
Australia today sold A$600 million ($414 million) of bonds maturing February 2017 at a weighted average yield of 4.29 percent. The government received bids for 3.7 times the securities on offer.
Australian government bonds advanced for a third day. The yield on 10-year notes fell two basis points, or 0.02 percentage point, to 4.41 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.14, or A$1.40 per A$1,000 face amount, to 106.73.
The currencies weakened against the greenback and the yen as U.S. lawmakers said the Obama administration is prepared to let General Motors Corp. and Chrysler LLC go bankrupt. New Zealand’s dollar dropped as central bank Governor Alan Bollard expressed concern about gains in long-term interest rates. Australian retail sales fell by the most since 2000, spurring speculation the central bank may lower its benchmark April 7.
“The retail spending data shows consumers are extremely cautious and really leaves the door open for a rate cut from the Reserve Bank of Australia next week,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney. “Bollard’s comments triggered the sell-off in” New Zealand’s dollar which may fall toward 55 U.S. cents, while Australia’s dollar may decline to 68 U.S. cents, she said.
Australia’s dollar weakened 0.2 percent to 68.98 U.S. cents as of 1:28 p.m. in Sydney from 69.13 cents late in New York yesterday. It depreciated 0.3 percent to 68.17 yen.
New Zealand’s dollar fell to 55.79 U.S. cents from 57.08 U.S. cents before Bollard’s comment and 55.95 cents late in New York. It bought 55.16 yen from 55.37 yen yesterday.
Gradual Recovery
“We are projecting interest rates to remain at relatively low levels for an extended period,” Bollard said today. “The economic recovery is expected to be very gradual.”
Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.
“There has been a panic rise in interest rates which stemmed from the view that the RBNZ wasn’t going to cut rates to as low as previously thought and hold them as low as thought,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “This removes the uncertainty around the easing track.”
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.71 percent from 3.93 percent before the comments. It had climbed as high as 4.12 percent on March 30, after the bank cut its benchmark on March 12 by less than some economists forecast.
Interest Rates
Traders raised bets for a 25 basis point cut by the RBNZ when it meets next April 30 to 100 percent from 72 percent at the start of the week, according to a Credit Suisse index based on swaps trading. Economists expect a reduction to 2.5 percent according to the median forecast of 13 economists surveyed by Bloomberg News. The bank has lowered its benchmark 5.25 percentage points since July.
The Australian dollar weakened 30 percent since a 25-year high reached July 15 as the country’s central bank cut interest rates by four percentage points. Four economists forecast the RBA will leave rates unchanged when it meets April 7, two expect a 25 basis point reduction and 10 predict a 50 basis point cut, according to a separate Bloomberg survey.
A decline in New Zealand’s cash rate to 2.5 percent, “further below the 3.25 percent in Australia, would argue for the Australian dollar above NZ$1.25,” wrote John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., in a note to clients today. The so-called Aussie advanced as high as NZ$1.2388, the most since March 25.
Retail Sales, Manufacturing
Australian retail sales declined 2 percent in February, the Bureau of Statistics said in Sydney today. The median forecast of 18 economists surveyed by Bloomberg News was for a 0.5 percent drop. Manufacturing contracted for a 10th month in March as new orders fell, the Australian Industry Group and PricewaterhouseCoopers said in a report today.
Australia today sold A$600 million ($414 million) of bonds maturing February 2017 at a weighted average yield of 4.29 percent. The government received bids for 3.7 times the securities on offer.
Australian government bonds advanced for a third day. The yield on 10-year notes fell two basis points, or 0.02 percentage point, to 4.41 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.14, or A$1.40 per A$1,000 face amount, to 106.73.
Asian Stocks Climb as U.S. Automaker Speculation Boosts Honda
April 1 (Bloomberg) -- Asian stocks gained, led by automakers and commodity producers, on speculation the U.S. will let General Motors Corp. and Chrysler LLC fail, and after raw- material prices rose.
Honda Motor Co., which generates more than half its sales in North America, climbed 6.9 percent and South Korea’s Hyundai Motor Co. added 5.2 percent on optimism they will boost U.S. market share. The U.S. government is prepared to let Chrysler go bankrupt and be sold off piecemeal, while General Motors appears headed for a prepackaged bankruptcy, people familiar with the matter said. Santos Ltd., Australia’s No. 3 oil and gas producer, rose 2.8 percent after oil prices climbed.
The MSCI Asia Pacific Index gained 1.8 percent to 82.41 as of 10:52 a.m. in Tokyo, following a two-day, 5.3 percent slump. The gauge rose 7.6 percent last month, its first advance in 2009, as some investors bet governments worldwide will succeed in easing the financial crisis and reviving global growth.
“I would say we are cautiously optimistic about the outlook of the economy going forward,” said Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion. “Globally, the Japanese auto industry is the most competitive, and because of concern about the outlook and about the U.S., these companies are trading on very attractive valuations.”
Japan’s Nikkei 225 Stock Average rose 2.4 percent to 8,301.50. South Korea’s Kospi Index climbed 2.6 percent. Australia’s key index was little changed, with gains limited as the nation’s manufacturing slumped for a 10th consecutive month. OneSteel Ltd., Australia’s No. 2 steelmaker, slumped 7.1 percent after extending production cuts.
Automaker Bankruptcies
Futures on the Standard & Poor’s 500 Index slumped 1 percent, following the gauge’s 1.3 percent rally yesterday. Futures accelerated declines as news of the U.S. government’s plans for the automakers emerged.
U.S. President Barack Obama will let Chrysler go bankrupt and be sold off piecemeal if the third-largest U.S. automaker can’t form an alliance with Fiat SpA, said members of Congress who have been briefed on the subject and two other people familiar with the administration’s deliberations. A prepackaged bankruptcy for GM appears to be inevitable, the people said.
U.S. March auto sales data due later today are expected to come in at an annualized rate of 8.8 million vehicles, which would be the lowest since December 1981, according to economists in a Bloomberg News survey.
The MSCI Asia Pacific Index’s March rally pared its decline last quarter to 9.7 percent amid growing signs the global recession is hurting corporate earnings.
Tankan Survey
The Bank of Japan’s quarterly Tankan survey of sentiment among large manufacturers that was released today fell to minus 58, a record low and worse than economists had predicted.
Capital spending plans only dropped by half as much as economists had forecast and managers said they expect a rebound in profits starting in the second half of the financial year that begins today.
Japanese Prime Minister Taro Aso said yesterday his administration will compile a third stimulus package by mid- April to address the “economic crisis.”
Crude oil for May delivery rose 2.6 percent to $49.66 a barrel in New York yesterday, capping an 11 percent gain over three months. A measure of six primary metals traded in London advanced 2.1 percent.
Honda Motor Co., which generates more than half its sales in North America, climbed 6.9 percent and South Korea’s Hyundai Motor Co. added 5.2 percent on optimism they will boost U.S. market share. The U.S. government is prepared to let Chrysler go bankrupt and be sold off piecemeal, while General Motors appears headed for a prepackaged bankruptcy, people familiar with the matter said. Santos Ltd., Australia’s No. 3 oil and gas producer, rose 2.8 percent after oil prices climbed.
The MSCI Asia Pacific Index gained 1.8 percent to 82.41 as of 10:52 a.m. in Tokyo, following a two-day, 5.3 percent slump. The gauge rose 7.6 percent last month, its first advance in 2009, as some investors bet governments worldwide will succeed in easing the financial crisis and reviving global growth.
“I would say we are cautiously optimistic about the outlook of the economy going forward,” said Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion. “Globally, the Japanese auto industry is the most competitive, and because of concern about the outlook and about the U.S., these companies are trading on very attractive valuations.”
Japan’s Nikkei 225 Stock Average rose 2.4 percent to 8,301.50. South Korea’s Kospi Index climbed 2.6 percent. Australia’s key index was little changed, with gains limited as the nation’s manufacturing slumped for a 10th consecutive month. OneSteel Ltd., Australia’s No. 2 steelmaker, slumped 7.1 percent after extending production cuts.
Automaker Bankruptcies
Futures on the Standard & Poor’s 500 Index slumped 1 percent, following the gauge’s 1.3 percent rally yesterday. Futures accelerated declines as news of the U.S. government’s plans for the automakers emerged.
U.S. President Barack Obama will let Chrysler go bankrupt and be sold off piecemeal if the third-largest U.S. automaker can’t form an alliance with Fiat SpA, said members of Congress who have been briefed on the subject and two other people familiar with the administration’s deliberations. A prepackaged bankruptcy for GM appears to be inevitable, the people said.
U.S. March auto sales data due later today are expected to come in at an annualized rate of 8.8 million vehicles, which would be the lowest since December 1981, according to economists in a Bloomberg News survey.
The MSCI Asia Pacific Index’s March rally pared its decline last quarter to 9.7 percent amid growing signs the global recession is hurting corporate earnings.
Tankan Survey
The Bank of Japan’s quarterly Tankan survey of sentiment among large manufacturers that was released today fell to minus 58, a record low and worse than economists had predicted.
Capital spending plans only dropped by half as much as economists had forecast and managers said they expect a rebound in profits starting in the second half of the financial year that begins today.
Japanese Prime Minister Taro Aso said yesterday his administration will compile a third stimulus package by mid- April to address the “economic crisis.”
Crude oil for May delivery rose 2.6 percent to $49.66 a barrel in New York yesterday, capping an 11 percent gain over three months. A measure of six primary metals traded in London advanced 2.1 percent.
Monday, March 30, 2009
Deutsche Bank Risk Chief Banziger Says Crisis ‘Far From Over’
March 31 (Bloomberg) -- Deutsche Bank AG Chief Risk Officer Hugo Banziger said the credit crisis is “far from over” and global financial regulations must be overhauled to regain investor trust.
“We are in the middle of it,” Banziger, 53, said yesterday at the Frankfurt School of Finance and Management. The industry has “an opportunity” to build a stable financial system that seeks higher capital buffers, while encouraging investors to return money to the market and help stem the crisis, he said.
Deutsche Bank in February reported its first annual deficit in more than 50 years after the worst financial crisis since the Great Depression pummeled bond and stock trading. The crisis has caused $1.3 trillion in losses for financial companies worldwide, a total that may climb to more than $3 trillion, Banziger said yesterday, citing forecasts.
Deutsche Bank has gained 40 percent this month in Frankfurt trading, valuing the bank at 18 billion euros ($24 billion), and eclipsing the 5 percent advance in the Bloomberg Europe Banks and Financial Services Index of 65 companies. The bank fell 10 percent to 28.75 euros in trading yesterday.
The German bank skirted the worst of the U.S. subprime mortgage collapse by betting against the bonds that contributed to credit losses and writedowns at the world’s largest financial companies and forced government-led bailouts from Berlin to London to Washington.
The German bank has booked about 9.3 billion euros in writedowns since the start of the U.S. subprime mortgage crisis in 2007. UBS AG in Zurich has had $50.6 billion of costs and New York-based Citigroup $88.3 billion, according to data compiled by Bloomberg.
Credit Spreads
Banziger said credit spreads are higher than before Lehman Brothers Holdings Inc. collapsed last year, which he said signaled the crisis was far from ending.
The cost of protecting European corporate bonds from default rose, according to traders of swaps. Contracts on the Markit iTraxx Crossover Index of 45 companies with mostly high- risk, high-yield credit ratings rose 33 basis points yesterday to 943, according to JPMorgan Chase & Co. in London.
The index is a benchmark for the cost of protecting bonds against default, and an increase signals deterioration in the perception of credit quality.
Deutsche Bank is resisting pressure to take government aid or raise additional capital to protect existing shareholders that have seen the value of their stock decline, Banziger said.
“One of my top priorities is to make sure that those who lost money recover it,” Banziger said. Protecting shareholder value is “our deep philosophy” and Deutsche Bank’s management “will stand by this.”
Tier 1 Capital
Deutsche Bank has several times raised a goal for Tier 1 capital, a key measure of solvency, Banziger said. The bank’s Tier 1 ratio is 10 percent, which may be insufficient in the future and result in boosting the standard to 12 percent, he said.
Banziger said a so-called bad bank in Germany to buy toxic assets from financial companies “can work,” though it would require an accepted process to value the securities and sufficient specialists to oversee the entity.
Banziger praised the German government for intervening with Hypo Real Estate Holding AG, the bailed out commercial-property lender, saying the company can’t be allowed to “crash against the wall.” Germany’s bank rescue fund, Soffin, said during the weekend that it will buy an 8.7 percent stake in Hypo Real Estate and plans to gain “full control.” The move presages the first bank nationalization in Germany since the 1930s.
‘Systemically Important’
Banziger said an institution such as Deutsche Bank is “systemically important” and “if anything happens” to the bank, it would cause “serious problems” in the euro zone. Government and regulators would act if needed, he said.
Regulators need the power to withdraw licenses from banks that take on more risk than they can absorb, and “they should’ve done that with a couple of institutions earlier in the crisis,” Banziger said.
Banziger criticized a lack of supervision for off-balance- sheet investment vehicles and urged more regulation. “It’s like in road traffic: not all Porsche drivers can drive like they want to. A red light means everyone has to stop,” he said. Compensation should also be geared more toward long-term success, he said.
“We are in the middle of it,” Banziger, 53, said yesterday at the Frankfurt School of Finance and Management. The industry has “an opportunity” to build a stable financial system that seeks higher capital buffers, while encouraging investors to return money to the market and help stem the crisis, he said.
Deutsche Bank in February reported its first annual deficit in more than 50 years after the worst financial crisis since the Great Depression pummeled bond and stock trading. The crisis has caused $1.3 trillion in losses for financial companies worldwide, a total that may climb to more than $3 trillion, Banziger said yesterday, citing forecasts.
Deutsche Bank has gained 40 percent this month in Frankfurt trading, valuing the bank at 18 billion euros ($24 billion), and eclipsing the 5 percent advance in the Bloomberg Europe Banks and Financial Services Index of 65 companies. The bank fell 10 percent to 28.75 euros in trading yesterday.
The German bank skirted the worst of the U.S. subprime mortgage collapse by betting against the bonds that contributed to credit losses and writedowns at the world’s largest financial companies and forced government-led bailouts from Berlin to London to Washington.
The German bank has booked about 9.3 billion euros in writedowns since the start of the U.S. subprime mortgage crisis in 2007. UBS AG in Zurich has had $50.6 billion of costs and New York-based Citigroup $88.3 billion, according to data compiled by Bloomberg.
Credit Spreads
Banziger said credit spreads are higher than before Lehman Brothers Holdings Inc. collapsed last year, which he said signaled the crisis was far from ending.
The cost of protecting European corporate bonds from default rose, according to traders of swaps. Contracts on the Markit iTraxx Crossover Index of 45 companies with mostly high- risk, high-yield credit ratings rose 33 basis points yesterday to 943, according to JPMorgan Chase & Co. in London.
The index is a benchmark for the cost of protecting bonds against default, and an increase signals deterioration in the perception of credit quality.
Deutsche Bank is resisting pressure to take government aid or raise additional capital to protect existing shareholders that have seen the value of their stock decline, Banziger said.
“One of my top priorities is to make sure that those who lost money recover it,” Banziger said. Protecting shareholder value is “our deep philosophy” and Deutsche Bank’s management “will stand by this.”
Tier 1 Capital
Deutsche Bank has several times raised a goal for Tier 1 capital, a key measure of solvency, Banziger said. The bank’s Tier 1 ratio is 10 percent, which may be insufficient in the future and result in boosting the standard to 12 percent, he said.
Banziger said a so-called bad bank in Germany to buy toxic assets from financial companies “can work,” though it would require an accepted process to value the securities and sufficient specialists to oversee the entity.
Banziger praised the German government for intervening with Hypo Real Estate Holding AG, the bailed out commercial-property lender, saying the company can’t be allowed to “crash against the wall.” Germany’s bank rescue fund, Soffin, said during the weekend that it will buy an 8.7 percent stake in Hypo Real Estate and plans to gain “full control.” The move presages the first bank nationalization in Germany since the 1930s.
‘Systemically Important’
Banziger said an institution such as Deutsche Bank is “systemically important” and “if anything happens” to the bank, it would cause “serious problems” in the euro zone. Government and regulators would act if needed, he said.
Regulators need the power to withdraw licenses from banks that take on more risk than they can absorb, and “they should’ve done that with a couple of institutions earlier in the crisis,” Banziger said.
Banziger criticized a lack of supervision for off-balance- sheet investment vehicles and urged more regulation. “It’s like in road traffic: not all Porsche drivers can drive like they want to. A red light means everyone has to stop,” he said. Compensation should also be geared more toward long-term success, he said.
Australia Central Bank Says Economy to Shrink in 2009
March 31 (Bloomberg) -- Australia’s economy will probably contract this year for the first time in almost two decades amid slumping global demand for exports, central bank Deputy Governor Ric Battellino said.
“There are limits on how much we can insulate ourselves from what is happening abroad, and therefore there are probably still some difficult times ahead,” Battellino told a conference in Brisbane today. Gross domestic product is “likely to fall in 2009,” he said. In February, the bank tipped 0.5 percent growth.
To stoke an economy that contracted in the fourth quarter for the first time in eight years as exporters such as BHP Billiton Ltd. shipped less coal and iron ore, policy makers have slashed the benchmark interest rate by a record four percentage points since early September to a 45-year low of 3.25 percent. The cuts “have been effective and there remains scope to ease policy further if circumstances require,” Battellino said.
“If they are going to move, it is better they cut rates sooner rather than later,” said Su-Lin Ong, a senior economist at RBC Capital Markets in Sydney. “Australia is not immune to what happens overseas, but is still better placed than many nations.”
The Australian dollar traded at 68.27 U.S. cents at noon in Sydney from 68.11 cents before the speech. Government bonds extended gains after the comments. The yield on the two-year note fell 6 basis points, or 0.06 percentage point, to 2.84 percent from yesterday.
Rate Outlook
The benchmark S&P/ASX 200 stock index fell 0.3 percent to 3593, led by shares of banks, mining companies and makers of building materials.
Reserve Bank of Australia policy makers will cut the overnight cash rate target by at least a quarter-point to 3 percent on April 7, according to 12 of 16 economists surveyed by Bloomberg News late last week. Four tipped no change.
Increased spending by Australia’s federal and state governments, including Prime Minister Kevin Rudd’s A$42 billion ($28.6 billion) stimulus package announced in February, will “go a long way” to offset negative influences on the economy coming from abroad, Battellino told an Urban Development Institute of Australia conference.
“Australia will remain one of the better-performing economies in the developed world and be well placed to benefit from the renewed global expansion when it comes,” he said.
About-Face
Still, his forecast for a drop in GDP this year comes less than two months after the bank predicted the economy would expand 0.25 percent in the 12 months through June, 0.5 percent in calendar 2009 and 2.5 percent next year.
“No amount of good economic management can totally shield us from what is happening in the global economy,” Battellino said.
The economy hasn’t been in a recession since 1991, when it shrank 1.3 percent, according to Anthony Thompson at Westpac Banking Corp., one of 16 economists surveyed by Bloomberg News who predict the economy is either in, or headed, for a recession.
While Battellino said he doesn’t know whether the economy is already in a recession, defined as two quarters of negative GDP, “most households will feel this downturn is severe enough that they’ll see it as a recession.”
Companies including underwear maker Pacific Brands Ltd. and BHP Billiton, the world’s biggest miner, fired the largest number of full-time workers in almost two decades in February, driving the jobless rate to a four-year high of 5.2 percent.
China Outlook
It will “be a while” before it’s known whether an economic slump has bottomed in China, Australia’s biggest trading partner, Battellino said.
“My guess is that the Chinese authorities, like everybody else, were caught by surprise at the suddenness of the downturn,” he said.
Given China has since “reacted with great speed and vigor in implementing monetary and fiscal measures to stimulate their economy,” it is possible the past six months will turn out to have been the period of “maximum weakness.”
Also, the U.S., the “country at the heart of the global crisis, is making reasonable progress” in attempts to restore its banking system, Battellino said.
Australia’s economy has also been affected by a halving of commodity prices from “boom levels” during the middle of last year, Battellino said. “This has resulted in a large loss of real income to the economy.”
Economy Contracts
GDP unexpectedly shrank 0.5 percent in the fourth quarter from the previous three months, and exports fell 5 percent in January, reports showed this month. Farm shipments dropped 3 percent and coal slumped 19 percent, the government said March 5.
Battellino said Australia’s central bank has reacted with a “very substantial lowering of interest rates,” which unlike many other countries, has pushed borrowing costs for businesses and households to “historically low levels.”
Households with an average-sized mortgage of A$250,000 are paying A$7,000 a year less than they were six months ago, which is equal to 8 percent of average family incomes, according to the central bank.
“There are limits on how much we can insulate ourselves from what is happening abroad, and therefore there are probably still some difficult times ahead,” Battellino told a conference in Brisbane today. Gross domestic product is “likely to fall in 2009,” he said. In February, the bank tipped 0.5 percent growth.
To stoke an economy that contracted in the fourth quarter for the first time in eight years as exporters such as BHP Billiton Ltd. shipped less coal and iron ore, policy makers have slashed the benchmark interest rate by a record four percentage points since early September to a 45-year low of 3.25 percent. The cuts “have been effective and there remains scope to ease policy further if circumstances require,” Battellino said.
“If they are going to move, it is better they cut rates sooner rather than later,” said Su-Lin Ong, a senior economist at RBC Capital Markets in Sydney. “Australia is not immune to what happens overseas, but is still better placed than many nations.”
The Australian dollar traded at 68.27 U.S. cents at noon in Sydney from 68.11 cents before the speech. Government bonds extended gains after the comments. The yield on the two-year note fell 6 basis points, or 0.06 percentage point, to 2.84 percent from yesterday.
Rate Outlook
The benchmark S&P/ASX 200 stock index fell 0.3 percent to 3593, led by shares of banks, mining companies and makers of building materials.
Reserve Bank of Australia policy makers will cut the overnight cash rate target by at least a quarter-point to 3 percent on April 7, according to 12 of 16 economists surveyed by Bloomberg News late last week. Four tipped no change.
Increased spending by Australia’s federal and state governments, including Prime Minister Kevin Rudd’s A$42 billion ($28.6 billion) stimulus package announced in February, will “go a long way” to offset negative influences on the economy coming from abroad, Battellino told an Urban Development Institute of Australia conference.
“Australia will remain one of the better-performing economies in the developed world and be well placed to benefit from the renewed global expansion when it comes,” he said.
About-Face
Still, his forecast for a drop in GDP this year comes less than two months after the bank predicted the economy would expand 0.25 percent in the 12 months through June, 0.5 percent in calendar 2009 and 2.5 percent next year.
“No amount of good economic management can totally shield us from what is happening in the global economy,” Battellino said.
The economy hasn’t been in a recession since 1991, when it shrank 1.3 percent, according to Anthony Thompson at Westpac Banking Corp., one of 16 economists surveyed by Bloomberg News who predict the economy is either in, or headed, for a recession.
While Battellino said he doesn’t know whether the economy is already in a recession, defined as two quarters of negative GDP, “most households will feel this downturn is severe enough that they’ll see it as a recession.”
Companies including underwear maker Pacific Brands Ltd. and BHP Billiton, the world’s biggest miner, fired the largest number of full-time workers in almost two decades in February, driving the jobless rate to a four-year high of 5.2 percent.
China Outlook
It will “be a while” before it’s known whether an economic slump has bottomed in China, Australia’s biggest trading partner, Battellino said.
“My guess is that the Chinese authorities, like everybody else, were caught by surprise at the suddenness of the downturn,” he said.
Given China has since “reacted with great speed and vigor in implementing monetary and fiscal measures to stimulate their economy,” it is possible the past six months will turn out to have been the period of “maximum weakness.”
Also, the U.S., the “country at the heart of the global crisis, is making reasonable progress” in attempts to restore its banking system, Battellino said.
Australia’s economy has also been affected by a halving of commodity prices from “boom levels” during the middle of last year, Battellino said. “This has resulted in a large loss of real income to the economy.”
Economy Contracts
GDP unexpectedly shrank 0.5 percent in the fourth quarter from the previous three months, and exports fell 5 percent in January, reports showed this month. Farm shipments dropped 3 percent and coal slumped 19 percent, the government said March 5.
Battellino said Australia’s central bank has reacted with a “very substantial lowering of interest rates,” which unlike many other countries, has pushed borrowing costs for businesses and households to “historically low levels.”
Households with an average-sized mortgage of A$250,000 are paying A$7,000 a year less than they were six months ago, which is equal to 8 percent of average family incomes, according to the central bank.
Moscow fights job losses with $1bn aid plan
Published: March 31 2009 03:22 | Last updated: March 31 2009 03:22
Vladimir Putin announced more than $1bn in state support for Russia’s embattled car industry on Monday in an effort to stave off job losses and prevent social unrest.
Unemployment in Russia has shot up since the global financial crisis caught up with the country last August. On Monday, the World Bank forecast a jobless rate for the country in 2009 of 12 per cent – up from 8.5 per cent in February.
EDITOR’S CHOICE
In depth: Russia’s financial fallout - Nov-04
State aid urged for Russian banks - Mar-26
Russian reformer hails low commodity prices - Mar-24
Kremlin refuses to bail out Russian oligarchs - Mar-21
Editorial: Tests of maturity - Mar-16
Medvedev says crisis is a test - Mar-16
Faced with mounting discontent in industrial towns across Russia, the Kremlin has been doing its best to convince business leaders not to make people redundant while, at the same time, being selective about the industries it bails out.
Mr Putin made the announcement of state aid in the city of Togliatti, home to Avtovaz, Russia’s largest carmaker. The prime minister heaped praise on the company for its restraint in regard to laying off workers.
“Unlike some other companies, Avtovaz has not fired workers en masse and that is an expensive feat,” he said, adding an unfavourable comparison with General Motors, the US car group, which, he said, had laid off 34,000 people.
Mr Putin ordered disbursement of Rbs25bn ($737m) in state funds to Avtovaz and asked state banks to lend another Rbs8bn, Reuters reported. He announced Rbs13.6bn in state loan guarantees to other carmakers. Avtovaz is 25 per cent owned by France’s Renault. Avtovaz shares rose 28 per cent on news of the bail-out.
The state aid comes as the World Bank issued a dire forecast of the crisis in Russia, saying it would be far worse than official government predictions. The bank said Russia’s gross domestic product would contract by 4.5 per cent this year, compared with the official forecast of a 2.2 per cent fall.
The bank said the state would need to increase social spending to help vulnerable people. It urged the government to spend up to 1 per cent of GDP to save 4m people from poverty and stave off social unrest.
“The social situation has worsened so rapidly and so unexpectedly that it is important to shift the focus of the anti-crisis policy to the population,” said Zeljko Bogetic, the bank’s chief economist on Russia.
Vladimir Putin announced more than $1bn in state support for Russia’s embattled car industry on Monday in an effort to stave off job losses and prevent social unrest.
Unemployment in Russia has shot up since the global financial crisis caught up with the country last August. On Monday, the World Bank forecast a jobless rate for the country in 2009 of 12 per cent – up from 8.5 per cent in February.
EDITOR’S CHOICE
In depth: Russia’s financial fallout - Nov-04
State aid urged for Russian banks - Mar-26
Russian reformer hails low commodity prices - Mar-24
Kremlin refuses to bail out Russian oligarchs - Mar-21
Editorial: Tests of maturity - Mar-16
Medvedev says crisis is a test - Mar-16
Faced with mounting discontent in industrial towns across Russia, the Kremlin has been doing its best to convince business leaders not to make people redundant while, at the same time, being selective about the industries it bails out.
Mr Putin made the announcement of state aid in the city of Togliatti, home to Avtovaz, Russia’s largest carmaker. The prime minister heaped praise on the company for its restraint in regard to laying off workers.
“Unlike some other companies, Avtovaz has not fired workers en masse and that is an expensive feat,” he said, adding an unfavourable comparison with General Motors, the US car group, which, he said, had laid off 34,000 people.
Mr Putin ordered disbursement of Rbs25bn ($737m) in state funds to Avtovaz and asked state banks to lend another Rbs8bn, Reuters reported. He announced Rbs13.6bn in state loan guarantees to other carmakers. Avtovaz is 25 per cent owned by France’s Renault. Avtovaz shares rose 28 per cent on news of the bail-out.
The state aid comes as the World Bank issued a dire forecast of the crisis in Russia, saying it would be far worse than official government predictions. The bank said Russia’s gross domestic product would contract by 4.5 per cent this year, compared with the official forecast of a 2.2 per cent fall.
The bank said the state would need to increase social spending to help vulnerable people. It urged the government to spend up to 1 per cent of GDP to save 4m people from poverty and stave off social unrest.
“The social situation has worsened so rapidly and so unexpectedly that it is important to shift the focus of the anti-crisis policy to the population,” said Zeljko Bogetic, the bank’s chief economist on Russia.
Sunday, March 29, 2009
Australian, New Zealand Dollars Fall as Regional Stocks Slide
March 30 (Bloomberg) -- The Australian and New Zealand dollars slid for a second day as regional stocks and commodities tumbled on concerns about the depth of the global recession.
New Zealand’s currency pared its strongest month of gains since 1985 as factory output in Japan, the world’s second- largest economy, fell for a fifth month in February, its longest losing streak since 2001. The U.S. jobless rate climbed in March to the highest level since 1983 and manufacturing shrank, putting the recession on the brink of becoming the longest in seven decades, economists said before reports this week.
“The last two days of March are likely to be a bit of a whimper with the markets giving back some of this month’s gains,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. “The market is looking for signs of life in the economy.”
Australia’s currency fell 0.6 percent to 69.09 U.S. cents as of 12:29 p.m. in Sydney, paring its advance in March to 8 percent, its best monthly performance since 2007. The currency slipped 0.4 percent to 67.69 yen from 67.93 yen late in New York on March 27.
New Zealand’s dollar declined 0.5 percent to 56.69 U.S. cents from 57.06 cents in New York. It has strengthened 13 percent in March, the most since August 1985. It bought 55.60 yen, taking this month’s advance to 14 percent, also the most since 1985.
Australia’s dollar may fall toward 68.70 U.S. cents today while New Zealand’s may slide toward 56.02 cents, Sinton said.
Homes Sales, Futures Bets
New Zealand home-building approvals rose for the first time in three months in February. Approvals jumped 11.6 percent from January when they declined 13 percent to a record, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. Australian sales of newly built home gained 3.9 percent in February, the Housing Industry Association said in a report e-mailed to Bloomberg News today.
Futures traders reversed bets that the Australian dollar will decline against the greenback, holding the largest net long position since August, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 8,413 on March 24, compared with net shorts of 419 a week earlier.
Quarterly Declines
The Australian dollar is set to decline 1.5 percent in the three months to March 31, its third straight decline after dropping 11 percent and 17 percent in the September and December quarters, respectively. New Zealand’s currency will slide 2 percent, the smallest drop in four consecutive quarters of losses.
The currencies weakened after their central banks slashed interest rates amid falling prices for commodities and equities as the industrialized world enters a synchronized recession. Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S.
Australian private sector credit grew 0.5 percent in February while retail sales last month shrank for the first time in five months, according to economists polled by Bloomberg News. The data will be released March 31 and April 1, respectively.
Australian government bonds rose, ending the longest stretch of losses since February 2008. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 4.53 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 added 0.30, or A$3 per A$1,000 face amount, to 105.74.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.09 percent from 3.85 percent on March 27.
New Zealand’s currency pared its strongest month of gains since 1985 as factory output in Japan, the world’s second- largest economy, fell for a fifth month in February, its longest losing streak since 2001. The U.S. jobless rate climbed in March to the highest level since 1983 and manufacturing shrank, putting the recession on the brink of becoming the longest in seven decades, economists said before reports this week.
“The last two days of March are likely to be a bit of a whimper with the markets giving back some of this month’s gains,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. “The market is looking for signs of life in the economy.”
Australia’s currency fell 0.6 percent to 69.09 U.S. cents as of 12:29 p.m. in Sydney, paring its advance in March to 8 percent, its best monthly performance since 2007. The currency slipped 0.4 percent to 67.69 yen from 67.93 yen late in New York on March 27.
New Zealand’s dollar declined 0.5 percent to 56.69 U.S. cents from 57.06 cents in New York. It has strengthened 13 percent in March, the most since August 1985. It bought 55.60 yen, taking this month’s advance to 14 percent, also the most since 1985.
Australia’s dollar may fall toward 68.70 U.S. cents today while New Zealand’s may slide toward 56.02 cents, Sinton said.
Homes Sales, Futures Bets
New Zealand home-building approvals rose for the first time in three months in February. Approvals jumped 11.6 percent from January when they declined 13 percent to a record, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. Australian sales of newly built home gained 3.9 percent in February, the Housing Industry Association said in a report e-mailed to Bloomberg News today.
Futures traders reversed bets that the Australian dollar will decline against the greenback, holding the largest net long position since August, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 8,413 on March 24, compared with net shorts of 419 a week earlier.
Quarterly Declines
The Australian dollar is set to decline 1.5 percent in the three months to March 31, its third straight decline after dropping 11 percent and 17 percent in the September and December quarters, respectively. New Zealand’s currency will slide 2 percent, the smallest drop in four consecutive quarters of losses.
The currencies weakened after their central banks slashed interest rates amid falling prices for commodities and equities as the industrialized world enters a synchronized recession. Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S.
Australian private sector credit grew 0.5 percent in February while retail sales last month shrank for the first time in five months, according to economists polled by Bloomberg News. The data will be released March 31 and April 1, respectively.
Australian government bonds rose, ending the longest stretch of losses since February 2008. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 4.53 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 added 0.30, or A$3 per A$1,000 face amount, to 105.74.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.09 percent from 3.85 percent on March 27.
India Asks S&P to Clarify Rating Outlook Cut, Standard
March 30 (Bloomberg) -- India has asked for an explanation from Standard & Poor’s after the rating agency on Feb. 24 lowered the nation’s rating outlook to negative from stable, the Business Standard newspaper reported, without saying where it got the information.
A team from S&P will meet finance ministry officials for a discussion, the newspaper said. The government has also approached Fitch Ratings and Moody’s to explain its fiscal strategy and the nation’s economic situation, according to the report.
A team from S&P will meet finance ministry officials for a discussion, the newspaper said. The government has also approached Fitch Ratings and Moody’s to explain its fiscal strategy and the nation’s economic situation, according to the report.
Asian Stocks Drop, Ending 5-Day Advance, on Recession Concern
March 30 (Bloomberg) -- Asian stocks declined for the first time in six days, paring the regional benchmark index’s best month since 1999, after commodities prices fell and on speculation a recovery for banks will be delayed.
BHP Billiton Ltd., the world’s No. 1 mining company, dropped 3.1 percent in Sydney after oil and copper prices fell. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line, lost 7.1 percent after freight charges declined for a 13th consecutive day. Mizuho Financial Group Inc., Japan’s second- largest listed bank, lost 6 percent after Goldman Sachs Group Inc. told investors to sell the shares and JPMorgan Chase & Co. said March was “tougher” than the previous two months.
“We’re seeing the brakes being put on the rally,” said Naoteru Teraoka, who helps oversee $21 billion at Tokyo-based Chuo Mitsui Asset Management Co. “Everyone knows the economic fundamentals are horrid, so the challenge becomes predicting when we’ll see a recovery.”
The MSCI Asia Pacific Index lost 2 percent to 83.81 as of 11:39 a.m. in Tokyo, following a five-day, 7.5 percent jump that took valuations to the highest since December 2007. Japan’s Nikkei 225 Stock Average slipped 1.8 percent to 8,475.06. Benchmark indexes throughout the region dropped.
MSCI’s Asian benchmark gauge has climbed 11 percent in March, as governments from the U.S. to Japan widened measures to ease the global financial crisis and revive economic growth. The monthly gain was the most since October 1999.
Futures on the Standard & Poor’s 500 Index dropped 1.1 percent. The gauge slumped 2 percent on March 27. Investors should sell U.S. stocks because earnings are likely to keep weakening, according to a Morgan Stanley report. The Standard & Poor’s 500 Index rose 21 percent in the past 14 trading days, the most since 1938, according to data compiled by New York- based S&P analyst Howard Silverblatt.
Oil, Metals Fall
BHP tumbled 3.1 percent to A$32.96. Sims Metal Management Ltd., the world’s biggest recycler of scrap metal, lost 7.6 percent to A$17.51 after Goldman Sachs recommended investors sell the shares. Japanese trading house Sumitomo Corp. declined 3.5 percent to 887 yen.
Crude oil for May delivery slumped 3.6 percent to $52.38 a barrel in New York on March 27, and slid as much as 2.4 percent today. A measure of six metals traded on the London Metal Exchange, including copper and zinc, lost 1 percent.
Kawasaki Kisen plunged 7.1 percent to 315 yen. Mitsui O.S.K. Lines Ltd., Japan’s second-biggest bulk shipper, lost 6.5 percent to 500 yen. The Baltic Dry Index lost 2.1 percent on March 27, the 13th straight decline for the benchmark measure of shipping costs for commodities.
Bank Shares Decline
Mizuho retreated 6 percent to 203 yen after Goldman Sachs lowered the stock to “sell” from “neutral.” The bank is among the most expensive in Japan based on book value and its high level of stock investments make it especially risky, analyst Toyoki Sameshima wrote in a report.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by value, lost 4.9 percent to 501 yen. National Australia Bank Ltd., Australia’s largest by assets, declined 1.4 percent to A$20.79.
JPMorgan’s Chief Executive Officer Jamie Dimon said in an interview with CNBC that March was a “little tougher” than January and February for the bank. Kenneth Lewis, Bank of America’s CEO, said the lender’s trading book wasn’t as good as in the first two months. The two said earlier this month that their banks were profitable through February, excluding taxes and provisions, contributing to advances in financial shares.
“Doubt has arisen among investors whether U.S. banks can really turn around,” Tomochika Kitaoka, a strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.
BHP Billiton Ltd., the world’s No. 1 mining company, dropped 3.1 percent in Sydney after oil and copper prices fell. Kawasaki Kisen Kaisha Ltd., Japan’s third-biggest shipping line, lost 7.1 percent after freight charges declined for a 13th consecutive day. Mizuho Financial Group Inc., Japan’s second- largest listed bank, lost 6 percent after Goldman Sachs Group Inc. told investors to sell the shares and JPMorgan Chase & Co. said March was “tougher” than the previous two months.
“We’re seeing the brakes being put on the rally,” said Naoteru Teraoka, who helps oversee $21 billion at Tokyo-based Chuo Mitsui Asset Management Co. “Everyone knows the economic fundamentals are horrid, so the challenge becomes predicting when we’ll see a recovery.”
The MSCI Asia Pacific Index lost 2 percent to 83.81 as of 11:39 a.m. in Tokyo, following a five-day, 7.5 percent jump that took valuations to the highest since December 2007. Japan’s Nikkei 225 Stock Average slipped 1.8 percent to 8,475.06. Benchmark indexes throughout the region dropped.
MSCI’s Asian benchmark gauge has climbed 11 percent in March, as governments from the U.S. to Japan widened measures to ease the global financial crisis and revive economic growth. The monthly gain was the most since October 1999.
Futures on the Standard & Poor’s 500 Index dropped 1.1 percent. The gauge slumped 2 percent on March 27. Investors should sell U.S. stocks because earnings are likely to keep weakening, according to a Morgan Stanley report. The Standard & Poor’s 500 Index rose 21 percent in the past 14 trading days, the most since 1938, according to data compiled by New York- based S&P analyst Howard Silverblatt.
Oil, Metals Fall
BHP tumbled 3.1 percent to A$32.96. Sims Metal Management Ltd., the world’s biggest recycler of scrap metal, lost 7.6 percent to A$17.51 after Goldman Sachs recommended investors sell the shares. Japanese trading house Sumitomo Corp. declined 3.5 percent to 887 yen.
Crude oil for May delivery slumped 3.6 percent to $52.38 a barrel in New York on March 27, and slid as much as 2.4 percent today. A measure of six metals traded on the London Metal Exchange, including copper and zinc, lost 1 percent.
Kawasaki Kisen plunged 7.1 percent to 315 yen. Mitsui O.S.K. Lines Ltd., Japan’s second-biggest bulk shipper, lost 6.5 percent to 500 yen. The Baltic Dry Index lost 2.1 percent on March 27, the 13th straight decline for the benchmark measure of shipping costs for commodities.
Bank Shares Decline
Mizuho retreated 6 percent to 203 yen after Goldman Sachs lowered the stock to “sell” from “neutral.” The bank is among the most expensive in Japan based on book value and its high level of stock investments make it especially risky, analyst Toyoki Sameshima wrote in a report.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by value, lost 4.9 percent to 501 yen. National Australia Bank Ltd., Australia’s largest by assets, declined 1.4 percent to A$20.79.
JPMorgan’s Chief Executive Officer Jamie Dimon said in an interview with CNBC that March was a “little tougher” than January and February for the bank. Kenneth Lewis, Bank of America’s CEO, said the lender’s trading book wasn’t as good as in the first two months. The two said earlier this month that their banks were profitable through February, excluding taxes and provisions, contributing to advances in financial shares.
“Doubt has arisen among investors whether U.S. banks can really turn around,” Tomochika Kitaoka, a strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.
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