Dec. 6 (Bloomberg) -- Australia’s chief competition regulator says there’s little chance he would allow further mergers between major and regional banks in the wake of the global financial crisis.
The nation’s banking industry has changed significantly in the past year, and there is less competition, Competition and Consumer Commission Chairman Graeme Samuel told ABC Television’s Inside Business program today.
Any proposed mergers would be examined critically, based on existing and likely future competition, he said.
Treasurer Wayne Swan maintained his rage against three of Australia’s biggest banks for raising interest rates more than the central bank, accusing them today of “taking families for a ride this Christmas.” The Reserve Bank raised its benchmark rate by a quarter point for an unprecedented third straight month, to 3.75 percent on Dec. 1.
Commonwealth Bank of Australia, Australia & New Zealand Banking Group and Westpac Banking Corp. all raised their home- loan rates by more than the official-cash-rate increase. Smaller St. George Bank Ltd. also raised by more.
“I think you would have to say that it would be a difficult ask to see any more of the regional banks moving into the fold of the major trading banks in light of the global financial crisis,” Samuel said.
“There’s even a question that you might ask, that if Westpac were to seek to acquire St. George today rather than prior to the global financial crisis, whether we’d have the same view as what we had back then.” Westpac bought St. George in 2008.
Less Competition
Samuel said local banks have less competition as foreign banks exit institutional lending and non-bank lenders stop residential mortgage loans.
“So there’s less competition. Generally when you’ve got less competition, you’ll have higher prices being charged,” he said.
The only way the competition commission can act is to block mergers that may be anti-competitive, Samuel said.
“One should never say never. What we have said is we will examine these very critically in the context of both competition in the banking market today, but more importantly the likely prognosis for competition into the forseeable future.”
Saturday, December 5, 2009
Friday, December 4, 2009
Jobs Report Is Strongest Since the Start of the Recession
The nation’s employers not only have stopped eliminating large numbers of jobs, but appear to be on the verge of rebuilding the American work force, devastated by the recession.
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Luke Sharrett/The New York Times
President Obama, shown here visiting a Pennsylvania career center on Friday, called the latest jobs report a “hopeful sign.”
Multimedia
The Labor Picture in NovemberGraphic
The Labor Picture in November
The Takeaway With David Leonhardt
Today’s Business: The Times’s Louis Uchitelle on the Latest Jobs Report
Related
You're the Boss: For Small Business, the Jobs Forum Is All About Credit
The Caucus: White House Pleased By Unemployment Dip
Bucks: Taking Questions on Unemployment Benefits
Enlarge This Image
Michael Reynolds/European Pressphoto Agency
Demonstrators outside the White House on Thursday as President Obama met with business leaders and economists to seek ideas for creating jobs.
The unexpected improvement comes as a relief to the Obama administration, which plans to unveil new proposals next week to ease the plight of the jobless following its labor forum in Washington on Thursday.
In the best report since the recession began two years ago, only 11,000 jobs disappeared last month, the government said on Friday, and the unemployment rate actually dipped, to 10 percent, from 10.2 percent the previous month.
“There are going to be some months where the reports are going to be a little better, some months where the reports are worse, but the trend line right now is good,” President Obama said in a visit to Allentown, Pa., offering reassurance to a city besieged by unemployment and a country still suffering from the highest unemployment rate in 26 years.
Many forecasters suggest that the turning point — from jobs being cut to jobs being added — will come by March, assuming the economy continues to grow, as it finally started to do in the third quarter. If they are right, the beginning of a work force recovery would come more quickly than after the last two recessions, in the early 1990s and 2001, despite the much greater severity of this downturn.
Stock markets rose sharply early Friday after the employment report was released and ended the day slightly higher, while the dollar had its biggest one-day rally since January.
Although 15.4 million people are struggling to find work, the November report revealed signs of improvement across the country. More than 50,000 temporary workers were hired, the first surge in months and often a precursor to companies hiring permanent workers. Employees worked more hours, even in manufacturing.
And, reflecting the increased hours, the average weekly wage for most of the nation’s workers rose by nearly two-thirds of a percentage point in a single month, to $622.
“Many companies have reached the point that they can’t extract more work from their existing employees,” said Nigel Gault, chief United States economist for IHS Global Insight. “That means they have to add hours for existing workers or add people. Just how many depends on how quickly the economy grows.”
It also depends on business executives feeling confident enough about the economy to invest and expand their operations. That may take months of steady economic growth even after they have stopped peeling back their work forces.
In the end, the unanticipated improvement in November may turn out to be partly a correction of too much bad news in October — particularly the unemployment rate, which shot up four-tenths of a percentage point that month and has retreated somewhat.
But economists in the Obama administration were having none of that. They see the November improvement as payback from the $787 billion stimulus package. In briefings with reporters, they said the federal spending saved or created 1.6 million jobs. Without that lift, the total job loss over the 23 months of recession would have been 8.8 million instead of 7.2 million.
“I think you have to give our interventions a lot of credit,” said Jared Bernstein, chief economist for Vice President Joseph R. Biden Jr. And then, insisting that Thursday’s job conference in Washington was a step along the way to more job creation activity, he said: “By no stretch of the imagination does this report mean less pressure on us for job creation.”
Republican economists were hardly as sanguine. “Even if you accept their analysis that we are creating jobs this year, when you remove the stimulus you are going to destroy jobs,” said Kevin A. Hassett, director of Economic Policy Studies at the conservative American Enterprise Institute and chief economist for John McCain in his failed presidential campaign. Mr. Hassett’s preferred tonic, like that of many Republicans, is tax cuts for job creation, not public spending.
Adding to the positive signs, a broad measure of unemployment — one that includes those forced to work only part time and those too discouraged to look for work — fell to 17.2 percent, from 17.5 percent in October, the first decline in several months. In addition, job losses in September and October turned out to be far less than previously reported: 250,000 instead of 409,000.
“All this good news is miles above the underlying trend rate of improvement, so we expect a correction in the next month or two,” Ian Shepherdson, chief domestic economist for High Frequency Economics, said in a message to the firm’s clients.
Even without a correction, once the economy turns and hiring resumes, nearly 18 million people are likely to be vying for jobs, as if they were all trying at once to jam themselves through a door too narrow to accommodate more than a few. In a strong economy, the work force seldom grows by more than 300,000 workers a month.
Nearly one-third have an even greater burden. They are the long-term unemployed, out of work for six months or more, and in many cases longer than a year. Not since records were first kept in 1948 has the percentage of long-term unemployed been as high as it is today: 38.3 percent of all those seeking work, or more than 10 percentage points above the previous high, in the aftermath of the early 1980s recession.
“Assuming we have a strong recovery, it will take at least five years or more to get the unemployment rate down to a more normal 5 percent,” said Jan Hatzius, chief domestic economist at Goldman Sachs, adding that the long-term unemployed have lost skills and some of the habits of work because of their extended idleness. Because of this, the nation may have to get used to an unemployment rate that seldom falls below 6 percent.
Annette Mercado, 39, a single mother in Chicago, said that she had retained her skills, even though she has been hunting for work since July of last year, when she was laid off from a $12-an-hour clerical job in a motorcycle accessory shop.
She attributes that layoff to her refusal to work extra hours. “I told them I wasn’t willing to spend more time away from my 14-year-old daughter,” Ms. Mercado said. She spent months scouring Craigslist, CareerBuilder and other job sites, but the best she could do, she said during an interview at the state unemployment office, was temporary holiday season work last December at a liquor store.
Ms. Mercado gets $984 a month in unemployment benefits as well as food stamps, but that is not really enough, she said, to pay all her expenses and those of her daughter without falling behind on the rent. Her plan, if work doesn’t materialize soon, is to put her belongings in storage and move in with her parents.
“They are barely making it themselves,” she said.
Skip to next paragraph
Enlarge This Image
Luke Sharrett/The New York Times
President Obama, shown here visiting a Pennsylvania career center on Friday, called the latest jobs report a “hopeful sign.”
Multimedia
The Labor Picture in NovemberGraphic
The Labor Picture in November
The Takeaway With David Leonhardt
Today’s Business: The Times’s Louis Uchitelle on the Latest Jobs Report
Related
You're the Boss: For Small Business, the Jobs Forum Is All About Credit
The Caucus: White House Pleased By Unemployment Dip
Bucks: Taking Questions on Unemployment Benefits
Enlarge This Image
Michael Reynolds/European Pressphoto Agency
Demonstrators outside the White House on Thursday as President Obama met with business leaders and economists to seek ideas for creating jobs.
The unexpected improvement comes as a relief to the Obama administration, which plans to unveil new proposals next week to ease the plight of the jobless following its labor forum in Washington on Thursday.
In the best report since the recession began two years ago, only 11,000 jobs disappeared last month, the government said on Friday, and the unemployment rate actually dipped, to 10 percent, from 10.2 percent the previous month.
“There are going to be some months where the reports are going to be a little better, some months where the reports are worse, but the trend line right now is good,” President Obama said in a visit to Allentown, Pa., offering reassurance to a city besieged by unemployment and a country still suffering from the highest unemployment rate in 26 years.
Many forecasters suggest that the turning point — from jobs being cut to jobs being added — will come by March, assuming the economy continues to grow, as it finally started to do in the third quarter. If they are right, the beginning of a work force recovery would come more quickly than after the last two recessions, in the early 1990s and 2001, despite the much greater severity of this downturn.
Stock markets rose sharply early Friday after the employment report was released and ended the day slightly higher, while the dollar had its biggest one-day rally since January.
Although 15.4 million people are struggling to find work, the November report revealed signs of improvement across the country. More than 50,000 temporary workers were hired, the first surge in months and often a precursor to companies hiring permanent workers. Employees worked more hours, even in manufacturing.
And, reflecting the increased hours, the average weekly wage for most of the nation’s workers rose by nearly two-thirds of a percentage point in a single month, to $622.
“Many companies have reached the point that they can’t extract more work from their existing employees,” said Nigel Gault, chief United States economist for IHS Global Insight. “That means they have to add hours for existing workers or add people. Just how many depends on how quickly the economy grows.”
It also depends on business executives feeling confident enough about the economy to invest and expand their operations. That may take months of steady economic growth even after they have stopped peeling back their work forces.
In the end, the unanticipated improvement in November may turn out to be partly a correction of too much bad news in October — particularly the unemployment rate, which shot up four-tenths of a percentage point that month and has retreated somewhat.
But economists in the Obama administration were having none of that. They see the November improvement as payback from the $787 billion stimulus package. In briefings with reporters, they said the federal spending saved or created 1.6 million jobs. Without that lift, the total job loss over the 23 months of recession would have been 8.8 million instead of 7.2 million.
“I think you have to give our interventions a lot of credit,” said Jared Bernstein, chief economist for Vice President Joseph R. Biden Jr. And then, insisting that Thursday’s job conference in Washington was a step along the way to more job creation activity, he said: “By no stretch of the imagination does this report mean less pressure on us for job creation.”
Republican economists were hardly as sanguine. “Even if you accept their analysis that we are creating jobs this year, when you remove the stimulus you are going to destroy jobs,” said Kevin A. Hassett, director of Economic Policy Studies at the conservative American Enterprise Institute and chief economist for John McCain in his failed presidential campaign. Mr. Hassett’s preferred tonic, like that of many Republicans, is tax cuts for job creation, not public spending.
Adding to the positive signs, a broad measure of unemployment — one that includes those forced to work only part time and those too discouraged to look for work — fell to 17.2 percent, from 17.5 percent in October, the first decline in several months. In addition, job losses in September and October turned out to be far less than previously reported: 250,000 instead of 409,000.
“All this good news is miles above the underlying trend rate of improvement, so we expect a correction in the next month or two,” Ian Shepherdson, chief domestic economist for High Frequency Economics, said in a message to the firm’s clients.
Even without a correction, once the economy turns and hiring resumes, nearly 18 million people are likely to be vying for jobs, as if they were all trying at once to jam themselves through a door too narrow to accommodate more than a few. In a strong economy, the work force seldom grows by more than 300,000 workers a month.
Nearly one-third have an even greater burden. They are the long-term unemployed, out of work for six months or more, and in many cases longer than a year. Not since records were first kept in 1948 has the percentage of long-term unemployed been as high as it is today: 38.3 percent of all those seeking work, or more than 10 percentage points above the previous high, in the aftermath of the early 1980s recession.
“Assuming we have a strong recovery, it will take at least five years or more to get the unemployment rate down to a more normal 5 percent,” said Jan Hatzius, chief domestic economist at Goldman Sachs, adding that the long-term unemployed have lost skills and some of the habits of work because of their extended idleness. Because of this, the nation may have to get used to an unemployment rate that seldom falls below 6 percent.
Annette Mercado, 39, a single mother in Chicago, said that she had retained her skills, even though she has been hunting for work since July of last year, when she was laid off from a $12-an-hour clerical job in a motorcycle accessory shop.
She attributes that layoff to her refusal to work extra hours. “I told them I wasn’t willing to spend more time away from my 14-year-old daughter,” Ms. Mercado said. She spent months scouring Craigslist, CareerBuilder and other job sites, but the best she could do, she said during an interview at the state unemployment office, was temporary holiday season work last December at a liquor store.
Ms. Mercado gets $984 a month in unemployment benefits as well as food stamps, but that is not really enough, she said, to pay all her expenses and those of her daughter without falling behind on the rent. Her plan, if work doesn’t materialize soon, is to put her belongings in storage and move in with her parents.
“They are barely making it themselves,” she said.
Pakistan Taliban Takes Responsibility for Deadly Mosque Attack
Dec. 5 (Bloomberg) -- The Taliban claimed responsibility for a grenade and gunfire attack that killed at least 17 children and 19 adults attending weekly prayers in a mosque near Pakistani army headquarters in the city of Rawalpindi.
A bomb blast brought down parts of the building as worshippers fled in panic yesterday, witnesses told Dawn News television. Two of the attackers were suicide bombers, while two died in gun battles with security forces, the army said in a statement.
Nine of the victims were military officers, including a major general and a brigadier, the army said. The Friday noon prayer at the mosque normally is packed with active and retired military personnel who live in the Qasim Market neighborhood, a few minutes’ drive from army headquarters, said Shaukat Qadir, a military analyst and retired Pakistani army brigadier.
Mufti Wali Rehman, second in command of the Taliban in Pakistan, told Geo TV the group took responsibility.
The attack was the latest in a series of Islamic militant bombings and guerrilla raids, many on military targets, that have killed about 400 people since the army began an offensive Oct. 17 against Pakistan’s largest Taliban faction. The fighting has taken place in the South Waziristan district near the border with Afghanistan.
“I saw 30 to 35 people lying dead in front of me,” including women and children, as gunmen fought a prolonged battle with security forces, Nasser Alisher told the channel. A military spokesman, Major General Athar Abbas, said 36 had been confirmed dead.
Five Attackers Seen
At least five militants were involved in the attack, said Qadir, citing officials. A single policeman tried to stop the team as it moved on the mosque, grappling with an attacker who detonated a suicide bomb he was wearing, killing both men, he said.
As gunfire continued through the afternoon, TV stations showed Pakistani police and soldiers directing traffic away from the neighborhood as helicopters hovered overhead.
President Barack Obama said on Dec. 1 that the U.S. will dispatch 30,000 extra troops to Afghanistan next year, calling Afghanistan and Pakistan the “epicenter of violent extremism practiced by al-Qaeda.”
Militant attacks in Pakistan this week sapped investors’ confidence in an economy that is dependent on foreign aid. The benchmark Karachi Stock Index had its steepest weekly slide in a month, falling 2.1 percent.
Recent Attacks
Guerrillas disguised in army uniforms assaulted the army headquarters in Rawalpindi on Oct. 10, killing 10 military personnel and four civilians. Qasim Market was hit in September 2007 by a suicide bomber who struck a bus carrying Defense Ministry employees.
As the army continues its Waziristan offensive, Taliban militants have fled to the Khyber, Kurram and Orakzai districts of Pakistan’s semi-autonomous tribal zone along the border.
They have fought escalating battles with security forces in the past month. The army will continue its attacks on suspected Taliban camps in those areas, Abbas said Nov. 30 in a telephone interview.
A bomb blast brought down parts of the building as worshippers fled in panic yesterday, witnesses told Dawn News television. Two of the attackers were suicide bombers, while two died in gun battles with security forces, the army said in a statement.
Nine of the victims were military officers, including a major general and a brigadier, the army said. The Friday noon prayer at the mosque normally is packed with active and retired military personnel who live in the Qasim Market neighborhood, a few minutes’ drive from army headquarters, said Shaukat Qadir, a military analyst and retired Pakistani army brigadier.
Mufti Wali Rehman, second in command of the Taliban in Pakistan, told Geo TV the group took responsibility.
The attack was the latest in a series of Islamic militant bombings and guerrilla raids, many on military targets, that have killed about 400 people since the army began an offensive Oct. 17 against Pakistan’s largest Taliban faction. The fighting has taken place in the South Waziristan district near the border with Afghanistan.
“I saw 30 to 35 people lying dead in front of me,” including women and children, as gunmen fought a prolonged battle with security forces, Nasser Alisher told the channel. A military spokesman, Major General Athar Abbas, said 36 had been confirmed dead.
Five Attackers Seen
At least five militants were involved in the attack, said Qadir, citing officials. A single policeman tried to stop the team as it moved on the mosque, grappling with an attacker who detonated a suicide bomb he was wearing, killing both men, he said.
As gunfire continued through the afternoon, TV stations showed Pakistani police and soldiers directing traffic away from the neighborhood as helicopters hovered overhead.
President Barack Obama said on Dec. 1 that the U.S. will dispatch 30,000 extra troops to Afghanistan next year, calling Afghanistan and Pakistan the “epicenter of violent extremism practiced by al-Qaeda.”
Militant attacks in Pakistan this week sapped investors’ confidence in an economy that is dependent on foreign aid. The benchmark Karachi Stock Index had its steepest weekly slide in a month, falling 2.1 percent.
Recent Attacks
Guerrillas disguised in army uniforms assaulted the army headquarters in Rawalpindi on Oct. 10, killing 10 military personnel and four civilians. Qasim Market was hit in September 2007 by a suicide bomber who struck a bus carrying Defense Ministry employees.
As the army continues its Waziristan offensive, Taliban militants have fled to the Khyber, Kurram and Orakzai districts of Pakistan’s semi-autonomous tribal zone along the border.
They have fought escalating battles with security forces in the past month. The army will continue its attacks on suspected Taliban camps in those areas, Abbas said Nov. 30 in a telephone interview.
G.I.’s Learning to Stand Down as Iraqis Step In
KIRKUK, Iraq — The soldiers of Battery B were on a routine walk through a downtown market when they heard the noise: a low crack that was followed by a plume of black smoke 500 yards away. The soldiers’ attention sharpened, their assault weapons swung at the ready. A few months ago, they would have been on the move by now.
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At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
But Lt. Christopher Freeman ordered them to stand down.
“They want us to stay away,” he said, referring to his counterparts in the Iraqi police force. Under an agreement that went into effect on July 1, the American forces could not go to the scene unless the Iraqis asked. So the soldiers continued their canvass, the smoke streaming in the near distance.
“You want to react,” said Lieutenant Freeman, of the Third Battalion, 82nd Field Artillery. “You want to make sure no one’s hurt. But this is how we do things now. It’s not our fight.”
For American soldiers in most of Iraq — even here in one of the nation’s most unsettled cities — this is the new reality since July 1, after United States forces pulled out of urban areas and changed their role from conducting combat missions to aiding the local police and the military. Soldiers here recited the new mantra: they were here just to support and train; the fight belonged to the Iraqis now — the essential condition, after nearly seven years, for American troops to go home.
Training local troops was an early goal in Iraq and is now the linchpin of President Obama’s plan to begin to withdraw soldiers from Afghanistan in 18 months. It is one of many similarities between the wars, though many conditions are different.
Here in Iraq, training has proved difficult and often chimerical. The Bush administration had hoped to hand over security to the Iraqis almost immediately after the invasion in 2003, only to find that Iraqi troops were ill equipped and often either targets or instruments of sectarian violence.
Now, as America prepares to remove most troops by next summer, routine missions like Battery B’s illuminate the sometimes creaky progress of the forces on whom Iraq’s future security rests. But at some point, Americans and Iraqis alike had to decide what was good enough.
The battery’s new support role marked a philosophical shift from 2007, when Gen. David H. Petraeus, then the top American commander here, made protecting the populace the highest priority. The new priorities are more diffuse: to enable local forces; to enhance their standing in the community; to spur economic development; and to improve inter-ethnic relations.
Soldiers in B and other units said they now had a role for which they were not trained, with more down time, limited movement outside the base and missions that often consisted of standing around while their officers exchanged notes with Iraqi counterparts.
Some itched to go to Afghanistan, where the small number of trained local troops still meant an active combat role for Americans. Others battled boredom.
On a recent mission, soldiers from the Fourth Squadron, Ninth Cavalry Regiment drove cautiously through an intersection.
“That right there is the peak of our excitement, trying to flag the traffic to a stop,” said Staff Sgt. Homero Bazaldua, of San Antonio. The unit had not seen combat since arriving in Kirkuk in July.
For a fighting force whose members enlisted during wartime or re-enlisted after active tours, the new footing has required adjustment.
“I stopped trying to explain what we do, because it’s almost impossible to explain,” said Lt. Eric Dixon, also of the Fourth Squadron. “Everyone has in their head an idea what’s going on, and then when you tell them what’s really going on, they say, that doesn’t make any sense. It’s the Iraqis completely in the lead and us just in support.”
Asked if it was better this way, Lieutenant Dixon, of Anacoco, La., said: “It’s hard to explain. Like this mission — we like it, but it’s boring to us. But this is a much more rewarding mission than kicking down doors every day.
“We get to see the progress of what we’re doing,” he said. “There’s times we’ll go on missions and they’ll say, ‘We don’t need you. We’ll take care of this and give you a report.’ There’s no better measure of success than that.”
Skip to next paragraph
At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
But Lt. Christopher Freeman ordered them to stand down.
“They want us to stay away,” he said, referring to his counterparts in the Iraqi police force. Under an agreement that went into effect on July 1, the American forces could not go to the scene unless the Iraqis asked. So the soldiers continued their canvass, the smoke streaming in the near distance.
“You want to react,” said Lieutenant Freeman, of the Third Battalion, 82nd Field Artillery. “You want to make sure no one’s hurt. But this is how we do things now. It’s not our fight.”
For American soldiers in most of Iraq — even here in one of the nation’s most unsettled cities — this is the new reality since July 1, after United States forces pulled out of urban areas and changed their role from conducting combat missions to aiding the local police and the military. Soldiers here recited the new mantra: they were here just to support and train; the fight belonged to the Iraqis now — the essential condition, after nearly seven years, for American troops to go home.
Training local troops was an early goal in Iraq and is now the linchpin of President Obama’s plan to begin to withdraw soldiers from Afghanistan in 18 months. It is one of many similarities between the wars, though many conditions are different.
Here in Iraq, training has proved difficult and often chimerical. The Bush administration had hoped to hand over security to the Iraqis almost immediately after the invasion in 2003, only to find that Iraqi troops were ill equipped and often either targets or instruments of sectarian violence.
Now, as America prepares to remove most troops by next summer, routine missions like Battery B’s illuminate the sometimes creaky progress of the forces on whom Iraq’s future security rests. But at some point, Americans and Iraqis alike had to decide what was good enough.
The battery’s new support role marked a philosophical shift from 2007, when Gen. David H. Petraeus, then the top American commander here, made protecting the populace the highest priority. The new priorities are more diffuse: to enable local forces; to enhance their standing in the community; to spur economic development; and to improve inter-ethnic relations.
Soldiers in B and other units said they now had a role for which they were not trained, with more down time, limited movement outside the base and missions that often consisted of standing around while their officers exchanged notes with Iraqi counterparts.
Some itched to go to Afghanistan, where the small number of trained local troops still meant an active combat role for Americans. Others battled boredom.
On a recent mission, soldiers from the Fourth Squadron, Ninth Cavalry Regiment drove cautiously through an intersection.
“That right there is the peak of our excitement, trying to flag the traffic to a stop,” said Staff Sgt. Homero Bazaldua, of San Antonio. The unit had not seen combat since arriving in Kirkuk in July.
For a fighting force whose members enlisted during wartime or re-enlisted after active tours, the new footing has required adjustment.
“I stopped trying to explain what we do, because it’s almost impossible to explain,” said Lt. Eric Dixon, also of the Fourth Squadron. “Everyone has in their head an idea what’s going on, and then when you tell them what’s really going on, they say, that doesn’t make any sense. It’s the Iraqis completely in the lead and us just in support.”
Asked if it was better this way, Lieutenant Dixon, of Anacoco, La., said: “It’s hard to explain. Like this mission — we like it, but it’s boring to us. But this is a much more rewarding mission than kicking down doors every day.
“We get to see the progress of what we’re doing,” he said. “There’s times we’ll go on missions and they’ll say, ‘We don’t need you. We’ll take care of this and give you a report.’ There’s no better measure of success than that.”
Himalayan ski plan hangs in balance
A project that would transform a former Himalayan haven for western hippies and Tibetan refugees into India’s first luxury ski resort hangs in the balance this week.
The government of Himachal Pradesh state in northern India is expected shortly to announce the results of a review of the $600m (€398m, £361m) Himalayan Ski Village project in Manali, a hill station on the road to the former Tibetan kingdom of Ladakh, that was conceived by a consortium of investors led by Alfred Ford, the great grandson of US industrialist Henry Ford.
EDITOR’S CHOICE
Radioactive leak was deliberate, says India - Nov-29
India reins in illegal mining - Nov-27
Singh backs US mission in Afghanistan - Nov-24
Obama treads fine line with India and China - Nov-23
Opinion: Put space at the heart of US-India relations - Nov-22
India ‘should fund environment projects’ - Nov-20
The government argues that the proposal, which is being financed mostly by wealthy individuals, is not acceptable in its present form because of environmental issues while proponents of the resort say it has become a test case of the difficulties facing foreign direct investors in India, particularly those forced to deal with state administration.
“The politics of negativity has prevailed and another FDI project in India may soon depart for friendlier shores,” John Sims, managing director of Himalayan Ski Village, said ahead of a meeting of government officials on the project on Saturday.
In spite of its prime Himalayan location and stable political environment, a lack of upscale facilities has made snow sports mostly an activity for the more adventurous in India. Ski enthusiasts access the mountains either through a few basic resorts, by helicopter or, in the case of the more extreme, by “yak skiing” – ascending the ski slopes using ropes pulled by the Himalayan beasts.
In 2004, Mr Ford and Mr Sims, who met in the 1970s through the Hare Krishna movement, came up with the idea of developing a Himalayan ski resort near Manali that would be of the standard of Vail in Colorado. They chose a 113-acre site that rises as high as 14,000 feet. The resort would have a six-kilometre main gondola, 700 hotel rooms costing about Rs8,000 ($172, €116, £105) a night and 20,000 sq ft of convention space.
They won the support of the previous Congress party-led state government, which signed an implementation agreement for the project in 2006. But the opposition Hindu-nationalist Bharatiya Janata party and residents and activists in the Kullu Valley opposed the plan, fearing it would damage pastures and water supplies. There were also allegations in the Indian media that the resort was a real estate venture masquerading as a tourism project.
The government of Himachal Pradesh state in northern India is expected shortly to announce the results of a review of the $600m (€398m, £361m) Himalayan Ski Village project in Manali, a hill station on the road to the former Tibetan kingdom of Ladakh, that was conceived by a consortium of investors led by Alfred Ford, the great grandson of US industrialist Henry Ford.
EDITOR’S CHOICE
Radioactive leak was deliberate, says India - Nov-29
India reins in illegal mining - Nov-27
Singh backs US mission in Afghanistan - Nov-24
Obama treads fine line with India and China - Nov-23
Opinion: Put space at the heart of US-India relations - Nov-22
India ‘should fund environment projects’ - Nov-20
The government argues that the proposal, which is being financed mostly by wealthy individuals, is not acceptable in its present form because of environmental issues while proponents of the resort say it has become a test case of the difficulties facing foreign direct investors in India, particularly those forced to deal with state administration.
“The politics of negativity has prevailed and another FDI project in India may soon depart for friendlier shores,” John Sims, managing director of Himalayan Ski Village, said ahead of a meeting of government officials on the project on Saturday.
In spite of its prime Himalayan location and stable political environment, a lack of upscale facilities has made snow sports mostly an activity for the more adventurous in India. Ski enthusiasts access the mountains either through a few basic resorts, by helicopter or, in the case of the more extreme, by “yak skiing” – ascending the ski slopes using ropes pulled by the Himalayan beasts.
In 2004, Mr Ford and Mr Sims, who met in the 1970s through the Hare Krishna movement, came up with the idea of developing a Himalayan ski resort near Manali that would be of the standard of Vail in Colorado. They chose a 113-acre site that rises as high as 14,000 feet. The resort would have a six-kilometre main gondola, 700 hotel rooms costing about Rs8,000 ($172, €116, £105) a night and 20,000 sq ft of convention space.
They won the support of the previous Congress party-led state government, which signed an implementation agreement for the project in 2006. But the opposition Hindu-nationalist Bharatiya Janata party and residents and activists in the Kullu Valley opposed the plan, fearing it would damage pastures and water supplies. There were also allegations in the Indian media that the resort was a real estate venture masquerading as a tourism project.
Thursday, December 3, 2009
Obama Tackles Jobless Woes, but Warns of Limited Funds
WASHINGTON — President Obama on Thursday hosted a forum with scores of business and labor leaders and economic advisers to both political parties to field “every demonstrably good idea” for creating jobs, but he cautioned that “our resources are limited.”
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The president said he would announce some new ideas of his own next week, which are likely to include a home-retrofitting proposal modeled on the popular “cash for clunkers” program that has particularly captured Mr. Obama’s imagination, according to aides.
Called “cash for caulkers,” it would offer government incentives to make homes and small businesses energy efficient, enlisting home-improvement companies like Lowe’s and Sears to advertise the benefits much as car dealers did for the clunker trade-ins earlier this year.
Opening Thursday’s panel discussions, however, Mr. Obama said he was in a listening mode.
“I want to be clear: While I believe the government has a critical role in creating the conditions for economic growth, ultimately true economic recovery is only going to come from the private sector,” he told his audience, which included critics as well as executives from American Airlines, Nucor Corp., Google Inc., Walt Disney Co. and Fed-Ex.
Mr. Obama told the chief executives that he wanted to know: “What’s holding back business investment and how we can increase confidence and spur hiring? And if there are things that we’re doing here in Washington that are inhibiting you, then we want to know about it.”
The timing of the event captured the political and policy vise now squeezing the president at the end of his first year. It followed by a day his long-awaited decision to send 30,000 additional American troops to Afghanistan, and came on the eve of Friday’s monthly unemployment report that is expected to show that while job losses continued to decline in November, the overall rate of unemployment remained stubbornly at 10 percent, where it is expected to hover for much of next year.
Both the domestic and the military demands are raising costs — which were unanticipated when Mr. Obama took office — even as pressures build to arrest annual budget deficits now exceeding $1 trillion. They also are eroding the broad support that swept him into office, especially among independent voters, and igniting a guns-versus-butter budget debate in his own party not seen since the Vietnam era.
Just as Mr. Obama said in his Afghanistan speech on Tuesday night that the United States could not afford an open-ended commitment, especially when the economy is so weak, he emphasized the limits of the government’s role after his own $787 billion economic stimulus package and the $700 billion financial bailout he inherited.
“When we walked in, there was an enormous fiscal gap between the money that is going out and the money coming in,” he said. “The recession has made that worse because of fewer tax receipts and more demands made on government for things like unemployment insurance.”
Both Mr. Obama and Vice President Joseph R. Biden Jr., who introduced him, emphasized that the financial industry has stabilized and the stimulus package has created or saved up to 1.6 million jobs, according to recent nonpartisan analyses. But their remarks underscored the administration’s defensiveness at times as Republicans have seized on the higher-than-anticipated joblessness to argue that the Obama policies not only are not working but are exacerbating businesses’ uncertainty about the future.
Indeed, House Republicans leaders hosted their own hastily convened jobs forum on Thursday, just before Mr. Obama’s, to underscore that point.
“The American people are asking, ‘where are the jobs?’ but all they are getting from Washington Democrats is more spending, more debt, and more policies that hurt small businesses,” said Representative John A. Boehner of Ohio, the House Republican leader, in opening his roundtable with Republican economists and lawmakers.
House Democratic leaders, in the meantime, were compiling their own proposals for additional spending on roads and infrastructure building, expanded lending and tax incentives for small businesses. They want to pass a bill this month, but the Senate is not likely to act until early next year.
Congressional Democrats are particularly worried about their own jobs as they face re-election next year amid declining support in national polls. Whatever they and the administration come up with, economists generally agree that they are likely to find that unemployment will remain high for some time.
Mr. Obama noted that job growth typically lags when the economy recovers from a recession. “But,” he added, “we cannot hang back and hope for the best when we’ve seen the kinds of job losses that we’ve seen over the last year. I am not interested in taking a wait and see approach when it comes to creating jobs. What I’m interested in is taking action right now to help businesses create jobs — right now, in the near term.”
Skip to next paragraph
Multimedia
Obama Discuesses Job Creation (CNBC)Video
Obama Discuesses Job Creation (CNBC)
Blog
The Caucus
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The latest on President Obama, his administration and other news from Washington and around the nation. Join the discussion.
* More Politics News
The president said he would announce some new ideas of his own next week, which are likely to include a home-retrofitting proposal modeled on the popular “cash for clunkers” program that has particularly captured Mr. Obama’s imagination, according to aides.
Called “cash for caulkers,” it would offer government incentives to make homes and small businesses energy efficient, enlisting home-improvement companies like Lowe’s and Sears to advertise the benefits much as car dealers did for the clunker trade-ins earlier this year.
Opening Thursday’s panel discussions, however, Mr. Obama said he was in a listening mode.
“I want to be clear: While I believe the government has a critical role in creating the conditions for economic growth, ultimately true economic recovery is only going to come from the private sector,” he told his audience, which included critics as well as executives from American Airlines, Nucor Corp., Google Inc., Walt Disney Co. and Fed-Ex.
Mr. Obama told the chief executives that he wanted to know: “What’s holding back business investment and how we can increase confidence and spur hiring? And if there are things that we’re doing here in Washington that are inhibiting you, then we want to know about it.”
The timing of the event captured the political and policy vise now squeezing the president at the end of his first year. It followed by a day his long-awaited decision to send 30,000 additional American troops to Afghanistan, and came on the eve of Friday’s monthly unemployment report that is expected to show that while job losses continued to decline in November, the overall rate of unemployment remained stubbornly at 10 percent, where it is expected to hover for much of next year.
Both the domestic and the military demands are raising costs — which were unanticipated when Mr. Obama took office — even as pressures build to arrest annual budget deficits now exceeding $1 trillion. They also are eroding the broad support that swept him into office, especially among independent voters, and igniting a guns-versus-butter budget debate in his own party not seen since the Vietnam era.
Just as Mr. Obama said in his Afghanistan speech on Tuesday night that the United States could not afford an open-ended commitment, especially when the economy is so weak, he emphasized the limits of the government’s role after his own $787 billion economic stimulus package and the $700 billion financial bailout he inherited.
“When we walked in, there was an enormous fiscal gap between the money that is going out and the money coming in,” he said. “The recession has made that worse because of fewer tax receipts and more demands made on government for things like unemployment insurance.”
Both Mr. Obama and Vice President Joseph R. Biden Jr., who introduced him, emphasized that the financial industry has stabilized and the stimulus package has created or saved up to 1.6 million jobs, according to recent nonpartisan analyses. But their remarks underscored the administration’s defensiveness at times as Republicans have seized on the higher-than-anticipated joblessness to argue that the Obama policies not only are not working but are exacerbating businesses’ uncertainty about the future.
Indeed, House Republicans leaders hosted their own hastily convened jobs forum on Thursday, just before Mr. Obama’s, to underscore that point.
“The American people are asking, ‘where are the jobs?’ but all they are getting from Washington Democrats is more spending, more debt, and more policies that hurt small businesses,” said Representative John A. Boehner of Ohio, the House Republican leader, in opening his roundtable with Republican economists and lawmakers.
House Democratic leaders, in the meantime, were compiling their own proposals for additional spending on roads and infrastructure building, expanded lending and tax incentives for small businesses. They want to pass a bill this month, but the Senate is not likely to act until early next year.
Congressional Democrats are particularly worried about their own jobs as they face re-election next year amid declining support in national polls. Whatever they and the administration come up with, economists generally agree that they are likely to find that unemployment will remain high for some time.
Mr. Obama noted that job growth typically lags when the economy recovers from a recession. “But,” he added, “we cannot hang back and hope for the best when we’ve seen the kinds of job losses that we’ve seen over the last year. I am not interested in taking a wait and see approach when it comes to creating jobs. What I’m interested in is taking action right now to help businesses create jobs — right now, in the near term.”
OECD Asks India to Loosen ‘Restrictive’ Rules in Insurance
Dec. 4 (Bloomberg) -- India must loosen foreign investment rules in insurance, banking and retail to create more jobs and accelerate economic growth, the Organization for Economic Cooperation and Development said.
The South Asian nation’s policies to attract overseas investors remain “restrictive in comparison with a majority of OECD countries,” the Paris-based organization said in a report titled “OECD Investment Policy Reviews: India.”
India limits New York Life Insurance Co. and other foreign insurers to a 26 percent stake in local companies and bars retailers including Wal-Mart Stores Inc. from opening outlets in the world’s second-most populous country. The OECD called for an improvement in the “investment environment” in India, which the World Bank places 133rd among 183 countries in a ranking based on the ease of doing business.
Indian Prime Minister Manmohan Singh told investors in New Delhi last month that the country had received foreign direct investment of $121 billion since 2001 and that it isn’t a “large number given the scale of our economy.” The flows were less than a quarter of the $566 billion that China attracted during the period.
“India may be able to better achieve its objectives through non-discriminatory policies rather than sectoral restrictions on foreign investment,” OECD Secretary-General Angel Gurria said in the report.
A plan to raise the foreign-direct-investment ceiling in insurance to 49 percent has been stuck in parliament for more than three years and is currently being debated by a group of all political parties.
Bank Access
In retail, local laws are aimed at protecting small shops in Asia’s third-largest economy. India permits overseas chains such as Wal-Mart to operate as wholesalers and sell groceries and other goods to businesses such as supermarkets, department stores and restaurants. They are barred them from opening stores or buying stakes in supermarket chains.
In banking, India’s central bank postponed in April a plan to review granting greater access for foreign lenders into the economy. The Reserve Bank of India regulates the entry of foreign banks and even limits expansion of their branches to 12 a year, the OECD said.
“Growth could be accelerated by the enhanced productivity from increased foreign investment,” the report said. “In banking, insurance and especially retail distribution, the influx of FDI could help raise incomes in the agriculture sector while increasing the choice and lowering living costs.”
Economic Growth
The OECD said that while growth and investment in India has been “impressive” since 1991, when Prime Minister Singh as finance minister opened the nation’s economy to foreign investors, income inequalities among states have increased.
India’s economic growth has averaged 8.5 percent each year since 2004 after expanding at a 6 percent pace during the 1990s. India’s investment rate has more than doubled to 35 percent of gross domestic product since 1991.
The OECD called upon poorer states in India to cut bureaucracy to attract more investment and spur growth.
“While the central government has reduced the number of approvals needed for new investment, there remains a need to streamline administrative procedures at the state level,” according to the report.
The OECD also called on India to improve the judiciary, whose capacity to handle cases such as those related to intellectual property rights “in a timely manner remains insufficient.”
The South Asian nation’s policies to attract overseas investors remain “restrictive in comparison with a majority of OECD countries,” the Paris-based organization said in a report titled “OECD Investment Policy Reviews: India.”
India limits New York Life Insurance Co. and other foreign insurers to a 26 percent stake in local companies and bars retailers including Wal-Mart Stores Inc. from opening outlets in the world’s second-most populous country. The OECD called for an improvement in the “investment environment” in India, which the World Bank places 133rd among 183 countries in a ranking based on the ease of doing business.
Indian Prime Minister Manmohan Singh told investors in New Delhi last month that the country had received foreign direct investment of $121 billion since 2001 and that it isn’t a “large number given the scale of our economy.” The flows were less than a quarter of the $566 billion that China attracted during the period.
“India may be able to better achieve its objectives through non-discriminatory policies rather than sectoral restrictions on foreign investment,” OECD Secretary-General Angel Gurria said in the report.
A plan to raise the foreign-direct-investment ceiling in insurance to 49 percent has been stuck in parliament for more than three years and is currently being debated by a group of all political parties.
Bank Access
In retail, local laws are aimed at protecting small shops in Asia’s third-largest economy. India permits overseas chains such as Wal-Mart to operate as wholesalers and sell groceries and other goods to businesses such as supermarkets, department stores and restaurants. They are barred them from opening stores or buying stakes in supermarket chains.
In banking, India’s central bank postponed in April a plan to review granting greater access for foreign lenders into the economy. The Reserve Bank of India regulates the entry of foreign banks and even limits expansion of their branches to 12 a year, the OECD said.
“Growth could be accelerated by the enhanced productivity from increased foreign investment,” the report said. “In banking, insurance and especially retail distribution, the influx of FDI could help raise incomes in the agriculture sector while increasing the choice and lowering living costs.”
Economic Growth
The OECD said that while growth and investment in India has been “impressive” since 1991, when Prime Minister Singh as finance minister opened the nation’s economy to foreign investors, income inequalities among states have increased.
India’s economic growth has averaged 8.5 percent each year since 2004 after expanding at a 6 percent pace during the 1990s. India’s investment rate has more than doubled to 35 percent of gross domestic product since 1991.
The OECD called upon poorer states in India to cut bureaucracy to attract more investment and spur growth.
“While the central government has reduced the number of approvals needed for new investment, there remains a need to streamline administrative procedures at the state level,” according to the report.
The OECD also called on India to improve the judiciary, whose capacity to handle cases such as those related to intellectual property rights “in a timely manner remains insufficient.”
Asian Stocks Drop as U.S. Services Report Dims Recovery Hopes
Dec. 4 (Bloomberg) -- Asian stocks fell from a 15-month high, led by mining companies, after U.S. service industries unexpectedly shrank, raising concern the economic recovery is still fragile.
Rio Tinto Group, the world’s third-biggest mining company, dropped 2.4 percent in Sydney, as metal prices slid after a U.S. index of non-manufacturing businesses missed the median economist estimate. Mitsui Mining & Smelting Co., a non-ferrous metal producer, declined 1.3 percent in Tokyo. James Hardie Industries NV, the top seller of home siding in the U.S., slumped 4.1 percent, ending a four-day winning streak.
“The weak economic indicator in the world’s biggest economy should spur a sell-off,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.
The MSCI Asia Pacific Index fell 0.4 percent to 121.19 as of 10:00 a.m. in Tokyo, after yesterday climbing to the highest level since Sept. 1, 2008. The gauge has advanced 6.5 percent this week, putting it on course for the steepest weekly gain since the period ended May 8. The index has rallied 72 percent from a more than five-year low on March 9 amid signs government stimulus measures are reviving global growth.
Japan’s Nikkei 225 Stock Average declined 0.4 percent. The nation’s government will report slower economic growth for the July-September quarter than the 4.8 percent estimated previously when it announces revised figures on Dec. 9, the Nikkei newspaper said, without saying where it got the information.
Japan Growth
Australia’s S&P/ASX 200 Index fell 1.2 percent, while New Zealand’s NZX 50 Index retreated 0.3 percent in Wellington. South Korea’s Kospi Index was little changed.
In New York, the Standard & Poor’s 500 Index fell for the first time in four days yesterday, losing 0.8 percent. The Institute for Supply Management’s index of businesses that make up almost 90 percent of the U.S. economy sank to 48.7 in November, compared with a median estimate of 51.5 by 71 economists. Fifty is the dividing line between expansion and contraction.
James Hardie, which gets more than three-quarters of its revenue from North America, sank 4.1 percent to A$8.15, the biggest decline on the Asian benchmark index. Its shares rose 3.2 percent yesterday after the Federal Reserve said the U.S. economy had improved.
Metals Decline
Rio dropped 2.4 percent to A$71.74. The London Metal Exchange Index, a measure of six metals including copper and zinc, dropped 1 percent yesterday, breaking a three-day winning streak. BHP Billiton Ltd., the world’s largest mining company, lost 1.7 percent to A$41.76. In Tokyo, Mitsui Mining declined 1.3 percent to 232 yen.
The MSCI Asia Pacific Index’s rally from its March low has outpaced gains of 63 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 16 times for the Stoxx.
Takefuji Corp., a Japanese consumer lender, plunged 10 percent to 382 yen. The company is limiting loans because it has difficulty finding funds, the Asahi newspaper said, citing a company executive it didn’t identify. Mitsui Fudosan Co., a Japanese property developer, dropped 0.9 percent to 1,583 yen after having its rating cut to “underperform” from “outperform” at Mizuho Securities Co.
Rio Tinto Group, the world’s third-biggest mining company, dropped 2.4 percent in Sydney, as metal prices slid after a U.S. index of non-manufacturing businesses missed the median economist estimate. Mitsui Mining & Smelting Co., a non-ferrous metal producer, declined 1.3 percent in Tokyo. James Hardie Industries NV, the top seller of home siding in the U.S., slumped 4.1 percent, ending a four-day winning streak.
“The weak economic indicator in the world’s biggest economy should spur a sell-off,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.
The MSCI Asia Pacific Index fell 0.4 percent to 121.19 as of 10:00 a.m. in Tokyo, after yesterday climbing to the highest level since Sept. 1, 2008. The gauge has advanced 6.5 percent this week, putting it on course for the steepest weekly gain since the period ended May 8. The index has rallied 72 percent from a more than five-year low on March 9 amid signs government stimulus measures are reviving global growth.
Japan’s Nikkei 225 Stock Average declined 0.4 percent. The nation’s government will report slower economic growth for the July-September quarter than the 4.8 percent estimated previously when it announces revised figures on Dec. 9, the Nikkei newspaper said, without saying where it got the information.
Japan Growth
Australia’s S&P/ASX 200 Index fell 1.2 percent, while New Zealand’s NZX 50 Index retreated 0.3 percent in Wellington. South Korea’s Kospi Index was little changed.
In New York, the Standard & Poor’s 500 Index fell for the first time in four days yesterday, losing 0.8 percent. The Institute for Supply Management’s index of businesses that make up almost 90 percent of the U.S. economy sank to 48.7 in November, compared with a median estimate of 51.5 by 71 economists. Fifty is the dividing line between expansion and contraction.
James Hardie, which gets more than three-quarters of its revenue from North America, sank 4.1 percent to A$8.15, the biggest decline on the Asian benchmark index. Its shares rose 3.2 percent yesterday after the Federal Reserve said the U.S. economy had improved.
Metals Decline
Rio dropped 2.4 percent to A$71.74. The London Metal Exchange Index, a measure of six metals including copper and zinc, dropped 1 percent yesterday, breaking a three-day winning streak. BHP Billiton Ltd., the world’s largest mining company, lost 1.7 percent to A$41.76. In Tokyo, Mitsui Mining declined 1.3 percent to 232 yen.
The MSCI Asia Pacific Index’s rally from its March low has outpaced gains of 63 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P and 16 times for the Stoxx.
Takefuji Corp., a Japanese consumer lender, plunged 10 percent to 382 yen. The company is limiting loans because it has difficulty finding funds, the Asahi newspaper said, citing a company executive it didn’t identify. Mitsui Fudosan Co., a Japanese property developer, dropped 0.9 percent to 1,583 yen after having its rating cut to “underperform” from “outperform” at Mizuho Securities Co.
GM and SAIC set to unveil India tie-up
General Motors and China’s SAIC Motor Corp are poised to announce a tie-up on Friday for the sale of vehicles in India, in a significant step in China’s efforts to gain a foothold in one of the for world’s largest emerging markets for automobiles.
GM and SAIC are expected to say they plan to bring some of the Chinese producer’s light commercial vehicles to India, including minivans and mini-trucks, a segment dominated by domestic market leader Tata Motors.
EDITOR’S CHOICE
Peugeot weighs buying Mitsubishi stake - Dec-03
Peugeot and Mitsubishi talk of alliance - Dec-03
Search begins to fill GM’s hotseat - Dec-02
Dutch sports car maker in Saab talks - Dec-03
Henderson ousted from top of GM - Dec-02
US carmakers report weak sales - Dec-01
“SAIC is looking for a greater role in the global markets and GM wants to enhance its portfolio by offering vehicles that are coming from a more cost-effective platform,” said Mohit Arora, JD Power Asia-Pacific senior director.
Trading of SAIC shares in Shanghai was suspended on Thursday after the company said in a statement to the Shanghai stock exchange that it planned a “major asset restructuring” and would hold a board meeting before December 9 to discuss the move.
The announcement led to speculation over whether SAIC was planning to alter the shareholding structure of some of its joint ventures in China, including a 50-50 joint venture with GM, which has had a record year in China.
GM has sold more than 1.6m cars in China through its joint ventures this year, a 64 per cent increase on the same period in 2008. November GM sales were up 109 per cent over the year-earlier period.
SAIC and GM have been talking about working together in India for several months. But SAIC has previously been reluctant to expand in international markets after its majority investment in Ssangyong, the South Korean automaker, recently ended in embarrassment when Ssangyong went into receivership.
India’s car market has roared back to life in recent months on the back of annualised gross domestic product growth of 7.9 per cent in the three months to September.
Tata Motors, India’s biggest automaker, in November reported an 81 per cent increase in commercial vehicle sales over a year earlier and a 48 per cent rise in domestic car sales.
India’s biggest passenger car maker, Maruti Suzuki, reported a rise in sales of 67 per cent from a year earlier while utility vehicle producer Mahindra & Mahindra’s passenger car sales almost doubled
GM’s India sales rose 65 per cent during the same month compared with the same period a year earlier, to 7,118 units.
India’s automotive market, while growing rapidly, is also one of the world’s most competitive as producers jostle to release the lowest cost cars and light trucks.
GM India declined to comment on SAIC yesterday.
One person familiar with the matter said: “There will be an announcement on this tomorrow.”
GM and SAIC are expected to say they plan to bring some of the Chinese producer’s light commercial vehicles to India, including minivans and mini-trucks, a segment dominated by domestic market leader Tata Motors.
EDITOR’S CHOICE
Peugeot weighs buying Mitsubishi stake - Dec-03
Peugeot and Mitsubishi talk of alliance - Dec-03
Search begins to fill GM’s hotseat - Dec-02
Dutch sports car maker in Saab talks - Dec-03
Henderson ousted from top of GM - Dec-02
US carmakers report weak sales - Dec-01
“SAIC is looking for a greater role in the global markets and GM wants to enhance its portfolio by offering vehicles that are coming from a more cost-effective platform,” said Mohit Arora, JD Power Asia-Pacific senior director.
Trading of SAIC shares in Shanghai was suspended on Thursday after the company said in a statement to the Shanghai stock exchange that it planned a “major asset restructuring” and would hold a board meeting before December 9 to discuss the move.
The announcement led to speculation over whether SAIC was planning to alter the shareholding structure of some of its joint ventures in China, including a 50-50 joint venture with GM, which has had a record year in China.
GM has sold more than 1.6m cars in China through its joint ventures this year, a 64 per cent increase on the same period in 2008. November GM sales were up 109 per cent over the year-earlier period.
SAIC and GM have been talking about working together in India for several months. But SAIC has previously been reluctant to expand in international markets after its majority investment in Ssangyong, the South Korean automaker, recently ended in embarrassment when Ssangyong went into receivership.
India’s car market has roared back to life in recent months on the back of annualised gross domestic product growth of 7.9 per cent in the three months to September.
Tata Motors, India’s biggest automaker, in November reported an 81 per cent increase in commercial vehicle sales over a year earlier and a 48 per cent rise in domestic car sales.
India’s biggest passenger car maker, Maruti Suzuki, reported a rise in sales of 67 per cent from a year earlier while utility vehicle producer Mahindra & Mahindra’s passenger car sales almost doubled
GM’s India sales rose 65 per cent during the same month compared with the same period a year earlier, to 7,118 units.
India’s automotive market, while growing rapidly, is also one of the world’s most competitive as producers jostle to release the lowest cost cars and light trucks.
GM India declined to comment on SAIC yesterday.
One person familiar with the matter said: “There will be an announcement on this tomorrow.”
Wednesday, December 2, 2009
Asian Stocks Rise on Fed Beige Book, Yen; James Hardie Gains
Dec. 3 (Bloomberg) -- Asian stocks rose, led by automakers and electronics companies, as the Federal Reserve said the U.S. economy improved and a weakening yen boosted the earnings outlook for Japanese exporters.
Honda Motor Co., which gets 42 percent of its revenue from North America, climbed 3.8 percent after the Fed’s Beige Book showed the economy expanded or improved “modestly” across the U.S. Sony Corp., which gets 20 percent of its sales in the U.S., added 3.8 percent. James Hardie Industries NV, the top seller of home siding in the U.S., gained 3.4 percent. Kawasaki Kisen Kaisha Ltd. gained 3.2 percent after freight rates snapped an eight-day streak of losses.
The MSCI Asia Pacific Index rose 0.8 percent to 120.78 as of 9:48 a.m. in Tokyo, set to close at the highest level since Oct. 20. The gauge has climbed 71 percent from a more than five- year low on March 9 on signs stimulus measures are reviving global growth.
“The Beige Book confirmed that the economy is on an upward trend, spreading a sense of security,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “People are expecting fundamentals to improve.”
Japan’s Nikkei 225 Stock Average climbed 1.7 percent. Australia’s S&P/ASX 200 Index rose 0.3 percent. South Korea’s Kospi Index advanced 0.7 percent. Futures on the U.S. Standard & Poor’s 500 Index added 0.2 percent. The gauge increased for a third day yesterday after the Fed’s comments.
The MSCI Asia Pacific Index’s gain since its March low has outpaced gains of 64 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI benchmark are valued at 22 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx 600.
Honda Motor Co., which gets 42 percent of its revenue from North America, climbed 3.8 percent after the Fed’s Beige Book showed the economy expanded or improved “modestly” across the U.S. Sony Corp., which gets 20 percent of its sales in the U.S., added 3.8 percent. James Hardie Industries NV, the top seller of home siding in the U.S., gained 3.4 percent. Kawasaki Kisen Kaisha Ltd. gained 3.2 percent after freight rates snapped an eight-day streak of losses.
The MSCI Asia Pacific Index rose 0.8 percent to 120.78 as of 9:48 a.m. in Tokyo, set to close at the highest level since Oct. 20. The gauge has climbed 71 percent from a more than five- year low on March 9 on signs stimulus measures are reviving global growth.
“The Beige Book confirmed that the economy is on an upward trend, spreading a sense of security,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “People are expecting fundamentals to improve.”
Japan’s Nikkei 225 Stock Average climbed 1.7 percent. Australia’s S&P/ASX 200 Index rose 0.3 percent. South Korea’s Kospi Index advanced 0.7 percent. Futures on the U.S. Standard & Poor’s 500 Index added 0.2 percent. The gauge increased for a third day yesterday after the Fed’s comments.
The MSCI Asia Pacific Index’s gain since its March low has outpaced gains of 64 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI benchmark are valued at 22 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx 600.
India to Raise $3.2 Billion Selling Shares in 3 Power Companies
Dec. 3 (Bloomberg) -- India plans to raise as much as 150 billion rupees ($3.2 billion) selling shares in three state-run electricity companies to help fund spending on roads and ports in Asia’s third-largest economy.
The government expects to raise as much as 60 billion rupees from the sale of shares in NTPC Ltd, India’s biggest power producer, and an equal amount from selling a stake in Rural Electrification Corp., Power Ministry Secretary H.S Brahma told reporters in New Delhi yesterday.
Prime Minister Manmohan Singh’s government plans to spend $8.95 billion in the year ending March to build networks of roads and telephones, power plants and irrigation facilities to help boost economic growth. The government resumed asset-sales after Singh won a second term without support from his former communist allies, who had foiled previous disinvestment attempts.
“Inclusive growth will become a reality if implementation acquires priority,” said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. “It is good if they use funds from stake sale for programs to build physical and social infrastructure.”
India in November changed a rule allowing proceeds from share sales to be used to fund social sector programs and infrastructure, helping trim the government’s budget deficit. The $1.2 trillion economy expanded 7.9 percent last quarter as the government increased spending. Gross domestic product may grow 7 percent in the year to March, Finance Minister Pranab Mukherjee said on Nov. 30.
Power Projects
Brahma said the government also plans to raise about 30 billion rupees from selling a stake in Satluj Jal Vidyut Nigam Ltd., a producer in the northern state of Himachal Pradesh. Rural Electrification, which lends to power projects in the nation’s villages, has tripled this year, making it the second-best performing stock among Indian state-run companies.
Rural Electrification’s shares rose 2.1 percent to 257.5 rupees in Mumbai yesterday. NTPC fell 0.7 percent to 209.05 rupees. The government owns about 90 percent of NTPC and 82 percent of Rural Electrification, according to data compiled by Bloomberg. Satluj Jal is owned by the central government and the government of Himachal Pradesh state.
India has 60 state-run companies including Steel Authority of India Ltd. and Coal India Ltd. in which it can sell stakes to raise funds, Sunil Mitra, secretary for asset sales at the finance ministry, said on Nov. 13.
The government expects to raise as much as 60 billion rupees from the sale of shares in NTPC Ltd, India’s biggest power producer, and an equal amount from selling a stake in Rural Electrification Corp., Power Ministry Secretary H.S Brahma told reporters in New Delhi yesterday.
Prime Minister Manmohan Singh’s government plans to spend $8.95 billion in the year ending March to build networks of roads and telephones, power plants and irrigation facilities to help boost economic growth. The government resumed asset-sales after Singh won a second term without support from his former communist allies, who had foiled previous disinvestment attempts.
“Inclusive growth will become a reality if implementation acquires priority,” said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. “It is good if they use funds from stake sale for programs to build physical and social infrastructure.”
India in November changed a rule allowing proceeds from share sales to be used to fund social sector programs and infrastructure, helping trim the government’s budget deficit. The $1.2 trillion economy expanded 7.9 percent last quarter as the government increased spending. Gross domestic product may grow 7 percent in the year to March, Finance Minister Pranab Mukherjee said on Nov. 30.
Power Projects
Brahma said the government also plans to raise about 30 billion rupees from selling a stake in Satluj Jal Vidyut Nigam Ltd., a producer in the northern state of Himachal Pradesh. Rural Electrification, which lends to power projects in the nation’s villages, has tripled this year, making it the second-best performing stock among Indian state-run companies.
Rural Electrification’s shares rose 2.1 percent to 257.5 rupees in Mumbai yesterday. NTPC fell 0.7 percent to 209.05 rupees. The government owns about 90 percent of NTPC and 82 percent of Rural Electrification, according to data compiled by Bloomberg. Satluj Jal is owned by the central government and the government of Himachal Pradesh state.
India has 60 state-run companies including Steel Authority of India Ltd. and Coal India Ltd. in which it can sell stakes to raise funds, Sunil Mitra, secretary for asset sales at the finance ministry, said on Nov. 13.
Tuesday, December 1, 2009
Australia’s Stevens to Keep Leading World in Increasing Rates
Dec. 2 (Bloomberg) -- Australia’s Glenn Stevens will continue leading the world in raising interest rates, with economists predicting a record fourth straight increase at the central bank’s next meeting in February.
Reserve Bank Governor Stevens will boost the overnight cash rate target by another quarter point to 4 percent on Feb. 2, adding to yesterday’s unprecedented third monthly increase, according to all 16 economists surveyed by Bloomberg News.
Australia’s economy has outpaced the U.S., Europe and Japan, which have all kept rates near record lows this year. Cash handouts by Prime Minister Kevin Rudd’s government have boosted consumer confidence and house prices, and China’s demand for resources such as iron ore from Rio Tinto Group and BHP Billiton Ltd. has stoked a new mining-jobs boom.
“Reserve Bank officials are taking the path of least hazard,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, who tips another increase in February followed by further “steady” gains in 2010. “They are hiking while they have time on their side and the exit from emergency settings can be orderly.”
Traders aren’t as convinced. The nation’s currency fell yesterday after Stevens said the board’s “material adjustments” to the benchmark rate, now at 3.75 percent, will be enough to keep inflation within his 2 percent to 3 percent target range.
Investor Bets
Investors are betting there is only a 36 percent chance of an increase in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late yesterday.
“I can see how people will interpret this is a pausing message -- and that’s more than fair,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Nevertheless, I think there are several reasons why the Reserve Bank won’t be pausing for too long.”
Speculation that Stevens will continue to lead the world in raising rates has stoked this year’s 30 percent surge in the nation’s dollar, making it the best performer among the 16 major currencies against the U.S. dollar. It traded at 91.24 U.S. cents at 5:55 p.m. yesterday in Sydney.
U.S. Federal Reserve Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa aren’t expected to raise borrowing costs for at least a year, according to Bloomberg calculations based on overnight interest-rate swaps.
Japan Meeting
The Bank of Japan kept its key overnight lending rate at 0.1 percent at an emergency meeting in Tokyo yesterday, in which it said it will provide short-term loans to commercial banks amid pressure from Prime Minister Yukio Hatoyama’s administration to address falling prices and the yen’s surge to a 14-year high.
Australia’s economy is in a “gradual recovery” that will see gross domestic product expand 3.25 percent in 2010 and 2011, according to Governor Stevens. Growth is being boosted by A$22 billion ($20 billion) in spending by Prime Minister Rudd’s government on roads, ports, railways and schools.
By contrast, the U.S. economy will expand 2.5 percent next year, the euro region will advance 0.9 percent and Japan will grow 1.8 percent, the Organization for Economic Cooperation and Development predicted last month.
Asia’s largest economies also show signs of outperforming most developed countries. A report published yesterday showed China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third- biggest economy and Australia’s largest iron-ore customer.
India, South Korea
India’s economy grew 7.9 percent in the third quarter, the fastest expansion in 1 1/2 years, and South Korea’s exports rose 18.8 percent in November from a year earlier, the first gain in 13 months, reports showed in the past two days.
“In China and Asia generally, where financial sectors are not impaired, recovery has been much quicker to date and prospects appear to be for good growth in 2010,” Stevens said.
Economic recovery in the region is helping stoke demand for Australian resources such as iron ore, and in September prompted Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc to approve the nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia.
Rio Tinto and BHP Billiton boosted iron-ore production to a record in the third quarter to satisfy Chinese demand for steel, which helped exports surge 5 percent in September.
“Prospects for ongoing expansion of private demand, including business investment, have been strengthening,” Stevens said yesterday. “Growth in 2010 is likely to be close to trend and inflation close to target.”
House Prices
House prices have climbed 10 percent this year, employment rose in October, and companies surveyed by the Bureau of Statistics in a report published on Nov. 25 forecast investment of A$105 billion in the year ending June 30, 2010, which is 5.9 percent more than they estimated three months earlier.
This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after the government distributed more than A$20 billion in cash handouts to households.
The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after yesterday’s central bank decision.
Stevens’s move “risks choking off higher retail spending,” said Margy Osmond, chief executive of the Australian National Retailers Association. “It was disappointing the bank didn’t wait until after Christmas.”
Dubai Turmoil
Yesterday’s decision also suggests Stevens is unmoved by the turmoil last week on global stock and credit markets after Dubai World, one of the emirate’s three main state-related holding companies, said it’s seeking to delay payments on $59 billion of debt.
“Financial markets have improved considerably during 2009, notwithstanding periodic setbacks, and capital flows into Asia and other emerging market regions have been picking up,” the Governor said.
A rebound in share prices and higher house prices have also caused “a noticeable recovery in household wealth,” he added.
The benchmark rate will be boosted to 5 percent by the fourth quarter of next year, according to the median estimate of economists surveyed by Bloomberg yesterday.
To contact the reporters for this story: Jacob Greber in Sydney at jgreber@bloomberg.netDaniel Petrie in Sydney at dpetrie5@bloomberg.net
Last Updated: December 1, 2009 08:01 EST
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* Yahoo! Buzz Dec. 2 (Bloomberg) -- Australia’s Glenn Stevens will continue leading the world in raising interest rates, with economists predicting a record fourth straight increase at the central bank’s next meeting in February.
Reserve Bank Governor Stevens will boost the overnight cash rate target by another quarter point to 4 percent on Feb. 2, adding to yesterday’s unprecedented third monthly increase, according to all 16 economists surveyed by Bloomberg News.
Australia’s economy has outpaced the U.S., Europe and Japan, which have all kept rates near record lows this year. Cash handouts by Prime Minister Kevin Rudd’s government have boosted consumer confidence and house prices, and China’s demand for resources such as iron ore from Rio Tinto Group and BHP Billiton Ltd. has stoked a new mining-jobs boom.
“Reserve Bank officials are taking the path of least hazard,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, who tips another increase in February followed by further “steady” gains in 2010. “They are hiking while they have time on their side and the exit from emergency settings can be orderly.”
Traders aren’t as convinced. The nation’s currency fell yesterday after Stevens said the board’s “material adjustments” to the benchmark rate, now at 3.75 percent, will be enough to keep inflation within his 2 percent to 3 percent target range.
Investor Bets
Investors are betting there is only a 36 percent chance of an increase in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late yesterday.
“I can see how people will interpret this is a pausing message -- and that’s more than fair,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Nevertheless, I think there are several reasons why the Reserve Bank won’t be pausing for too long.”
Speculation that Stevens will continue to lead the world in raising rates has stoked this year’s 30 percent surge in the nation’s dollar, making it the best performer among the 16 major currencies against the U.S. dollar. It traded at 91.24 U.S. cents at 5:55 p.m. yesterday in Sydney.
U.S. Federal Reserve Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa aren’t expected to raise borrowing costs for at least a year, according to Bloomberg calculations based on overnight interest-rate swaps.
Japan Meeting
The Bank of Japan kept its key overnight lending rate at 0.1 percent at an emergency meeting in Tokyo yesterday, in which it said it will provide short-term loans to commercial banks amid pressure from Prime Minister Yukio Hatoyama’s administration to address falling prices and the yen’s surge to a 14-year high.
Australia’s economy is in a “gradual recovery” that will see gross domestic product expand 3.25 percent in 2010 and 2011, according to Governor Stevens. Growth is being boosted by A$22 billion ($20 billion) in spending by Prime Minister Rudd’s government on roads, ports, railways and schools.
By contrast, the U.S. economy will expand 2.5 percent next year, the euro region will advance 0.9 percent and Japan will grow 1.8 percent, the Organization for Economic Cooperation and Development predicted last month.
Asia’s largest economies also show signs of outperforming most developed countries. A report published yesterday showed China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third- biggest economy and Australia’s largest iron-ore customer.
India, South Korea
India’s economy grew 7.9 percent in the third quarter, the fastest expansion in 1 1/2 years, and South Korea’s exports rose 18.8 percent in November from a year earlier, the first gain in 13 months, reports showed in the past two days.
“In China and Asia generally, where financial sectors are not impaired, recovery has been much quicker to date and prospects appear to be for good growth in 2010,” Stevens said.
Economic recovery in the region is helping stoke demand for Australian resources such as iron ore, and in September prompted Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc to approve the nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia.
Rio Tinto and BHP Billiton boosted iron-ore production to a record in the third quarter to satisfy Chinese demand for steel, which helped exports surge 5 percent in September.
“Prospects for ongoing expansion of private demand, including business investment, have been strengthening,” Stevens said yesterday. “Growth in 2010 is likely to be close to trend and inflation close to target.”
House Prices
House prices have climbed 10 percent this year, employment rose in October, and companies surveyed by the Bureau of Statistics in a report published on Nov. 25 forecast investment of A$105 billion in the year ending June 30, 2010, which is 5.9 percent more than they estimated three months earlier.
This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after the government distributed more than A$20 billion in cash handouts to households.
The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after yesterday’s central bank decision.
Stevens’s move “risks choking off higher retail spending,” said Margy Osmond, chief executive of the Australian National Retailers Association. “It was disappointing the bank didn’t wait until after Christmas.”
Dubai Turmoil
Yesterday’s decision also suggests Stevens is unmoved by the turmoil last week on global stock and credit markets after Dubai World, one of the emirate’s three main state-related holding companies, said it’s seeking to delay payments on $59 billion of debt.
“Financial markets have improved considerably during 2009, notwithstanding periodic setbacks, and capital flows into Asia and other emerging market regions have been picking up,” the Governor said.
A rebound in share prices and higher house prices have also caused “a noticeable recovery in household wealth,” he added.
The benchmark rate will be boosted to 5 percent by the fourth quarter of next year, according to the median estimate of economists surveyed by Bloomberg yesterday.
Reserve Bank Governor Stevens will boost the overnight cash rate target by another quarter point to 4 percent on Feb. 2, adding to yesterday’s unprecedented third monthly increase, according to all 16 economists surveyed by Bloomberg News.
Australia’s economy has outpaced the U.S., Europe and Japan, which have all kept rates near record lows this year. Cash handouts by Prime Minister Kevin Rudd’s government have boosted consumer confidence and house prices, and China’s demand for resources such as iron ore from Rio Tinto Group and BHP Billiton Ltd. has stoked a new mining-jobs boom.
“Reserve Bank officials are taking the path of least hazard,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, who tips another increase in February followed by further “steady” gains in 2010. “They are hiking while they have time on their side and the exit from emergency settings can be orderly.”
Traders aren’t as convinced. The nation’s currency fell yesterday after Stevens said the board’s “material adjustments” to the benchmark rate, now at 3.75 percent, will be enough to keep inflation within his 2 percent to 3 percent target range.
Investor Bets
Investors are betting there is only a 36 percent chance of an increase in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late yesterday.
“I can see how people will interpret this is a pausing message -- and that’s more than fair,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Nevertheless, I think there are several reasons why the Reserve Bank won’t be pausing for too long.”
Speculation that Stevens will continue to lead the world in raising rates has stoked this year’s 30 percent surge in the nation’s dollar, making it the best performer among the 16 major currencies against the U.S. dollar. It traded at 91.24 U.S. cents at 5:55 p.m. yesterday in Sydney.
U.S. Federal Reserve Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa aren’t expected to raise borrowing costs for at least a year, according to Bloomberg calculations based on overnight interest-rate swaps.
Japan Meeting
The Bank of Japan kept its key overnight lending rate at 0.1 percent at an emergency meeting in Tokyo yesterday, in which it said it will provide short-term loans to commercial banks amid pressure from Prime Minister Yukio Hatoyama’s administration to address falling prices and the yen’s surge to a 14-year high.
Australia’s economy is in a “gradual recovery” that will see gross domestic product expand 3.25 percent in 2010 and 2011, according to Governor Stevens. Growth is being boosted by A$22 billion ($20 billion) in spending by Prime Minister Rudd’s government on roads, ports, railways and schools.
By contrast, the U.S. economy will expand 2.5 percent next year, the euro region will advance 0.9 percent and Japan will grow 1.8 percent, the Organization for Economic Cooperation and Development predicted last month.
Asia’s largest economies also show signs of outperforming most developed countries. A report published yesterday showed China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third- biggest economy and Australia’s largest iron-ore customer.
India, South Korea
India’s economy grew 7.9 percent in the third quarter, the fastest expansion in 1 1/2 years, and South Korea’s exports rose 18.8 percent in November from a year earlier, the first gain in 13 months, reports showed in the past two days.
“In China and Asia generally, where financial sectors are not impaired, recovery has been much quicker to date and prospects appear to be for good growth in 2010,” Stevens said.
Economic recovery in the region is helping stoke demand for Australian resources such as iron ore, and in September prompted Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc to approve the nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia.
Rio Tinto and BHP Billiton boosted iron-ore production to a record in the third quarter to satisfy Chinese demand for steel, which helped exports surge 5 percent in September.
“Prospects for ongoing expansion of private demand, including business investment, have been strengthening,” Stevens said yesterday. “Growth in 2010 is likely to be close to trend and inflation close to target.”
House Prices
House prices have climbed 10 percent this year, employment rose in October, and companies surveyed by the Bureau of Statistics in a report published on Nov. 25 forecast investment of A$105 billion in the year ending June 30, 2010, which is 5.9 percent more than they estimated three months earlier.
This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after the government distributed more than A$20 billion in cash handouts to households.
The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after yesterday’s central bank decision.
Stevens’s move “risks choking off higher retail spending,” said Margy Osmond, chief executive of the Australian National Retailers Association. “It was disappointing the bank didn’t wait until after Christmas.”
Dubai Turmoil
Yesterday’s decision also suggests Stevens is unmoved by the turmoil last week on global stock and credit markets after Dubai World, one of the emirate’s three main state-related holding companies, said it’s seeking to delay payments on $59 billion of debt.
“Financial markets have improved considerably during 2009, notwithstanding periodic setbacks, and capital flows into Asia and other emerging market regions have been picking up,” the Governor said.
A rebound in share prices and higher house prices have also caused “a noticeable recovery in household wealth,” he added.
The benchmark rate will be boosted to 5 percent by the fourth quarter of next year, according to the median estimate of economists surveyed by Bloomberg yesterday.
To contact the reporters for this story: Jacob Greber in Sydney at jgreber@bloomberg.netDaniel Petrie in Sydney at dpetrie5@bloomberg.net
Last Updated: December 1, 2009 08:01 EST
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* Yahoo! Buzz Dec. 2 (Bloomberg) -- Australia’s Glenn Stevens will continue leading the world in raising interest rates, with economists predicting a record fourth straight increase at the central bank’s next meeting in February.
Reserve Bank Governor Stevens will boost the overnight cash rate target by another quarter point to 4 percent on Feb. 2, adding to yesterday’s unprecedented third monthly increase, according to all 16 economists surveyed by Bloomberg News.
Australia’s economy has outpaced the U.S., Europe and Japan, which have all kept rates near record lows this year. Cash handouts by Prime Minister Kevin Rudd’s government have boosted consumer confidence and house prices, and China’s demand for resources such as iron ore from Rio Tinto Group and BHP Billiton Ltd. has stoked a new mining-jobs boom.
“Reserve Bank officials are taking the path of least hazard,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, who tips another increase in February followed by further “steady” gains in 2010. “They are hiking while they have time on their side and the exit from emergency settings can be orderly.”
Traders aren’t as convinced. The nation’s currency fell yesterday after Stevens said the board’s “material adjustments” to the benchmark rate, now at 3.75 percent, will be enough to keep inflation within his 2 percent to 3 percent target range.
Investor Bets
Investors are betting there is only a 36 percent chance of an increase in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late yesterday.
“I can see how people will interpret this is a pausing message -- and that’s more than fair,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Nevertheless, I think there are several reasons why the Reserve Bank won’t be pausing for too long.”
Speculation that Stevens will continue to lead the world in raising rates has stoked this year’s 30 percent surge in the nation’s dollar, making it the best performer among the 16 major currencies against the U.S. dollar. It traded at 91.24 U.S. cents at 5:55 p.m. yesterday in Sydney.
U.S. Federal Reserve Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa aren’t expected to raise borrowing costs for at least a year, according to Bloomberg calculations based on overnight interest-rate swaps.
Japan Meeting
The Bank of Japan kept its key overnight lending rate at 0.1 percent at an emergency meeting in Tokyo yesterday, in which it said it will provide short-term loans to commercial banks amid pressure from Prime Minister Yukio Hatoyama’s administration to address falling prices and the yen’s surge to a 14-year high.
Australia’s economy is in a “gradual recovery” that will see gross domestic product expand 3.25 percent in 2010 and 2011, according to Governor Stevens. Growth is being boosted by A$22 billion ($20 billion) in spending by Prime Minister Rudd’s government on roads, ports, railways and schools.
By contrast, the U.S. economy will expand 2.5 percent next year, the euro region will advance 0.9 percent and Japan will grow 1.8 percent, the Organization for Economic Cooperation and Development predicted last month.
Asia’s largest economies also show signs of outperforming most developed countries. A report published yesterday showed China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third- biggest economy and Australia’s largest iron-ore customer.
India, South Korea
India’s economy grew 7.9 percent in the third quarter, the fastest expansion in 1 1/2 years, and South Korea’s exports rose 18.8 percent in November from a year earlier, the first gain in 13 months, reports showed in the past two days.
“In China and Asia generally, where financial sectors are not impaired, recovery has been much quicker to date and prospects appear to be for good growth in 2010,” Stevens said.
Economic recovery in the region is helping stoke demand for Australian resources such as iron ore, and in September prompted Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc to approve the nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia.
Rio Tinto and BHP Billiton boosted iron-ore production to a record in the third quarter to satisfy Chinese demand for steel, which helped exports surge 5 percent in September.
“Prospects for ongoing expansion of private demand, including business investment, have been strengthening,” Stevens said yesterday. “Growth in 2010 is likely to be close to trend and inflation close to target.”
House Prices
House prices have climbed 10 percent this year, employment rose in October, and companies surveyed by the Bureau of Statistics in a report published on Nov. 25 forecast investment of A$105 billion in the year ending June 30, 2010, which is 5.9 percent more than they estimated three months earlier.
This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after the government distributed more than A$20 billion in cash handouts to households.
The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after yesterday’s central bank decision.
Stevens’s move “risks choking off higher retail spending,” said Margy Osmond, chief executive of the Australian National Retailers Association. “It was disappointing the bank didn’t wait until after Christmas.”
Dubai Turmoil
Yesterday’s decision also suggests Stevens is unmoved by the turmoil last week on global stock and credit markets after Dubai World, one of the emirate’s three main state-related holding companies, said it’s seeking to delay payments on $59 billion of debt.
“Financial markets have improved considerably during 2009, notwithstanding periodic setbacks, and capital flows into Asia and other emerging market regions have been picking up,” the Governor said.
A rebound in share prices and higher house prices have also caused “a noticeable recovery in household wealth,” he added.
The benchmark rate will be boosted to 5 percent by the fourth quarter of next year, according to the median estimate of economists surveyed by Bloomberg yesterday.
AI Capital Plans New Fund of Private-Equity Funds Next Year
Dec. 2 (Bloomberg) -- Alternative Investment Capital Ltd., majority owned by Mitsubishi Corp., plans to start a new fund to invest in Asian private equity next year, as the industry emerges from a two-year slump triggered by a credit freeze.
The AIC Japan III Fund will be the company’s third of private-equity funds with focus on Asia investments, Kazushige Kobayashi, president and chief executive officer of the firm, said in an interview. The latest fund’s investments include Carlyle Group and Advantage Partners LLP, he said.
Tokyo-based Alternative Investment Capital, with $2.7 billion in assets, has committed $634 million through five funds investing in private equity since inception in 2002. The firm’s new fund plans to put money in about 15 to 20 funds gradually over about three years, and targets an internal rate of return of more than 20 percent, according to Kobayashi.
“In the private-equity world, 2009 has been the lost year in the wake of the financial crisis, but we’re starting to see the market normalizing as we see some bigger deals and buyers of debt are emerging,” Kobayashi said. “We expect that next year will be more normalized in the private-equity market.”
Kobayashi pointed to Goldman Sachs Group Inc.’s $3.28 billion commitment to finance TPG Inc. and the CPP Investment Board’s purchase of IMS Health Inc. for $5.2 billion as evidence of a recovery in the global buyout market. He also cited Boston- based Bain Capital LLC’s acquisition of Bellsystem24 Inc., Japan’s biggest telemarketing firm, from Citigroup Inc. for 120 billion yen.
Recovery Signs
Private-equity deals, in which managers use debt to finance acquisitions, evaporated as credit became more expensive and banks were reluctant to lend during the global financial crisis that deepened in 2008. Buyout groups bought a record $1.4 trillion of companies in 2006 and 2007, according to data compiled by Bloomberg.
Henry Kravis, co-founder of KKR & Co., and Stephen Schwarzman of Blackstone Group Inc., the world’s biggest private-equity company, both said in October that they’re poised to start buying again. Blackstone agreed Oct. 7 to buy brewer AB InBev’s amusement park unit for as much as $2.7 billion. KKR bought Oriental Brewery Co. earlier this year from AB InBev for $1.8 billion.
Private-equity investments in Asia have reached $25 billion since July, overtaking the $22.4 billion total for the first half, according to the Asian Venture Capital Journal.
‘A Waste’
Alternative Investment Capital’s new fund aims to raise more money than its second Asia-focused vehicle, which committed 18.8 billion yen, according to people familiar with the matter, who declined to be identified because information is not public.
Kobayashi declined to comment on the size of the fund.
“There are quite a few middle-market deals in Japan that are still unknown and it’s a waste not to tap that market,” Kobayashi, 48, said on Nov. 30. “In Asia, we’re seeing funds that are trying to capture the gross capital in countries such as China and India on the back of the economic growth and that’s an opportunity for us.”
In June, Carlyle said it raised $1.04 billion for its fourth Asian growth capital fund and will invest mainly in privately held companies in China and India as it bets domestic consumption will be fuelled by growing personal incomes and a recovery in the capital markets.
Opportunities for investments in Japan can be found at companies where aging managers have to find new successors, Kobayashi said. Japanese manufacturers trying to boost sales abroad, especially in China, can also be tapped, he said.
Alternative Investment Capital, also known as AI Capital, was established in October 2002 by Mitsubishi Corp., Japan’s biggest trading company, and Daido Life Insurance Co. It also provides discretionary investment management services and advisory services to clients.
The AIC Japan III Fund will be the company’s third of private-equity funds with focus on Asia investments, Kazushige Kobayashi, president and chief executive officer of the firm, said in an interview. The latest fund’s investments include Carlyle Group and Advantage Partners LLP, he said.
Tokyo-based Alternative Investment Capital, with $2.7 billion in assets, has committed $634 million through five funds investing in private equity since inception in 2002. The firm’s new fund plans to put money in about 15 to 20 funds gradually over about three years, and targets an internal rate of return of more than 20 percent, according to Kobayashi.
“In the private-equity world, 2009 has been the lost year in the wake of the financial crisis, but we’re starting to see the market normalizing as we see some bigger deals and buyers of debt are emerging,” Kobayashi said. “We expect that next year will be more normalized in the private-equity market.”
Kobayashi pointed to Goldman Sachs Group Inc.’s $3.28 billion commitment to finance TPG Inc. and the CPP Investment Board’s purchase of IMS Health Inc. for $5.2 billion as evidence of a recovery in the global buyout market. He also cited Boston- based Bain Capital LLC’s acquisition of Bellsystem24 Inc., Japan’s biggest telemarketing firm, from Citigroup Inc. for 120 billion yen.
Recovery Signs
Private-equity deals, in which managers use debt to finance acquisitions, evaporated as credit became more expensive and banks were reluctant to lend during the global financial crisis that deepened in 2008. Buyout groups bought a record $1.4 trillion of companies in 2006 and 2007, according to data compiled by Bloomberg.
Henry Kravis, co-founder of KKR & Co., and Stephen Schwarzman of Blackstone Group Inc., the world’s biggest private-equity company, both said in October that they’re poised to start buying again. Blackstone agreed Oct. 7 to buy brewer AB InBev’s amusement park unit for as much as $2.7 billion. KKR bought Oriental Brewery Co. earlier this year from AB InBev for $1.8 billion.
Private-equity investments in Asia have reached $25 billion since July, overtaking the $22.4 billion total for the first half, according to the Asian Venture Capital Journal.
‘A Waste’
Alternative Investment Capital’s new fund aims to raise more money than its second Asia-focused vehicle, which committed 18.8 billion yen, according to people familiar with the matter, who declined to be identified because information is not public.
Kobayashi declined to comment on the size of the fund.
“There are quite a few middle-market deals in Japan that are still unknown and it’s a waste not to tap that market,” Kobayashi, 48, said on Nov. 30. “In Asia, we’re seeing funds that are trying to capture the gross capital in countries such as China and India on the back of the economic growth and that’s an opportunity for us.”
In June, Carlyle said it raised $1.04 billion for its fourth Asian growth capital fund and will invest mainly in privately held companies in China and India as it bets domestic consumption will be fuelled by growing personal incomes and a recovery in the capital markets.
Opportunities for investments in Japan can be found at companies where aging managers have to find new successors, Kobayashi said. Japanese manufacturers trying to boost sales abroad, especially in China, can also be tapped, he said.
Alternative Investment Capital, also known as AI Capital, was established in October 2002 by Mitsubishi Corp., Japan’s biggest trading company, and Daido Life Insurance Co. It also provides discretionary investment management services and advisory services to clients.
Monday, November 30, 2009
N.Z. Economy to Recover on Spending, Trade, Institute Says
Dec. 1 (Bloomberg) -- New Zealand’s economy is likely to grow in 2010, buoyed by consumer spending and global demand for exports, according to the New Zealand Institute of Economic Research Inc.
The economy will expand 2.6 percent next year after shrinking 0.9 percent in 2009, the Wellington-based institute said in quarterly predictions published today. Growth won’t return to pre-recession levels until 2012, it said.
New Zealand emerged from its worst recession in three decades in the second quarter, when gross domestic product increased 0.1 percent. Another quarter of contraction is possible as the jobless rate rises and the construction industry faces slowing demand, the institute said.
“The next few quarters will be bumpy as the economy slowly converts the rebound into recovery,” said Shamubeel Eaqub, principal economist at the institute. “There are still significant risks to the economy from renewed over-valuation in the housing market, rising unemployment, persistent external imbalances and rising oil prices.”
Given the risks, there is little urgency for Reserve Bank Governor Alan Bollard to raise the benchmark interest rate from a record-low 2.5 percent, Eaqub said. He expects borrowing costs will be unchanged until September 2010.
Household spending will recover in late 2010 once there are signs of an improving labor market, he said. The jobless rate may rise to 8 percent next year from 6.5 percent in the third quarter, the institute forecasts.
The economy will expand 2.6 percent next year after shrinking 0.9 percent in 2009, the Wellington-based institute said in quarterly predictions published today. Growth won’t return to pre-recession levels until 2012, it said.
New Zealand emerged from its worst recession in three decades in the second quarter, when gross domestic product increased 0.1 percent. Another quarter of contraction is possible as the jobless rate rises and the construction industry faces slowing demand, the institute said.
“The next few quarters will be bumpy as the economy slowly converts the rebound into recovery,” said Shamubeel Eaqub, principal economist at the institute. “There are still significant risks to the economy from renewed over-valuation in the housing market, rising unemployment, persistent external imbalances and rising oil prices.”
Given the risks, there is little urgency for Reserve Bank Governor Alan Bollard to raise the benchmark interest rate from a record-low 2.5 percent, Eaqub said. He expects borrowing costs will be unchanged until September 2010.
Household spending will recover in late 2010 once there are signs of an improving labor market, he said. The jobless rate may rise to 8 percent next year from 6.5 percent in the third quarter, the institute forecasts.
Japanese 10-Year Yields Set to Drop to 1% as Deflation Deepens
Dec. 1 (Bloomberg) -- Japan’s benchmark 10-year government bond yields may drop by a quarter percentage point to as low as 1 percent, the least in more than six years, by the end of March, according to analysts and economists.
Demand for bonds is likely to increase as the world’s second-largest economy slips further into deflation, smothering demand in an economy analysts say may falter in coming months as global stimulus wanes. The government said Nov. 20 the country is in deflation for the first time in three years after consumer prices dropped for an eighth month in October. Deflation, persistent declines in prices, enhances bonds’ fixed returns.
“Given the mounting deflationary pressure, it’s not strange to think that yields will break the 1 percent level,” said Tokyo-based Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. “There is a limit to how much recovery can be spurred through economic packages.”
Industrial production rose in October by less than economists estimated in October, a Trade Ministry report yesterday showed, underlining concerns that the economy may slow even after more than 20 trillion yen ($232 billion) in stimulus spending helped it expand for the past two quarters.
Ten-year yields added 1.5 basis points to 1.26 percent yesterday in Tokyo. Investors who buy 10-year debt today would make a 2.7 percent return, should Shiraishi’s predictions prove accurate, calculations by Bloomberg show.
Deepening Deflation
Deflation blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s. Prices excluding fresh food slid 2.2 percent in October from a year earlier after dropping a near-record 2.3 percent in September. Prices excluding both food and energy dropped 1.1 percent that month.
The benchmark 10-year yield slid to an all-time low of 0.43 percent on June 11, 2003, according to data compiled by Bloomberg. Japan’s consumer prices excluding food and fuel fell at an annual 0.3 percent in June 2003, capping 48 straight months of declines.
Ten-year notes offer a real yield, or what investors get after accounting for costs in the economy, of 2.36 percent, compared with similar-dated U.S. real yields of 1.5 percent, adjusting returns in each case for prices excluding food and energy.
“Japan’s CPI will stay negative for some time,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. “Japanese real interest rates are higher than U.S. real yields, which make Japanese bonds attractive. I recommend buying 10-year Japanese bonds.”
The spread between rates on five-year notes and inflation- linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 1.05 percentage point yesterday, from minus 0.88 two weeks ago.
Inflation Expectations
Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
“It’s a good time to buy government bonds,” said Akira Takei, a manager in the international bond investment department in Tokyo at Mizuho Asset Management Co., a unit of Japan’s second-largest bank. “Given deflation, yields have more room to decline.”
Ten-year yields will slump to 1.2 percent by the end of the year, Mizuho Asset’s Takei said.
Demand for bonds is also likely to increase toward the end of the year as Dubai World’s possible default spurs investors to sell off riskier assets and put their money into government debt.
Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said Nov. 25 it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010.
Lower Hurdle
“The hurdle for investors to buy bonds has been lowered following the Dubai report,” said Kazuya Ito, a fund manager in Tokyo at Daiwa SB Investments Ltd., a unit of Japan’s second largest brokerage.
The cost of protecting Dubai government notes from default more than doubled to 647 basis points in three days after Dubai World announced plans to delay loan repayments, according to CMA DataVision prices. The cost of protecting Japanese debt from default stood at 80 basis points at the end of last week.
The swap contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. Dec. 1 (Bloomberg) -- Japan’s benchmark 10-year government bond yields may drop by a quarter percentage point to as low as 1 percent, the least in more than six years, by the end of March, according to analysts and economists.
Demand for bonds is likely to increase as the world’s second-largest economy slips further into deflation, smothering demand in an economy analysts say may falter in coming months as global stimulus wanes. The government said Nov. 20 the country is in deflation for the first time in three years after consumer prices dropped for an eighth month in October. Deflation, persistent declines in prices, enhances bonds’ fixed returns.
“Given the mounting deflationary pressure, it’s not strange to think that yields will break the 1 percent level,” said Tokyo-based Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. “There is a limit to how much recovery can be spurred through economic packages.”
Industrial production rose in October by less than economists estimated in October, a Trade Ministry report yesterday showed, underlining concerns that the economy may slow even after more than 20 trillion yen ($232 billion) in stimulus spending helped it expand for the past two quarters.
Ten-year yields added 1.5 basis points to 1.26 percent yesterday in Tokyo. Investors who buy 10-year debt today would make a 2.7 percent return, should Shiraishi’s predictions prove accurate, calculations by Bloomberg show.
Deepening Deflation
Deflation blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s. Prices excluding fresh food slid 2.2 percent in October from a year earlier after dropping a near-record 2.3 percent in September. Prices excluding both food and energy dropped 1.1 percent that month.
The benchmark 10-year yield slid to an all-time low of 0.43 percent on June 11, 2003, according to data compiled by Bloomberg. Japan’s consumer prices excluding food and fuel fell at an annual 0.3 percent in June 2003, capping 48 straight months of declines.
Ten-year notes offer a real yield, or what investors get after accounting for costs in the economy, of 2.36 percent, compared with similar-dated U.S. real yields of 1.5 percent, adjusting returns in each case for prices excluding food and energy.
“Japan’s CPI will stay negative for some time,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. “Japanese real interest rates are higher than U.S. real yields, which make Japanese bonds attractive. I recommend buying 10-year Japanese bonds.”
The spread between rates on five-year notes and inflation- linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 1.05 percentage point yesterday, from minus 0.88 two weeks ago.
Inflation Expectations
Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
“It’s a good time to buy government bonds,” said Akira Takei, a manager in the international bond investment department in Tokyo at Mizuho Asset Management Co., a unit of Japan’s second-largest bank. “Given deflation, yields have more room to decline.”
Ten-year yields will slump to 1.2 percent by the end of the year, Mizuho Asset’s Takei said.
Demand for bonds is also likely to increase toward the end of the year as Dubai World’s possible default spurs investors to sell off riskier assets and put their money into government debt.
Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said Nov. 25 it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010.
Lower Hurdle
“The hurdle for investors to buy bonds has been lowered following the Dubai report,” said Kazuya Ito, a fund manager in Tokyo at Daiwa SB Investments Ltd., a unit of Japan’s second largest brokerage.
The cost of protecting Dubai government notes from default more than doubled to 647 basis points in three days after Dubai World announced plans to delay loan repayments, according to CMA DataVision prices. The cost of protecting Japanese debt from default stood at 80 basis points at the end of last week.
The swap contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
Demand for bonds is likely to increase as the world’s second-largest economy slips further into deflation, smothering demand in an economy analysts say may falter in coming months as global stimulus wanes. The government said Nov. 20 the country is in deflation for the first time in three years after consumer prices dropped for an eighth month in October. Deflation, persistent declines in prices, enhances bonds’ fixed returns.
“Given the mounting deflationary pressure, it’s not strange to think that yields will break the 1 percent level,” said Tokyo-based Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. “There is a limit to how much recovery can be spurred through economic packages.”
Industrial production rose in October by less than economists estimated in October, a Trade Ministry report yesterday showed, underlining concerns that the economy may slow even after more than 20 trillion yen ($232 billion) in stimulus spending helped it expand for the past two quarters.
Ten-year yields added 1.5 basis points to 1.26 percent yesterday in Tokyo. Investors who buy 10-year debt today would make a 2.7 percent return, should Shiraishi’s predictions prove accurate, calculations by Bloomberg show.
Deepening Deflation
Deflation blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s. Prices excluding fresh food slid 2.2 percent in October from a year earlier after dropping a near-record 2.3 percent in September. Prices excluding both food and energy dropped 1.1 percent that month.
The benchmark 10-year yield slid to an all-time low of 0.43 percent on June 11, 2003, according to data compiled by Bloomberg. Japan’s consumer prices excluding food and fuel fell at an annual 0.3 percent in June 2003, capping 48 straight months of declines.
Ten-year notes offer a real yield, or what investors get after accounting for costs in the economy, of 2.36 percent, compared with similar-dated U.S. real yields of 1.5 percent, adjusting returns in each case for prices excluding food and energy.
“Japan’s CPI will stay negative for some time,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. “Japanese real interest rates are higher than U.S. real yields, which make Japanese bonds attractive. I recommend buying 10-year Japanese bonds.”
The spread between rates on five-year notes and inflation- linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 1.05 percentage point yesterday, from minus 0.88 two weeks ago.
Inflation Expectations
Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
“It’s a good time to buy government bonds,” said Akira Takei, a manager in the international bond investment department in Tokyo at Mizuho Asset Management Co., a unit of Japan’s second-largest bank. “Given deflation, yields have more room to decline.”
Ten-year yields will slump to 1.2 percent by the end of the year, Mizuho Asset’s Takei said.
Demand for bonds is also likely to increase toward the end of the year as Dubai World’s possible default spurs investors to sell off riskier assets and put their money into government debt.
Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said Nov. 25 it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010.
Lower Hurdle
“The hurdle for investors to buy bonds has been lowered following the Dubai report,” said Kazuya Ito, a fund manager in Tokyo at Daiwa SB Investments Ltd., a unit of Japan’s second largest brokerage.
The cost of protecting Dubai government notes from default more than doubled to 647 basis points in three days after Dubai World announced plans to delay loan repayments, according to CMA DataVision prices. The cost of protecting Japanese debt from default stood at 80 basis points at the end of last week.
The swap contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. Dec. 1 (Bloomberg) -- Japan’s benchmark 10-year government bond yields may drop by a quarter percentage point to as low as 1 percent, the least in more than six years, by the end of March, according to analysts and economists.
Demand for bonds is likely to increase as the world’s second-largest economy slips further into deflation, smothering demand in an economy analysts say may falter in coming months as global stimulus wanes. The government said Nov. 20 the country is in deflation for the first time in three years after consumer prices dropped for an eighth month in October. Deflation, persistent declines in prices, enhances bonds’ fixed returns.
“Given the mounting deflationary pressure, it’s not strange to think that yields will break the 1 percent level,” said Tokyo-based Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. “There is a limit to how much recovery can be spurred through economic packages.”
Industrial production rose in October by less than economists estimated in October, a Trade Ministry report yesterday showed, underlining concerns that the economy may slow even after more than 20 trillion yen ($232 billion) in stimulus spending helped it expand for the past two quarters.
Ten-year yields added 1.5 basis points to 1.26 percent yesterday in Tokyo. Investors who buy 10-year debt today would make a 2.7 percent return, should Shiraishi’s predictions prove accurate, calculations by Bloomberg show.
Deepening Deflation
Deflation blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s. Prices excluding fresh food slid 2.2 percent in October from a year earlier after dropping a near-record 2.3 percent in September. Prices excluding both food and energy dropped 1.1 percent that month.
The benchmark 10-year yield slid to an all-time low of 0.43 percent on June 11, 2003, according to data compiled by Bloomberg. Japan’s consumer prices excluding food and fuel fell at an annual 0.3 percent in June 2003, capping 48 straight months of declines.
Ten-year notes offer a real yield, or what investors get after accounting for costs in the economy, of 2.36 percent, compared with similar-dated U.S. real yields of 1.5 percent, adjusting returns in each case for prices excluding food and energy.
“Japan’s CPI will stay negative for some time,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. “Japanese real interest rates are higher than U.S. real yields, which make Japanese bonds attractive. I recommend buying 10-year Japanese bonds.”
The spread between rates on five-year notes and inflation- linked debt, which reflects the outlook among traders for consumer prices over the term of the securities, was negative 1.05 percentage point yesterday, from minus 0.88 two weeks ago.
Inflation Expectations
Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
“It’s a good time to buy government bonds,” said Akira Takei, a manager in the international bond investment department in Tokyo at Mizuho Asset Management Co., a unit of Japan’s second-largest bank. “Given deflation, yields have more room to decline.”
Ten-year yields will slump to 1.2 percent by the end of the year, Mizuho Asset’s Takei said.
Demand for bonds is also likely to increase toward the end of the year as Dubai World’s possible default spurs investors to sell off riskier assets and put their money into government debt.
Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said Nov. 25 it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010.
Lower Hurdle
“The hurdle for investors to buy bonds has been lowered following the Dubai report,” said Kazuya Ito, a fund manager in Tokyo at Daiwa SB Investments Ltd., a unit of Japan’s second largest brokerage.
The cost of protecting Dubai government notes from default more than doubled to 647 basis points in three days after Dubai World announced plans to delay loan repayments, according to CMA DataVision prices. The cost of protecting Japanese debt from default stood at 80 basis points at the end of last week.
The swap contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
Sunday, November 29, 2009
Asian Stocks to Gain 20% as Inflows Rise, BNP Says
Nov. 30 (Bloomberg) -- Asian stocks may extend their best annual rally in 16 years, with a regional index poised to gain 20 percent in 2010 as foreign fund flows into the region’s equities increase, BNP Paribas said.
The MSCI Asia excluding Japan Index may rise to 570 in the next 12 months, compared with the Nov. 27 close of 455.15, as inflows rise 30 percent to $35 billion, BNP strategists led by Clive McDonnell wrote in a report today. Singapore was raised to “overweight” from “underweight,” while South Korea was cut to “neutral” from “overweight,” according to the report.
“Foreign fund flows have played a key part in the recovery of Asian equity markets, with $27 billion forecast to flow into Asia in 2009,” the strategists wrote. “A surge in free cash flow and excess liquidity imply a surge in mergers and acquisitions in 2010.”
The MSCI gauge of Asian stock markets excluding Japan has gained 58 percent this year, which will be the best annual gain since 1993. BNP’s estimate of 570 will take the index to its highest level since May 2008.
McDonnell, the head of Asian equity strategy at BNP, predicted on Aug. 19 that the regional index may rise to 550 on declining risks and cost of equity, a buildup in liquidity and a return to “peak profitability” in some markets.
Capital Controls
Still, the gain in foreign funds into the region’s equity markets could increase the risk of capital controls, especially in South Korea and Indonesia, BNP said.
South Korean inflows totaled 9 percent of the economy’s gross domestic product during the third quarter, given the “undervaluation” of the exchange rate and a change in investors’ weighting in the market, the strategists said. The nation’s central bank may raise borrowing costs first, with a 25 basis point gain as early as January, they said. A basis point equals 0.01 percentage point.
Singapore was upgraded at BNP, which cited the outlook for improving asset quality and higher fee-based income at the city- state’s banks.
The MSCI Asia excluding Japan Index may rise to 570 in the next 12 months, compared with the Nov. 27 close of 455.15, as inflows rise 30 percent to $35 billion, BNP strategists led by Clive McDonnell wrote in a report today. Singapore was raised to “overweight” from “underweight,” while South Korea was cut to “neutral” from “overweight,” according to the report.
“Foreign fund flows have played a key part in the recovery of Asian equity markets, with $27 billion forecast to flow into Asia in 2009,” the strategists wrote. “A surge in free cash flow and excess liquidity imply a surge in mergers and acquisitions in 2010.”
The MSCI gauge of Asian stock markets excluding Japan has gained 58 percent this year, which will be the best annual gain since 1993. BNP’s estimate of 570 will take the index to its highest level since May 2008.
McDonnell, the head of Asian equity strategy at BNP, predicted on Aug. 19 that the regional index may rise to 550 on declining risks and cost of equity, a buildup in liquidity and a return to “peak profitability” in some markets.
Capital Controls
Still, the gain in foreign funds into the region’s equity markets could increase the risk of capital controls, especially in South Korea and Indonesia, BNP said.
South Korean inflows totaled 9 percent of the economy’s gross domestic product during the third quarter, given the “undervaluation” of the exchange rate and a change in investors’ weighting in the market, the strategists said. The nation’s central bank may raise borrowing costs first, with a 25 basis point gain as early as January, they said. A basis point equals 0.01 percentage point.
Singapore was upgraded at BNP, which cited the outlook for improving asset quality and higher fee-based income at the city- state’s banks.
India’s Economy May Grow at Fastest Pace in Year, Survey Shows
Nov. 30 (Bloomberg) -- India’s economy, the third biggest in Asia, probably grew at the fastest pace in a year because of record-low interest rates and tax cuts.
Gross domestic product rose 6.3 percent in the three months ending Sept. 30 from a year earlier, according to the median forecast of 19 economists in a Bloomberg survey. That would compare with 6.1 percent in the previous quarter. The statistics office will announce the number at 11 a.m. local time in New Delhi today.
Officials are weighing the threat from inflation against the risk that raising interest rates too quickly will undermine the recovery of the $1.2 trillion economy. India must withdraw monetary stimulus “carefully and strategically” to sustain growth, central bank Deputy Governor Subir Gokarn said in Mumbai on Nov. 24.
“India’s growth is being heavily driven by government stimulus,” said Nikhilesh Bhattacharyya, a Sydney-based economist at Moody’s Economy.com. “It’s way too soon to turn away from accommodative monetary and fiscal policies.”
To steer the nation through the worst global financial crisis since the 1930s, the central bank has kept the key reverse repurchase rate at 3.25 percent since April and government spending and tax cuts have taken the value of stimulus measures to 12 percent of GDP. That’s helped growth recover from a four-year low in the final quarter of last year and the benchmark Sensitive index on the Bombay Stock Exchange to climb about 70 percent this year.
Monsoon Rains
Inflation pressures are building as growth quickens and after the weakest monsoon rains since 1972 hurt farm output, pushing up food costs. The central bank forecasts inflation of 6.5 percent by March 31 from 1.34 percent in October and 0.5 percent in September. During 2008, the rate rose to as high as almost 13 percent.
“Given the magnitude of easing and the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon,” the Paris-based Organization for Economic Cooperation and Development said Nov. 19.
Falling bond yields signal that investors don’t expect interest rates to rise this year.
“We see inflation risks emerging and expect interest-rate hikes from January 2010,” said Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore.
Obsessed With Growth?
In a debate in parliament on Nov. 26, Finance Minister Pranab Mukherjee said policy makers are balancing the need to create jobs against inflation concerns. The central bank started tightening monetary policy on Oct. 27 by ordering lenders to keep more money in government bonds.
Food inflation has climbed to 15.58 percent, a politically sensitive issue in a nation where the World Bank estimates that three-quarters of the population live on less than $2 a day. Opposition lawmakers said last week that the government is obsessed with growth, allowing prices to spiral to the detriment of the poor.
By sustaining the second-fastest growth of any major economy, trailing only China, India is drawing investment from companies including French tiremaker Michelin & Cie, which said this month that it will add a factory in the southern state of Tamil Nadu, and South Korea’s Samsung Electronics Co.
Prime Minister Manmohan Singh said this month that returning to the 9 percent growth that India averaged between 2004 and 2008 is “eminently feasible” in the medium term because a high national savings rate will aid investment.
Car sales climbed at a 33.9 percent annual pace in October and cellular operators, led by Tata Teleservices Ltd., added 16.6 million new subscribers. Lodha Developers Ltd., an Indian property company planning an initial share sale, said its home sales may climb about threefold this fiscal year as low interest rates encourage spending.
Gross domestic product rose 6.3 percent in the three months ending Sept. 30 from a year earlier, according to the median forecast of 19 economists in a Bloomberg survey. That would compare with 6.1 percent in the previous quarter. The statistics office will announce the number at 11 a.m. local time in New Delhi today.
Officials are weighing the threat from inflation against the risk that raising interest rates too quickly will undermine the recovery of the $1.2 trillion economy. India must withdraw monetary stimulus “carefully and strategically” to sustain growth, central bank Deputy Governor Subir Gokarn said in Mumbai on Nov. 24.
“India’s growth is being heavily driven by government stimulus,” said Nikhilesh Bhattacharyya, a Sydney-based economist at Moody’s Economy.com. “It’s way too soon to turn away from accommodative monetary and fiscal policies.”
To steer the nation through the worst global financial crisis since the 1930s, the central bank has kept the key reverse repurchase rate at 3.25 percent since April and government spending and tax cuts have taken the value of stimulus measures to 12 percent of GDP. That’s helped growth recover from a four-year low in the final quarter of last year and the benchmark Sensitive index on the Bombay Stock Exchange to climb about 70 percent this year.
Monsoon Rains
Inflation pressures are building as growth quickens and after the weakest monsoon rains since 1972 hurt farm output, pushing up food costs. The central bank forecasts inflation of 6.5 percent by March 31 from 1.34 percent in October and 0.5 percent in September. During 2008, the rate rose to as high as almost 13 percent.
“Given the magnitude of easing and the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon,” the Paris-based Organization for Economic Cooperation and Development said Nov. 19.
Falling bond yields signal that investors don’t expect interest rates to rise this year.
“We see inflation risks emerging and expect interest-rate hikes from January 2010,” said Ramya Suryanarayanan, an economist at DBS Group Holdings Ltd. in Singapore.
Obsessed With Growth?
In a debate in parliament on Nov. 26, Finance Minister Pranab Mukherjee said policy makers are balancing the need to create jobs against inflation concerns. The central bank started tightening monetary policy on Oct. 27 by ordering lenders to keep more money in government bonds.
Food inflation has climbed to 15.58 percent, a politically sensitive issue in a nation where the World Bank estimates that three-quarters of the population live on less than $2 a day. Opposition lawmakers said last week that the government is obsessed with growth, allowing prices to spiral to the detriment of the poor.
By sustaining the second-fastest growth of any major economy, trailing only China, India is drawing investment from companies including French tiremaker Michelin & Cie, which said this month that it will add a factory in the southern state of Tamil Nadu, and South Korea’s Samsung Electronics Co.
Prime Minister Manmohan Singh said this month that returning to the 9 percent growth that India averaged between 2004 and 2008 is “eminently feasible” in the medium term because a high national savings rate will aid investment.
Car sales climbed at a 33.9 percent annual pace in October and cellular operators, led by Tata Teleservices Ltd., added 16.6 million new subscribers. Lodha Developers Ltd., an Indian property company planning an initial share sale, said its home sales may climb about threefold this fiscal year as low interest rates encourage spending.
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