The Obama administration on Saturday called for a broad overhaul of President George W. Bush’s No Child Left Behind law, proposing to reshape divisive provisions that encouraged instructors to teach to tests, narrowed the curriculum, and labeled one in three American schools as failing.
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President Obama spoke to students in October at a school in Silver Spring, Md., that was named a “Blue Ribbon” school under the law in 2005.
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Times Topic: No Child Left Behind Act
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President George W. Bush visited a Philadelphia school in January 2009 to speak about No Child Left Behind.
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By announcing that he would send his education blueprint to Congress on Monday, President Obama returned to a campaign promise to repair the sprawling federal law, which affects each of the nation’s nearly 100,000 public schools. His plan strikes a careful balance, retaining some key features of the Bush-era law, including its requirement for annual reading and math tests, while proposing far-reaching changes.
The administration would replace the law’s pass-fail school grading system with one that would measure individual students’ academic growth and judge schools based not on test scores alone but also on indicators like pupil attendance, graduation rates and learning climate. And while the proposal calls for more vigorous interventions in failing schools, it would also reward top performers and lessen federal interference in tens of thousands of reasonably well-run schools in the middle.
In addition, President Obama would replace the law’s requirement that every American child reach proficiency in reading and math, which administration officials have called utopian, with a new national target that could prove equally elusive: that all students should graduate from high school prepared for college and a career.
“Under these guidelines, schools that achieve excellence or show real progress will be rewarded,” the president said in his weekly radio address, “and local districts will be encouraged to commit to change in schools that are clearly letting their students down.”
Administration officials said their plan would urge the states to achieve the college-ready goal by 2020.
The No Child law, passed in 2001 by bipartisan majorities, focused the nation’s attention on closing achievement gaps between minorities and whites, but it included many provisions that created what Education Secretary Arne Duncan on Friday called “perverse incentives.”
In an effort to meet the law’s requirements for passing grades, many states began dumbing down standards, and teachers began focusing on test preparation rather than on engaging class work.
“We’ve got to get accountability right this time,” Mr. Duncan told reporters Friday. “For the mass of schools, we want to get rid of prescriptive interventions. We’ll leave it up to them to figure out how to make progress.”
The administration’s turn toward education signaled that the president hoped to get beyond health care and broaden the agenda before the midterm elections make progress on legislative issues more difficult.
Mr. Duncan has been working behind the scenes on rewriting the No Child law with a bipartisan group of senior lawmakers in both chambers, and administration officials say they hope to complete work on a new bill by August, when the elections will dominate the Congressional agenda. Many skeptics question that timetable.
And while leading Congressional Democrats praised the plan, the nation’s two major teachers unions did not. “We are disappointed,” said Dennis Van Roekel, president of the National Education Association.
Randi Weingarten, president of the American Federation of Teachers, said of the proposal, “From everything that we’ve seen, this blueprint places 100 percent of the responsibility on teachers and gives them zero percent of the authority.”
Christopher Edley Jr., a former Clinton administration official who is dean of the law school at the University of California, Berkeley, and an expert on civil rights law, said a briefing document he read had left him concerned about the administration’s direction.
“I worry about retreating from the notion of quality education as a civil right,” Mr. Edley said. “N.C.L.B. had some good sticks in it to compel equity. I’m alarmed by the frequent references to ‘incentives,’ and the apparent intention to reduce the federal role in forcing compliance.”
Representative John Kline of Minnesota, the top Republican on the House education committee, was also skeptical. “From 30,000 feet, the blueprint seems to set a lot of right goals,” Mr. Kline said. “Yet when we drill down to the details, we are looking at a heavier federal hand than many of us wish to see.”
Saturday, March 13, 2010
US takes risks with ties to strongman
Colonel Abdul Raziq, a 33-year-old suspected drug baron, was keen to impress his American guest.
Masked gunmen stood watch on the rooftops of mud homes at a crossing in Spin Boldak on the Afghanistan-Pakistan border. More armed men zoomed past on four-wheeled dirt bikes. Col Raziq strode toward the towering “Friendship Gate” marking the frontier sporting desert-patterned fatigues, a close-cropped beard and an engaging grin.
Afghanistan map
Stanley McChrystal, the top Nato general in Afghanistan, had come in search of help. Col Raziq is the commander of 3,500 Afghan Border Police and the undisputed king of Spin Boldak, one of only two main gateways to Pakistan .
The US military needs Col Raziq’s co-operation to implement a multi-million dollar plan to modernise the crossing and build a bypass to speed up the flow of Nato supply trucks from Pakistan. The alliance will otherwise struggle to import the food and fuel needed to power a big offensive in Kandahar province this summer that Gen McChrystal hopes will change the course of the war.
EDITOR’S CHOICE
India tells Putin of Afghan fears - Mar-12
In depth: Afghanistan - Aug-30
India renews vow to stay in Afghanistan - Mar-07
Karzai wary of Pakistan offer - Mar-12
US doubts Islamabad’s will to pursue militants - Mar-09
The meeting illustrates a central dilemma: relying on local strongmen to preserve stability risks undermining the broader goal of promoting good governance needed to deny the insurgents support.
The dilemma is particularly acute in Kandahar province. US officials say an offensive launched last month in Marjah in neighbouring Helmand province was the prelude to a broader operation to secure Kandahar, birthplace of the Taliban and the political and economic capital of the south.
Marjah has confronted Nato with a similar problem. Abdul Zahir, the new district leader installed after the offensive, has a criminal record in Germany according to recent news reports, though Mr Zahir denies he has any convictions.
The Kandahar campaign forms a central pillar of Gen McChrystal’s plan to protect the population in the ethnic Pashtun centre of the insurgency to buy the government of Hamid Karzai, the president, time to build stronger support. US and UK aid workers deployed as part of a “civilian surge” alongside the American troop build-up aim to implement projects to show that the state can offer more than the Taliban’s “shadow” security and justice systems.
“The most important thing we want is honest and clean administration,” said Kamal Khan, a farmer from the Now’Zad district in Helmand.
Western officials believe a combination of military pressure and civilian support is yielding dividends in Helmand. Gulab Mangal, the provincial governor, can now appoint officials in 10 of Helmand’s 13 districts, compared with four when he came into office in 2008.
The gains are fragile but Mr Gulab believes the influx of troops and advisers will help consolidate his tenuous authority. “We must gain the trust of people by keeping our promises,” he said in Lashkar Gah, Helmand’s capital.
Extending the model to Kandahar may be harder. The Taliban has placed a campaign to retake Afghanistan’s second largest city at the centre of its strategy to dominate the south.
Nato forces expect to face some hard fighting, but US officials fear it will be even tougher to overcome widespread alienation from Mr Karzai’s government.
In his Spin Boldak fiefdom, Col Raziq symbolises precisely the kind of power-broker whose method of control runs counter to the ideal of impartial, technocratic administration envisaged in Gen McChrystal’s strategy.
Col Raziq’s district is one of the safest for Nato troops in southern Afghanistan, and he is popular among many locals. But western officials suspect he is involved in a lucrative cross-border opium smuggling operation.
The opposition accused him of organising mass ballot stuffing in favour of Mr Karzai during last year’s deeply flawed elections. By packing his police with members of his Achakzai tribe, researchers say, Mr Raziq has driven their Noorzai rivals closer to the Taliban.
Col Raziq denies the allegations, saying his troops have tightened frontier controls in recent months. “There are some newspapers who have accused me of corruption and drug smuggling,” he said. “The words are coming from my enemies who want to give me and the government a bad name.”
While western officials enthuse over Mr Mangal’s modernising approach in Helmand, in Kandahar US officials fear Ahmed Wali Karzai. President Karzai’s influential half-brother – known locally as the “king of the south” – is less supportive of reform. “He’s sucking all the oxygen out of every political initiative that we’re attempting,” a senior US official said.
Mr Karzai’s critics accuse him of using his position as chairman of Kandahar’s provincial council to favour his family’s Popalzai tribe, angering smaller groups. Mr Karzai has dismissed such criticism, saying he has used his influence to help stabilise the province.
Combating the disaffection that has fuelled the Taliban’s resurgence in Kandahar will be one of the west’s hardest tasks. “You have to get people to believe that government by crypto-warlord syndicate is not necessarily inevitable or permanent,” the US official said. “It’s going to be very tough.”
Masked gunmen stood watch on the rooftops of mud homes at a crossing in Spin Boldak on the Afghanistan-Pakistan border. More armed men zoomed past on four-wheeled dirt bikes. Col Raziq strode toward the towering “Friendship Gate” marking the frontier sporting desert-patterned fatigues, a close-cropped beard and an engaging grin.
Afghanistan map
Stanley McChrystal, the top Nato general in Afghanistan, had come in search of help. Col Raziq is the commander of 3,500 Afghan Border Police and the undisputed king of Spin Boldak, one of only two main gateways to Pakistan .
The US military needs Col Raziq’s co-operation to implement a multi-million dollar plan to modernise the crossing and build a bypass to speed up the flow of Nato supply trucks from Pakistan. The alliance will otherwise struggle to import the food and fuel needed to power a big offensive in Kandahar province this summer that Gen McChrystal hopes will change the course of the war.
EDITOR’S CHOICE
India tells Putin of Afghan fears - Mar-12
In depth: Afghanistan - Aug-30
India renews vow to stay in Afghanistan - Mar-07
Karzai wary of Pakistan offer - Mar-12
US doubts Islamabad’s will to pursue militants - Mar-09
The meeting illustrates a central dilemma: relying on local strongmen to preserve stability risks undermining the broader goal of promoting good governance needed to deny the insurgents support.
The dilemma is particularly acute in Kandahar province. US officials say an offensive launched last month in Marjah in neighbouring Helmand province was the prelude to a broader operation to secure Kandahar, birthplace of the Taliban and the political and economic capital of the south.
Marjah has confronted Nato with a similar problem. Abdul Zahir, the new district leader installed after the offensive, has a criminal record in Germany according to recent news reports, though Mr Zahir denies he has any convictions.
The Kandahar campaign forms a central pillar of Gen McChrystal’s plan to protect the population in the ethnic Pashtun centre of the insurgency to buy the government of Hamid Karzai, the president, time to build stronger support. US and UK aid workers deployed as part of a “civilian surge” alongside the American troop build-up aim to implement projects to show that the state can offer more than the Taliban’s “shadow” security and justice systems.
“The most important thing we want is honest and clean administration,” said Kamal Khan, a farmer from the Now’Zad district in Helmand.
Western officials believe a combination of military pressure and civilian support is yielding dividends in Helmand. Gulab Mangal, the provincial governor, can now appoint officials in 10 of Helmand’s 13 districts, compared with four when he came into office in 2008.
The gains are fragile but Mr Gulab believes the influx of troops and advisers will help consolidate his tenuous authority. “We must gain the trust of people by keeping our promises,” he said in Lashkar Gah, Helmand’s capital.
Extending the model to Kandahar may be harder. The Taliban has placed a campaign to retake Afghanistan’s second largest city at the centre of its strategy to dominate the south.
Nato forces expect to face some hard fighting, but US officials fear it will be even tougher to overcome widespread alienation from Mr Karzai’s government.
In his Spin Boldak fiefdom, Col Raziq symbolises precisely the kind of power-broker whose method of control runs counter to the ideal of impartial, technocratic administration envisaged in Gen McChrystal’s strategy.
Col Raziq’s district is one of the safest for Nato troops in southern Afghanistan, and he is popular among many locals. But western officials suspect he is involved in a lucrative cross-border opium smuggling operation.
The opposition accused him of organising mass ballot stuffing in favour of Mr Karzai during last year’s deeply flawed elections. By packing his police with members of his Achakzai tribe, researchers say, Mr Raziq has driven their Noorzai rivals closer to the Taliban.
Col Raziq denies the allegations, saying his troops have tightened frontier controls in recent months. “There are some newspapers who have accused me of corruption and drug smuggling,” he said. “The words are coming from my enemies who want to give me and the government a bad name.”
While western officials enthuse over Mr Mangal’s modernising approach in Helmand, in Kandahar US officials fear Ahmed Wali Karzai. President Karzai’s influential half-brother – known locally as the “king of the south” – is less supportive of reform. “He’s sucking all the oxygen out of every political initiative that we’re attempting,” a senior US official said.
Mr Karzai’s critics accuse him of using his position as chairman of Kandahar’s provincial council to favour his family’s Popalzai tribe, angering smaller groups. Mr Karzai has dismissed such criticism, saying he has used his influence to help stabilise the province.
Combating the disaffection that has fuelled the Taliban’s resurgence in Kandahar will be one of the west’s hardest tasks. “You have to get people to believe that government by crypto-warlord syndicate is not necessarily inevitable or permanent,” the US official said. “It’s going to be very tough.”
New Fraud Cases Point to Lapses in Iraq Projects
Investigators looking into corruption involving reconstruction in Iraq say they have opened more than 50 new cases in six months by scrutinizing large cash transactions — involving banks, land deals, loan payments, casinos and even plastic surgery — made by some of the Americans involved in the nearly $150 billion program.
At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
Related
*
Issue of Presidency Endangers Iraq’s Tenuous Balance (March 14, 2010)
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Some of the cases involve people who are suspected of having mailed tens of thousands of dollars to themselves from Iraq, or of having stuffed the money into duffel bags and suitcases when leaving the country, the federal investigators said. In other cases, millions of dollars were moved through wire transfers. Suspects then used cash to buy BMWs, Humvees and expensive jewelry, or to pay off enormous casino debts.
Some suspects also tried to conceal foreign bank accounts in Ghana, Switzerland, the Netherlands and Britain, the investigators said, while in other cases, cash was simply found stacked in home safes.
There have already been dozens of indictments and convictions for corruption since the 2003 invasion of Iraq. But the new cases seem to confirm what investigators have long speculated: that the chaos, weak oversight and wide use of cash payments in the reconstruction program in Iraq allowed many more Americans who took bribes or stole money to get off scot-free.
“I’ve had a continuing sense that there is ongoing fraud that we have not been able to nail down,” said Stuart W. Bowen Jr., who leads the Office of the Special Inspector General for Iraq Reconstruction, an independent oversight agency. “This spate of new cases is evidence that that sense was reasonably well placed.”
The cases were uncovered during the first phase of a new, systematic inquiry into financial activities, which investigators said began in earnest last summer. A related investigation of rebuilding funds for Afghanistan began in February.
Mr. Bowen’s office agreed to answer general questions on the new inquiry but declined to divulge the names of the suspects, who include private contractors, military officers and civilian officials.
Developed in the Treasury Department, the financial monitoring effort goes by the generic name of the Financial Crimes Enforcement Network, or Fincen, which continually generates data on suspicious financial transactions in support of more than 275 federal and state law enforcement agencies, according to a December report by the Government Accountability Office.
Stephen Hudak, a spokesman at the Treasury Department for Fincen, said it generated 15 million to 16 million reports a year on suspicious financial activity or major currency transactions, including cash deposits of more than $10,000. He said that transactions in banks, check-cashing outlets, wire services, casinos, stockbrokers’ offices and insurance companies were covered.
“Basically, we follow dirty money,” Mr. Hudak said. “Authorized users can access Fincen’s databases to make connections in criminal investigations.”
Mr. Hudak confirmed that Fincen was being used to investigate reconstruction corruption in Iraq.
Because the investigation has covered only limited areas in the United States so far, Mr. Bowen said he estimated that dozens of additional cases would be opened by the end of the year. Mr. Bowen, who spoke by phone from Baghdad, described the effort as a “concerted, focused, forensic financial review involving all the Iraq reconstruction funds.”
Congress has appropriated about $53 billion for reconstruction projects, and the rest of the money has come from Iraqi assets and international pledges. According to testimony before the Wartime Contracting Commission last month by Arnold Fields, who leads the Office of the Special Inspector General for Afghanistan Reconstruction, Congress has appropriated $51 billion to rebuild that country since 2002.
John Brummet, the assistant inspector general for audits in that office, said that the office’s staff members had been studying the Iraq investigation for nearly a year and that they had started a related effort last month.
“What we’re trying to do is basically replicate what they’ve done without having to pay the price of the learning curve,” Mr. Brummet said.
Investigations involving the inspector general’s office for Iraq’s reconstruction have led to 35 indictments and 27 convictions for fraud in numerous forms; the number of convictions rises to 58 when cases pursued by other government agencies are included, according to figures compiled by the Justice Department.
Mr. Bowen would not comment on whether indictments had yet been written up for the new cases, which numbered 52 by last week. But he said that at least 45 of those had come directly from the forensic effort.
Wayne White, who until 2005 was a senior intelligence official with the State Department focused on Iraq and is now a scholar with the Middle East Institute in Washington, said he was not surprised that new cases were still turning up.
Since Iraq’s economy collapsed after the 1991 Persian Gulf war, the country’s dealings with foreign companies and contractors have been laced with bribery, kickbacks and other fraud, Mr. White said, adding that weak oversight of the reconstruction efforts almost guaranteed that those problems would not be rooted out.
“That’s been very disappointing, and we’ve seen it in Afghanistan as well,” Mr. White said.
A senior federal official said that some of the new cases appeared to be closely linked to known networks of conspiracy and fraud and were likely to extend investigators’ knowledge of cases that had already ended with convictions. Many other cases seem to be entirely new, the official said.
Mr. Bowen said that many of the new cases involved bribes and kickbacks for awarding lucrative work to contractors, and that in a number of cases, spouses or other relatives of the suspects are accused of setting up fraudulent companies to hide the illicit gains.
When people who turn up in the net are initially contacted by investigators, the reaction “runs the gamut,” Mr. Bowen said. Some deny wrongdoing and others admit to accepting small bribes, which on further investigation rise into hundreds of thousands of dollars.
One suspect, he said, made the job especially easy on investigators who arrived at his door. “I’ve been waiting for you,” the suspect said.
At War
Notes from Afghanistan, Pakistan, Iraq and other areas of conflict in the post-9/11 era. Go to the Blog »
Related
*
Issue of Presidency Endangers Iraq’s Tenuous Balance (March 14, 2010)
Readers' Comments
Share your thoughts.
* Post a Comment »
* Read All Comments (69) »
Some of the cases involve people who are suspected of having mailed tens of thousands of dollars to themselves from Iraq, or of having stuffed the money into duffel bags and suitcases when leaving the country, the federal investigators said. In other cases, millions of dollars were moved through wire transfers. Suspects then used cash to buy BMWs, Humvees and expensive jewelry, or to pay off enormous casino debts.
Some suspects also tried to conceal foreign bank accounts in Ghana, Switzerland, the Netherlands and Britain, the investigators said, while in other cases, cash was simply found stacked in home safes.
There have already been dozens of indictments and convictions for corruption since the 2003 invasion of Iraq. But the new cases seem to confirm what investigators have long speculated: that the chaos, weak oversight and wide use of cash payments in the reconstruction program in Iraq allowed many more Americans who took bribes or stole money to get off scot-free.
“I’ve had a continuing sense that there is ongoing fraud that we have not been able to nail down,” said Stuart W. Bowen Jr., who leads the Office of the Special Inspector General for Iraq Reconstruction, an independent oversight agency. “This spate of new cases is evidence that that sense was reasonably well placed.”
The cases were uncovered during the first phase of a new, systematic inquiry into financial activities, which investigators said began in earnest last summer. A related investigation of rebuilding funds for Afghanistan began in February.
Mr. Bowen’s office agreed to answer general questions on the new inquiry but declined to divulge the names of the suspects, who include private contractors, military officers and civilian officials.
Developed in the Treasury Department, the financial monitoring effort goes by the generic name of the Financial Crimes Enforcement Network, or Fincen, which continually generates data on suspicious financial transactions in support of more than 275 federal and state law enforcement agencies, according to a December report by the Government Accountability Office.
Stephen Hudak, a spokesman at the Treasury Department for Fincen, said it generated 15 million to 16 million reports a year on suspicious financial activity or major currency transactions, including cash deposits of more than $10,000. He said that transactions in banks, check-cashing outlets, wire services, casinos, stockbrokers’ offices and insurance companies were covered.
“Basically, we follow dirty money,” Mr. Hudak said. “Authorized users can access Fincen’s databases to make connections in criminal investigations.”
Mr. Hudak confirmed that Fincen was being used to investigate reconstruction corruption in Iraq.
Because the investigation has covered only limited areas in the United States so far, Mr. Bowen said he estimated that dozens of additional cases would be opened by the end of the year. Mr. Bowen, who spoke by phone from Baghdad, described the effort as a “concerted, focused, forensic financial review involving all the Iraq reconstruction funds.”
Congress has appropriated about $53 billion for reconstruction projects, and the rest of the money has come from Iraqi assets and international pledges. According to testimony before the Wartime Contracting Commission last month by Arnold Fields, who leads the Office of the Special Inspector General for Afghanistan Reconstruction, Congress has appropriated $51 billion to rebuild that country since 2002.
John Brummet, the assistant inspector general for audits in that office, said that the office’s staff members had been studying the Iraq investigation for nearly a year and that they had started a related effort last month.
“What we’re trying to do is basically replicate what they’ve done without having to pay the price of the learning curve,” Mr. Brummet said.
Investigations involving the inspector general’s office for Iraq’s reconstruction have led to 35 indictments and 27 convictions for fraud in numerous forms; the number of convictions rises to 58 when cases pursued by other government agencies are included, according to figures compiled by the Justice Department.
Mr. Bowen would not comment on whether indictments had yet been written up for the new cases, which numbered 52 by last week. But he said that at least 45 of those had come directly from the forensic effort.
Wayne White, who until 2005 was a senior intelligence official with the State Department focused on Iraq and is now a scholar with the Middle East Institute in Washington, said he was not surprised that new cases were still turning up.
Since Iraq’s economy collapsed after the 1991 Persian Gulf war, the country’s dealings with foreign companies and contractors have been laced with bribery, kickbacks and other fraud, Mr. White said, adding that weak oversight of the reconstruction efforts almost guaranteed that those problems would not be rooted out.
“That’s been very disappointing, and we’ve seen it in Afghanistan as well,” Mr. White said.
A senior federal official said that some of the new cases appeared to be closely linked to known networks of conspiracy and fraud and were likely to extend investigators’ knowledge of cases that had already ended with convictions. Many other cases seem to be entirely new, the official said.
Mr. Bowen said that many of the new cases involved bribes and kickbacks for awarding lucrative work to contractors, and that in a number of cases, spouses or other relatives of the suspects are accused of setting up fraudulent companies to hide the illicit gains.
When people who turn up in the net are initially contacted by investigators, the reaction “runs the gamut,” Mr. Bowen said. Some deny wrongdoing and others admit to accepting small bribes, which on further investigation rise into hundreds of thousands of dollars.
One suspect, he said, made the job especially easy on investigators who arrived at his door. “I’ve been waiting for you,” the suspect said.
India tells Putin of Afghan fears
India is calling on Russia to reach out to Afghanistan’s neighbours to start preparing a strategy for when Nato forces pull out to prevent extremist forces destabilising central Asia and southern Russia.
EDITOR’S CHOICE
India renews vow to stay in Afghanistan - Mar-07
Russia seen as route into Afghanistan - Feb-07
India and Pakistan talks end without deal - Feb-25
US doubts Islamabad’s will to pursue militants - Mar-09
Veterans of Soviet war see same errors by US - Nov-30
New Delhi’s desire to intensify talks with Moscow over the future of Afghanistan comes as concerns rise among neighbours of the war-torn state about a possible reconciliation with the Taliban and ultimately its return to political power in Kabul.
Russia has preferred to keep a focus on the drugs-trafficking menace emanating from Afghanistan rather than consider a fuller international engagement over a country that inflicted humiliation on the Russian army in the 1980s. Afghanistan is highly sensitive for Russia, as it lost thousands of soldiers in its war with mujahideen fighters, a defeat that encapsulated its decline in the closing years of the cold war.
Speaking after a meeting with his Russian counterpart, Vladimir Putin, Manmohan Singh, the Indian prime minister, said on Friday night: “We have agreed to intensify our consultations on Afghanistan and the challenges posed by terrorism and extremism in our region.”
New Delhi is concerned that a Nato withdrawal could lead to Afghanistan falling under the control of extremists, undermining regional security and handing Pakistan, the Taliban’s traditional sponsor, more influence. As such it is very keen to develop – with Afghanistan’s neighbours – plans to shore up the long-term stability of the country.
Top Indian officials say India is “engaging deeply” with Russia over Afghanistan, and that shared concerns were discussed by the two leaders. The Nato alliance will be wary of deeper dialogue between Russia and India. The US and other western powers want India, which has a $1.3bn development programme in Afghanistan, to remain aligned with Nato policy. They fear any suggestion of steps towards reforming the former Northern Alliance, a military political coalition of Uzbekhs, Tajiks and Hazara, that fought the Taliban from the late 1990s with support from regional allies.
Earlier this week, an influential member of India’s National Security Advisory Board told Russian diplomats that Moscow should “chart a hedging strategy” with India, Iran and central Asian states in response to “very disquieting” events in Afghanistan. Kanwal Sibal, a former foreign secretary and ambassador to Russia, said the US wanted to “cut its losses in Afghanistan as quickly as possible”.
“India and Russia should be worried at the strategic depth that the Wahabbist [a militant form of Sunni ideology] will acquire in the region, threatening central Asia and India,” he added.
Indian concerns about Afghanistan – where the US recently committed another 30,000 troops – have been mounting since the London conference on the war-torn country earlier this year.
On the eve of that conference General Stanley McChrystal, the Nato commander in Afghanistan, raised the prospect that the US troop surge would lead to a negotiated peace with the Taliban.
Advisers to Mr Singh have criticised the proposal to buy off Taliban fighters, saying the approach is rooted in Britain’s 19th century failures in Afghanistan.
EDITOR’S CHOICE
India renews vow to stay in Afghanistan - Mar-07
Russia seen as route into Afghanistan - Feb-07
India and Pakistan talks end without deal - Feb-25
US doubts Islamabad’s will to pursue militants - Mar-09
Veterans of Soviet war see same errors by US - Nov-30
New Delhi’s desire to intensify talks with Moscow over the future of Afghanistan comes as concerns rise among neighbours of the war-torn state about a possible reconciliation with the Taliban and ultimately its return to political power in Kabul.
Russia has preferred to keep a focus on the drugs-trafficking menace emanating from Afghanistan rather than consider a fuller international engagement over a country that inflicted humiliation on the Russian army in the 1980s. Afghanistan is highly sensitive for Russia, as it lost thousands of soldiers in its war with mujahideen fighters, a defeat that encapsulated its decline in the closing years of the cold war.
Speaking after a meeting with his Russian counterpart, Vladimir Putin, Manmohan Singh, the Indian prime minister, said on Friday night: “We have agreed to intensify our consultations on Afghanistan and the challenges posed by terrorism and extremism in our region.”
New Delhi is concerned that a Nato withdrawal could lead to Afghanistan falling under the control of extremists, undermining regional security and handing Pakistan, the Taliban’s traditional sponsor, more influence. As such it is very keen to develop – with Afghanistan’s neighbours – plans to shore up the long-term stability of the country.
Top Indian officials say India is “engaging deeply” with Russia over Afghanistan, and that shared concerns were discussed by the two leaders. The Nato alliance will be wary of deeper dialogue between Russia and India. The US and other western powers want India, which has a $1.3bn development programme in Afghanistan, to remain aligned with Nato policy. They fear any suggestion of steps towards reforming the former Northern Alliance, a military political coalition of Uzbekhs, Tajiks and Hazara, that fought the Taliban from the late 1990s with support from regional allies.
Earlier this week, an influential member of India’s National Security Advisory Board told Russian diplomats that Moscow should “chart a hedging strategy” with India, Iran and central Asian states in response to “very disquieting” events in Afghanistan. Kanwal Sibal, a former foreign secretary and ambassador to Russia, said the US wanted to “cut its losses in Afghanistan as quickly as possible”.
“India and Russia should be worried at the strategic depth that the Wahabbist [a militant form of Sunni ideology] will acquire in the region, threatening central Asia and India,” he added.
Indian concerns about Afghanistan – where the US recently committed another 30,000 troops – have been mounting since the London conference on the war-torn country earlier this year.
On the eve of that conference General Stanley McChrystal, the Nato commander in Afghanistan, raised the prospect that the US troop surge would lead to a negotiated peace with the Taliban.
Advisers to Mr Singh have criticised the proposal to buy off Taliban fighters, saying the approach is rooted in Britain’s 19th century failures in Afghanistan.
Friday, March 12, 2010
Asian Currencies Rally for Fifth Week as Recovery Spurs Inflows
March 13 (Bloomberg) -- Asian currencies rallied this week, led by the Malaysian ringgit and South Korea’s won, as improving economic data and reduced concern about Greece’s debt crisis spurred demand for regional assets.
The Bloomberg-JPMorgan Asia Dollar Index gained for a fifth week as stock-exchange data showed overseas investors pumped more than $5 billion into shares in India, Taiwan and Korea since the end of February. China this week announced bigger gains in exports, lending and consumer prices than economists forecast. The central bank in Indonesia, Southeast Asia’s largest economy, raised its 2010 and 2011 growth forecasts and Standard & Poor’s yesterday upgraded the nation’s credit rating.
“Global risk abated as concerns over Greece subsided,” said Sebastien Barbe, head of emerging-market research at Credit Agricole CIB in Hong Kong. “The other driver was the strong Chinese data which boosted yuan appreciation bets. Prospects of rate hikes in the region also supported Asian currencies.”
The ringgit strengthened 1.9 percent from its March 5 close to 3.301 per dollar, according to data compiled by Bloomberg. It was the biggest weekly gain in five months and the currency yesterday touched a 19-month high of 3.300. The won climbed 1.1 percent to 1,128.20, the Philippine peso rose 0.9 percent to 45.65 and Indonesia’s rupiah appreciated 0.7 percent to 9,155.
The Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, gained 0.3 percent this week and the MSCI Asia-Pacific Index of shares posted its best close since January. Emerging-market and high-yield bond funds each took in more than $1 billion in the week ended March 10, EPFR Global said yesterday, the most since the research firm began publishing weekly data on the sectors a decade ago.
Greece Risk
Former European Commission President Romano Prodi said March 10 that Greece’s problems are “over” and the rest of the euro region is safe. The nation this month announced the third round of austerity measures this year and sold 5 billion euros ($6.8 billion) of debt, helping shore up confidence in emerging- market assets.
Twelve-month non-deliverable yuan forwards climbed 0.3 percent from March 5 to 6.629 per dollar in Hong Kong, reflecting bets the currency will strengthen 3 percent in a year from the spot rate of 6.8255.
Central bank Governor Zhou Xiaochuan said March 6 that policies introduced to combat an economic slump must end “sooner or later,” fanning speculation interest rates will be raised and the yuan allowed to strengthen. Yuan appreciation has been kept in check since July 2008, following a 21 percent advance in three years, and renewed gains may deter policy makers elsewhere in Asia from trying to limit currency moves that erode the competitiveness of their exports.
Policy Tightening
“Yuan appreciation will support further currency gains in the region,” said Calbert Loh, head of treasury at Bangkok Bank Bhd. in Kuala Lumpur.
The Philippine peso posted its biggest weekly gain in two months after the central bank this week began to withdraw monetary stimulus by paring a lending program even as it left benchmark rates unchanged at a record low. Bank Negara Malaysia on March 5 increased its overnight policy rate to 2.25 percent, from a record-low 2 percent, and Thailand’s central bank on March 11 signaled plans to raise its benchmark rate from a five- year low.
“BSP’s unwinding of liquidity marks the start of more in the rest of the region and we could see Asian central bank rate hikes in the second quarter which will be supportive of Asian currencies,” Barbe said.
Brighter Prospects
The Indonesian rupiah yesterday touched 9,150 per dollar, the strongest level in almost two months, after the S&P ratings upgrade. The nation’s long-term foreign-currency rating was increased one level to a 12-year high of ‘BB’.
“This is in line with Indonesia’s strong economic fundamentals like improving government debt, rising foreign reserves and accelerating gross domestic product growth,” said Prakriti Sofat, a Singapore-based regional economist at Barclays Plc. “Indonesia has already been attracting a lot of offshore interest and there is potential for more strong inflows, which should support the currency.”
Bank Indonesia yesterday raised its 2011 economic growth forecast to as much as 6.5 percent from an earlier prediction of as much as 6 percent. It earlier in the week raised its estimate for 2010 growth to 5.6 percent from 5.2 percent.
Singapore’s gross domestic product will rise 6.5 percent this year, according to the median forecast of economists in a Monetary Authority of Singapore survey published this week. That compares with the 5.5 percent increase projected in a December poll. Singapore’s dollar climbed 0.4 percent this week to S$1.3946 versus the greenback.
Elsewhere, Taiwan’s dollar advanced 0.6 percent to NT$31.84 and the Thai baht gained 0.2 percent to 32.57.
The Bloomberg-JPMorgan Asia Dollar Index gained for a fifth week as stock-exchange data showed overseas investors pumped more than $5 billion into shares in India, Taiwan and Korea since the end of February. China this week announced bigger gains in exports, lending and consumer prices than economists forecast. The central bank in Indonesia, Southeast Asia’s largest economy, raised its 2010 and 2011 growth forecasts and Standard & Poor’s yesterday upgraded the nation’s credit rating.
“Global risk abated as concerns over Greece subsided,” said Sebastien Barbe, head of emerging-market research at Credit Agricole CIB in Hong Kong. “The other driver was the strong Chinese data which boosted yuan appreciation bets. Prospects of rate hikes in the region also supported Asian currencies.”
The ringgit strengthened 1.9 percent from its March 5 close to 3.301 per dollar, according to data compiled by Bloomberg. It was the biggest weekly gain in five months and the currency yesterday touched a 19-month high of 3.300. The won climbed 1.1 percent to 1,128.20, the Philippine peso rose 0.9 percent to 45.65 and Indonesia’s rupiah appreciated 0.7 percent to 9,155.
The Asia Dollar Index, which tracks the region’s 10 most- used currencies excluding the yen, gained 0.3 percent this week and the MSCI Asia-Pacific Index of shares posted its best close since January. Emerging-market and high-yield bond funds each took in more than $1 billion in the week ended March 10, EPFR Global said yesterday, the most since the research firm began publishing weekly data on the sectors a decade ago.
Greece Risk
Former European Commission President Romano Prodi said March 10 that Greece’s problems are “over” and the rest of the euro region is safe. The nation this month announced the third round of austerity measures this year and sold 5 billion euros ($6.8 billion) of debt, helping shore up confidence in emerging- market assets.
Twelve-month non-deliverable yuan forwards climbed 0.3 percent from March 5 to 6.629 per dollar in Hong Kong, reflecting bets the currency will strengthen 3 percent in a year from the spot rate of 6.8255.
Central bank Governor Zhou Xiaochuan said March 6 that policies introduced to combat an economic slump must end “sooner or later,” fanning speculation interest rates will be raised and the yuan allowed to strengthen. Yuan appreciation has been kept in check since July 2008, following a 21 percent advance in three years, and renewed gains may deter policy makers elsewhere in Asia from trying to limit currency moves that erode the competitiveness of their exports.
Policy Tightening
“Yuan appreciation will support further currency gains in the region,” said Calbert Loh, head of treasury at Bangkok Bank Bhd. in Kuala Lumpur.
The Philippine peso posted its biggest weekly gain in two months after the central bank this week began to withdraw monetary stimulus by paring a lending program even as it left benchmark rates unchanged at a record low. Bank Negara Malaysia on March 5 increased its overnight policy rate to 2.25 percent, from a record-low 2 percent, and Thailand’s central bank on March 11 signaled plans to raise its benchmark rate from a five- year low.
“BSP’s unwinding of liquidity marks the start of more in the rest of the region and we could see Asian central bank rate hikes in the second quarter which will be supportive of Asian currencies,” Barbe said.
Brighter Prospects
The Indonesian rupiah yesterday touched 9,150 per dollar, the strongest level in almost two months, after the S&P ratings upgrade. The nation’s long-term foreign-currency rating was increased one level to a 12-year high of ‘BB’.
“This is in line with Indonesia’s strong economic fundamentals like improving government debt, rising foreign reserves and accelerating gross domestic product growth,” said Prakriti Sofat, a Singapore-based regional economist at Barclays Plc. “Indonesia has already been attracting a lot of offshore interest and there is potential for more strong inflows, which should support the currency.”
Bank Indonesia yesterday raised its 2011 economic growth forecast to as much as 6.5 percent from an earlier prediction of as much as 6 percent. It earlier in the week raised its estimate for 2010 growth to 5.6 percent from 5.2 percent.
Singapore’s gross domestic product will rise 6.5 percent this year, according to the median forecast of economists in a Monetary Authority of Singapore survey published this week. That compares with the 5.5 percent increase projected in a December poll. Singapore’s dollar climbed 0.4 percent this week to S$1.3946 versus the greenback.
Elsewhere, Taiwan’s dollar advanced 0.6 percent to NT$31.84 and the Thai baht gained 0.2 percent to 32.57.
Toyota Says It’s Upgrading Software That Reads Crash Data
March 13 (Bloomberg) -- Toyota Motor Corp. said it is upgrading software that helps read information from devices used to record vehicle crash data, according to a statement on the automaker’s Web site.
Toyota, the world’s biggest automaker, has recalled about 8 million vehicles to repair defects that may cause unintended acceleration. Its handling of the recalls, and the government’s response, have been the subject of hearings by three committees in Congress.
Media reports have “mischaracterized how Toyota uses and discloses information” from recorders in its Toyota and Lexus vehicles, the company said in the statement. Toyota has always made all data recorded available to the National Highway Traffic Safety Administration, law enforcement officials and courts “when requested or ordered to do so,” the automaker said.
The software for the data recorders will be upgraded to be compatible with all vehicles, Toyota said in the statement. The Toyota City, Japan-based company delivered a specialized computer used to read crash data to U.S. regulators on March 3, and three more will be delivered in April, the company said.
Toyota will also provide 150 computers to read the “event data recorders” throughout North America by the end of April, the statement said.
“Once the additional read-out units are available and appropriate procedures are in place, Toyota will provide vehicle owners with access to EDR data from their vehicles upon request,” Toyota said.
Toyota, the world’s biggest automaker, has recalled about 8 million vehicles to repair defects that may cause unintended acceleration. Its handling of the recalls, and the government’s response, have been the subject of hearings by three committees in Congress.
Media reports have “mischaracterized how Toyota uses and discloses information” from recorders in its Toyota and Lexus vehicles, the company said in the statement. Toyota has always made all data recorded available to the National Highway Traffic Safety Administration, law enforcement officials and courts “when requested or ordered to do so,” the automaker said.
The software for the data recorders will be upgraded to be compatible with all vehicles, Toyota said in the statement. The Toyota City, Japan-based company delivered a specialized computer used to read crash data to U.S. regulators on March 3, and three more will be delivered in April, the company said.
Toyota will also provide 150 computers to read the “event data recorders” throughout North America by the end of April, the statement said.
“Once the additional read-out units are available and appropriate procedures are in place, Toyota will provide vehicle owners with access to EDR data from their vehicles upon request,” Toyota said.
Thursday, March 11, 2010
India’s Stalled Arms Buying Leaves Its Army Outgunned by China
March 12 (Bloomberg) -- India, which has tripled its defense spending in a race against China’s military buildup, is having trouble converting the funding into weapons and equipment its military says are urgently needed.
The government in five years has canceled two tenders for artillery guns, a contract for ammunition propellant and two helicopter tenders, together worth at least $4 billion. No contract exceeding $100 million has been awarded through competitive bidding in at least 23 years, said military analyst V.K. Kapoor. Defense Ministry spokesman Sitanshu Kar said he couldn’t immediately identify the last such deal.
India’s “military capacity and preparedness are being reduced because of the inadequacy of the procurement process,” said Uday Bhaskar, director of the National Maritime Foundation, a New Delhi research institute on strategic issues. The military’s upgrading is “on hold and its obsolescence is increasing.”
The cancellations have disrupted attempted weapons sales by Textron Inc.’s Bell Helicopter unit in Fort Worth, BAE Systems Plc and South Africa’s Denel Ltd. Bhaskar said they have hurt troop readiness along more than 4,200 kilometers (2,600 miles) of Himalayan frontiers, where India has fought three full-blown wars with Pakistan and one with China.
India took 20 years to negotiate a 2004 contract for jet trainers, even as 157 pilots died in three decades of jet fighter crashes blamed partly on inadequate training craft.
Obsolete Weapons
The Defense Ministry, which wields the world’s 10th-largest military budget, has surrendered 3 percent to 9 percent of its announced budget in each of the past seven years because it couldn’t spend all the money allocated for arms, according to a January report by the New Delhi office of accounting firm KPMG and the Confederation of Indian Industry. Half of India’s weapons are obsolete, the report said.
China has almost quadrupled its official defense spending since 2000 to $78 billion for fiscal 2011, 7.5 percent more than in the previous year. India will spend $32 billion on defense this year, triple its 2000 outlay and 4 percent more than in fiscal 2010.
India has bought no artillery for more than 23 years, a period during which the government has sought to buy more than 1,500 155 mm guns for use mainly along the Pakistani and Chinese borders. Such guns were used to defeat Pakistan in a 1999 conflict at Kargil in Kashmir; India would have had too few had that fight grown into a full-scale war, said Kapoor, who is also a retired army lieutenant general.
Howitzer Delays
India’s military is adequately prepared on its borders and will benefit from an accelerating modernization program, Minister of State for Defense M.M. Pallam Raju said at a conference with defense companies in New Delhi on Feb. 16. “In the past five years we have created a faster, more transparent procurement process,” he said.
That process is being tested as India’s air force conducts flight trials in the world’s biggest fighter-jet purchase in 15 years. Chicago-based Boeing Co., Lockheed Martin Corp. and four European builders are vying under a 2007 tender to sell India 126 warplanes worth $11 billion.
India is expected to sign a separate deal for 29 naval MiG- 29 fighters during this week’s visit by Russian Prime Minister Vladimir Putin.
John Giese, a spokesman for Bethesda, Maryland-based Lockheed, called the fighter tender “one of the most challenging competitions in the history of fighter aviation.” Given the complexity, “the competition has been very efficient, transparent and professionally managed,” Boeing spokeswoman Mary Ann Brett said in an e-mail.
European Competitors
Lockheed and Boeing are competing with Paris-based Dassault Aviation SA, Stockholm-based Saab AB, European Aeronautic, Defense & Space Co., which has headquarters in Paris and Munich, and Moscow-based OAO United Aircraft Corp.
While the military says rules last amended in November let it sign a contract within 20 to 34 months, it is too early to judge their effectiveness, said Gurpal Singh, a deputy director general for the industry federation in New Delhi.
The air force asked the government in 1983 to order advanced jet trainers because pilots taught mainly in subsonic jets were losing control of supersonic MiG-21 fighters that were more than three times faster. Political and bureaucratic battles under 11 prime ministers added to the delays before BAE Hawk jets were purchased.
India’s main political blocs -- led by the Congress Party and the Bharatiya Janata Party (BJP) -- have fought over arms buying since 1987. Indian newspapers reported then that Swedish artillery builder Bofors, now a unit of London-based BAE, bribed officials to buy its guns. The scandal scuttled most of the deal and helped drive the Congress government of Prime Minister Rajiv Gandhi to defeat in 1989 elections.
Reviewing Deals
India was still seeking artillery in 2004 when Congress was elected, and halted bidding as it reviewed defense deals under the previous BJP administration. When police investigated Pretoria-based Denel for paying illegal commissions in winning a 2002 army order for rifles, the government blacklisted the state-owned company.
Four more foreign companies were barred from defense contracts last year, after the Central Bureau of Investigation said they were being investigated on suspicion of bribery. That forced Singapore Technologies Engineering Ltd. out of the race, leaving London-based BAE as a single vendor and prompting officials to halt the tender.
The government in five years has canceled two tenders for artillery guns, a contract for ammunition propellant and two helicopter tenders, together worth at least $4 billion. No contract exceeding $100 million has been awarded through competitive bidding in at least 23 years, said military analyst V.K. Kapoor. Defense Ministry spokesman Sitanshu Kar said he couldn’t immediately identify the last such deal.
India’s “military capacity and preparedness are being reduced because of the inadequacy of the procurement process,” said Uday Bhaskar, director of the National Maritime Foundation, a New Delhi research institute on strategic issues. The military’s upgrading is “on hold and its obsolescence is increasing.”
The cancellations have disrupted attempted weapons sales by Textron Inc.’s Bell Helicopter unit in Fort Worth, BAE Systems Plc and South Africa’s Denel Ltd. Bhaskar said they have hurt troop readiness along more than 4,200 kilometers (2,600 miles) of Himalayan frontiers, where India has fought three full-blown wars with Pakistan and one with China.
India took 20 years to negotiate a 2004 contract for jet trainers, even as 157 pilots died in three decades of jet fighter crashes blamed partly on inadequate training craft.
Obsolete Weapons
The Defense Ministry, which wields the world’s 10th-largest military budget, has surrendered 3 percent to 9 percent of its announced budget in each of the past seven years because it couldn’t spend all the money allocated for arms, according to a January report by the New Delhi office of accounting firm KPMG and the Confederation of Indian Industry. Half of India’s weapons are obsolete, the report said.
China has almost quadrupled its official defense spending since 2000 to $78 billion for fiscal 2011, 7.5 percent more than in the previous year. India will spend $32 billion on defense this year, triple its 2000 outlay and 4 percent more than in fiscal 2010.
India has bought no artillery for more than 23 years, a period during which the government has sought to buy more than 1,500 155 mm guns for use mainly along the Pakistani and Chinese borders. Such guns were used to defeat Pakistan in a 1999 conflict at Kargil in Kashmir; India would have had too few had that fight grown into a full-scale war, said Kapoor, who is also a retired army lieutenant general.
Howitzer Delays
India’s military is adequately prepared on its borders and will benefit from an accelerating modernization program, Minister of State for Defense M.M. Pallam Raju said at a conference with defense companies in New Delhi on Feb. 16. “In the past five years we have created a faster, more transparent procurement process,” he said.
That process is being tested as India’s air force conducts flight trials in the world’s biggest fighter-jet purchase in 15 years. Chicago-based Boeing Co., Lockheed Martin Corp. and four European builders are vying under a 2007 tender to sell India 126 warplanes worth $11 billion.
India is expected to sign a separate deal for 29 naval MiG- 29 fighters during this week’s visit by Russian Prime Minister Vladimir Putin.
John Giese, a spokesman for Bethesda, Maryland-based Lockheed, called the fighter tender “one of the most challenging competitions in the history of fighter aviation.” Given the complexity, “the competition has been very efficient, transparent and professionally managed,” Boeing spokeswoman Mary Ann Brett said in an e-mail.
European Competitors
Lockheed and Boeing are competing with Paris-based Dassault Aviation SA, Stockholm-based Saab AB, European Aeronautic, Defense & Space Co., which has headquarters in Paris and Munich, and Moscow-based OAO United Aircraft Corp.
While the military says rules last amended in November let it sign a contract within 20 to 34 months, it is too early to judge their effectiveness, said Gurpal Singh, a deputy director general for the industry federation in New Delhi.
The air force asked the government in 1983 to order advanced jet trainers because pilots taught mainly in subsonic jets were losing control of supersonic MiG-21 fighters that were more than three times faster. Political and bureaucratic battles under 11 prime ministers added to the delays before BAE Hawk jets were purchased.
India’s main political blocs -- led by the Congress Party and the Bharatiya Janata Party (BJP) -- have fought over arms buying since 1987. Indian newspapers reported then that Swedish artillery builder Bofors, now a unit of London-based BAE, bribed officials to buy its guns. The scandal scuttled most of the deal and helped drive the Congress government of Prime Minister Rajiv Gandhi to defeat in 1989 elections.
Reviewing Deals
India was still seeking artillery in 2004 when Congress was elected, and halted bidding as it reviewed defense deals under the previous BJP administration. When police investigated Pretoria-based Denel for paying illegal commissions in winning a 2002 army order for rifles, the government blacklisted the state-owned company.
Four more foreign companies were barred from defense contracts last year, after the Central Bureau of Investigation said they were being investigated on suspicion of bribery. That forced Singapore Technologies Engineering Ltd. out of the race, leaving London-based BAE as a single vendor and prompting officials to halt the tender.
Asian Stocks Rise, Heading to Third Weekly Gain; Honda Advances
March 12 (Bloomberg) -- Asian stocks rose, sending the MSCI Asia Pacific to its third weekly advance, as the yen weakened on speculation Japan’s central bank will loosen monetary policies.
Honda Motor Co., a carmaker that gets about 45 percent of sales in North America, and Nissan Motor Co., which gets about 77 percent of its revenue outside Japan, climbed more than 1 percent in Tokyo. Hitachi Ltd. gained 1.5 percent after its incoming president said the unprofitable manufacturer’s performance will improve next fiscal year.
The Bank of Japan may seek to expand a 10 trillion-yen ($110 billion) fund that provides loans to banks in a March 16- 17 policy meeting, according to two central bank officials who spoke on condition of anonymity.
“The BOJ is increasingly seen as determined to beat deflation, and that’s propping up investor sentiment,” said Kenichi Hirano, general manager and strategist at Tokyo-based Tachibana Securities Co. “Further monetary easing will widen a gap in borrowing costs between Japan and other countries, which may lead to the yen’s depreciation.”
The MSCI Asia Pacific Index rose 0.3 percent to 123.16 as of 9:30 a.m. in Tokyo, with twice as many shares advancing as declining.
The gauge has gained about 2.4 percent this week, set for a third weekly advance, as a lower-than-estimated U.S. unemployment rate boosted investor confidence in a U.S. economic recovery. Shares in the gauge trade at 19 times estimated earnings, compared with 15 times for the Standard & Poor’s 500 Index in the U.S. and 13 times for the Stoxx Europe 600 Index.
Nikkei Advances
Japan’s Nikkei 225 Stock Average climbed 0.8 percent to 10,748.45, the biggest advance among major Asia-Pacific benchmark indexes. Australia’s S&P/ASX 200 Index rose 0.4 percent. South Korea’s Kospi Index increased 0.5 percent.
Futures on the Standard & Poor’s 500 Index fell less than 0.1 percent. The gauge gained 0.4 percent yesterday in New York to the highest level since October 2008, as Citigroup Inc. led a bank rally and investors speculated that health-care reform will be harder to pass.
The yen depreciated to 124.15 against the euro today from 123.31 at the 3 p.m. close of stock trading in Tokyo yesterday, and weakened to 90.75 versus the dollar today from 90.38. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency.
Honda Motor Co., a carmaker that gets about 45 percent of sales in North America, and Nissan Motor Co., which gets about 77 percent of its revenue outside Japan, climbed more than 1 percent in Tokyo. Hitachi Ltd. gained 1.5 percent after its incoming president said the unprofitable manufacturer’s performance will improve next fiscal year.
The Bank of Japan may seek to expand a 10 trillion-yen ($110 billion) fund that provides loans to banks in a March 16- 17 policy meeting, according to two central bank officials who spoke on condition of anonymity.
“The BOJ is increasingly seen as determined to beat deflation, and that’s propping up investor sentiment,” said Kenichi Hirano, general manager and strategist at Tokyo-based Tachibana Securities Co. “Further monetary easing will widen a gap in borrowing costs between Japan and other countries, which may lead to the yen’s depreciation.”
The MSCI Asia Pacific Index rose 0.3 percent to 123.16 as of 9:30 a.m. in Tokyo, with twice as many shares advancing as declining.
The gauge has gained about 2.4 percent this week, set for a third weekly advance, as a lower-than-estimated U.S. unemployment rate boosted investor confidence in a U.S. economic recovery. Shares in the gauge trade at 19 times estimated earnings, compared with 15 times for the Standard & Poor’s 500 Index in the U.S. and 13 times for the Stoxx Europe 600 Index.
Nikkei Advances
Japan’s Nikkei 225 Stock Average climbed 0.8 percent to 10,748.45, the biggest advance among major Asia-Pacific benchmark indexes. Australia’s S&P/ASX 200 Index rose 0.4 percent. South Korea’s Kospi Index increased 0.5 percent.
Futures on the Standard & Poor’s 500 Index fell less than 0.1 percent. The gauge gained 0.4 percent yesterday in New York to the highest level since October 2008, as Citigroup Inc. led a bank rally and investors speculated that health-care reform will be harder to pass.
The yen depreciated to 124.15 against the euro today from 123.31 at the 3 p.m. close of stock trading in Tokyo yesterday, and weakened to 90.75 versus the dollar today from 90.38. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency.
Wednesday, March 10, 2010
Japanese Stocks Rise on Economic View Report; Mitsui Gains
March 11 (Bloomberg) -- Japanese stocks advanced after the Nikkei newspaper reported the government may lift its outlook on the nation’s economy and on speculation iron ore prices will increase as demand grows.
Mitsui & Co., which owns a 15 percent stake in Vale SA’s major shareholder, climbed 3 percent after the Nikkei said Brazil-based Vale is seeking to raise iron-ore prices. Mitsui O.S.K. Lines Ltd., Japan’s largest operator of iron-ore ships, rose 2.3 percent. Sony Corp., which gets 71 percent of its sales outside Japan, advanced 2.7 percent as the yen fell against the dollar. Shinsei Bank Ltd. slid 1.9 percent after the Financial Times said it decided not to merge with Aozora Bank Ltd.
“The economy is undoubtedly in the midst of mild recovery,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “Manufacturers’ earnings are improving thanks to the resilience of emerging economies.”
The Nikkei 225 Stock Average climbed 0.9 percent to 10,653.53 as of 10:13 a.m. in Tokyo. The broader Topix index rose 0.9 percent to 930.75 with almost six times as many shares gaining as falling.
The Topix has increased 2.2 percent for the past four days, set for a third-straight weekly gain, as a lower-than-estimated U.S. unemployment rate boosted investor confidence in a U.S. economic recovery. The average daily value of stocks traded in Tokyo dropped 16 percent this week from the 12-month mean as investors awaited the settlement of Nikkei 225 futures and options due tomorrow.
Sony, Nintendo
The Japanese government will probably upgrade its overall assessment on the nation’s economy for the first time since July, the Nikkei said today, without identifying its source of information. The report is expected to say the economy is making a “steady recovery” as rising exports to China drove growth in production, the newspaper said.
Sony, the maker of the PlayStation 3 game machine, jumped 2.7 percent to 3,465 yen. Nintendo Co., the world’s biggest maker of handheld game players climbed 1.4 percent to 27,890 yen.
The yen weakened to as low as 90.82 against the dollar from 90.10 at the 3 p.m. close of Tokyo stock trading yesterday, while depreciating to 124.00 per euro from 122.53. A weaker yen boosts the value of overseas sales at Japanese companies when converted into their home currency.
Mitsui O.S.K., Japan’s No. 2 shipping line, advanced 2.3 percent to 623 yen. Smaller rival Kawasaki Kisen Kaisha Ltd. rose 1.4 percent to 352 yen after the Nikkei said its container- ship business may have a narrower loss in the year to March 2011. Shipping companies collectively posted the steepest climb among the Topix’s 33 industry groups.
Trading Houses
The Baltic Dry Index, a measure of shipping costs for commodities, rose 0.6 percent in London yesterday.
Mitsui, Japan’s No. 2 trading house by market value, gained 3 percent to 1,549 yen. Itochu Corp., which holds interest in a Brazilian iron-ore producer, climbed 2.4 percent to 781 yen.
Vale, controlled by Valepar SA, is seeking to raise contract iron-ore prices by more than 90 percent in negotiations with Japanese steelmakers, the Nikkei reported today. Vale, the world’s biggest producer of the raw material used to make steel, has proposed increasing the price for the April-June period, Nikkei said.
JFE Holdings Inc., Japan’s second-biggest steelmaker, fell 1.1 percent to 3,460 yen and was the heaviest drag on the Topix. Smaller rival Kobe Steel Ltd. dropped 0.6 percent to 180 yen.
Shinsei slumped 1.9 percent to 102 yen. The bank concluded a planned merger with smaller rival Aozora Bank is no longer necessary and is planning to raise about $830 million, the Financial Times reported. Aozora rose 0.8 percent to 121 yen.
At 11 a.m. Tokyo time, China’s government is scheduled to release its reports on the nation’s consumer-price index, retail sales and industrial production.
Mitsui & Co., which owns a 15 percent stake in Vale SA’s major shareholder, climbed 3 percent after the Nikkei said Brazil-based Vale is seeking to raise iron-ore prices. Mitsui O.S.K. Lines Ltd., Japan’s largest operator of iron-ore ships, rose 2.3 percent. Sony Corp., which gets 71 percent of its sales outside Japan, advanced 2.7 percent as the yen fell against the dollar. Shinsei Bank Ltd. slid 1.9 percent after the Financial Times said it decided not to merge with Aozora Bank Ltd.
“The economy is undoubtedly in the midst of mild recovery,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “Manufacturers’ earnings are improving thanks to the resilience of emerging economies.”
The Nikkei 225 Stock Average climbed 0.9 percent to 10,653.53 as of 10:13 a.m. in Tokyo. The broader Topix index rose 0.9 percent to 930.75 with almost six times as many shares gaining as falling.
The Topix has increased 2.2 percent for the past four days, set for a third-straight weekly gain, as a lower-than-estimated U.S. unemployment rate boosted investor confidence in a U.S. economic recovery. The average daily value of stocks traded in Tokyo dropped 16 percent this week from the 12-month mean as investors awaited the settlement of Nikkei 225 futures and options due tomorrow.
Sony, Nintendo
The Japanese government will probably upgrade its overall assessment on the nation’s economy for the first time since July, the Nikkei said today, without identifying its source of information. The report is expected to say the economy is making a “steady recovery” as rising exports to China drove growth in production, the newspaper said.
Sony, the maker of the PlayStation 3 game machine, jumped 2.7 percent to 3,465 yen. Nintendo Co., the world’s biggest maker of handheld game players climbed 1.4 percent to 27,890 yen.
The yen weakened to as low as 90.82 against the dollar from 90.10 at the 3 p.m. close of Tokyo stock trading yesterday, while depreciating to 124.00 per euro from 122.53. A weaker yen boosts the value of overseas sales at Japanese companies when converted into their home currency.
Mitsui O.S.K., Japan’s No. 2 shipping line, advanced 2.3 percent to 623 yen. Smaller rival Kawasaki Kisen Kaisha Ltd. rose 1.4 percent to 352 yen after the Nikkei said its container- ship business may have a narrower loss in the year to March 2011. Shipping companies collectively posted the steepest climb among the Topix’s 33 industry groups.
Trading Houses
The Baltic Dry Index, a measure of shipping costs for commodities, rose 0.6 percent in London yesterday.
Mitsui, Japan’s No. 2 trading house by market value, gained 3 percent to 1,549 yen. Itochu Corp., which holds interest in a Brazilian iron-ore producer, climbed 2.4 percent to 781 yen.
Vale, controlled by Valepar SA, is seeking to raise contract iron-ore prices by more than 90 percent in negotiations with Japanese steelmakers, the Nikkei reported today. Vale, the world’s biggest producer of the raw material used to make steel, has proposed increasing the price for the April-June period, Nikkei said.
JFE Holdings Inc., Japan’s second-biggest steelmaker, fell 1.1 percent to 3,460 yen and was the heaviest drag on the Topix. Smaller rival Kobe Steel Ltd. dropped 0.6 percent to 180 yen.
Shinsei slumped 1.9 percent to 102 yen. The bank concluded a planned merger with smaller rival Aozora Bank is no longer necessary and is planning to raise about $830 million, the Financial Times reported. Aozora rose 0.8 percent to 121 yen.
At 11 a.m. Tokyo time, China’s government is scheduled to release its reports on the nation’s consumer-price index, retail sales and industrial production.
Japan’s Economy Grows 3.8%, Less Than First Estimated
March 11 (Bloomberg) -- Japan’s economy expanded less than initially estimated in the fourth quarter as companies pared spending and stockpiles as deflation deepened.
Gross domestic product rose at an annual 3.8 percent pace, slower than the 4.6 percent reported in preliminary figures last month, the Cabinet Office said today in Tokyo. The GDP deflator, a gauge of price trends, fell a record 2.8 percent.
The report suggests business spending remains the weak link of an economic recovery that has begun to spread from exporters to households. Renewed demand in Asia is helping Japanese companies such as Canon Inc. and Honda Motor Co., which may minimize an economic slowdown in the coming months as government stimulus measures fade.
“A rebound in capital investment is key for Japan’s economy to regain momentum,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “While declines in investment are coming to a halt, it’s hard to tell when companies will start to beef up spending again.”
The yen traded at 90.46 per dollar at 9:47 a.m. in Tokyo from 90.40 before the report. The Nikkei 225 Stock Average rose 0.7 percent.
The median estimate of 29 economists surveyed by Bloomberg News was for 4 percent growth on an annualized basis. The economy grew 0.9 percent in the fourth quarter from the previous three months, slower than the 1.1 percent first reported.
‘Receded Slightly’
“Concerns about a double-dip recession have receded slightly,” Keisuke Tsumura, a parliamentary secretary at the Cabinet Office, told reporters in Tokyo. “There are budding signs for self-sustained recovery.”
Private inventory shaved 0.1 percentage point from growth, after the initial report showed it added to GDP, the main reason for today’s revision. Automakers may have responded to higher demand by paring stockpiles, Tsumura said. Capital spending rose 0.9 percent in the three months through December from the previous quarter, compared with a 1 percent increase estimated last month.
About a third of factory capacity is sitting idle and falling prices are squeezing profit margins, prompting companies such as Sony Corp. to cut costs to protect their earnings. Sony last month narrowed its forecast for a net loss, saying it is approaching its target of trimming 330 billion yen ($3.7 billion) in costs by eliminating jobs and shutting factories.
Providing Incentives
The government has been providing incentives to buy energy- efficient cars and home appliances. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen stimulus package in December. Consumer spending, which makes up about 60 percent of the economy, climbed 0.7 percent, unchanged from the initial report, the government said today.
An increase in household outlays may not last as government stimulus measures fade and a shortfall in demand keeps suppressing prices, said Hiroshi Watanabe, a senior economist at Daiwa Institute of Research in Tokyo. “The stimulus program gives a one-shot boost to the economy, but it won’t substantially increase consumer spending,” he said.
Finance Minister Naoto Kan last week renewed calls for the Bank of Japan to help arrest deflation, saying he hopes prices will rise this year. Bank of Japan Deputy Governor Hirohide Yamaguchi said last month that prices may not be improving as quickly as he had expected.
The drop in the GDP deflator, the broadest measure of prices in the economy, was the largest since comparable data were made available in 1955. The government initially reported a 3 percent decline in the gauge.
‘Worst-Case Scenario’
“The deflator number really is terrible at the moment,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. “The worst-case scenario is that if you never get out of deflation, you’re running an economy with interest rates that are persistently too high, which damages growth and also makes it impossible to stabilize public finances.”
The government’s options to combat falling prices have been limited by its swelling debt burden, the largest in the industrialized world. Kan said yesterday maintaining fiscal discipline is a significant challenge for policy makers. The central bank has kept the benchmark interest rate at 0.1 percent since December 2008.
Still, some companies are benefiting from rebounding demand in Asia, particularly China, the world’s fastest-growing major economy and Japan’s biggest overseas market. Canon, the world’s biggest camera maker, forecasts sales volume will rise 10 percent in China this year, Masaya Maeda, director of the company, said this week. Honda Motor’s sales in China rose 40 percent in February from a year earlier.
Exports increased 5 percent from the previous quarter, unchanged from the preliminary figures. Net exports, or shipments minus imports, added 0.5 percentage point to growth, the same as last month’s reading.
Some reports for January indicate the export revival is filtering to workers. The unemployment rate dropped to a 10- month low of 4.9 percent and wages climbed for the first time in 20 months.
Gross domestic product rose at an annual 3.8 percent pace, slower than the 4.6 percent reported in preliminary figures last month, the Cabinet Office said today in Tokyo. The GDP deflator, a gauge of price trends, fell a record 2.8 percent.
The report suggests business spending remains the weak link of an economic recovery that has begun to spread from exporters to households. Renewed demand in Asia is helping Japanese companies such as Canon Inc. and Honda Motor Co., which may minimize an economic slowdown in the coming months as government stimulus measures fade.
“A rebound in capital investment is key for Japan’s economy to regain momentum,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo. “While declines in investment are coming to a halt, it’s hard to tell when companies will start to beef up spending again.”
The yen traded at 90.46 per dollar at 9:47 a.m. in Tokyo from 90.40 before the report. The Nikkei 225 Stock Average rose 0.7 percent.
The median estimate of 29 economists surveyed by Bloomberg News was for 4 percent growth on an annualized basis. The economy grew 0.9 percent in the fourth quarter from the previous three months, slower than the 1.1 percent first reported.
‘Receded Slightly’
“Concerns about a double-dip recession have receded slightly,” Keisuke Tsumura, a parliamentary secretary at the Cabinet Office, told reporters in Tokyo. “There are budding signs for self-sustained recovery.”
Private inventory shaved 0.1 percentage point from growth, after the initial report showed it added to GDP, the main reason for today’s revision. Automakers may have responded to higher demand by paring stockpiles, Tsumura said. Capital spending rose 0.9 percent in the three months through December from the previous quarter, compared with a 1 percent increase estimated last month.
About a third of factory capacity is sitting idle and falling prices are squeezing profit margins, prompting companies such as Sony Corp. to cut costs to protect their earnings. Sony last month narrowed its forecast for a net loss, saying it is approaching its target of trimming 330 billion yen ($3.7 billion) in costs by eliminating jobs and shutting factories.
Providing Incentives
The government has been providing incentives to buy energy- efficient cars and home appliances. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen stimulus package in December. Consumer spending, which makes up about 60 percent of the economy, climbed 0.7 percent, unchanged from the initial report, the government said today.
An increase in household outlays may not last as government stimulus measures fade and a shortfall in demand keeps suppressing prices, said Hiroshi Watanabe, a senior economist at Daiwa Institute of Research in Tokyo. “The stimulus program gives a one-shot boost to the economy, but it won’t substantially increase consumer spending,” he said.
Finance Minister Naoto Kan last week renewed calls for the Bank of Japan to help arrest deflation, saying he hopes prices will rise this year. Bank of Japan Deputy Governor Hirohide Yamaguchi said last month that prices may not be improving as quickly as he had expected.
The drop in the GDP deflator, the broadest measure of prices in the economy, was the largest since comparable data were made available in 1955. The government initially reported a 3 percent decline in the gauge.
‘Worst-Case Scenario’
“The deflator number really is terrible at the moment,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. “The worst-case scenario is that if you never get out of deflation, you’re running an economy with interest rates that are persistently too high, which damages growth and also makes it impossible to stabilize public finances.”
The government’s options to combat falling prices have been limited by its swelling debt burden, the largest in the industrialized world. Kan said yesterday maintaining fiscal discipline is a significant challenge for policy makers. The central bank has kept the benchmark interest rate at 0.1 percent since December 2008.
Still, some companies are benefiting from rebounding demand in Asia, particularly China, the world’s fastest-growing major economy and Japan’s biggest overseas market. Canon, the world’s biggest camera maker, forecasts sales volume will rise 10 percent in China this year, Masaya Maeda, director of the company, said this week. Honda Motor’s sales in China rose 40 percent in February from a year earlier.
Exports increased 5 percent from the previous quarter, unchanged from the preliminary figures. Net exports, or shipments minus imports, added 0.5 percentage point to growth, the same as last month’s reading.
Some reports for January indicate the export revival is filtering to workers. The unemployment rate dropped to a 10- month low of 4.9 percent and wages climbed for the first time in 20 months.
Indian Stocks are Better Long-Term Bet, Franklin Says
March 10 (Bloomberg) -- India offers better long-term returns on stocks than China given the outlook for economic growth and corporate earnings, according to Franklin Templeton Investments.
India’s economy may sustain faster expansion from a smaller base as “favorable” demographics boost consumption, said Stephen Dover, who oversees $25 billion as managing director and international chief investment officer for Franklin Templeton Investments’ Local Asset Management groups. Price clearing and the exchange rate are “freer” in India, he said.
“If we were to make one long-term bet, we would make it on India rather than China,” he told reporters in Singapore. “India is, in my opinion, still quite underinvested. Looking at India, India has the opportunity for some of that growth that China has had and the difference is that investors can participate in that growth.”
The Bombay Stock Exchange’s benchmark Sensitive Index has lost 2.2 percent this year, after rallying 81 percent in 2009, as the economy dodged the worst of the global recession. The gauge narrowly beat the 80 percent increase in China’s Shanghai Composite Index to rank among the 10 best performers globally.
Dover said 90 percent of discussion at conferences is focused on China. “For investors really looking for opportunities, the footnote is on India,” he said.
Earnings Growth
Earnings in India may grow 20 percent over the next three years, according to estimates by Sukumar Rajah, chief investment officer at Franklin Templeton Asset Management India Pvt. The company counts Infosys Technologies Ltd., Nestle India Ltd. and Bharti Airtel Ltd. among its holdings in the country.
San Mateo, California-based Franklin Templeton oversaw $189.5 billion in non-U.S. stocks, $66.3 billion in domestic equities and $187.6 billion in fixed-income funds as of Dec. 31. These include emerging-market funds managed by Mark Mobius, who correctly predicted on March 23 the start of a “bull-market” rally. The MSCI Emerging Markets Index rose a record 75 percent in 2009.
India stocks may “outpace” other emerging markets as the country’s economy strengthens, Mobius, Singapore-based chairman of Templeton Asset Management Ltd., said in a question and answer interview posted on the company’s Web site on March 1.
Finance Minister Pranab Mukherjee said in his Feb. 26 budget speech that India had weathered the worst global economic crisis since the 1930s and that the South Asian nation’s growth may reach 10 percent in the “not-too-distant future.”
China, Brazil
Still, Franklin Templeton continues to find investment “opportunities” in China, particularly as consumer spending increases. The investment firm holds shares of China Yurun Food Group Ltd., Parkson Retail Group Ltd. and Ctrip.com International Ltd., Rajah said.
Among other emerging markets, Franklin Templeton is also optimistic on the outlook for Brazilian equities, according to Frederico Sampaio, portfolio manager at Franklin Templeton Investimentos Brasil. The benchmark Bovespa index rallied 83 percent last year and has gained 1.4 percent so far in 2010.
Commodity stocks may lead gains in Brazil this year with an expected pickup in the U.S. economy, Sampaio said in an interview before the briefing today. Vale SA, the world’s biggest iron-ore producer and his top holding, may benefit as prices for the commodity will probably rise after negotiations currently taking place with buyers, he said.
Shares that benefit from the domestic outlook for Brazil’s economy may be a better bet over the long term, Sampaio said.
India’s economy may sustain faster expansion from a smaller base as “favorable” demographics boost consumption, said Stephen Dover, who oversees $25 billion as managing director and international chief investment officer for Franklin Templeton Investments’ Local Asset Management groups. Price clearing and the exchange rate are “freer” in India, he said.
“If we were to make one long-term bet, we would make it on India rather than China,” he told reporters in Singapore. “India is, in my opinion, still quite underinvested. Looking at India, India has the opportunity for some of that growth that China has had and the difference is that investors can participate in that growth.”
The Bombay Stock Exchange’s benchmark Sensitive Index has lost 2.2 percent this year, after rallying 81 percent in 2009, as the economy dodged the worst of the global recession. The gauge narrowly beat the 80 percent increase in China’s Shanghai Composite Index to rank among the 10 best performers globally.
Dover said 90 percent of discussion at conferences is focused on China. “For investors really looking for opportunities, the footnote is on India,” he said.
Earnings Growth
Earnings in India may grow 20 percent over the next three years, according to estimates by Sukumar Rajah, chief investment officer at Franklin Templeton Asset Management India Pvt. The company counts Infosys Technologies Ltd., Nestle India Ltd. and Bharti Airtel Ltd. among its holdings in the country.
San Mateo, California-based Franklin Templeton oversaw $189.5 billion in non-U.S. stocks, $66.3 billion in domestic equities and $187.6 billion in fixed-income funds as of Dec. 31. These include emerging-market funds managed by Mark Mobius, who correctly predicted on March 23 the start of a “bull-market” rally. The MSCI Emerging Markets Index rose a record 75 percent in 2009.
India stocks may “outpace” other emerging markets as the country’s economy strengthens, Mobius, Singapore-based chairman of Templeton Asset Management Ltd., said in a question and answer interview posted on the company’s Web site on March 1.
Finance Minister Pranab Mukherjee said in his Feb. 26 budget speech that India had weathered the worst global economic crisis since the 1930s and that the South Asian nation’s growth may reach 10 percent in the “not-too-distant future.”
China, Brazil
Still, Franklin Templeton continues to find investment “opportunities” in China, particularly as consumer spending increases. The investment firm holds shares of China Yurun Food Group Ltd., Parkson Retail Group Ltd. and Ctrip.com International Ltd., Rajah said.
Among other emerging markets, Franklin Templeton is also optimistic on the outlook for Brazilian equities, according to Frederico Sampaio, portfolio manager at Franklin Templeton Investimentos Brasil. The benchmark Bovespa index rallied 83 percent last year and has gained 1.4 percent so far in 2010.
Commodity stocks may lead gains in Brazil this year with an expected pickup in the U.S. economy, Sampaio said in an interview before the briefing today. Vale SA, the world’s biggest iron-ore producer and his top holding, may benefit as prices for the commodity will probably rise after negotiations currently taking place with buyers, he said.
Shares that benefit from the domestic outlook for Brazil’s economy may be a better bet over the long term, Sampaio said.
Tuesday, March 9, 2010
Bank of China, Fuyao, Gemdale, SAIC Motor: China Equity Preview
March 10 (Bloomberg) -- The following companies may have unusual price changes in China trading. Stock symbols are in parentheses, and share prices are as of the last close.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 15.91, or 0.5 percent, to 3,069.14. The CSI 300 Index rose 0.6 percent to 3,305.86.
The customs office is due to release February trade data today. Exports probably rose 38.3 percent from a year earlier, the third monthly increase and the biggest gain in three years, according to a Bloomberg News survey. Imports may have climbed 38 percent, leaving a trade surplus of $7.15 billion.
Automakers: China’s passenger-car sales gained 55 percent to 942,900 units in February from a year earlier, the China Association of Automobile Manufacturers said. Total vehicle sales, which include buses and trucks, rose 46 percent, it said.
SAIC Motor Corp. (600104 CH), China’s largest carmaker, fell 0.2 percent to 21.95 yuan. FAW Car Co. (000800 CH), which makes passenger cars in China with Volkswagen AG, added 0.1 percent to 24.03 yuan.
Bank of China Ltd. (601988 CH): The nation’s third-largest bank has no further fundraising plans in mainland China after its previously announced plans to sell bonds, Chairman Xiao Gang said yesterday in Beijing. The bank’s new loans will grow at a pace exceeding 15 percent this year, Xiao said. The stock gained 0.5 percent to 4.17 yuan.
China Citic Bank Corp. (601998 CH): The banking unit of the nation’s largest investment company plans to sell subordinate bonds to boost capital, Chairman Kong Dan said yesterday in Beijing. The shares gained 3.3 percent to 7.13 yuan.
China State Construction Engineering Corp. (601668 CH): The nation’s largest housing contractor said property sales rose 72 percent to 6.5 billion yuan ($952.2 million) in the first two months of this year from a year earlier. The shares rose 1.2 percent to 4.33 yuan.
COFCO Property (Group) Co. (000031 CH): The developer said 2009 net income jumped 163 percent to 373.5 million yuan on sales that increased 85 percent. The stock gained 3.7 percent to 9.80 yuan.
Fuyao Group Glass Industries Co. (600660 CH): China’s biggest auto-glass maker said 2009 net income surged 354 percent to 1.1 billion yuan as the company cut costs. The stock lost 0.4 percent to 12.43 yuan.
Gemdale Corp. (600383 CH): The country’s fourth-largest developer by market value said its 2009 net income rose 111 percent to 1.78 billion yuan on sales that increased 24 percent. The stock jumped 6.9 percent to 13.77 yuan.
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, gained 15.91, or 0.5 percent, to 3,069.14. The CSI 300 Index rose 0.6 percent to 3,305.86.
The customs office is due to release February trade data today. Exports probably rose 38.3 percent from a year earlier, the third monthly increase and the biggest gain in three years, according to a Bloomberg News survey. Imports may have climbed 38 percent, leaving a trade surplus of $7.15 billion.
Automakers: China’s passenger-car sales gained 55 percent to 942,900 units in February from a year earlier, the China Association of Automobile Manufacturers said. Total vehicle sales, which include buses and trucks, rose 46 percent, it said.
SAIC Motor Corp. (600104 CH), China’s largest carmaker, fell 0.2 percent to 21.95 yuan. FAW Car Co. (000800 CH), which makes passenger cars in China with Volkswagen AG, added 0.1 percent to 24.03 yuan.
Bank of China Ltd. (601988 CH): The nation’s third-largest bank has no further fundraising plans in mainland China after its previously announced plans to sell bonds, Chairman Xiao Gang said yesterday in Beijing. The bank’s new loans will grow at a pace exceeding 15 percent this year, Xiao said. The stock gained 0.5 percent to 4.17 yuan.
China Citic Bank Corp. (601998 CH): The banking unit of the nation’s largest investment company plans to sell subordinate bonds to boost capital, Chairman Kong Dan said yesterday in Beijing. The shares gained 3.3 percent to 7.13 yuan.
China State Construction Engineering Corp. (601668 CH): The nation’s largest housing contractor said property sales rose 72 percent to 6.5 billion yuan ($952.2 million) in the first two months of this year from a year earlier. The shares rose 1.2 percent to 4.33 yuan.
COFCO Property (Group) Co. (000031 CH): The developer said 2009 net income jumped 163 percent to 373.5 million yuan on sales that increased 85 percent. The stock gained 3.7 percent to 9.80 yuan.
Fuyao Group Glass Industries Co. (600660 CH): China’s biggest auto-glass maker said 2009 net income surged 354 percent to 1.1 billion yuan as the company cut costs. The stock lost 0.4 percent to 12.43 yuan.
Gemdale Corp. (600383 CH): The country’s fourth-largest developer by market value said its 2009 net income rose 111 percent to 1.78 billion yuan on sales that increased 24 percent. The stock jumped 6.9 percent to 13.77 yuan.
Philippine Export Growth Accelerates to 14-Year High
March 10 (Bloomberg) -- Philippine exports rose at the fastest pace in more than 14 years in January as demand for electronics goods gained amid the global economic recovery.
Shipments abroad increased 42.5 percent from a year earlier to $3.58 billion, the National Statistics Office said in Manila today. That compares with the median forecast for a 30.2 percent gain in a Bloomberg News survey of nine economists.
Rising exports, which account for about a third of the Philippines’s $167 billion economy, are helping spur growth after expansion slowed to an 11-year low of 0.9 percent in 2009. The central bank will consider unwinding some of its stimulus measures even as it may keep interest rates unchanged to support the recovery, Deputy Governor Diwa Guinigundo said this week.
“Strong exports should help maintain or create jobs as it trickles into the economy,” Jonathan Ravelas, chief market strategist at Banco de Oro Unibank Inc., said before the report. “It’s a clear sign that there is recovery, supporting the central bank’s decision to start its exit strategy.”
Bangko Sentral ng Pilipinas earlier this year raised the rediscounting rate, one of the interest rates it charges lenders for borrowing money from the central bank, by half a percentage point to 4 percent. The central bank will probably keep benchmark borrowing costs at a record-low 4 percent for a sixth straight meeting tomorrow, economists forecast.
Record-low interest rates and increased government spending around the world have revived demand for Philippine-made Texas Instruments Inc. semiconductors and The Gap Inc. clothing. Worldwide semiconductor sales rose 47.2 percent in January from a year earlier, according to the Semiconductor Industry Association.
Shipments abroad increased 42.5 percent from a year earlier to $3.58 billion, the National Statistics Office said in Manila today. That compares with the median forecast for a 30.2 percent gain in a Bloomberg News survey of nine economists.
Rising exports, which account for about a third of the Philippines’s $167 billion economy, are helping spur growth after expansion slowed to an 11-year low of 0.9 percent in 2009. The central bank will consider unwinding some of its stimulus measures even as it may keep interest rates unchanged to support the recovery, Deputy Governor Diwa Guinigundo said this week.
“Strong exports should help maintain or create jobs as it trickles into the economy,” Jonathan Ravelas, chief market strategist at Banco de Oro Unibank Inc., said before the report. “It’s a clear sign that there is recovery, supporting the central bank’s decision to start its exit strategy.”
Bangko Sentral ng Pilipinas earlier this year raised the rediscounting rate, one of the interest rates it charges lenders for borrowing money from the central bank, by half a percentage point to 4 percent. The central bank will probably keep benchmark borrowing costs at a record-low 4 percent for a sixth straight meeting tomorrow, economists forecast.
Record-low interest rates and increased government spending around the world have revived demand for Philippine-made Texas Instruments Inc. semiconductors and The Gap Inc. clothing. Worldwide semiconductor sales rose 47.2 percent in January from a year earlier, according to the Semiconductor Industry Association.
Subbarao Says India Deficit Cut Helps Rate Policy
March 9 (Bloomberg) -- Indian central bank Governor Duvvuri Subbarao said the government’s plan to narrow the budget deficit makes it easier to set interest rates in the world’s fastest- growing major economy after China.
“The reduction in fiscal deficit certainly helps in monetary-policy management,” Subbarao told reporters yesterday after a meeting of global central-bank counterparts in Basel, Switzerland. It “certainly helps both in managing inflation as well as providing space for credit demand.”
Finance Minister Pranab Mukherjee on Feb. 26 unveiled plans to cut the budget deficit to 5.5 percent of gross domestic product in the year starting April 1 from 6.9 percent the previous year, the sharpest reduction in 19 years. That means Prime Minister Manmohan Singh’s government will need to borrow less, enabling private credit to grow more strongly.
“We believe that there will be enough liquidity to meet private liquidity demand,” Subbarao said. “There is enough liquidity there and enough supply to meet the government borrowing program.”
Bond Yields Rise
The budget unveiled by Mukherjee estimates the government’s public debt sales to increase by 1.3 percent, less than the 2 percent median forecast in a Bloomberg News survey, to 4.57 trillion rupees in the next fiscal year.
Tax increases and 400 billion rupees ($9 billion) of state asset sales will shrink a debt burden equivalent to about 82 percent of the economy.
Even so, the yield on the benchmark 10-year government bond has climbed 14 basis points to 8 percent since the budget plan on inflation concerns.
Subbarao said that while bond yields have risen, they still are “reasonable” and he expects inflation to “moderate in weeks and months ahead.”
India’s inflation rate rose to 8.56 percent in January, the highest in 15 months, from 7.31 percent in December, the commerce ministry said Feb. 15.
“Yields have hardened a little bit,” he said. “We’ll manage the program in such a way that yields are within reasonable limits and interest rates don’t have a negative impact on the competitiveness of the economy.”
Subbarao has kept the central bank’s key reverse repurchase rate at a record low of 3.25 percent since April. In January, he raised the proportion of deposits lenders need to keep as cash reserves to 5.75 percent from 5 percent.
In India, where policy makers aim to achieve the fastest- growing economy in the world within four years, fiscal stimulus steps saw the deficit climb from 2.7 percent of GDP two years ago. The country’s debt level is almost quadruple China’s, according to International Monetary Fund figures.
Moody’s Investors Service ranks India’s rupee-denominated debt at Ba2, two levels below investment grade, while Fitch Ratings and Standard & Poor’s have a BBB- rating, the lowest investment grade.
“The reduction in fiscal deficit certainly helps in monetary-policy management,” Subbarao told reporters yesterday after a meeting of global central-bank counterparts in Basel, Switzerland. It “certainly helps both in managing inflation as well as providing space for credit demand.”
Finance Minister Pranab Mukherjee on Feb. 26 unveiled plans to cut the budget deficit to 5.5 percent of gross domestic product in the year starting April 1 from 6.9 percent the previous year, the sharpest reduction in 19 years. That means Prime Minister Manmohan Singh’s government will need to borrow less, enabling private credit to grow more strongly.
“We believe that there will be enough liquidity to meet private liquidity demand,” Subbarao said. “There is enough liquidity there and enough supply to meet the government borrowing program.”
Bond Yields Rise
The budget unveiled by Mukherjee estimates the government’s public debt sales to increase by 1.3 percent, less than the 2 percent median forecast in a Bloomberg News survey, to 4.57 trillion rupees in the next fiscal year.
Tax increases and 400 billion rupees ($9 billion) of state asset sales will shrink a debt burden equivalent to about 82 percent of the economy.
Even so, the yield on the benchmark 10-year government bond has climbed 14 basis points to 8 percent since the budget plan on inflation concerns.
Subbarao said that while bond yields have risen, they still are “reasonable” and he expects inflation to “moderate in weeks and months ahead.”
India’s inflation rate rose to 8.56 percent in January, the highest in 15 months, from 7.31 percent in December, the commerce ministry said Feb. 15.
“Yields have hardened a little bit,” he said. “We’ll manage the program in such a way that yields are within reasonable limits and interest rates don’t have a negative impact on the competitiveness of the economy.”
Subbarao has kept the central bank’s key reverse repurchase rate at a record low of 3.25 percent since April. In January, he raised the proportion of deposits lenders need to keep as cash reserves to 5.75 percent from 5 percent.
In India, where policy makers aim to achieve the fastest- growing economy in the world within four years, fiscal stimulus steps saw the deficit climb from 2.7 percent of GDP two years ago. The country’s debt level is almost quadruple China’s, according to International Monetary Fund figures.
Moody’s Investors Service ranks India’s rupee-denominated debt at Ba2, two levels below investment grade, while Fitch Ratings and Standard & Poor’s have a BBB- rating, the lowest investment grade.
Public Pension Funds Are Adding Risk to Raise Returns
States and companies have started investing very differently when it comes to the billions of dollars they are safeguarding for workers’ retirement.
Jerry W. Hoefer for The New York Times
Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, said states were looking at riskier investments in an effort to meet pension obligations.
Jerry W. Hoefer for The New York Times
Trent May, chief of Wyoming's pension fund, said states were “moving away from the perceived safety and liquidity of the investment-grade market.”
Companies are quietly and gradually moving their pension funds out of stocks. They want to reduce their investment risk and are buying more long-term bonds.
But states and other bodies of government are seeking higher returns for their pension funds, to make up for ground lost in the last couple of years and to pay all the benefits promised to present and future retirees. Higher returns come with more risk.
“In effect, they’re going to Las Vegas,” said Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, which oversees public plans in that state. “Double up to catch up.”
Though they generally say that their strategies are aimed at diversification and are not riskier, public pension funds are trying a wide range of investments: commodity futures, junk bonds, foreign stocks, deeply discounted mortgage-backed securities and margin investing. And some states that previously shunned hedge funds are trying them now.
The Texas teachers’ pension fund recently paid Chicago to receive a stream of payments from the money going into the city’s parking meters in the coming years. The deal gave Chicago an upfront payment that it could use to help balance its budget. Alas, Chicago did not have enough money to contribute to its own pension fund, which has been stung by real estate deals that fizzled when the city lost out in the bidding for the 2016 Olympics.
A spokeswoman for the Texas teachers’ fund said plan administrators believed that such alternative investments were the likeliest way to earn 8 percent average annual returns over time.
Pension funds rarely trumpet their intentions, partly to keep other big investors from trading against them. But some big corporations are unloading the stocks that have dominated pension portfolios for decades. General Motors, Hewlett-Packard, J. C. Penney, Boeing, Federal Express and Ashland are among those that have been shifting significant amounts of pension money out of stocks.
Other companies say they plan to follow suit, though more slowly. A poll of pension funds conducted by Pyramis Global Advisors last November found that more than half of corporate funds were reducing the portion they invested in United States equities.
Laggards tend to be companies with big shortfalls in their pension funds. Those moving the fastest are often mature companies with large pension funds, and who fear a big bear market could decimate the funds and the companies’ own finances.
“The larger the pension plan, the lower-risk strategy you would like to employ,” said Andrew T. Ward, the chief investment officer of Boeing, which shifted a big block of pension money out of stocks in 2007. That helped cushion Boeing’s pension fund against the big losses of 2008.
Shedding stocks gave Boeing “material protection right when we needed it most,” Mr. Ward said. By the time the markets had bottomed out last March, Boeing’s pension fund had lost 14 percent of its value, while those of its equity-laden peers had lost 25 to 30 percent, he said.
“We estimated that the strategy saved our company in the short term right around $4 or $5 billion of funded status,” he said.
Boeing and other companies seeking to reduce their investment risk are moving into fixed-income instruments, like bonds — but not just any bonds. They are buying and holding bonds scheduled to pay many years in the future, when their retirees expect their money.
The value of the bonds may fall in the meantime, just like the value of stocks. But declining bond prices are not such a worry, because the companies plan to hold the bonds for the accompanying interest payments that will in turn go to retirees, not sell them in the interim.
Towers Watson, a big benefits consulting firm, surveyed senior financial executives last year and found that two-thirds planned to decrease the stock portion of their companies’ pension funds by the end of 2010. They typically said their stock allocations would shrink by 10 percentage points.
“That’s 10 times the shift we might see in any given year,” said Carl Hess, head of Towers Watson’s investment consulting business. Economists have speculated that a truly seismic shift in pension investing away from stocks could be a drag on the market, but they say it would not be long-lasting.
Corporate America’s change of heart is notable all on its own, after decades of resistance to anything other than returns like those of the stock markets. But it’s even more startling when compared with governments’ continued loyalty to stocks. When governments scale back on the domestic stocks in their pension portfolios these days, it is often just to make way for more foreign stocks or private equities, which are not publicly traded.
Jerry W. Hoefer for The New York Times
Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, said states were looking at riskier investments in an effort to meet pension obligations.
Jerry W. Hoefer for The New York Times
Trent May, chief of Wyoming's pension fund, said states were “moving away from the perceived safety and liquidity of the investment-grade market.”
Companies are quietly and gradually moving their pension funds out of stocks. They want to reduce their investment risk and are buying more long-term bonds.
But states and other bodies of government are seeking higher returns for their pension funds, to make up for ground lost in the last couple of years and to pay all the benefits promised to present and future retirees. Higher returns come with more risk.
“In effect, they’re going to Las Vegas,” said Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, which oversees public plans in that state. “Double up to catch up.”
Though they generally say that their strategies are aimed at diversification and are not riskier, public pension funds are trying a wide range of investments: commodity futures, junk bonds, foreign stocks, deeply discounted mortgage-backed securities and margin investing. And some states that previously shunned hedge funds are trying them now.
The Texas teachers’ pension fund recently paid Chicago to receive a stream of payments from the money going into the city’s parking meters in the coming years. The deal gave Chicago an upfront payment that it could use to help balance its budget. Alas, Chicago did not have enough money to contribute to its own pension fund, which has been stung by real estate deals that fizzled when the city lost out in the bidding for the 2016 Olympics.
A spokeswoman for the Texas teachers’ fund said plan administrators believed that such alternative investments were the likeliest way to earn 8 percent average annual returns over time.
Pension funds rarely trumpet their intentions, partly to keep other big investors from trading against them. But some big corporations are unloading the stocks that have dominated pension portfolios for decades. General Motors, Hewlett-Packard, J. C. Penney, Boeing, Federal Express and Ashland are among those that have been shifting significant amounts of pension money out of stocks.
Other companies say they plan to follow suit, though more slowly. A poll of pension funds conducted by Pyramis Global Advisors last November found that more than half of corporate funds were reducing the portion they invested in United States equities.
Laggards tend to be companies with big shortfalls in their pension funds. Those moving the fastest are often mature companies with large pension funds, and who fear a big bear market could decimate the funds and the companies’ own finances.
“The larger the pension plan, the lower-risk strategy you would like to employ,” said Andrew T. Ward, the chief investment officer of Boeing, which shifted a big block of pension money out of stocks in 2007. That helped cushion Boeing’s pension fund against the big losses of 2008.
Shedding stocks gave Boeing “material protection right when we needed it most,” Mr. Ward said. By the time the markets had bottomed out last March, Boeing’s pension fund had lost 14 percent of its value, while those of its equity-laden peers had lost 25 to 30 percent, he said.
“We estimated that the strategy saved our company in the short term right around $4 or $5 billion of funded status,” he said.
Boeing and other companies seeking to reduce their investment risk are moving into fixed-income instruments, like bonds — but not just any bonds. They are buying and holding bonds scheduled to pay many years in the future, when their retirees expect their money.
The value of the bonds may fall in the meantime, just like the value of stocks. But declining bond prices are not such a worry, because the companies plan to hold the bonds for the accompanying interest payments that will in turn go to retirees, not sell them in the interim.
Towers Watson, a big benefits consulting firm, surveyed senior financial executives last year and found that two-thirds planned to decrease the stock portion of their companies’ pension funds by the end of 2010. They typically said their stock allocations would shrink by 10 percentage points.
“That’s 10 times the shift we might see in any given year,” said Carl Hess, head of Towers Watson’s investment consulting business. Economists have speculated that a truly seismic shift in pension investing away from stocks could be a drag on the market, but they say it would not be long-lasting.
Corporate America’s change of heart is notable all on its own, after decades of resistance to anything other than returns like those of the stock markets. But it’s even more startling when compared with governments’ continued loyalty to stocks. When governments scale back on the domestic stocks in their pension portfolios these days, it is often just to make way for more foreign stocks or private equities, which are not publicly traded.
Manganese Ore to Join India’s Steel-Dominated Asset Sell-Off
March 9 (Bloomberg) -- India plans to sell about 10 percent of Manganese Ore (India) Ltd., the nation’s largest producer, as steel-related companies drive the government’s record sale of state assets.
The initial offering will be completed in the financial year starting April 1, steel minister Virbhadra Singh said in an interview in New Delhi, without specifying an amount. The ministry has approved the offer, which is awaiting final clearance from the department of disinvestment, Manganese Ore Finance Director M.A.V. Goutham said yesterday.
“The stake sale will be equivalent to about 10 percent of the company’s total shares,” Goutham said.
The government plans to raise 400 billion rupees ($8.8 billion), more than the combined fund-raising by all previous administrations, in the next fiscal year to help narrow the budget deficit from a 16-year high. India has 60 companies, including Steel Authority of India Ltd. and NMDC Ltd., in which it plans to raise funds to build roads, ports and utilities.
“Our ministry will contribute more than half of the government’s disinvestment target,” Singh said in an interview at his New Delhi residence on March 5.
The government aims to sell an 8.38 percent stake in NMDC, the nation’s largest iron-ore producer, in an offer starting March 10 and ending March 12. Steel Authority, the country’s second-largest producer, plans to offer 10 percent of its equity, while the government will sell a similar stake.
Federal Government
India’s federal government will sell 13 percent of its holding, minister Singh said.
Manganese Ore, 81.5 percent owned by the federal government and the remainder by the provincial administrations of Maharashtra and Madhya Pradesh, may have a 22 percent drop in sales for the year ending March 31, Goutham said, without giving a profit forecast. The economic slowdown last year curbed demand from steelmakers, which use manganese as a raw material, he said.
Manganese Ore, which operates 10 mines in the western state of Maharashtra and the central state of Madhya Pradesh, produces annually about 1.4 million metric tons of ore, or about 65 percent of India’s needs, according to its Web site. The company plans to set up a captive power plant and expand the capacity of its ferro-manganese plant.
The initial offering will be completed in the financial year starting April 1, steel minister Virbhadra Singh said in an interview in New Delhi, without specifying an amount. The ministry has approved the offer, which is awaiting final clearance from the department of disinvestment, Manganese Ore Finance Director M.A.V. Goutham said yesterday.
“The stake sale will be equivalent to about 10 percent of the company’s total shares,” Goutham said.
The government plans to raise 400 billion rupees ($8.8 billion), more than the combined fund-raising by all previous administrations, in the next fiscal year to help narrow the budget deficit from a 16-year high. India has 60 companies, including Steel Authority of India Ltd. and NMDC Ltd., in which it plans to raise funds to build roads, ports and utilities.
“Our ministry will contribute more than half of the government’s disinvestment target,” Singh said in an interview at his New Delhi residence on March 5.
The government aims to sell an 8.38 percent stake in NMDC, the nation’s largest iron-ore producer, in an offer starting March 10 and ending March 12. Steel Authority, the country’s second-largest producer, plans to offer 10 percent of its equity, while the government will sell a similar stake.
Federal Government
India’s federal government will sell 13 percent of its holding, minister Singh said.
Manganese Ore, 81.5 percent owned by the federal government and the remainder by the provincial administrations of Maharashtra and Madhya Pradesh, may have a 22 percent drop in sales for the year ending March 31, Goutham said, without giving a profit forecast. The economic slowdown last year curbed demand from steelmakers, which use manganese as a raw material, he said.
Manganese Ore, which operates 10 mines in the western state of Maharashtra and the central state of Madhya Pradesh, produces annually about 1.4 million metric tons of ore, or about 65 percent of India’s needs, according to its Web site. The company plans to set up a captive power plant and expand the capacity of its ferro-manganese plant.
Satyam case tests foreign investors’ rights
A legal case brought in New York against Satyam Computer Services will test the ability of overseas shareholders in Indian companies to seek damages through class-action lawsuits.
The suit against Satyam, which was India’s fifth-largest outsourcing company until its chairman confessed to a $1bn fraud early last year, and PwC, its auditor, will particularly test the rights of investors holding American Depositary Shares.
EDITOR’S CHOICE
Lex: Indian corporate governance - Jan-18
Satyam’s rescue from the depths - Dec-28
Satyam shares tumble over fresh charges - Nov-25
Tech Mahindra enlists BT to revive Satyam - Jul-28
Lawyers for the Satyam investors, who include large US and foreign pension funds, are seeking to block an attempt to shift the case from the New York Southern District Court to India.
They argue that, in cases of securities fraud, only the regulator, the Securities and Exchange Board of India (Sebi), is allowed to act, effectively ruling out civil class-action lawsuits.
“The substantive laws of India provide no means of individual or class recovery for private investors in securities fraud matters because the civil courts in India are barred from hearing such cases where, as here, Sebi is empowered to act,” the lawyers for the investors said in a document filed with the court.
Satyam nearly collapsed in January 2009 after B Ramalinga Raju, its then chairman, confessed to fixing the company’s accounts over a period of years.
India’s business world has argued that the case reflects a one-off breakdown in an otherwise sound corporate governance regime but analysts argue it has revealed cracks in the country’s ability to handle large instances of securities fraud.
Mr Raju and a number of others suspected of involvement in the fraud, including two PwC auditors, are awaiting the matter to come to trial. The two PwC auditors have denied any involvement in the fraud.
Concerned that any collapse of Satyam would lead to mass redundancies among the company’s former workforce of 50,000 people and undermine confidence in India’s multibillion-dollar outsourcing industry, the government facilitated last year the sale of the company to a rival, Tech Mahindra.
To try to seek compensation, leading investors such as the UK-based Mineworkers Pension Scheme, Skagen – a Norwegian mutual fund, Sampension KP Livsforsikring – another Scandinavian fund, and the US-based Mississippi Public Employees Retirement System, sued the company in New York.
But one of the defendants, PwC and its affiliates, has applied to the court to shift the case to India.
PwC says that most of the witnesses and evidence are in India, Satyam’s underlying shares mostly trade in Mumbai and the main plaintiffs in the lawsuit, the pension funds, are mostly sophisticated foreign investors.
But last month, the investors responded with a detailed statement saying India does not have the proper legal structure to support class-action suits.
In addition, India’s courts, particularly those in Andhra Pradesh, the home state of Satyam, are so clogged with cases, the matter would fester there for years, they said.
“The inadequacy of the proposed Indian forum is further established by a wealth of public information demonstrating that the court system in the state of Andhra Pradesh is so overwhelmed with a staggering caseload that significant delays in the administration of justice, often extending for decades, are inevitable,” the lawyers for the investors said.
Asian corporate governance experts say that some of the region’s regulators have laws enabling class-action lawsuits but few in practice, are legally viable.
The suit against Satyam, which was India’s fifth-largest outsourcing company until its chairman confessed to a $1bn fraud early last year, and PwC, its auditor, will particularly test the rights of investors holding American Depositary Shares.
EDITOR’S CHOICE
Lex: Indian corporate governance - Jan-18
Satyam’s rescue from the depths - Dec-28
Satyam shares tumble over fresh charges - Nov-25
Tech Mahindra enlists BT to revive Satyam - Jul-28
Lawyers for the Satyam investors, who include large US and foreign pension funds, are seeking to block an attempt to shift the case from the New York Southern District Court to India.
They argue that, in cases of securities fraud, only the regulator, the Securities and Exchange Board of India (Sebi), is allowed to act, effectively ruling out civil class-action lawsuits.
“The substantive laws of India provide no means of individual or class recovery for private investors in securities fraud matters because the civil courts in India are barred from hearing such cases where, as here, Sebi is empowered to act,” the lawyers for the investors said in a document filed with the court.
Satyam nearly collapsed in January 2009 after B Ramalinga Raju, its then chairman, confessed to fixing the company’s accounts over a period of years.
India’s business world has argued that the case reflects a one-off breakdown in an otherwise sound corporate governance regime but analysts argue it has revealed cracks in the country’s ability to handle large instances of securities fraud.
Mr Raju and a number of others suspected of involvement in the fraud, including two PwC auditors, are awaiting the matter to come to trial. The two PwC auditors have denied any involvement in the fraud.
Concerned that any collapse of Satyam would lead to mass redundancies among the company’s former workforce of 50,000 people and undermine confidence in India’s multibillion-dollar outsourcing industry, the government facilitated last year the sale of the company to a rival, Tech Mahindra.
To try to seek compensation, leading investors such as the UK-based Mineworkers Pension Scheme, Skagen – a Norwegian mutual fund, Sampension KP Livsforsikring – another Scandinavian fund, and the US-based Mississippi Public Employees Retirement System, sued the company in New York.
But one of the defendants, PwC and its affiliates, has applied to the court to shift the case to India.
PwC says that most of the witnesses and evidence are in India, Satyam’s underlying shares mostly trade in Mumbai and the main plaintiffs in the lawsuit, the pension funds, are mostly sophisticated foreign investors.
But last month, the investors responded with a detailed statement saying India does not have the proper legal structure to support class-action suits.
In addition, India’s courts, particularly those in Andhra Pradesh, the home state of Satyam, are so clogged with cases, the matter would fester there for years, they said.
“The inadequacy of the proposed Indian forum is further established by a wealth of public information demonstrating that the court system in the state of Andhra Pradesh is so overwhelmed with a staggering caseload that significant delays in the administration of justice, often extending for decades, are inevitable,” the lawyers for the investors said.
Asian corporate governance experts say that some of the region’s regulators have laws enabling class-action lawsuits but few in practice, are legally viable.
Sunday, March 7, 2010
Japanese Bonds Decline as Recovery Signs Damp Demand for Debt
March 8 (Bloomberg) -- Japan’s 10-year bonds fell for the first time in three days as signs the global recovery is gaining momentum hurt demand for the safety of government debt.
Ten-year bonds extended last week’s drop after a report showed Japan posted a wider-than-expected current-account surplus in January, signaling overseas consumption is buoying the economy. Demand for bonds also waned as stocks gained following a U.S. report last week that showed the world’s biggest economy lost fewer jobs than economists forecast.
“The better U.S. employment data is a factor weighing on bond prices,” said Masaru Hamasaki, chief strategist at Tokyo- based Toyota Asset Management Co., which oversees the equivalent of $14 billion.
The yield on the 1.4 percent bond due March 2020 rose one basis point to 1.315 percent at the 11:05 a.m. morning close in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.089 yen to 100.750.
Ten-year bond futures for March delivery dropped 0.05 to 140.14 at the Tokyo Stock Exchange.
The Nikkei 225 Stock Average gained 1.8 percent to 10,551.30. The yen fell 0.2 percent after slumping the most in three months on March 5.
‘Hard to Buy’
“The advance of the Nikkei to above 10,500 and the weak yen makes it hard to buy bonds,” said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France’s largest bank.
Japan posted a current-account surplus of 899.8 billion yen ($9.95 billion) for January, the Ministry of Finance said in Tokyo. The surplus was forecast to be 783.9 billion yen, according to a Bloomberg News survey. Exports grew at the fastest pace in more than 30 years in January and industrial production rose the most since May, reports showed last month.
“Yields are likely to rise given the better-than-expected U.S. payrolls,” said Jun Ishii, chief fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest banking group. The 10-year rate will probably rise to 1.325 percent today, Ishii said.
Ten-year U.S. Treasury yields climbed eight basis points to 3.68 percent on March 5 after the Labor Department said payrolls dropped by 36,000 last month, less than the 68,000 decline predicted by economists.
The extra yield offered by 10-year Treasuries over similar-maturity Japanese debt expanded to 2.38 percentage points today, the widest since Feb. 22.
“The JGB market is likely to react to the snapback in U.S. yields following last Friday’s stronger-than-expected U.S. employment data,” Chotaro Morita, head of fixed-income strategy research at Barclays Capital, wrote in a note to clients.
Ten-year bonds extended last week’s drop after a report showed Japan posted a wider-than-expected current-account surplus in January, signaling overseas consumption is buoying the economy. Demand for bonds also waned as stocks gained following a U.S. report last week that showed the world’s biggest economy lost fewer jobs than economists forecast.
“The better U.S. employment data is a factor weighing on bond prices,” said Masaru Hamasaki, chief strategist at Tokyo- based Toyota Asset Management Co., which oversees the equivalent of $14 billion.
The yield on the 1.4 percent bond due March 2020 rose one basis point to 1.315 percent at the 11:05 a.m. morning close in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.089 yen to 100.750.
Ten-year bond futures for March delivery dropped 0.05 to 140.14 at the Tokyo Stock Exchange.
The Nikkei 225 Stock Average gained 1.8 percent to 10,551.30. The yen fell 0.2 percent after slumping the most in three months on March 5.
‘Hard to Buy’
“The advance of the Nikkei to above 10,500 and the weak yen makes it hard to buy bonds,” said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France’s largest bank.
Japan posted a current-account surplus of 899.8 billion yen ($9.95 billion) for January, the Ministry of Finance said in Tokyo. The surplus was forecast to be 783.9 billion yen, according to a Bloomberg News survey. Exports grew at the fastest pace in more than 30 years in January and industrial production rose the most since May, reports showed last month.
“Yields are likely to rise given the better-than-expected U.S. payrolls,” said Jun Ishii, chief fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest banking group. The 10-year rate will probably rise to 1.325 percent today, Ishii said.
Ten-year U.S. Treasury yields climbed eight basis points to 3.68 percent on March 5 after the Labor Department said payrolls dropped by 36,000 last month, less than the 68,000 decline predicted by economists.
The extra yield offered by 10-year Treasuries over similar-maturity Japanese debt expanded to 2.38 percentage points today, the widest since Feb. 22.
“The JGB market is likely to react to the snapback in U.S. yields following last Friday’s stronger-than-expected U.S. employment data,” Chotaro Morita, head of fixed-income strategy research at Barclays Capital, wrote in a note to clients.
N.Z. Manufacturing, Construction Add to Fourth-Quarter Growth
March 8 (Bloomberg) -- New Zealand manufacturing sales increased the most since 2002 in the fourth quarter and home building surged, adding to signs economic growth accelerated in the final months of last year.
Sales volumes adjusted to remove inflation rose 3.1 percent from the previous three months, Statistics New Zealand said in a statement in Wellington today. Residential construction increased 7.4 percent in the same period, the statistics agency said in a separate report.
Stronger construction, manufacturing and retail sales suggest economic growth accelerated in the fourth quarter, buoyed by record-low interest rates and an expansion in Australia, which is the biggest market for New Zealand’s exports. The Treasury Department last week said the currency’s 3.7 percent decline against the U.S. dollar so far this year is providing more confidence for exporters.
“Construction and manufacturing look set to provide a positive contribution to gross domestic product in the quarter,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland. He estimates the economy grew 1 percent in the three months ended Dec. 31.
New Zealand’s dollar bought 70.01 U.S. cents at 11:55 a.m. in Wellington trading from 69.54 cents immediately before the reports were published.
Economic growth is accelerating after GDP increased 0.2 percent in both the second and third quarters of 2009, ending the nation’s worst recession in three decades. Fourth-quarter GDP figures are published on March 25.
Export Volumes
Economists will complete their GDP forecasts after a report on export and import volumes on March 10 and data on electricity generation due a week later. Retail sales rose 1 percent in the fourth quarter, according to a report on Feb. 12.
Reserve Bank Governor Alan Bollard has kept the official cash rate at 2.5 percent since April last year. He will leave the rate unchanged at his next review on March 11, according to all 13 economists surveyed by Bloomberg News.
Manufacturing sales rose in the three months through December by the most since the third quarter of 2002, when volumes jumped 4.1 percent. Eleven of 15 industries recorded gains, the statistics agency said.
Meat and dairy sales advanced 4.6 percent, led by meat. That offset a fall in milk powder, butter and cheese volumes. More than half the meat and dairy production is exported, the statistics agency said.
Excluding those categories, manufacturing climbed 3.6 percent, the agency said. Analysts use the figure excluding meat and dairy as a guide for the contribution of manufacturing to New Zealand’s GDP.
GDP Contribution
“Adjusting for changes in inventory levels, we estimate that manufacturing production rose around 4 percent” in the quarter, said Borkin. “This emphasizes a turn in performance after a period of significant weakness.”
Before the latest period, manufacturing had declined for five of seven quarters.
Demand for exports is being buoyed by global growth, led by China and other Asian economies. In Australia, which buys 23 percent of New Zealand exports, growth was 0.9 percent in the fourth quarter.
The increase in home construction followed two quarters of declines, while non-residential construction fell 6.1 percent, the statistics agency said in a second report.
“We expect residential construction activity will continue to recover over the coming quarters,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. “Non residential was significantly weaker than our expectation.”
Construction lags behind home-building approvals, which surged 21 percent in the fourth quarter from the three months through September, according to a report on Jan. 29.
Sales volumes adjusted to remove inflation rose 3.1 percent from the previous three months, Statistics New Zealand said in a statement in Wellington today. Residential construction increased 7.4 percent in the same period, the statistics agency said in a separate report.
Stronger construction, manufacturing and retail sales suggest economic growth accelerated in the fourth quarter, buoyed by record-low interest rates and an expansion in Australia, which is the biggest market for New Zealand’s exports. The Treasury Department last week said the currency’s 3.7 percent decline against the U.S. dollar so far this year is providing more confidence for exporters.
“Construction and manufacturing look set to provide a positive contribution to gross domestic product in the quarter,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland. He estimates the economy grew 1 percent in the three months ended Dec. 31.
New Zealand’s dollar bought 70.01 U.S. cents at 11:55 a.m. in Wellington trading from 69.54 cents immediately before the reports were published.
Economic growth is accelerating after GDP increased 0.2 percent in both the second and third quarters of 2009, ending the nation’s worst recession in three decades. Fourth-quarter GDP figures are published on March 25.
Export Volumes
Economists will complete their GDP forecasts after a report on export and import volumes on March 10 and data on electricity generation due a week later. Retail sales rose 1 percent in the fourth quarter, according to a report on Feb. 12.
Reserve Bank Governor Alan Bollard has kept the official cash rate at 2.5 percent since April last year. He will leave the rate unchanged at his next review on March 11, according to all 13 economists surveyed by Bloomberg News.
Manufacturing sales rose in the three months through December by the most since the third quarter of 2002, when volumes jumped 4.1 percent. Eleven of 15 industries recorded gains, the statistics agency said.
Meat and dairy sales advanced 4.6 percent, led by meat. That offset a fall in milk powder, butter and cheese volumes. More than half the meat and dairy production is exported, the statistics agency said.
Excluding those categories, manufacturing climbed 3.6 percent, the agency said. Analysts use the figure excluding meat and dairy as a guide for the contribution of manufacturing to New Zealand’s GDP.
GDP Contribution
“Adjusting for changes in inventory levels, we estimate that manufacturing production rose around 4 percent” in the quarter, said Borkin. “This emphasizes a turn in performance after a period of significant weakness.”
Before the latest period, manufacturing had declined for five of seven quarters.
Demand for exports is being buoyed by global growth, led by China and other Asian economies. In Australia, which buys 23 percent of New Zealand exports, growth was 0.9 percent in the fourth quarter.
The increase in home construction followed two quarters of declines, while non-residential construction fell 6.1 percent, the statistics agency said in a second report.
“We expect residential construction activity will continue to recover over the coming quarters,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. “Non residential was significantly weaker than our expectation.”
Construction lags behind home-building approvals, which surged 21 percent in the fourth quarter from the three months through September, according to a report on Jan. 29.
Hewlett-Packard, Sybase, YRC Worldwide: U.S. Equity Preview
March 7 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses, and prices are as of 5:23 p.m. in New York on March 5.
Standard & Poor’s 500 Index futures expiring in March rose 1.3 percent to 1,136.50.
AT&T Inc. (T:US): The largest U.S. telephone company said core wireline employees in its southeast region voted to ratify a three-year agreement with the Communications Workers of America covering about 30,000 people.
BCE Inc. (BCE:US): Canada’s largest telephone company may rise as much as 10 percent during the next year as it cuts costs and improves profitability, Barron’s reported.
C.H. Robinson Worldwide Inc. (CHRW:US): The freight- shipment manager may rise to $66 in the next year as the economy rebounds and boosts demand for deliveries, Barron’s reported, citing money manager Lisa Dong.
Hewlett-Packard Co. (HPQ:US) fell 0.2 percent to $51.93. The world’s largest personal-computer maker revised its first- quarter results, cutting profit by 3 cents a share, after a lawsuit against its Electronic Data Systems unit increased legal costs.
Imax Corp. (IMAX:US): “Alice in Wonderland” earned $11.9 million at 188 Imax 3-D theaters this weekend, the most ever in its history, according to Hollywood.com Box-Office.
OAO Mobile TeleSystems (MBT:US): Russia’s largest mobile- phone company may rise 25 percent during the next year as it bundles more telecommunications services for consumers, Barron’s reported, citing analyst Pieter Stalenhof.
Sybase Inc. (SY:US): The mobile software maker said it boosted its share repurchase by $150 million, and said it will use cash and stock to pay for the conversion of about $390 million of its 1.75 percent convertible notes due 2025.
Walt Disney Co. (DIS:US): “Alice in Wonderland,” the classic Lewis Carroll tale re-imagined in 3-D by director Tim Burton, earned $116.3 million this weekend. The film had the sixth-best opening ever, the best March debut, and was the first movie to cross the $100 million in the January-to-March period, Hollywood.com Box Office said.
Wipro Ltd. (WIT:US): The India-based international outsourcing company may decline along with Infosys Technologies Ltd. (INFY:US) as customers delay orders on lingering questions about the economic recovery and competition increases, Barron’s reported.
YRC Worldwide Inc. (YRCW:US): The largest U.S. trucker said it expects to complete a reverse stock split during the second quarter after the Nasdaq Stock Market notified the company it was not in compliance because shares closed at a per-share bid price of less than $1 for 30 consecutive business days.
Standard & Poor’s 500 Index futures expiring in March rose 1.3 percent to 1,136.50.
AT&T Inc. (T:US): The largest U.S. telephone company said core wireline employees in its southeast region voted to ratify a three-year agreement with the Communications Workers of America covering about 30,000 people.
BCE Inc. (BCE:US): Canada’s largest telephone company may rise as much as 10 percent during the next year as it cuts costs and improves profitability, Barron’s reported.
C.H. Robinson Worldwide Inc. (CHRW:US): The freight- shipment manager may rise to $66 in the next year as the economy rebounds and boosts demand for deliveries, Barron’s reported, citing money manager Lisa Dong.
Hewlett-Packard Co. (HPQ:US) fell 0.2 percent to $51.93. The world’s largest personal-computer maker revised its first- quarter results, cutting profit by 3 cents a share, after a lawsuit against its Electronic Data Systems unit increased legal costs.
Imax Corp. (IMAX:US): “Alice in Wonderland” earned $11.9 million at 188 Imax 3-D theaters this weekend, the most ever in its history, according to Hollywood.com Box-Office.
OAO Mobile TeleSystems (MBT:US): Russia’s largest mobile- phone company may rise 25 percent during the next year as it bundles more telecommunications services for consumers, Barron’s reported, citing analyst Pieter Stalenhof.
Sybase Inc. (SY:US): The mobile software maker said it boosted its share repurchase by $150 million, and said it will use cash and stock to pay for the conversion of about $390 million of its 1.75 percent convertible notes due 2025.
Walt Disney Co. (DIS:US): “Alice in Wonderland,” the classic Lewis Carroll tale re-imagined in 3-D by director Tim Burton, earned $116.3 million this weekend. The film had the sixth-best opening ever, the best March debut, and was the first movie to cross the $100 million in the January-to-March period, Hollywood.com Box Office said.
Wipro Ltd. (WIT:US): The India-based international outsourcing company may decline along with Infosys Technologies Ltd. (INFY:US) as customers delay orders on lingering questions about the economic recovery and competition increases, Barron’s reported.
YRC Worldwide Inc. (YRCW:US): The largest U.S. trucker said it expects to complete a reverse stock split during the second quarter after the Nasdaq Stock Market notified the company it was not in compliance because shares closed at a per-share bid price of less than $1 for 30 consecutive business days.
Retail Sales Probably Fell in February: U.S. Economy Preview
March 7 (Bloomberg) -- Sales at U.S. retailers probably declined in February as blizzards kept Americans away from malls and auto-dealer showrooms, economists said before a government report this week.
Purchases dropped 0.2 percent after a 0.5 percent gain the prior month, according to the median estimate of 56 economists surveyed by Bloomberg News before Commerce Department figures on March 12. Other reports may show the trade gap widened in January and consumers grew more confident this month.
Figures last week showing the U.S. lost fewer jobs in February than anticipated, overcoming the effects of the snowstorms that caused some companies to temporarily close, signals employment is on the verge of accelerating. More hiring and wage increases will be critical in lifting consumer spending, the biggest part of the economy.
“Retail sales likely would have squeaked out a modest gain if not for the severe snowstorms,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. Nonetheless, “consumers will have to spend more freely for the recovery to sustain itself.”
A Labor Department report March 5 showed the economy lost 36,000 jobs in February and the unemployment rate held at 9.7 percent for a second month, indicating the labor market is stabilizing.
President Barack Obama, speaking at a Washington-area energy company, said the job report was “actually better than expected.” Even so, he said the number of unemployed is “more than we should tolerate” and urged Congress to pass a jobs bill to help lower unemployment.
Auto Sales
Auto sales fell last month to an annual pace of 10.4 million vehicles from 10.8 million in January, according to industry data last week. Toyota Motor Corp. sales fell 8.7 percent from a year earlier as it struggled with global recalls that halted demand for some models. Ford Motor Co., overcoming the snowstorms that curbed showroom traffic, beat General Motors Co. in monthly sales for the first time since 1998.
Excluding automobiles, retail sales were probably little changed after a 0.6 percent gain the prior month, according to the Bloomberg survey.
Chain stores turned in a better-than-forecast performance last month, compared with a low point last year, industry figures showed last week. Macy’s Inc., Abercrombie & Fitch Co. and Gap Inc. beat analysts’ estimates in February as holiday sales and spring collections tempted consumers to go shopping in a month of record snowfalls.
Same-Store Sales
February comparable-store sales climbed 4.1 percent, topping the Retail Metrics 3 percent estimate. It was the sixth straight monthly gain and the biggest in 27 months. Purchases fell 4.1 percent in February 2009, Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said last week.
TJX Corporation Inc., an off-price apparel chain, reported a 16 percent sales increase in the four weeks ended Feb. 27 from a year earlier.
“We achieved these sales despite the harsh snowstorms that affected many regions in the country,” said Sherry Lang, investor vice president, in a teleconference on March 4. “The month ended on a stronger note than we had anticipated.”
Households are feeling less pessimistic. The Reuters/University of Michigan preliminary index of consumer sentiment for March probably rose to 73.8 from 73.6 a month earlier, according to the Bloomberg survey before the March 12 release.
Fewer Claims
In a sign that job losses are abating, a report from the Labor Department on March 11 may show initial jobless claims fell to 460,000 last week from 469,000 the previous week, according to economists surveyed.
Stocks have recovered from a January slump prompted by concerns of a possible Greek default and government plans to boost oversight over banks. The Standard & Poor’s 500 Index has gained 6 percent since the end of January.
The economy grew at a 5.9 percent annual pace in the fourth quarter, the strongest showing in more than six years as companies tried to stabilize inventories, the government reported last month. Economists surveyed by Bloomberg early last month forecast growth will slow to 3 percent in this quarter.
A Commerce Department report on March 12 may show business inventories rose 0.2 percent in January after dropping 0.2 percent the prior month, according to economists surveyed.
As companies begin rebuilding stockpiles and consumer purchases recover, demand for imports is rising. That probably caused the trade deficit to widen to $41 billion in January from $40.2 billion in December, according to the survey median before a March 11 report from the Commerce Department. The collapse in trade earlier last year brought the deficit down to a near- decade low of $25.8 billion in May.
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Whlsale Inv. MOM% 3/10 Jan. -0.8% 0.2%
Federal Budget $ Blns 3/10 Feb. -193.9 -210.0
Trade Balance $ Blns 3/11 Jan. -40.2 -41.0
Initial Claims ,000’s 3/11 27-Feb 469 460
Cont. Claims ,000’s 3/11 20-Feb 4500 4495
Retail Sales MOM% 3/12 Feb. 0.5% -0.2%
Retail ex-autos MOM% 3/12 Feb. 0.6% 0.0%
Retail exauto/gas MOM% 3/12 Feb. 0.6% 0.3%
U of Mich Conf. Index 3/12 March P 73.6 73.8
Business Inv. MOM% 3/12 Jan. -0.2% 0.2%
================================================================
Purchases dropped 0.2 percent after a 0.5 percent gain the prior month, according to the median estimate of 56 economists surveyed by Bloomberg News before Commerce Department figures on March 12. Other reports may show the trade gap widened in January and consumers grew more confident this month.
Figures last week showing the U.S. lost fewer jobs in February than anticipated, overcoming the effects of the snowstorms that caused some companies to temporarily close, signals employment is on the verge of accelerating. More hiring and wage increases will be critical in lifting consumer spending, the biggest part of the economy.
“Retail sales likely would have squeaked out a modest gain if not for the severe snowstorms,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. Nonetheless, “consumers will have to spend more freely for the recovery to sustain itself.”
A Labor Department report March 5 showed the economy lost 36,000 jobs in February and the unemployment rate held at 9.7 percent for a second month, indicating the labor market is stabilizing.
President Barack Obama, speaking at a Washington-area energy company, said the job report was “actually better than expected.” Even so, he said the number of unemployed is “more than we should tolerate” and urged Congress to pass a jobs bill to help lower unemployment.
Auto Sales
Auto sales fell last month to an annual pace of 10.4 million vehicles from 10.8 million in January, according to industry data last week. Toyota Motor Corp. sales fell 8.7 percent from a year earlier as it struggled with global recalls that halted demand for some models. Ford Motor Co., overcoming the snowstorms that curbed showroom traffic, beat General Motors Co. in monthly sales for the first time since 1998.
Excluding automobiles, retail sales were probably little changed after a 0.6 percent gain the prior month, according to the Bloomberg survey.
Chain stores turned in a better-than-forecast performance last month, compared with a low point last year, industry figures showed last week. Macy’s Inc., Abercrombie & Fitch Co. and Gap Inc. beat analysts’ estimates in February as holiday sales and spring collections tempted consumers to go shopping in a month of record snowfalls.
Same-Store Sales
February comparable-store sales climbed 4.1 percent, topping the Retail Metrics 3 percent estimate. It was the sixth straight monthly gain and the biggest in 27 months. Purchases fell 4.1 percent in February 2009, Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said last week.
TJX Corporation Inc., an off-price apparel chain, reported a 16 percent sales increase in the four weeks ended Feb. 27 from a year earlier.
“We achieved these sales despite the harsh snowstorms that affected many regions in the country,” said Sherry Lang, investor vice president, in a teleconference on March 4. “The month ended on a stronger note than we had anticipated.”
Households are feeling less pessimistic. The Reuters/University of Michigan preliminary index of consumer sentiment for March probably rose to 73.8 from 73.6 a month earlier, according to the Bloomberg survey before the March 12 release.
Fewer Claims
In a sign that job losses are abating, a report from the Labor Department on March 11 may show initial jobless claims fell to 460,000 last week from 469,000 the previous week, according to economists surveyed.
Stocks have recovered from a January slump prompted by concerns of a possible Greek default and government plans to boost oversight over banks. The Standard & Poor’s 500 Index has gained 6 percent since the end of January.
The economy grew at a 5.9 percent annual pace in the fourth quarter, the strongest showing in more than six years as companies tried to stabilize inventories, the government reported last month. Economists surveyed by Bloomberg early last month forecast growth will slow to 3 percent in this quarter.
A Commerce Department report on March 12 may show business inventories rose 0.2 percent in January after dropping 0.2 percent the prior month, according to economists surveyed.
As companies begin rebuilding stockpiles and consumer purchases recover, demand for imports is rising. That probably caused the trade deficit to widen to $41 billion in January from $40.2 billion in December, according to the survey median before a March 11 report from the Commerce Department. The collapse in trade earlier last year brought the deficit down to a near- decade low of $25.8 billion in May.
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Whlsale Inv. MOM% 3/10 Jan. -0.8% 0.2%
Federal Budget $ Blns 3/10 Feb. -193.9 -210.0
Trade Balance $ Blns 3/11 Jan. -40.2 -41.0
Initial Claims ,000’s 3/11 27-Feb 469 460
Cont. Claims ,000’s 3/11 20-Feb 4500 4495
Retail Sales MOM% 3/12 Feb. 0.5% -0.2%
Retail ex-autos MOM% 3/12 Feb. 0.6% 0.0%
Retail exauto/gas MOM% 3/12 Feb. 0.6% 0.3%
U of Mich Conf. Index 3/12 March P 73.6 73.8
Business Inv. MOM% 3/12 Jan. -0.2% 0.2%
================================================================
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