Ayear ago when Rahul Gandhi embarked on his mission to democratize the Youth Congress and NSUI, with the idea of attracting youth to politics, hardly anyone could have said for sure that he would be successful. And yet, youth is the flavour of the season today. In the wake of the Congress Party’s spectacular performance in the 15th Lok Sabha elections, youth is at the core of our national discourse.
The world missed the significance of our baby steps in democratizing the Congress’s youth organizations. Everyone wrongly assumed young Indians were allergic to politics and change. But they are eager to be active agents of change.
The election results are scant evidence of the chord Rahul has struck with youth with his attempts to throw open political parties to the next generation. In the last few months, we held elections for our youth organizations in Gujarat, Uttarakhand and Punjab. The result was the new vigour seen in GenNext during the Lok Sabha elections — they took up campaigning in big numbers and turned out in hordes to vote. They seem to have backed Congress with great enthusiasm.
It is the young who can — and will — change the country and the way it is run. The basic problem arises from the simplistic assumption that the young are averse to “dirty politics”. The urban middle class may be cynical about politics but in the rural heartland there are 5.5 lakh panchayats and several lakh young men and women serving as panchs, sarpanchs and as members of zilla parishads. According to a rough estimate, 70% of these elected representatives are no older than 35.
Surely that is evidence enough to show that the young are interested in entering the system to change their village communities? If the urban young are apathetic about politics it is largely because of the system’s penchant for political institutions, the closed-door functioning of political outfits and the special status given to politicians. These are all negatives factors and breed revulsion among ordinary people.
The philosophy and purpose of Rahul Gandhi’s internal democratization of the NSUI and Youth Congress was opening them up to the common people. This has created a feeling within the new generation that there is a clean way of getting into politics and moving into leadership positions. At the moment, many young politicians belong to political families and the positions they get are passed down as legacies. There’s nothing wrong with that but there should be equal opportunity for others too if they want it.
It is not a small change. It would open up politics to all, making it possible for ordinary people to compete with the privileged few. Some may
try to discourage the change, but
it will happen. Ours is a longterm vision but the results of
this election are encouraging,
particularly because we saw
huge youth participation in
our campaign and the voting
process.
I went to Mandsaur in Madhya Pradesh to contest the election. I was a first-timer in the big, challenging world of electoral politics. But the experience was phenomenal. Throughout the campaign, I would get scraps on my Orkut profile and phone calls from boys and girls who would introduce themselves as first-time voters who had cast their ballot in my favour. It was a very satisfying experience — the flight of hope among those who possibly would not have taken to it with such gusto had they not seen change coming into the closed, 60-year-old world of politics.
Through Congress’s philosophy of equality, India’s young will change the way politics is perceived in this country. Politics and elections are seen as an ideological challenge, but young people see it as a management challenge. As the young enter politics, real issues will come to centrestage and the possibility of their own being able to participate in the process would cement their faith in the philosophy of equality, opportunity and change.
It will be a boon for society as it will undercut the school of political thought that promotes divisiveness. As we gain acceptability, there will be copycats. That would be good because they will be following our path.
But this may be hard for those whose politics is based on parochialism. Divisive politics marginalizes the youth it seeks to exclude. Youth participation in such parties will decline. Simply put, divisive ideology is antithetical to greater youth participation.
LONG-TERM VISION: (from left to right) Vijay Inder Singla, Sandeep Dikshit, Jitin Prasada, Sachin Pilot and Jyotiraditya Scindia
Saturday, May 23, 2009
NEIGHBOURHOOD WATCH Has Af-Pak strategy led to civil war in Pakistan?
It is a measure of the intensity of US pressure that the Pakistan army appears finally to have begun serious counter-insurgency operations in the tribal areas of Pakistan. This is part of the overall US Af-Pak strategy of containing the Taliban and related militancy to the Pashtun areas, which straddle the Afghan-Pakistan border. The US intent is to weaken the Taliban and allied militants to the point they can be contained, at least temporarily, by the Afghan and Pakistan militaries respectively, allowing the US to scale down its regional presence to one of minimal support for counter-insurgency and the conduct of the ongoing battle against al-Qaida. If this can ever be achieved, it will be called victory.
On the Afghan side, strategy-implementation is led by the US forces and nuanced by the linkages between the US, NATO and the estimated 500,000 foreign nationals working in civilian nation-building roles. On the Pakistan side the US is at one remove, seeking to implement strategy through the brute tool of the Pakistan army.
In the Rah-e-Haq 4 operations that are unfolding in the districts of Buner, Dir and Swat, and in similar operations that occurred earlier in Bajaur, it is possible to see the way in which the Pakistan army is seeking to subvert American intentions in the continued pursuit of its own interests. A useful point of departure to understand this is the Pakistan army’s operations in Bajaur, which began in September 2008 in the wake of the Islamabad Marriott bombing. Fearful of significant combat losses, and worried about the loyalty of its soldiers, the army used air strikes, helicopter gunships and artillery to pound militant positions and flatten towns and villages. When this phase of the conflict was over in late February 2009, the regional commander, Major General Tariq Khan, flew journalists to observe the piles of rubble that had once been the homes of the people of Bajaur. Khan claimed that the Taliban were defeated in Bajaur and that the whole of the FATA would be back in the hands of the Pakistan state by the end of 2009. Three months later, these claims are exposed as hubris. The Taliban are back in de facto control of most of what remains of Bajaur. To assert state control over the whole of the FATA in the next seven months now seems unlikely.
The unfolding operations bear hallmarks of the Bajaur operation. The use of air strikes, helicopter gunships and artillery again form the centrepiece and the price is being paid by the peoples of these districts. Most estimates suggest that more than two million people may be internally displaced from Pakistan’s tribal areas.
One element of the strategy, however, appears different. The Pakistan army has reportedly airlifted troops into the Peochar valley in order to surround the Pakistan Taliban Tehreek-e-Nafaz-e-Shariat-e-Mohammedi (TNSM) leadership of Maulvi Fazlullah. If confirmed, and if Fazlullah and his commanders are not spirited away, this will mark a stepchange in Pakistan army operations. It will also expose the myth of the army’s inability to move against militants. In theory, no force on earth could have better counterinsurgency credentials than the Pakistan army, which for decades has trained, supported and sometimes fought alongside militants. Nor can the Pakistan army’s claim to be under-resourced be seen as anything other than an appeal to Washington for more funding.
So, making sense of what is taking place in Pakistan’s tribal areas requires revisiting the fundamentals. There is, as yet, no move against the Afghan Taliban on the Pakistan side of the border, no increase in useable intelligence about the Afghan Taliban being provided to the US or NATO, and no reduction of pressure on NATO supply lines through Pakistan. There is also no move against the Haqqani or Hekmatyar networks, nor against the core of militants and terrorists in the FATA, particularly in North and South Waziristan. Bajaur was flattened and much of its population driven out, but Bajaur has not been held or brought under the writ of the Pakistan state.
Moreover, following Bajaur and earlier operations in the FATA, the army cannot have been unaware of the humanitarian refugee catastrophe, which would result from the failure to properly prepare for the deluge. Is it too cynical to suggest that the army has forced the refugee crisis knowing (as in Sri Lanka) that there will be an international clamour to end the fighting?
The huge unknown, hanging over all these events, is the likely scale and nature of the backlash against the Pakistani state. If, as some believe, a powerful ‘Deobandi complex’ is now taking shape in Pakistan involving militants, religious movements, religious and conservative political parties, Islamist sympathizers, and perhaps some within the army and ISI, then the ‘Af-Pak’ strategy may be seen to have precipitated the first phase of a civil war in Pakistan.
The writer is a professor at the
Pakistan Security Research Unit,
University of Bradford
On the Afghan side, strategy-implementation is led by the US forces and nuanced by the linkages between the US, NATO and the estimated 500,000 foreign nationals working in civilian nation-building roles. On the Pakistan side the US is at one remove, seeking to implement strategy through the brute tool of the Pakistan army.
In the Rah-e-Haq 4 operations that are unfolding in the districts of Buner, Dir and Swat, and in similar operations that occurred earlier in Bajaur, it is possible to see the way in which the Pakistan army is seeking to subvert American intentions in the continued pursuit of its own interests. A useful point of departure to understand this is the Pakistan army’s operations in Bajaur, which began in September 2008 in the wake of the Islamabad Marriott bombing. Fearful of significant combat losses, and worried about the loyalty of its soldiers, the army used air strikes, helicopter gunships and artillery to pound militant positions and flatten towns and villages. When this phase of the conflict was over in late February 2009, the regional commander, Major General Tariq Khan, flew journalists to observe the piles of rubble that had once been the homes of the people of Bajaur. Khan claimed that the Taliban were defeated in Bajaur and that the whole of the FATA would be back in the hands of the Pakistan state by the end of 2009. Three months later, these claims are exposed as hubris. The Taliban are back in de facto control of most of what remains of Bajaur. To assert state control over the whole of the FATA in the next seven months now seems unlikely.
The unfolding operations bear hallmarks of the Bajaur operation. The use of air strikes, helicopter gunships and artillery again form the centrepiece and the price is being paid by the peoples of these districts. Most estimates suggest that more than two million people may be internally displaced from Pakistan’s tribal areas.
One element of the strategy, however, appears different. The Pakistan army has reportedly airlifted troops into the Peochar valley in order to surround the Pakistan Taliban Tehreek-e-Nafaz-e-Shariat-e-Mohammedi (TNSM) leadership of Maulvi Fazlullah. If confirmed, and if Fazlullah and his commanders are not spirited away, this will mark a stepchange in Pakistan army operations. It will also expose the myth of the army’s inability to move against militants. In theory, no force on earth could have better counterinsurgency credentials than the Pakistan army, which for decades has trained, supported and sometimes fought alongside militants. Nor can the Pakistan army’s claim to be under-resourced be seen as anything other than an appeal to Washington for more funding.
So, making sense of what is taking place in Pakistan’s tribal areas requires revisiting the fundamentals. There is, as yet, no move against the Afghan Taliban on the Pakistan side of the border, no increase in useable intelligence about the Afghan Taliban being provided to the US or NATO, and no reduction of pressure on NATO supply lines through Pakistan. There is also no move against the Haqqani or Hekmatyar networks, nor against the core of militants and terrorists in the FATA, particularly in North and South Waziristan. Bajaur was flattened and much of its population driven out, but Bajaur has not been held or brought under the writ of the Pakistan state.
Moreover, following Bajaur and earlier operations in the FATA, the army cannot have been unaware of the humanitarian refugee catastrophe, which would result from the failure to properly prepare for the deluge. Is it too cynical to suggest that the army has forced the refugee crisis knowing (as in Sri Lanka) that there will be an international clamour to end the fighting?
The huge unknown, hanging over all these events, is the likely scale and nature of the backlash against the Pakistani state. If, as some believe, a powerful ‘Deobandi complex’ is now taking shape in Pakistan involving militants, religious movements, religious and conservative political parties, Islamist sympathizers, and perhaps some within the army and ISI, then the ‘Af-Pak’ strategy may be seen to have precipitated the first phase of a civil war in Pakistan.
The writer is a professor at the
Pakistan Security Research Unit,
University of Bradford
Mukherjee the ‘Deliverer’ Takes Over as Indian Finance Minister
May 24 (Bloomberg) -- Pranab Mukherjee earned a reputation as a trouble shooter in Prime Minister Manmohan Singh’s cabinet since 2004 by resolving spats among ministries and coalition partners. Now he’s got the job of reviving the economy.
The 73-year-old Congress party veteran was appointed finance minister yesterday, a position he has been acting in since January as Singh, 76, recovered from surgery. He held the defense and then the foreign portfolio for the bulk of Singh’s first term.
Mukherjee, who ran a closed economy as the finance minister in Indira Gandhi’s cabinet from 1982 to 1984, inherits one that is now open and exposed to the global recession. He has called for “accelerating” reforms in banking and insurance to make the economy more competitive and accelerate growth.
“He is a deliverer,” said Alastair Newton, a political analyst at Nomura International Plc in London. “He will have challenges in the economic portfolio given the political realities -- market expectations are high.”
The Bombay Stock Exchange’s benchmark stock index surged by a record 17 percent on May 18, the first day after Singh’s re- election, as investors bet the resounding victory will enable the new finance minister to ease foreign investment rules and sell state assets -- policies that were stalled by Singh’s communist partners in his previous term.
Congress has the support of 322 lawmakers in the lower house of parliament, with the party getting 206 lawmakers of its own. That’s the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that have helped India’s economy quadruple in size.
‘Strong Endorsement’
The victory was as much Mukherjee’s as Singh’s. As the No. 2 in the cabinet, he backed the prime minister’s policies ranging from creating jobs in rural areas and writing off farmers’ loans to closer ties with the U.S., renewing a relationship that began in the early 1980s when he appointed Singh as the central bank governor.
“Despite the strong endorsement from voters, the finance minister may have a tough job pushing through some much-needed reforms,” said Nikhilesh Bhattacharyya, an economist at Moody’s Economy.com in Sydney. “It’s very hard for politicians, for example, to do away with subsidies, which may result in a backlash. Expectations should be tempered.”
India spends one trillion rupees ($21 billion), or a tenth of its budget, on food, fuel and other subsidies each year in a country where the World Bank estimates three-quarters of the people live on less than $2 a day. About 13 percent of spending goes to defense and 20 percent to pay interest on national debt. That leaves little for other needs, such as health, education and power plants, boosting borrowings.
Ballooning Deficit
The federal government budget deficit was at 6 percent of gross domestic product for the year ended March 31, more than double the target of 2.5 percent of GDP.
Moody’s Investors Service places India’s long-term local currency rating at Ba2, two levels below investment grade, and lower than the ratings assigned to Colombia, Romania and Kazakhstan. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.
Investors will be looking at how much fiscal stimulus Mukherjee, who was on the boards of the International Monetary Fund and the World Bank in the 1980s, can provide in his first policy statement -- the budget for this year -- expected in early July.
Singh’s government said before the elections that stimulus of at least another 1 percent of GDP is needed to prop up an economy that’s growing at its slowest pace since 2003.
Policy Conflicts
Mukherjee, who first became a minister in 1973, estimated in February that India may need to raise a record 3.62 trillion rupees from bond sales in the fiscal year that started April 1. The central bank governor Duvvuri Subbarao said May 22 that borrowings have “already expanded rapidly” and that it goes against his efforts to keep borrowing costs low.
“The government faces a challenge to balance two conflicting issues -- to stimulate the economy while preventing fiscal position from further erosion,” said Takahira Ogawa, S&P’s director of sovereign ratings. “There is a possibility for the government to implement various measures to further expand the economy and consolidate the fiscal situation.”
Singh’s administration, which doesn’t need communists’ support for a majority in parliament, could raise as much as $20 billion from sale of state-run companies, according to Rashesh Shah, chief executive officer of Edelweiss Capital Ltd.
Asset Sales
Among the companies that could be placed on the block are NHPC Ltd., India’s largest producer of electricity from water, explorer Oil India Ltd. and fuel retailer Hindustan Petroleum Corp., according to Mumbai-based brokerage Religare Capital Markets Ltd.
Still, analysts such as Seema Desai at Eurasia Group, a London-based political-risk advisory firm, expect economic changes will be “selective and gradual.”
“There is a significant segment within the party that is suspicious of sweeping pro-market reforms,” Desai said.
Mukherjee, who last year successfully rallied China, Japan, Russia and 42 other nations to end India’s nuclear isolation and resume supplies without signing the Nuclear Non-Proliferation Treaty, needs to bring the same acumen to gain support of his party colleagues, many of whom are still tied to the original socialist principles of the Congress party.
At stake is a bill to raise the foreign investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and other proposed legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non- state banks. The government also wants to allow global retailers such as Wal-Mart Stores Inc. into India.
The 73-year-old Congress party veteran was appointed finance minister yesterday, a position he has been acting in since January as Singh, 76, recovered from surgery. He held the defense and then the foreign portfolio for the bulk of Singh’s first term.
Mukherjee, who ran a closed economy as the finance minister in Indira Gandhi’s cabinet from 1982 to 1984, inherits one that is now open and exposed to the global recession. He has called for “accelerating” reforms in banking and insurance to make the economy more competitive and accelerate growth.
“He is a deliverer,” said Alastair Newton, a political analyst at Nomura International Plc in London. “He will have challenges in the economic portfolio given the political realities -- market expectations are high.”
The Bombay Stock Exchange’s benchmark stock index surged by a record 17 percent on May 18, the first day after Singh’s re- election, as investors bet the resounding victory will enable the new finance minister to ease foreign investment rules and sell state assets -- policies that were stalled by Singh’s communist partners in his previous term.
Congress has the support of 322 lawmakers in the lower house of parliament, with the party getting 206 lawmakers of its own. That’s the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that have helped India’s economy quadruple in size.
‘Strong Endorsement’
The victory was as much Mukherjee’s as Singh’s. As the No. 2 in the cabinet, he backed the prime minister’s policies ranging from creating jobs in rural areas and writing off farmers’ loans to closer ties with the U.S., renewing a relationship that began in the early 1980s when he appointed Singh as the central bank governor.
“Despite the strong endorsement from voters, the finance minister may have a tough job pushing through some much-needed reforms,” said Nikhilesh Bhattacharyya, an economist at Moody’s Economy.com in Sydney. “It’s very hard for politicians, for example, to do away with subsidies, which may result in a backlash. Expectations should be tempered.”
India spends one trillion rupees ($21 billion), or a tenth of its budget, on food, fuel and other subsidies each year in a country where the World Bank estimates three-quarters of the people live on less than $2 a day. About 13 percent of spending goes to defense and 20 percent to pay interest on national debt. That leaves little for other needs, such as health, education and power plants, boosting borrowings.
Ballooning Deficit
The federal government budget deficit was at 6 percent of gross domestic product for the year ended March 31, more than double the target of 2.5 percent of GDP.
Moody’s Investors Service places India’s long-term local currency rating at Ba2, two levels below investment grade, and lower than the ratings assigned to Colombia, Romania and Kazakhstan. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.
Investors will be looking at how much fiscal stimulus Mukherjee, who was on the boards of the International Monetary Fund and the World Bank in the 1980s, can provide in his first policy statement -- the budget for this year -- expected in early July.
Singh’s government said before the elections that stimulus of at least another 1 percent of GDP is needed to prop up an economy that’s growing at its slowest pace since 2003.
Policy Conflicts
Mukherjee, who first became a minister in 1973, estimated in February that India may need to raise a record 3.62 trillion rupees from bond sales in the fiscal year that started April 1. The central bank governor Duvvuri Subbarao said May 22 that borrowings have “already expanded rapidly” and that it goes against his efforts to keep borrowing costs low.
“The government faces a challenge to balance two conflicting issues -- to stimulate the economy while preventing fiscal position from further erosion,” said Takahira Ogawa, S&P’s director of sovereign ratings. “There is a possibility for the government to implement various measures to further expand the economy and consolidate the fiscal situation.”
Singh’s administration, which doesn’t need communists’ support for a majority in parliament, could raise as much as $20 billion from sale of state-run companies, according to Rashesh Shah, chief executive officer of Edelweiss Capital Ltd.
Asset Sales
Among the companies that could be placed on the block are NHPC Ltd., India’s largest producer of electricity from water, explorer Oil India Ltd. and fuel retailer Hindustan Petroleum Corp., according to Mumbai-based brokerage Religare Capital Markets Ltd.
Still, analysts such as Seema Desai at Eurasia Group, a London-based political-risk advisory firm, expect economic changes will be “selective and gradual.”
“There is a significant segment within the party that is suspicious of sweeping pro-market reforms,” Desai said.
Mukherjee, who last year successfully rallied China, Japan, Russia and 42 other nations to end India’s nuclear isolation and resume supplies without signing the Nuclear Non-Proliferation Treaty, needs to bring the same acumen to gain support of his party colleagues, many of whom are still tied to the original socialist principles of the Congress party.
At stake is a bill to raise the foreign investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and other proposed legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non- state banks. The government also wants to allow global retailers such as Wal-Mart Stores Inc. into India.
U.S. Relies More on Aid of Allies in Terror Cases
WASHINGTON — The United States is now relying heavily on foreign intelligence services to capture, interrogate and detain all but the highest-level terrorist suspects seized outside the battlefields of Iraq and Afghanistan, according to current and former American government officials.
The change represents a significant loosening of the reins for the United States, which has worked closely with allies to combat violent extremism since the 9/11 attacks but is now pushing that cooperation to new limits.
In the past 10 months, for example, about a half-dozen midlevel financiers and logistics experts working with Al Qaeda have been captured and are being held by intelligence services in four Middle Eastern countries after the United States provided information that led to their arrests by local security services, a former American counterterrorism official said.
In addition, Pakistan’s intelligence and security services captured a Saudi suspect and a Yemeni suspect this year with the help of American intelligence and logistical support, Pakistani officials said. The two are the highest-ranking Qaeda operatives captured since President Obama took office, but they are still being held by Pakistan, which has shared information from their interrogations with the United States, the official said.
The current approach, which began in the last two years of the Bush administration and has gained momentum under Mr. Obama, is driven in part by court rulings and policy changes that have closed the secret prisons run by the Central Intelligence Agency, and all but ended the transfer of prisoners from outside Iraq and Afghanistan to American military prisons.
Human rights advocates say that relying on foreign governments to hold and question terrorist suspects could carry significant risks. It could increase the potential for abuse at the hands of foreign interrogators and could also yield bad intelligence, they say.
The fate of many terrorist suspects whom the Bush administration sent to foreign countries remains uncertain. One suspect, Ibn al-Shaykh al-Libi, who was captured by the C.I.A. in late 2001 and sent to Libya, was recently reported to have died there in Libyan custody.
“As a practical matter you have to rely on partner governments, so the focus should be on pressing and assisting those governments to handle those cases professionally,” said Tom Malinowski, Washington advocacy director for Human Rights Watch.
The United States itself has not detained any high-level terrorist suspects outside Iraq and Afghanistan since Mr. Obama took office, and the question of where to detain the most senior terrorist suspects on a long-term basis is being debated within the new administration. Even deciding where the two Qaeda suspects in Pakistani custody will be kept over the long term is “extremely, extremely sensitive right now,” a senior American military official said, adding, “They’re both bad dudes. The issue is: where do they get parked so they stay parked?”
How the United States is dealing with terrorism suspects beyond those already in the prison at Guantánamo Bay, Cuba, was a question Mr. Obama did not address in the speech he gave Thursday about his antiterrorism policies. While he said he might seek to create a new system that would allow preventive detention inside the United States, the government currently has no obvious long-term detention center for imprisoning terrorism suspects without court oversight.
Mr. Obama has said he still intends to close the Guantánamo prison by January, despite misgivings in Congress, and the Supreme Court has ruled that inmates there may challenge their detention before federal judges. Some suspects are being imprisoned without charges at a United States air base in Afghanistan, but a federal court has ruled that at least some of them may also file habeas corpus lawsuits to challenge their detentions.
American officials say that in the last years of the Bush administration and now on Mr. Obama’s watch, the balance has shifted toward leaving all but the most high-level terrorist suspects in foreign rather than American custody. The United States has repatriated hundreds of detainees held at prisons in Cuba, Iraq and Afghanistan, but the current approach is different because it seeks to keep the prisoners out of American custody altogether.
How the United States deals with terrorism suspects remains a contentious issue in Congress.
Leon E. Panetta, the director of the C.I.A., said in February that the agency might continue its program of extraordinary rendition, in which captured terrorism suspects are transferred to other countries without extradition proceedings.
He said the C.I.A. would be likely to continue to transfer detainees from their place of capture to other countries, either their home countries or nations that intended to bring charges against them.
As a safeguard against torture, Mr. Panetta said, the United States would rely on diplomatic assurances of good treatment. The Bush administration sought the same assurances, which critics say are ineffective.
A half-dozen current and former American intelligence and counterterrorism officials and allied officials were interviewed for this article, but all spoke on the condition of anonymity because the detention and interrogation programs are classified.
Officials say the United States has learned so much about Al Qaeda and other militant groups since the 9/11 attacks that it can safely rely on foreign partners to detain and question more suspects. “It’s the preferred method now,” one former counterterrorism official said.
The Obama administration’s policies will probably become clearer after two task forces the president created in January report to him in July on detainee policy, interrogation techniques and extraordinary rendition.
In many instances now, allies are using information provided by the United States to pick up terrorism suspects on their own territory — including the two suspects seized in Pakistan this year.
The Saudi militant, Zabi al-Taifi, was picked up by Pakistani commandos in a dawn raid at a safe house outside Peshawar on Jan. 22, an operation conducted with the help of the C.I.A.
A Pakistani official said the Yemeni suspect, Abu Sufyan al-Yemeni, was a Qaeda paramilitary commander who was on C.I.A. and Pakistani lists of the top 20 Qaeda operatives. He was believed to be a conduit for communications between Qaeda leaders in Pakistan and cells in East Africa, Iran, Yemen and elsewhere. American and Pakistani intelligence officials say they believe that Mr. Yemeni, who was arrested Feb. 24 by Pakistani authorities in Quetta, helped arrange travel and training for Qaeda operatives from various parts of the Muslim world to the Pakistani tribal areas.
He is now in the custody of Pakistan’s main spy agency, the Directorate for Inter-Services Intelligence, but his fate is unclear. The Pakistani official said that he would remain in Pakistani hands, but that it would be difficult to try him because the evidence against him came from informers.
American officials said the United States would still take custody of the most senior Qaeda operatives captured in the future. As a model, they cited the case of Abd al-Hadi al-Iraqi, an Iraqi Kurd who is said to have joined Al Qaeda in the late 1990s and risen to become a top aide to Osama bin Laden, and who was captured by a foreign security service in 2006. He was handed over to the C.I.A., which transferred him to Guantánamo Bay in April 2007. He was one of the last detainees shipped there.
The change represents a significant loosening of the reins for the United States, which has worked closely with allies to combat violent extremism since the 9/11 attacks but is now pushing that cooperation to new limits.
In the past 10 months, for example, about a half-dozen midlevel financiers and logistics experts working with Al Qaeda have been captured and are being held by intelligence services in four Middle Eastern countries after the United States provided information that led to their arrests by local security services, a former American counterterrorism official said.
In addition, Pakistan’s intelligence and security services captured a Saudi suspect and a Yemeni suspect this year with the help of American intelligence and logistical support, Pakistani officials said. The two are the highest-ranking Qaeda operatives captured since President Obama took office, but they are still being held by Pakistan, which has shared information from their interrogations with the United States, the official said.
The current approach, which began in the last two years of the Bush administration and has gained momentum under Mr. Obama, is driven in part by court rulings and policy changes that have closed the secret prisons run by the Central Intelligence Agency, and all but ended the transfer of prisoners from outside Iraq and Afghanistan to American military prisons.
Human rights advocates say that relying on foreign governments to hold and question terrorist suspects could carry significant risks. It could increase the potential for abuse at the hands of foreign interrogators and could also yield bad intelligence, they say.
The fate of many terrorist suspects whom the Bush administration sent to foreign countries remains uncertain. One suspect, Ibn al-Shaykh al-Libi, who was captured by the C.I.A. in late 2001 and sent to Libya, was recently reported to have died there in Libyan custody.
“As a practical matter you have to rely on partner governments, so the focus should be on pressing and assisting those governments to handle those cases professionally,” said Tom Malinowski, Washington advocacy director for Human Rights Watch.
The United States itself has not detained any high-level terrorist suspects outside Iraq and Afghanistan since Mr. Obama took office, and the question of where to detain the most senior terrorist suspects on a long-term basis is being debated within the new administration. Even deciding where the two Qaeda suspects in Pakistani custody will be kept over the long term is “extremely, extremely sensitive right now,” a senior American military official said, adding, “They’re both bad dudes. The issue is: where do they get parked so they stay parked?”
How the United States is dealing with terrorism suspects beyond those already in the prison at Guantánamo Bay, Cuba, was a question Mr. Obama did not address in the speech he gave Thursday about his antiterrorism policies. While he said he might seek to create a new system that would allow preventive detention inside the United States, the government currently has no obvious long-term detention center for imprisoning terrorism suspects without court oversight.
Mr. Obama has said he still intends to close the Guantánamo prison by January, despite misgivings in Congress, and the Supreme Court has ruled that inmates there may challenge their detention before federal judges. Some suspects are being imprisoned without charges at a United States air base in Afghanistan, but a federal court has ruled that at least some of them may also file habeas corpus lawsuits to challenge their detentions.
American officials say that in the last years of the Bush administration and now on Mr. Obama’s watch, the balance has shifted toward leaving all but the most high-level terrorist suspects in foreign rather than American custody. The United States has repatriated hundreds of detainees held at prisons in Cuba, Iraq and Afghanistan, but the current approach is different because it seeks to keep the prisoners out of American custody altogether.
How the United States deals with terrorism suspects remains a contentious issue in Congress.
Leon E. Panetta, the director of the C.I.A., said in February that the agency might continue its program of extraordinary rendition, in which captured terrorism suspects are transferred to other countries without extradition proceedings.
He said the C.I.A. would be likely to continue to transfer detainees from their place of capture to other countries, either their home countries or nations that intended to bring charges against them.
As a safeguard against torture, Mr. Panetta said, the United States would rely on diplomatic assurances of good treatment. The Bush administration sought the same assurances, which critics say are ineffective.
A half-dozen current and former American intelligence and counterterrorism officials and allied officials were interviewed for this article, but all spoke on the condition of anonymity because the detention and interrogation programs are classified.
Officials say the United States has learned so much about Al Qaeda and other militant groups since the 9/11 attacks that it can safely rely on foreign partners to detain and question more suspects. “It’s the preferred method now,” one former counterterrorism official said.
The Obama administration’s policies will probably become clearer after two task forces the president created in January report to him in July on detainee policy, interrogation techniques and extraordinary rendition.
In many instances now, allies are using information provided by the United States to pick up terrorism suspects on their own territory — including the two suspects seized in Pakistan this year.
The Saudi militant, Zabi al-Taifi, was picked up by Pakistani commandos in a dawn raid at a safe house outside Peshawar on Jan. 22, an operation conducted with the help of the C.I.A.
A Pakistani official said the Yemeni suspect, Abu Sufyan al-Yemeni, was a Qaeda paramilitary commander who was on C.I.A. and Pakistani lists of the top 20 Qaeda operatives. He was believed to be a conduit for communications between Qaeda leaders in Pakistan and cells in East Africa, Iran, Yemen and elsewhere. American and Pakistani intelligence officials say they believe that Mr. Yemeni, who was arrested Feb. 24 by Pakistani authorities in Quetta, helped arrange travel and training for Qaeda operatives from various parts of the Muslim world to the Pakistani tribal areas.
He is now in the custody of Pakistan’s main spy agency, the Directorate for Inter-Services Intelligence, but his fate is unclear. The Pakistani official said that he would remain in Pakistani hands, but that it would be difficult to try him because the evidence against him came from informers.
American officials said the United States would still take custody of the most senior Qaeda operatives captured in the future. As a model, they cited the case of Abd al-Hadi al-Iraqi, an Iraqi Kurd who is said to have joined Al Qaeda in the late 1990s and risen to become a top aide to Osama bin Laden, and who was captured by a foreign security service in 2006. He was handed over to the C.I.A., which transferred him to Guantánamo Bay in April 2007. He was one of the last detainees shipped there.
Friday, May 22, 2009
Pakistan seeks $600m in emergency funds
Pakistan’s prime minister Yusuf Raza Gilani will seek at least $600m in emergency funds from donors on Thursday to fund up to 2m internally displaced people from the embattled Swat valley – described by UN officials as one of the word’s worst refugee crises.
On Tuesday, the US government said it would provide $110m in emergency aid in a move which President Barack Obama hoped would demonstrate his country’s support for Pakistan in its fight against extremists.
EDITOR’S CHOICE
Transcript: FT interview with Pakistan’s top finance official - May-21
Western diplomats warned that many Pakistanis who are already sceptical of support to the western world, notably the US, would intensify their opposition to future military offensives if the humanitarian crisis intensified.
Shaukat Tarin, the de facto Finance Minister told the Financial Times that they were looking for between $600m to $1bn in emergency relief funds.
Mr Tarin said the funds sought were only the first instalment in meeting the costs of the conflict in the Swat valley where government forces are fighting Taliban militants to thwart their creeping incursion into Pakistan. Hundreds of thousands have fled the region in recent weeks sparking one of the world’s worst humanitarian crises.
Hasan Askari Rizvi, a respected Pakistan commentator on political and security affairs said he believed the military operation had almost succeeded in Swat in either driving out or killing up to four thousand ‘Taliban’ militants. Up to 1,000 Taliban militants have been killed in the past week alone, according to government statistics.
However, Mr Rizvi warned, that a failure by donors to help to fund the engagement and also the relief operation would fuel domestic opposition to future such military action.
Mr Tarin said a meeting of the Friends of Pakistan - an international grouping of the country’s largest donors - will take place in Turkey later this year where Pakistan will formally seek support to fund annual security costs of about $2.5b-$3b. The Turkey meeting will follow last month’s meeting of the Friends group in Tokyo in which $5.5bn were pledged in economic support to Pakistan.
“As far as the security is concerned, we have already said that this war on terror is now costing our economy $8.5bn a year in terms of lost exports, lost investments, increased expenses and loss in revenue,” he said. “I believe direct annual cost of the security apparatus is about $2.5b-$3b in the next two years. This is for trying to raise another force and to give them equipment”.
A western diplomat said, it was important for the global community “to keep on encouraging Pakistan and keep on nudging it in the right direction by giving enough support for the refugees”.
On Tuesday, the US government said it would provide $110m in emergency aid in a move which President Barack Obama hoped would demonstrate his country’s support for Pakistan in its fight against extremists.
EDITOR’S CHOICE
Transcript: FT interview with Pakistan’s top finance official - May-21
Western diplomats warned that many Pakistanis who are already sceptical of support to the western world, notably the US, would intensify their opposition to future military offensives if the humanitarian crisis intensified.
Shaukat Tarin, the de facto Finance Minister told the Financial Times that they were looking for between $600m to $1bn in emergency relief funds.
Mr Tarin said the funds sought were only the first instalment in meeting the costs of the conflict in the Swat valley where government forces are fighting Taliban militants to thwart their creeping incursion into Pakistan. Hundreds of thousands have fled the region in recent weeks sparking one of the world’s worst humanitarian crises.
Hasan Askari Rizvi, a respected Pakistan commentator on political and security affairs said he believed the military operation had almost succeeded in Swat in either driving out or killing up to four thousand ‘Taliban’ militants. Up to 1,000 Taliban militants have been killed in the past week alone, according to government statistics.
However, Mr Rizvi warned, that a failure by donors to help to fund the engagement and also the relief operation would fuel domestic opposition to future such military action.
Mr Tarin said a meeting of the Friends of Pakistan - an international grouping of the country’s largest donors - will take place in Turkey later this year where Pakistan will formally seek support to fund annual security costs of about $2.5b-$3b. The Turkey meeting will follow last month’s meeting of the Friends group in Tokyo in which $5.5bn were pledged in economic support to Pakistan.
“As far as the security is concerned, we have already said that this war on terror is now costing our economy $8.5bn a year in terms of lost exports, lost investments, increased expenses and loss in revenue,” he said. “I believe direct annual cost of the security apparatus is about $2.5b-$3b in the next two years. This is for trying to raise another force and to give them equipment”.
A western diplomat said, it was important for the global community “to keep on encouraging Pakistan and keep on nudging it in the right direction by giving enough support for the refugees”.
India’s Stocks Rise, Posting Biggest Weekly Advance in 17 Years
May 22 (Bloomberg) -- Indian stocks rose, with the benchmark index posting its steepest weekly gain in 17 years, on speculation the ruling party will accelerate economic reforms after its biggest election victory in two decades.
Larsen & Toubro Ltd., India’s largest engineering company, added 5 percent, leading construction stocks higher on expectation infrastructure spending will be boosted to buoy an economy expanding at its slowest pace in six years. Reliance Industries Ltd., the biggest company by market value, gained 3.3 percent.
“The market is expecting the reform process will speed up,” said Naresh Kumar Garg, chief investment officer at Sahara Asset Management Co. in Mumbai, who manages $45 million in assets. He is confident “infrastructure investment will rise” in Prime Minister Manmohan Singh’s second term.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, added 150.61, or 1.1 percent, to 13,887.15, after swinging between gains and losses at least seven times. The S&P CNX Nifty Index on the National Stock Exchange gained 0.7 percent to 4,238.50. The BSE 200 Index increased 1.1 percent to 1,684.27.
The Sensex’s 14 percent gain this week is its sharpest advance since the week ended March 27, 1992. The measure has risen for 11 consecutive weeks, the longest winning streak since August 2005.
Sterlite Industries (India) Ltd. led declines among metal producers after copper prices fell in London.
‘Modest’ Export Dependence
India’s “modest” dependence on exports will help the economy weather the global recession and recover this year, reducing the need for further stimulus, central bank Governor Duvvuri Subbarao said today.
Larsen and Toubro jumped 5 percent to 1,300.75 rupees. Reliance Industries climbed 3.3 percent to 2,185.75 rupees. NTPC Ltd., the biggest power producer, rose 2.1 percent to 216.60 rupees, its highest in 15 months.
Sterlite lost 4.6 percent to 507.85 rupees. Tata Steel Ltd. dropped 0.6 percent to 363.65 rupees. Copper slumped 2.6 percent and a gauge of six metals in London dropped 3.7 percent, the most since April 20.
The following stocks were among the most active on the exchange:
Tata Motors Ltd. (TTMT IN) fell 3.3 percent to 345.75 rupees. India’s biggest commercial-vehicle maker plans to complete the refinancing of a bridge loan used to buy its Jaguar and Land Rover luxury units by early next week, spokesman Debasis Ray said yesterday.
Airlines: Jet Airways (India) Ltd. (JETIN IN) rose 5.5 percent to 304.40 rupees, Kingfisher Airlines Ltd. (KAIR IN) rose 13 percent to 62.25 rupees and Spicejet Ltd. (SJET IN) jumped 10 percent to 21.71 rupees. The domestic carriers surged on speculation the country’s new government may ease investment rules.
Reliance Capital Ltd. (RCFT IN) added 5.3 percent to 903.30 rupees. The company owned by billionaire Anil Ambani gained on speculation the new government would ease restrictions for overseas investment in the insurance industry.
Larsen & Toubro Ltd., India’s largest engineering company, added 5 percent, leading construction stocks higher on expectation infrastructure spending will be boosted to buoy an economy expanding at its slowest pace in six years. Reliance Industries Ltd., the biggest company by market value, gained 3.3 percent.
“The market is expecting the reform process will speed up,” said Naresh Kumar Garg, chief investment officer at Sahara Asset Management Co. in Mumbai, who manages $45 million in assets. He is confident “infrastructure investment will rise” in Prime Minister Manmohan Singh’s second term.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, added 150.61, or 1.1 percent, to 13,887.15, after swinging between gains and losses at least seven times. The S&P CNX Nifty Index on the National Stock Exchange gained 0.7 percent to 4,238.50. The BSE 200 Index increased 1.1 percent to 1,684.27.
The Sensex’s 14 percent gain this week is its sharpest advance since the week ended March 27, 1992. The measure has risen for 11 consecutive weeks, the longest winning streak since August 2005.
Sterlite Industries (India) Ltd. led declines among metal producers after copper prices fell in London.
‘Modest’ Export Dependence
India’s “modest” dependence on exports will help the economy weather the global recession and recover this year, reducing the need for further stimulus, central bank Governor Duvvuri Subbarao said today.
Larsen and Toubro jumped 5 percent to 1,300.75 rupees. Reliance Industries climbed 3.3 percent to 2,185.75 rupees. NTPC Ltd., the biggest power producer, rose 2.1 percent to 216.60 rupees, its highest in 15 months.
Sterlite lost 4.6 percent to 507.85 rupees. Tata Steel Ltd. dropped 0.6 percent to 363.65 rupees. Copper slumped 2.6 percent and a gauge of six metals in London dropped 3.7 percent, the most since April 20.
The following stocks were among the most active on the exchange:
Tata Motors Ltd. (TTMT IN) fell 3.3 percent to 345.75 rupees. India’s biggest commercial-vehicle maker plans to complete the refinancing of a bridge loan used to buy its Jaguar and Land Rover luxury units by early next week, spokesman Debasis Ray said yesterday.
Airlines: Jet Airways (India) Ltd. (JETIN IN) rose 5.5 percent to 304.40 rupees, Kingfisher Airlines Ltd. (KAIR IN) rose 13 percent to 62.25 rupees and Spicejet Ltd. (SJET IN) jumped 10 percent to 21.71 rupees. The domestic carriers surged on speculation the country’s new government may ease investment rules.
Reliance Capital Ltd. (RCFT IN) added 5.3 percent to 903.30 rupees. The company owned by billionaire Anil Ambani gained on speculation the new government would ease restrictions for overseas investment in the insurance industry.
Singh May Set Record in India Asset Sales After Election Victory
May 22 (Bloomberg) -- Indian Prime Minister Manmohan Singh, who began his second term this week, may set a record for selling state assets as he revives efforts that were foiled by his former communist allies, bankers and analysts said.
The new administration could start by resuming share sale plans for NHPC Ltd., India’s largest producer of electricity from water, explorer Oil India Ltd. and fuel retailer Hindustan Petroleum Corp., according to Mumbai-based brokerage Religare Capital Markets Ltd.
Singh may sell $20 billion of state assets in the next five years as he tries to plug a budget shortfall, said Rashesh Shah, chief executive officer of Edelweiss Capital Ltd. After a privatization wave that netted a record $6 billion between 1999 and 2004 to a government led by Singh’s main opponents, sales slumped during his first term as communist allies thwarted plans.
“Sales by this government will be significantly higher than the previous record,” S. Subramanian, head of investment banking at Enam Financial Consultants Ltd. in Mumbai, said in an interview. Mumbai-based Enam has managed share offerings for state-owned companies including Power Grid Corp. of India Ltd., CMC Ltd. and Power Finance Corp.
Singh’s Congress party-led coalition faces a fiscal deficit that’s more than double the government target and an economy growing at the slowest pace since 2003.
The nation will sell stakes in companies as promised by the Congress party’s election manifesto, P. Chidambaram, who was in charge of the finance and home ministries in Singh’s previous administration, said on May 18. Singh, the first premier to win re-election after serving a full term since 1971, doesn’t need the Communists’ support for his new administration after winning the backing of 322 lawmakers in the 545-seat lower house.
‘Right to Own’
“The Indian people have every right to own part of the shares of public sector companies while the government retains majority shareholding,” the election manifesto said. Still, Congress “rejects the policy of blind privatization” followed by the opposition Bharatiya Janata Party and its allies, it said.
Singh, 76, raised 67 billion rupees ($1.41 billion) from selling stakes in NTPC Ltd. and Rural Electrification Corp. of India Ltd. during his first term, according to India’s Department of Disinvestment. Then-finance minister Chidambaram’s plans to sell shares in companies including Bharat Heavy Electricals Ltd., India’s biggest maker of power equipment, and National Aluminium Co. were blocked by the communists in 2006.
The previous Singh administration waived farm loans, raised government employees’ salaries for the first time in 12 years, cut taxes and increased spending on roads, ports and other infrastructure as it sought to revive economic growth and shore up support before the election. That strained state finances as the economic slowdown hurt tax collections.
Strained Finances
India’s fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target.
The prospect of a wider budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen.
“The government will now have the ability to look at disinvestment seriously in the context of the fiscal deficit,” S. Ramesh, chief operating officer of Kotak Mahindra Bank Ltd.’s investment banking unit, said in an interview. “The numbers can be significant.”
Raising 100 billion rupees from share sales and initial public offerings in the financial year that began April 1 would help cut the fiscal deficit by a quarter-point, according to Religare estimates.
NHPC, Oil India
Companies in which the government had planned to reduce its holding through an IPO, only to scrap the proposals, may be first in line for sales, Religare said in a May 12 research note. Such firms include NHPC, which had expected to raise 55 billion rupees, RITES Ltd., and Oil India, the brokerage said.
The nation’s Disinvestment Committee had also previously recommended cutting stakes in Shipping Corp. of India Ltd., National Buildings Construction Corp., Projects & Equipment Corp., Hindustan Shipyard and Electronics Corp. of India, making them likely candidates during Singh’s second term, Religare said.
Delivering on asset sales pledges may reassure foreign investors that Singh is also serious about economic reforms aimed at making India more competitive. Overseas funds bought $3.1 billion of Indian equities so far in May, the most in a month since October 2007, according to Bloomberg data.
“There’s a huge backlog of offers that will get cleared now,” said Ravi Sardana, senior vice president of ICICI Securities Ltd. “It is also a good message for global investors.”
The new administration could start by resuming share sale plans for NHPC Ltd., India’s largest producer of electricity from water, explorer Oil India Ltd. and fuel retailer Hindustan Petroleum Corp., according to Mumbai-based brokerage Religare Capital Markets Ltd.
Singh may sell $20 billion of state assets in the next five years as he tries to plug a budget shortfall, said Rashesh Shah, chief executive officer of Edelweiss Capital Ltd. After a privatization wave that netted a record $6 billion between 1999 and 2004 to a government led by Singh’s main opponents, sales slumped during his first term as communist allies thwarted plans.
“Sales by this government will be significantly higher than the previous record,” S. Subramanian, head of investment banking at Enam Financial Consultants Ltd. in Mumbai, said in an interview. Mumbai-based Enam has managed share offerings for state-owned companies including Power Grid Corp. of India Ltd., CMC Ltd. and Power Finance Corp.
Singh’s Congress party-led coalition faces a fiscal deficit that’s more than double the government target and an economy growing at the slowest pace since 2003.
The nation will sell stakes in companies as promised by the Congress party’s election manifesto, P. Chidambaram, who was in charge of the finance and home ministries in Singh’s previous administration, said on May 18. Singh, the first premier to win re-election after serving a full term since 1971, doesn’t need the Communists’ support for his new administration after winning the backing of 322 lawmakers in the 545-seat lower house.
‘Right to Own’
“The Indian people have every right to own part of the shares of public sector companies while the government retains majority shareholding,” the election manifesto said. Still, Congress “rejects the policy of blind privatization” followed by the opposition Bharatiya Janata Party and its allies, it said.
Singh, 76, raised 67 billion rupees ($1.41 billion) from selling stakes in NTPC Ltd. and Rural Electrification Corp. of India Ltd. during his first term, according to India’s Department of Disinvestment. Then-finance minister Chidambaram’s plans to sell shares in companies including Bharat Heavy Electricals Ltd., India’s biggest maker of power equipment, and National Aluminium Co. were blocked by the communists in 2006.
The previous Singh administration waived farm loans, raised government employees’ salaries for the first time in 12 years, cut taxes and increased spending on roads, ports and other infrastructure as it sought to revive economic growth and shore up support before the election. That strained state finances as the economic slowdown hurt tax collections.
Strained Finances
India’s fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target.
The prospect of a wider budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen.
“The government will now have the ability to look at disinvestment seriously in the context of the fiscal deficit,” S. Ramesh, chief operating officer of Kotak Mahindra Bank Ltd.’s investment banking unit, said in an interview. “The numbers can be significant.”
Raising 100 billion rupees from share sales and initial public offerings in the financial year that began April 1 would help cut the fiscal deficit by a quarter-point, according to Religare estimates.
NHPC, Oil India
Companies in which the government had planned to reduce its holding through an IPO, only to scrap the proposals, may be first in line for sales, Religare said in a May 12 research note. Such firms include NHPC, which had expected to raise 55 billion rupees, RITES Ltd., and Oil India, the brokerage said.
The nation’s Disinvestment Committee had also previously recommended cutting stakes in Shipping Corp. of India Ltd., National Buildings Construction Corp., Projects & Equipment Corp., Hindustan Shipyard and Electronics Corp. of India, making them likely candidates during Singh’s second term, Religare said.
Delivering on asset sales pledges may reassure foreign investors that Singh is also serious about economic reforms aimed at making India more competitive. Overseas funds bought $3.1 billion of Indian equities so far in May, the most in a month since October 2007, according to Bloomberg data.
“There’s a huge backlog of offers that will get cleared now,” said Ravi Sardana, senior vice president of ICICI Securities Ltd. “It is also a good message for global investors.”
Chrysler Dealers Make Case Against Closings
DETROIT — The calls from Chrysler officials were coming nearly every day, sometimes several times a day, right through the final weeks before the company filed for bankruptcy. And the message, said Robert Archer, who runs three Chrysler dealerships in the Houston area, was simple: Take more cars.
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Dealerships on Chrysler’s Chopping Block Slash Prices (May 23, 2009)
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“They tell me, ‘The only way that we can survive is if you order cars, and Fiat and the government see money coming in,’ ” Mr. Archer said.
He acquiesced, he said, thinking he was doing his part to save the company. “I’m a team player and I don’t want them to go out of business, so I ordered a ton of cars.”
Then, a week ago, Chrysler told Mr. Archer, a dealer for three decades, that his three stores were among the 789 dealerships the company was eliminating as of June 9. Mr. Archer had 700 new vehicles and $1.7 million in new parts in stock when the letters arrived.
Now, Mr. Archer is among 330 dealers, calling themselves the Committee of Chrysler Affected Dealers, who are contesting the company’s action. Next week and on June 3, the bankruptcy judge handling Chrysler’s case will consider their objections.
Many of those fighting the hardest are dealers who recently spent huge amounts of money to stay in the company’s good graces, who sacrificed their own profits to help keep the company intact or who otherwise thought they had bent over backward to ensure that Chrysler could survive, only to learn that they were the ones who would not.
“I’m mad at myself for being duped all these years by them and going along with all of the things they wanted me to do,” said Homer Cutrubus, a Chrysler dealer in Utah since 1969. “If I treated my customers like Chrysler treated me, I wouldn’t have any business.”
For years, Chrysler had been urging Mr. Cutrubus and other dealers to combine dealerships with just one or two of the company’s brands into “alpha” stores selling all three: Chrysler, Dodge and Jeep. It stepped up that pressure in February, he said, and in April he finally agreed to move his Dodge store in Layton, Utah, into a Chrysler-Jeep showroom half a mile away, even though he thought the change made little sense financially and had to be done at his own expense.
Included in the exhibits filed in bankruptcy court is an e-mail message from a Chrysler official in Denver to Mr. Cutrubus that said the company wanted to keep only one of the four area dealerships, preferably him. It concluded, “Are you our guy?”
“I called them the next day and said, ‘Yeah, we’ve got a deal,’ ” Mr. Cutrubus said. Six weeks later, after he already had spent $100,000 making the move, he got the letter cutting all his franchises.
Chrysler executives this week defended their decision to cut a quarter of its dealers and the process they used to determine which dealers should be eliminated. They said stores were evaluated on a number of factors, including sales, customer satisfaction, location and condition of the dealership.
If Chrysler does not streamline its operations and complete the proposed sale of its good assets to the Italian automaker Fiat, “the stark reality is all 3,181 dealers will face elimination,” Steven J. Landry, the company’s vice president of North American sales and marketing, said in a statement.
“It was not an easy decision to ask the court to reject a portion of our dealer contracts, but the reality is Chrysler’s viability depends on a vibrant, profitable dealer network,” Mr. Landry said. “As presently configured, Chrysler’s dealer network does not meet that test.”
Mr. Landry also argued that the company was “treating the rejected dealers fairly by assisting in the redistribution of remaining vehicle and parts inventory, paying incentive and warranty payments due.” But many dealers disagree.
Chrysler is not buying back any inventory, including the vehicles and parts that dealers say they never wanted and bought only under pressure. And the entire process, which gives them only until June 9 to liquidate everything, is far from fair, they contend.
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Letting Go at ChryslerSlide Show
Letting Go at Chrysler
Chrysler Dealerships Slated for ClosingInteractive Map
Chrysler Dealerships Slated for Closing
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Milestones in the Carmakers’ Crisis
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Dealerships on Chrysler’s Chopping Block Slash Prices (May 23, 2009)
Times Topics: Automotive Industry Crisis | Chrysler LLC
“They tell me, ‘The only way that we can survive is if you order cars, and Fiat and the government see money coming in,’ ” Mr. Archer said.
He acquiesced, he said, thinking he was doing his part to save the company. “I’m a team player and I don’t want them to go out of business, so I ordered a ton of cars.”
Then, a week ago, Chrysler told Mr. Archer, a dealer for three decades, that his three stores were among the 789 dealerships the company was eliminating as of June 9. Mr. Archer had 700 new vehicles and $1.7 million in new parts in stock when the letters arrived.
Now, Mr. Archer is among 330 dealers, calling themselves the Committee of Chrysler Affected Dealers, who are contesting the company’s action. Next week and on June 3, the bankruptcy judge handling Chrysler’s case will consider their objections.
Many of those fighting the hardest are dealers who recently spent huge amounts of money to stay in the company’s good graces, who sacrificed their own profits to help keep the company intact or who otherwise thought they had bent over backward to ensure that Chrysler could survive, only to learn that they were the ones who would not.
“I’m mad at myself for being duped all these years by them and going along with all of the things they wanted me to do,” said Homer Cutrubus, a Chrysler dealer in Utah since 1969. “If I treated my customers like Chrysler treated me, I wouldn’t have any business.”
For years, Chrysler had been urging Mr. Cutrubus and other dealers to combine dealerships with just one or two of the company’s brands into “alpha” stores selling all three: Chrysler, Dodge and Jeep. It stepped up that pressure in February, he said, and in April he finally agreed to move his Dodge store in Layton, Utah, into a Chrysler-Jeep showroom half a mile away, even though he thought the change made little sense financially and had to be done at his own expense.
Included in the exhibits filed in bankruptcy court is an e-mail message from a Chrysler official in Denver to Mr. Cutrubus that said the company wanted to keep only one of the four area dealerships, preferably him. It concluded, “Are you our guy?”
“I called them the next day and said, ‘Yeah, we’ve got a deal,’ ” Mr. Cutrubus said. Six weeks later, after he already had spent $100,000 making the move, he got the letter cutting all his franchises.
Chrysler executives this week defended their decision to cut a quarter of its dealers and the process they used to determine which dealers should be eliminated. They said stores were evaluated on a number of factors, including sales, customer satisfaction, location and condition of the dealership.
If Chrysler does not streamline its operations and complete the proposed sale of its good assets to the Italian automaker Fiat, “the stark reality is all 3,181 dealers will face elimination,” Steven J. Landry, the company’s vice president of North American sales and marketing, said in a statement.
“It was not an easy decision to ask the court to reject a portion of our dealer contracts, but the reality is Chrysler’s viability depends on a vibrant, profitable dealer network,” Mr. Landry said. “As presently configured, Chrysler’s dealer network does not meet that test.”
Mr. Landry also argued that the company was “treating the rejected dealers fairly by assisting in the redistribution of remaining vehicle and parts inventory, paying incentive and warranty payments due.” But many dealers disagree.
Chrysler is not buying back any inventory, including the vehicles and parts that dealers say they never wanted and bought only under pressure. And the entire process, which gives them only until June 9 to liquidate everything, is far from fair, they contend.
Thursday, May 21, 2009
Asian Real Estate Shares Gain on Li Recommendation; Sony Falls
May 22 (Bloomberg) -- Asian financial and real estate stocks rose after billionaire Li Ka-shing recommended property investments, countering slumps by electronics and mining shares.
Sun Hung Kai Properties Ltd., the world’s biggest developer by value, gained 3.3 percent in Hong Kong after Li said real- estate investors are “sure to make money” in the next three- to-four years. Sony Corp., the maker of Bravia televisions, slipped 1.4 percent as the yen strengthened to a two-month high against the dollar. BHP Billiton Ltd., the world’s biggest mining company, retreated 2.2 percent in Sydney after oil and copper prices sank yesterday.
Five stocks declined for every three that advanced on the MSCI Asia Pacific Index, which added 0.2 percent to 99.88 as of 12:38 p.m. in Tokyo. The gauge was boosted by the strengthening yen, which increased the value of Japanese stocks on the dollar- denominated index. The index is up 2.7 percent this week, having risen 41 percent from a five-year low on March 9.
“The rebound up until this point has been driven by two factors -- a feeling that the worst is over and improving economic indicators,” said Takashi Kamiya, chief economist at T&D Asset Management Co., which oversees about $16 billion. “The million-dollar question going forward is whether data such as U.S. production numbers can continue to improve. I doubt it.”
Japan’s Nikkei 225 Stock Average was little changed, as was Hong Kong’s Hang Seng Index. Rio Tinto Group led declines in Australia after the Financial Times said Aluminum Corp. of China won’t agree to a stake of less than 15 percent in the company.
Newcrest Mining Ltd., Australia’s largest gold producer, rose 1.5 percent as investors sought haven in the precious metal.
Futures on the U.S. Standard & Poor’s 500 Index added 0.4 percent. The gauge declined 1.7 percent yesterday as a Labor Department report showed initial jobless claims fell by 12,000 to 631,000 in the week ended May 16, while economists had expected claims would drop to 625,000. The previous week’s figures were revised higher.
Sun Hung Kai Properties Ltd., the world’s biggest developer by value, gained 3.3 percent in Hong Kong after Li said real- estate investors are “sure to make money” in the next three- to-four years. Sony Corp., the maker of Bravia televisions, slipped 1.4 percent as the yen strengthened to a two-month high against the dollar. BHP Billiton Ltd., the world’s biggest mining company, retreated 2.2 percent in Sydney after oil and copper prices sank yesterday.
Five stocks declined for every three that advanced on the MSCI Asia Pacific Index, which added 0.2 percent to 99.88 as of 12:38 p.m. in Tokyo. The gauge was boosted by the strengthening yen, which increased the value of Japanese stocks on the dollar- denominated index. The index is up 2.7 percent this week, having risen 41 percent from a five-year low on March 9.
“The rebound up until this point has been driven by two factors -- a feeling that the worst is over and improving economic indicators,” said Takashi Kamiya, chief economist at T&D Asset Management Co., which oversees about $16 billion. “The million-dollar question going forward is whether data such as U.S. production numbers can continue to improve. I doubt it.”
Japan’s Nikkei 225 Stock Average was little changed, as was Hong Kong’s Hang Seng Index. Rio Tinto Group led declines in Australia after the Financial Times said Aluminum Corp. of China won’t agree to a stake of less than 15 percent in the company.
Newcrest Mining Ltd., Australia’s largest gold producer, rose 1.5 percent as investors sought haven in the precious metal.
Futures on the U.S. Standard & Poor’s 500 Index added 0.4 percent. The gauge declined 1.7 percent yesterday as a Labor Department report showed initial jobless claims fell by 12,000 to 631,000 in the week ended May 16, while economists had expected claims would drop to 625,000. The previous week’s figures were revised higher.
Seligman Technology Fund Manager Shifts India Bets for China
May 22 (Bloomberg) -- J&W Seligman & Co.’s global technology fund is shifting investments into China and out of India after it beat 90 percent of peers over the past year by owning some of the subcontinent’s biggest companies.
“We’re not in India at all right now,” Richard Parower, who manages $4.5 billion out of the $17 billion in assets at New York-based J&W Seligman, said in an interview. “It’s basically the consumer recession. Their end markets have slowed down.”
The Indian Congress Party’s biggest election victory in two decades fueled a record 17 percent jump in the nation’s benchmark index on May 18, raising concern about valuations. China and Sri Lanka offer better investment opportunities than India, Jim Rogers, who set up Singapore-based Rogers Holdings after co-founding the Quantum Fund with George Soros, said today.
The Congress party won the most seats since 1991, enabling it to start forming a new government without support from communist lawmakers.
“We still need to see the regulatory framework,” said Parower. “We need to see whether they will allow investors to go short or long. I’m more optimistic about its long-term outlook.”
The Seligman Global Technology Fund has gained 23 percent this year, compared with a 15 percent advance for technology stocks in the MSCI World Index, according to data compiled by Bloomberg. Over the past year, the fund lost 25 percent, compared with the 33 percent drop for that MSCI index.
Parower said he sold stakes in Satyam Computer Services Ltd. and Tata Consultancy Services Ltd. “a while ago” because of concern the global slump would hurt demand. The U.S., Europe and Japan are in recession and Standard & Poor’s said today Britain may lose its AAA credit rating for the first time.
‘Rocky Road’
Indian software companies such as Infosys Technologies Ltd. face a “rocky road” in the next six to 12 months, Parower said. The fund manager said he’s buying Chinese Internet companies including Perfect World Co., an online game developer, and recently sold Baidu Inc., the operator of China’s most-used Internet search engine, after a “great run.”
Baidu’s American depositary receipts have jumped 83 percent this year, boosted by speculation online demand will surge as the world’s third-biggest economy recovers.
BNP Paribas SA said today selling Indian stocks after the rally may be a “mistake” as fund managers reallocate their holdings to add more of the nation’s equities.
“We’re not in India at all right now,” Richard Parower, who manages $4.5 billion out of the $17 billion in assets at New York-based J&W Seligman, said in an interview. “It’s basically the consumer recession. Their end markets have slowed down.”
The Indian Congress Party’s biggest election victory in two decades fueled a record 17 percent jump in the nation’s benchmark index on May 18, raising concern about valuations. China and Sri Lanka offer better investment opportunities than India, Jim Rogers, who set up Singapore-based Rogers Holdings after co-founding the Quantum Fund with George Soros, said today.
The Congress party won the most seats since 1991, enabling it to start forming a new government without support from communist lawmakers.
“We still need to see the regulatory framework,” said Parower. “We need to see whether they will allow investors to go short or long. I’m more optimistic about its long-term outlook.”
The Seligman Global Technology Fund has gained 23 percent this year, compared with a 15 percent advance for technology stocks in the MSCI World Index, according to data compiled by Bloomberg. Over the past year, the fund lost 25 percent, compared with the 33 percent drop for that MSCI index.
Parower said he sold stakes in Satyam Computer Services Ltd. and Tata Consultancy Services Ltd. “a while ago” because of concern the global slump would hurt demand. The U.S., Europe and Japan are in recession and Standard & Poor’s said today Britain may lose its AAA credit rating for the first time.
‘Rocky Road’
Indian software companies such as Infosys Technologies Ltd. face a “rocky road” in the next six to 12 months, Parower said. The fund manager said he’s buying Chinese Internet companies including Perfect World Co., an online game developer, and recently sold Baidu Inc., the operator of China’s most-used Internet search engine, after a “great run.”
Baidu’s American depositary receipts have jumped 83 percent this year, boosted by speculation online demand will surge as the world’s third-biggest economy recovers.
BNP Paribas SA said today selling Indian stocks after the rally may be a “mistake” as fund managers reallocate their holdings to add more of the nation’s equities.
Singh May Set Record in India Asset Sales After Election Victory
May 22 (Bloomberg) -- Indian Prime Minister Manmohan Singh, who began his second term this week, may set a record for selling state assets as he revives efforts that were foiled by his former communist allies, bankers and analysts said.
The new administration could start by resuming share sale plans for NHPC Ltd., India’s largest producer of electricity from water, explorer Oil India Ltd. and fuel retailer Hindustan Petroleum Corp., according to Mumbai-based brokerage Religare Capital Markets Ltd.
Singh may sell $20 billion of state assets in the next five years as he tries to plug a budget shortfall, said Rashesh Shah, chief executive officer of Edelweiss Capital Ltd. After a privatization wave that netted a record $6 billion between 1999 and 2004 to a government led by Singh’s main opponents, sales slumped during his first term as communist allies thwarted plans.
“Sales by this government will be significantly higher than the previous record,” S. Subramanian, head of investment banking at Enam Financial Consultants Ltd. in Mumbai, said in an interview. Mumbai-based Enam has managed share offerings for state-owned companies including Power Grid Corp. of India Ltd., CMC Ltd. and Power Finance Corp.
Singh’s Congress party-led coalition faces a fiscal deficit that’s more than double the government target and an economy growing at the slowest pace since 2003.
The nation will sell stakes in companies as promised by the Congress party’s election manifesto, P. Chidambaram, who was in charge of the finance and home ministries in Singh’s previous administration, said on May 18. Singh, the first premier to win re-election after serving a full term since 1971, doesn’t need the Communists’ support for his new administration after winning the backing of 322 lawmakers in the 545-seat lower house.
‘Right to Own’
“The Indian people have every right to own part of the shares of public sector companies while the government retains majority shareholding,” the election manifesto said. Still, Congress “rejects the policy of blind privatization” followed by the opposition Bharatiya Janata Party and its allies, it said.
Singh, 76, raised 67 billion rupees ($1.41 billion) from selling stakes in NTPC Ltd. and Rural Electrification Corp. of India Ltd. during his first term, according to India’s Department of Disinvestment. Then-finance minister Chidambaram’s plans to sell shares in companies including Bharat Heavy Electricals Ltd., India’s biggest maker of power equipment, and National Aluminium Co. were blocked by the communists in 2006.
The previous Singh administration waived farm loans, raised government employees’ salaries for the first time in 12 years, cut taxes and increased spending on roads, ports and other infrastructure as it sought to revive economic growth and shore up support before the election. That strained state finances as the economic slowdown hurt tax collections.
Strained Finances
India’s fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target.
The prospect of a wider budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen.
“The government will now have the ability to look at disinvestment seriously in the context of the fiscal deficit,” S. Ramesh, chief operating officer of Kotak Mahindra Bank Ltd.’s investment banking unit, said in an interview. “The numbers can be significant.”
Raising 100 billion rupees from share sales and initial public offerings in the financial year that began April 1 would help cut the fiscal deficit by a quarter-point, according to Religare estimates.
NHPC, Oil India
Companies in which the government had planned to reduce its holding through an IPO, only to scrap the proposals, may be first in line for sales, Religare said in a May 12 research note. Such firms include NHPC, which had expected to raise 55 billion rupees, RITES Ltd., and Oil India, the brokerage said.
The nation’s Disinvestment Committee had also previously recommended cutting stakes in Shipping Corp. of India Ltd., National Buildings Construction Corp., Projects & Equipment Corp., Hindustan Shipyard and Electronics Corp. of India, making them likely candidates during Singh’s second term, Religare said.
Delivering on asset sales pledges may reassure foreign investors that Singh is also serious about economic reforms aimed at making India more competitive. Overseas funds bought $3.1 billion of Indian equities so far in May, the most in a month since October 2007, according to Bloomberg data.
“There’s a huge backlog of offers that will get cleared now,” said Ravi Sardana, senior vice president of ICICI Securities Ltd. “It is also a good message for global investors.”
The new administration could start by resuming share sale plans for NHPC Ltd., India’s largest producer of electricity from water, explorer Oil India Ltd. and fuel retailer Hindustan Petroleum Corp., according to Mumbai-based brokerage Religare Capital Markets Ltd.
Singh may sell $20 billion of state assets in the next five years as he tries to plug a budget shortfall, said Rashesh Shah, chief executive officer of Edelweiss Capital Ltd. After a privatization wave that netted a record $6 billion between 1999 and 2004 to a government led by Singh’s main opponents, sales slumped during his first term as communist allies thwarted plans.
“Sales by this government will be significantly higher than the previous record,” S. Subramanian, head of investment banking at Enam Financial Consultants Ltd. in Mumbai, said in an interview. Mumbai-based Enam has managed share offerings for state-owned companies including Power Grid Corp. of India Ltd., CMC Ltd. and Power Finance Corp.
Singh’s Congress party-led coalition faces a fiscal deficit that’s more than double the government target and an economy growing at the slowest pace since 2003.
The nation will sell stakes in companies as promised by the Congress party’s election manifesto, P. Chidambaram, who was in charge of the finance and home ministries in Singh’s previous administration, said on May 18. Singh, the first premier to win re-election after serving a full term since 1971, doesn’t need the Communists’ support for his new administration after winning the backing of 322 lawmakers in the 545-seat lower house.
‘Right to Own’
“The Indian people have every right to own part of the shares of public sector companies while the government retains majority shareholding,” the election manifesto said. Still, Congress “rejects the policy of blind privatization” followed by the opposition Bharatiya Janata Party and its allies, it said.
Singh, 76, raised 67 billion rupees ($1.41 billion) from selling stakes in NTPC Ltd. and Rural Electrification Corp. of India Ltd. during his first term, according to India’s Department of Disinvestment. Then-finance minister Chidambaram’s plans to sell shares in companies including Bharat Heavy Electricals Ltd., India’s biggest maker of power equipment, and National Aluminium Co. were blocked by the communists in 2006.
The previous Singh administration waived farm loans, raised government employees’ salaries for the first time in 12 years, cut taxes and increased spending on roads, ports and other infrastructure as it sought to revive economic growth and shore up support before the election. That strained state finances as the economic slowdown hurt tax collections.
Strained Finances
India’s fiscal deficit reached 6 percent of gross domestic product in the year ended March 31, surpassing the 2.5 percent government target.
The prospect of a wider budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen.
“The government will now have the ability to look at disinvestment seriously in the context of the fiscal deficit,” S. Ramesh, chief operating officer of Kotak Mahindra Bank Ltd.’s investment banking unit, said in an interview. “The numbers can be significant.”
Raising 100 billion rupees from share sales and initial public offerings in the financial year that began April 1 would help cut the fiscal deficit by a quarter-point, according to Religare estimates.
NHPC, Oil India
Companies in which the government had planned to reduce its holding through an IPO, only to scrap the proposals, may be first in line for sales, Religare said in a May 12 research note. Such firms include NHPC, which had expected to raise 55 billion rupees, RITES Ltd., and Oil India, the brokerage said.
The nation’s Disinvestment Committee had also previously recommended cutting stakes in Shipping Corp. of India Ltd., National Buildings Construction Corp., Projects & Equipment Corp., Hindustan Shipyard and Electronics Corp. of India, making them likely candidates during Singh’s second term, Religare said.
Delivering on asset sales pledges may reassure foreign investors that Singh is also serious about economic reforms aimed at making India more competitive. Overseas funds bought $3.1 billion of Indian equities so far in May, the most in a month since October 2007, according to Bloomberg data.
“There’s a huge backlog of offers that will get cleared now,” said Ravi Sardana, senior vice president of ICICI Securities Ltd. “It is also a good message for global investors.”
Obama Faces Pitfalls With ‘Surgical’ Tack on Detainees
As President Obama defends his national security strategy, he faces a daunting challenge. He must convince the country that it is in safe hands despite warnings to the contrary from the right, and at the same time persuade the skeptical left that it is enough to amend his predecessor’s approach rather than abandon it.
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Obama Sets 'New Direction' on Terror
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Cheney's Rebuttal to Obama
Related
Obama Mounts Defense of Plans to Close Guantánamo (May 22, 2009)
A ‘Freer’ Cheney Makes His Case (With Dual Focus) (May 22, 2009)
The TV Watch: Like a Scene From Campaign ’08 (May 22, 2009)
Times Topics: Guantánamo Bay Naval Base (Cuba)
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Arguably on the defensive over policy for the first time since taking office, Mr. Obama is gambling that his oratorical powers can reassure the public that bringing terrorism suspects to prisons on American soil will not put the public in danger.
At the same time, he must explain and win support for a nuanced set of positions that fall somewhere between George W. Bush and the American Civil Liberties Union.
Rather than an easily labeled program, Mr. Obama is picking seemingly disparate elements from across the policy continuum — banning torture and other harsh interrogation techniques but embracing the endless detention of certain terror suspects without trial, closing the prison at Guantánamo Bay, Cuba, but retaining the military commissions held there.
“A surgical approach,” the president called it in his address on Thursday at the National Archives.
But surgical approaches are rarely satisfying to those on either end of the political spectrum who tend to dominate political dialogue in Washington, particularly when it comes to an issue as fraught with emotional resonance and moral implications as the struggle against terrorists.
In the reductionist debate in Washington, either any sacrifice must be made to win a pitiless war against radicals, or terrorism does not justify any compromise with cherished American values.
“Both sides may be sincere in their views, but neither side is right,” Mr. Obama said. “The American people are not absolutist, and they don’t elect us to impose a rigid ideology on our problems. They know that we need not sacrifice our security for our values, nor sacrifice our values for our security, so long as we approach difficult questions with honesty and care and a dose of common sense.”
In his rebuttal speech across town, former Vice President Dick Cheney in effect argued that absolutism in the defense of liberty was no vice.
“In the fight against terrorism there is no middle ground, and half measures keep you half-exposed,” Mr. Cheney said shortly after Mr. Obama’s address. “You cannot keep just some nuclear-armed terrorists out of the United States. Triangulation is a political strategy, not a national security strategy.”
The debates over Mr. Obama’s latest decisions — to establish a legal basis for holding detainees indefinitely without charge and to withhold photographs of past abuse while reauthorizing military tribunals with greater due process — have become a proxy for a broader struggle that could shape his presidency. With the economy in dire shape, Mr. Obama would prefer to focus on domestic issues and put the polarizing security-versus-liberty argument of the Bush years behind the country, but it stubbornly persists.
With Mr. Cheney accusing the president of endangering the country and liberal allies expressing outrage at what they perceive as his betrayal of progressive principles, the White House concluded that it had no choice but to address the matter head-on.
Mr. Obama has never lacked confidence in his ability to educate and win over people when it comes to complex and combustible issues, as he tried to do on the issue of race in the campaign last year or on abortion in his commencement address on Sunday at the University of Notre Dame.
“The issue skewed off into a lot of different directions in the last couple of weeks,” David Axelrod, the president’s senior adviser, said in an interview.
Mr. Axelrod expressed confidence that the public would grasp the new multilayered approach articulated in the speech. “It was a thoughtful speech that treated the American people like adults,” he said.
Yet even as the White House argued that Mr. Obama always recognized the complexity of the issues before him, Vice President Joseph R. Biden Jr. on Thursday acknowledged some surprise at the difficulties involved. Speaking with reporters at Camp Bondsteel in Kosovo, he described going through portfolios on “every single detainee” at the detention center at Guantánamo Bay.
“We knew we were inheriting a system that was not functioning,” Mr. Biden said. “We knew we were inheriting a system that was causing us great difficulty around the world.” But he suggested that the administration’s approach had been shaped by what it learned after taking office.
“It’s like opening Pandora’s box here,” Mr. Biden said. “We don’t know what’s inside the box. Now we know a lot more than we did in January.”
Both Mr. Obama and Mr. Cheney used the term “ad hoc” to scorn the other party’s policy toward terrorism. But the case-by-case approach of the current White House — officials there describe it as pragmatic — has generated confusion and disappointment across the political spectrum. While Mr. Obama dismissed concerns among fellow Democrats about “30-second commercials” attacking them as weak on terrorism — “I get it,” he said — the reality is that the debate could replay in harsh fashion in the midterm elections next year.
James Jay Carafano, a national security expert at the Heritage Foundation, said Mr. Obama risked being left with no supporters on either side for his program.
“The people on the left know there’s more in common than not between the Obama policy and the Bush policy,” he said. “And the people on the right know there’s a credibility problem because there’s a gap between what he tells the left and what he’s doing.”
Sarah Mendelson, a scholar at the Center for Strategic and International Studies who led a commission study that urged the closing of Guantánamo, said the fusion of Bush and anti-Bush policies was untenable. “They’re literally trying to combine these paradigms,” Ms. Mendelson said. “And that means nobody will be happy.”
Skip to next paragraph
Multimedia
Obama Sets 'New Direction' on TerrorVideo
Obama Sets 'New Direction' on Terror
Cheney's Rebuttal to ObamaVideo
Cheney's Rebuttal to Obama
Related
Obama Mounts Defense of Plans to Close Guantánamo (May 22, 2009)
A ‘Freer’ Cheney Makes His Case (With Dual Focus) (May 22, 2009)
The TV Watch: Like a Scene From Campaign ’08 (May 22, 2009)
Times Topics: Guantánamo Bay Naval Base (Cuba)
Blog
The Caucus
The CaucusThe latest political news from around the nation. Join the discussion.
* More Politics News
Arguably on the defensive over policy for the first time since taking office, Mr. Obama is gambling that his oratorical powers can reassure the public that bringing terrorism suspects to prisons on American soil will not put the public in danger.
At the same time, he must explain and win support for a nuanced set of positions that fall somewhere between George W. Bush and the American Civil Liberties Union.
Rather than an easily labeled program, Mr. Obama is picking seemingly disparate elements from across the policy continuum — banning torture and other harsh interrogation techniques but embracing the endless detention of certain terror suspects without trial, closing the prison at Guantánamo Bay, Cuba, but retaining the military commissions held there.
“A surgical approach,” the president called it in his address on Thursday at the National Archives.
But surgical approaches are rarely satisfying to those on either end of the political spectrum who tend to dominate political dialogue in Washington, particularly when it comes to an issue as fraught with emotional resonance and moral implications as the struggle against terrorists.
In the reductionist debate in Washington, either any sacrifice must be made to win a pitiless war against radicals, or terrorism does not justify any compromise with cherished American values.
“Both sides may be sincere in their views, but neither side is right,” Mr. Obama said. “The American people are not absolutist, and they don’t elect us to impose a rigid ideology on our problems. They know that we need not sacrifice our security for our values, nor sacrifice our values for our security, so long as we approach difficult questions with honesty and care and a dose of common sense.”
In his rebuttal speech across town, former Vice President Dick Cheney in effect argued that absolutism in the defense of liberty was no vice.
“In the fight against terrorism there is no middle ground, and half measures keep you half-exposed,” Mr. Cheney said shortly after Mr. Obama’s address. “You cannot keep just some nuclear-armed terrorists out of the United States. Triangulation is a political strategy, not a national security strategy.”
The debates over Mr. Obama’s latest decisions — to establish a legal basis for holding detainees indefinitely without charge and to withhold photographs of past abuse while reauthorizing military tribunals with greater due process — have become a proxy for a broader struggle that could shape his presidency. With the economy in dire shape, Mr. Obama would prefer to focus on domestic issues and put the polarizing security-versus-liberty argument of the Bush years behind the country, but it stubbornly persists.
With Mr. Cheney accusing the president of endangering the country and liberal allies expressing outrage at what they perceive as his betrayal of progressive principles, the White House concluded that it had no choice but to address the matter head-on.
Mr. Obama has never lacked confidence in his ability to educate and win over people when it comes to complex and combustible issues, as he tried to do on the issue of race in the campaign last year or on abortion in his commencement address on Sunday at the University of Notre Dame.
“The issue skewed off into a lot of different directions in the last couple of weeks,” David Axelrod, the president’s senior adviser, said in an interview.
Mr. Axelrod expressed confidence that the public would grasp the new multilayered approach articulated in the speech. “It was a thoughtful speech that treated the American people like adults,” he said.
Yet even as the White House argued that Mr. Obama always recognized the complexity of the issues before him, Vice President Joseph R. Biden Jr. on Thursday acknowledged some surprise at the difficulties involved. Speaking with reporters at Camp Bondsteel in Kosovo, he described going through portfolios on “every single detainee” at the detention center at Guantánamo Bay.
“We knew we were inheriting a system that was not functioning,” Mr. Biden said. “We knew we were inheriting a system that was causing us great difficulty around the world.” But he suggested that the administration’s approach had been shaped by what it learned after taking office.
“It’s like opening Pandora’s box here,” Mr. Biden said. “We don’t know what’s inside the box. Now we know a lot more than we did in January.”
Both Mr. Obama and Mr. Cheney used the term “ad hoc” to scorn the other party’s policy toward terrorism. But the case-by-case approach of the current White House — officials there describe it as pragmatic — has generated confusion and disappointment across the political spectrum. While Mr. Obama dismissed concerns among fellow Democrats about “30-second commercials” attacking them as weak on terrorism — “I get it,” he said — the reality is that the debate could replay in harsh fashion in the midterm elections next year.
James Jay Carafano, a national security expert at the Heritage Foundation, said Mr. Obama risked being left with no supporters on either side for his program.
“The people on the left know there’s more in common than not between the Obama policy and the Bush policy,” he said. “And the people on the right know there’s a credibility problem because there’s a gap between what he tells the left and what he’s doing.”
Sarah Mendelson, a scholar at the Center for Strategic and International Studies who led a commission study that urged the closing of Guantánamo, said the fusion of Bush and anti-Bush policies was untenable. “They’re literally trying to combine these paradigms,” Ms. Mendelson said. “And that means nobody will be happy.”
Wednesday, May 20, 2009
Pakistan seeks $600m in emergency funds
Pakistan’s prime minister Yusuf Raza Gilani will seek at least US$600m in emergency funds from donors on Thursday to fund up to 2m internally displaced people from the embattled Swat valley – described by UN officials as one of the word’s worst refugee crises.
On Tuesday, the US government said it would provide US$110m in emergency aid in a move which President Barack Obama hoped would demonstrate his country’s support for Pakistan in its fight against extremists.
EDITOR’S CHOICE
Interview with Pakistan’s top finance official - May-21
Western diplomats warned that many Pakistanis who are already sceptical of support to the western world, notably the US, would intensify their opposition to future military offensives if the humanitarian crisis intensified.
Shaukat Tarin, the de facto Finance Minister told the Financial Times that they were looking for between US$600m to US$1bn in emergency relief funds.
Mr Tarin said the funds sought were only the first instalment in meeting the costs of the conflict in the Swat valley where government forces are fighting Taliban militants to thwart their creeping incursion into Pakistan. Hundreds of thousands have fled the region in recent weeks sparking one of the world’s worst humanitarian crises.
Hasan Askari Rizvi, a respected Pakistan commentator on political and security affairs said he believed the military operation had almost succeeded in Swat in either driving out or killing up to four thousand ‘Taliban’ militants. Up to 1,000 Taliban militants have been killed in the past week alone, according to government statistics.
However, Mr Rizvi warned, that a failure by donors to help to fund the engagement and also the relief operation would fuel domestic opposition to future such military action.
Mr Tarin said a meeting of the Friends of Pakistan - an international grouping of the country’s largest donors - will take place in Turkey later this year where Pakistan will formally seek support to fund annual security costs of about US$2.5b-US$3b. The Turkey meeting will follow last month’s meeting of the Friends group in Tokyo in which US$5.5bn were pledged in economic support to Pakistan.
“As far as the security is concerned, we have already said that this war on terror is now costing our economy US$8.5bn a year in terms of lost exports, lost investments, increased expenses and loss in revenue,” he said. “I believe direct annual cost of the security apparatus is about US$2.5b-US$3b in the next two years. This is for trying to raise another force and to give them equipment”.
A western diplomat said, it was important for the global community “to keep on encouraging Pakistan and keep on nudging it in the right direction by giving enough support for the refugees”.
On Tuesday, the US government said it would provide US$110m in emergency aid in a move which President Barack Obama hoped would demonstrate his country’s support for Pakistan in its fight against extremists.
EDITOR’S CHOICE
Interview with Pakistan’s top finance official - May-21
Western diplomats warned that many Pakistanis who are already sceptical of support to the western world, notably the US, would intensify their opposition to future military offensives if the humanitarian crisis intensified.
Shaukat Tarin, the de facto Finance Minister told the Financial Times that they were looking for between US$600m to US$1bn in emergency relief funds.
Mr Tarin said the funds sought were only the first instalment in meeting the costs of the conflict in the Swat valley where government forces are fighting Taliban militants to thwart their creeping incursion into Pakistan. Hundreds of thousands have fled the region in recent weeks sparking one of the world’s worst humanitarian crises.
Hasan Askari Rizvi, a respected Pakistan commentator on political and security affairs said he believed the military operation had almost succeeded in Swat in either driving out or killing up to four thousand ‘Taliban’ militants. Up to 1,000 Taliban militants have been killed in the past week alone, according to government statistics.
However, Mr Rizvi warned, that a failure by donors to help to fund the engagement and also the relief operation would fuel domestic opposition to future such military action.
Mr Tarin said a meeting of the Friends of Pakistan - an international grouping of the country’s largest donors - will take place in Turkey later this year where Pakistan will formally seek support to fund annual security costs of about US$2.5b-US$3b. The Turkey meeting will follow last month’s meeting of the Friends group in Tokyo in which US$5.5bn were pledged in economic support to Pakistan.
“As far as the security is concerned, we have already said that this war on terror is now costing our economy US$8.5bn a year in terms of lost exports, lost investments, increased expenses and loss in revenue,” he said. “I believe direct annual cost of the security apparatus is about US$2.5b-US$3b in the next two years. This is for trying to raise another force and to give them equipment”.
A western diplomat said, it was important for the global community “to keep on encouraging Pakistan and keep on nudging it in the right direction by giving enough support for the refugees”.
Gas Is Up; Drivers May Not Cut Back
Thanks to lower fuel costs and a proliferation of travel bargains, Americans are expected to hit the roads this Memorial Day weekend in bigger numbers than last year.
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Today's Business: Jad Mouawad on the Rebound in Oil Prices
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Times Topics: Oil and Gasoline
Last summer’s energy shock drove gasoline prices well above $4 a gallon and forced people to cut back on driving. Then oil prices plunged, and the stratospheric cost of a gallon of gas became a dim memory. But gasoline has been rising rapidly in recent weeks.
Gasoline is selling for an average of $2.33 a gallon, up from $2.06 just last month, according to AAA, the automobile club, and a steep rise from the recent low of $1.67 a gallon in December. A cutback in refining production and the expected rebound in driving this weekend are helping to push up prices at the pump.
Some analysts expect to see gas rise above $2.50 a gallon this summer.
The number of people traveling by car this weekend is projected to rise by 2.7 percent compared with 2008, to 27 million people, according to projections from AAA. Last year, road travel fell by 9.6 percent when prices surged, according to the automobile group.
“The bargains and the cheaper gas, combined with the stressed-out consumer who is ready for a break, will trump other concerns,” Robert L. Darbelnet, AAA’s chief executive, told reporters last week. “It is a slight uptick. In this economy, any uptick over last year is a positive sign.”
The jump in demand that accompanies summer travel is just one of many factors that are driving up energy prices.
Oil prices rose above $60 a barrel on Wednesday in New York, settling at $62.04, the highest level since November, after a weekly report from the Energy Department showed a drop in commercial inventories and gasoline production was curbed by fires at two refineries, in Texas and Pennsylvania.
Some analysts also say they believe that the worst of the economic slowdown may be over, even if a recovery could take a long time, infusing some optimism into the oil market. The Energy Department said recently that oil prices had risen after suggestions the economy “may have reached a turning point in the current recession.”
“Oil prices have improved markedly in recent weeks, largely on ostensible signs that the global economy has begun its long-awaited recovery,” according to a report by PFC Energy, a consultancy. “But while evidence is mounting that the worst of the contraction is behind us, a broad economic recovery is still some time away.”
Oil markets are also weighing the effect on global supplies of a fresh round of violence in the Niger Delta, Nigeria’s oil-rich region. Last week, the Nigerian government started its biggest military offensive in the delta in years, mounting helicopter raids and naval attacks on militant camps.
The largest rebel group in the region, the Movement for the Emancipation of the Niger Delta, responded with calls for “an all-out war” and said it blew up two pipelines over the weekend.
The fighting is threatening to further disrupt supplies from Nigeria, Africa’s top oil and gas exporter. Security forces clashed with militants on Tuesday near a flow station operated by Chevron in the western part of the Niger Delta, according to a report from Reuters. On Wednesday, Eni, the Italian oil company, said it was invoking emergency contract provisions that allow it to suspend export obligations at its Brass River terminal in the delta.
Nigeria’s state oil company, NNPC, said there had been no significant impact on oil production so far. “The success of the military campaign means that production can go on,” Levi Ajuonuma, a spokesman for the company, told Reuters.
Higher prices will be the main topic on the agenda of the Organization of the Petroleum Exporting Countries, whose members meet next week in Vienna to consider new production targets for the next few months. More than anything else, it was action by the members of the OPEC cartel that has helped push prices up since the beginning of the year.
After peaking at a record close of $145.29 a barrel last summer, oil prices slumped to a closing low of $33.87 a barrel by December as global credit markets froze and the global economy went into a tailspin.
In response, OPEC members agreed to cut their output by 4.2 million barrels during several rounds of feverish meetings over the last eight months, helping set a floor on the market.
Despite the recent market rally and fragile optimism about the state of the economy, oil consumption in the United States, and across much of the world, still remains weak. In its latest monthly report, the International Energy Agency estimated that daily average oil consumption in 2009 would drop to 83.2 million barrels, a drop of 2.6 million barrels, or 3 percent, from last year.
“The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010,” the energy agency said. “A quick recovery remains so far elusive.”
In the United States, oil demand has dropped without interruption for 15 months. According to the energy agency, oil demand fell by 5.9 percent in March, compared with the same time last year.
But the Memorial Day weekend could reverse that trend, if only temporarily, analysts said.
“You give the American consumers a reduction in price and consuming confidence is getting slightly better, I think people go back and take their vacations,” said Lawrence Goldstein, an energy analyst. “They don’t go on a spending binge, but they ease up a little bit.”
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Today's Business: Jad Mouawad on the Rebound in Oil Prices
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Times Topics: Oil and Gasoline
Last summer’s energy shock drove gasoline prices well above $4 a gallon and forced people to cut back on driving. Then oil prices plunged, and the stratospheric cost of a gallon of gas became a dim memory. But gasoline has been rising rapidly in recent weeks.
Gasoline is selling for an average of $2.33 a gallon, up from $2.06 just last month, according to AAA, the automobile club, and a steep rise from the recent low of $1.67 a gallon in December. A cutback in refining production and the expected rebound in driving this weekend are helping to push up prices at the pump.
Some analysts expect to see gas rise above $2.50 a gallon this summer.
The number of people traveling by car this weekend is projected to rise by 2.7 percent compared with 2008, to 27 million people, according to projections from AAA. Last year, road travel fell by 9.6 percent when prices surged, according to the automobile group.
“The bargains and the cheaper gas, combined with the stressed-out consumer who is ready for a break, will trump other concerns,” Robert L. Darbelnet, AAA’s chief executive, told reporters last week. “It is a slight uptick. In this economy, any uptick over last year is a positive sign.”
The jump in demand that accompanies summer travel is just one of many factors that are driving up energy prices.
Oil prices rose above $60 a barrel on Wednesday in New York, settling at $62.04, the highest level since November, after a weekly report from the Energy Department showed a drop in commercial inventories and gasoline production was curbed by fires at two refineries, in Texas and Pennsylvania.
Some analysts also say they believe that the worst of the economic slowdown may be over, even if a recovery could take a long time, infusing some optimism into the oil market. The Energy Department said recently that oil prices had risen after suggestions the economy “may have reached a turning point in the current recession.”
“Oil prices have improved markedly in recent weeks, largely on ostensible signs that the global economy has begun its long-awaited recovery,” according to a report by PFC Energy, a consultancy. “But while evidence is mounting that the worst of the contraction is behind us, a broad economic recovery is still some time away.”
Oil markets are also weighing the effect on global supplies of a fresh round of violence in the Niger Delta, Nigeria’s oil-rich region. Last week, the Nigerian government started its biggest military offensive in the delta in years, mounting helicopter raids and naval attacks on militant camps.
The largest rebel group in the region, the Movement for the Emancipation of the Niger Delta, responded with calls for “an all-out war” and said it blew up two pipelines over the weekend.
The fighting is threatening to further disrupt supplies from Nigeria, Africa’s top oil and gas exporter. Security forces clashed with militants on Tuesday near a flow station operated by Chevron in the western part of the Niger Delta, according to a report from Reuters. On Wednesday, Eni, the Italian oil company, said it was invoking emergency contract provisions that allow it to suspend export obligations at its Brass River terminal in the delta.
Nigeria’s state oil company, NNPC, said there had been no significant impact on oil production so far. “The success of the military campaign means that production can go on,” Levi Ajuonuma, a spokesman for the company, told Reuters.
Higher prices will be the main topic on the agenda of the Organization of the Petroleum Exporting Countries, whose members meet next week in Vienna to consider new production targets for the next few months. More than anything else, it was action by the members of the OPEC cartel that has helped push prices up since the beginning of the year.
After peaking at a record close of $145.29 a barrel last summer, oil prices slumped to a closing low of $33.87 a barrel by December as global credit markets froze and the global economy went into a tailspin.
In response, OPEC members agreed to cut their output by 4.2 million barrels during several rounds of feverish meetings over the last eight months, helping set a floor on the market.
Despite the recent market rally and fragile optimism about the state of the economy, oil consumption in the United States, and across much of the world, still remains weak. In its latest monthly report, the International Energy Agency estimated that daily average oil consumption in 2009 would drop to 83.2 million barrels, a drop of 2.6 million barrels, or 3 percent, from last year.
“The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010,” the energy agency said. “A quick recovery remains so far elusive.”
In the United States, oil demand has dropped without interruption for 15 months. According to the energy agency, oil demand fell by 5.9 percent in March, compared with the same time last year.
But the Memorial Day weekend could reverse that trend, if only temporarily, analysts said.
“You give the American consumers a reduction in price and consuming confidence is getting slightly better, I think people go back and take their vacations,” said Lawrence Goldstein, an energy analyst. “They don’t go on a spending binge, but they ease up a little bit.”
Crude Oil Snaps Three Days of Gains on Equities, Lower Demand
May 21 (Bloomberg) -- Crude oil fell in New York, snapping three days of gains, after U.S. stocks retreated as the Federal Reserve predicted a deeper recession and a government report showed a drop in fuel demand.
Oil declined after minutes of the April 28-29 Federal Open Market Committee meeting showed yesterday that some members judged last month that the central bank may need to boost its purchases of assets to secure a stronger economic recovery. Total U.S. daily fuel demand in the four weeks ended May 15 fell 7.6 percent from a year earlier, an Energy Department report showed yesterday.
“The market seemed to think that the minutes of the FOMC meeting were somewhat less optimistic than they had hoped, it did seem to drag on the equities,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “I just don’t think the fundamentals of the oil market can support prices up around the early $60s given that we really haven’t seen any improvement in demand.”
Crude oil for July delivery dropped as much as 69 cents, or 1.1 percent, to $61.35, and was at $61.41 on the New York Mercantile Exchange at 11:14 a.m. in Singapore. Yesterday, oil rose $1.94, or 3.2 percent, to settle at $62.04 a barrel, the highest settlement since Nov. 10.
The Standard & Poor’s 500 Index slipped 0.5 percent to 903.47 and The Dow Jones Industrial Average lost 0.6 percent to 8,422.04.
Refinery Rates
Crude oil may be poised to fall further, based on technical indicators used by traders. The 30-day relative strength index has climbed to 60.58 today. The last time it was near this level, at 60.90 on July 14, the oil price started a 22 percent drop from $145.18 a barrel to $112.87 on Aug. 18.
U.S. refineries operated at 81.8 percent of capacity, down 1.9 percentage points from the prior week, the Energy Department report showed.
“It was a pretty significant drop,” Hassall said. “We are operating at the moment almost 10 percent below the five- year average rate, which is really an indication of the demand environment.”
Disruptions at U.S. refineries included the shutdown of the catalytic cracker after a fire yesterday at Flint Hills Resources LLC’s Corpus Christi, Texas, plant. A catalytic cracker makes products such as gasoline and diesel. Sunoco Inc. shut a gasoline-making unit at its Marcus Hook, Pennsylvania, refinery after a fire on May 17.
Fighting between Nigerian troops and the militant group Movement for the Emancipation of the Niger Delta erupted on May 13. Nigeria produces low-sulfur oil, prized by U.S. refiners because of the proportion of high-value gasoline it yields.
Fizzling Rally
“So far the trend is up,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “I would still be cautious for what is to come after Memorial Day and the OPEC meeting. The rally could fizzle and the markets could calm for the summer and stay flat to down.”
The Organization of Petroleum Exporting Countries is unlikely to reduce output further when it meets on May 28, a member of Kuwait’s Supreme Petroleum Council was cited as saying by state-owned KUNA news agency yesterday. OPEC is still implementing a series of supply cuts announced last year.
The 11 OPEC members with quotas, all except Iraq, pumped 25.812 million barrels a day last month, a report from the group on May 13 said, citing secondary sources, which include estimates from analysts and news organizations. That’s up 225,000 barrels a day from March.
Gasoline for June delivery declined 1.65 cents to $1.7930 a gallon in New York at 10:39 a.m. Singapore time. Futures touched $1.8724 yesterday, the highest intraday price since Oct. 15.
Inventory decline
Crude stockpiles dropped 2.11 million barrels to 368.5 million in the week ended May 15, the Energy Department said. A 400,000-barrel decrease was forecast, according to a Bloomberg News survey.
Gasoline supplies plunged 4.34 million barrels to 204 million. A 1.2 million-barrel drop was forecast, according to the median estimate of 15 analysts surveyed by Bloomberg News.
Energy and metals futures also gained after the dollar fell to the lowest level versus the euro in four months, bolstering demand for commodities as an alternative investment. The dollar traded at $1.3780 at 6:02 a.m. in Tokyo, after dropping 1.1 percent and touching $1.3830, the weakest level since Jan. 5.
Gold futures for June delivery rose $10.70, or 1.2 percent, to $937.40 an ounce yesterday on the Comex division of Nymex, the highest settlement since March 26. The Reuters/Jefferies CRB Index of 19 commodities increased 3.39 points, or 1.4 percent, to 244.84, the highest since Nov. 26.
Brent crude for July settlement fell as much as 64 cents, or 1.1 percent, to $59.95 a barrel on London’s ICE Futures Europe exchange.
Oil declined after minutes of the April 28-29 Federal Open Market Committee meeting showed yesterday that some members judged last month that the central bank may need to boost its purchases of assets to secure a stronger economic recovery. Total U.S. daily fuel demand in the four weeks ended May 15 fell 7.6 percent from a year earlier, an Energy Department report showed yesterday.
“The market seemed to think that the minutes of the FOMC meeting were somewhat less optimistic than they had hoped, it did seem to drag on the equities,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “I just don’t think the fundamentals of the oil market can support prices up around the early $60s given that we really haven’t seen any improvement in demand.”
Crude oil for July delivery dropped as much as 69 cents, or 1.1 percent, to $61.35, and was at $61.41 on the New York Mercantile Exchange at 11:14 a.m. in Singapore. Yesterday, oil rose $1.94, or 3.2 percent, to settle at $62.04 a barrel, the highest settlement since Nov. 10.
The Standard & Poor’s 500 Index slipped 0.5 percent to 903.47 and The Dow Jones Industrial Average lost 0.6 percent to 8,422.04.
Refinery Rates
Crude oil may be poised to fall further, based on technical indicators used by traders. The 30-day relative strength index has climbed to 60.58 today. The last time it was near this level, at 60.90 on July 14, the oil price started a 22 percent drop from $145.18 a barrel to $112.87 on Aug. 18.
U.S. refineries operated at 81.8 percent of capacity, down 1.9 percentage points from the prior week, the Energy Department report showed.
“It was a pretty significant drop,” Hassall said. “We are operating at the moment almost 10 percent below the five- year average rate, which is really an indication of the demand environment.”
Disruptions at U.S. refineries included the shutdown of the catalytic cracker after a fire yesterday at Flint Hills Resources LLC’s Corpus Christi, Texas, plant. A catalytic cracker makes products such as gasoline and diesel. Sunoco Inc. shut a gasoline-making unit at its Marcus Hook, Pennsylvania, refinery after a fire on May 17.
Fighting between Nigerian troops and the militant group Movement for the Emancipation of the Niger Delta erupted on May 13. Nigeria produces low-sulfur oil, prized by U.S. refiners because of the proportion of high-value gasoline it yields.
Fizzling Rally
“So far the trend is up,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “I would still be cautious for what is to come after Memorial Day and the OPEC meeting. The rally could fizzle and the markets could calm for the summer and stay flat to down.”
The Organization of Petroleum Exporting Countries is unlikely to reduce output further when it meets on May 28, a member of Kuwait’s Supreme Petroleum Council was cited as saying by state-owned KUNA news agency yesterday. OPEC is still implementing a series of supply cuts announced last year.
The 11 OPEC members with quotas, all except Iraq, pumped 25.812 million barrels a day last month, a report from the group on May 13 said, citing secondary sources, which include estimates from analysts and news organizations. That’s up 225,000 barrels a day from March.
Gasoline for June delivery declined 1.65 cents to $1.7930 a gallon in New York at 10:39 a.m. Singapore time. Futures touched $1.8724 yesterday, the highest intraday price since Oct. 15.
Inventory decline
Crude stockpiles dropped 2.11 million barrels to 368.5 million in the week ended May 15, the Energy Department said. A 400,000-barrel decrease was forecast, according to a Bloomberg News survey.
Gasoline supplies plunged 4.34 million barrels to 204 million. A 1.2 million-barrel drop was forecast, according to the median estimate of 15 analysts surveyed by Bloomberg News.
Energy and metals futures also gained after the dollar fell to the lowest level versus the euro in four months, bolstering demand for commodities as an alternative investment. The dollar traded at $1.3780 at 6:02 a.m. in Tokyo, after dropping 1.1 percent and touching $1.3830, the weakest level since Jan. 5.
Gold futures for June delivery rose $10.70, or 1.2 percent, to $937.40 an ounce yesterday on the Comex division of Nymex, the highest settlement since March 26. The Reuters/Jefferies CRB Index of 19 commodities increased 3.39 points, or 1.4 percent, to 244.84, the highest since Nov. 26.
Brent crude for July settlement fell as much as 64 cents, or 1.1 percent, to $59.95 a barrel on London’s ICE Futures Europe exchange.
Singapore quarterly growth falls 14.6%
Singapore’s economy contracted by a record 10.1 per cent in the first three months of 2009 amidst signs that the city-state’s worst postwar recession may have bottomed.
The government maintained its forecast that the economy will contract between 6 per cent and 9 per cent this year in spite of the first quarter’s revised figures that showed a slight improvement over earlier official estimates for the January-March period.
EDITOR’S CHOICE
Indonesia’s Yudhoyono eyes 7% growth by 2014 - May-20
Tokyo divines hope in record output decline - May-21
On a quarter-on-quarter, seasonally adjusted annualised basis, the economy shrank by 14.6 per cent against the government’s preliminary estimate a month ago of 19.7 per cent. The economic contraction appeared to be slowing since growth in the fourth quarter of 2008 fell by 16.4 per cent from the previous quarter.
Officials had estimated in April that the economy in the first quarter would contract by 11.5 per cent from a year ago. The economy contracted by 4.2 per cent in the fourth quarter of 2008 from a year earlier.
The government has warned, however, that trade-dependent economy faces a long and painful recovery, with some analysts believing that the unemployment rate could increase in the coming months. Exports declined in April after posting two months of recovery.
”There are some positive signs of a bottoming out. But it is not clear that we have begun to rebound from the bottom,” said Ravi Menon at the ministry of trade and industry, which released the data. Manufacturing contracted by 26.6 per cent and services by 10.3 per cent.
The government maintained its inflation rate forecast at minus one per cent to plus one percent as inflation slowed to 2.1 per cent in the first quarter from 5.4 per cent in the fourth quarter of 2008 due to a fall in commodity prices.
The government maintained its forecast that the economy will contract between 6 per cent and 9 per cent this year in spite of the first quarter’s revised figures that showed a slight improvement over earlier official estimates for the January-March period.
EDITOR’S CHOICE
Indonesia’s Yudhoyono eyes 7% growth by 2014 - May-20
Tokyo divines hope in record output decline - May-21
On a quarter-on-quarter, seasonally adjusted annualised basis, the economy shrank by 14.6 per cent against the government’s preliminary estimate a month ago of 19.7 per cent. The economic contraction appeared to be slowing since growth in the fourth quarter of 2008 fell by 16.4 per cent from the previous quarter.
Officials had estimated in April that the economy in the first quarter would contract by 11.5 per cent from a year ago. The economy contracted by 4.2 per cent in the fourth quarter of 2008 from a year earlier.
The government has warned, however, that trade-dependent economy faces a long and painful recovery, with some analysts believing that the unemployment rate could increase in the coming months. Exports declined in April after posting two months of recovery.
”There are some positive signs of a bottoming out. But it is not clear that we have begun to rebound from the bottom,” said Ravi Menon at the ministry of trade and industry, which released the data. Manufacturing contracted by 26.6 per cent and services by 10.3 per cent.
The government maintained its inflation rate forecast at minus one per cent to plus one percent as inflation slowed to 2.1 per cent in the first quarter from 5.4 per cent in the fourth quarter of 2008 due to a fall in commodity prices.
Tuesday, May 19, 2009
Japan Economy Shrinks Record 15.2% as Exports, Spending Plunge
May 20 (Bloomberg) -- Japan’s economy shrank by a record last quarter as exports collapsed and consumers and businesses slashed spending, a decline that probably marked the low point in the country’s worst recession since World War II.
Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.
Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
“There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added, there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect.
The yen traded at 95.59 per dollar at 12:56 p.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.3 percent. Economists surveyed predicted the economy would shrink 16.1 percent.
Worse Than U.S.
GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter.
Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused.
“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”
Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs.
May Grow
Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September.
“Japan, first of all, will get a big boost from fiscal stimulus,” Thomas Byrne, senior vice president of Moody’s Investors Service, said in an interview in Tokyo. “Second, if the global economy picks up a little bit, that will help tremendously in Japan because of its dependence on exports.”
Byrne said Moody’s is unlikely to cut Japan’s debt rating over the next year because investors are willing to buy bonds that will fund the stimulus plans. Moody’s unified Japan’s ratings at Aa2 this week, raising the local-currency assessment from Aa3 and lowering the foreign-currency view from Aaa.
Replenishing Inventories
“While the economy will continue to be in a severe state, I expect less pressure from inventory adjustments and the stimulus package to provide support,” Economy and Fiscal Policy Minister Kaoru Yosano said after today’s report.
Falling inventories accounted for 0.3 percentage point, or about a tenth, of last quarter’s contraction. Companies including Honda Motor Corp. have cut stockpiles at a quicker rate than sales have declined, giving them room to boost output.
Honda plans to increase production in Japan this quarter as dealerships clear inventories, the Wall Street Journal reported last week. Auto sales in Japan and the U.S. may have “bottomed,” Fuji Heavy Industries Ltd. President Ikuo Mori said in Tokyo today. Fuji Heavy makes Subaru-brand cars.
Still, the failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery. Toyota, Hitachi, and Panasonic Corp. all forecast continued losses in the current business year. Panasonic said last week it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February.
“We basically bottomed out,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. Even so, “on the consumer spending side you’ve got a very clear negative from the severe labor market adjustment.”
Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.
Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
“There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added, there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect.
The yen traded at 95.59 per dollar at 12:56 p.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.3 percent. Economists surveyed predicted the economy would shrink 16.1 percent.
Worse Than U.S.
GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter.
Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused.
“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”
Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs.
May Grow
Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September.
“Japan, first of all, will get a big boost from fiscal stimulus,” Thomas Byrne, senior vice president of Moody’s Investors Service, said in an interview in Tokyo. “Second, if the global economy picks up a little bit, that will help tremendously in Japan because of its dependence on exports.”
Byrne said Moody’s is unlikely to cut Japan’s debt rating over the next year because investors are willing to buy bonds that will fund the stimulus plans. Moody’s unified Japan’s ratings at Aa2 this week, raising the local-currency assessment from Aa3 and lowering the foreign-currency view from Aaa.
Replenishing Inventories
“While the economy will continue to be in a severe state, I expect less pressure from inventory adjustments and the stimulus package to provide support,” Economy and Fiscal Policy Minister Kaoru Yosano said after today’s report.
Falling inventories accounted for 0.3 percentage point, or about a tenth, of last quarter’s contraction. Companies including Honda Motor Corp. have cut stockpiles at a quicker rate than sales have declined, giving them room to boost output.
Honda plans to increase production in Japan this quarter as dealerships clear inventories, the Wall Street Journal reported last week. Auto sales in Japan and the U.S. may have “bottomed,” Fuji Heavy Industries Ltd. President Ikuo Mori said in Tokyo today. Fuji Heavy makes Subaru-brand cars.
Still, the failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery. Toyota, Hitachi, and Panasonic Corp. all forecast continued losses in the current business year. Panasonic said last week it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February.
“We basically bottomed out,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. Even so, “on the consumer spending side you’ve got a very clear negative from the severe labor market adjustment.”
World Bank Says China Recovery Hopes May Be Premature
May 20 (Bloomberg) -- Enthusiasm about an economic recovery in China may be “premature” as private investment lags behind government spending, the World Bank said.
“Until we see a recovery in private investment, it’s hard to get too excited about the future,” David Dollar, country director for China, said at a forum in Beijing today.
The Shanghai Composite Index has climbed 47 percent this year on optimism that a 4 trillion yuan ($586 billion) stimulus package will revive growth after exports collapsed because of the global recession. The world’s third-biggest economy is “struggling” and may fall short of the government’s target of an 8 percent expansion this year, Oppenheimer & Co. said this week.
Private investment, the main driver of growth, was “way down” in the first quarter, Dollar said, without citing a figure. Manufacturers have excess capacity and “a lot of the real-estate sector is over-built,” he said.
Shanghai’s stock index fell 0.1 percent as of the break in trading at 11:30 a.m. local time.
While China is the only one of the world’s five biggest economies that is still expanding, growth slowed to 6.1 percent in the first quarter, the weakest pace since at least 1999.
Stimulus spending has “stabilized” the Chinese economy, Dollar said, adding that it can’t be the source of long-term sustainable growth and the country needs to do more to increase consumption.
Borrowing Costs
China should raise the ceiling on interest rates for deposits, encouraging spending by improving returns for savers, he said.
A 30.5 percent gain in urban fixed-asset investment in the first four months from a year earlier, sparked by the stimulus plan, stoked investors’ optimism that a recovery is building.
Mark Williams, an economist with Capital Economics Ltd. in London, said May 15 that the official numbers don’t tally with other indicators, such as steel prices and excavator sales, suggesting that investment remains weak.
A recovery “lacks momentum” and hopes for a rapid rebound are receding, Williams said.
The central bank cautioned in a quarterly monetary policy report released May 6 that surging lending has been overly concentrated on government projects at the expense of small businesses. The recovery’s foundations aren’t solid, it said.
The World Bank is a lender formed after World War II to help nations reduce poverty.
“Until we see a recovery in private investment, it’s hard to get too excited about the future,” David Dollar, country director for China, said at a forum in Beijing today.
The Shanghai Composite Index has climbed 47 percent this year on optimism that a 4 trillion yuan ($586 billion) stimulus package will revive growth after exports collapsed because of the global recession. The world’s third-biggest economy is “struggling” and may fall short of the government’s target of an 8 percent expansion this year, Oppenheimer & Co. said this week.
Private investment, the main driver of growth, was “way down” in the first quarter, Dollar said, without citing a figure. Manufacturers have excess capacity and “a lot of the real-estate sector is over-built,” he said.
Shanghai’s stock index fell 0.1 percent as of the break in trading at 11:30 a.m. local time.
While China is the only one of the world’s five biggest economies that is still expanding, growth slowed to 6.1 percent in the first quarter, the weakest pace since at least 1999.
Stimulus spending has “stabilized” the Chinese economy, Dollar said, adding that it can’t be the source of long-term sustainable growth and the country needs to do more to increase consumption.
Borrowing Costs
China should raise the ceiling on interest rates for deposits, encouraging spending by improving returns for savers, he said.
A 30.5 percent gain in urban fixed-asset investment in the first four months from a year earlier, sparked by the stimulus plan, stoked investors’ optimism that a recovery is building.
Mark Williams, an economist with Capital Economics Ltd. in London, said May 15 that the official numbers don’t tally with other indicators, such as steel prices and excavator sales, suggesting that investment remains weak.
A recovery “lacks momentum” and hopes for a rapid rebound are receding, Williams said.
The central bank cautioned in a quarterly monetary policy report released May 6 that surging lending has been overly concentrated on government projects at the expense of small businesses. The recovery’s foundations aren’t solid, it said.
The World Bank is a lender formed after World War II to help nations reduce poverty.
Asian Stocks Advance, Led by Mitsubishi; T&D Slumps on Loss
May 20 (Bloomberg) -- Asian stocks rose, led by commodity companies, as Goldman, Sachs & Co. recommended buying Mitsubishi Corp. shares. Finance companies declined.
Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
Brokerage Upgrade
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
Billabong, T&D
T&D Holdings slumped 13 percent to 2,830 yen. The company reported a loss of 89.1 billion yen ($931 million) in the 12 months ended March 31, compared with a 36.7 billion yen profit the previous year. Nomura Holdings Inc. downgraded T&D’s stock to “reduce” from “buy” after the results, which compared with a February forecast for an 84 billion yen loss.
Australia’s Billabong tumbled 16 percent to A$8.49. The company sold about A$230 million ($177 million) in new stock to institutional holders at A$7.50 a share. James Hardie slipped 2.3 percent to A$4.29. The company said fourth-quarter earnings fell 57 percent due to the U.S. housing slump.
Kawasaki Kisen Kaisha added 2.9 percent to 397 yen. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping company, gained 1.9 percent to 632 yen. The Baltic Dry Index, a measure of shipping costs for commodities, jumped for a 13th straight session to a level not seen in seven months.
Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
Brokerage Upgrade
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
Billabong, T&D
T&D Holdings slumped 13 percent to 2,830 yen. The company reported a loss of 89.1 billion yen ($931 million) in the 12 months ended March 31, compared with a 36.7 billion yen profit the previous year. Nomura Holdings Inc. downgraded T&D’s stock to “reduce” from “buy” after the results, which compared with a February forecast for an 84 billion yen loss.
Australia’s Billabong tumbled 16 percent to A$8.49. The company sold about A$230 million ($177 million) in new stock to institutional holders at A$7.50 a share. James Hardie slipped 2.3 percent to A$4.29. The company said fourth-quarter earnings fell 57 percent due to the U.S. housing slump.
Kawasaki Kisen Kaisha added 2.9 percent to 397 yen. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping company, gained 1.9 percent to 632 yen. The Baltic Dry Index, a measure of shipping costs for commodities, jumped for a 13th straight session to a level not seen in seven months.
Monday, May 18, 2009
Stevens Says Australia Economy Aided By Rate Cuts, China Growth
May 19 (Bloomberg) -- Australia’s economy is in good shape to benefit from a global recovery later this year as interest- rate cuts drive domestic demand and a pickup in China stokes exports, central bank Governor Glenn Stevens said today.
Australia “should be in a relatively good position and well placed to take part in a renewed international expansion,” Stevens said in Sydney. “That said, most observers think that the early part of any new global expansion will be characterized by pretty slow growth.”
The Reserve Bank decided against cutting its interest rate this month on signs record policy easing and government stimulus are stoking demand, the board said in minutes of the May 5 meeting released today. Australia is benefiting from a sound banking system and households are responding to the lowest borrowing costs in half a century, Stevens said, after recent reports showed retail sales and mortgage lending surged in March.
“The Reserve Bank is happy with policy at the moment,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “They’re saying we’ll eventually drag ourselves out of the current downturn, but it’s going to be a drawn-out affair.”
The Australian dollar traded at 76.59 U.S. cents at 1:07 p.m. in Sydney from 76.47 cents before the speech was released. The yield on the two-year government bond rose 9 basis points to 3.52 percent from yesterday.
Economic Stimulus
Australia’s economy is likely to “record better outcomes than most other advanced economies in 2009 and 2010,” the central bank’s minutes said.
The government last week announced a A$22 billion ($16.9 billion) program of spending on roads, rail, ports, hospitals and education, adding to cash handouts already allocated earlier this year.
The central bank cut its benchmark rate by a record 4.25 percentage points between early September and April to 3 percent.
“Certainly for the household sector, this is an expansionary monetary policy,” Stevens said, when answering questions after his speech. “The way households are responding confirms that.”
He added that there are signs of “quite a significant” pickup in the economy of China, Australia’s largest trading partner. The central bank’s May 5 minutes noted that export volumes from Australia had held up better than expected in the first quarter.
Australia recorded its second-largest trade surplus on record in March as agricultural exports gained.
Job Gains
Employers unexpectedly added 27,300 workers in April, pushing the jobless rate down to 5.4 percent from 5.7 percent, the first drop in eight months, the statistics bureau said this month. Retail sales rose 2.2 percent in March, four times as much as economists forecast.
“Central bankers can finally see some light at the end of the tunnel,” said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. “While they are understandably cautious, the hint of optimism is there.”
Federal Reserve Bank of Minneapolis President Gary Stern said the U.S. economy is approaching the trough of the worst recession in at least half a century. “There have been a number of more favorable developments in recent months,” Stern said in an interview last week.
The question faced by the Reserve Bank board two weeks ago was “was whether monetary policy should be eased further at this stage, or whether the cash rate should be maintained at its current level,” according to the May 5 minutes.
Rate Expectations
Investors expect Australia’s benchmark interest rate will be lower in 12 months time, according to a Credit Suisse Group index based on swaps trading.
Traders forecast the overnight cash rate target will be 8 basis points lower in 12 months, the index showed at 1:04 p.m. in Sydney. Late yesterday, they forecast 16 basis points of reductions and at the start of April, they tipped 37 basis points of adjustment.
While it’s “too soon to say” whether the global economy is rebounding, “developments over recent months are certainly consistent with the view that a recovery will get underway towards the end of the year,” Stevens said.
The nation’s economy will shrink 1.25 percent in the 12 months through June, before expanding 0.25 percent the following fiscal year, the central bank forecast last week. Three months earlier, the bank predicted growth of 0.25 percent this fiscal year and 1.25 percent a year later.
Australia “should be in a relatively good position and well placed to take part in a renewed international expansion,” Stevens said in Sydney. “That said, most observers think that the early part of any new global expansion will be characterized by pretty slow growth.”
The Reserve Bank decided against cutting its interest rate this month on signs record policy easing and government stimulus are stoking demand, the board said in minutes of the May 5 meeting released today. Australia is benefiting from a sound banking system and households are responding to the lowest borrowing costs in half a century, Stevens said, after recent reports showed retail sales and mortgage lending surged in March.
“The Reserve Bank is happy with policy at the moment,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “They’re saying we’ll eventually drag ourselves out of the current downturn, but it’s going to be a drawn-out affair.”
The Australian dollar traded at 76.59 U.S. cents at 1:07 p.m. in Sydney from 76.47 cents before the speech was released. The yield on the two-year government bond rose 9 basis points to 3.52 percent from yesterday.
Economic Stimulus
Australia’s economy is likely to “record better outcomes than most other advanced economies in 2009 and 2010,” the central bank’s minutes said.
The government last week announced a A$22 billion ($16.9 billion) program of spending on roads, rail, ports, hospitals and education, adding to cash handouts already allocated earlier this year.
The central bank cut its benchmark rate by a record 4.25 percentage points between early September and April to 3 percent.
“Certainly for the household sector, this is an expansionary monetary policy,” Stevens said, when answering questions after his speech. “The way households are responding confirms that.”
He added that there are signs of “quite a significant” pickup in the economy of China, Australia’s largest trading partner. The central bank’s May 5 minutes noted that export volumes from Australia had held up better than expected in the first quarter.
Australia recorded its second-largest trade surplus on record in March as agricultural exports gained.
Job Gains
Employers unexpectedly added 27,300 workers in April, pushing the jobless rate down to 5.4 percent from 5.7 percent, the first drop in eight months, the statistics bureau said this month. Retail sales rose 2.2 percent in March, four times as much as economists forecast.
“Central bankers can finally see some light at the end of the tunnel,” said Michael Blythe, chief economist at Commonwealth Bank of Australia in Sydney. “While they are understandably cautious, the hint of optimism is there.”
Federal Reserve Bank of Minneapolis President Gary Stern said the U.S. economy is approaching the trough of the worst recession in at least half a century. “There have been a number of more favorable developments in recent months,” Stern said in an interview last week.
The question faced by the Reserve Bank board two weeks ago was “was whether monetary policy should be eased further at this stage, or whether the cash rate should be maintained at its current level,” according to the May 5 minutes.
Rate Expectations
Investors expect Australia’s benchmark interest rate will be lower in 12 months time, according to a Credit Suisse Group index based on swaps trading.
Traders forecast the overnight cash rate target will be 8 basis points lower in 12 months, the index showed at 1:04 p.m. in Sydney. Late yesterday, they forecast 16 basis points of reductions and at the start of April, they tipped 37 basis points of adjustment.
While it’s “too soon to say” whether the global economy is rebounding, “developments over recent months are certainly consistent with the view that a recovery will get underway towards the end of the year,” Stevens said.
The nation’s economy will shrink 1.25 percent in the 12 months through June, before expanding 0.25 percent the following fiscal year, the central bank forecast last week. Three months earlier, the bank predicted growth of 0.25 percent this fiscal year and 1.25 percent a year later.
Asian Stocks Rise on Growth Optimism; Toyota, PetroChina Gain
May 19 (Bloomberg) -- Asian stocks rose, led by finance companies, as U.S. banks applied to repay relief funds to the government and a drop in borrowing costs stoked optimism the financial crisis is easing.
Mitsubishi UFJ Financial Group Ltd. gained 5.6 percent in Tokyo as the London interbank offered rate fell the most in two months. Toyota Motor Corp., which gets a third of its sales in North America, rose 2.8 percent as the yen weakened. PetroChina Co., the nation’s biggest oil producer, surged 6 percent in Hong Kong as Goldman Sachs Group Inc. predicted oil prices will rise. Futures on India’s Nifty Index climbed 5 percent following a surge in American depositary receipts on election results.
“There are indications the banking system in the U.S. and parts of Europe are improving,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. “That means the recovery will occur perhaps sooner than expected a few months ago.”
The MSCI Asia Pacific Index advanced 2.5 percent to 99.24 at 1:16 p.m. in Tokyo, with finance companies accounting for 34 percent of the increase. The gauge has climbed 40 percent from a more than five-year low on March 9.
“When we look back on these times, we’ll see the global economy bottomed out in the April-June period,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Japan’s Nikkei 225 Stock Average climbed 3 percent to 9,306.76. Australia’s S&P/ASX 200 Index added 2.2 percent and Hong Kong’s Hang Seng Index jumped 3.1 percent. Trading in India is due to resume today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
‘More Confident’
China Mobile Ltd. climbed 4.6 percent in Hong Kong trading on speculation the company will seek acquisitions. Asahi Glass Co., which makes glass substrates for plasma-display panels, surged 8.9 percent in Tokyo after Daiwa Securities Group Inc. recommended investors buy the stock. Filinvest Land Inc. rose 4.7 percent in Manila on brokerage upgrades.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley applied to repay the combined $45 billion they received in October from the government’s Troubled Asset Relief Program, said people familiar with the matter.
“U.S. financial institutions paying back government aid is a good sign that they are becoming more confident,” said Yoji Takeda, who manages $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Macro economic data have been showing signs of bottoming. We need to see more of this for a sustained rally.”
Borrowing Costs
Mitsubishi UFJ, Japan’s biggest publicly traded bank, advanced 5.6 percent to 625 yen. Westpac Banking Corp., Australia’s biggest lender by market value, added 2.8 percent to A$20.07. HSBC Holdings Plc, Europe’s largest lender, gained 5 percent to HK$67.50 in Hong Kong.
The three-month Libor had its biggest decline since March 19 yesterday, according to British Bankers’ Association data. It has fallen for the past 34 days, as credit markets thawed amid record low interest rates and rising customer deposits.
“We’ve seen credit spreads coming back dramatically and global and Libor rates contracting,” said Ausbil’s Xiradis. “Those are good lead indicators.”
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as low as 96.62 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday.
Overseas Sales
Toyota rose 3.7 percent to 3,690 yen on speculation a weaker yen will boost the value of overseas sales. Canon Inc., which gets 28 percent of sales in the U.S., climbed 4.8 percent to 3,300 yen.
PetroChina jumped 6 percent to HK$8.53. Cnooc Ltd., China’s biggest offshore oil producer, added 4.6 percent to HK$10.40. Inpex Corp., Japan’s largest oil explorer, climbed 4.9 percent to 704,000 yen. in Hong Kong.
Goldman Sachs upgraded PetroChina to “neutral” from “sell,” according to a report. The brokerage raised Cnooc and Inpex Corp. to “buy” from “neutral.”
Oil prices will average $70 a barrel next year due to a recovery in demand and as supply remains constrained, Goldman Sachs said. Crude oil futures gained 4.8 percent to $59.03 a barrel in New York yesterday, the highest settlement since Nov. 11. Prices were little changed in after-hours trading.
Indian shares trading in the U.S. rallied on speculation Prime Minister Manmohan Singh’s Congress party victory in nationwide elections will speed up economic reforms and lure overseas funds. The Bank of New York Mellon India ADR Index surged 16 percent.
Overseas Acquisitions
American depositary receipts of ICICI Bank Ltd., India’s second-largest lender, climbed 25 percent to the highest in eight months after Morgan Stanley raised its recommendation on the country’s financial stocks.
China Mobile climbed 4.6 percent to HK$75.60. The company’s Chairman Wang Jianzhou said in the city today that there is a “good opportunity” for overseas acquisitions as phone assets are “inexpensive.”
Asahi Glass rallied 8.9 percent to 671 yen, set to close at its highest level since Oct. 15. The shares were boosted to “buy” from “neutral” by Daiwa analyst Yusuke Ando.
Filinvest, the fourth-largest Philippine builder, jumped 4.7 percent to 67 centavos after Credit Suisse Group and JPMorgan Chase & Co. raised their share-price estimates.
Mitsubishi UFJ Financial Group Ltd. gained 5.6 percent in Tokyo as the London interbank offered rate fell the most in two months. Toyota Motor Corp., which gets a third of its sales in North America, rose 2.8 percent as the yen weakened. PetroChina Co., the nation’s biggest oil producer, surged 6 percent in Hong Kong as Goldman Sachs Group Inc. predicted oil prices will rise. Futures on India’s Nifty Index climbed 5 percent following a surge in American depositary receipts on election results.
“There are indications the banking system in the U.S. and parts of Europe are improving,” said Paul Xiradis, who manages $8 billion as chief executive officer of Ausbil Dexia Ltd. in Sydney. “That means the recovery will occur perhaps sooner than expected a few months ago.”
The MSCI Asia Pacific Index advanced 2.5 percent to 99.24 at 1:16 p.m. in Tokyo, with finance companies accounting for 34 percent of the increase. The gauge has climbed 40 percent from a more than five-year low on March 9.
“When we look back on these times, we’ll see the global economy bottomed out in the April-June period,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Japan’s Nikkei 225 Stock Average climbed 3 percent to 9,306.76. Australia’s S&P/ASX 200 Index added 2.2 percent and Hong Kong’s Hang Seng Index jumped 3.1 percent. Trading in India is due to resume today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
‘More Confident’
China Mobile Ltd. climbed 4.6 percent in Hong Kong trading on speculation the company will seek acquisitions. Asahi Glass Co., which makes glass substrates for plasma-display panels, surged 8.9 percent in Tokyo after Daiwa Securities Group Inc. recommended investors buy the stock. Filinvest Land Inc. rose 4.7 percent in Manila on brokerage upgrades.
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley applied to repay the combined $45 billion they received in October from the government’s Troubled Asset Relief Program, said people familiar with the matter.
“U.S. financial institutions paying back government aid is a good sign that they are becoming more confident,” said Yoji Takeda, who manages $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Macro economic data have been showing signs of bottoming. We need to see more of this for a sustained rally.”
Borrowing Costs
Mitsubishi UFJ, Japan’s biggest publicly traded bank, advanced 5.6 percent to 625 yen. Westpac Banking Corp., Australia’s biggest lender by market value, added 2.8 percent to A$20.07. HSBC Holdings Plc, Europe’s largest lender, gained 5 percent to HK$67.50 in Hong Kong.
The three-month Libor had its biggest decline since March 19 yesterday, according to British Bankers’ Association data. It has fallen for the past 34 days, as credit markets thawed amid record low interest rates and rising customer deposits.
“We’ve seen credit spreads coming back dramatically and global and Libor rates contracting,” said Ausbil’s Xiradis. “Those are good lead indicators.”
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as low as 96.62 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday.
Overseas Sales
Toyota rose 3.7 percent to 3,690 yen on speculation a weaker yen will boost the value of overseas sales. Canon Inc., which gets 28 percent of sales in the U.S., climbed 4.8 percent to 3,300 yen.
PetroChina jumped 6 percent to HK$8.53. Cnooc Ltd., China’s biggest offshore oil producer, added 4.6 percent to HK$10.40. Inpex Corp., Japan’s largest oil explorer, climbed 4.9 percent to 704,000 yen. in Hong Kong.
Goldman Sachs upgraded PetroChina to “neutral” from “sell,” according to a report. The brokerage raised Cnooc and Inpex Corp. to “buy” from “neutral.”
Oil prices will average $70 a barrel next year due to a recovery in demand and as supply remains constrained, Goldman Sachs said. Crude oil futures gained 4.8 percent to $59.03 a barrel in New York yesterday, the highest settlement since Nov. 11. Prices were little changed in after-hours trading.
Indian shares trading in the U.S. rallied on speculation Prime Minister Manmohan Singh’s Congress party victory in nationwide elections will speed up economic reforms and lure overseas funds. The Bank of New York Mellon India ADR Index surged 16 percent.
Overseas Acquisitions
American depositary receipts of ICICI Bank Ltd., India’s second-largest lender, climbed 25 percent to the highest in eight months after Morgan Stanley raised its recommendation on the country’s financial stocks.
China Mobile climbed 4.6 percent to HK$75.60. The company’s Chairman Wang Jianzhou said in the city today that there is a “good opportunity” for overseas acquisitions as phone assets are “inexpensive.”
Asahi Glass rallied 8.9 percent to 671 yen, set to close at its highest level since Oct. 15. The shares were boosted to “buy” from “neutral” by Daiwa analyst Yusuke Ando.
Filinvest, the fourth-largest Philippine builder, jumped 4.7 percent to 67 centavos after Credit Suisse Group and JPMorgan Chase & Co. raised their share-price estimates.
Indian Stock Surge Shows Investors Anticipate More Open Economy
May 19 (Bloomberg) -- India’s record stock-market surge after the election triumph of Prime Minister Manmohan Singh’s Congress Party is a sign of just how much investors want the next government to open Asia’s third-biggest economy.
Expectations are soaring as Singh, 76, starts his second term without the need for support from the communist allies who choked his market-opening efforts from 2004. Investors are betting the Oxford-trained economist will remove the last barriers to foreign investments in financial services and re- start asset sales to help trim a widening budget deficit.
“There’s a real sense of urgency in taking this event and translating it into tangible results,” said Nick Chamie, global head of emerging-markets research at RBC Capital Markets in Toronto. “If we don’t see some positive signs on an improving fiscal deficit in relatively short order, we could end up again with a weaker equity market, a weaker rupee and reduced confidence in the government’s ability.”
The benchmark Sensitive Index, or Sensex, jumped 17 percent yesterday, breaching the daily limit and forcing share trading to be halted for the day for the first time. The rupee climbed 3.1 percent against the dollar to 47.92 in Mumbai and the benchmark bond yield fell 12 basis points.
Among the names being speculated by the Indian media to take over the reigns of the finance ministry is Palaniappan Chidambaram, who had the job for more than four years until last November, when he was moved to the home ministry to tackle terrorism after the Mumbai attacks. Chidambaram, 63, presided over a record average growth rate of almost 9 percent since 2004.
Mukherjee, Nath
Other potential candidates for the position include acting finance minister Pranab Mukherjee, Commerce Minister Kamal Nath, 62, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, 65, and former central bank governor Chakravarthy Rangarajan, the Economic Times reported yesterday.
Congress and its allies won 261 of the 543 elected lower- house seats, with the party getting 206 lawmakers of its own, the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that have helped India’s economy quadruple in size.
The immediate interest among investors is the fiscal stimulus the government can provide to revive an economy growing at its weakest pace since 2003. The finance minister may unveil this year’s budget by July. Singh’s government said before the elections that the economy needs stimulus of at least another 1 percent of gross domestic product.
Six-Month ‘Honeymoon’
“They’ll have a honeymoon of six to eight months,” said John Praveen, chief investment strategist at Pramerica International Investments Advisers, a unit of Prudential Financial Inc. in Newark, New Jersey. “As long as they’re delivering on some of the expectations, the markets will hold the gains. They have to make the right start.”
The Reserve Bank of India estimates the fiscal and monetary steps announced so far are worth more than $85 billion, or almost 7 percent of GDP.
The tax cuts and increased spending since December widened the federal budget deficit to 6 percent of GDP in the year ended March 31, from a target of 2.5 percent.
The prospect of an increased budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.
Window of Opportunity
S&P and Moody’s Investors Service, which places India two steps below investment grade, yesterday indicated the South Asian nation has a chance to improve its fiscal situation after the resounding election victory.
The poll result gives the government more “political space” to sell stakes in state-run companies and improve revenue, Moody’s senior analyst Aninda Mitra told Bloomberg News.
S&P’s director of sovereign ratings Takahira Ogawa said “there is a possibility for the government to implement various measures to reform for further expansion of the economy and for the fiscal consolidation.”
Singh had to depend on the communist parties to gain a majority in parliament in his first term. The communists were opposed to his plans to raise funds by selling stakes in National Hydroelectric Power Corp., Oil India Ltd., Bharat Heavy Electricals Ltd. and National Aluminium Co.
“Among the key reforms will be disinvestment now - the new government will focus on fiscal responsibility,” said Rajeev Malik, an economist at Macquarie Group Ltd. in Singapore. “The key issue will be for the government to balance the need for additional fiscal stimulus with a credible plan for fiscal consolidation.”
Communist Impact
Communists also stalled a bill to raise the foreign- investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and resisted legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non-state banks. They also blocked entry of global retailers such as Wal-Mart Stores Inc. into India.
“Now the Congress party can rule with a minimum number of coalition partners and with a mandate for reform,” said Rory Medcalf, an India specialist at the Lowy Institute for International Policy in Sydney. “This is exceptionally good news for India.”
Expectations are soaring as Singh, 76, starts his second term without the need for support from the communist allies who choked his market-opening efforts from 2004. Investors are betting the Oxford-trained economist will remove the last barriers to foreign investments in financial services and re- start asset sales to help trim a widening budget deficit.
“There’s a real sense of urgency in taking this event and translating it into tangible results,” said Nick Chamie, global head of emerging-markets research at RBC Capital Markets in Toronto. “If we don’t see some positive signs on an improving fiscal deficit in relatively short order, we could end up again with a weaker equity market, a weaker rupee and reduced confidence in the government’s ability.”
The benchmark Sensitive Index, or Sensex, jumped 17 percent yesterday, breaching the daily limit and forcing share trading to be halted for the day for the first time. The rupee climbed 3.1 percent against the dollar to 47.92 in Mumbai and the benchmark bond yield fell 12 basis points.
Among the names being speculated by the Indian media to take over the reigns of the finance ministry is Palaniappan Chidambaram, who had the job for more than four years until last November, when he was moved to the home ministry to tackle terrorism after the Mumbai attacks. Chidambaram, 63, presided over a record average growth rate of almost 9 percent since 2004.
Mukherjee, Nath
Other potential candidates for the position include acting finance minister Pranab Mukherjee, Commerce Minister Kamal Nath, 62, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, 65, and former central bank governor Chakravarthy Rangarajan, the Economic Times reported yesterday.
Congress and its allies won 261 of the 543 elected lower- house seats, with the party getting 206 lawmakers of its own, the most since 1991, when Singh as finance minister abandoned Soviet-style state planning and introduced free-market policies that have helped India’s economy quadruple in size.
The immediate interest among investors is the fiscal stimulus the government can provide to revive an economy growing at its weakest pace since 2003. The finance minister may unveil this year’s budget by July. Singh’s government said before the elections that the economy needs stimulus of at least another 1 percent of gross domestic product.
Six-Month ‘Honeymoon’
“They’ll have a honeymoon of six to eight months,” said John Praveen, chief investment strategist at Pramerica International Investments Advisers, a unit of Prudential Financial Inc. in Newark, New Jersey. “As long as they’re delivering on some of the expectations, the markets will hold the gains. They have to make the right start.”
The Reserve Bank of India estimates the fiscal and monetary steps announced so far are worth more than $85 billion, or almost 7 percent of GDP.
The tax cuts and increased spending since December widened the federal budget deficit to 6 percent of GDP in the year ended March 31, from a target of 2.5 percent.
The prospect of an increased budget shortfall prompted Standard & Poor’s to say in February that India’s spending plans were “not sustainable” and the nation’s credit rating may be cut to junk if finances worsen. S&P has a BBB- long term credit rating on India, the lowest investment-grade level.
Window of Opportunity
S&P and Moody’s Investors Service, which places India two steps below investment grade, yesterday indicated the South Asian nation has a chance to improve its fiscal situation after the resounding election victory.
The poll result gives the government more “political space” to sell stakes in state-run companies and improve revenue, Moody’s senior analyst Aninda Mitra told Bloomberg News.
S&P’s director of sovereign ratings Takahira Ogawa said “there is a possibility for the government to implement various measures to reform for further expansion of the economy and for the fiscal consolidation.”
Singh had to depend on the communist parties to gain a majority in parliament in his first term. The communists were opposed to his plans to raise funds by selling stakes in National Hydroelectric Power Corp., Oil India Ltd., Bharat Heavy Electricals Ltd. and National Aluminium Co.
“Among the key reforms will be disinvestment now - the new government will focus on fiscal responsibility,” said Rajeev Malik, an economist at Macquarie Group Ltd. in Singapore. “The key issue will be for the government to balance the need for additional fiscal stimulus with a credible plan for fiscal consolidation.”
Communist Impact
Communists also stalled a bill to raise the foreign- investment ceiling for Prudential Plc and other insurers to 49 percent from 26 percent, and resisted legislation aimed at removing a 10 percent cap on the voting rights of foreign investors in non-state banks. They also blocked entry of global retailers such as Wal-Mart Stores Inc. into India.
“Now the Congress party can rule with a minimum number of coalition partners and with a mandate for reform,” said Rory Medcalf, an India specialist at the Lowy Institute for International Policy in Sydney. “This is exceptionally good news for India.”
Sunday, May 17, 2009
Bulls Get A New Rallying Point Markets set to surge up to 20% this week
Mumbai: After 10 Janpath, the partying may shift to PJ Towers, Dalal Street.
Unlike 2004, there is no fear of any Left-sponsored Common Minimum Programme (CMP) on Dalal Street this time around. So the bulls are waiting for the maximum: To take the sensex up by a circuit-hitting 10% within minutes of opening on Monday. Most Street players expect 15-20% rally during the week.
“The market was not expecting this (a thumping win for UPA) and was preparing for a fractured mandate. The election outcome is like a dreamcome-true and we are in for a massive gap-up opening on Monday,’’ said Nishid Shah, president & chief investment officer, IDFC Mutual Fund. So no one is ready to sit on the sidelines and miss the party. “FIIs, domestic institutions and investors will invest big time over next several months. Local investors, who were left out of the last two months’ rally, will also jump in,’’ Shah added.
Other than retail investors, speculators and mutual funds could also jump in. Over the last two months, MFs stayed in cash. But now they are expected to join the celebrations, broking house officials said. “Anticipating a fractured election mandate, domestic institutions did not participate in the rally. But now DIIs have to start investing as the event risk is over,’’ said Amitabh Chakraborty, president-equities, Religare Capital Markets.
Other than the expected euphoric buying, some short coverings could further aid the rally. Markets have put built-up around 3,300-3,200 (nifty) level and those positions could prompt some short covering, Chakraborty said. Technically, the nifty could rally for another 600-650 points before it faces any major hurdle, chartists said. On sensex, this could translate to a rally of about 2,000 points and that could happen in the next 10 sessions, a derivatives analyst with a local brokerage said.
Moving beyond the immediates, the global markets, the budget and emerging economic conditions will again play on sentiments and impact the market, participants said.
Unlike 2004, there is no fear of any Left-sponsored Common Minimum Programme (CMP) on Dalal Street this time around. So the bulls are waiting for the maximum: To take the sensex up by a circuit-hitting 10% within minutes of opening on Monday. Most Street players expect 15-20% rally during the week.
“The market was not expecting this (a thumping win for UPA) and was preparing for a fractured mandate. The election outcome is like a dreamcome-true and we are in for a massive gap-up opening on Monday,’’ said Nishid Shah, president & chief investment officer, IDFC Mutual Fund. So no one is ready to sit on the sidelines and miss the party. “FIIs, domestic institutions and investors will invest big time over next several months. Local investors, who were left out of the last two months’ rally, will also jump in,’’ Shah added.
Other than retail investors, speculators and mutual funds could also jump in. Over the last two months, MFs stayed in cash. But now they are expected to join the celebrations, broking house officials said. “Anticipating a fractured election mandate, domestic institutions did not participate in the rally. But now DIIs have to start investing as the event risk is over,’’ said Amitabh Chakraborty, president-equities, Religare Capital Markets.
Other than the expected euphoric buying, some short coverings could further aid the rally. Markets have put built-up around 3,300-3,200 (nifty) level and those positions could prompt some short covering, Chakraborty said. Technically, the nifty could rally for another 600-650 points before it faces any major hurdle, chartists said. On sensex, this could translate to a rally of about 2,000 points and that could happen in the next 10 sessions, a derivatives analyst with a local brokerage said.
Moving beyond the immediates, the global markets, the budget and emerging economic conditions will again play on sentiments and impact the market, participants said.
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