Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.
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Gary D. Cohn, president of Goldman Sachs, went to Athens to pitch complex products to defer debt. Such deals let Greece continue deficit spending, like a consumer with a second mortgage.
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Weekend Business: Floyd Norris on Greece and the Euro Crisis.
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Greek Statistician Is Caught in Limelight (February 14, 2010)
Europe Commits to Action on Greek Debt (February 12, 2010)
Greece’s Woes May Give Pause to Euro Zone Candidates (February 12, 2010)
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As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.
The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.
It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.
As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.
Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.
Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.
The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.
A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.
While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.
“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.
Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.
“If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the International Monetary Fund’s capital markets surveillance unit, which monitors vulnerability in global capital markets.
Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments. While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.
Saturday, February 13, 2010
Explosion Kills 9 in Pune; India Says Terror Attack
Feb. 14 (Bloomberg) -- Nine people were killed when a bomb ripped through a bakery popular with international visitors in the Indian city of Pune, in what officials called the biggest terrorist strike in the nation since the 2008 Mumbai attacks.
“Six bodies have been identified,” police official R. Shalake said in a telephone interview from Pune, situated approximately 100 kilometers (62 miles) southeast of India’s financial hub of Mumbai. “There are three unknown bodies. At least 53 people have been injured,” Shalake said.
Television channels showed tables and chairs strewn across the pavement outside the bakery, with billboards ripped from their mountings. The blast occurred at 7:30 p.m. local time yesterday, Home Secretary Gopal K. Pillai said at a New Delhi news conference.
Home Minister Palaniappan Chidambaram said it was “the biggest terror incident in 14 months,” in remarks carried by Indian television channels late yesterday. “All the information available now points to a plot to explode a device at a place frequented by foreigners and locals,” he said.
Both he and Pillai said forensic investigations must be completed before it will be possible to say who was behind the bombing. “I don’t think any particular community was targeted. There is no failure of intelligence and it was an insidious attack. This is not an overt terror attack,” Chidambaram said.
Major Bombing
“The explosion sounded like a Katyusha” rocket, said Betzalel Kupchik, a rabbi at the Chabad House, a Jewish center, across the street from the bakery. The place was “probably targeted because you have a lot of foreigners coming there,” Kupchik said.
The Pune attack is the first major bombing in India since the November 2008 assault on Mumbai that killed 166 people. India blamed the Mumbai attack on the Pakistan-based Lashkar-e- Taiba group and scrapped five years of peace talks with its neighbor. The latest incident may threaten plans to revive negotiations between the two nuclear-armed countries. Foreign secretaries of India and Pakistan are scheduled to meet Feb. 25.
A spiritual center, located near the bakery and also frequented by foreigners, was among five places surveyed by David Coleman Headley, a Chicago man indicted by the U.S. for scouting targets before the Mumbai attacks, Pillai told reporters. Headley has pleaded not guilty to the charges.
Patrols, Training
After the Mumbai attack, Chidambaram created a federal investigation agency, strengthened patrols of coastal areas and improved training for anti-terrorism police as part of a national security overhaul.
Pillai said Dec. 9 that India remains vulnerable to terror attacks even after the revamp. Ports, power plants, nuclear installations, oil refineries and information technology firms are particularly vulnerable as groups based in India and abroad try to “wreck India’s economy,” he said.
Rebel groups in the disputed Himalayan region of Kashmir have been fighting for independence from India or a union with Pakistan since 1989. The country also faces insurgencies in some northeastern states, while Maoist guerillas have attacked economic infrastructure and security forces in southern and eastern parts of the country.
“Six bodies have been identified,” police official R. Shalake said in a telephone interview from Pune, situated approximately 100 kilometers (62 miles) southeast of India’s financial hub of Mumbai. “There are three unknown bodies. At least 53 people have been injured,” Shalake said.
Television channels showed tables and chairs strewn across the pavement outside the bakery, with billboards ripped from their mountings. The blast occurred at 7:30 p.m. local time yesterday, Home Secretary Gopal K. Pillai said at a New Delhi news conference.
Home Minister Palaniappan Chidambaram said it was “the biggest terror incident in 14 months,” in remarks carried by Indian television channels late yesterday. “All the information available now points to a plot to explode a device at a place frequented by foreigners and locals,” he said.
Both he and Pillai said forensic investigations must be completed before it will be possible to say who was behind the bombing. “I don’t think any particular community was targeted. There is no failure of intelligence and it was an insidious attack. This is not an overt terror attack,” Chidambaram said.
Major Bombing
“The explosion sounded like a Katyusha” rocket, said Betzalel Kupchik, a rabbi at the Chabad House, a Jewish center, across the street from the bakery. The place was “probably targeted because you have a lot of foreigners coming there,” Kupchik said.
The Pune attack is the first major bombing in India since the November 2008 assault on Mumbai that killed 166 people. India blamed the Mumbai attack on the Pakistan-based Lashkar-e- Taiba group and scrapped five years of peace talks with its neighbor. The latest incident may threaten plans to revive negotiations between the two nuclear-armed countries. Foreign secretaries of India and Pakistan are scheduled to meet Feb. 25.
A spiritual center, located near the bakery and also frequented by foreigners, was among five places surveyed by David Coleman Headley, a Chicago man indicted by the U.S. for scouting targets before the Mumbai attacks, Pillai told reporters. Headley has pleaded not guilty to the charges.
Patrols, Training
After the Mumbai attack, Chidambaram created a federal investigation agency, strengthened patrols of coastal areas and improved training for anti-terrorism police as part of a national security overhaul.
Pillai said Dec. 9 that India remains vulnerable to terror attacks even after the revamp. Ports, power plants, nuclear installations, oil refineries and information technology firms are particularly vulnerable as groups based in India and abroad try to “wreck India’s economy,” he said.
Rebel groups in the disputed Himalayan region of Kashmir have been fighting for independence from India or a union with Pakistan since 1989. The country also faces insurgencies in some northeastern states, while Maoist guerillas have attacked economic infrastructure and security forces in southern and eastern parts of the country.
Eight die in India’s first big attack since Mumbai
In India’s first terrorist attack since terrorists besieged Mumbai in 2008, a bomb on Saturday evening ripped through a restaurant in Pune, near India’s financial capital, killing at least eight people, reportedly including foreigners, and wounding 33 others.
Indian television reports said between one and four foreigners were among the dead in the blast, which rocked the German Bakery, a cafe popular with tourists staying at the nearby Osho ashram, one of India’s most famous communes, which hosts followers of the teachings of the late Osho Rajneesh, a spiritual guru.
EDITOR’S CHOICE
In depth: India - Jul-12
Mumbai plotter ‘could be an Indian’ - Feb-04
The explosion comes only a day after India and Pakistan agreed to resume high-level peace talks on February 25, which have been suspended since the Mumbai terrorist attacks.
“I was sitting in my living room when a strong blast shattered my windows,” said Niharika Arora, who lives across from the German Bakery, where the bomb was planted. “It is clearly an attack as the bakery is in a strategic spot close to Osho ashram.”
The bakery is also close to Pune’s Chabad House Jewish prayer and community centre.
Osho was one of the potential targets allegedly surveyed by David Coleman Headley, an American accused by US authorities of scouting targets for the Pakistan-based Islamic militant group, Lashkar-e-Taiba, ahead of the Mumbai attacks in 2008.
“Pune was one of the places reportedly visited by him for allegedly collecting target information for the LeT,” said B. Raman, director, Institute of Topical Studies, in Chennai.
Mr Headley has been detained in the US on accusations of helping to plot the Mumbai attacks, in which a group of 10 terrorists killed 166 people in a commando-style assault on three luxury hotels, a tourist cafe – Leopold’s, a railway station and another Jewish centre.
“It’s the Leopold’s of Pune,” said Charu Shree Roy, a film student at the nearby Film and Television Institute of India in Pune, referring to the German Bakery. “A lot of Osho people go there.”
No one has claimed responsibility for the Pune attack, police said.
“There was an abandoned bag which seems to have contained some IED [improvised explosive device],” senior police official Rajendra Sonawane told reporters.
The explosion at German Bakery occurred in the evening, when the restaurant was packed with tourists and foreigners. ”Four women foreigners were killed. Their nationality is not known.” Dilip Band, a senior police official, told India’s CNN-IBN television.
Debris was strewn around the bakery. The impact of the blast knocked the bakery’s sign off, blew out windows and left a large crater inside the restaurant.
”It [the bomb] was under one of the tables ... We transferred lots of people to the ambulances ... there is no German bakery any more,” one foreigner, short of breath and resting against a wall, told local CNN-IBN television.
Indian television reports said between one and four foreigners were among the dead in the blast, which rocked the German Bakery, a cafe popular with tourists staying at the nearby Osho ashram, one of India’s most famous communes, which hosts followers of the teachings of the late Osho Rajneesh, a spiritual guru.
EDITOR’S CHOICE
In depth: India - Jul-12
Mumbai plotter ‘could be an Indian’ - Feb-04
The explosion comes only a day after India and Pakistan agreed to resume high-level peace talks on February 25, which have been suspended since the Mumbai terrorist attacks.
“I was sitting in my living room when a strong blast shattered my windows,” said Niharika Arora, who lives across from the German Bakery, where the bomb was planted. “It is clearly an attack as the bakery is in a strategic spot close to Osho ashram.”
The bakery is also close to Pune’s Chabad House Jewish prayer and community centre.
Osho was one of the potential targets allegedly surveyed by David Coleman Headley, an American accused by US authorities of scouting targets for the Pakistan-based Islamic militant group, Lashkar-e-Taiba, ahead of the Mumbai attacks in 2008.
“Pune was one of the places reportedly visited by him for allegedly collecting target information for the LeT,” said B. Raman, director, Institute of Topical Studies, in Chennai.
Mr Headley has been detained in the US on accusations of helping to plot the Mumbai attacks, in which a group of 10 terrorists killed 166 people in a commando-style assault on three luxury hotels, a tourist cafe – Leopold’s, a railway station and another Jewish centre.
“It’s the Leopold’s of Pune,” said Charu Shree Roy, a film student at the nearby Film and Television Institute of India in Pune, referring to the German Bakery. “A lot of Osho people go there.”
No one has claimed responsibility for the Pune attack, police said.
“There was an abandoned bag which seems to have contained some IED [improvised explosive device],” senior police official Rajendra Sonawane told reporters.
The explosion at German Bakery occurred in the evening, when the restaurant was packed with tourists and foreigners. ”Four women foreigners were killed. Their nationality is not known.” Dilip Band, a senior police official, told India’s CNN-IBN television.
Debris was strewn around the bakery. The impact of the blast knocked the bakery’s sign off, blew out windows and left a large crater inside the restaurant.
”It [the bomb] was under one of the tables ... We transferred lots of people to the ambulances ... there is no German bakery any more,” one foreigner, short of breath and resting against a wall, told local CNN-IBN television.
Friday, February 12, 2010
Japanese Government Bonds Rise on Speculation Rates to Stay Low
Feb. 13 (Bloomberg) -- Japan’s 10-year bonds completed a weekly gain on speculation chronic deflation will encourage the Bank of Japan to keep its benchmark interest rate near zero when policy makers meet next week.
Benchmarkyields stayed near the lowest level in two weeks before a report on Feb. 15 that economists said will show prices fell at a faster pace in the final quarter of 2009 even as economic growth quickened. Bond futures dropped yesterday as stocks advanced for second day after European Union leaders pledged to help Greece tackle it swelling budget deficit.
“A quickening expansion won’t dispel strong deflationary pressure immediately,” said Takeshi Minami, chief economist at Norinchukin Research Institute Ltd. in Tokyo. “The Bank of Japan is still far away from exiting credit easing, which will continue to support the debt market.”
Ten-year yields fell 2.5 basis points this week to 1.33 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. They slid to 1.325 percent on Feb. 10, the lowest level since Feb. 1.
Benchmark yields rose half a basis point yesterday and 10- year bond futures for March delivery slipped 0.06 to 139.37 at the close of the Tokyo Stock Exchange.
The gross domestic product deflator declined 2.3 percent in the fourth quarter from a year earlier, according to a Bloomberg News survey. The deflator is used to calculate real GDP, or economic growth adjusted for price changes.
The economy grew an annual 3.5 percent last quarter, after expanding 1.3 percent in prior three months, according to a separate Bloomberg survey.
‘Stave off’ Recession
“Japan may be able to stave off a double-dip recession,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without stimulus is possible. The economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”
The Bank of Japan will keep its overnight call rate at 0.1 percent throughout 2010, according to Bloomberg News survey. BOJ Governor Masaaki Shirakawa and fellow board members will start a two-day policy meeting on Feb. 17.
Central bank board members this month affirmed their forecasts for Japan’s economy to keep expanding while consumer prices will fall through the year ending March 2012, a third- year of declines.
Stocks Bounce
Bond futures snapped a four-day gain yesterday as Asian stocks extended a worldwide equity rally, limiting demand for the relative safety of government debt.
“Easing concerns over Greece support demand for riskier securities,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “The recent trend of buying flight-to-safety assets will weaken.”
The Nikkei 225 Stock Average advanced 1.3 percent yesterday. Benchmark 10-year yields had a correlation of 0.6 with the Nikkei 225 this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
European leaders promised “determined” action to staunch the worst crisis in the euro’s 11-year history. The agreement reached on Feb. 11 called for closer monitoring of the Greek economy and stopped short of offering concrete steps to help Greece handle a debt load exceeding annual economic output.
“It’s a political message that we wanted to send out,” European Union President Herman Van Rompuy told reporters in Brussels on Feb. 11. “The Greek government will take the responsibility for cleaning up its public finances.”
Benchmarkyields stayed near the lowest level in two weeks before a report on Feb. 15 that economists said will show prices fell at a faster pace in the final quarter of 2009 even as economic growth quickened. Bond futures dropped yesterday as stocks advanced for second day after European Union leaders pledged to help Greece tackle it swelling budget deficit.
“A quickening expansion won’t dispel strong deflationary pressure immediately,” said Takeshi Minami, chief economist at Norinchukin Research Institute Ltd. in Tokyo. “The Bank of Japan is still far away from exiting credit easing, which will continue to support the debt market.”
Ten-year yields fell 2.5 basis points this week to 1.33 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. They slid to 1.325 percent on Feb. 10, the lowest level since Feb. 1.
Benchmark yields rose half a basis point yesterday and 10- year bond futures for March delivery slipped 0.06 to 139.37 at the close of the Tokyo Stock Exchange.
The gross domestic product deflator declined 2.3 percent in the fourth quarter from a year earlier, according to a Bloomberg News survey. The deflator is used to calculate real GDP, or economic growth adjusted for price changes.
The economy grew an annual 3.5 percent last quarter, after expanding 1.3 percent in prior three months, according to a separate Bloomberg survey.
‘Stave off’ Recession
“Japan may be able to stave off a double-dip recession,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without stimulus is possible. The economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”
The Bank of Japan will keep its overnight call rate at 0.1 percent throughout 2010, according to Bloomberg News survey. BOJ Governor Masaaki Shirakawa and fellow board members will start a two-day policy meeting on Feb. 17.
Central bank board members this month affirmed their forecasts for Japan’s economy to keep expanding while consumer prices will fall through the year ending March 2012, a third- year of declines.
Stocks Bounce
Bond futures snapped a four-day gain yesterday as Asian stocks extended a worldwide equity rally, limiting demand for the relative safety of government debt.
“Easing concerns over Greece support demand for riskier securities,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “The recent trend of buying flight-to-safety assets will weaken.”
The Nikkei 225 Stock Average advanced 1.3 percent yesterday. Benchmark 10-year yields had a correlation of 0.6 with the Nikkei 225 this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
European leaders promised “determined” action to staunch the worst crisis in the euro’s 11-year history. The agreement reached on Feb. 11 called for closer monitoring of the Greek economy and stopped short of offering concrete steps to help Greece handle a debt load exceeding annual economic output.
“It’s a political message that we wanted to send out,” European Union President Herman Van Rompuy told reporters in Brussels on Feb. 11. “The Greek government will take the responsibility for cleaning up its public finances.”
Asia Currencies Have Best Week in a Month on Growth, Greece Aid
Feb. 13 (Bloomberg) -- Asian currencies completed the best week in more than a month as a pledge by European leaders to defend Greece boosted investor confidence in emerging-market assets and data added to evidence of a regional recovery.
The Bloomberg-JPMorgan Asia Dollar Index climbed this week for the first time since the period ended Jan. 8, while the MSCI Asia-Pacific Index of shares rallied 1.5 percent. The European Union promised “determined and coordinated action” for Greece, without providing specifics before they meet again on Feb. 15. Reports showed Taiwan exports rose by the most in more than 30 years and Malaysia’s factory output posted the biggest increase in 22 months.
“On the surface, what they want to do is to calm the markets,” said Roland Avante, treasurer at Sterling Bank of Asia in Manila. “The statement should start sparing emerging markets from the effects of the sovereign crisis happening in Europe.”
South Korea’s won led gains among Asian currencies, strengthening 1.5 percent to 1,151.40 per dollar at the 3 p.m. close in Seoul, and Indonesia’s rupiah appreciated 1.1 percent to 9,340, according to data compiled by Bloomberg. Malaysia’s ringgit rose 0.8 percent to 3.4185 and Singapore’s dollar advanced 0.8 percent to S$1.4120.
The European Union pledged to defend Greece from speculative attack and was looking at establishing a lending facility for the country following a summit in Brussels on Feb. 11. Officials said they “fully” support Greece’s efforts to rein in its budget deficit, the largest in the 27-member grouping.
Euro Loss
The statements failed to convince some investors, sending the euro lower against the dollar and yen, while funds pulled money out of equity funds in developing nations.
The euro declined to $1.3632 in New York yesterday. The currency dropped to $1.3596 on Feb. 11, the lowest level since Feb. 5.
Outflows from emerging-market equity funds reached $2.9 billion in the week to Feb. 10, the highest amount since the period ended July 9, 2008, according to data from Cambridge, Massachusetts-based research firm EPFR Global.
Economic reports in the week helped bolster demand for Asian currencies ahead of Lunar New Year holidays next week.
“Export demand in Asia is holding up very well and regional currencies should continue to strengthen,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur.
Export Data
Taiwan’s overseas sales climbed 75.8 percent in January from a year earlier, beating the median estimate in a Bloomberg News survey for a 62.9 percent increase. Shipments out of China gained 21 percent, a second monthly rise, and Philippine exports advanced 23.6 percent. Malaysia’s industrial production was up 8.9 percent in December.
India’s rupee strengthened 0.5 percent in the week to 46.5 per dollar. A government report yesterday showed output at factories, utilities and mines increased 16.8 percent in December from a year earlier, the most since at least 1994. It beat analysts’ expectations of a 12.4 percent increase.
China’s yuan completed its biggest weekly decline in more than one year on speculation importers bought dollar before the weeklong Chinese New Year holidays.
The currency depreciated 0.09 percent in the week to 6.8330 per dollar, the biggest loss since the five days ended Jan. 9, 2009, according to China Foreign Exchange Trade System.
“The wider moves are probably due to the pre-holiday demand for the dollar,” said Chen Yue, a foreign exchange trader at China Merchants Bank China Merchants Bank Co., the nation’s fifth-largest lender by market value. “It’s hard to say if flexibility will increase.”
The central bank yesterday said it will raise banks’ reserve requirement ratio by 50 basis points effective Feb. 25, according to a statement on its Web site. The markets will close next week for the holiday.
Dong Devaluation
Vietnam’s dong weakened to a record low for a second day after the central bank on Feb. 11 devalued the currency to reduce the trade deficit and the gap with black market rates.
The dong fell as much as 2 percent to 19,100 per dollar, trading at the upper limit of the 3 percent band from the daily fixing, according to data compiled by Bloomberg. It dropped 2.3 percent for the week, the biggest loss since the period ended Nov. 27, when the central bank last devalued the currency.
Vietnam, China and Taiwan are closed all next week for the New Year holidays, while markets in Singapore, Hong Kong and Malaysia are shut Feb. 15-16. South Korea closes Monday and reopens on Feb. 16.
Elsewhere in Asian trading this week, the Philippine peso appreciated 0.6 percent to 46.245 versus the greenback and Taiwan’s dollar advanced 0.3 percent to NT$32.10.
--Judy Chen, Karl Lester M. Yap. With assistance from Lilian Karunungan and David Yong in Singapore. Editor: Simon Harvey, Shanthy Nambiar
The Bloomberg-JPMorgan Asia Dollar Index climbed this week for the first time since the period ended Jan. 8, while the MSCI Asia-Pacific Index of shares rallied 1.5 percent. The European Union promised “determined and coordinated action” for Greece, without providing specifics before they meet again on Feb. 15. Reports showed Taiwan exports rose by the most in more than 30 years and Malaysia’s factory output posted the biggest increase in 22 months.
“On the surface, what they want to do is to calm the markets,” said Roland Avante, treasurer at Sterling Bank of Asia in Manila. “The statement should start sparing emerging markets from the effects of the sovereign crisis happening in Europe.”
South Korea’s won led gains among Asian currencies, strengthening 1.5 percent to 1,151.40 per dollar at the 3 p.m. close in Seoul, and Indonesia’s rupiah appreciated 1.1 percent to 9,340, according to data compiled by Bloomberg. Malaysia’s ringgit rose 0.8 percent to 3.4185 and Singapore’s dollar advanced 0.8 percent to S$1.4120.
The European Union pledged to defend Greece from speculative attack and was looking at establishing a lending facility for the country following a summit in Brussels on Feb. 11. Officials said they “fully” support Greece’s efforts to rein in its budget deficit, the largest in the 27-member grouping.
Euro Loss
The statements failed to convince some investors, sending the euro lower against the dollar and yen, while funds pulled money out of equity funds in developing nations.
The euro declined to $1.3632 in New York yesterday. The currency dropped to $1.3596 on Feb. 11, the lowest level since Feb. 5.
Outflows from emerging-market equity funds reached $2.9 billion in the week to Feb. 10, the highest amount since the period ended July 9, 2008, according to data from Cambridge, Massachusetts-based research firm EPFR Global.
Economic reports in the week helped bolster demand for Asian currencies ahead of Lunar New Year holidays next week.
“Export demand in Asia is holding up very well and regional currencies should continue to strengthen,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur.
Export Data
Taiwan’s overseas sales climbed 75.8 percent in January from a year earlier, beating the median estimate in a Bloomberg News survey for a 62.9 percent increase. Shipments out of China gained 21 percent, a second monthly rise, and Philippine exports advanced 23.6 percent. Malaysia’s industrial production was up 8.9 percent in December.
India’s rupee strengthened 0.5 percent in the week to 46.5 per dollar. A government report yesterday showed output at factories, utilities and mines increased 16.8 percent in December from a year earlier, the most since at least 1994. It beat analysts’ expectations of a 12.4 percent increase.
China’s yuan completed its biggest weekly decline in more than one year on speculation importers bought dollar before the weeklong Chinese New Year holidays.
The currency depreciated 0.09 percent in the week to 6.8330 per dollar, the biggest loss since the five days ended Jan. 9, 2009, according to China Foreign Exchange Trade System.
“The wider moves are probably due to the pre-holiday demand for the dollar,” said Chen Yue, a foreign exchange trader at China Merchants Bank China Merchants Bank Co., the nation’s fifth-largest lender by market value. “It’s hard to say if flexibility will increase.”
The central bank yesterday said it will raise banks’ reserve requirement ratio by 50 basis points effective Feb. 25, according to a statement on its Web site. The markets will close next week for the holiday.
Dong Devaluation
Vietnam’s dong weakened to a record low for a second day after the central bank on Feb. 11 devalued the currency to reduce the trade deficit and the gap with black market rates.
The dong fell as much as 2 percent to 19,100 per dollar, trading at the upper limit of the 3 percent band from the daily fixing, according to data compiled by Bloomberg. It dropped 2.3 percent for the week, the biggest loss since the period ended Nov. 27, when the central bank last devalued the currency.
Vietnam, China and Taiwan are closed all next week for the New Year holidays, while markets in Singapore, Hong Kong and Malaysia are shut Feb. 15-16. South Korea closes Monday and reopens on Feb. 16.
Elsewhere in Asian trading this week, the Philippine peso appreciated 0.6 percent to 46.245 versus the greenback and Taiwan’s dollar advanced 0.3 percent to NT$32.10.
--Judy Chen, Karl Lester M. Yap. With assistance from Lilian Karunungan and David Yong in Singapore. Editor: Simon Harvey, Shanthy Nambiar
Thursday, February 11, 2010
Taliban strikes target police in north Pakistan
Pakistan Taliban militants on Thursday launched an audacious bomb and armed attack on two police compounds in the northern city of Bannu in North West Frontier Province, prompting fresh warnings that Islamic militants have the capability to strike at supposedly well protected targets.
A doctor at Bannu’s main hospital told Reuters new agency that 15 people had been killed and about 20 wounded people had been brought in. ”Seven police are among the dead,” said a Bannu police officer. The town’s police chief was among the wounded, police added.
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In depth: Pakistan - Nov-20
Suicide bomb attack kills 17 in Pakistan - Feb-10
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US soldiers killed in Pakistan blast - Feb-03
Pakistan confident of insurgent death - Feb-02
Interactive graphic: Taliban attacks in Pakistan - Feb-05
A senior Pakistani intelligence officer said the attack appeared to be in retaliation for last month’s reported killing of Taliban militant leader Hakimullah Mehsud. “The Taliban are determined to seek revenge from innocent people for the death of their leader,” he said.
Thursday’s attacks came just a day after a suicide car bomber attacked a group of paramilitary soldiers in the northwestern Khyber region just outside Peshawar on Wednesday, killing at least 19 people including 11 policeman.
Thursday’s attack came on the day when James Jones, US national security adviser, met President Asif Ali Zardari. Though no details of the meeting were publicly given, a senior Pakistan foreign ministry official said part of the discussion involved the matter of Pakistan’s potential support to bridge differences between Taliban militants in Afghanistan and the regime of Afghan president Hamid Karzai backed by the US and its NATO allies.
“We are obviously well placed to facilitate a dialogue which eventually helps bring an end to this conflict” he said.
However, western diplomats in Islamabad warned, the Taliban operating on Pakistani soil were likely to become increasingly ferocious in carrying out their attacks after a year of increasingly bloody confrontation with the country’s military. In recent weeks, some western officials have privately criticised Pakistan’s security forces for not taking their fighter deeper inside the tribal region beyond areas which were targeted till the end of last year.
The Pakistani Taliban, allies of the Afghan Taliban, have lost much ground in military offensives over the past year but they have responded with numerous bomb attacks, many of them aimed at the security forces.
There has been speculation over the Taliban leader’s fate since January 14 when security officials said a missile-firing US drone had targeted him. A drone was believed to have attacked him again three days later, officials said.
The government had ”credible information” that Mehsud was dead, Interior Minister Rehman Malik said on Wednesday.
A Taliban spokesman has denied that Mehsud was dead. Militants also denied for weeks the death in August of their previous leader, who was killed by a US drone.
A doctor at Bannu’s main hospital told Reuters new agency that 15 people had been killed and about 20 wounded people had been brought in. ”Seven police are among the dead,” said a Bannu police officer. The town’s police chief was among the wounded, police added.
EDITOR’S CHOICE
In depth: Pakistan - Nov-20
Suicide bomb attack kills 17 in Pakistan - Feb-10
Twin blasts kill at least 25 in Karachi - Feb-05
US soldiers killed in Pakistan blast - Feb-03
Pakistan confident of insurgent death - Feb-02
Interactive graphic: Taliban attacks in Pakistan - Feb-05
A senior Pakistani intelligence officer said the attack appeared to be in retaliation for last month’s reported killing of Taliban militant leader Hakimullah Mehsud. “The Taliban are determined to seek revenge from innocent people for the death of their leader,” he said.
Thursday’s attacks came just a day after a suicide car bomber attacked a group of paramilitary soldiers in the northwestern Khyber region just outside Peshawar on Wednesday, killing at least 19 people including 11 policeman.
Thursday’s attack came on the day when James Jones, US national security adviser, met President Asif Ali Zardari. Though no details of the meeting were publicly given, a senior Pakistan foreign ministry official said part of the discussion involved the matter of Pakistan’s potential support to bridge differences between Taliban militants in Afghanistan and the regime of Afghan president Hamid Karzai backed by the US and its NATO allies.
“We are obviously well placed to facilitate a dialogue which eventually helps bring an end to this conflict” he said.
However, western diplomats in Islamabad warned, the Taliban operating on Pakistani soil were likely to become increasingly ferocious in carrying out their attacks after a year of increasingly bloody confrontation with the country’s military. In recent weeks, some western officials have privately criticised Pakistan’s security forces for not taking their fighter deeper inside the tribal region beyond areas which were targeted till the end of last year.
The Pakistani Taliban, allies of the Afghan Taliban, have lost much ground in military offensives over the past year but they have responded with numerous bomb attacks, many of them aimed at the security forces.
There has been speculation over the Taliban leader’s fate since January 14 when security officials said a missile-firing US drone had targeted him. A drone was believed to have attacked him again three days later, officials said.
The government had ”credible information” that Mehsud was dead, Interior Minister Rehman Malik said on Wednesday.
A Taliban spokesman has denied that Mehsud was dead. Militants also denied for weeks the death in August of their previous leader, who was killed by a US drone.
India’s Visa Rules ‘Out of Line’ for Companies Seeking Expats
Feb. 12 (Bloomberg) -- T.V. Mohandas Pai says he wants to hire more expatriates for Infosys Technologies Ltd., India’s second-largest software exporter, as the global economic recovery boosts sales. Stricter visa rules prompted by unskilled Chinese workers are holding him back.
Infosys has about 20 foreign workers and needs “many more” to help it expand abroad, said Pai, who runs the Bangalore-based company’s human resources department. Companies in Asia’s third-biggest economy are using annual growth averaging 8.7 percent in fiscal years 2006-2009 to reverse a decades-long “brain drain” to the U.S. and Europe.
The government toughened regulations for foreign workers last year after discovering that about 40,000 Chinese building power plants used business visas instead of employment visas, skirting taxes and taking jobs from locals. The crackdown restricted employment visas to skilled people in senior jobs and limited foreigners to 1 percent of a project’s workforce.
“We need to get expats to help us understand the complexity of businesses,” Pai said. “But instead of helping, the government has tightened the visa rules. The problem in India is policymakers are totally out of line with reality.”
Building Power Plants
India is attracting foreign workers facing jobless rates of 9.7 percent in the U.S. and 10 percent in the 16-nation euro region. India doesn’t regularly release unemployment data.
Little attention was paid to visas in the past decade as the government sought investments from abroad. The number of registered foreign nationals more than doubled to 351,999 in 2007 from 137,474 the year before, according to the latest data from the Ministry of Home Affairs Web site.
Three power plants being built by billionaire Anil Ambani’sReliance Power Ltd. placed orders with Shanghai Electric Group Co. Lanco Infratech Ltd. awarded a contract for its 1,015- megawatt plant to Deyang, China-based Dongfang Electric Corp.
“It has come to the notice of the government that a large number of foreign nationals, including Chinese, were coming for execution of projects/contracts in India on Business Visas instead of the Employment Visas,” Harish Rawat, junior minister for labor, said Dec. 16 in a written response to lawmakers.
Foreign workers without employment visas aren’t paying taxes, said Amitabh Singh, a partner at Ernst & Young Pvt. in New Delhi.
7.2 Percent Growth
The government forecasts economic growth will reach 7.2 percent in the year ending March. India recorded the highest average pay increase in the Asia-Pacific region in 2009 at 6.3 percent, Lincolnshire, Illinois-based Hewitt Associates Inc. said in October.
“It has become a hot destination,” said Jeffrey Joerres, chief executive officer of staffing company Manpower Inc. “India and China are on the front end of the recovery.”
Infosys is benefiting from a strong rebound in the financial services industry, Chief Executive Officer S. Gopalakrishnan said Jan. 28. The company on Jan. 12 reported profit that beat analysts’ estimates and raised its annual revenue forecast.
Sales may rise as much as 2 percent to $4.76 billion in the year ending March 31, compared with an earlier prediction of a 1.3 percent drop.
‘Hard Work, Sacrifice’
Matthew Barney, 40, left Wisconsin a year ago and moved his family near Bangalore to become head of leadership development for Infosys.
“Indian culture today is similar to the original cultural values that drove the U.S.,” said Barney, whose wife is Indian. “Both value hard work and sacrifice today for the next generation to have a better standard of living.”
India’s travel and tourism economy is expected to grow 7.7 percent a year in real terms from 2010 to 2019, according to a 2009 report by the World Travel & Tourism Council. Gurgaon-based Air Works India Engineering Pvt. hired American Todd Hattaway as president of airline maintenance last year.
“Aviation is developing so fast and to be a major part of that will definitely enhance my career,” Hattaway said.
Deepak Gupta, country head and managing director of executive-search firm Korn/Ferry International, said the new rules may dim India’s attractiveness to foreign workers.
“The visa system has to be made more friendly,” Gupta said. “It’s not going to help make India a global employment destination.”
Favoring Indians
The government said Nov. 25 that employment visas would only be granted to professionals including technical experts, senior executives and managers. The visas “will not be granted for jobs for which a large number of qualified Indians are available,” M. Ramachandran, a Home Affairs junior minister, said in a written statement to parliament.
The Ministry of Labour and Employment said foreign nationals cannot total more than 1 percent of a workforce, with between five and 20 allowed on a project.
The Chinese government received numerous complaints from companies and said, “We hope India will be considerate of the circumstances of Chinese firms there,” state-run China Daily reported Nov. 3.
In December, India amended the rules to allow up to 40 foreigners on power and steel projects through June. Companies seeking more overseas workers need labor ministry approval.
Pai said limiting foreigners will do more harm than good.
“We need substantial relaxation in work permit policies,” he said. “India needs to get many, many more expats.”
Infosys has about 20 foreign workers and needs “many more” to help it expand abroad, said Pai, who runs the Bangalore-based company’s human resources department. Companies in Asia’s third-biggest economy are using annual growth averaging 8.7 percent in fiscal years 2006-2009 to reverse a decades-long “brain drain” to the U.S. and Europe.
The government toughened regulations for foreign workers last year after discovering that about 40,000 Chinese building power plants used business visas instead of employment visas, skirting taxes and taking jobs from locals. The crackdown restricted employment visas to skilled people in senior jobs and limited foreigners to 1 percent of a project’s workforce.
“We need to get expats to help us understand the complexity of businesses,” Pai said. “But instead of helping, the government has tightened the visa rules. The problem in India is policymakers are totally out of line with reality.”
Building Power Plants
India is attracting foreign workers facing jobless rates of 9.7 percent in the U.S. and 10 percent in the 16-nation euro region. India doesn’t regularly release unemployment data.
Little attention was paid to visas in the past decade as the government sought investments from abroad. The number of registered foreign nationals more than doubled to 351,999 in 2007 from 137,474 the year before, according to the latest data from the Ministry of Home Affairs Web site.
Three power plants being built by billionaire Anil Ambani’sReliance Power Ltd. placed orders with Shanghai Electric Group Co. Lanco Infratech Ltd. awarded a contract for its 1,015- megawatt plant to Deyang, China-based Dongfang Electric Corp.
“It has come to the notice of the government that a large number of foreign nationals, including Chinese, were coming for execution of projects/contracts in India on Business Visas instead of the Employment Visas,” Harish Rawat, junior minister for labor, said Dec. 16 in a written response to lawmakers.
Foreign workers without employment visas aren’t paying taxes, said Amitabh Singh, a partner at Ernst & Young Pvt. in New Delhi.
7.2 Percent Growth
The government forecasts economic growth will reach 7.2 percent in the year ending March. India recorded the highest average pay increase in the Asia-Pacific region in 2009 at 6.3 percent, Lincolnshire, Illinois-based Hewitt Associates Inc. said in October.
“It has become a hot destination,” said Jeffrey Joerres, chief executive officer of staffing company Manpower Inc. “India and China are on the front end of the recovery.”
Infosys is benefiting from a strong rebound in the financial services industry, Chief Executive Officer S. Gopalakrishnan said Jan. 28. The company on Jan. 12 reported profit that beat analysts’ estimates and raised its annual revenue forecast.
Sales may rise as much as 2 percent to $4.76 billion in the year ending March 31, compared with an earlier prediction of a 1.3 percent drop.
‘Hard Work, Sacrifice’
Matthew Barney, 40, left Wisconsin a year ago and moved his family near Bangalore to become head of leadership development for Infosys.
“Indian culture today is similar to the original cultural values that drove the U.S.,” said Barney, whose wife is Indian. “Both value hard work and sacrifice today for the next generation to have a better standard of living.”
India’s travel and tourism economy is expected to grow 7.7 percent a year in real terms from 2010 to 2019, according to a 2009 report by the World Travel & Tourism Council. Gurgaon-based Air Works India Engineering Pvt. hired American Todd Hattaway as president of airline maintenance last year.
“Aviation is developing so fast and to be a major part of that will definitely enhance my career,” Hattaway said.
Deepak Gupta, country head and managing director of executive-search firm Korn/Ferry International, said the new rules may dim India’s attractiveness to foreign workers.
“The visa system has to be made more friendly,” Gupta said. “It’s not going to help make India a global employment destination.”
Favoring Indians
The government said Nov. 25 that employment visas would only be granted to professionals including technical experts, senior executives and managers. The visas “will not be granted for jobs for which a large number of qualified Indians are available,” M. Ramachandran, a Home Affairs junior minister, said in a written statement to parliament.
The Ministry of Labour and Employment said foreign nationals cannot total more than 1 percent of a workforce, with between five and 20 allowed on a project.
The Chinese government received numerous complaints from companies and said, “We hope India will be considerate of the circumstances of Chinese firms there,” state-run China Daily reported Nov. 3.
In December, India amended the rules to allow up to 40 foreigners on power and steel projects through June. Companies seeking more overseas workers need labor ministry approval.
Pai said limiting foreigners will do more harm than good.
“We need substantial relaxation in work permit policies,” he said. “India needs to get many, many more expats.”
Poll Finds Edge for Obama Over G.O.P. Among the Public
WASHINGTON — At a time of deepening political disaffection and intensified distress about the economy, President Obama enjoys an edge over Republicans in the battle for public support, according to the latest New York Times/CBS News poll.
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While the president is showing signs of vulnerability on his handling of the economy — a majority of respondents say he has yet to offer a clear plan for creating jobs — Americans blame former President George W. Bush, Wall Street and Congress much more than they do Mr. Obama for the nation’s economic problems and the budget deficit, the poll found.
They credit Mr. Obama more than Republicans with making an effort at bipartisanship, and they back the White House’s policies on a variety of disputed issues, including allowing gay men and lesbians to serve openly in the military and repealing the Bush tax cuts for the wealthy.
The poll suggests that both parties face a toxic environment as they prepare for the elections in November. Public disapproval of Congress is at a historic high, and huge numbers of Americans think Congress is beholden to special interests. Fewer than 1 in 10 Americans say members of Congress deserve re-election.
As the party in power, Democrats face a particular risk from any wave of voter discontent; unfavorable views of the Democratic Party are as high as they have been since the Republican takeover of Congress in 1994, though Republicans continue to register an even worse showing. The percentage of Americans who approve of Mr. Obama’s job performance, 46 percent, is as low as it has been since he took office.
Still, the poll suggests that Mr. Obama and his party have an opportunity to deflect the anger and anxiety if they can frame the election not as a referendum on the president and his party, but as a choice between them and a Republican approach that yielded results under Mr. Bush that much of the nation still blames for the country’s woes. That is what the White House has been trying to do since the beginning of the year.
For all the erosion in support for Mr. Obama, Americans say he better understands their needs and problems and has made more of an effort to be bipartisan than Congressional Republicans, the poll found.
“It feels like an attempt to sabotage the majority and to regain control of power rather than working on a compromise,” John Smith, a Republican from Greenville, S.C., said of his party after participating in the poll.
Americans say that Mr. Obama is far less likely to favor special interests over the American people than Congress. Mr. Obama and his party continue to have an edge over Republicans on which party would do better in dealing with health care and job creation. But Republicans have gained an edge on handling of the economy.
The public has lost much of its enthusiasm for a health care overhaul, and how Mr. Obama has managed it. He gets low marks for his handling of the deficit and the economy. And the fact that 56 percent of respondents of think that Mr. Obama does not have a plan to create jobs is a distressing bit of news for a White House that in recent weeks had made an intensive effort to present Mr. Obama as concerned with the economy.
But the public backs other elements of Mr. Obama’s agenda. By a two-to-one ratio, Americans support an end to tax cuts for the wealthy, and Americans favor allowing gay men and lesbians to serve openly in the military.
The Tea Party movement, which has grown out of the strain of discontent, so far commands relatively little public support; 18 percent of respondents said they considered themselves supporters of the movement, while 55 percent said they had heard little or nothing about it.
The level of dissatisfaction with both political parties — and the fact that 56 percent of Americans in the poll want a smaller government — suggests that the Tea Party movement has an opportunity to draw more support. The poll found that 51 percent of Americans now view the Democratic Party unfavorably, nearly matching the highest in the history of the Times/CBS News poll. At the same time, 57 percent have an unfavorable view of the Republican Party.
The nationwide telephone poll of 1,084 adults was taken from Feb. 5 through 10 and has a margin of sampling error of plus or minus three percentage points for all adults.
The poll found substantial pessimism: 62 percent of respondents said the country was heading in the wrong direction. And 70 percent of those polled said they thought it was going to take two years or longer for the effects of the recession that technically ended last year to fade away.
Three-quarters of the public disapproves of Congress, matching the highest level measured by the New York Times/CBS News Poll since it began asking the question in 1977. Four out of five voters thought Congress was more interested in serving special interests than voters.
“I think Congress and the Senate need to be completely revamped,” said Michael Wish, 30, a Democrat from Medina, Ohio. He added, “The old way of doing things is no longer working.”
Americans appear hungry for an end to partisan infighting in Washington, so much so that half of respondents said the Senate should change the filibuster rules that Republicans have used to block Mr. Obama’s agenda. Almost 60 percent said both Mr. Obama and Congressional Republicans should compromise in the interest of consensus.
But Mr. Obama is seen as making more of an effort to do that: 62 percent said Mr. Obama was trying to work with Congressional Republicans, while the same percentage said that Republicans were not trying to work with Mr. Obama.
“Obama is certainly trying,” said Bonnie Ewasiuk, 60, of Woodbridge, Va. “I’m a Republican so I don’t like to go against the party, but Obama has reached out and had meetings and I don’t think the Republicans are going to be responsive. All you see from them is negativity.”
More than half of respondents said that Mr. Obama had not spent enough time trying to fix the economy, and nearly half said he had spent too much time trying to pass a health care bill.
He scored better on other measures, particularly in comparison with Republicans; 60 percent said the president understood their problems, compared with 42 percent who said the same thing about Congressional Democrats and 35 percent for Congressional Republicans.
Skip to next paragraph
Multimedia
Document Reader: Complete Poll ResultsInteractive
Document Reader: Complete Poll Results
Backstory: Adam Nagourney on the Latest Poll Numbers
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How the Poll Was Conducted (February 12, 2010)
Blog
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The Caucus
The latest on President Obama, his administration and other news from Washington and around the nation. Join the discussion.
* More Politics News
Readers' Comments
Share your thoughts.
* Post a Comment »
* Read All Comments (84) »
While the president is showing signs of vulnerability on his handling of the economy — a majority of respondents say he has yet to offer a clear plan for creating jobs — Americans blame former President George W. Bush, Wall Street and Congress much more than they do Mr. Obama for the nation’s economic problems and the budget deficit, the poll found.
They credit Mr. Obama more than Republicans with making an effort at bipartisanship, and they back the White House’s policies on a variety of disputed issues, including allowing gay men and lesbians to serve openly in the military and repealing the Bush tax cuts for the wealthy.
The poll suggests that both parties face a toxic environment as they prepare for the elections in November. Public disapproval of Congress is at a historic high, and huge numbers of Americans think Congress is beholden to special interests. Fewer than 1 in 10 Americans say members of Congress deserve re-election.
As the party in power, Democrats face a particular risk from any wave of voter discontent; unfavorable views of the Democratic Party are as high as they have been since the Republican takeover of Congress in 1994, though Republicans continue to register an even worse showing. The percentage of Americans who approve of Mr. Obama’s job performance, 46 percent, is as low as it has been since he took office.
Still, the poll suggests that Mr. Obama and his party have an opportunity to deflect the anger and anxiety if they can frame the election not as a referendum on the president and his party, but as a choice between them and a Republican approach that yielded results under Mr. Bush that much of the nation still blames for the country’s woes. That is what the White House has been trying to do since the beginning of the year.
For all the erosion in support for Mr. Obama, Americans say he better understands their needs and problems and has made more of an effort to be bipartisan than Congressional Republicans, the poll found.
“It feels like an attempt to sabotage the majority and to regain control of power rather than working on a compromise,” John Smith, a Republican from Greenville, S.C., said of his party after participating in the poll.
Americans say that Mr. Obama is far less likely to favor special interests over the American people than Congress. Mr. Obama and his party continue to have an edge over Republicans on which party would do better in dealing with health care and job creation. But Republicans have gained an edge on handling of the economy.
The public has lost much of its enthusiasm for a health care overhaul, and how Mr. Obama has managed it. He gets low marks for his handling of the deficit and the economy. And the fact that 56 percent of respondents of think that Mr. Obama does not have a plan to create jobs is a distressing bit of news for a White House that in recent weeks had made an intensive effort to present Mr. Obama as concerned with the economy.
But the public backs other elements of Mr. Obama’s agenda. By a two-to-one ratio, Americans support an end to tax cuts for the wealthy, and Americans favor allowing gay men and lesbians to serve openly in the military.
The Tea Party movement, which has grown out of the strain of discontent, so far commands relatively little public support; 18 percent of respondents said they considered themselves supporters of the movement, while 55 percent said they had heard little or nothing about it.
The level of dissatisfaction with both political parties — and the fact that 56 percent of Americans in the poll want a smaller government — suggests that the Tea Party movement has an opportunity to draw more support. The poll found that 51 percent of Americans now view the Democratic Party unfavorably, nearly matching the highest in the history of the Times/CBS News poll. At the same time, 57 percent have an unfavorable view of the Republican Party.
The nationwide telephone poll of 1,084 adults was taken from Feb. 5 through 10 and has a margin of sampling error of plus or minus three percentage points for all adults.
The poll found substantial pessimism: 62 percent of respondents said the country was heading in the wrong direction. And 70 percent of those polled said they thought it was going to take two years or longer for the effects of the recession that technically ended last year to fade away.
Three-quarters of the public disapproves of Congress, matching the highest level measured by the New York Times/CBS News Poll since it began asking the question in 1977. Four out of five voters thought Congress was more interested in serving special interests than voters.
“I think Congress and the Senate need to be completely revamped,” said Michael Wish, 30, a Democrat from Medina, Ohio. He added, “The old way of doing things is no longer working.”
Americans appear hungry for an end to partisan infighting in Washington, so much so that half of respondents said the Senate should change the filibuster rules that Republicans have used to block Mr. Obama’s agenda. Almost 60 percent said both Mr. Obama and Congressional Republicans should compromise in the interest of consensus.
But Mr. Obama is seen as making more of an effort to do that: 62 percent said Mr. Obama was trying to work with Congressional Republicans, while the same percentage said that Republicans were not trying to work with Mr. Obama.
“Obama is certainly trying,” said Bonnie Ewasiuk, 60, of Woodbridge, Va. “I’m a Republican so I don’t like to go against the party, but Obama has reached out and had meetings and I don’t think the Republicans are going to be responsive. All you see from them is negativity.”
More than half of respondents said that Mr. Obama had not spent enough time trying to fix the economy, and nearly half said he had spent too much time trying to pass a health care bill.
He scored better on other measures, particularly in comparison with Republicans; 60 percent said the president understood their problems, compared with 42 percent who said the same thing about Congressional Democrats and 35 percent for Congressional Republicans.
India to launch trade talks with Israel
India is to launch negotiations to strike a bilateral trade agreement with Israel in what is one of the most tangible symbols of the fast-warming relations between the two countries.
Rahul Khullar, India’s commerce secretary, said that India was prioritising a deal with Israel from among a list of about 20 countries lined up seeking improved bilateral trade ties with one of the world’s fastest growing large economies.
EDITOR’S CHOICE
New Delhi offers to suspend mine deals - Feb-09
India fine-tunes fight against Maoists - Feb-09
Call for ‘green revolution’ in India - Feb-09
In depth: India - Jul-20
“I’ve just had authorisation to open up negotiations with Israel and New Zealand,” Mr Khullar told the Financial Times.
India, which has traditionally taken a leadership position in the Non-Aligned Movement and held deep sympathies with the Palestinian cause, only opened formal diplomatic relations with Israel in 1992.
Bilateral trade between India and Israel has risen quickly to an estimated $4.1bn in 2008, excluding a growing defence trade. A more formal agreement would give India’s manufacturing industries greater access to Israel’s high technology sector, while Israel would benefit from better trade and investment prospects in India’s large, fast growing domestic market of 1.2bn people.
An Israeli official said an agreement had been “under discussion for quite some time” but said that Tel Aviv was yet to receive official notification of New Delhi's intentions to advance negotiations. He predicted that bilateral trade could rise to $12bn within five years once a pact was in place. Among other areas, Israel has agricultural technology that would assist Indian farmers in boosting their productivity and has strong ties with India's diamond industry.
Trade negotiations with India are a big step for Israel, which has pushed for high profile official recognition from India, the world’s largest democracy. Israel already has FTAs with the US, European Union, Canada and Jordan.
India, Asia’s third largest economy, has signed two similar agreements, with the Association of South-East Asian Nations regional grouping and South Korea. New Delhi is currently negotiating trade deals with the EU and Japan. Indian officials have surprised trade negotiators by putting ambitious timetables to achieve notoriously complicated and prolonged arrangements.
“Japan and Europe are next,” said Mr Khullar. “My guess is Europe will come first and Japan a little later. Both are clear prospects for this year. [Negotiations with] Canada will kick off by summer”.
New Zealand confirmed that talks with India will begin shortly. Coal is the dominant product in the two country’s NZ$1bn annual trade.
The European Commission has urged New Delhi to get into the details of “a give and take process”, saying the political will to strike a deal after seven rounds of talks was now in place. Negotiations were dragging over disagreements surrounding intellectual property.
Mr Khullar, however, expressed frustration that New Delhi did not have the resources to engage in multiple negotiations with trading partners, saying that the staff headcount in the commerce department had been “frozen” for 30 years.
“We are latecomers to this bilateral type of race,” he said. “We just don’t have the resources to commit - the manpower resources.”
The decision to proceed with more bilateral trade agreements comes in the absence of progress towards concluding the World Trade Organisation’s Doha round of talks and fears of rising protectionism in the US as the Obama administration pursues job creation.
It also comes as New Delhi feels increasingly confident about the strength of the Indian economy when markets in the west remain depressed. Official figures estimate economic growth of 7.2 per cent this year.
Rahul Khullar, India’s commerce secretary, said that India was prioritising a deal with Israel from among a list of about 20 countries lined up seeking improved bilateral trade ties with one of the world’s fastest growing large economies.
EDITOR’S CHOICE
New Delhi offers to suspend mine deals - Feb-09
India fine-tunes fight against Maoists - Feb-09
Call for ‘green revolution’ in India - Feb-09
In depth: India - Jul-20
“I’ve just had authorisation to open up negotiations with Israel and New Zealand,” Mr Khullar told the Financial Times.
India, which has traditionally taken a leadership position in the Non-Aligned Movement and held deep sympathies with the Palestinian cause, only opened formal diplomatic relations with Israel in 1992.
Bilateral trade between India and Israel has risen quickly to an estimated $4.1bn in 2008, excluding a growing defence trade. A more formal agreement would give India’s manufacturing industries greater access to Israel’s high technology sector, while Israel would benefit from better trade and investment prospects in India’s large, fast growing domestic market of 1.2bn people.
An Israeli official said an agreement had been “under discussion for quite some time” but said that Tel Aviv was yet to receive official notification of New Delhi's intentions to advance negotiations. He predicted that bilateral trade could rise to $12bn within five years once a pact was in place. Among other areas, Israel has agricultural technology that would assist Indian farmers in boosting their productivity and has strong ties with India's diamond industry.
Trade negotiations with India are a big step for Israel, which has pushed for high profile official recognition from India, the world’s largest democracy. Israel already has FTAs with the US, European Union, Canada and Jordan.
India, Asia’s third largest economy, has signed two similar agreements, with the Association of South-East Asian Nations regional grouping and South Korea. New Delhi is currently negotiating trade deals with the EU and Japan. Indian officials have surprised trade negotiators by putting ambitious timetables to achieve notoriously complicated and prolonged arrangements.
“Japan and Europe are next,” said Mr Khullar. “My guess is Europe will come first and Japan a little later. Both are clear prospects for this year. [Negotiations with] Canada will kick off by summer”.
New Zealand confirmed that talks with India will begin shortly. Coal is the dominant product in the two country’s NZ$1bn annual trade.
The European Commission has urged New Delhi to get into the details of “a give and take process”, saying the political will to strike a deal after seven rounds of talks was now in place. Negotiations were dragging over disagreements surrounding intellectual property.
Mr Khullar, however, expressed frustration that New Delhi did not have the resources to engage in multiple negotiations with trading partners, saying that the staff headcount in the commerce department had been “frozen” for 30 years.
“We are latecomers to this bilateral type of race,” he said. “We just don’t have the resources to commit - the manpower resources.”
The decision to proceed with more bilateral trade agreements comes in the absence of progress towards concluding the World Trade Organisation’s Doha round of talks and fears of rising protectionism in the US as the Obama administration pursues job creation.
It also comes as New Delhi feels increasingly confident about the strength of the Indian economy when markets in the west remain depressed. Official figures estimate economic growth of 7.2 per cent this year.
Wednesday, February 10, 2010
Stocks, Commodities Climb on Jobs, Greece, China Inflation
Feb. 11 (Bloomberg) -- Asian stocks advanced for a third day, while commodities and higher-yielding currencies rallied, as Australian unemployment fell, European leaders meet on an aid package for Greece and Chinese inflation unexpectedly slowed.
More than three shares rose for each that fell today on the MSCI Asia Pacific excluding Japan Index which was up 2.8 percent this week by 11:18 a.m. Singapore time. The Australian dollar strengthened against all 16 of the most-traded currencies. Copper advanced as much as 3.7 percent and oil 0.5 percent. Standard & Poor’s 500 Index futures were up 0.5 percent.
Investor sentiment improved after Australian employers added the most workers in more than three years in January, the fifth straight monthly increase, according to the statistics bureau in Sydney. European Union leaders may lay the groundwork today for a precedent-setting aid package for Greece, while China’s inflation gained 1.5 percent in January, slower than a 1.9 percent increase in December.
“People are more optimistic for the time being and a bit happier the way the world is panning out,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. The employment data “exceeded expectations. We still need confirmation that a plan to save Greece is going to take place in the next 24 to 48 hours.”
The MSCI Asia Pacific excluding Japan Index advanced 1.4 percent to 386.99. Hong Kong’s Hang Seng Index climbed 1.4 percent and the Shanghai Composite Index added 0.3 percent after China’s gain in consumer prices was less than the median forecast for a 2.1 percent increase in a Bloomberg News survey of economists.
Australia, Korea
The Kospi Index increased 1.4 percent in South Korea, where the central bank left its key interest rate unchanged today. Japan and Taiwan are closed.
Australia’s S&P/ASX 200 Index was up 0.8 percent as Woodside Petroleum Ltd., Australia’s No. 2 oil producer, rose 3.5 percent to A$43.10. Santos Ltd., Australia’s No. 3 oil producer, climbed 2.5 percent to A$13.36. Crude oil for March delivery rose 1 percent to $74.52 a barrel in New York yesterday and added 0.4 percent today, the fourth-consecutive advance.
James Hardie Industries NV, the biggest seller of home siding in the U.S., advanced 0.9 percent to A$7.74. The company said operating profit rose 66 percent in the third quarter and it expects full-year operating profit to be close to the top range of analyst estimates.
Phone stocks were among the biggest drags on the index as Telstra Corp. slumped 3.8 percent to A$3.26 after cutting its annual revenue forecast for a second time in two months. Telstra also said first-half profit fell 3.3 percent.
Australia Dollar, Bonds
The Australian dollar gained 1.2 percent to 88.58 U.S. cents and the yield on Australia’s benchmark 10-year note increased nine basis points to 5.54 percent after the statistics bureau said the country added 52,700 workers in January, three times as many jobs as economists forecast.
The Australian dollar, like the New Zealand dollar and South African rand, also strengthened as copper jumped to $6,778 a metric ton and zinc was up 2.1 percent. The New Zealand currency rose 0.5 percent to 69.64 cents and the rand climbed 0.4 percent to 7.7115 per dollar.
“A big boost for the Aussie on the back of that labor force number,” said Amber Rabinov, an economist in Melbourne at Australia & New Zealand Banking Group Ltd. “The numbers put more emphasis behind the feeling that the unemployment rate has peaked and we’re now seeing it steadily head lower.”
The euro gained against the dollar and yen on optimism European Union leaders meeting in Brussels today will put together an aid package to help Greece counter its widening budget deficit. The euro advanced to 124.01 yen from 123.56, and appreciated to $1.3777 from $1.3737.
Greece Summit
Germany and France are working on options such as loan guarantees for Greece as long as Prime Minister George Papandreou overcomes street protests and makes deeper cuts to the EU’s biggest budget deficit.
U.S. Treasuries fell yesterday after demand declined at an auction of 10-year notes and Federal Reserve Chairman Ben. S. Bernanke said policy makers may raise the discount rate “before long” as the economy improves. The Treasury will sell $16 billion of 30-year bonds today. Trading of Treasury bills, notes and bonds was closed in Japan today.
More than three shares rose for each that fell today on the MSCI Asia Pacific excluding Japan Index which was up 2.8 percent this week by 11:18 a.m. Singapore time. The Australian dollar strengthened against all 16 of the most-traded currencies. Copper advanced as much as 3.7 percent and oil 0.5 percent. Standard & Poor’s 500 Index futures were up 0.5 percent.
Investor sentiment improved after Australian employers added the most workers in more than three years in January, the fifth straight monthly increase, according to the statistics bureau in Sydney. European Union leaders may lay the groundwork today for a precedent-setting aid package for Greece, while China’s inflation gained 1.5 percent in January, slower than a 1.9 percent increase in December.
“People are more optimistic for the time being and a bit happier the way the world is panning out,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. The employment data “exceeded expectations. We still need confirmation that a plan to save Greece is going to take place in the next 24 to 48 hours.”
The MSCI Asia Pacific excluding Japan Index advanced 1.4 percent to 386.99. Hong Kong’s Hang Seng Index climbed 1.4 percent and the Shanghai Composite Index added 0.3 percent after China’s gain in consumer prices was less than the median forecast for a 2.1 percent increase in a Bloomberg News survey of economists.
Australia, Korea
The Kospi Index increased 1.4 percent in South Korea, where the central bank left its key interest rate unchanged today. Japan and Taiwan are closed.
Australia’s S&P/ASX 200 Index was up 0.8 percent as Woodside Petroleum Ltd., Australia’s No. 2 oil producer, rose 3.5 percent to A$43.10. Santos Ltd., Australia’s No. 3 oil producer, climbed 2.5 percent to A$13.36. Crude oil for March delivery rose 1 percent to $74.52 a barrel in New York yesterday and added 0.4 percent today, the fourth-consecutive advance.
James Hardie Industries NV, the biggest seller of home siding in the U.S., advanced 0.9 percent to A$7.74. The company said operating profit rose 66 percent in the third quarter and it expects full-year operating profit to be close to the top range of analyst estimates.
Phone stocks were among the biggest drags on the index as Telstra Corp. slumped 3.8 percent to A$3.26 after cutting its annual revenue forecast for a second time in two months. Telstra also said first-half profit fell 3.3 percent.
Australia Dollar, Bonds
The Australian dollar gained 1.2 percent to 88.58 U.S. cents and the yield on Australia’s benchmark 10-year note increased nine basis points to 5.54 percent after the statistics bureau said the country added 52,700 workers in January, three times as many jobs as economists forecast.
The Australian dollar, like the New Zealand dollar and South African rand, also strengthened as copper jumped to $6,778 a metric ton and zinc was up 2.1 percent. The New Zealand currency rose 0.5 percent to 69.64 cents and the rand climbed 0.4 percent to 7.7115 per dollar.
“A big boost for the Aussie on the back of that labor force number,” said Amber Rabinov, an economist in Melbourne at Australia & New Zealand Banking Group Ltd. “The numbers put more emphasis behind the feeling that the unemployment rate has peaked and we’re now seeing it steadily head lower.”
The euro gained against the dollar and yen on optimism European Union leaders meeting in Brussels today will put together an aid package to help Greece counter its widening budget deficit. The euro advanced to 124.01 yen from 123.56, and appreciated to $1.3777 from $1.3737.
Greece Summit
Germany and France are working on options such as loan guarantees for Greece as long as Prime Minister George Papandreou overcomes street protests and makes deeper cuts to the EU’s biggest budget deficit.
U.S. Treasuries fell yesterday after demand declined at an auction of 10-year notes and Federal Reserve Chairman Ben. S. Bernanke said policy makers may raise the discount rate “before long” as the economy improves. The Treasury will sell $16 billion of 30-year bonds today. Trading of Treasury bills, notes and bonds was closed in Japan today.
Australian Employers Add Most Jobs in Three Years
Feb. 11 (Bloomberg) -- Australian employers added the most workers in more than three years in January, sending the currency surging on speculation the central bank will resume its record round of interest-rate increases.
The number of people employed rose 52,700 from December, more than three times the 15,000 median estimate of 21 economists surveyed by Bloomberg News. The jobless rate fell to an 11-month low of 5.3 percent from 5.5 percent, the statistics bureau said in Sydney today.
The biggest hiring boom in five years is increasing pressure on Reserve Bank of Australia Governor Glenn Stevens to resume raising borrowing costs to prevent a surge in wages feeding inflation. Traders doubled bets the bank will raise the benchmark lending rate by a quarter point to 4 percent next month, adding to similar moves in December, November and October.
“It will concern the Reserve Bank that the unemployment rate has peaked at a very low rate,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “Imagine what’s going to happen later this year” to inflation and wages when a forecast surge in mining investment intensifies, she said.
The Australian dollar, which has jumped 36 percent in the last 12 months, rose to 88.57 U.S. cents at 12:48 p.m. in Sydney from 87.72 cents just before the report was released. The two- year government bond yield jumped 11 basis points to 4.28 percent. A basis point is 0.01 percentage point. The S&P/ASX 200 index of stocks rose 1 percent to 4556.3.
Demand for Energy
Today’s report reinforces the central bank’s prediction last week that Australia’s economic growth will accelerate this year as companies such as Chevron Corp. boost investment to meet rising global demand for energy.
Australian employers have added 194,600 jobs since August, the biggest five-month surge since they created 214,000 jobs between September 2004 and January 2005.
The nation’s unemployment rate has also tumbled from 5.8 percent in October, after Prime Minister Kevin Rudd’s government stoked the economy by distributing more than A$20 billion ($18 billion) in cash to consumers. Another A$22 billion is being spent on roads, railways and schools.
In contrast, the unemployment rate in the U.S. was 9.7 percent in January, and 10 percent in November among European Union countries, the highest rate in more than 11 years. New Zealand’s jobless rate climbed to 7.3 percent in the fourth quarter, the highest in more than 10 years, and Japan’s rate was 5.1 percent in December.
Stimulus Measures
The rebound in Australia’s economy, one of the few to skirt last year’s global recession, is being driven by a combination of the government’s stimulus package, Governor Stevens’ decision to slash interest rates to a half-century low of 3 percent in April last year, a stronger Australian dollar and the resilience of China, Treasury Secretary Ken Henry said today in Canberra.
Stevens unexpectedly kept the overnight cash rate target unchanged at 3.75 percent last week, saying information about the impact on the economy of quarter-point gains every month last quarter is still limited.
Today’s report “should be substantial evidence for policy makers that labor-market conditions are tighter than expected,” said Ben Dinte, an economist at Macquarie Group Ltd. in Sydney.
Increased Bets
Investors are betting there is a 100 percent chance of a quarter-point increase in the overnight cash rate target to 4 percent by early May, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. Chances of a move at the central bank’s next meeting on March 2 stood at 48 percent at 12:30 p.m. in Sydney, up from 24 percent prior to today’s report.
The central bank says Australia’s economic growth will accelerate this year, boosted by demand from China for natural resources such as coal and iron ore that will deepen a scarcity of workers.
Gross domestic product will climb 3.25 percent in the three months through December 2010 from a year earlier, after gaining an annual 2 percent in the fourth quarter of 2009, the bank said in its quarterly monetary policy statement published last week.
“It now looks likely that the unemployment rate has peaked around 5.75 percent, a much better outcome than thought likely early last year,” when the government forecast the jobless rate would reach 8.5 percent in 2010, the central bank said on Feb. 5.
Resource Projects
The number of full-time jobs gained 15,900 in January and part-time employment increased 36,900, today’s report showed.
A shortage of workers may increase costs and cause delays at the nation’s liquefied natural gas projects, Fitch Ratings said on Feb. 8.
The Maritime Workers Union of Australia has secured a A$50,000 pay increase over three years for workers at Total Marine Services Ltd., the Australian Broadcasting Corp. reported last week.
Marius Kloppers, chief executive officer of BHP Billiton Ltd., the world’s biggest mining company, said yesterday that the skills shortage in Australia’s resources industry is emerging faster than expected.
Chevron in December announced it signed an $82 billion deal with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone field in Western Australia. The project is forecast to generate 6,500 jobs during construction.
It is in addition to the Chevron-led Gorgon gas venture, which is forecast to create another 10,000 jobs when construction starts this year.
Harvey Norman Holdings Ltd., Australia’s biggest furniture and electronics retailer, was “pretty happy” with Christmas sales at its stores compared with year-earlier numbers that were boosted by government stimulus, its Chairman Gerry Harvey said in an interview last month.
The number of people employed rose 52,700 from December, more than three times the 15,000 median estimate of 21 economists surveyed by Bloomberg News. The jobless rate fell to an 11-month low of 5.3 percent from 5.5 percent, the statistics bureau said in Sydney today.
The biggest hiring boom in five years is increasing pressure on Reserve Bank of Australia Governor Glenn Stevens to resume raising borrowing costs to prevent a surge in wages feeding inflation. Traders doubled bets the bank will raise the benchmark lending rate by a quarter point to 4 percent next month, adding to similar moves in December, November and October.
“It will concern the Reserve Bank that the unemployment rate has peaked at a very low rate,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “Imagine what’s going to happen later this year” to inflation and wages when a forecast surge in mining investment intensifies, she said.
The Australian dollar, which has jumped 36 percent in the last 12 months, rose to 88.57 U.S. cents at 12:48 p.m. in Sydney from 87.72 cents just before the report was released. The two- year government bond yield jumped 11 basis points to 4.28 percent. A basis point is 0.01 percentage point. The S&P/ASX 200 index of stocks rose 1 percent to 4556.3.
Demand for Energy
Today’s report reinforces the central bank’s prediction last week that Australia’s economic growth will accelerate this year as companies such as Chevron Corp. boost investment to meet rising global demand for energy.
Australian employers have added 194,600 jobs since August, the biggest five-month surge since they created 214,000 jobs between September 2004 and January 2005.
The nation’s unemployment rate has also tumbled from 5.8 percent in October, after Prime Minister Kevin Rudd’s government stoked the economy by distributing more than A$20 billion ($18 billion) in cash to consumers. Another A$22 billion is being spent on roads, railways and schools.
In contrast, the unemployment rate in the U.S. was 9.7 percent in January, and 10 percent in November among European Union countries, the highest rate in more than 11 years. New Zealand’s jobless rate climbed to 7.3 percent in the fourth quarter, the highest in more than 10 years, and Japan’s rate was 5.1 percent in December.
Stimulus Measures
The rebound in Australia’s economy, one of the few to skirt last year’s global recession, is being driven by a combination of the government’s stimulus package, Governor Stevens’ decision to slash interest rates to a half-century low of 3 percent in April last year, a stronger Australian dollar and the resilience of China, Treasury Secretary Ken Henry said today in Canberra.
Stevens unexpectedly kept the overnight cash rate target unchanged at 3.75 percent last week, saying information about the impact on the economy of quarter-point gains every month last quarter is still limited.
Today’s report “should be substantial evidence for policy makers that labor-market conditions are tighter than expected,” said Ben Dinte, an economist at Macquarie Group Ltd. in Sydney.
Increased Bets
Investors are betting there is a 100 percent chance of a quarter-point increase in the overnight cash rate target to 4 percent by early May, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. Chances of a move at the central bank’s next meeting on March 2 stood at 48 percent at 12:30 p.m. in Sydney, up from 24 percent prior to today’s report.
The central bank says Australia’s economic growth will accelerate this year, boosted by demand from China for natural resources such as coal and iron ore that will deepen a scarcity of workers.
Gross domestic product will climb 3.25 percent in the three months through December 2010 from a year earlier, after gaining an annual 2 percent in the fourth quarter of 2009, the bank said in its quarterly monetary policy statement published last week.
“It now looks likely that the unemployment rate has peaked around 5.75 percent, a much better outcome than thought likely early last year,” when the government forecast the jobless rate would reach 8.5 percent in 2010, the central bank said on Feb. 5.
Resource Projects
The number of full-time jobs gained 15,900 in January and part-time employment increased 36,900, today’s report showed.
A shortage of workers may increase costs and cause delays at the nation’s liquefied natural gas projects, Fitch Ratings said on Feb. 8.
The Maritime Workers Union of Australia has secured a A$50,000 pay increase over three years for workers at Total Marine Services Ltd., the Australian Broadcasting Corp. reported last week.
Marius Kloppers, chief executive officer of BHP Billiton Ltd., the world’s biggest mining company, said yesterday that the skills shortage in Australia’s resources industry is emerging faster than expected.
Chevron in December announced it signed an $82 billion deal with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone field in Western Australia. The project is forecast to generate 6,500 jobs during construction.
It is in addition to the Chevron-led Gorgon gas venture, which is forecast to create another 10,000 jobs when construction starts this year.
Harvey Norman Holdings Ltd., Australia’s biggest furniture and electronics retailer, was “pretty happy” with Christmas sales at its stores compared with year-earlier numbers that were boosted by government stimulus, its Chairman Gerry Harvey said in an interview last month.
Tuesday, February 9, 2010
U.K. Charities, Unions Call for Tax on Foreign Currency Trades
Feb. 10 (Bloomberg) -- Charities, trade unions and faith groups urged U.K. Prime Minister Gordon Brown to impose a tax on foreign exchange transactions to fund aid projects in poor nations.
The campaign is being backed by “Four Weddings and a Funeral” director Richard Curtis, who will open an advertising campaign today to highlight the case for a tax, according to a statement released in London by the Trades Union Congress and charities including Oxfam and Barnados.
The groups want Britain and other European countries to charge 0.05 percent on each foreign exchange transaction. In November, the U.S. rejected Brown’s call for Group of 20 nations to consider the tax.
“A tiny tax on banks would make a massive difference to the millions of ordinary people around the globe forced into extreme poverty by the economic crisis,” Barbara Stocking, Oxfam’s chief executive, said in the statement.
Group of Seven finance ministers last week distanced themselves from Brown’s plan and instead rallied around proposals for an insurance levy on banks to pay for future bailouts.
The campaign is being backed by “Four Weddings and a Funeral” director Richard Curtis, who will open an advertising campaign today to highlight the case for a tax, according to a statement released in London by the Trades Union Congress and charities including Oxfam and Barnados.
The groups want Britain and other European countries to charge 0.05 percent on each foreign exchange transaction. In November, the U.S. rejected Brown’s call for Group of 20 nations to consider the tax.
“A tiny tax on banks would make a massive difference to the millions of ordinary people around the globe forced into extreme poverty by the economic crisis,” Barbara Stocking, Oxfam’s chief executive, said in the statement.
Group of Seven finance ministers last week distanced themselves from Brown’s plan and instead rallied around proposals for an insurance levy on banks to pay for future bailouts.
U.K. Lawmakers Urge Government to Reject EU Hedge Fund Rules
Feb. 10 (Bloomberg) -- U.K. lawmakers advised the government to challenge a proposed European Union law regulating hedge funds and private equity because it could make it harder for EU funds to compete.
The government “should not agree” to the rules unless they are “compatible with equivalent legislation with regulatory regimes in third countries and in particular in the United States,” the House of Lords European Union Committee said in a report today. Fund managers risk losing “competitiveness at a global level” according to the report.
“It will mean Cayman Island funds run by European managers will be more expensive than Cayman funds managed from the U.S., and that is dangerous,” Andrew Shrimpton, a former U.K. regulator who now advises hedge funds at Kinetic Partners LLP, said in a telephone interview. “The asset management industry is an Anglo-American industry.”
Hedge-fund managers have come under fire from politicians and regulators since the collapse of the U.S. subprime mortgage market triggered a global crisis. The European Commission proposed the Alternative Investment Fund Managers directive to tighten supervision of hedge funds last year. Finance ministers from the 27-member EU bloc are scheduled to vote on the rules later this year.
Equivalence Requirements
Investors from Europe won’t be able to access 40 percent of hedge funds and 35 percent of private equity firms under the proposals because of so-called equivalence requirements, Dan Waters, the Financial Services Authority’s asset-management sector leader, said in a speech in London last month.
The U.K. government “should continue to negotiate a solution that does not penalize the marketing of non-EU funds” because of the “negative repercussions on the U.K. and European financial markets,” the committee said in its report.
European lawmakers made hundreds of changes to the commission draft rules last week. Two members of the European Parliament proposed an amendment that would force hedge-fund and private-equity managers to return more than 20 percent of their bonuses to their funds if they don’t properly account for risk levels.
“The U.K. government should do everything it can to ensure that the final proposals that emerge in the AIFM Directive do not damage the EU and U.K. economies to which the City of London makes an important contribution,” Kenneth Woolmer, a member of the House of Lords Sub-Committee on Economic and Financial Affairs, said in an e-mailed statement.
The government “should not agree” to the rules unless they are “compatible with equivalent legislation with regulatory regimes in third countries and in particular in the United States,” the House of Lords European Union Committee said in a report today. Fund managers risk losing “competitiveness at a global level” according to the report.
“It will mean Cayman Island funds run by European managers will be more expensive than Cayman funds managed from the U.S., and that is dangerous,” Andrew Shrimpton, a former U.K. regulator who now advises hedge funds at Kinetic Partners LLP, said in a telephone interview. “The asset management industry is an Anglo-American industry.”
Hedge-fund managers have come under fire from politicians and regulators since the collapse of the U.S. subprime mortgage market triggered a global crisis. The European Commission proposed the Alternative Investment Fund Managers directive to tighten supervision of hedge funds last year. Finance ministers from the 27-member EU bloc are scheduled to vote on the rules later this year.
Equivalence Requirements
Investors from Europe won’t be able to access 40 percent of hedge funds and 35 percent of private equity firms under the proposals because of so-called equivalence requirements, Dan Waters, the Financial Services Authority’s asset-management sector leader, said in a speech in London last month.
The U.K. government “should continue to negotiate a solution that does not penalize the marketing of non-EU funds” because of the “negative repercussions on the U.K. and European financial markets,” the committee said in its report.
European lawmakers made hundreds of changes to the commission draft rules last week. Two members of the European Parliament proposed an amendment that would force hedge-fund and private-equity managers to return more than 20 percent of their bonuses to their funds if they don’t properly account for risk levels.
“The U.K. government should do everything it can to ensure that the final proposals that emerge in the AIFM Directive do not damage the EU and U.K. economies to which the City of London makes an important contribution,” Kenneth Woolmer, a member of the House of Lords Sub-Committee on Economic and Financial Affairs, said in an e-mailed statement.
Monday, February 8, 2010
Macquarie Shares Slump After Forecast Disappoints
Feb. 9 (Bloomberg) -- Macquarie Group Ltd., Australia’s largest investment bank, fell the most in more than eight months in Sydney trading after its forecast for second-half profit failed to match analyst estimates.
The shares dropped 6.6 percent after Macquarie said net income in the six months to March 31 may climb 10 percent from the first half. That indicates second-half profit of A$526.9 million ($455 million), below the A$586 million average estimate of three analysts surveyed by Bloomberg.
“Some investors were looking for a greater upgrade, so on a short-term basis are happy to close out positions,” said Angus Gluskie, who oversees $300 million at White Funds Management Pty in Sydney.
Australian financial companies such as Commonwealth Bank of Australia and Axa Asia Pacific Holdings Ltd. have reported profits that beat analyst estimates as markets and economies recover from the global financial crisis. Macquarie stock more than doubled in the past year as the credit squeeze eased.
Macquarie, which earned A$479 million in the first half, said its forecast is “subject to market conditions, significant swing factors and unexpected one-off items.”
Moore ‘Balancing Act’
“They’ve issued an outlook statement that is qualified with a number of items, which seems to have muddied the water a bit instead of providing the clarity that a statement of this nature seeks to provide,” said Prasad Patkar, who helps manage about $1.5 billion at Platypus Asset Management in Sydney.
The shares tumbled to A$47.07 at 11:55 a.m. local time, posting their biggest percentage drop since May.
Sydney-based Macquarie, with capital of A$4.5 billion above the regulatory minimum at the end of December, said today the completion of acquisitions will add to services on offer worldwide, without detailing any earnings contributions.
Chief Executive Officer Nicholas Moore spent more than $770 million on acquisitions last year in North America, ranging from energy advisory and asset management units to brokerages.
“There’s a fair bit more to come,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. Moore is performing a “balancing act” between buying assets and keeping a capital cushion against volatility, said Dive.
Macquarie last week agreed to buy the equity trading and research operations of Sal. Oppenheim Jr. & Cie KGaA to expand its business in Europe, following a December agreement to purchase the company’s derivatives business.
Corporate Advisory
“I am not ruling out any acquisitions, but in terms of normal trends, you’d expect those to be going back to normal rates as markets settle down,” Moore said on a call with investors today. “We have sufficient capital for the plans we are working on at the moment.”
Profit at Macquarie may almost double in the next two years as takeovers pay off and fees swell from advising on mergers and acquisitions, Bank of America Merrill Lynch said in a Jan. 28 report. Macquarie Capital, which arranges debt and equity sales and gives corporate advice, will drive growth, Bank of America said.
Moore said today the operating result at that unit in the three months ended December fell from the previous quarter, though beat that of the three months ended June. That matched the trend at the securities division, the corporate and asset finance business, and the fixed-income, currencies and commodities division, he said.
‘Cyclical Effect’
In Australia, where Macquarie makes about half its profit, the benchmark S&P/ASX 200 has climbed for three consecutive quarters. If that trend continues, companies are more likely to attempt takeovers, boosting earnings at the banks advising on the deals, said Peter Swan, finance professor at the Australia School of Business at the University of New South Wales.
“There’s always a cyclical effect,” said Swan. “M&A is much more successful when investors are more optimistic. That’s what Macquarie is relying on.”
Australia’s government said on Feb. 7 that it will withdraw on March 31 a guarantee on large deposits and wholesale funding that helped banks access credit after the global financial crisis. That removal is “not expected to impact” Macquarie’s funding position, the bank said today.
The shares dropped 6.6 percent after Macquarie said net income in the six months to March 31 may climb 10 percent from the first half. That indicates second-half profit of A$526.9 million ($455 million), below the A$586 million average estimate of three analysts surveyed by Bloomberg.
“Some investors were looking for a greater upgrade, so on a short-term basis are happy to close out positions,” said Angus Gluskie, who oversees $300 million at White Funds Management Pty in Sydney.
Australian financial companies such as Commonwealth Bank of Australia and Axa Asia Pacific Holdings Ltd. have reported profits that beat analyst estimates as markets and economies recover from the global financial crisis. Macquarie stock more than doubled in the past year as the credit squeeze eased.
Macquarie, which earned A$479 million in the first half, said its forecast is “subject to market conditions, significant swing factors and unexpected one-off items.”
Moore ‘Balancing Act’
“They’ve issued an outlook statement that is qualified with a number of items, which seems to have muddied the water a bit instead of providing the clarity that a statement of this nature seeks to provide,” said Prasad Patkar, who helps manage about $1.5 billion at Platypus Asset Management in Sydney.
The shares tumbled to A$47.07 at 11:55 a.m. local time, posting their biggest percentage drop since May.
Sydney-based Macquarie, with capital of A$4.5 billion above the regulatory minimum at the end of December, said today the completion of acquisitions will add to services on offer worldwide, without detailing any earnings contributions.
Chief Executive Officer Nicholas Moore spent more than $770 million on acquisitions last year in North America, ranging from energy advisory and asset management units to brokerages.
“There’s a fair bit more to come,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. Moore is performing a “balancing act” between buying assets and keeping a capital cushion against volatility, said Dive.
Macquarie last week agreed to buy the equity trading and research operations of Sal. Oppenheim Jr. & Cie KGaA to expand its business in Europe, following a December agreement to purchase the company’s derivatives business.
Corporate Advisory
“I am not ruling out any acquisitions, but in terms of normal trends, you’d expect those to be going back to normal rates as markets settle down,” Moore said on a call with investors today. “We have sufficient capital for the plans we are working on at the moment.”
Profit at Macquarie may almost double in the next two years as takeovers pay off and fees swell from advising on mergers and acquisitions, Bank of America Merrill Lynch said in a Jan. 28 report. Macquarie Capital, which arranges debt and equity sales and gives corporate advice, will drive growth, Bank of America said.
Moore said today the operating result at that unit in the three months ended December fell from the previous quarter, though beat that of the three months ended June. That matched the trend at the securities division, the corporate and asset finance business, and the fixed-income, currencies and commodities division, he said.
‘Cyclical Effect’
In Australia, where Macquarie makes about half its profit, the benchmark S&P/ASX 200 has climbed for three consecutive quarters. If that trend continues, companies are more likely to attempt takeovers, boosting earnings at the banks advising on the deals, said Peter Swan, finance professor at the Australia School of Business at the University of New South Wales.
“There’s always a cyclical effect,” said Swan. “M&A is much more successful when investors are more optimistic. That’s what Macquarie is relying on.”
Australia’s government said on Feb. 7 that it will withdraw on March 31 a guarantee on large deposits and wholesale funding that helped banks access credit after the global financial crisis. That removal is “not expected to impact” Macquarie’s funding position, the bank said today.
China’s Loan Growth, Inflation Probably Accelerated
Feb. 9 (Bloomberg) -- China’s banks probably made more new loans in January than the previous three months combined as lenders sought to head off a credit clampdown by policy makers seeking to stem rising inflation pressures.
New bank lending totaled 1.38 trillion yuan ($201 billion) last month, according to the median estimate of 16 economists in a Bloomberg News survey ahead of a government report scheduled for this week. Separate figures are projected to show consumer prices rose the most since 2008 and export gains accelerated.
Regulators are seeking to slow a credit boom loosed last year that may now be inflating a bubble in China’s property market. The week’s economic reports are likely to reinforce expectations for the central bank to start raising interest rates and loosen controls on the yuan in coming months, moves that might trigger similar steps across the region.
“Central banks are looking at China’s policy moves,” said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong who previously worked at the Federal Reserve Bank of New York and Bank of England. “More aggressive policy tightening from China, including interest-rate increases and yuan appreciation, will make it easier for the rest of the region to move as well.”
Year-on-year percent changes in some of China’s January economic data may have been distorted by the lunar new year holiday, which was in January last year but February in 2010. Most businesses close for the week-long celebration.
Inflation Quickens
At the same time, trends show accelerating price pressures across the economy poised to become world’s second biggest this year, behind the U.S. Aluminum Corp. of China Ltd., the nation’s top producer of the metal, on Jan. 4 raised alumina prices for the third time in five months. Beijing Yanjing Brewery Co. Jan. 15 raised prices for some of its beer about 10 percent, citing rising costs of fuel and rice.
“Inflation fears are beginning to take over from China’s growth euphoria as both consumer and producer inflation continue to climb,” said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. “The central bank must tighten policies more aggressively,” said Lai, who expects the People’s Bank of China to start lifting its benchmark rate as soon as this month.
Consumer prices probably advanced 2.1 percent in January from a year before, a third straight gain, the median estimate shows. Producer price inflation probably quickened to 3.5 percent, according to the survey. Growth of the M2 money supply measure probably slowed for a second month to 25.9 percent, the median projection shows.
Regional Response
Inflation is also accelerating from South Korea to Vietnam as commodity and food prices rise amid the Asia-led global recovery. Still, South Korea, India, Indonesia, Thailand, Malaysia, Taiwan and the Philippines have yet to raise rates and policy makers in countries including Thailand and Taiwan are restraining currency gains, traders say.
In China, authorities have kept the yuan at about 6.83 per dollar since July 2008 to help exporters after letting it appreciate about 21 percent the previous three years. China may allow the yuan to begin appreciate this quarter, which may make its Asian neighbors more comfortable in allowing their currencies to advance, said RBC’s Jackson.
Any need to restrain the yuan may be easing. Exports probably jumped 28 percent last month from a year earlier, and imports probably surged 85 percent, leaving a trade surplus of $20 billion, Bloomberg surveys show.
Growth Quickens
Economic growth accelerated to a 10.7 percent year-on-year pace last quarter, the fastest since 2007, responding to an unprecedented 9.59 trillion yuan of credit extended by banks in 2009 and a 4 trillion yuan two-year fiscal stimulus plan.
The estimate for new lending in January is 48 percent more than the total extended in the last three months of 2009. It’s also 18 percent of the 7.5 trillion yuan Premier Wen Jiabao’s government set as the target for this year.
Property prices in 70 major cities climbed 7.8 percent in December, the most in 18 months, responding in part to the record credit surge. Poly Real Estate Group Co., the nation’s second-largest listed developer, said yesterday evening that its January property sales jumped 142 percent from a year earlier.
The Shanghai Composite Index has slumped 10 percent since the year began on concern the government will curb lending to cool the economy.
Day of ‘Reckoning’
“There are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China,” Neil McDonald, a business restructuring and insolvency partner in Hong Kong with law-firm Lovells LLP, said at conference last week, using another term for the yuan. “At some point there’s going to be a reckoning for that.”
The central bank asked lenders to set aside more money as reserves on Jan. 12, the first such increase since June 2008. Some lenders have since been asked to limit credit, punished by even higher reserve ratios.
Bank of China Ltd., the nation’s third-largest lender by market value, on Feb. 3 reduced discounts for some mortgages, citing concern about rising property-market risks. Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, said Jan. 27 it “stabilized” loan growth after lending rose “relatively fast” in the first half of the month.
New bank lending totaled 1.38 trillion yuan ($201 billion) last month, according to the median estimate of 16 economists in a Bloomberg News survey ahead of a government report scheduled for this week. Separate figures are projected to show consumer prices rose the most since 2008 and export gains accelerated.
Regulators are seeking to slow a credit boom loosed last year that may now be inflating a bubble in China’s property market. The week’s economic reports are likely to reinforce expectations for the central bank to start raising interest rates and loosen controls on the yuan in coming months, moves that might trigger similar steps across the region.
“Central banks are looking at China’s policy moves,” said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong who previously worked at the Federal Reserve Bank of New York and Bank of England. “More aggressive policy tightening from China, including interest-rate increases and yuan appreciation, will make it easier for the rest of the region to move as well.”
Year-on-year percent changes in some of China’s January economic data may have been distorted by the lunar new year holiday, which was in January last year but February in 2010. Most businesses close for the week-long celebration.
Inflation Quickens
At the same time, trends show accelerating price pressures across the economy poised to become world’s second biggest this year, behind the U.S. Aluminum Corp. of China Ltd., the nation’s top producer of the metal, on Jan. 4 raised alumina prices for the third time in five months. Beijing Yanjing Brewery Co. Jan. 15 raised prices for some of its beer about 10 percent, citing rising costs of fuel and rice.
“Inflation fears are beginning to take over from China’s growth euphoria as both consumer and producer inflation continue to climb,” said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. “The central bank must tighten policies more aggressively,” said Lai, who expects the People’s Bank of China to start lifting its benchmark rate as soon as this month.
Consumer prices probably advanced 2.1 percent in January from a year before, a third straight gain, the median estimate shows. Producer price inflation probably quickened to 3.5 percent, according to the survey. Growth of the M2 money supply measure probably slowed for a second month to 25.9 percent, the median projection shows.
Regional Response
Inflation is also accelerating from South Korea to Vietnam as commodity and food prices rise amid the Asia-led global recovery. Still, South Korea, India, Indonesia, Thailand, Malaysia, Taiwan and the Philippines have yet to raise rates and policy makers in countries including Thailand and Taiwan are restraining currency gains, traders say.
In China, authorities have kept the yuan at about 6.83 per dollar since July 2008 to help exporters after letting it appreciate about 21 percent the previous three years. China may allow the yuan to begin appreciate this quarter, which may make its Asian neighbors more comfortable in allowing their currencies to advance, said RBC’s Jackson.
Any need to restrain the yuan may be easing. Exports probably jumped 28 percent last month from a year earlier, and imports probably surged 85 percent, leaving a trade surplus of $20 billion, Bloomberg surveys show.
Growth Quickens
Economic growth accelerated to a 10.7 percent year-on-year pace last quarter, the fastest since 2007, responding to an unprecedented 9.59 trillion yuan of credit extended by banks in 2009 and a 4 trillion yuan two-year fiscal stimulus plan.
The estimate for new lending in January is 48 percent more than the total extended in the last three months of 2009. It’s also 18 percent of the 7.5 trillion yuan Premier Wen Jiabao’s government set as the target for this year.
Property prices in 70 major cities climbed 7.8 percent in December, the most in 18 months, responding in part to the record credit surge. Poly Real Estate Group Co., the nation’s second-largest listed developer, said yesterday evening that its January property sales jumped 142 percent from a year earlier.
The Shanghai Composite Index has slumped 10 percent since the year began on concern the government will curb lending to cool the economy.
Day of ‘Reckoning’
“There are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China,” Neil McDonald, a business restructuring and insolvency partner in Hong Kong with law-firm Lovells LLP, said at conference last week, using another term for the yuan. “At some point there’s going to be a reckoning for that.”
The central bank asked lenders to set aside more money as reserves on Jan. 12, the first such increase since June 2008. Some lenders have since been asked to limit credit, punished by even higher reserve ratios.
Bank of China Ltd., the nation’s third-largest lender by market value, on Feb. 3 reduced discounts for some mortgages, citing concern about rising property-market risks. Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, said Jan. 27 it “stabilized” loan growth after lending rose “relatively fast” in the first half of the month.
Sunday, February 7, 2010
Indian Bourse Boosts System as Volumes Rise, Angel Broking Says
Feb. 8 (Bloomberg) -- National Stock Exchange of India’s upgraded system, tested during a special trading session over the weekend, will help the bourse cope with rising volume and competition, India’s biggest brokerage by branch network said.
The nation’s stocks gained for the first time in three days on Feb. 6 during the 90-minute trading session to test the Indian bourse’s enhanced software. The Bombay Stock Exchange’s Sensitive Index or Sensex climbed 0.8 percent to 15,915.65 after a 4.3 percent two-day slide.
“They are improving their infrastructure to the next level,” said Vinay Agrawal, executive director of equities broking at Angel Broking Ltd. in Mumbai, ranked by Dun & Bradstreet as the brokerage with the biggest distribution network in India. “As the volumes are growing, the exchanges also need to upgrade their infrastructure.”
Foreign fund flows into India’s stock market rose to $17.5 billion in 2009, close to a record set two years ago, as the biggest rally in 18 years lured foreign investors. National Exchange, the bigger of the country’s two bourses, is also upgrading ahead of more competition.
MCX Stock Exchange Ltd., which has partnered London’s FTSE Group, is awaiting regulatory approval to begin trading.
National Exchange and the smaller Bombay Stock Exchange started trading 55 minutes earlier this year at 9 a.m. to lure derivatives traders in Singapore and Hong Kong. The Bombay exchange also followed its rival in conducting a special trading session over the weekend.
Trading volume is expected to increase, driving the Sensex to rise as much as 30 percent this year as consumer spending in the world’s second-most populous nation boosts company earnings, EM Capital Management LLC said last month.
Reserve Bank of India Governor Duvvuri Subbarao said Jan. 29 the nation’s economic growth could “gain momentum” over the next year. India’s $1.2 trillion economy, Asia’s third largest, will expand 7.5 percent in the 12 months through March 31, more than an October forecast of 6 percent, “with an upward bias,” he also said.
The nation’s stocks gained for the first time in three days on Feb. 6 during the 90-minute trading session to test the Indian bourse’s enhanced software. The Bombay Stock Exchange’s Sensitive Index or Sensex climbed 0.8 percent to 15,915.65 after a 4.3 percent two-day slide.
“They are improving their infrastructure to the next level,” said Vinay Agrawal, executive director of equities broking at Angel Broking Ltd. in Mumbai, ranked by Dun & Bradstreet as the brokerage with the biggest distribution network in India. “As the volumes are growing, the exchanges also need to upgrade their infrastructure.”
Foreign fund flows into India’s stock market rose to $17.5 billion in 2009, close to a record set two years ago, as the biggest rally in 18 years lured foreign investors. National Exchange, the bigger of the country’s two bourses, is also upgrading ahead of more competition.
MCX Stock Exchange Ltd., which has partnered London’s FTSE Group, is awaiting regulatory approval to begin trading.
National Exchange and the smaller Bombay Stock Exchange started trading 55 minutes earlier this year at 9 a.m. to lure derivatives traders in Singapore and Hong Kong. The Bombay exchange also followed its rival in conducting a special trading session over the weekend.
Trading volume is expected to increase, driving the Sensex to rise as much as 30 percent this year as consumer spending in the world’s second-most populous nation boosts company earnings, EM Capital Management LLC said last month.
Reserve Bank of India Governor Duvvuri Subbarao said Jan. 29 the nation’s economic growth could “gain momentum” over the next year. India’s $1.2 trillion economy, Asia’s third largest, will expand 7.5 percent in the 12 months through March 31, more than an October forecast of 6 percent, “with an upward bias,” he also said.
India Can’t Be Lax as It Aims to Cool Prices, Chakrabarty Says
Feb. 8 (Bloomberg) -- India can’t afford to be lax about fighting inflation as the nation seeks to slow price gains to 5 percent or less, central bank Deputy Governor K.C. Chakrabarty said yesterday.
“You cannot afford to be in any way lax in monitoring inflation and controlling it,” Chakrabarty said in an interview in Sydney. “We would not like to have more than 4 or 5 percent inflation. That’s the challenge.”
Central Bank Governor Duvvuri Subbarao raised the amount lenders are required to set aside as reserves last month to prevent excess money in the banking system from fanning price gains. India’s wholesale-food inflation rate rose to 17.56 percent in the week to Jan. 23, moving closer to an 11-year high and fueling speculation that Subbarao may raise interest rates.
India’s “inflation is edging up, and that’s why you see we have already exited from the monetary stimulus, almost exited,” Chakrabarty said. “We hope that this will anchor inflation” expectations.
Consumer-price inflation in India is the highest among Asia-Pacific countries, according to data compiled by Bloomberg. Prices paid by industrial workers rose 14.97 percent in December from a year earlier, the most in 11 years, while consumer-price inflation for farm workers in the country accelerated to 17.21 percent.
The benchmark wholesale-price inflation rate was 7.31 percent in December, the highest in 13 months.
Monsoon Rains
Food costs are rising as the June-to-September monsoon rains, the main source of irrigation in Asia’s third-largest economy, were the weakest since 1972, hurting agriculture.
The Reserve Bank of India hopes to cool inflation to 4 percent or 5 percent in 2011 or 2012, Chakrabarty said. Price gains won’t come to that level “so soon,” the deputy governor said, without saying if he was referring to consumer or wholesale prices.
The central bank on Jan. 29 increased the so-called cash reserve ratio by 0.75 percentage points to 5.75 percent, a move it estimates will drain about 360 billion rupees ($7.7 billion) from the banking system. Subbarao left the benchmark reverse repurchase rate unchanged at 3.25 percent.
“Our main policy instruments are all currently at levels that are more consistent with a crisis situation than with a fast-recovering economy,” Subbarao said at the time. “It’s therefore necessary to carry forward the process” of exiting them, he said, signaling the central bank may boost policy rates as growth strengthens.
Growth Forecast
The central bank raised its economic growth forecast to 7.5 percent in the fiscal year through March 2010, from an earlier estimate of 6 percent, and increased its inflation forecast to 8.5 percent from 6.5 percent. The Reserve Bank will give a forecast for the following year in April, Chakrabarty said.
The government injected fiscal and monetary stimulus of more than 12 percent of gross domestic product between September 2008 and April last year, helping the South Asian nation’s economy grow 7.9 percent in the three months ended Sept. 30, the fastest pace in 18 months.
Industrial production climbed 11.7 percent in November, the fastest pace in two years, as stimulus measures stoked demand for cars made by Maruti Suzuki India Ltd., the plasma screens of the Indian unit of LG Electronics Inc., and Hero Honda Motors Ltd. motorcycles.
Global stocks plunged last week while bond default risks soared after Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to implement his plan to cut the European Union’s largest deficit.
“Any time anywhere sovereign crisis is happening, we need to be cautious,” Chakrabarty said. “But we hope that we don’t have much exposure to these small countries until it affects the other economies. I think if it is controlled at the Greece level, I don’t think” it will spread.
India’s financial markets “are more or less stable,” he added. “With higher growth it has to have the stability.”
“You cannot afford to be in any way lax in monitoring inflation and controlling it,” Chakrabarty said in an interview in Sydney. “We would not like to have more than 4 or 5 percent inflation. That’s the challenge.”
Central Bank Governor Duvvuri Subbarao raised the amount lenders are required to set aside as reserves last month to prevent excess money in the banking system from fanning price gains. India’s wholesale-food inflation rate rose to 17.56 percent in the week to Jan. 23, moving closer to an 11-year high and fueling speculation that Subbarao may raise interest rates.
India’s “inflation is edging up, and that’s why you see we have already exited from the monetary stimulus, almost exited,” Chakrabarty said. “We hope that this will anchor inflation” expectations.
Consumer-price inflation in India is the highest among Asia-Pacific countries, according to data compiled by Bloomberg. Prices paid by industrial workers rose 14.97 percent in December from a year earlier, the most in 11 years, while consumer-price inflation for farm workers in the country accelerated to 17.21 percent.
The benchmark wholesale-price inflation rate was 7.31 percent in December, the highest in 13 months.
Monsoon Rains
Food costs are rising as the June-to-September monsoon rains, the main source of irrigation in Asia’s third-largest economy, were the weakest since 1972, hurting agriculture.
The Reserve Bank of India hopes to cool inflation to 4 percent or 5 percent in 2011 or 2012, Chakrabarty said. Price gains won’t come to that level “so soon,” the deputy governor said, without saying if he was referring to consumer or wholesale prices.
The central bank on Jan. 29 increased the so-called cash reserve ratio by 0.75 percentage points to 5.75 percent, a move it estimates will drain about 360 billion rupees ($7.7 billion) from the banking system. Subbarao left the benchmark reverse repurchase rate unchanged at 3.25 percent.
“Our main policy instruments are all currently at levels that are more consistent with a crisis situation than with a fast-recovering economy,” Subbarao said at the time. “It’s therefore necessary to carry forward the process” of exiting them, he said, signaling the central bank may boost policy rates as growth strengthens.
Growth Forecast
The central bank raised its economic growth forecast to 7.5 percent in the fiscal year through March 2010, from an earlier estimate of 6 percent, and increased its inflation forecast to 8.5 percent from 6.5 percent. The Reserve Bank will give a forecast for the following year in April, Chakrabarty said.
The government injected fiscal and monetary stimulus of more than 12 percent of gross domestic product between September 2008 and April last year, helping the South Asian nation’s economy grow 7.9 percent in the three months ended Sept. 30, the fastest pace in 18 months.
Industrial production climbed 11.7 percent in November, the fastest pace in two years, as stimulus measures stoked demand for cars made by Maruti Suzuki India Ltd., the plasma screens of the Indian unit of LG Electronics Inc., and Hero Honda Motors Ltd. motorcycles.
Global stocks plunged last week while bond default risks soared after Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to implement his plan to cut the European Union’s largest deficit.
“Any time anywhere sovereign crisis is happening, we need to be cautious,” Chakrabarty said. “But we hope that we don’t have much exposure to these small countries until it affects the other economies. I think if it is controlled at the Greece level, I don’t think” it will spread.
India’s financial markets “are more or less stable,” he added. “With higher growth it has to have the stability.”
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