Sept. 18 (Bloomberg) -- India’s benchmark stock index rose, extending its second weekly gain. Dr. Reddy’s Laboratories Ltd. climbed to a record after the Economic Times reported GlaxoSmithKline Plc may buy a stake.
Dr. Reddy’s jumped 3.7 percent to the highest since Bloomberg began tracking it in 1991. Container Corp. of India Ltd. jumped the most in two months as Nomura Holdings Inc. upgraded the stock on its earnings outlook. ICICI Bank Ltd. and Tata Motors Ltd. fell after investors judged gains this week as excessive.
“The growth story will continue as companies are likely to report better numbers in the September quarter,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai. “Also, there is strong inflow by foreign funds and the worries about the drought have abated. These three factors helped the market go higher this week.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 30.19, or 0.2 percent, to 16,741.30. The gauge gained 2.9 percent this week. The S&P CNX Nifty Index on the National Stock Exchange gained 0.2 percent to 4,976.05. The BSE 200 Index rose 0.4 percent to 2,052.81.
Overseas funds bought a net 11.7 billion rupees ($243 million) of Indian stocks on Sept. 16, the Securities and Exchange Board of India said yesterday on its Web site. The funds have bought a net 450 billion rupees of the nation’s stocks this year, compared with record net sales of 530 billion rupees in 2008.
Container Corp.
Container Corp., a state-run cargo services company, climbed 6.3 percent to 1,164.25 rupees after Nomura raised it to “buy” from “reduce,” saying signs of improving economic conditions should allow the company to sustain “strong” earnings growth momentum over the next 12 to 15 months.
Dr. Reddy’s, the country’s second-largest drugmaker, rose 3.7 percent to 866 rupees, after the Economic Times said GlaxoSmithKline is in talks to buy a 5 percent stake in the Hyderabad-based company. Glaxo is in talks to strengthen its association with the Indian generic drugmaker, with whom it had signed a marketing alliance four months ago, the Economic Times said. Dr. Reddy’s declined to comment.
ICICI, the nation’s No. 2 lender, lost 3.6 percent after a three-day, 5.8 percent advance. Tata Motors, the biggest gainer on the index this year, lost 1 percent, trimming its surge in 2009 to 277 percent. The company, India’s biggest truckmaker and owner of Jaguar Land Rover Ltd., lost 1 percent to 599.9 rupees. Its RSI was over 70 for a fifth day.
ICICI, Tata Motors
ICICI lost 3.6 percent to 841.2 rupees, paring its advance to 88 percent this year. Its 14-day relative strength index, which measures how rapidly prices rose or fell during the specified period, has been over 70 for the past two days. Some investors regard readings at 70 or more as a signal to sell.
Tata Motors and other automakers make up the top three gainers on the Sensex this year. Mahindra & Mahindra Ltd., the largest sport-utility vehicle maker, rose 1.9 percent to 885.9 rupees, extending the year’s advance to 223 percent. Maruti Suzuki India Ltd., the maker of half the cars sold in India, jumped 5.1 percent to a record 1,639.3 rupees today.
“The auto sector leads the rally in any global recovery,” Sridhar said.
Raymond Ltd. advanced by the daily limit of 10 percent for the second day to 226.25 rupees. The textile and suit maker will build “affordable” homes on as much as 20 acres of its surplus land in north Mumbai, Chairman Gautam Singhania said yesterday.
Friday, September 18, 2009
Secret talks aim to heal Afghan political splits
Afghan politicians, power-brokers and diplomats are playing a game of intrigue that could broker a compromise to bury the divisive legacy of last month’s disputed presidential election.
Western missions in Kabul say the country’s destiny will be decided by a recount of hundreds of thousands of suspect votes that could overturn the lead of Hamid Karzai, the incumbent president.
EDITOR’S CHOICE
West pushes for Afghan coalition deal - Sep-13
US army chief calls for more resources to tackle Taliban - Sep-15
US calls for patience on Afghanistan - Sep-11
Abdullah conundrum over Afghan hero - Sep-10
Opinion: Pashtuns lose patience with King Karzai - Sep-04
Behind closed doors, however, opposition leaders and foreign envoys are in talks that could boost the influence of technocrats and trim presidential powers.
Yet the participants will have to juggle such an array of ethnic, regional and political factors that any unity government might be less capable of confronting a Taliban insurgency than its predecessor.
“Just imagine that you’re taking birds from different species and forcing them to live together in a cage,” says Waheed Mojda, a political analyst. “They are only staying in the cage because they fear the cat – the Taliban.”
The west’s worry is that disputed polls will trigger a prolonged power struggle while Barack Obama, the US president, is battling to convince Congress to back a counter-insurgency strategy aimed at winning Afghan support.
Evidence of fraud has prompted a UN-backed Electoral Complaints Commission to order a partial recount that could invalidate an existing tally that gives Mr Karzai outright victory over Abdullah Abdullah, his main rival.
Yet a second-round run-off might not be feasible before winter snows melt, raising the risk of a vacuum that could be exploited by insurgents behind bombings in Kabul, including an attack on Thursday that killed six Italian soldiers and 10 Afghan civilians.
There is a chance that a second round might be held sooner than expected. An official at the Independent Election Commission said staff were told on Thursday to ensure they had supplies in case they had to stage a run-off. Mr Abdullah and Mr Karzai have both said they believe the complaints process must take its course, although the president has played down prospects for a second round, saying reports of rigging are exaggerated.
Mr Abdullah, who served Mr Karzai as foreign minister before they fell out, said on Thursday he would not join a coalition. “My point right from the beginning was not to get a post in the government, but rather to bring change ,” he said.
The impasse has encouraged manoeuvring by other presidential hopefuls. Sarwar Ahmedzai, who has a strong following in parts of the Pashtun south, says he made a proposal to UN and US diplomats under which Mr Karzai would remain president but create new posts to allow technocrats to oversee security, economic and foreign policy.
Any compromise would need to balance competing ethnic interests in the face of growing alienation in the Pashtun areas, the main theatre of the Taliban insurgency, and discontent among northern minorities who back Mr Abdullah.
Analysts say Ashraf Ghani, a former World Bank executive who also ran against Mr Karzai, might be a natural choice to try to rally Pashtuns. “Ghani and Karzai are holding private meetings to make sure Pashtuns don’t lose power,” said a senior member of Mr Karzai’s campaign team. The insider said there had been no direct contact between Mr Karzai and Mr Abdullah.
Appeasing northern sentiment will also be complex. Analysts say figures such as Ata Mohammed Nur, governor of Balkh province, might wield even more influence than Mr Abdullah, whose friends in Iran and Russia will want a say. With relations between Mr Karzai and western allies strained, and foreign diplomats divided over strategy, it is unclear how much influence Europe and Washington will be able to exert.
But for Afghans, who braved Taliban rockets and threats of mutilation to vote, the spectacle of flawed elections giving way to a messy compromise might undermine support for democracy.
“We have to have a fair outcome,” says Mohammed Qasim Akhgar, editor of Hashte-e-Sobh, a daily newspaper. “Otherwise we’ll have to to hold a funeral to bid farewell to democracy.”
Western missions in Kabul say the country’s destiny will be decided by a recount of hundreds of thousands of suspect votes that could overturn the lead of Hamid Karzai, the incumbent president.
EDITOR’S CHOICE
West pushes for Afghan coalition deal - Sep-13
US army chief calls for more resources to tackle Taliban - Sep-15
US calls for patience on Afghanistan - Sep-11
Abdullah conundrum over Afghan hero - Sep-10
Opinion: Pashtuns lose patience with King Karzai - Sep-04
Behind closed doors, however, opposition leaders and foreign envoys are in talks that could boost the influence of technocrats and trim presidential powers.
Yet the participants will have to juggle such an array of ethnic, regional and political factors that any unity government might be less capable of confronting a Taliban insurgency than its predecessor.
“Just imagine that you’re taking birds from different species and forcing them to live together in a cage,” says Waheed Mojda, a political analyst. “They are only staying in the cage because they fear the cat – the Taliban.”
The west’s worry is that disputed polls will trigger a prolonged power struggle while Barack Obama, the US president, is battling to convince Congress to back a counter-insurgency strategy aimed at winning Afghan support.
Evidence of fraud has prompted a UN-backed Electoral Complaints Commission to order a partial recount that could invalidate an existing tally that gives Mr Karzai outright victory over Abdullah Abdullah, his main rival.
Yet a second-round run-off might not be feasible before winter snows melt, raising the risk of a vacuum that could be exploited by insurgents behind bombings in Kabul, including an attack on Thursday that killed six Italian soldiers and 10 Afghan civilians.
There is a chance that a second round might be held sooner than expected. An official at the Independent Election Commission said staff were told on Thursday to ensure they had supplies in case they had to stage a run-off. Mr Abdullah and Mr Karzai have both said they believe the complaints process must take its course, although the president has played down prospects for a second round, saying reports of rigging are exaggerated.
Mr Abdullah, who served Mr Karzai as foreign minister before they fell out, said on Thursday he would not join a coalition. “My point right from the beginning was not to get a post in the government, but rather to bring change ,” he said.
The impasse has encouraged manoeuvring by other presidential hopefuls. Sarwar Ahmedzai, who has a strong following in parts of the Pashtun south, says he made a proposal to UN and US diplomats under which Mr Karzai would remain president but create new posts to allow technocrats to oversee security, economic and foreign policy.
Any compromise would need to balance competing ethnic interests in the face of growing alienation in the Pashtun areas, the main theatre of the Taliban insurgency, and discontent among northern minorities who back Mr Abdullah.
Analysts say Ashraf Ghani, a former World Bank executive who also ran against Mr Karzai, might be a natural choice to try to rally Pashtuns. “Ghani and Karzai are holding private meetings to make sure Pashtuns don’t lose power,” said a senior member of Mr Karzai’s campaign team. The insider said there had been no direct contact between Mr Karzai and Mr Abdullah.
Appeasing northern sentiment will also be complex. Analysts say figures such as Ata Mohammed Nur, governor of Balkh province, might wield even more influence than Mr Abdullah, whose friends in Iran and Russia will want a say. With relations between Mr Karzai and western allies strained, and foreign diplomats divided over strategy, it is unclear how much influence Europe and Washington will be able to exert.
But for Afghans, who braved Taliban rockets and threats of mutilation to vote, the spectacle of flawed elections giving way to a messy compromise might undermine support for democracy.
“We have to have a fair outcome,” says Mohammed Qasim Akhgar, editor of Hashte-e-Sobh, a daily newspaper. “Otherwise we’ll have to to hold a funeral to bid farewell to democracy.”
Unemployment in California at 12%, Highest in Nearly 70 Years
LOS ANGELES — California’s unemployment rate in August hit its highest point in nearly 70 years, starkly underscoring how the nation’s incipient economic recovery continues to elude millions of Americans looking for work.
While job losses continue to fall, the state’s new unemployment rate — 12.2 percent, according to the Bureau of Labor Statistics — is far above the national average of 9.7 percent and places California, the nation’s most-populous state, fourth behind Michigan, Nevada and Rhode Island. Statistics kept by the state show California’s unemployment rate was 14.7 percent in 1940, said Kevin Callori, a spokesman for the California Employment Development Department.While California has convulsed under the same blows as the rest of the country over the last two years, its exposure to both the foreclosure crisis and the slowdown in construction — an industry that has fueled growth in much of the state over the last decade — has been outsized.
Total building levels in California have fallen to $23 billion this year from $63 billion in 2005; home building this year is less than a quarter of what it was in 2005, according to the Center for Continuing Study of the California Economy. Roughly 500,000 of the state’s job losses have been in construction, finance, real estate and industries related to construction.
“We were at the epicenter of the housing bubble, and we are at the epicenter of the fallout,” said Stephen Levy, senior economist and director of the center. “The reason we are doing worse in California than other states is construction.”
While California has enjoyed some signs of a comeback in recent months, unemployment, which is often the last economic indicator to turn around in a protracted recession, is expected to remain high for the near future. For example, a recent study by the University of California, Los Angeles, predicted that while the state would enjoy 2 percent quarterly growth in 2010, the unemployment rate would remain above 10 percent.
Such numbers have caused deep pain to a state overly reliant on personal income taxes to balance its budget. The near collapse of the stock market, which greatly reduced personal wealth in the state, and job losses related to the housing bust combined to sharply reduce that source of revenue.
In July, Gov. Arnold Schwarzenegger signed a budget that closed a roughly $24 billion two-year gap with extensive cuts to social services, parks and education. This has left the state with large numbers of people without jobs seeking government services, which further strained its resources and hindered potential consumer spending among laid off and furloughed government workers.
The governor seized on California’s grim unemployment milestone Friday to make a case for his current pet projects: revising the state’s tax system, fixing its broken water system, which has contributed to unemployment in the state’s farm regions, and tapping the federal government for all he can get.
“The latest unemployment numbers reinforce the importance of combining federal, state and local efforts to put Californians back to work and to help all those struggling in this difficult economy,” Mr. Schwarzenegger said. “Immediately addressing our challenges, which include reforming the state’s antiquated tax structure and updating our water delivery system will move the state forward and build a stronger, more diverse economy. While I am pleased to see fewer jobs lost, my administration will not rest until job growth resumes and employment returns to normal.”
Earlier this week, Ben S. Bernanke, the Federal Reserve chairman, proclaimed that the country was emerging from its protracted recession, and doubtlessly, California is showing its own signs of recovery. In Southern California, the center of the housing bust, home sales rose 11 percent in August from a year earlier, and prices have begun to tick up as well. In addition, the state’s exports are once again growing as international economics, particularly in Asia, have begun to recover and create demand for goods, and layoffs have slowed statewide.
“Any economist would tell you we’re in a recovery,” Mr. Levy said. “Job losses are lessening, the G.D.P. is rising, the housing market is stabilizing, and have you looked at the stock market lately? But the unemployment rate is the thing families care about. They don’t care about G.D.P. or China coming back; they care about jobs.”
While job losses continue to fall, the state’s new unemployment rate — 12.2 percent, according to the Bureau of Labor Statistics — is far above the national average of 9.7 percent and places California, the nation’s most-populous state, fourth behind Michigan, Nevada and Rhode Island. Statistics kept by the state show California’s unemployment rate was 14.7 percent in 1940, said Kevin Callori, a spokesman for the California Employment Development Department.While California has convulsed under the same blows as the rest of the country over the last two years, its exposure to both the foreclosure crisis and the slowdown in construction — an industry that has fueled growth in much of the state over the last decade — has been outsized.
Total building levels in California have fallen to $23 billion this year from $63 billion in 2005; home building this year is less than a quarter of what it was in 2005, according to the Center for Continuing Study of the California Economy. Roughly 500,000 of the state’s job losses have been in construction, finance, real estate and industries related to construction.
“We were at the epicenter of the housing bubble, and we are at the epicenter of the fallout,” said Stephen Levy, senior economist and director of the center. “The reason we are doing worse in California than other states is construction.”
While California has enjoyed some signs of a comeback in recent months, unemployment, which is often the last economic indicator to turn around in a protracted recession, is expected to remain high for the near future. For example, a recent study by the University of California, Los Angeles, predicted that while the state would enjoy 2 percent quarterly growth in 2010, the unemployment rate would remain above 10 percent.
Such numbers have caused deep pain to a state overly reliant on personal income taxes to balance its budget. The near collapse of the stock market, which greatly reduced personal wealth in the state, and job losses related to the housing bust combined to sharply reduce that source of revenue.
In July, Gov. Arnold Schwarzenegger signed a budget that closed a roughly $24 billion two-year gap with extensive cuts to social services, parks and education. This has left the state with large numbers of people without jobs seeking government services, which further strained its resources and hindered potential consumer spending among laid off and furloughed government workers.
The governor seized on California’s grim unemployment milestone Friday to make a case for his current pet projects: revising the state’s tax system, fixing its broken water system, which has contributed to unemployment in the state’s farm regions, and tapping the federal government for all he can get.
“The latest unemployment numbers reinforce the importance of combining federal, state and local efforts to put Californians back to work and to help all those struggling in this difficult economy,” Mr. Schwarzenegger said. “Immediately addressing our challenges, which include reforming the state’s antiquated tax structure and updating our water delivery system will move the state forward and build a stronger, more diverse economy. While I am pleased to see fewer jobs lost, my administration will not rest until job growth resumes and employment returns to normal.”
Earlier this week, Ben S. Bernanke, the Federal Reserve chairman, proclaimed that the country was emerging from its protracted recession, and doubtlessly, California is showing its own signs of recovery. In Southern California, the center of the housing bust, home sales rose 11 percent in August from a year earlier, and prices have begun to tick up as well. In addition, the state’s exports are once again growing as international economics, particularly in Asia, have begun to recover and create demand for goods, and layoffs have slowed statewide.
“Any economist would tell you we’re in a recovery,” Mr. Levy said. “Job losses are lessening, the G.D.P. is rising, the housing market is stabilizing, and have you looked at the stock market lately? But the unemployment rate is the thing families care about. They don’t care about G.D.P. or China coming back; they care about jobs.”
3i Looks for Third India Port Stake as Traffic Exceeds Capacity
Sept. 19 (Bloomberg) -- 3i Group Plc, the London-based private-equity investor that has a $1.2 billion infrastructure fund for India, is looking to make its third investment in a port as the nation’s freight traffic exceeds capacity.
“We like the space,” said Anil Ahuja, managing director of 3i’s India business and co-head of 3i Asia, in a telephone interview from Singapore. “India is amazingly short on port capacity.” He declined to identify the potential targets.
3i has placed a combined $211 million in Krishnapatnam Port Co. on India’s eastern coast and Mundra Port & Special Economic Zone Ltd. in the west to tap capacity in a nation where traffic is forecast by the government to almost double to 1 billion tons by March 2012. As much as 95 percent of the South Asian nation’s global trade is routed by sea and the ports require $20 billion in the next five years, according to India’s Planning Commission.
3i invested $50 million in Mundra in the western state of Gujarat before India’s largest non-state-run cargo terminal sold shares in an initial offering in November 2007. The port had a 46 percent growth in revenue in the year ended March 31 and a profit margin of 36 percent, according to data on the Bloomberg.
In February this year 3i Group invested $161 million in Krishnapatnam. The port, still being built on a 12-kilometer (7.4 mile) quay in the southern Andhra Pradesh state, will be among India’s largest, Ahuja said.
“The growth is quite steady and is almost predictable,” he said. “We’ve done two ports and our experience in both has been very good.”
India’s 12 major ports handled 530.4 million tons in the year ended March 31, 2009, up 2 percent from the year earlier, according to the Indian Ports Association. Kandla, the biggest state-owned major port in Gujarat, handled 72.2 million tons.
‘Serious Shortages’
Separately, Ahuja said 3i will make its next investment in a company that may be in the power, airports or roads business. He didn’t provide details.
“We believe there are serious shortages. Capital can be deployed and returns made,” he said.
India’s government aims to spend $500 billion by 2012 to build roads, ports and power supply to boost growth and incomes in Asia’s third-biggest economy.
“We like the space,” said Anil Ahuja, managing director of 3i’s India business and co-head of 3i Asia, in a telephone interview from Singapore. “India is amazingly short on port capacity.” He declined to identify the potential targets.
3i has placed a combined $211 million in Krishnapatnam Port Co. on India’s eastern coast and Mundra Port & Special Economic Zone Ltd. in the west to tap capacity in a nation where traffic is forecast by the government to almost double to 1 billion tons by March 2012. As much as 95 percent of the South Asian nation’s global trade is routed by sea and the ports require $20 billion in the next five years, according to India’s Planning Commission.
3i invested $50 million in Mundra in the western state of Gujarat before India’s largest non-state-run cargo terminal sold shares in an initial offering in November 2007. The port had a 46 percent growth in revenue in the year ended March 31 and a profit margin of 36 percent, according to data on the Bloomberg.
In February this year 3i Group invested $161 million in Krishnapatnam. The port, still being built on a 12-kilometer (7.4 mile) quay in the southern Andhra Pradesh state, will be among India’s largest, Ahuja said.
“The growth is quite steady and is almost predictable,” he said. “We’ve done two ports and our experience in both has been very good.”
India’s 12 major ports handled 530.4 million tons in the year ended March 31, 2009, up 2 percent from the year earlier, according to the Indian Ports Association. Kandla, the biggest state-owned major port in Gujarat, handled 72.2 million tons.
‘Serious Shortages’
Separately, Ahuja said 3i will make its next investment in a company that may be in the power, airports or roads business. He didn’t provide details.
“We believe there are serious shortages. Capital can be deployed and returns made,” he said.
India’s government aims to spend $500 billion by 2012 to build roads, ports and power supply to boost growth and incomes in Asia’s third-biggest economy.
G-20 Split Over Rates Signaled by Rupee, Real Swaps
Sept. 18 (Bloomberg) -- Investors are buying Indian rupees, South Korean won and Brazilian reais, betting developing nations will raise interest rates even after the Group of 20 said it’s too early to end central bank support for the global economy.
Swap contracts, in which traders exchange a fixed rate for a floating one, indicate the market is pricing in the fastest increases in borrowing costs in the G-20 in India and South Korea. The cost of a one-year agreement in India has risen to 1.61 percentage points over the central bank’s benchmark, up from 0.95 point on June 30. Spreads in Indonesia and Brazil have also grown and are wider than the U.S., Germany and Japan.
Threadneedle Asset Management Ltd., Schroders Plc and Ashmore Investment Management Ltd. say they are buying emerging- market currencies as policy makers in New Delhi, Seoul and Brasilia become more focused on avoiding inflation and stock- market bubbles than on supporting the global recovery. The won and the rupee will be the world’s best-performing currencies in the year ahead, each gaining about 7 percent, median estimates in Bloomberg strategist surveys show.
“It’s going to be the emerging-market world that sees rate hikes first, and that should support currencies,” said Richard House, who manages $2 billion in developing-nation fixed income at Threadneedle in London and started buying the rupee and the real in the past month. “India will be among countries that will be first.”
The International Monetary Fund forecasts developing nations will expand 4.7 percent next year, almost eight times faster than the 0.6 percent growth in advanced economies. Consumer prices will rise 4.6 percent, dwarfing developed countries’ 0.9 percent inflation rate, the IMF predicts.
‘Imbalances’
Brazilian central bank President Henrique Meirelles, a Harvard Business School graduate, told reporters in Brasilia on Sept. 15 there was a danger accelerating growth could cause “imbalances” in demand and supply. Latin America’s largest economy created jobs in August at the fastest pace in 11 months, the Labor Ministry said Sept. 16. The real is the second-best performing emerging-market currency against the dollar this year with a gain of 29 percent to 1.8055 per dollar.
Bank of Korea Governor Lee Seong Tae told reporters in Seoul on Sept. 10 he would “consider a revision to our policy direction.” Spending at the nation’s three biggest department- store chains climbed 7.6 percent from a year earlier in August, government data released yesterday showed. The won climbed 4.2 percent this year to 1,208.7 per dollar.
Challenge
Reserve Bank of India Governor Duvvuri Subbarao, a former fellow at the Massachusetts Institute of Technology, said at a conference in New Delhi on Sept. 15 that balancing growth and inflation has become a challenge for India. The Sensex stock index has rallied 73 percent this year. The rupee has gained 1.4 percent this year to 48.1525, after plunging to a record low of 52.18 on March 3.
By contrast, Federal Reserve Chairman Ben S. Bernanke, who studied at both Harvard University and MIT in Cambridge, Massachusetts, said on Sept. 15 the U.S. economy isn’t strong enough to reduce the 9.7 percent unemployment rate quickly. European Central Bank President Jean-Claude Trichet said on Sept. 4 that it’s “premature to declare the financial crisis over,” while Bank of Japan Governor Masaaki Shirakawa said on Aug. 31 he’s not yet confident in his nation’s recovery.
‘Exit Strategies’
President Barack Obama and other G-20 leaders will pledge in Pittsburgh next week to keep stimulus policies in place until a recovery is certain, Michael Froman, a deputy assistant to Obama, said in a Sept. 16 interview. Finance officials from the group said after talks in London Sept. 5 that they would engage in “coordinated exit strategies” when growth returned. The collection of industrial and emerging economies includes Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey.
Rate increases would boost the appeal of selling currencies from nations with lower borrowing costs to buy assets where they are higher, a tactic known as the carry trade. The three-month London interbank offered rate, or Libor, for dollar loans has fallen to 0.29 percent from 1.43 percent at the end of 2008 after the Fed reduced its key rate to 0.25 percent. Brazil’s benchmark rate is 8.75 percent, a record low.
The Israeli shekel has gained 5 percent this quarter to 3.7389 per dollar as the Bank of Israel became the first central bank to tighten monetary policy in the past year, increasing its benchmark rate by a quarter of a percentage point to 0.75 percent on Aug. 24.
Won, Rupee
Developing nation currencies will continue to outperform, with the won forecast to climb 7.2 percent by Sept. 30, 2010, the rupee estimated to rise 6.4 percent and the Israeli shekel 5.8 percent, according to the median estimates by strategists in Bloomberg surveys. The Brazilian real will advance to 1.79 per dollar from 1.80, according to the forecasts.
Emerging-market central banks may try to limit appreciation and protect exports by selling their own legal tender, according to Allianz SE, Europe’s biggest insurer.
Global foreign-exchange reserves have climbed by $441 billion in the past five months to a record $7.088 trillion, reflecting increased dollar purchases by China, South Korea, India and Brazil, data compiled by Bloomberg show. They declined by $340 billion in the eight months ended March as the global credit crisis forced investors to dump emerging-market assets and hoard dollars.
Stability
“Gains in currencies won’t be huge because there is a desire for stability among central banks,” said Nikhil Srinivasan, who oversees $20 billion of assets as chief investment officer for Asia and the Middle East at Munich-based Allianz.
The Asian Development Bank warned in a Sept. 15 report that premature interest-rate increases could disrupt financial markets. Merrill Lynch & Co. and Banco Votorantim SA predict Brazil will keep rates on hold next year, Bloomberg data show.
The search for higher yields helped emerging-market bond funds take in a net $3.6 billion in a 21-week stretch that ended Sept. 2, the longest streak of weekly inflows in two years, according to EPFR Global in Cambridge, Massachusetts.
Foreign holdings of Indian bonds climbed 28 percent since March 31 to $6.4 billion, stock exchange data show. Japanese investors bought a net 1.66 trillion yen ($18.2 billion) in overseas debt in the week ended Sept. 12, the most since June 2005, the Ministry of Finance said yesterday.
‘Value’
“We do see value in both emerging-market debt and emerging-market currencies,” said Nicholas Gartside, head of global fixed income at Schroders in London, who oversees $31 billion. “Asia could be the first region to raise rates.”
The spread between the benchmark monetary-policy rate and the one-year swap rate, a measure of expectations for rate changes, has increased by 38 basis points in South Korea this quarter to 1.42 percentage points, 53 basis points to 1.48 percentage points in Indonesia and 55 basis points to 0.57 percentage point in Brazil. In Germany, the U.S. and Japan, the spreads are 0.18 percentage point, 0.36 point and 0.42 point.
Goldman Sachs Group Inc. forecasts India, Indonesia and South Korea will raise interest rates in the first quarter of 2010. The Reserve Bank of India may increase 300 basis points to 6.25 percent and Bank of Korea by 75 basis points in 2010 to 2.75 percent, Goldman Sachs chief Asia-Pacific economist Michael Buchanan wrote in a Sept. 8 note.
Doug Smith, chief economist for the Americas at Standard Chartered Plc in New York, predicts Brazil will add 50 basis points by March 31.
Inflation will accelerate to 4.4 percent in Brazil in 2010, from 4.3 percent in 2009, according to a Bloomberg survey of 13 economists. For the U.S., the median prediction of 66 analysts is for 0.5 percent deflation this year and 1.9 percent inflation in 2010.
“The interest-rate turn will come first in emerging markets for the simple reason they don’t have a credit crunch,” said Jerome Booth, head of research at Ashmore Investment Management in London, which manages $25 billion of developing- nation assets.
Swap contracts, in which traders exchange a fixed rate for a floating one, indicate the market is pricing in the fastest increases in borrowing costs in the G-20 in India and South Korea. The cost of a one-year agreement in India has risen to 1.61 percentage points over the central bank’s benchmark, up from 0.95 point on June 30. Spreads in Indonesia and Brazil have also grown and are wider than the U.S., Germany and Japan.
Threadneedle Asset Management Ltd., Schroders Plc and Ashmore Investment Management Ltd. say they are buying emerging- market currencies as policy makers in New Delhi, Seoul and Brasilia become more focused on avoiding inflation and stock- market bubbles than on supporting the global recovery. The won and the rupee will be the world’s best-performing currencies in the year ahead, each gaining about 7 percent, median estimates in Bloomberg strategist surveys show.
“It’s going to be the emerging-market world that sees rate hikes first, and that should support currencies,” said Richard House, who manages $2 billion in developing-nation fixed income at Threadneedle in London and started buying the rupee and the real in the past month. “India will be among countries that will be first.”
The International Monetary Fund forecasts developing nations will expand 4.7 percent next year, almost eight times faster than the 0.6 percent growth in advanced economies. Consumer prices will rise 4.6 percent, dwarfing developed countries’ 0.9 percent inflation rate, the IMF predicts.
‘Imbalances’
Brazilian central bank President Henrique Meirelles, a Harvard Business School graduate, told reporters in Brasilia on Sept. 15 there was a danger accelerating growth could cause “imbalances” in demand and supply. Latin America’s largest economy created jobs in August at the fastest pace in 11 months, the Labor Ministry said Sept. 16. The real is the second-best performing emerging-market currency against the dollar this year with a gain of 29 percent to 1.8055 per dollar.
Bank of Korea Governor Lee Seong Tae told reporters in Seoul on Sept. 10 he would “consider a revision to our policy direction.” Spending at the nation’s three biggest department- store chains climbed 7.6 percent from a year earlier in August, government data released yesterday showed. The won climbed 4.2 percent this year to 1,208.7 per dollar.
Challenge
Reserve Bank of India Governor Duvvuri Subbarao, a former fellow at the Massachusetts Institute of Technology, said at a conference in New Delhi on Sept. 15 that balancing growth and inflation has become a challenge for India. The Sensex stock index has rallied 73 percent this year. The rupee has gained 1.4 percent this year to 48.1525, after plunging to a record low of 52.18 on March 3.
By contrast, Federal Reserve Chairman Ben S. Bernanke, who studied at both Harvard University and MIT in Cambridge, Massachusetts, said on Sept. 15 the U.S. economy isn’t strong enough to reduce the 9.7 percent unemployment rate quickly. European Central Bank President Jean-Claude Trichet said on Sept. 4 that it’s “premature to declare the financial crisis over,” while Bank of Japan Governor Masaaki Shirakawa said on Aug. 31 he’s not yet confident in his nation’s recovery.
‘Exit Strategies’
President Barack Obama and other G-20 leaders will pledge in Pittsburgh next week to keep stimulus policies in place until a recovery is certain, Michael Froman, a deputy assistant to Obama, said in a Sept. 16 interview. Finance officials from the group said after talks in London Sept. 5 that they would engage in “coordinated exit strategies” when growth returned. The collection of industrial and emerging economies includes Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey.
Rate increases would boost the appeal of selling currencies from nations with lower borrowing costs to buy assets where they are higher, a tactic known as the carry trade. The three-month London interbank offered rate, or Libor, for dollar loans has fallen to 0.29 percent from 1.43 percent at the end of 2008 after the Fed reduced its key rate to 0.25 percent. Brazil’s benchmark rate is 8.75 percent, a record low.
The Israeli shekel has gained 5 percent this quarter to 3.7389 per dollar as the Bank of Israel became the first central bank to tighten monetary policy in the past year, increasing its benchmark rate by a quarter of a percentage point to 0.75 percent on Aug. 24.
Won, Rupee
Developing nation currencies will continue to outperform, with the won forecast to climb 7.2 percent by Sept. 30, 2010, the rupee estimated to rise 6.4 percent and the Israeli shekel 5.8 percent, according to the median estimates by strategists in Bloomberg surveys. The Brazilian real will advance to 1.79 per dollar from 1.80, according to the forecasts.
Emerging-market central banks may try to limit appreciation and protect exports by selling their own legal tender, according to Allianz SE, Europe’s biggest insurer.
Global foreign-exchange reserves have climbed by $441 billion in the past five months to a record $7.088 trillion, reflecting increased dollar purchases by China, South Korea, India and Brazil, data compiled by Bloomberg show. They declined by $340 billion in the eight months ended March as the global credit crisis forced investors to dump emerging-market assets and hoard dollars.
Stability
“Gains in currencies won’t be huge because there is a desire for stability among central banks,” said Nikhil Srinivasan, who oversees $20 billion of assets as chief investment officer for Asia and the Middle East at Munich-based Allianz.
The Asian Development Bank warned in a Sept. 15 report that premature interest-rate increases could disrupt financial markets. Merrill Lynch & Co. and Banco Votorantim SA predict Brazil will keep rates on hold next year, Bloomberg data show.
The search for higher yields helped emerging-market bond funds take in a net $3.6 billion in a 21-week stretch that ended Sept. 2, the longest streak of weekly inflows in two years, according to EPFR Global in Cambridge, Massachusetts.
Foreign holdings of Indian bonds climbed 28 percent since March 31 to $6.4 billion, stock exchange data show. Japanese investors bought a net 1.66 trillion yen ($18.2 billion) in overseas debt in the week ended Sept. 12, the most since June 2005, the Ministry of Finance said yesterday.
‘Value’
“We do see value in both emerging-market debt and emerging-market currencies,” said Nicholas Gartside, head of global fixed income at Schroders in London, who oversees $31 billion. “Asia could be the first region to raise rates.”
The spread between the benchmark monetary-policy rate and the one-year swap rate, a measure of expectations for rate changes, has increased by 38 basis points in South Korea this quarter to 1.42 percentage points, 53 basis points to 1.48 percentage points in Indonesia and 55 basis points to 0.57 percentage point in Brazil. In Germany, the U.S. and Japan, the spreads are 0.18 percentage point, 0.36 point and 0.42 point.
Goldman Sachs Group Inc. forecasts India, Indonesia and South Korea will raise interest rates in the first quarter of 2010. The Reserve Bank of India may increase 300 basis points to 6.25 percent and Bank of Korea by 75 basis points in 2010 to 2.75 percent, Goldman Sachs chief Asia-Pacific economist Michael Buchanan wrote in a Sept. 8 note.
Doug Smith, chief economist for the Americas at Standard Chartered Plc in New York, predicts Brazil will add 50 basis points by March 31.
Inflation will accelerate to 4.4 percent in Brazil in 2010, from 4.3 percent in 2009, according to a Bloomberg survey of 13 economists. For the U.S., the median prediction of 66 analysts is for 0.5 percent deflation this year and 1.9 percent inflation in 2010.
“The interest-rate turn will come first in emerging markets for the simple reason they don’t have a credit crunch,” said Jerome Booth, head of research at Ashmore Investment Management in London, which manages $25 billion of developing- nation assets.
U.S. Proposes Ban on ‘Flash’ Trading on Wall Street
It is an obscure art of Wall Street, a technique that gives a scattering of traders an edge over everyone else — and the Securities and Exchange Commission wants to stamp it out.
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Flash traders, armed with powerful computers, make quick profits by keeping up-to-the-instant track of what others are doing.
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Times Topics: Securities and Exchange Commission, U.S.
Brendan Hoffman/Bloomberg News
Mary L. Schapiro, head of the Securities and Exchange Commission, Thursday in Washington.
The S.E.C. on Thursday proposed banning what are known as flash orders, which use powerful computers to glimpse at investors’ orders. The practice is often associated with a controversial corner of finance called high-frequency trading, which has grown, largely hidden from view, into a potent force in the markets.
The proposed ban was announced on the same day that the S.E.C. put forward new rules for credit ratings agencies, which were widely criticized for their role in the financial crisis. Together, the moves telegraphed a tougher line from the commission after a series of prominent missteps, including its failure to spot the Ponzi scheme orchestrated by Bernard L. Madoff.
Critics say flash orders favor sophisticated, fast-moving traders at the expense of slower market participants. Using lightning-quick computers, high-frequency traders often issue and then cancel orders almost simultaneously and get an early peek at how others are trading.
Mary L. Schapiro, the chairwoman of the S.E.C., said on Thursday that in proposing the ban, the commission was trying to balance the often competing interests of long-term investors and short-term traders. The proposal requires a second vote by the commission to become binding.
“Flash orders may create a two-tiered market by allowing only selected participants to access information about the best available prices for listed securities,” she said during a meeting in Washington. Other modern market practices, she said, are similarly opaque.
Fast-moving electronic exchanges have upended old-fashioned stock trading. Buyers and sellers no longer must interact on exchange floors and haggle over prices. Today, traders employ powerful computer programs to execute millions of orders a second and scan dozens of marketplaces simultaneously.
While anyone can gain access to flash orders for a fee, only very powerful computers can process and act on the information. In July, flash orders represented 2.8 percent of the roughly 9 billion shares of stocks traded in the United States.
According to Richard H. Repetto, an analyst at Sandler O’Neill who studies stock exchanges, the average trade is executed, or completed, in less than 10 milliseconds and often as fast as 5 milliseconds.
The proliferation of high-frequency trading has pushed up average daily volume on the nation’s stock exchanges by 164 percent since 2005. Proponents of the practice argue such trading enhances the liquidity and greases the wheels of the markets.
“High frequency trading has made the markets more efficient, and generally speaking, markets that are more efficient are better for all participants,” said Justin Schack, a vice president at Rosenblatt Securities.
Even so, Mr. Schack said he was pleased the S.E.C. was moving to ban flash orders, which he said tended to “benefit everyone except for the customer.”
Direct Edge, an electronic exchange, has benefited the most from the use of flash orders, analysts said. But other electronic exchanges, including Nasdaq and BATS also jumped into the market, prodded by competitive pressures.
Getting flashed an order offers traders a distinctive edge. When buy and sell orders come into an exchange, they are first flashed to those paying to see them for 30 milliseconds — 0.03 seconds — before they are available to everyone else. In the blink of an eye, the systems can detect patterns and get a jump on other investors. Before others even sees the order, high-frequency traders swoop in and then out.
The move to ban flash orders drew praise from some on Capitol Hill.
“This ban, as proposed, is pretty much water-tight and should not be weakened by the commission as the rule-making process goes forward,” said Senator Charles E. Schumer, Democrat of New York. “This proposal will once and for all get rid of flash trading.”
The parent of the New York Stock Exchange, NYSE Euronext, which never adopted flash trades, trumpeted the proposal. “I think this was a practice that gave unfair access to information flow to a select group of brokers, disadvantaged customer orders and led to a two-tier market system,” said Larry Leibowitz, head of United States markets and global technology at NYSE Euronext.
The S.E.C. on Thursday also passed rules aimed at improving transparency at credit rating agencies and reducing conflicts of interest at the companies.
One rule will force certain investors to rely less on credit ratings and more on their own research. Another requires the agencies to disclose rating histories and requires them to share information about securities they have rated with competitors so they too can rate the securities.
“These are baby steps, clearly,” said Jerome S. Fons, an independent consultant and former managing director at Moody’s, one of the major ratings agencies. He said even greater public disclosure was needed from the agencies.
Skip to next paragraph
Enlarge This Image
Chris Hondros/Getty Images
Flash traders, armed with powerful computers, make quick profits by keeping up-to-the-instant track of what others are doing.
Related
Times Topics: Securities and Exchange Commission, U.S.
Brendan Hoffman/Bloomberg News
Mary L. Schapiro, head of the Securities and Exchange Commission, Thursday in Washington.
The S.E.C. on Thursday proposed banning what are known as flash orders, which use powerful computers to glimpse at investors’ orders. The practice is often associated with a controversial corner of finance called high-frequency trading, which has grown, largely hidden from view, into a potent force in the markets.
The proposed ban was announced on the same day that the S.E.C. put forward new rules for credit ratings agencies, which were widely criticized for their role in the financial crisis. Together, the moves telegraphed a tougher line from the commission after a series of prominent missteps, including its failure to spot the Ponzi scheme orchestrated by Bernard L. Madoff.
Critics say flash orders favor sophisticated, fast-moving traders at the expense of slower market participants. Using lightning-quick computers, high-frequency traders often issue and then cancel orders almost simultaneously and get an early peek at how others are trading.
Mary L. Schapiro, the chairwoman of the S.E.C., said on Thursday that in proposing the ban, the commission was trying to balance the often competing interests of long-term investors and short-term traders. The proposal requires a second vote by the commission to become binding.
“Flash orders may create a two-tiered market by allowing only selected participants to access information about the best available prices for listed securities,” she said during a meeting in Washington. Other modern market practices, she said, are similarly opaque.
Fast-moving electronic exchanges have upended old-fashioned stock trading. Buyers and sellers no longer must interact on exchange floors and haggle over prices. Today, traders employ powerful computer programs to execute millions of orders a second and scan dozens of marketplaces simultaneously.
While anyone can gain access to flash orders for a fee, only very powerful computers can process and act on the information. In July, flash orders represented 2.8 percent of the roughly 9 billion shares of stocks traded in the United States.
According to Richard H. Repetto, an analyst at Sandler O’Neill who studies stock exchanges, the average trade is executed, or completed, in less than 10 milliseconds and often as fast as 5 milliseconds.
The proliferation of high-frequency trading has pushed up average daily volume on the nation’s stock exchanges by 164 percent since 2005. Proponents of the practice argue such trading enhances the liquidity and greases the wheels of the markets.
“High frequency trading has made the markets more efficient, and generally speaking, markets that are more efficient are better for all participants,” said Justin Schack, a vice president at Rosenblatt Securities.
Even so, Mr. Schack said he was pleased the S.E.C. was moving to ban flash orders, which he said tended to “benefit everyone except for the customer.”
Direct Edge, an electronic exchange, has benefited the most from the use of flash orders, analysts said. But other electronic exchanges, including Nasdaq and BATS also jumped into the market, prodded by competitive pressures.
Getting flashed an order offers traders a distinctive edge. When buy and sell orders come into an exchange, they are first flashed to those paying to see them for 30 milliseconds — 0.03 seconds — before they are available to everyone else. In the blink of an eye, the systems can detect patterns and get a jump on other investors. Before others even sees the order, high-frequency traders swoop in and then out.
The move to ban flash orders drew praise from some on Capitol Hill.
“This ban, as proposed, is pretty much water-tight and should not be weakened by the commission as the rule-making process goes forward,” said Senator Charles E. Schumer, Democrat of New York. “This proposal will once and for all get rid of flash trading.”
The parent of the New York Stock Exchange, NYSE Euronext, which never adopted flash trades, trumpeted the proposal. “I think this was a practice that gave unfair access to information flow to a select group of brokers, disadvantaged customer orders and led to a two-tier market system,” said Larry Leibowitz, head of United States markets and global technology at NYSE Euronext.
The S.E.C. on Thursday also passed rules aimed at improving transparency at credit rating agencies and reducing conflicts of interest at the companies.
One rule will force certain investors to rely less on credit ratings and more on their own research. Another requires the agencies to disclose rating histories and requires them to share information about securities they have rated with competitors so they too can rate the securities.
“These are baby steps, clearly,” said Jerome S. Fons, an independent consultant and former managing director at Moody’s, one of the major ratings agencies. He said even greater public disclosure was needed from the agencies.
India’s Stocks Fluctuate; Sterlite Declines, Dr. Reddy’s Gains
Sept. 18 (Bloomberg) -- India’s stocks fluctuated. Sterlite Industries (India) Ltd. sank after metal prices fell, while Dr. Reddy’s Laboratories Ltd. climbed to a record high on a report GlaxoSmithKline Plc may buy a stake in the company.
Sterlite Industries, India’s biggest copper producer, lost 1 percent. ICICI Bank Ltd. declined 2.1 percent after a three- day, 5.7 percent gain, paring its advance to 89 percent this year. Dr. Reddy’s, the country’s second-largest drugmaker, rose 3.7 percent after the Economic Times said GlaxoSmithKline is in talks to buy a 5 percent stake in the Hyderabad-based company.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, was little changed at 16,709.18 at 10:35 a.m. in Mumbai. The gauge is set for a weekly gain of 2.7 percent. It swung between gains and losses at least 12 times. The S&P CNX Nifty Index on the National Stock Exchange lost less than 0.1 percent to 4,961.10. The BSE 200 Index added 0.1 percent to 2,047.25.
“The market will consolidate after the Nifty touched the symbolic level of 5,000 yesterday,” said Deven Choksey, chief executive of KR Choksey Shares & Securities Pvt. “But there is a lot of pent-up demand and very high liquidity, which is supporting the market.”
The Sensex’s 14-day relative strength index, which measures how rapidly prices rose or fell during the specified period, has been over 70 for the past two days. Some investors regard readings at 70 or more as a signal to sell.
Sterlite fell 1 percent to 763.75 rupees. The December- delivery contract on the Shanghai Futures Exchange fell as much as 1.2 percent to 49,170 yuan ($7,202) a ton and traded at 49,230 yuan. Three-month delivery copper traded at $6,350 a ton on the London Metal Exchange after losing 0.6 percent.
ICICI
ICICI Bank lost 2.1 percent to 854 rupees. Its relative strength index dropped to 65 after exceeding 70 the past two days.
Overseas funds bought a net 11.7 billion rupees ($243 million) of Indian stocks on Sept. 16, the Securities and Exchange Board of India said yesterday on its Web site. The funds have bought a net 450 billion rupees of the nation’s stocks since Jan. 1, compared with record net sales of 530 billion rupees in 2008.
Dr. Reddy’s added 3.7 percent to 866.05 rupees, the highest since the stock was listed in 1991. The Economic Times said Glaxo is in talks to strengthen its association with the Indian generic drugmaker, with whom it had signed a marketing alliance four months ago. Dr. Reddy’s declined to comment.
Cargo Services
Container Corp. of India Ltd., a state-run cargo services company, rose 4 percent to 1,139.55 rupees after it was raised to “buy” from “reduce” at Nomura Holdings Inc., which said signs of improving economic conditions should allow the company to sustain “strong” earnings growth momentum over the next 12 to 15 months.
Raymond Ltd. advanced 8.1 percent to 222.2 rupees, extending yesterday’s 10 percent surge. The textile and suit maker will build “affordable” homes on as much as 20 acres of its surplus land in north Mumbai, Chairman Gautam Singhania said yesterday.
Sterlite Industries, India’s biggest copper producer, lost 1 percent. ICICI Bank Ltd. declined 2.1 percent after a three- day, 5.7 percent gain, paring its advance to 89 percent this year. Dr. Reddy’s, the country’s second-largest drugmaker, rose 3.7 percent after the Economic Times said GlaxoSmithKline is in talks to buy a 5 percent stake in the Hyderabad-based company.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, was little changed at 16,709.18 at 10:35 a.m. in Mumbai. The gauge is set for a weekly gain of 2.7 percent. It swung between gains and losses at least 12 times. The S&P CNX Nifty Index on the National Stock Exchange lost less than 0.1 percent to 4,961.10. The BSE 200 Index added 0.1 percent to 2,047.25.
“The market will consolidate after the Nifty touched the symbolic level of 5,000 yesterday,” said Deven Choksey, chief executive of KR Choksey Shares & Securities Pvt. “But there is a lot of pent-up demand and very high liquidity, which is supporting the market.”
The Sensex’s 14-day relative strength index, which measures how rapidly prices rose or fell during the specified period, has been over 70 for the past two days. Some investors regard readings at 70 or more as a signal to sell.
Sterlite fell 1 percent to 763.75 rupees. The December- delivery contract on the Shanghai Futures Exchange fell as much as 1.2 percent to 49,170 yuan ($7,202) a ton and traded at 49,230 yuan. Three-month delivery copper traded at $6,350 a ton on the London Metal Exchange after losing 0.6 percent.
ICICI
ICICI Bank lost 2.1 percent to 854 rupees. Its relative strength index dropped to 65 after exceeding 70 the past two days.
Overseas funds bought a net 11.7 billion rupees ($243 million) of Indian stocks on Sept. 16, the Securities and Exchange Board of India said yesterday on its Web site. The funds have bought a net 450 billion rupees of the nation’s stocks since Jan. 1, compared with record net sales of 530 billion rupees in 2008.
Dr. Reddy’s added 3.7 percent to 866.05 rupees, the highest since the stock was listed in 1991. The Economic Times said Glaxo is in talks to strengthen its association with the Indian generic drugmaker, with whom it had signed a marketing alliance four months ago. Dr. Reddy’s declined to comment.
Cargo Services
Container Corp. of India Ltd., a state-run cargo services company, rose 4 percent to 1,139.55 rupees after it was raised to “buy” from “reduce” at Nomura Holdings Inc., which said signs of improving economic conditions should allow the company to sustain “strong” earnings growth momentum over the next 12 to 15 months.
Raymond Ltd. advanced 8.1 percent to 222.2 rupees, extending yesterday’s 10 percent surge. The textile and suit maker will build “affordable” homes on as much as 20 acres of its surplus land in north Mumbai, Chairman Gautam Singhania said yesterday.
Italians question Afghan role after deaths
Calls to withdraw Italian troops from Afghanistan were growing on Thursday night after six soldiers were killed by a suicide car bomber who rammed a Nato convoy in Kabul.
Italians were shocked by the worst casualties the country has suffered since the start of the Afghan war. Umberto Bossi, a key partner in Silvio Berlusconi’s centre-right coalition, added to pressure on the prime minister by saying all Italian forces should “be home in Italy by Christmas”.
EDITOR’S CHOICE
West pushes for Afghan coalition deal - Sep-13
Upbeat Rasmussen faces modernising task - Sep-15
Mr Berlusconi, however, reiterated that Italy would not take any unilateral action after the attack and the country’s contribution to “a very difficult situation” would continue.
Italy has 2,800 troops deployed in Afghanistan. The bulk of these forces are concentrated in the western Herat province, which borders Iran.
Franco Frattini, the foreign minister, said: “It is right at this difficult moment that we remain close to the Afghans and not forget that our presence in that country enhances their and our security.”
The attack looks certain to fuel debate within Italy about the campaign. The centre-right party of Silvio Berlusconi, the prime minister, appears to back the government’s strategy but at least one coalition member – the Northern League, led by Umberto Bossi – has called for Italy’s to be withdrawn from Afghanistan.
Antonio di Pietro, the leader of a small liberal party, said on his blog: “While we insist on staying in Afghanistan we no longer know the reasons why we went there.”
Italian disquiet at an increasingly unpopular war echoes a debate in Germany this month, when a German commander called in an air strike that killed 30 Afghan civilians and 69 insurgents, according to a presidential investigation.
Ten Afghan civilians were killed and 55 wounded in Thursday’s blast, which deals a fresh blow to a western mission locked in a growing confrontation with President Hamid Karzai over disputed elections.
“Like other elections of the world . . . there were problems and sensitivities in the Afghanistan elections but it has not been to the extent which the media speak of,” Mr Karzai told his first news conference since the August 20 polls.
Mr Karzai’s confidence in the vote’s integrity set him at odds with European Union observers who said on Wednesday that more than a million ballots cast for the president, over a third of his tally, were suspect.
A UN-backed Electoral Complaints Commission has ordered a recount that could overturn preliminary results that hand Mr Karzai 54 per cent of the vote – enough to avoid a run-off with Abdullah Abdullah, his main challenger.
Mr Abdullah said the recount must be respected even if it created short-term uncertainty. “How can we surrender to fraud to decide our destiny? This is the wrong foundation for our country and it will only strengthen the insurgents,” he said. .
The mounting insurgency and political uncertainty over the polls have sharpened a dilemma faced by Barack Obama, US president, over whether to send in more troops .
Mr Obama sought to bolster support for the war from a sceptical public on Wednesday by sending Congress a list of benchmarks to measure success in battling Afghan insurgents and hunting militants in Pakistan.
Washington said the attack on Italian troops highlighted the need for the US and its allies to remain united in Afghanistan.
“This vicious act of terrorism reinforces the need for the US and allies, in partnership with the people of Afghanistan, to continue our critical work,” the state department said. “We are united in our commitment to defeat the extremist elements, whose intention is to destroy the freedom and dignity to which all people are entitled.”
European diplomats they expect any call for more troops for the war effort to also be directed at them – but argue that in many countries it would be politically impossible for some countries to send more forces to what has become an unpopular war.
General Stanley McChrystal, the Obama administration’s handpicked commander for Afghanistan, is expected to ask for more troops to establish a presence in parts of the country now dominated by the Taliban.
Admiral Mike Mullen, the head of the US joint chiefs of staff, also said this week that the US would probably need more troops.
But in a sign of the depths of the dilemma confronting him as he chooses between heeding the advice of his generals and responding to mounting concern among Congressional Democrats and US public opinion as a whole, President Barack Obama said this week that no decision on sending more resources was imminent.
Italians were shocked by the worst casualties the country has suffered since the start of the Afghan war. Umberto Bossi, a key partner in Silvio Berlusconi’s centre-right coalition, added to pressure on the prime minister by saying all Italian forces should “be home in Italy by Christmas”.
EDITOR’S CHOICE
West pushes for Afghan coalition deal - Sep-13
Upbeat Rasmussen faces modernising task - Sep-15
Mr Berlusconi, however, reiterated that Italy would not take any unilateral action after the attack and the country’s contribution to “a very difficult situation” would continue.
Italy has 2,800 troops deployed in Afghanistan. The bulk of these forces are concentrated in the western Herat province, which borders Iran.
Franco Frattini, the foreign minister, said: “It is right at this difficult moment that we remain close to the Afghans and not forget that our presence in that country enhances their and our security.”
The attack looks certain to fuel debate within Italy about the campaign. The centre-right party of Silvio Berlusconi, the prime minister, appears to back the government’s strategy but at least one coalition member – the Northern League, led by Umberto Bossi – has called for Italy’s to be withdrawn from Afghanistan.
Antonio di Pietro, the leader of a small liberal party, said on his blog: “While we insist on staying in Afghanistan we no longer know the reasons why we went there.”
Italian disquiet at an increasingly unpopular war echoes a debate in Germany this month, when a German commander called in an air strike that killed 30 Afghan civilians and 69 insurgents, according to a presidential investigation.
Ten Afghan civilians were killed and 55 wounded in Thursday’s blast, which deals a fresh blow to a western mission locked in a growing confrontation with President Hamid Karzai over disputed elections.
“Like other elections of the world . . . there were problems and sensitivities in the Afghanistan elections but it has not been to the extent which the media speak of,” Mr Karzai told his first news conference since the August 20 polls.
Mr Karzai’s confidence in the vote’s integrity set him at odds with European Union observers who said on Wednesday that more than a million ballots cast for the president, over a third of his tally, were suspect.
A UN-backed Electoral Complaints Commission has ordered a recount that could overturn preliminary results that hand Mr Karzai 54 per cent of the vote – enough to avoid a run-off with Abdullah Abdullah, his main challenger.
Mr Abdullah said the recount must be respected even if it created short-term uncertainty. “How can we surrender to fraud to decide our destiny? This is the wrong foundation for our country and it will only strengthen the insurgents,” he said. .
The mounting insurgency and political uncertainty over the polls have sharpened a dilemma faced by Barack Obama, US president, over whether to send in more troops .
Mr Obama sought to bolster support for the war from a sceptical public on Wednesday by sending Congress a list of benchmarks to measure success in battling Afghan insurgents and hunting militants in Pakistan.
Washington said the attack on Italian troops highlighted the need for the US and its allies to remain united in Afghanistan.
“This vicious act of terrorism reinforces the need for the US and allies, in partnership with the people of Afghanistan, to continue our critical work,” the state department said. “We are united in our commitment to defeat the extremist elements, whose intention is to destroy the freedom and dignity to which all people are entitled.”
European diplomats they expect any call for more troops for the war effort to also be directed at them – but argue that in many countries it would be politically impossible for some countries to send more forces to what has become an unpopular war.
General Stanley McChrystal, the Obama administration’s handpicked commander for Afghanistan, is expected to ask for more troops to establish a presence in parts of the country now dominated by the Taliban.
Admiral Mike Mullen, the head of the US joint chiefs of staff, also said this week that the US would probably need more troops.
But in a sign of the depths of the dilemma confronting him as he chooses between heeding the advice of his generals and responding to mounting concern among Congressional Democrats and US public opinion as a whole, President Barack Obama said this week that no decision on sending more resources was imminent.
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