June 14 (Bloomberg) -- Australian workers will suffer more job losses as the global recession spreads, Treasurer Wayne Swan said.
“The global recession will continue to batter our economy, and like other nations, we need to brace ourselves for more job losses in Australia,” Swan said in an e-mailed statement today. “While we received some good news last week on the housing and confidence front, there is no room for complacency.”
Australian employers fired fewer workers than estimated in May, adding to signs the economy is overcoming the worst global slump since the Great Depression. Home-loan approvals rose in April for a seventh month as the lowest borrowing costs in half a century and government cash handouts bolstered demand among first-time buyers.
To spur domestic demand, the government unveiled plans in May to embark on an unprecedented A$22 billion ($18 billion) program to build schools, roads and railways. The jobless rate rose to 5.7 percent from a revised 5.5 percent last month.
“The government has acted decisively to stimulate the economy and cushion Australians from the worst effects of the global recession, with three phases of stimulus -- cash stimulus payments, shovel-ready projects, and large-scale nation building infrastructure,” Swan said today. “There is no doubt that without this decisive action, unemployment in this country would be much higher.”
Saturday, June 13, 2009
Australia ‘Furious’ With Commonwealth Bank Rates, Macklin Says
June 14 (Bloomberg) -- Australian mortgage holders are “furious” with the Commonwealth Bank of Australia’s move to raise its variable mortgage rates, according to the government.
“Mortgage holders have got every reason to be furious with the Commonwealth Bank,” Jenny Macklin, minister for families, housing, community services and indigenous affairs, told the Channel 10 television network today. “We need to do everything we can to support our economy in these very difficult times, not see interest rates go up.”
The nation’s second-biggest lender on June 10 became the first of the country’s four largest banks to raise variable rates since the central bank began a record round of cuts to borrowing costs in September. Bank borrowing costs have climbed this year as speculation grows that the Reserve Bank of Australia will increase its benchmark lending rate as the economy strengthens.
“The Commonwealth Bank is acting in a selfish way,” Deputy Prime Minister Julia Gillard told the Nine television network today, according to the Herald Sun. “This is a decision the government is rightly furious about.”
The standard variable rate will increase to 5.74 percent tomorrow from 5.64 percent, Sydney-based Commonwealth Bank said June 12. Australia’s biggest mortgage lender, which previously had the lowest rate among the nation’s four largest banks, also raised business loan rates and said fixed mortgage rates will soon rise.
Central bank Governor Glenn Stevens left the overnight cash rate target at a 49-year low of 3 percent on June 2
“Mortgage holders have got every reason to be furious with the Commonwealth Bank,” Jenny Macklin, minister for families, housing, community services and indigenous affairs, told the Channel 10 television network today. “We need to do everything we can to support our economy in these very difficult times, not see interest rates go up.”
The nation’s second-biggest lender on June 10 became the first of the country’s four largest banks to raise variable rates since the central bank began a record round of cuts to borrowing costs in September. Bank borrowing costs have climbed this year as speculation grows that the Reserve Bank of Australia will increase its benchmark lending rate as the economy strengthens.
“The Commonwealth Bank is acting in a selfish way,” Deputy Prime Minister Julia Gillard told the Nine television network today, according to the Herald Sun. “This is a decision the government is rightly furious about.”
The standard variable rate will increase to 5.74 percent tomorrow from 5.64 percent, Sydney-based Commonwealth Bank said June 12. Australia’s biggest mortgage lender, which previously had the lowest rate among the nation’s four largest banks, also raised business loan rates and said fixed mortgage rates will soon rise.
Central bank Governor Glenn Stevens left the overnight cash rate target at a 49-year low of 3 percent on June 2
Friday, June 12, 2009
It’s A False Debate Conservation isn’t about growth versus green
There are, as an old joke goes, two shades of green activists: the rabid and the romantic. Most good jokes draw from reality. I reaffirmed this conviction by observing a few green stalwarts over the past few weeks. Nobody in India, i was told, bothers about conservation more than the Gandhis. Remember, it was Indira who banned hunting almost 40 years back. Remember, it was Rajiv who always had time for the lowly forest staff. And remember, it’s Rahul who set up a tiger caucus with young politicians and got bullied by tribal activists.
The Congress has crossed the 200-mark on its own. More, Rahul Gandhi has earned for himself a say in matters of governance and policies. I could imagine the sense of vindication among these green stalwarts when the Congress freed the ministry of environment and forests (MoEF) from the clutches of allies and put an ‘able minister’ in charge.
Then came Jairam Ramesh’s first media statement about the prime minister asking him not to let the MoEF become an anti-development bottleneck. At once, there were war cries. How could we have expected better from a PM who tried to steamroll India’s national environment policy at the World Bank’s prompting? How dare they advocate summary green clearance for all development projects?
But can anyone deny that the current environmental clearance procedure is highly arbitrary, delaying decisions while leaving room for manipulation? After all, less than 1per cent of all proposals put up for green clearance has been turned down so far. Was Ramesh, perhaps, talking of streamlining the process? Surprisingly, few were willing to give the minister the benefit of the doubt.
Ramesh’s biggest challenge will be to fight the irrational – the suspicion of the rabid and the expectation of the romantic. Some will always see the shadow of what they call the PM’s growth-rush behind all his moves. Others will seek magical inspiration from the young Gandhi. Some will always suspect foul play each time Ramesh’s ministry clears forest land for development. Others will expect 33 per cent forest cover and at least 5,000 tigers by the end of his term.
Frankly, should we have a blanket policy for development projects inside protected areas? What we need is objective cost-benefit comparatives for each project proposal so that informed decisions are possible. Even a few acres of a pristine forest are much more valuable than many hectares of an already degraded stretch. A road that can well do with a few kilometres of detour may not be allowed inside a sanctuary, but there might be logic in allowing the lifeline of a highway through a marginal forest area.
We cannot reverse the conservation clock just by wishful thinking. Those who hit the streets, demanding 5,000 wild tigers in the next five years, should understand that we do not have viable forests to hold even 2,000 tigers. And anyone who dreams of 33 per cent forest cover should start promoting kitchen gardens in each and every service balcony.
Performing isn’t easy in such an atmosphere of irrationality, particularly when a minister is briefed by a bunch of bureaucrats and experts mostly incapable of any scientific or even practical input. Our conservation paradigm is so outdated and unimaginative that we have reduced the whole issue to an emotional debate of growth-versus-green. But no attempt to conserve our natural heritage will work unless it is backed by scientific decisions and economic incentives.
There are at least five sets of files on Ramesh’s table that cannot wait any longer. One, the proposal to bifurcate the MoEF – one secretariat for environment and another for forests and wildlife – is pending since 2006 even after an assurance from the prime minister’s office. Two, a blueprint is needed to shake up the Indian forest service by creating a short-service wildlife sub-cadre, with special training and perks, for our national parks and sanctuaries. Three, field-level staff vacancies need to be filled up across the country. There is enough money lying with the Centre but our federal structure does not allow the Centre to hire or pay state government employees.
Four, for quick rehabilitation of villages out of ‘‘core critical forests”, the ministry needs to tap funds available under various central government schemes and ensure proper coordination among the district administration, forest authorities and credible NGOs. Five, an achievable national action plan for climate security is needed so that India can underline its leadership role in the climate debate in the run-up to the Copenhagen summit.
In the long term, Ramesh’s real test will be to find solutions to the three most critical issues plaguing conservation: habitat loss, mananimal conflict and poaching. The present practices to combat these problems are dangerously naive and counterproductive. We maintain forest boundaries for habitat security instead of creating buffer and connectivity for multiple land use. We create ‘maneaters’ by arbitrarily capturing and releasing so-called problem animals. We fail to guard our reserves against poaching but do not try to rehabilitate the handful of poaching communities.
It’s time our conservation outlook disowned the deadwood and forced a shift towards scientific and economic strategies. Ramesh has his task cut out.
The writer is a journalist and film-maker.
The Congress has crossed the 200-mark on its own. More, Rahul Gandhi has earned for himself a say in matters of governance and policies. I could imagine the sense of vindication among these green stalwarts when the Congress freed the ministry of environment and forests (MoEF) from the clutches of allies and put an ‘able minister’ in charge.
Then came Jairam Ramesh’s first media statement about the prime minister asking him not to let the MoEF become an anti-development bottleneck. At once, there were war cries. How could we have expected better from a PM who tried to steamroll India’s national environment policy at the World Bank’s prompting? How dare they advocate summary green clearance for all development projects?
But can anyone deny that the current environmental clearance procedure is highly arbitrary, delaying decisions while leaving room for manipulation? After all, less than 1per cent of all proposals put up for green clearance has been turned down so far. Was Ramesh, perhaps, talking of streamlining the process? Surprisingly, few were willing to give the minister the benefit of the doubt.
Ramesh’s biggest challenge will be to fight the irrational – the suspicion of the rabid and the expectation of the romantic. Some will always see the shadow of what they call the PM’s growth-rush behind all his moves. Others will seek magical inspiration from the young Gandhi. Some will always suspect foul play each time Ramesh’s ministry clears forest land for development. Others will expect 33 per cent forest cover and at least 5,000 tigers by the end of his term.
Frankly, should we have a blanket policy for development projects inside protected areas? What we need is objective cost-benefit comparatives for each project proposal so that informed decisions are possible. Even a few acres of a pristine forest are much more valuable than many hectares of an already degraded stretch. A road that can well do with a few kilometres of detour may not be allowed inside a sanctuary, but there might be logic in allowing the lifeline of a highway through a marginal forest area.
We cannot reverse the conservation clock just by wishful thinking. Those who hit the streets, demanding 5,000 wild tigers in the next five years, should understand that we do not have viable forests to hold even 2,000 tigers. And anyone who dreams of 33 per cent forest cover should start promoting kitchen gardens in each and every service balcony.
Performing isn’t easy in such an atmosphere of irrationality, particularly when a minister is briefed by a bunch of bureaucrats and experts mostly incapable of any scientific or even practical input. Our conservation paradigm is so outdated and unimaginative that we have reduced the whole issue to an emotional debate of growth-versus-green. But no attempt to conserve our natural heritage will work unless it is backed by scientific decisions and economic incentives.
There are at least five sets of files on Ramesh’s table that cannot wait any longer. One, the proposal to bifurcate the MoEF – one secretariat for environment and another for forests and wildlife – is pending since 2006 even after an assurance from the prime minister’s office. Two, a blueprint is needed to shake up the Indian forest service by creating a short-service wildlife sub-cadre, with special training and perks, for our national parks and sanctuaries. Three, field-level staff vacancies need to be filled up across the country. There is enough money lying with the Centre but our federal structure does not allow the Centre to hire or pay state government employees.
Four, for quick rehabilitation of villages out of ‘‘core critical forests”, the ministry needs to tap funds available under various central government schemes and ensure proper coordination among the district administration, forest authorities and credible NGOs. Five, an achievable national action plan for climate security is needed so that India can underline its leadership role in the climate debate in the run-up to the Copenhagen summit.
In the long term, Ramesh’s real test will be to find solutions to the three most critical issues plaguing conservation: habitat loss, mananimal conflict and poaching. The present practices to combat these problems are dangerously naive and counterproductive. We maintain forest boundaries for habitat security instead of creating buffer and connectivity for multiple land use. We create ‘maneaters’ by arbitrarily capturing and releasing so-called problem animals. We fail to guard our reserves against poaching but do not try to rehabilitate the handful of poaching communities.
It’s time our conservation outlook disowned the deadwood and forced a shift towards scientific and economic strategies. Ramesh has his task cut out.
The writer is a journalist and film-maker.
TONNES OF MONEY
New Delhi: Having realised that its “aam aadmi’’ agenda is vote-catching, the UPA government is likely to give a huge fillip to social sector spending with special focus on education, health and rural development in its budget. Top government sources hinted that gross budgetary support (GBS) will be around Rs 3.35 lakh crore—Rs 50,000 crore more than the GBS (Rs 2.85 lakh crore) fixed in the interim budget.
However, this would mean higher fiscal deficit as compared to 5.5% reflected in the interim budget with a GBS of Rs 2.85 lakh crore. In consonance with Prime Minister Manmohan Singh’s directive to adhere to the UPA’s agenda as outlined in the President’s address, the government is likely to enhance spending on education. The finance ministry and Planning Commission is working on a figure of Rs 15,500 crore more for education sector in addition to Rs 34,400 crore allocated in the interim budget.
Also, a special allocation of Rs 8,500 crore is in the offing for setting up of eight new Indian Institutes of Technology (IITs) and 16 new central universities in the coming budget.
With the President highlighting the need to focus on women’s literacy and quality education, the government is likely to allocate another Rs 7,000 crore to set up model schools in educationally backward blocks of the country and improve quality of education under Sarva Shiksha Abhiyan.
The government’s renewed focus is going to be on rural development, specially on NREGA whose vote-garnering potential was realised in general elections by the UPA establishment. The rural development ministry’s allocation is expected to be increased by Rs 4,000 crore, which will take the total budget of the ministry to Rs 70,000 crore, highest for any social sector ministry.
With special focus on reducing infant mortality, MMR, and upgrading PHCs, the health ministry’s allocation is expected to increase by around 25%. The government wants the health ministry to focus on strengthening crumbling rural health infrastructure under National Rural Health Mission. In the interim budget, the ministry had got Rs 16,534 crore and now the ministry is likely to get an additional Rs 4,000 crore.
In an effort to meet ambitious agenda outlined by the President to make India slumfree and to upgrade urban infrastructure, the government is set to increase the budget of JNNURM being handled by housing ministry and urban development ministry. In the interim budget, the allocation was Rs 4,724 crore. Now an additional amount of Rs 3,500 crore is likely to be earmarked for the urban renewal mission.
Commonwealth Games-2010, to be held in Delhi, is high on the UPA’s agenda as the government is set to hike the allocation by three times. The total allocation for the Games would be around Rs 2,000 crore.
With rural electrification not up to the mark under Bharat Nirman, the power ministry is expected to get additional allocation of Rs 8,000 crore which means the total budget of the ministry would be over Rs 60,000 crore.
However, this would mean higher fiscal deficit as compared to 5.5% reflected in the interim budget with a GBS of Rs 2.85 lakh crore. In consonance with Prime Minister Manmohan Singh’s directive to adhere to the UPA’s agenda as outlined in the President’s address, the government is likely to enhance spending on education. The finance ministry and Planning Commission is working on a figure of Rs 15,500 crore more for education sector in addition to Rs 34,400 crore allocated in the interim budget.
Also, a special allocation of Rs 8,500 crore is in the offing for setting up of eight new Indian Institutes of Technology (IITs) and 16 new central universities in the coming budget.
With the President highlighting the need to focus on women’s literacy and quality education, the government is likely to allocate another Rs 7,000 crore to set up model schools in educationally backward blocks of the country and improve quality of education under Sarva Shiksha Abhiyan.
The government’s renewed focus is going to be on rural development, specially on NREGA whose vote-garnering potential was realised in general elections by the UPA establishment. The rural development ministry’s allocation is expected to be increased by Rs 4,000 crore, which will take the total budget of the ministry to Rs 70,000 crore, highest for any social sector ministry.
With special focus on reducing infant mortality, MMR, and upgrading PHCs, the health ministry’s allocation is expected to increase by around 25%. The government wants the health ministry to focus on strengthening crumbling rural health infrastructure under National Rural Health Mission. In the interim budget, the ministry had got Rs 16,534 crore and now the ministry is likely to get an additional Rs 4,000 crore.
In an effort to meet ambitious agenda outlined by the President to make India slumfree and to upgrade urban infrastructure, the government is set to increase the budget of JNNURM being handled by housing ministry and urban development ministry. In the interim budget, the allocation was Rs 4,724 crore. Now an additional amount of Rs 3,500 crore is likely to be earmarked for the urban renewal mission.
Commonwealth Games-2010, to be held in Delhi, is high on the UPA’s agenda as the government is set to hike the allocation by three times. The total allocation for the Games would be around Rs 2,000 crore.
With rural electrification not up to the mark under Bharat Nirman, the power ministry is expected to get additional allocation of Rs 8,000 crore which means the total budget of the ministry would be over Rs 60,000 crore.
BROKEN PROMISES? ‘Discriminatory’ NPS fails to find takers
New Delhi: The New Pension System (NPS), rolled out to the public from May 1 and applicable to all government employees since 2004, has failed to take off due to its discriminatory nature and has led to a tussle between two departments of the finance ministry.
While the pension division has been asking the revenue department to exempt all income accrued to an employee at the time of his retirement under NPS, the latter has refused to budge and give any concessions.
For instance, person A who joined government on or before December 31, 2003, will not have to pay any tax on the pension benefits that he receives at the time of his retirement. However, someone who has joined office on January 1, 2004, or later will have to pay 30% tax, 10% surcharge if the amount exceeds Rs 10 lakh and 3% education cess, taking the total to 33.99% on his accumulated pension reimbursement that he gets when he is retiring.
The tax amount on the accrued income that includes tax-exempt deposits of previous years is huge, said a senior finance ministry official. If person A is to get Rs 10 lakh, the government will take away Rs 3.40 lakh as his tax obligation on the net disbursal. For someone who is expected to get Rs 20 lakh, the amount of tax outgo could be Rs 6.80 lakh.
Had he been employed a day earlier than January 1, 2004, an employee’s entire tax outgo could have been saved. Interestingly, a person employed with the private sector whose provident fund is deposited with the Employees’ Provident Fund Organisation (EPFO) is also exempted from paying any tax.
The discriminatory policy, a finance ministry official said, was the reason behind the lacklustre response to NPS since its launch. In the one month after it was opened to public (May 1), NPS received only 500 applications and managed to collect a paltry Rs 28 lakh. Footfalls at the 22 points of presence appointed by the Pension Fund Regulatory and Development Authority (PFRDA) too have been negligible.
Investments made in NPS are exempted at two stages for government employees — first under 80CCC with a cap of Rs 1 lakh and then on the interest accrued on this income. However, at the third stage — at the time of withdrawal — the entire amount is taxed, thus nullifying benefits of all previous exemptions.
While the pension division has been asking the revenue department to exempt all income accrued to an employee at the time of his retirement under NPS, the latter has refused to budge and give any concessions.
For instance, person A who joined government on or before December 31, 2003, will not have to pay any tax on the pension benefits that he receives at the time of his retirement. However, someone who has joined office on January 1, 2004, or later will have to pay 30% tax, 10% surcharge if the amount exceeds Rs 10 lakh and 3% education cess, taking the total to 33.99% on his accumulated pension reimbursement that he gets when he is retiring.
The tax amount on the accrued income that includes tax-exempt deposits of previous years is huge, said a senior finance ministry official. If person A is to get Rs 10 lakh, the government will take away Rs 3.40 lakh as his tax obligation on the net disbursal. For someone who is expected to get Rs 20 lakh, the amount of tax outgo could be Rs 6.80 lakh.
Had he been employed a day earlier than January 1, 2004, an employee’s entire tax outgo could have been saved. Interestingly, a person employed with the private sector whose provident fund is deposited with the Employees’ Provident Fund Organisation (EPFO) is also exempted from paying any tax.
The discriminatory policy, a finance ministry official said, was the reason behind the lacklustre response to NPS since its launch. In the one month after it was opened to public (May 1), NPS received only 500 applications and managed to collect a paltry Rs 28 lakh. Footfalls at the 22 points of presence appointed by the Pension Fund Regulatory and Development Authority (PFRDA) too have been negligible.
Investments made in NPS are exempted at two stages for government employees — first under 80CCC with a cap of Rs 1 lakh and then on the interest accrued on this income. However, at the third stage — at the time of withdrawal — the entire amount is taxed, thus nullifying benefits of all previous exemptions.
Thursday, June 11, 2009
India Steel Demand May Rise 10% on Infrastructure, Rastogi Says
June 12 (Bloomberg) -- India’s steel demand may gain as much as 10 percent this fiscal year, almost double the pace previously estimated, as the government spends more on infrastructure, Steel Secretary Pramod Rastogi said.
“Based on the economic factors, it will not be a surprise to see a surge in consumption,” Rastogi said in an interview in New Delhi, revising his May 18 forecast of 6 percent growth this year. Demand, which almost disappeared last year, rose 6 percent in the past two months, he said.
Prime Minister Manmohan Singh’s administration, which returned to power without the help of communist allies last month, is reviving state projects and restoring a rural jobs program that’s lifting demand in villages and towns. The government plans to spend $8.95 billion this fiscal year to build networks of roads, telephones, electricity and irrigation.
“There’s considerable scope to increase public expenditure, particularly on infrastructure projects and that would not lead to inflation,” Singh told lawmakers on June 9. “That is the right way to deal with the international slowdown.”
As demand grows, Indian steelmakers are expected to double their combined capacity in the next three years, Rastogi said in his Udyog Bhavan office yesterday. Capacity is expected to increase to as much as 124 million metric tons by 2012 or at least 100 million tons in the “worst-case scenario,” he said.
“The steel companies have started speaking a positive language as they are seeing a rise in demand,” Rastogi said.
Steel Production
India produced 56.4 million metric tons of steel in the year ended March 31, little changed from 56.1 million tons the previous year, according to the data provided by the Joint Plant Committee, a data dissemination body under the steel ministry.
Imports of steel rose 21 percent to 528,000 metric tons last month from a year earlier, Rastogi said, citing figures compiled by the ministry. Some countries are offering prices lower than those in India, which is leading to the spurt in imports, he said, without identifying the nations.
Producers from Ukraine and Russia are willing to sell in India at below-market prices, Seshagiri Rao, chief financial officer at India’s third-largest producer JSW Steel Ltd., said in an interview yesterday. China’s move to offer a rebate on steel exports will also hinder the Indian steelmakers, he said.
Falling Prices
Coking coal contract prices, which surged to a record $300 a ton last year, have declined 60 percent since April. Steelmakers in Japan and Rio Tinto Group, the world’s third- largest mining company, agreed to a 33 percent cut in iron ore prices, settling for 97 cents a dry metric ton unit.
India’s government last month rejected a plea by Steel Authority of India Ltd., the nation’s second-biggest producer, JSW and rivals to impose a 25 percent so called safeguard duty on imports in addition to the existing 5 percent import tax.
“We are watching, though from the data it’s clear that China is not a threat at the moment because very little steel is coming from there,” Rastogi said. “Also, Indian companies are trying to lower costs to be more competitive.”
A venture formed by state-owned steelmakers is scouting for coal mines in the U.S., Canada, Australia and Mozambique to secure supplies for Indian companies, he said.
“Based on the economic factors, it will not be a surprise to see a surge in consumption,” Rastogi said in an interview in New Delhi, revising his May 18 forecast of 6 percent growth this year. Demand, which almost disappeared last year, rose 6 percent in the past two months, he said.
Prime Minister Manmohan Singh’s administration, which returned to power without the help of communist allies last month, is reviving state projects and restoring a rural jobs program that’s lifting demand in villages and towns. The government plans to spend $8.95 billion this fiscal year to build networks of roads, telephones, electricity and irrigation.
“There’s considerable scope to increase public expenditure, particularly on infrastructure projects and that would not lead to inflation,” Singh told lawmakers on June 9. “That is the right way to deal with the international slowdown.”
As demand grows, Indian steelmakers are expected to double their combined capacity in the next three years, Rastogi said in his Udyog Bhavan office yesterday. Capacity is expected to increase to as much as 124 million metric tons by 2012 or at least 100 million tons in the “worst-case scenario,” he said.
“The steel companies have started speaking a positive language as they are seeing a rise in demand,” Rastogi said.
Steel Production
India produced 56.4 million metric tons of steel in the year ended March 31, little changed from 56.1 million tons the previous year, according to the data provided by the Joint Plant Committee, a data dissemination body under the steel ministry.
Imports of steel rose 21 percent to 528,000 metric tons last month from a year earlier, Rastogi said, citing figures compiled by the ministry. Some countries are offering prices lower than those in India, which is leading to the spurt in imports, he said, without identifying the nations.
Producers from Ukraine and Russia are willing to sell in India at below-market prices, Seshagiri Rao, chief financial officer at India’s third-largest producer JSW Steel Ltd., said in an interview yesterday. China’s move to offer a rebate on steel exports will also hinder the Indian steelmakers, he said.
Falling Prices
Coking coal contract prices, which surged to a record $300 a ton last year, have declined 60 percent since April. Steelmakers in Japan and Rio Tinto Group, the world’s third- largest mining company, agreed to a 33 percent cut in iron ore prices, settling for 97 cents a dry metric ton unit.
India’s government last month rejected a plea by Steel Authority of India Ltd., the nation’s second-biggest producer, JSW and rivals to impose a 25 percent so called safeguard duty on imports in addition to the existing 5 percent import tax.
“We are watching, though from the data it’s clear that China is not a threat at the moment because very little steel is coming from there,” Rastogi said. “Also, Indian companies are trying to lower costs to be more competitive.”
A venture formed by state-owned steelmakers is scouting for coal mines in the U.S., Canada, Australia and Mozambique to secure supplies for Indian companies, he said.
Britain’s White Collar Jobless Claims Rise 154% on Recession
June 12 (Bloomberg) -- Jobless claims from white-collar workers in the U.K. rose by 154 percent in the year through May as the recession led banks and other services companies to fire workers, particularly in London and the South East of England.
The number of managers and professionals claiming the Jobseekers’ Allowance increased to 118,700 from 46,700 a year earlier, the Local Government Association said in a report today.
“It’s the South that has seen a sharp rise in the number of managerial job losses,” said Jeremy Beecham, vice-chairman of the association, a lobbying group that represents the interest of local councils. “White-collar workers are by no means safe from job cuts, and increasing numbers of them are being forced onto Job Seekers’ Allowance.”
Britain’s economy is hemorrhaging workers in a recession predicted by Prime Minister Gordon Brown’s government to be the worst since World War II. Service industries account for 80 percent of all jobs in Britain, and in financial services 40 percent of workers are based in London and the South East.
The number of jobless based on International Labour Organization methods rose 244,000 in the three months through March, the biggest increase since 1981, government figures show. Economists say unemployment, currently 2.22 million, may continue to rise long after the recession has ended and peak above 3 million.
The number of manual and skilled trade workers seeking jobless benefits increased by 77 percent to 589,000, the Local Government Association said.
The number of managers and professionals claiming the Jobseekers’ Allowance increased to 118,700 from 46,700 a year earlier, the Local Government Association said in a report today.
“It’s the South that has seen a sharp rise in the number of managerial job losses,” said Jeremy Beecham, vice-chairman of the association, a lobbying group that represents the interest of local councils. “White-collar workers are by no means safe from job cuts, and increasing numbers of them are being forced onto Job Seekers’ Allowance.”
Britain’s economy is hemorrhaging workers in a recession predicted by Prime Minister Gordon Brown’s government to be the worst since World War II. Service industries account for 80 percent of all jobs in Britain, and in financial services 40 percent of workers are based in London and the South East.
The number of jobless based on International Labour Organization methods rose 244,000 in the three months through March, the biggest increase since 1981, government figures show. Economists say unemployment, currently 2.22 million, may continue to rise long after the recession has ended and peak above 3 million.
The number of manual and skilled trade workers seeking jobless benefits increased by 77 percent to 589,000, the Local Government Association said.
Infosys Is Ready to Boost Staff in Case of ‘Hire American’ Law
June 12 (Bloomberg) -- Infosys Technologies Ltd., India’s second-largest provider of software services, plans to boost hiring in the U.S. if a proposal to restrict the country’s work visas becomes law, said B. G. Srinivas, a company executive.
The recruitment would be in addition to existing projects, Srinivas said yesterday in an interview from London, where the senior vice president heads the company’s operations in Europe and manufacturing-services unit worldwide. Bangalore-based Infosys has budgeted 1,000 new U.S. employees by the end of 2010.
“We have already started the hiring engine, but we haven’t hired yet,” Srinivas said in the telephone interview. “All actions have been taken, including locations where this hiring will happen, what kind of profiles -- those plans are in place and we can execute at any time.”
Infosys, whose clients include General Electric Co. and General Motors Corp., has about 10 percent of its 104,900 employees in the U.S., mainly Indians on H-1B foreign work visas. The proposal by Senators Dick Durbin of the Democratic Party and Republican Charles Grassley would require the company to replace half of them with Americans. They submitted the bill in April as the U.S. battles its highest unemployment rate since 1983.
“The first signs of protectionism are there,” Krishnakumar Natarajan, the chief executive officer of Infosys’s smaller rival MindTree Ltd., said in an interview this week in Bangalore. “The sentiment is clearly, ‘Hey, when there are job losses here, why should they go outside?’”
A possible U.S. law limiting foreign visas comes as Armonk, New York-based International Business Machines Corp., the world’s largest provider of computer services, adds staff in India and challenges Infosys, larger rival Tata Consultancy Services Ltd. and their peers in their home market.
Infosys has risen 57 percent in Mumbai trading this year, compared with a 62 percent gain at Tata Consultancy. The benchmark Bombay Sensitive Index has advanced 62 percent.
The Durbin-Grassley bill “obviously is a concern if it gets implemented in full and with no time lag,” Srinivas said. “Over a period of two years, we can easily manage.”
The recruitment would be in addition to existing projects, Srinivas said yesterday in an interview from London, where the senior vice president heads the company’s operations in Europe and manufacturing-services unit worldwide. Bangalore-based Infosys has budgeted 1,000 new U.S. employees by the end of 2010.
“We have already started the hiring engine, but we haven’t hired yet,” Srinivas said in the telephone interview. “All actions have been taken, including locations where this hiring will happen, what kind of profiles -- those plans are in place and we can execute at any time.”
Infosys, whose clients include General Electric Co. and General Motors Corp., has about 10 percent of its 104,900 employees in the U.S., mainly Indians on H-1B foreign work visas. The proposal by Senators Dick Durbin of the Democratic Party and Republican Charles Grassley would require the company to replace half of them with Americans. They submitted the bill in April as the U.S. battles its highest unemployment rate since 1983.
“The first signs of protectionism are there,” Krishnakumar Natarajan, the chief executive officer of Infosys’s smaller rival MindTree Ltd., said in an interview this week in Bangalore. “The sentiment is clearly, ‘Hey, when there are job losses here, why should they go outside?’”
A possible U.S. law limiting foreign visas comes as Armonk, New York-based International Business Machines Corp., the world’s largest provider of computer services, adds staff in India and challenges Infosys, larger rival Tata Consultancy Services Ltd. and their peers in their home market.
Infosys has risen 57 percent in Mumbai trading this year, compared with a 62 percent gain at Tata Consultancy. The benchmark Bombay Sensitive Index has advanced 62 percent.
The Durbin-Grassley bill “obviously is a concern if it gets implemented in full and with no time lag,” Srinivas said. “Over a period of two years, we can easily manage.”
Wednesday, June 10, 2009
Asian Stocks Rise on Profit Optimism; Nippon Steel, JFE Climb
June 11 (Bloomberg) -- Asian stocks rose, led by steelmakers and energy companies, on speculation industry profits will improve as the global recovery takes hold.
Nippon Steel Corp. jumped 5.7 percent in Tokyo after the Nikkei newspaper reported the company is restarting some idled capacity. China Petroleum & Chemical Corp., the country’s biggest refiner, gained 3.7 percent in Hong Kong as a unit forecast a return to profit. KDDI Corp., Japan’s No. 2 mobile- phone carrier, sank 3.7 percent, leading declines by phone stocks and utilities on speculation investors are shifting funds to companies more likely to benefit from economic growth.
“The outlook for commodities is getting brighter as the economic data improves, especially out of China,” said Nader Naeimi, an investment strategist at AMP Capital Investors in Sydney, which manages about $95 billion. “Asian markets should benefit as economic activity picks up steam and regional trade improves.”
Five stocks declined for every four that rose on the MSCI Asia Pacific Index, which gained 0.6 percent to 105.12 as of 1:37 p.m. in Tokyo. The gauge has climbed 49 percent from a five-year low on March 9, taking valuations of its companies to the highest in more than eight months.
Japan’s Nikkei 225 Stock Average was little changed as the government said gross domestic product shrank at a 14.2 percent annual pace last quarter. South Korea’s Kospi Index gained 1 percent. Australia’s S&P/ASX 200 Index added 0.7 percent.
Taiwan Semiconductor Manufacturing Co., the world’s largest supplier of made-to-order chips, sank 0.9 percent in Taipei after saying sales slumped last month.
Higher Yields
Futures on the Standard & Poor’s 500 Index added 0.5 percent. The gauge lost 0.4 percent yesterday, led by financial companies, as yields on 10-year Treasury notes climbed to the highest level in eight months. Russia’s central bank may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, Alexei Ulyukayev, the bank’s first deputy chairman, said yesterday.
The three-month stock rally has driven the average valuations of companies on the MSCI Asia Pacific Index to 1.5 times the book value of assets, the highest since Sept. 26. Analyst profit forecasts have been increasing since the end of March, according to data compiled by Bloomberg.
Nippon Steel climbed 5.7 percent to 393 yen, while JFE Holdings Inc. rose 4.3 percent to 3,370 yen. Kobe Steel Ltd. added 4.9 percent to 193 yen. The three steelmakers are restarting some idled capacity because output at automakers and other manufacturers has hit bottom, the Nikkei reported.
High Valuations
“There are expectations the economy will start to recover later this year and stocks will climb even further,” said Mitsushige Akino, who oversees about $560 million at Ichiyoshi Investment Management Co. in Tokyo. “As valuations are high, optimism alone isn’t enough for investors to buy more.”
Companies on Japan’s Nikkei traded at 42.5 times estimated profit for this fiscal year, the highest level in almost a month, according to gauge compiler Nikkei Inc. The 25-day Toraku index, a measure of daily stock winners and losers in Tokyo, jumped to 135.32 yesterday, above the 130 level that some traders use as a signal to sell.
China Petroleum, known as Sinopec, climbed 3.7 percent to HK$5.93. The company’s Sinopec Shanghai Petrochemical Co. unit said it expects to post a profit for the first half of 2009, compared with a net loss for the same period last year.
Sinopec Shanghai jumped 8.1 percent to HK$2.82 in Hong Kong.
‘Defensive’ Stocks
KDDI fell 3.7 percent to 493,000 yen, while smaller rival Softbank Corp., the sole provider of Apple Inc.’s iPhone in Japan, slid 1.6 percent. CLP Holdings Ltd., Hong Kong’s biggest power utility, sank 0.6 percent to HK$51.80.
Telecommunication companies and utilities are in so-called defensive sectors that are considered to be relatively insulated against an economic downturn. The two industries were the best performing of the MSCI Asia Pacific Index’s 10 groups at the height of the credit crisis in the fourth quarter of 2008.
“People are shifting to cyclical shares from defensive ones on expectations the global economy will recover,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co. in Tokyo, which oversees about $88 billion.
Nippon Steel Corp. jumped 5.7 percent in Tokyo after the Nikkei newspaper reported the company is restarting some idled capacity. China Petroleum & Chemical Corp., the country’s biggest refiner, gained 3.7 percent in Hong Kong as a unit forecast a return to profit. KDDI Corp., Japan’s No. 2 mobile- phone carrier, sank 3.7 percent, leading declines by phone stocks and utilities on speculation investors are shifting funds to companies more likely to benefit from economic growth.
“The outlook for commodities is getting brighter as the economic data improves, especially out of China,” said Nader Naeimi, an investment strategist at AMP Capital Investors in Sydney, which manages about $95 billion. “Asian markets should benefit as economic activity picks up steam and regional trade improves.”
Five stocks declined for every four that rose on the MSCI Asia Pacific Index, which gained 0.6 percent to 105.12 as of 1:37 p.m. in Tokyo. The gauge has climbed 49 percent from a five-year low on March 9, taking valuations of its companies to the highest in more than eight months.
Japan’s Nikkei 225 Stock Average was little changed as the government said gross domestic product shrank at a 14.2 percent annual pace last quarter. South Korea’s Kospi Index gained 1 percent. Australia’s S&P/ASX 200 Index added 0.7 percent.
Taiwan Semiconductor Manufacturing Co., the world’s largest supplier of made-to-order chips, sank 0.9 percent in Taipei after saying sales slumped last month.
Higher Yields
Futures on the Standard & Poor’s 500 Index added 0.5 percent. The gauge lost 0.4 percent yesterday, led by financial companies, as yields on 10-year Treasury notes climbed to the highest level in eight months. Russia’s central bank may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, Alexei Ulyukayev, the bank’s first deputy chairman, said yesterday.
The three-month stock rally has driven the average valuations of companies on the MSCI Asia Pacific Index to 1.5 times the book value of assets, the highest since Sept. 26. Analyst profit forecasts have been increasing since the end of March, according to data compiled by Bloomberg.
Nippon Steel climbed 5.7 percent to 393 yen, while JFE Holdings Inc. rose 4.3 percent to 3,370 yen. Kobe Steel Ltd. added 4.9 percent to 193 yen. The three steelmakers are restarting some idled capacity because output at automakers and other manufacturers has hit bottom, the Nikkei reported.
High Valuations
“There are expectations the economy will start to recover later this year and stocks will climb even further,” said Mitsushige Akino, who oversees about $560 million at Ichiyoshi Investment Management Co. in Tokyo. “As valuations are high, optimism alone isn’t enough for investors to buy more.”
Companies on Japan’s Nikkei traded at 42.5 times estimated profit for this fiscal year, the highest level in almost a month, according to gauge compiler Nikkei Inc. The 25-day Toraku index, a measure of daily stock winners and losers in Tokyo, jumped to 135.32 yesterday, above the 130 level that some traders use as a signal to sell.
China Petroleum, known as Sinopec, climbed 3.7 percent to HK$5.93. The company’s Sinopec Shanghai Petrochemical Co. unit said it expects to post a profit for the first half of 2009, compared with a net loss for the same period last year.
Sinopec Shanghai jumped 8.1 percent to HK$2.82 in Hong Kong.
‘Defensive’ Stocks
KDDI fell 3.7 percent to 493,000 yen, while smaller rival Softbank Corp., the sole provider of Apple Inc.’s iPhone in Japan, slid 1.6 percent. CLP Holdings Ltd., Hong Kong’s biggest power utility, sank 0.6 percent to HK$51.80.
Telecommunication companies and utilities are in so-called defensive sectors that are considered to be relatively insulated against an economic downturn. The two industries were the best performing of the MSCI Asia Pacific Index’s 10 groups at the height of the credit crisis in the fourth quarter of 2008.
“People are shifting to cyclical shares from defensive ones on expectations the global economy will recover,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co. in Tokyo, which oversees about $88 billion.
Crisis Sets Back Global Rules When Most Needed, Regulators Say
June 11 (Bloomberg) -- National overhauls of banking and market rules in response to the financial crisis have set back plans by world leaders to create common standards, regulators and industry officials say.
The U.S., European Union and Japan have imposed new rules on banks and investors in response to the turmoil, in some cases undoing years of work to build up global standards, officials said at a conference of the International Organization of Securities Commissions in Tel Aviv this week.
“It will be difficult once the crisis is over to start again with a coherent system of international cooperation,” said Eddy Wymeersch, chairman of the EU’s Committee of European Securities Regulators and supervisory board chairman of the Belgian Banking, Finance and Insurance Commission, in an interview in Tel Aviv.
The single-country responses delay not only initiatives to develop uniform rules pledged by world leaders at the Group of 20 summit in London on April 2. It also complicates efforts by regulators to guard against financial disruptions such as the U.S. subprime-mortgage collapse that triggered the credit crunch.
The differences include divergent approaches between the U.S. and EU -- the world’s two largest economic blocs -- to regulating bank capital, hedge funds and credit-rating companies such as Moody’s Investors Service and Standard & Poor’s, regulators and industry executives say. Japan, the U.S. and Europe have also have imposed varying restrictions on short- selling.
‘Contagion’
“Everyone knows that we have to cooperate as closely as possible, because of contagion,” said Hans Hoogervorst, head of Dutch financial regulator AFM and vice chairman of IOSCO’s main standard-setting body, the Technical Committee. In an interview at the conference, he said, “This is a more serious problem than the H1N1 flu that came from Mexico.”
The financial crisis, which started with the collapse of the U.S. property market in 2007, has triggered more than $1.46 trillion of writedowns and credit losses at banks and other financial institutions and sent the global economy into its first recession since World War II, according to data compiled by Bloomberg.
The turmoil that arose two years ago has slowed a drive between 2005 and 2007, when many countries adopted Basel II global banking standards and international accounting standards took hold in more than 100 countries. U.S. regulators meanwhile were moving toward applying the global rules.
Lost Momentum
“We have lost a little bit of momentum and we will have to start it over again,” Wymeersch said. As a result, he said, business “is going to be more costly. If you want to do capital raising it will be more costly. If you want to establish banks, you have duplication of supervision, and so on.”
Since the credit crunch, the EU has proposed bank-capital revisions ahead of the Basel, Switzerland, committee that writes banking rules. U.S. policy makers also have forced through changes to accounting rules, that some say are out of sync with a review by the international standard-setters.
“Progress in global convergence in regulatory standards has ground to a halt,” Richard Britton, a consultant on regulatory issues to the International Capital Market Association, said in an interview in Tel Aviv. “The hope must be that, as the world economy recovers from the crisis,” the momentum from 2005-2007 “will be regained.”
To get back on track, the G-20 has called on the Financial Stability Board of central bankers and finance ministers to coordinate efforts to stiffen regulations for banks, hedge funds, and other parties.
“Whatever we do, no matter how we design future regulation, we will continue having a level playing field,” Mario Draghi, FSB chairman and governor of the Bank of Italy, said at the conference yesterday. “That’s the most important thing and it’s the thing that’s most in danger right now.”
The U.S., European Union and Japan have imposed new rules on banks and investors in response to the turmoil, in some cases undoing years of work to build up global standards, officials said at a conference of the International Organization of Securities Commissions in Tel Aviv this week.
“It will be difficult once the crisis is over to start again with a coherent system of international cooperation,” said Eddy Wymeersch, chairman of the EU’s Committee of European Securities Regulators and supervisory board chairman of the Belgian Banking, Finance and Insurance Commission, in an interview in Tel Aviv.
The single-country responses delay not only initiatives to develop uniform rules pledged by world leaders at the Group of 20 summit in London on April 2. It also complicates efforts by regulators to guard against financial disruptions such as the U.S. subprime-mortgage collapse that triggered the credit crunch.
The differences include divergent approaches between the U.S. and EU -- the world’s two largest economic blocs -- to regulating bank capital, hedge funds and credit-rating companies such as Moody’s Investors Service and Standard & Poor’s, regulators and industry executives say. Japan, the U.S. and Europe have also have imposed varying restrictions on short- selling.
‘Contagion’
“Everyone knows that we have to cooperate as closely as possible, because of contagion,” said Hans Hoogervorst, head of Dutch financial regulator AFM and vice chairman of IOSCO’s main standard-setting body, the Technical Committee. In an interview at the conference, he said, “This is a more serious problem than the H1N1 flu that came from Mexico.”
The financial crisis, which started with the collapse of the U.S. property market in 2007, has triggered more than $1.46 trillion of writedowns and credit losses at banks and other financial institutions and sent the global economy into its first recession since World War II, according to data compiled by Bloomberg.
The turmoil that arose two years ago has slowed a drive between 2005 and 2007, when many countries adopted Basel II global banking standards and international accounting standards took hold in more than 100 countries. U.S. regulators meanwhile were moving toward applying the global rules.
Lost Momentum
“We have lost a little bit of momentum and we will have to start it over again,” Wymeersch said. As a result, he said, business “is going to be more costly. If you want to do capital raising it will be more costly. If you want to establish banks, you have duplication of supervision, and so on.”
Since the credit crunch, the EU has proposed bank-capital revisions ahead of the Basel, Switzerland, committee that writes banking rules. U.S. policy makers also have forced through changes to accounting rules, that some say are out of sync with a review by the international standard-setters.
“Progress in global convergence in regulatory standards has ground to a halt,” Richard Britton, a consultant on regulatory issues to the International Capital Market Association, said in an interview in Tel Aviv. “The hope must be that, as the world economy recovers from the crisis,” the momentum from 2005-2007 “will be regained.”
To get back on track, the G-20 has called on the Financial Stability Board of central bankers and finance ministers to coordinate efforts to stiffen regulations for banks, hedge funds, and other parties.
“Whatever we do, no matter how we design future regulation, we will continue having a level playing field,” Mario Draghi, FSB chairman and governor of the Bank of Italy, said at the conference yesterday. “That’s the most important thing and it’s the thing that’s most in danger right now.”
Economic group calls end of downturn
Published: June 11 2009 03:00 | Last updated: June 11 2009 03:00
The first growth in industrial output in more than a year led a respected research group to say the recession passed its trough in March, with the UK economy returning to growth in April and May.
The economy grew by 0.1 per cent in May and by 0.2 per cent in April after contracting by 0.5 per cent in March, said the National Institute for Economic and Social Research.
Martin Weale, director of the NIESR, said the recession had ended "as far as I can tell". He added: "There has been much less downward momentum than we expected."
Overall, NIESR reported that the output of the UK economy fell by 5 per cent between the beginning of the recession in May 2008 and March of this year, leaving the contraction worse than that of the early 1990s, but not as bad so far as the early 1980s recession.
Its verdict that the recession had bottomed out came after industrial production - which includes manufacturing, energy extraction, mining and utilities output - rose by 0.3 per cent in April for the first time in 14 months.
Official data from the Office for National Statistics yesterday showed manufacturing production rose by 0.4 per cent over March and April, albeit after a decline of almost 14 per cent over the previous year.
Other business surveys have recently suggested that the services sector , which makes up about three-quarters of the UK economy, has also returned to modest growth.
The manufacturing data suggest that the second quarter from April to June is likely to see at worst only a small fall in gross domestic product, and may even see growth. That would suggest an earlier return to expansion for the economy than expected by the Treasury, after Alistair Darling, chancellor, predicted in the Budget that a recovery would not begin until the fourth quarter, as did many City economists.
But there are widespread fears that, after stabilising as companies run low on stocks and are forced to increase orders, the economy could take another downwards slide, because consumer and business spending remain weak.
Kate Barker , a member of the Bank of England's interest rate-setting committee, echoed those concerns in an interview with a local newspaper yesterday.
"Some areas of retailing are still doing reasonably well and manufacturing orders are starting to come back, but whether that's a stocking issue or a turn up in final demand isn't so clear," she told the Leicester Mercury . "I think there's a lot of concern about what's going to happen beyond this pick-up."
The improvement in industrial output came as trade figures suggested levels of demand were improving more quickly in the UK than abroad. The trade deficit in traded goods excluding oil jumped to £7bn ($11bn, €8bn) in April, from £6bn in March, as exports rose by less than imports.
The first growth in industrial output in more than a year led a respected research group to say the recession passed its trough in March, with the UK economy returning to growth in April and May.
The economy grew by 0.1 per cent in May and by 0.2 per cent in April after contracting by 0.5 per cent in March, said the National Institute for Economic and Social Research.
Martin Weale, director of the NIESR, said the recession had ended "as far as I can tell". He added: "There has been much less downward momentum than we expected."
Overall, NIESR reported that the output of the UK economy fell by 5 per cent between the beginning of the recession in May 2008 and March of this year, leaving the contraction worse than that of the early 1990s, but not as bad so far as the early 1980s recession.
Its verdict that the recession had bottomed out came after industrial production - which includes manufacturing, energy extraction, mining and utilities output - rose by 0.3 per cent in April for the first time in 14 months.
Official data from the Office for National Statistics yesterday showed manufacturing production rose by 0.4 per cent over March and April, albeit after a decline of almost 14 per cent over the previous year.
Other business surveys have recently suggested that the services sector , which makes up about three-quarters of the UK economy, has also returned to modest growth.
The manufacturing data suggest that the second quarter from April to June is likely to see at worst only a small fall in gross domestic product, and may even see growth. That would suggest an earlier return to expansion for the economy than expected by the Treasury, after Alistair Darling, chancellor, predicted in the Budget that a recovery would not begin until the fourth quarter, as did many City economists.
But there are widespread fears that, after stabilising as companies run low on stocks and are forced to increase orders, the economy could take another downwards slide, because consumer and business spending remain weak.
Kate Barker , a member of the Bank of England's interest rate-setting committee, echoed those concerns in an interview with a local newspaper yesterday.
"Some areas of retailing are still doing reasonably well and manufacturing orders are starting to come back, but whether that's a stocking issue or a turn up in final demand isn't so clear," she told the Leicester Mercury . "I think there's a lot of concern about what's going to happen beyond this pick-up."
The improvement in industrial output came as trade figures suggested levels of demand were improving more quickly in the UK than abroad. The trade deficit in traded goods excluding oil jumped to £7bn ($11bn, €8bn) in April, from £6bn in March, as exports rose by less than imports.
Tuesday, June 9, 2009
India May Increase Key Rates in Early 2010, Goldman Sachs Says
June 10 (Bloomberg) -- India’s central bank may start increasing interest rates in early 2010 as inflation accelerates at more than double the expected pace, Goldman Sachs said.
“Policy easing is at an end,” Tushar Poddar, an economist at Goldman Sachs in Mumbai, said in a report yesterday. “The first rate hikes may come in early 2010 as monetary policy moves from being very loose to a more neutral stance.”
Goldman Sachs joins Barclays Plc in predicting that the Reserve Bank of India, which has cut rates to record lows amid the global recession, may soon change its stance and begin raising borrowing costs to ward off inflation. Central bank Governor Duvvuri Subbarao said last month that it might be time to start thinking about reversing “expansionary” policies.
Subbarao has slashed India’s policy repurchase rate by 425 basis points since October and lowered the reverse repurchase rate by 275 basis points. The reductions, combined with three government stimulus packages, are worth about 7 percent of gross domestic product, according to central bank estimates.
“Policy remains very loose,” Poddar said. “Additional cuts would be a mistake as it would affect demand when it is already rising and risk stoking inflationary pressures.”
Signs of a recovery in Asia’s third-largest economy are already emerging.
The $433 billion economy expanded 5.8 percent in the three months to March 31 from a year earlier, matching the growth pace of the previous quarter and beating the 5 percent median forecast of economists surveyed by Bloomberg News.
‘Stronger Recovery’
Growth can rebound to a 9 percent pace as higher government spending counters the impact of the worst worldwide economic slump since the Great Depression, Prime Minister Manmohan Singh told parliament in New Delhi yesterday. Finance Minister Pranab Mukherjee is due to unveil the government’s budget in early July.
“The initial conditions for a domestic demand-led recovery are now in place,” Sonal Varma, an economist at Nomura Securities Co. in Mumbai, said in a report yesterday. “The economy should see a stronger recovery from the fourth quarter of 2009 onwards.”
An index of composite leading indicators for the Indian economy compiled by the Organisation for Economic Cooperation and Development rose 0.4 point in April from the previous month, the first increase in 16 months.
“Tentative signs of a trough” have emerged in the Indian economy, the Paris-based OECD said in a June 8 report.
Rising domestic demand will exert upward pressure on prices, Poddar said. He expects Indian inflation to reach 6.5 percent in the year ending March 31, 2010, compared with a previous forecast of 3 percent.
Price Pressures
India’s benchmark wholesale price index rose 0.48 percent in the week to May 23 from a year earlier, holding below 1 percent for the 12th straight week.
Other price measures have not been so benign. Consumer prices paid by industrial workers rose 8.03 percent in March from a year earlier, after gaining 9.63 percent in February.
India has four consumer price indices and uses the wholesale price index as the benchmark as the other gauges don’t capture the aggregate price picture.
Higher oil prices will also add to inflationary pressures in India, Poddar said, adding that Goldman Sachs’ commodity research team has increased its forecast for crude to $85 a barrel at year-end 2009 from a previous prediction of $65. The price target for the end of 2010 is $95 a barrel.
“India is particularly vulnerable to oil prices as it imports a majority of its oil needs,” Poddar said. A 10 percent increase in the nation’s administered price of crude oil would add 0.6 percent to the benchmark wholesale price inflation index, he said.
“Policy easing is at an end,” Tushar Poddar, an economist at Goldman Sachs in Mumbai, said in a report yesterday. “The first rate hikes may come in early 2010 as monetary policy moves from being very loose to a more neutral stance.”
Goldman Sachs joins Barclays Plc in predicting that the Reserve Bank of India, which has cut rates to record lows amid the global recession, may soon change its stance and begin raising borrowing costs to ward off inflation. Central bank Governor Duvvuri Subbarao said last month that it might be time to start thinking about reversing “expansionary” policies.
Subbarao has slashed India’s policy repurchase rate by 425 basis points since October and lowered the reverse repurchase rate by 275 basis points. The reductions, combined with three government stimulus packages, are worth about 7 percent of gross domestic product, according to central bank estimates.
“Policy remains very loose,” Poddar said. “Additional cuts would be a mistake as it would affect demand when it is already rising and risk stoking inflationary pressures.”
Signs of a recovery in Asia’s third-largest economy are already emerging.
The $433 billion economy expanded 5.8 percent in the three months to March 31 from a year earlier, matching the growth pace of the previous quarter and beating the 5 percent median forecast of economists surveyed by Bloomberg News.
‘Stronger Recovery’
Growth can rebound to a 9 percent pace as higher government spending counters the impact of the worst worldwide economic slump since the Great Depression, Prime Minister Manmohan Singh told parliament in New Delhi yesterday. Finance Minister Pranab Mukherjee is due to unveil the government’s budget in early July.
“The initial conditions for a domestic demand-led recovery are now in place,” Sonal Varma, an economist at Nomura Securities Co. in Mumbai, said in a report yesterday. “The economy should see a stronger recovery from the fourth quarter of 2009 onwards.”
An index of composite leading indicators for the Indian economy compiled by the Organisation for Economic Cooperation and Development rose 0.4 point in April from the previous month, the first increase in 16 months.
“Tentative signs of a trough” have emerged in the Indian economy, the Paris-based OECD said in a June 8 report.
Rising domestic demand will exert upward pressure on prices, Poddar said. He expects Indian inflation to reach 6.5 percent in the year ending March 31, 2010, compared with a previous forecast of 3 percent.
Price Pressures
India’s benchmark wholesale price index rose 0.48 percent in the week to May 23 from a year earlier, holding below 1 percent for the 12th straight week.
Other price measures have not been so benign. Consumer prices paid by industrial workers rose 8.03 percent in March from a year earlier, after gaining 9.63 percent in February.
India has four consumer price indices and uses the wholesale price index as the benchmark as the other gauges don’t capture the aggregate price picture.
Higher oil prices will also add to inflationary pressures in India, Poddar said, adding that Goldman Sachs’ commodity research team has increased its forecast for crude to $85 a barrel at year-end 2009 from a previous prediction of $65. The price target for the end of 2010 is $95 a barrel.
“India is particularly vulnerable to oil prices as it imports a majority of its oil needs,” Poddar said. A 10 percent increase in the nation’s administered price of crude oil would add 0.6 percent to the benchmark wholesale price inflation index, he said.
Asia Bondholders Face Pain as Bankruptcies Climb, Lawyers Say
June 10 (Bloomberg) -- The number of failed companies in Asia, particularly in China and Indonesia, will rise sharply in coming months, leaving many bondholders with little chance of recovering their money, according to insolvency lawyers.
“I’m getting one to two decent-sized jobs a month and I don’t see the pipeline turning off anytime soon,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said in an interview today.
Defaults and bankruptcies in the Asia-Pacific region have risen to 67 this year, from 16 in the same period last year, according to data compiled by Bloomberg, while banks in Asia have written off $38.5 billion since the global credit crisis began in 2007. Petitions to wind up companies in Hong Kong jumped 57 percent from March to April, according to the Official Receiver’s Office, bringing the total number of petitions and winding-up orders in the city this year to 408.
McDonald, who has worked on insolvencies including NV De Indonesische Overzeese Bank, PT Central Proteinaprima and Anglo Starlite Insurance Co., said a constant problem for bondholders is the way many companies were set up, with an operating entity in either mainland China or Indonesia, and the parent company based offshore in the British Virgin or Cayman Islands.
“That’s the classic holding structure of many companies in Asia. You appoint a liquidator in Hong Kong and all the local banks jump on the assets in China,” he said. “These companies have structures which for any practical purpose put bondholders out of the money from day one.”
Banks First
Bondholders of Asia Aluminum Holdings Ltd. could get 20 cents on the dollar or less while Chinese banks will probably recoup all they’re owed, the metal company’s provisional liquidators Ferrier Hodgson Ltd. said on May 14. Asia Aluminum was placed into provisional liquidation by a Hong Kong court in March after bondholders rejected a debt restructuring plan.
Shareholders of Indonesian shrimp producer PT Central Proteinaprima, or CP Prima as it is known, agreed on May 12 to a debt-conversion plan and rights offer which bondholder groups, including one known as Red Dragon, say may cause overseas noteholders to lose control of the company, a claim CP Prima denies. The Jakarta-based company owes bondholders $525 million, according to Bloomberg data.
David Zemans, managing partner of Milbank Tweed Hadley & McCloy LLP’s Singapore office, said it was often difficult for bondholders with strong cases to rely on local legal systems. Many of the bondholders he represents are owed money in Indonesia, he said.
Legal Systems
“It’s unlike other jurisdictions, where you have some reasonable sense of confidence documents will be interpreted in accordance with how they’re meant to be interpreted,” Zemans said. “You have to go in with your eyes wide open.”
Non-performing loans in Indonesia, the largest Southeast nation, rose 11 percent this year to 61.7 trillion rupiah ($6.1 billion), the central bank’s data shows.
In Singapore, the number of petitions filed to wind up companies rose 55 percent from March to April, according to the city-state’s Insolvency & Public Trustee’s Office, a unit of the Ministry of Law.
Offers from struggling companies to buy back debt at low prices are on the rise, McDonald said.
On June 4, China Glass Holdings Ltd. had its rating cut to Ca, the second-lowest level, by Moody’s Investors Service, after China’s second-largest maker of flat glass offered to buy back $100 million bonds maturing in 2012 for up to 50 cents on the dollar.
Caving In
“Moody’s views the transaction as a distressed exchange and the Ca rating reflects the high economic loss for the noteholders,” Moody’s analyst Wonnie Chu said in an e-mailed statement yesterday.
Distressed companies often hope bondholders would simply “cave in,” McDonald said. “If the noteholders are banks it’s a little different as they have strong risk committees and can’t, or will not, just write off money like that. Others do end up saying ‘Well, we need the cash, we’d rather write it off and move on,’” he said.
Bigger groups had more chance of success, according to Zemans.
“There are always situations where bondholders decide to cut bait, but in situations where there are unifying factors, like a very difficult borrower and/or clear upside to holding the bonds, bondholders are usually able to find common ground,” he said.
The absence of any formal structure to deal with companies on the brink of bankruptcy in Asia is a huge issue, McDonald said. Countries including China and Indonesia have no Chapter 11 equivalent, or any other similar reorganization proceedings to deal with businesses finding it hard to stay solvent, he said.
“When a business gets sick, the first thing it needs is emergency working capital,” said McDonald. “But unless there’s some certainty surrounding the security you obtain when you do put money in, why would anyone help?”
“I’m getting one to two decent-sized jobs a month and I don’t see the pipeline turning off anytime soon,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said in an interview today.
Defaults and bankruptcies in the Asia-Pacific region have risen to 67 this year, from 16 in the same period last year, according to data compiled by Bloomberg, while banks in Asia have written off $38.5 billion since the global credit crisis began in 2007. Petitions to wind up companies in Hong Kong jumped 57 percent from March to April, according to the Official Receiver’s Office, bringing the total number of petitions and winding-up orders in the city this year to 408.
McDonald, who has worked on insolvencies including NV De Indonesische Overzeese Bank, PT Central Proteinaprima and Anglo Starlite Insurance Co., said a constant problem for bondholders is the way many companies were set up, with an operating entity in either mainland China or Indonesia, and the parent company based offshore in the British Virgin or Cayman Islands.
“That’s the classic holding structure of many companies in Asia. You appoint a liquidator in Hong Kong and all the local banks jump on the assets in China,” he said. “These companies have structures which for any practical purpose put bondholders out of the money from day one.”
Banks First
Bondholders of Asia Aluminum Holdings Ltd. could get 20 cents on the dollar or less while Chinese banks will probably recoup all they’re owed, the metal company’s provisional liquidators Ferrier Hodgson Ltd. said on May 14. Asia Aluminum was placed into provisional liquidation by a Hong Kong court in March after bondholders rejected a debt restructuring plan.
Shareholders of Indonesian shrimp producer PT Central Proteinaprima, or CP Prima as it is known, agreed on May 12 to a debt-conversion plan and rights offer which bondholder groups, including one known as Red Dragon, say may cause overseas noteholders to lose control of the company, a claim CP Prima denies. The Jakarta-based company owes bondholders $525 million, according to Bloomberg data.
David Zemans, managing partner of Milbank Tweed Hadley & McCloy LLP’s Singapore office, said it was often difficult for bondholders with strong cases to rely on local legal systems. Many of the bondholders he represents are owed money in Indonesia, he said.
Legal Systems
“It’s unlike other jurisdictions, where you have some reasonable sense of confidence documents will be interpreted in accordance with how they’re meant to be interpreted,” Zemans said. “You have to go in with your eyes wide open.”
Non-performing loans in Indonesia, the largest Southeast nation, rose 11 percent this year to 61.7 trillion rupiah ($6.1 billion), the central bank’s data shows.
In Singapore, the number of petitions filed to wind up companies rose 55 percent from March to April, according to the city-state’s Insolvency & Public Trustee’s Office, a unit of the Ministry of Law.
Offers from struggling companies to buy back debt at low prices are on the rise, McDonald said.
On June 4, China Glass Holdings Ltd. had its rating cut to Ca, the second-lowest level, by Moody’s Investors Service, after China’s second-largest maker of flat glass offered to buy back $100 million bonds maturing in 2012 for up to 50 cents on the dollar.
Caving In
“Moody’s views the transaction as a distressed exchange and the Ca rating reflects the high economic loss for the noteholders,” Moody’s analyst Wonnie Chu said in an e-mailed statement yesterday.
Distressed companies often hope bondholders would simply “cave in,” McDonald said. “If the noteholders are banks it’s a little different as they have strong risk committees and can’t, or will not, just write off money like that. Others do end up saying ‘Well, we need the cash, we’d rather write it off and move on,’” he said.
Bigger groups had more chance of success, according to Zemans.
“There are always situations where bondholders decide to cut bait, but in situations where there are unifying factors, like a very difficult borrower and/or clear upside to holding the bonds, bondholders are usually able to find common ground,” he said.
The absence of any formal structure to deal with companies on the brink of bankruptcy in Asia is a huge issue, McDonald said. Countries including China and Indonesia have no Chapter 11 equivalent, or any other similar reorganization proceedings to deal with businesses finding it hard to stay solvent, he said.
“When a business gets sick, the first thing it needs is emergency working capital,” said McDonald. “But unless there’s some certainty surrounding the security you obtain when you do put money in, why would anyone help?”
Japan's urgent action averts credit crisis
Published: June 10 2009 03:00 | Last updated: June 10 2009 03:00
Sweeping emergency measures adopted by the Japanese authorities have helped to avert a feared credit crisis, recent developments show.
Earlier this year Japan was gripped by the fear that the global financial meltdown would lead to domestic crisis, with bankruptcies surging and weakened share markets plunging further. Companies hoarded cash.
But that grim scenario failed to materialise and a measure of calm has re-turned to the capital markets. The monthly count of bankruptcies fell in May for the first time in a year.
"The tsunami has passed," said Tatsuya Terazawa, director of the economic and industrial policy division at the ministry of economy. "When the market was just going in one direction - down - we had no idea what would happen," he said. "[But] I think the sense of panic is gone."
Masaaki Shirakawa, governor of the Bank of Japan, said yesterday: "Hopefully, the worst is behind us." While revised gross domestic product figures for the January-March quarter, to be unveiled tomorrow, are expected to show the economy remained anaemic, in the past few months the stock market has enjoyed a rally that has even seasoned investors scratching their heads. The Nikkei average has soared 38 per cent in the three months since March 10, when it hit a 26-year low of 7,054.98.
Policymakers moved more quickly than usual to put measures in place and send the message that the government would do whatever it needed to support the market. The government set aside Y30,000bn in loan guarantees to encourage banks to lend to cash-strapped companies. Just over a third of that amount has been used since the end of October and demand has eased since March, indicating the programme is having its desired effect.
Meanwhile, the Bank of Japan stepped in to ease the pressure on banks and encouraged them to in-crease lending by buying commercial paper and other assets on their books.
At the nadir of the Nikkei average's dip, the Financial Services Agency asked banks to be flexible on loan covenants and to consider using syndicated loans as a way to provide funding while minimising risk.
The consensus is that these measures are having a positive effect, particularly in averting large-scale bankruptcies. But a concern is whether the measures will provide lasting relief or will turn out to be merely a stop gap solution.
"There is a possibility that the positive impact of the policy measures will run out of steam," said Nobuo Tomoda, senior manager in the research department of Tokyo Shoko Research, a credit research group.
Sweeping emergency measures adopted by the Japanese authorities have helped to avert a feared credit crisis, recent developments show.
Earlier this year Japan was gripped by the fear that the global financial meltdown would lead to domestic crisis, with bankruptcies surging and weakened share markets plunging further. Companies hoarded cash.
But that grim scenario failed to materialise and a measure of calm has re-turned to the capital markets. The monthly count of bankruptcies fell in May for the first time in a year.
"The tsunami has passed," said Tatsuya Terazawa, director of the economic and industrial policy division at the ministry of economy. "When the market was just going in one direction - down - we had no idea what would happen," he said. "[But] I think the sense of panic is gone."
Masaaki Shirakawa, governor of the Bank of Japan, said yesterday: "Hopefully, the worst is behind us." While revised gross domestic product figures for the January-March quarter, to be unveiled tomorrow, are expected to show the economy remained anaemic, in the past few months the stock market has enjoyed a rally that has even seasoned investors scratching their heads. The Nikkei average has soared 38 per cent in the three months since March 10, when it hit a 26-year low of 7,054.98.
Policymakers moved more quickly than usual to put measures in place and send the message that the government would do whatever it needed to support the market. The government set aside Y30,000bn in loan guarantees to encourage banks to lend to cash-strapped companies. Just over a third of that amount has been used since the end of October and demand has eased since March, indicating the programme is having its desired effect.
Meanwhile, the Bank of Japan stepped in to ease the pressure on banks and encouraged them to in-crease lending by buying commercial paper and other assets on their books.
At the nadir of the Nikkei average's dip, the Financial Services Agency asked banks to be flexible on loan covenants and to consider using syndicated loans as a way to provide funding while minimising risk.
The consensus is that these measures are having a positive effect, particularly in averting large-scale bankruptcies. But a concern is whether the measures will provide lasting relief or will turn out to be merely a stop gap solution.
"There is a possibility that the positive impact of the policy measures will run out of steam," said Nobuo Tomoda, senior manager in the research department of Tokyo Shoko Research, a credit research group.
Monday, June 8, 2009
Australian Business Confidence Jumps Most Since 2001
June 9 (Bloomberg) -- Australian business confidence jumped in May by the most in almost eight years after the government said it will spend A$22 billion (A$17 billion) to build roads, railways and schools.
The sentiment index rose 12 points to minus 2, the highest level since February 2008, according to a National Australia Bank Ltd. survey of more than 560 companies conducted between May 25 and May 29, and released in Sydney today. A figure below zero shows pessimists outnumbered optimists.
Central bank Governor Glenn Stevens left the benchmark interest rate a 49-year low of 3 percent last week ahead of a report that showed Australia’s economy is one of only a few, including China and India, that grew in the first quarter. The government announced a record building program on May 12 to spur domestic demand.
“The stimulus from the federal budget has clearly raised hopes of a government investment-led recovery, with construction industry confidence leading the way,” said Alan Oster, chief economist at National Australia Bank in Melbourne.
“The survey reinforces the point that the Australian economy continues to outperform other” developed economies, Oster added.
The Australian dollar traded at 79.18 U.S. cents at 11:39 a.m. in Sydney from 79.20 cents just before the report was released. The two-year government bond yield gained 1 basis point to 3.89 percent. A basis point is 0.01 percentage point.
Job Advertisements
A separate report published today shows Australian advertisements for job vacancies were little changed in May, after tumbling to a record low in April. Jobs advertised in newspapers and on the Internet dropped 0.2 percent from April and 49.1 percent from a year earlier.
Borrowing costs have tumbled in Australia after Governor Stevens and his board slashed the benchmark lending rate by a record 4.25 percentage points between September and April.
The government also distributed more than A$12 billion in cash to low- and medium income households to stoke spending, driving up retail sales at companies such as Harvey Norman Holdings Ltd.. Treasurer Wayne Swan last month also unveiled a A$22 billion program of spending on roads, rails, ports, hospitals and schools.
“We are likely to see significant growth in public spending over the year ahead, reflecting fiscal policy decisions,” Stevens said in a speech on June 4.
Economic Growth
“Our expectation remains that the economy will be well placed for expansion toward the end of this year,” he added.
Gross domestic product unexpectedly rose 0.4 percent in the first quarter from the previous three months as consumer spending and exports helped Australia skirt a recession, a report showed on June 3.
Still, National Australia Bank’s gauge of forward orders fell 3 points in May to minus 14, “suggesting a still soggy outlook,” Oster said.
Australia’s economy will shrink 0.5 percent this year, before expanding 1 percent in 2010, Oster forecasts.
Australia’s “smaller downturn than most countries” reflects the nation’s limited exposure to “financial excesses that have been the problem in some other countries, as well as the good fortune of our position in relation to China,” Stevens said last week.
National Australia’s business conditions gauge, a measure of hiring, sales and profits, fell 4 points to minus 14.
Governor Stevens and his central bank board will keep the benchmark interest rate at 3 percent to gauge the impact of prior cuts to the overnight cash rate target, Oster said.
“We still see the Reserve Bank as keen to re-establish more normal policy settings once recovery becomes entrenched,” Oster added. The benchmark rate will be raised to 3.5 percent by the end of next year, he said.
The sentiment index rose 12 points to minus 2, the highest level since February 2008, according to a National Australia Bank Ltd. survey of more than 560 companies conducted between May 25 and May 29, and released in Sydney today. A figure below zero shows pessimists outnumbered optimists.
Central bank Governor Glenn Stevens left the benchmark interest rate a 49-year low of 3 percent last week ahead of a report that showed Australia’s economy is one of only a few, including China and India, that grew in the first quarter. The government announced a record building program on May 12 to spur domestic demand.
“The stimulus from the federal budget has clearly raised hopes of a government investment-led recovery, with construction industry confidence leading the way,” said Alan Oster, chief economist at National Australia Bank in Melbourne.
“The survey reinforces the point that the Australian economy continues to outperform other” developed economies, Oster added.
The Australian dollar traded at 79.18 U.S. cents at 11:39 a.m. in Sydney from 79.20 cents just before the report was released. The two-year government bond yield gained 1 basis point to 3.89 percent. A basis point is 0.01 percentage point.
Job Advertisements
A separate report published today shows Australian advertisements for job vacancies were little changed in May, after tumbling to a record low in April. Jobs advertised in newspapers and on the Internet dropped 0.2 percent from April and 49.1 percent from a year earlier.
Borrowing costs have tumbled in Australia after Governor Stevens and his board slashed the benchmark lending rate by a record 4.25 percentage points between September and April.
The government also distributed more than A$12 billion in cash to low- and medium income households to stoke spending, driving up retail sales at companies such as Harvey Norman Holdings Ltd.. Treasurer Wayne Swan last month also unveiled a A$22 billion program of spending on roads, rails, ports, hospitals and schools.
“We are likely to see significant growth in public spending over the year ahead, reflecting fiscal policy decisions,” Stevens said in a speech on June 4.
Economic Growth
“Our expectation remains that the economy will be well placed for expansion toward the end of this year,” he added.
Gross domestic product unexpectedly rose 0.4 percent in the first quarter from the previous three months as consumer spending and exports helped Australia skirt a recession, a report showed on June 3.
Still, National Australia Bank’s gauge of forward orders fell 3 points in May to minus 14, “suggesting a still soggy outlook,” Oster said.
Australia’s economy will shrink 0.5 percent this year, before expanding 1 percent in 2010, Oster forecasts.
Australia’s “smaller downturn than most countries” reflects the nation’s limited exposure to “financial excesses that have been the problem in some other countries, as well as the good fortune of our position in relation to China,” Stevens said last week.
National Australia’s business conditions gauge, a measure of hiring, sales and profits, fell 4 points to minus 14.
Governor Stevens and his central bank board will keep the benchmark interest rate at 3 percent to gauge the impact of prior cuts to the overnight cash rate target, Oster said.
“We still see the Reserve Bank as keen to re-establish more normal policy settings once recovery becomes entrenched,” Oster added. The benchmark rate will be raised to 3.5 percent by the end of next year, he said.
Asian Stocks Fall on Valuation Concern; BHP, Hutchison Decline
June 9 (Bloomberg) -- Asian stocks fell, led by commodity and finance companies, on concern a three-month rally had overvalued earnings prospects.
BHP Billiton Ltd., the world’s largest mining company, declined 3.1 percent from a more than eight-month high in Sydney. Cnooc Ltd. lost 3.3 percent in Hong Kong, pacing declines by energy companies, Asia’s best performers in the past month. Billionaire Li Ka-shing’s Hutchison Whampoa Ltd. slumped 4.7 percent as Fitch Ratings forecast a bigger contraction for Hong Kong’s economy.
“People are just buying and selling stocks for short-term returns,” said Naoki Fujiwara, who oversees about $6.1 billion at Shinkin Asset Management Co. in Tokyo. “There are concerns the market has risen too fast and will have a big drop, so investors don’t want to hold any stocks for a long time.”
Three stocks declined for each one that advanced on the MSCI Asia Pacific Index, which dropped 0.8 percent to 101.50 as of 12:47 p.m. in Tokyo. The gauge has risen 44 percent from a five-year low on March 9 on optimism government stimulus measures worldwide are succeeding in reviving growth.
Hong Kong’s Hang Seng Index sank 2.3 percent, while Australia’s S&P/ASX 200 Index, which resumed trading today after a one-day holiday, fell 0.5 percent. Japan’s Nikkei 225 Stock Average declined 1.1 percent as Nipponkoa Insurance Co. slumped 3.7 percent on a newspaper report that former executives opposed a merger with a rival.
Limiting declines in Tokyo, Softbank Corp. jumped 4.2 percent after saying it will sell Apple Inc.’s new iPhone. CSL Ltd., a maker of blood plasma products, climbed 5.6 percent in Sydney on a plan to buy back shares after dropping a $3.1 billion acquisition.
Summer Recovery?
Futures on the U.S. Standard & Poor’s 500 Index lost 0.3 percent. The gauge dipped 0.1 percent yesterday as a drop in commodities shares countered gains among financial companies. Paul Krugman, a Princeton University economist, said he wouldn’t be surprised “if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer.”
BHP lost 3.1 percent to A$36.99, following an 8.7 percent surge on June 5 that took the stock to its highest close since Sept. 22. Those gains came after the company said it will pay Rio Tinto Group $5.8 billion to create an iron-ore venture.
Materials producers and energy stocks are the best performing of the MSCI Asia Pacific Index’s 10 industry groups in the past month on speculation a pick-up in global growth will boost demand for oil and metals. The rally has taken the average valuation of companies in the materials sub-index to 23 times reported profit, the highest since March 2004.
Cashing Out
Cnooc, China’s largest offshore oil producer, slumped 3.3 percent to HK$10.46. Sumitomo Metal Mining Co., Japan’s biggest copper smelter, lost 2.2 percent to 1,445 yen, its third day of declines since closing at an 11-month high. China Steel Corp. sank 3.4 percent to NT$27.35 in Taipei, paring its advance in the past three months to 30 percent.
“It’s no surprise to see people cash out to some degree after the huge run we’ve had in the last couple of weeks,” said Michiya Tomita, who helps manage $51 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong.
Hutchison slumped 4.7 percent to HK$55.25. Hong Kong’s economy will probably contract 9.1 percent in 2009, according to Fitch Ratings. The ratings agency previously estimated that Hong Kong’s economy will shrink 6.4 percent this year, James McCormack, head of Asian sovereign ratings at Fitch said today.
Japanese Insurers
Nipponkoa lost 3.7 percent to 566 yen, leading Japanese insurers to the biggest slump among the Topix’s 33 industry groups. Former executives wrote in a letter to the company that a planned merger would benefit Sompo Japan Insurance Co. at the expense of Nipponkoa, the Asahi newspaper reported today.
The insurers said in March they planned to merge next year. Sompo slipped 1.3 percent to 712 yen.
Softbank, Japan’s No. 3 mobile-phone carrier, rose 4.2 percent to 1,874 yen. The company said today it will start offering the new model of the iPhone on June 26, which Apple said can run applications twice as fast as the current version.
Melbourne-based CSL climbed 5.6 percent to A$30.61 after saying it will repurchase up to 9 percent of its shares, costing about A$1.59 billion ($1.3 billion). The company dropped its proposed acquisition of Talecris Biotherapeutics Holdings Corp. after the plan was blocked by the U.S. Federal Trade Commission.
BHP Billiton Ltd., the world’s largest mining company, declined 3.1 percent from a more than eight-month high in Sydney. Cnooc Ltd. lost 3.3 percent in Hong Kong, pacing declines by energy companies, Asia’s best performers in the past month. Billionaire Li Ka-shing’s Hutchison Whampoa Ltd. slumped 4.7 percent as Fitch Ratings forecast a bigger contraction for Hong Kong’s economy.
“People are just buying and selling stocks for short-term returns,” said Naoki Fujiwara, who oversees about $6.1 billion at Shinkin Asset Management Co. in Tokyo. “There are concerns the market has risen too fast and will have a big drop, so investors don’t want to hold any stocks for a long time.”
Three stocks declined for each one that advanced on the MSCI Asia Pacific Index, which dropped 0.8 percent to 101.50 as of 12:47 p.m. in Tokyo. The gauge has risen 44 percent from a five-year low on March 9 on optimism government stimulus measures worldwide are succeeding in reviving growth.
Hong Kong’s Hang Seng Index sank 2.3 percent, while Australia’s S&P/ASX 200 Index, which resumed trading today after a one-day holiday, fell 0.5 percent. Japan’s Nikkei 225 Stock Average declined 1.1 percent as Nipponkoa Insurance Co. slumped 3.7 percent on a newspaper report that former executives opposed a merger with a rival.
Limiting declines in Tokyo, Softbank Corp. jumped 4.2 percent after saying it will sell Apple Inc.’s new iPhone. CSL Ltd., a maker of blood plasma products, climbed 5.6 percent in Sydney on a plan to buy back shares after dropping a $3.1 billion acquisition.
Summer Recovery?
Futures on the U.S. Standard & Poor’s 500 Index lost 0.3 percent. The gauge dipped 0.1 percent yesterday as a drop in commodities shares countered gains among financial companies. Paul Krugman, a Princeton University economist, said he wouldn’t be surprised “if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer.”
BHP lost 3.1 percent to A$36.99, following an 8.7 percent surge on June 5 that took the stock to its highest close since Sept. 22. Those gains came after the company said it will pay Rio Tinto Group $5.8 billion to create an iron-ore venture.
Materials producers and energy stocks are the best performing of the MSCI Asia Pacific Index’s 10 industry groups in the past month on speculation a pick-up in global growth will boost demand for oil and metals. The rally has taken the average valuation of companies in the materials sub-index to 23 times reported profit, the highest since March 2004.
Cashing Out
Cnooc, China’s largest offshore oil producer, slumped 3.3 percent to HK$10.46. Sumitomo Metal Mining Co., Japan’s biggest copper smelter, lost 2.2 percent to 1,445 yen, its third day of declines since closing at an 11-month high. China Steel Corp. sank 3.4 percent to NT$27.35 in Taipei, paring its advance in the past three months to 30 percent.
“It’s no surprise to see people cash out to some degree after the huge run we’ve had in the last couple of weeks,” said Michiya Tomita, who helps manage $51 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong.
Hutchison slumped 4.7 percent to HK$55.25. Hong Kong’s economy will probably contract 9.1 percent in 2009, according to Fitch Ratings. The ratings agency previously estimated that Hong Kong’s economy will shrink 6.4 percent this year, James McCormack, head of Asian sovereign ratings at Fitch said today.
Japanese Insurers
Nipponkoa lost 3.7 percent to 566 yen, leading Japanese insurers to the biggest slump among the Topix’s 33 industry groups. Former executives wrote in a letter to the company that a planned merger would benefit Sompo Japan Insurance Co. at the expense of Nipponkoa, the Asahi newspaper reported today.
The insurers said in March they planned to merge next year. Sompo slipped 1.3 percent to 712 yen.
Softbank, Japan’s No. 3 mobile-phone carrier, rose 4.2 percent to 1,874 yen. The company said today it will start offering the new model of the iPhone on June 26, which Apple said can run applications twice as fast as the current version.
Melbourne-based CSL climbed 5.6 percent to A$30.61 after saying it will repurchase up to 9 percent of its shares, costing about A$1.59 billion ($1.3 billion). The company dropped its proposed acquisition of Talecris Biotherapeutics Holdings Corp. after the plan was blocked by the U.S. Federal Trade Commission.
Reliance May Give $600 Million Order to Alcatel, Standard Says
June 9 (Bloomberg) -- Reliance Communications Ltd. may give a contract worth as much as $600 million to Alcatel-Lucent SA, Business Standard reported, citing unidentified people familiar with the developments.
The order to operate and maintain Reliance’s global system for mobile communications and optical fiber networks may be awarded in a couple of weeks, the newspaper said.
Gaurav Wahi, a Mumbai-based spokesman at Reliance, declined to comment on the report when called by Bloomberg News.
Alcatel-Lucent and Reliance, India’s second-biggest wireless carrier, agreed in May last year to form a venture to manage mobile-phone networks in India.
The order to operate and maintain Reliance’s global system for mobile communications and optical fiber networks may be awarded in a couple of weeks, the newspaper said.
Gaurav Wahi, a Mumbai-based spokesman at Reliance, declined to comment on the report when called by Bloomberg News.
Alcatel-Lucent and Reliance, India’s second-biggest wireless carrier, agreed in May last year to form a venture to manage mobile-phone networks in India.
Sunday, June 7, 2009
India May Say Factory Output Fell for Third Month: Week Ahead
June 8 (Bloomberg) -- India’s industrial production may decline for the third straight month in April as the global recession curtails overseas sales of goods.
The government may say on June 12 that output at factories, utilities and mines fell from a year earlier after declining 2.3 percent in March and 0.7 percent in February, according to the median estimate in a Bloomberg News survey.
Exports fell 33.2 percent in April, the most in at least 14 years, as the worst global recession since the Great Depression slashed demand for the nation’s jewelry, clothing and other products. Falling overseas sales may cost India about 10 million jobs, the Federation of Indian Export Organisation, a lobby group, estimates.
The Society of Indian Automobile Manufacturers will release data for domestic car sales in May today after companies sold 4.2 percent more cars in April from a year earlier.
India’s rupee strengthened last week on optimism a rally in the benchmark share index will spur overseas investors to raise holdings of local stocks from a 10-month high.
The rupee climbed 0.1 percent to 47.1225 per dollar in the five days through June 5 in Mumbai, according to data compiled by Bloomberg. That took its gains this quarter to 7.6 percent, the third-best among the 10 most-used Asian currencies.
Bonds, Stocks
Government bonds gained last week after a report showed the inflation rate slowed. The yield on the 6.05 percent note due February 2019 fell 14 basis points to 6.56 percent in Mumbai, according to the central bank’s trading system. The price rose 1.01 per 100-rupee face amount, to 96.41. A basis point is 0.01 percentage point.
The Sensitive index rose 3.3 percent last week, extending its winning streak to 13 weeks. The index completed the longest weekly winning streak since August 2005 after President Pratibha Devisingh Patil told parliament on June 4 the government may allow greater overseas investment and inject capital into lenders to stoke economic growth. Fund inflows surged to a one- year high.
Grasim Industries Ltd., India’s third-biggest cement maker and producer of viscose-staple fiber, and Tata Motors Ltd., the largest truck maker, were the biggest gainers last week. Grasim added 19.5 percent and Tata Motors 15.5 percent.
The government may say on June 12 that output at factories, utilities and mines fell from a year earlier after declining 2.3 percent in March and 0.7 percent in February, according to the median estimate in a Bloomberg News survey.
Exports fell 33.2 percent in April, the most in at least 14 years, as the worst global recession since the Great Depression slashed demand for the nation’s jewelry, clothing and other products. Falling overseas sales may cost India about 10 million jobs, the Federation of Indian Export Organisation, a lobby group, estimates.
The Society of Indian Automobile Manufacturers will release data for domestic car sales in May today after companies sold 4.2 percent more cars in April from a year earlier.
India’s rupee strengthened last week on optimism a rally in the benchmark share index will spur overseas investors to raise holdings of local stocks from a 10-month high.
The rupee climbed 0.1 percent to 47.1225 per dollar in the five days through June 5 in Mumbai, according to data compiled by Bloomberg. That took its gains this quarter to 7.6 percent, the third-best among the 10 most-used Asian currencies.
Bonds, Stocks
Government bonds gained last week after a report showed the inflation rate slowed. The yield on the 6.05 percent note due February 2019 fell 14 basis points to 6.56 percent in Mumbai, according to the central bank’s trading system. The price rose 1.01 per 100-rupee face amount, to 96.41. A basis point is 0.01 percentage point.
The Sensitive index rose 3.3 percent last week, extending its winning streak to 13 weeks. The index completed the longest weekly winning streak since August 2005 after President Pratibha Devisingh Patil told parliament on June 4 the government may allow greater overseas investment and inject capital into lenders to stoke economic growth. Fund inflows surged to a one- year high.
Grasim Industries Ltd., India’s third-biggest cement maker and producer of viscose-staple fiber, and Tata Motors Ltd., the largest truck maker, were the biggest gainers last week. Grasim added 19.5 percent and Tata Motors 15.5 percent.
Asian Currencies Fall Led by Won, Rupiah as U.S. Slowdown Eases
June 8 (Bloomberg) -- South Korea’s won and the Indonesian rupiah led declines among Asian currencies as signs a U.S. recession is easing helped strengthen the dollar, damping demand for riskier emerging-market assets.
ICE’s Dollar Index, which tracks the greenback against six major currencies, rose on June 5 by the most since January after a government report showed the U.S. lost fewer jobs than economists had forecast in May. Taiwan’s dollar weakened for a fourth day on speculation officials will cap appreciation to bolster exports before data today that may show overseas sales shrank for a ninth month.
“The global strength of the dollar is the key driving force,” said Seoul-based Ko Yun Jin, a currency dealer with Kookmin Bank. “Traders feel comfortable with pushing the dollar higher but will have to keep a tab on the performance of exporters and foreign investors.”
The won fell 0.7 percent to 1,252.20 per dollar as of 12:10 p.m. in Seoul, according to data compiled by Bloomberg. The currency reached 1,225.97 on May 11, the highest level since October. The rupiah dropped 0.6 percent to 9,993 and the Taiwan dollar lost 0.3 percent to NT$32.831.
Malaysia’s ringgit weakened for a fifth day before a government report on June 10 that may show factory output slumped for an eighth month in April. The currency declined 0.5 percent to 3.5125 per dollar.
Malaysia Production
Industrial production fell 13 percent from a year earlier after dropping 14 percent in March, according to the median estimate of economists surveyed by Bloomberg News. The nation’s exports tumbled 26 percent in April, the trade ministry reported on June 4.
The dollar traded near the strongest level in a month against the yen on speculation a U.S. recession is easing. The greenback traded at 98.44 yen from 98.64 on June 5 in New York, when it climbed to 98.89, the highest level since May 8.
The Asian financial crisis and the bursting of the Internet bubble in 2000 “warned us against underestimating the dollar finding a floor,” DBS Group Holdings Inc. said in a research report published today.
A U.S. Commerce Department report on June 11 will show consumers increased spending in May. Retail sales climbed 0.5 percent after two months of declines, according to economists in a Bloomberg survey. U.S. payrolls fell by 345,000 in May, the smallest decrease in eight months, after a revised 504,000 loss in April, the Labor Department said on June 5.
Jobs Data
“The strong job data was hard to ignore in terms of the impact on the greenback,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “There’s some covering of short-dollar positions.” A short position is a bet that a currency will decline.
Taiwan’s dollar weakened before a 4 p.m. report that will show overseas sales declined 34 percent in May from a year earlier, compared with a 34 percent drop the previous month and a 36 percent loss in March, according to a separate Bloomberg survey.
The currency has “maintained dynamic stability” with official action only taken when changes are “excessive,” Perng Fai-nan, the island’s central bank governor, said yesterday. Exchange rates must be flexible to prevent the currency from being attacked by speculators, Perng said.
Elsewhere, Thailand’s baht fell 0.4 percent to 34.33 per dollar. China’s yuan traded little changed at 6.8356 and the Philippine peso declined 0.5 percent to 47.470.
ICE’s Dollar Index, which tracks the greenback against six major currencies, rose on June 5 by the most since January after a government report showed the U.S. lost fewer jobs than economists had forecast in May. Taiwan’s dollar weakened for a fourth day on speculation officials will cap appreciation to bolster exports before data today that may show overseas sales shrank for a ninth month.
“The global strength of the dollar is the key driving force,” said Seoul-based Ko Yun Jin, a currency dealer with Kookmin Bank. “Traders feel comfortable with pushing the dollar higher but will have to keep a tab on the performance of exporters and foreign investors.”
The won fell 0.7 percent to 1,252.20 per dollar as of 12:10 p.m. in Seoul, according to data compiled by Bloomberg. The currency reached 1,225.97 on May 11, the highest level since October. The rupiah dropped 0.6 percent to 9,993 and the Taiwan dollar lost 0.3 percent to NT$32.831.
Malaysia’s ringgit weakened for a fifth day before a government report on June 10 that may show factory output slumped for an eighth month in April. The currency declined 0.5 percent to 3.5125 per dollar.
Malaysia Production
Industrial production fell 13 percent from a year earlier after dropping 14 percent in March, according to the median estimate of economists surveyed by Bloomberg News. The nation’s exports tumbled 26 percent in April, the trade ministry reported on June 4.
The dollar traded near the strongest level in a month against the yen on speculation a U.S. recession is easing. The greenback traded at 98.44 yen from 98.64 on June 5 in New York, when it climbed to 98.89, the highest level since May 8.
The Asian financial crisis and the bursting of the Internet bubble in 2000 “warned us against underestimating the dollar finding a floor,” DBS Group Holdings Inc. said in a research report published today.
A U.S. Commerce Department report on June 11 will show consumers increased spending in May. Retail sales climbed 0.5 percent after two months of declines, according to economists in a Bloomberg survey. U.S. payrolls fell by 345,000 in May, the smallest decrease in eight months, after a revised 504,000 loss in April, the Labor Department said on June 5.
Jobs Data
“The strong job data was hard to ignore in terms of the impact on the greenback,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “There’s some covering of short-dollar positions.” A short position is a bet that a currency will decline.
Taiwan’s dollar weakened before a 4 p.m. report that will show overseas sales declined 34 percent in May from a year earlier, compared with a 34 percent drop the previous month and a 36 percent loss in March, according to a separate Bloomberg survey.
The currency has “maintained dynamic stability” with official action only taken when changes are “excessive,” Perng Fai-nan, the island’s central bank governor, said yesterday. Exchange rates must be flexible to prevent the currency from being attacked by speculators, Perng said.
Elsewhere, Thailand’s baht fell 0.4 percent to 34.33 per dollar. China’s yuan traded little changed at 6.8356 and the Philippine peso declined 0.5 percent to 47.470.
Deans fight crisis fires with MBA overhaul
Published: June 8 2009 03:00 | Last updated: June 8 2009 03:00
What a difference a year makes. On April 8 2008 Harvard Business School trumpeted 100 triumphant years of the MBA. A year later it published an introspective case study questioning its role and the Harvard Business Review began an online debate - How to Fix Business Schools.
Harvard is not alone in this volte-face, tacitly acknowledging that something is broken in the world of management education. At a recent meeting of the AACSB, the US business school accreditation body, many US professors were heard to claim they had really been socialists all along. One participant described the meeting as "like a therapy session for US deans".
Views on the culpability of schools in the economic meltdown range from one extreme to another, as do the prescriptions for how to win back the trust of business and students.
Richard Cosier, chairman of the AACSB board and dean of the Krannert school at Purdue University, represents one end of the spectrum. He says personal greed and unethical lending practices were the cause of the problem, not business schools. Saying schools should not teach complex financial models is erroneous, he says. "That's like saying you can't teach chemistry because you can make things explode . . . People make their own decisions."
Others are more circumspect. Santiago Iñiguez, dean of IE Business Schoo l in Spain, voices the opinion of many when he says: "Not accepting part of the responsibility would be to say we are not part of the game."
While some believe schools can carry on regardless, other schools have introduced new and revised core courses and electives. Harvard, historically slow to act, has been one of the first out of the blocks, along with Insead, to launch non-degree executive programmes looking at the new issues business face. Most schools are re-addressing the issues of risk and financial modelling in their courses. But is this enough?
At Stanford business school , Garth Saloner, a long-time professor who has been appointed to the dean's job at Stanford from September, believes the pedagogy as well as the content has to change. He was the chief engineer of the new-look Stanford MBA, which requires all new students to work in small tutorial groups to discuss various business issues. The aim, he says, is to "equip students to think critically about the issues business face".
Others believe the problem is deeper and systemic. Dipak Jain, out-going dean of the Kellogg school at Northwestern University , says the last 10 to 15 years of economic growth have come with a cost. "Students have become more focused on earning rather than learning. There has to be a correction in the salaries of MBAs."
Prof Saloner is dismissive of the idea that the two-year Stanford MBA programme will prove too costly to attract the best students, but Prof Jain argues that cost will prove a real factor for many schools. "My view is that management education will be like a sandwich, with students going to the top schools and to state schools." Mid-market schools, will survive only if they specialise he says.
Cost will also fuel the growth in part-time or technology-driven programmes, he believes.
Even these changes do not go far enough for some. Henry Mintzberg, management professor at McGill in Canada and Insead in France and Singapore, and long-term critic of the traditional US MBA model is typically outspoken, saying the pedagogy and structure of US MBA programmes need to change. "US business schools just don't get it. They keep trying to fix what they have already got."
He argues that the case method, pioneered by Harvard and taught in most US schools, teaches decision-making that is inappropriate for younger students, who increasingly make up the population in the US MBA classroom. In the Harvard class of 2008, for example, more than two-thirds of the students had graduated from undergraduate programmes in the previous four years.
Peter Tufano, a Harvard finance professor, says the case study method and its role in "developing 'arrogant' students" was one of the concerns raised by faculty as Harvard began its months of soul-searching.
Philip Delves-Broughton, Harvard alumnus from the class of 2006, and a thorn in the side of his alma mater, believes dramatic change is needed. "They [Harvard] are trying to sell a Hummer when everyone wants a Fiat Cinquecento."
Prof Mintzberg goes further by arguing that innovation in management education is no longer being created in the US but in Europe. "They [US schools] don't create managers, they create hubris. And they will not willingly change. US business schools have been riding a wave . . . short of going bankrupt or their applications dropping to zero, they won't change."
Under the spotlight
As the widely regarded leader of the business school world, Harvard is an easy target for those who feel the need to blame business schools and their MBA graduates for the financial meltdown.
But even the patricians at Harvard must have been concerned by the number of graduates who were key figures as the crisis unfolded, including Hank Paulson, former US Treasury secretary, Christopher Cox, former chairman of the Securities and Exchange Commission, Stan O'Neal and John Thain, the last two heads of Merrill Lynch. And in Europe Andy Hornby, former chief executive of HBOS.
What a difference a year makes. On April 8 2008 Harvard Business School trumpeted 100 triumphant years of the MBA. A year later it published an introspective case study questioning its role and the Harvard Business Review began an online debate - How to Fix Business Schools.
Harvard is not alone in this volte-face, tacitly acknowledging that something is broken in the world of management education. At a recent meeting of the AACSB, the US business school accreditation body, many US professors were heard to claim they had really been socialists all along. One participant described the meeting as "like a therapy session for US deans".
Views on the culpability of schools in the economic meltdown range from one extreme to another, as do the prescriptions for how to win back the trust of business and students.
Richard Cosier, chairman of the AACSB board and dean of the Krannert school at Purdue University, represents one end of the spectrum. He says personal greed and unethical lending practices were the cause of the problem, not business schools. Saying schools should not teach complex financial models is erroneous, he says. "That's like saying you can't teach chemistry because you can make things explode . . . People make their own decisions."
Others are more circumspect. Santiago Iñiguez, dean of IE Business Schoo l in Spain, voices the opinion of many when he says: "Not accepting part of the responsibility would be to say we are not part of the game."
While some believe schools can carry on regardless, other schools have introduced new and revised core courses and electives. Harvard, historically slow to act, has been one of the first out of the blocks, along with Insead, to launch non-degree executive programmes looking at the new issues business face. Most schools are re-addressing the issues of risk and financial modelling in their courses. But is this enough?
At Stanford business school , Garth Saloner, a long-time professor who has been appointed to the dean's job at Stanford from September, believes the pedagogy as well as the content has to change. He was the chief engineer of the new-look Stanford MBA, which requires all new students to work in small tutorial groups to discuss various business issues. The aim, he says, is to "equip students to think critically about the issues business face".
Others believe the problem is deeper and systemic. Dipak Jain, out-going dean of the Kellogg school at Northwestern University , says the last 10 to 15 years of economic growth have come with a cost. "Students have become more focused on earning rather than learning. There has to be a correction in the salaries of MBAs."
Prof Saloner is dismissive of the idea that the two-year Stanford MBA programme will prove too costly to attract the best students, but Prof Jain argues that cost will prove a real factor for many schools. "My view is that management education will be like a sandwich, with students going to the top schools and to state schools." Mid-market schools, will survive only if they specialise he says.
Cost will also fuel the growth in part-time or technology-driven programmes, he believes.
Even these changes do not go far enough for some. Henry Mintzberg, management professor at McGill in Canada and Insead in France and Singapore, and long-term critic of the traditional US MBA model is typically outspoken, saying the pedagogy and structure of US MBA programmes need to change. "US business schools just don't get it. They keep trying to fix what they have already got."
He argues that the case method, pioneered by Harvard and taught in most US schools, teaches decision-making that is inappropriate for younger students, who increasingly make up the population in the US MBA classroom. In the Harvard class of 2008, for example, more than two-thirds of the students had graduated from undergraduate programmes in the previous four years.
Peter Tufano, a Harvard finance professor, says the case study method and its role in "developing 'arrogant' students" was one of the concerns raised by faculty as Harvard began its months of soul-searching.
Philip Delves-Broughton, Harvard alumnus from the class of 2006, and a thorn in the side of his alma mater, believes dramatic change is needed. "They [Harvard] are trying to sell a Hummer when everyone wants a Fiat Cinquecento."
Prof Mintzberg goes further by arguing that innovation in management education is no longer being created in the US but in Europe. "They [US schools] don't create managers, they create hubris. And they will not willingly change. US business schools have been riding a wave . . . short of going bankrupt or their applications dropping to zero, they won't change."
Under the spotlight
As the widely regarded leader of the business school world, Harvard is an easy target for those who feel the need to blame business schools and their MBA graduates for the financial meltdown.
But even the patricians at Harvard must have been concerned by the number of graduates who were key figures as the crisis unfolded, including Hank Paulson, former US Treasury secretary, Christopher Cox, former chairman of the Securities and Exchange Commission, Stan O'Neal and John Thain, the last two heads of Merrill Lynch. And in Europe Andy Hornby, former chief executive of HBOS.
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