THE advertisement warns of speculative financial bubbles. It mocks a group of gullible Frenchmen seduced into a silly, 18th-century investment scheme, noting that the modern shareholder, armed with superior information, can avoid the pitfalls of the past. “How different the position of the investor today!” the ad enthuses.
It ran in The Saturday Evening Post on Sept. 14, 1929. A month later, the stock market crashed.
“Everyone wants to think they’re smarter than the poor souls in developing countries, and smarter than their predecessors,” says Carmen M. Reinhart, an economist at the University of Maryland. “They’re wrong. And we can prove it.”
Like a pair of financial sleuths, Ms. Reinhart and her collaborator from Harvard, Kenneth S. Rogoff, have spent years investigating wreckage scattered across documents from nearly a millennium of economic crises and collapses. They have wandered the basements of rare-book libraries, riffled through monks’ yellowed journals and begged central banks worldwide for centuries-old debt records. And they have manually entered their findings, digit by digit, into one of the biggest spreadsheets you’ve ever seen.
Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.
The book, and Ms. Reinhart’s and Mr. Rogoff’s own professional journeys as economists, zero in on some of the broader shortcomings of their trade — thrown into harsh relief by economists’ widespread failure to anticipate or address the financial crisis that began in 2007.
“The mainstream of academic research in macroeconomics puts theoretical coherence and elegance first, and investigating the data second,” says Mr. Rogoff. For that reason, he says, much of the profession’s celebrated work “was not terribly useful in either predicting the financial crisis, or in assessing how it would it play out once it happened.”
“People almost pride themselves on not paying attention to current events,” he says.
In the past, other economists often took the same empirical approach as the Reinhart-Rogoff team. But this approach fell into disfavor over the last few decades as economists glorified financial papers that were theory-rich and data-poor.
Much of that theory-driven work, critics say, is built on the same disassembled and reassembled sets of data points — generally from just the last 25 years or so and from the same handful of rich countries — that quants have whisked into ever more dazzling and complicated mathematical formations.
But in the wake of the recent crisis, a few economists — like Professors Reinhart and Rogoff, and other like-minded colleagues like Barry Eichengreen and Alan Taylor — have been encouraging others in their field to look beyond hermetically sealed theoretical models and into the historical record.
“There is so much inbredness in this profession,” says Ms. Reinhart. “They all read the same sources. They all use the same data sets. They all talk to the same people. There is endless extrapolation on extrapolation on extrapolation, and for years that is what has been rewarded.”
ONE of Ken Rogoff’s favorite economics jokes — yes, there are economics jokes — is “the one about the lamppost”: A drunk on his way home from a bar one night realizes that he has dropped his keys. He gets down on his hands and knees and starts groping around beneath a lamppost. A policeman asks what he’s doing.
“I lost my keys in the park,” says the drunk.
“Then why are you looking for them under the lamppost?” asks the puzzled cop.
“Because,” says the drunk, “that’s where the light is.”
Mr. Rogoff, 57, has spent a lifetime exploring places and ideas off the beaten track. Tall, thin and bespectacled, he grew up in Rochester. There, he attended a “tough inner-city school,” where his “true liberal parents” — a radiologist and a librarian — sent him so he would be exposed to students from a variety of social and economic classes.
He received a chess set for his 13th birthday, and he quickly discovered that he was something of a prodigy, a fact he decided to hide so he wouldn’t get beaten up in the lunchroom.
“I think chess may be a relatively cool thing for kids to do now, on par with soccer or other sports,” he says. “It really wasn’t then.”
Saturday, July 3, 2010
Nasdaq-100 Index Posts Record Losing Streak as Microsoft Slumps
Technology companies are suffering some of the U.S. stock market’s biggest losses, sending the Nasdaq-100 Index to the longest losing streak in its 25-year history.
The measure, which gets 63 percent of its value from computer-related companies such as Microsoft Corp. and Apple Inc., has declined 9.7 percent after slumping 10 consecutive days. Microsoft has tumbled 26 percent since peaking on April 22, while Apple has fallen 9.9 percent in two weeks.
“There is an orderly liquidation of equity positions by traders who are taking risk units off the table,” said Kevin Caron, a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, whose clients have about $90 billion in assets. “Nasdaq is typically the home of high beta risk units. Makes perfect sense.”
U.S. shares are experiencing the largest losses since the bull market began in March 2009, when the Standard & Poor’s 500 Index sank to a 12-year low. The benchmark measure of U.S. equities has fallen in 9 out of the past 10 days as reports on consumer confidence, manufacturing, home sales and employment were weaker than economists surveyed by Bloomberg predicted, fueling concern the recovery is in peril. The S&P 500 fell 5 percent since June 25, the biggest weekly loss since May.
“We’re in a psychological bear market,” said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts, which oversees $500 million. “The recent economic setback is significant,” and investors are bracing for companies to reduce forecasts in the next few weeks, he added.
GDP, Profits
Economists predict that U.S. gross domestic product will expand 3.2 percent this year and 2.9 percent in 2011, according to the median forecasts in a Bloomberg survey. Profit for companies in the S&P 500 are projected to rise 32 percent to a combined $81.72 a share in 2010, according to estimates from more than 2,000 analysts tracked by Bloomberg.
Barton Biggs, whose purchase of stocks in March 2009 gave Traxis Partners LLC a 38 percent gain last year, said concern the economy is about to contract prompted him to sell almost all his U.S. technology shares this week.
“I’m worried that we could have not just a soft patch but a double dip which lasts two or three quarters, and where nominal GDP is only up 2 or 3 percent, and that’ll have a big effect on profits,” Biggs said in a Bloomberg Television interview yesterday. “It’ll scare everybody, and I’m afraid the market goes down another 10 or 15 percent if that happens.”
When stocks rebound, technology shares may be the leaders, according to James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis.
Technology is “one of the first groups to go if you go into a downward trend,” he said. “It’s going to be one that’s going to come back if we turn the corner again.”
The measure, which gets 63 percent of its value from computer-related companies such as Microsoft Corp. and Apple Inc., has declined 9.7 percent after slumping 10 consecutive days. Microsoft has tumbled 26 percent since peaking on April 22, while Apple has fallen 9.9 percent in two weeks.
“There is an orderly liquidation of equity positions by traders who are taking risk units off the table,” said Kevin Caron, a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, whose clients have about $90 billion in assets. “Nasdaq is typically the home of high beta risk units. Makes perfect sense.”
U.S. shares are experiencing the largest losses since the bull market began in March 2009, when the Standard & Poor’s 500 Index sank to a 12-year low. The benchmark measure of U.S. equities has fallen in 9 out of the past 10 days as reports on consumer confidence, manufacturing, home sales and employment were weaker than economists surveyed by Bloomberg predicted, fueling concern the recovery is in peril. The S&P 500 fell 5 percent since June 25, the biggest weekly loss since May.
“We’re in a psychological bear market,” said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts, which oversees $500 million. “The recent economic setback is significant,” and investors are bracing for companies to reduce forecasts in the next few weeks, he added.
GDP, Profits
Economists predict that U.S. gross domestic product will expand 3.2 percent this year and 2.9 percent in 2011, according to the median forecasts in a Bloomberg survey. Profit for companies in the S&P 500 are projected to rise 32 percent to a combined $81.72 a share in 2010, according to estimates from more than 2,000 analysts tracked by Bloomberg.
Barton Biggs, whose purchase of stocks in March 2009 gave Traxis Partners LLC a 38 percent gain last year, said concern the economy is about to contract prompted him to sell almost all his U.S. technology shares this week.
“I’m worried that we could have not just a soft patch but a double dip which lasts two or three quarters, and where nominal GDP is only up 2 or 3 percent, and that’ll have a big effect on profits,” Biggs said in a Bloomberg Television interview yesterday. “It’ll scare everybody, and I’m afraid the market goes down another 10 or 15 percent if that happens.”
When stocks rebound, technology shares may be the leaders, according to James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis.
Technology is “one of the first groups to go if you go into a downward trend,” he said. “It’s going to be one that’s going to come back if we turn the corner again.”
Friday, July 2, 2010
Asian Stocks Post Weekly Drop on Signs Global Recovery Waning
July 3 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to its fourth weekly decline in five, as weaker manufacturing growth in the U.S., Europe and China added to signs global economic recovery is faltering.
Canon Inc., the world’s biggest camera maker that counts the U.S. as its second-biggest market, fell 7.7 percent. Foxconn International Holdings Ltd., the world’s biggest contract maker of mobile phones, tumbled 13.3 percent after predicting a wider first-half loss. Hyundai Motor Co. and Toyota Motor Corp. dropped at least 3.7 percent as car sales in the U.S. grew at a slower pace. BHP Billiton Ltd., the world’s largest mining company, fell 4.4 percent as commodity prices slipped.
“The view is spreading among investors that a recovery in the global economy won’t be as easy as people had expected,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “Moves by countries around the world to tighten fiscal policies are behind the plunge in markets.”
The MSCI Asia Pacific Index fell 3.4 percent to 111.70. The gauge has slumped 7.3 percent this year amid concerns Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
China’s Shanghai Composite Index declined 6.7 percent, the biggest decline among benchmark indices in the Asia-Pacific after the New York-based Conference Board revised down an estimate for China’s growth and the country’s manufacturing expanded at a slower-than-expected pace. Hong Kong’s Hang Seng Index slipped 3.8 percent.
Faltering Growth
Japan’s Nikkei 225 Stock Average lost 5.5 percent, after the yen strengthened for a fourth week, dragging shares of Japanese exporters such as Canon Inc. and Sony Corp. lower. Australia’s S&P/ASX 200 Index dropped 4 percent, while South Korea’s Kospi Index sank 3.4 percent.
Gauges of raw material producers and electronics companies led this week’s decline as economic numbers released this week from China, Europe and the U.S. deteriorated.
Reports on U.S. manufacturing, employment and home sales pointed to slower growth in the second half of the year. The Institute for Supply Management’s manufacturing gauge released on July 1 fell more than forecast. Other data released on the same day showed contracts to buy existing homes tumbled in May, and claims for jobless benefits unexpectedly rose last week. A report by the New York-based Conference Board on June 29 also showed confidence among consumers declined more than forecast last month.
Slower Sales
Canon, which got about 28 percent of sales from the U.S. last year, fell 7.7 percent to 3,260 yen. Sony, the maker of Playstation gaming consoles and Bravia televisions, dropped 5.4 percent to 2,310 yen. Panasonic Corp., the world’s largest maker of plasma TVs, slipped 5.8 percent to 1,098 yen.
Shares of Asian automakers dropped as data released by Autodata Corp. on July 1 showed the growth in sales in the U.S. decelerated to 14 percent last month from a year earlier, after gains of 19 percent in May and 20 percent in April.
Toyota, the world’s biggest carmaker, slid 3.7 percent to 3,020 yen. Honda Motor Co., which counts North America as its biggest market, declined 6.8 percent to 2,495 yen. Hyundai Motor Co., South Korea’s biggest carmaker, dropped 7.7 percent to 132,500 won.
Japanese exporters also declined as a stronger yen threatened to reduce the value of overseas sales when repatriated. The dollar fell for a fourth week against the yen as signs the global recovery is faltering boosted demand for safer assets.
Australia Tax Agreement
Foxconn, controlled by Taiwan’s Hon Hai Precision Industry Co., slumped 13.3 percent to HK$4.88, the third-biggest decline on the MSCI Asia Pacific Index. The company said on June 29 its first-half loss will widen in part because of lower prices for its products and higher depreciation expenses, triggering a wave target price cuts from Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Shares of mining companies declined as weaker commodity prices weighed on the sector even as Australian Prime Minister Julia Gillard scaled back a proposed tax on mining companies.
BHP Billiton Ltd. declined 4.4 percent to A$37.09. Rio Tinto Ltd., the world’s third-biggest mining company, dropped 6.2 percent to A$65.30. Jiangxi Copper Co., China’s biggest supplier of the metal, lost 6 percent to HK$14.46.
The Reuters/Jefferies CRB Index, which tracks prices of commodities from copper to corn, dropped 4.2 percent amid heightened concern over the economic health of the China.
China Forecasts Cut
China’s manufacturing growth slowed more than economists forecast in June, data released on July 1 showed. The Conference Board on June 29 corrected down its April gauge for the nation’s economic outlook due to a calculation error.
Goldman Sachs Group Inc. yesterday cut its real gross domestic product growth forecast for China this year to 10.1 percent from 11.4 percent, joining BNP Paribas, Macquarie Securities Ltd. and China International Capital Corp. in doing so.
Companies with substantial business in Europe dropped after two surveys released on July 1 showed factory output in the 16- member euro region weakened for a second month.
Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its biggest market, dropped 5.5 percent to HK$42. Li & Fung Ltd., the supplier of toys and home furnishings that got 27 percent of sales from Europe last year, dropped 10 percent to HK$34.85. Billabong International Ltd., the world’s biggest publicly traded surfwear maker, lost 2.7 percent to A$8.64.
Canon Inc., the world’s biggest camera maker that counts the U.S. as its second-biggest market, fell 7.7 percent. Foxconn International Holdings Ltd., the world’s biggest contract maker of mobile phones, tumbled 13.3 percent after predicting a wider first-half loss. Hyundai Motor Co. and Toyota Motor Corp. dropped at least 3.7 percent as car sales in the U.S. grew at a slower pace. BHP Billiton Ltd., the world’s largest mining company, fell 4.4 percent as commodity prices slipped.
“The view is spreading among investors that a recovery in the global economy won’t be as easy as people had expected,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “Moves by countries around the world to tighten fiscal policies are behind the plunge in markets.”
The MSCI Asia Pacific Index fell 3.4 percent to 111.70. The gauge has slumped 7.3 percent this year amid concerns Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
China’s Shanghai Composite Index declined 6.7 percent, the biggest decline among benchmark indices in the Asia-Pacific after the New York-based Conference Board revised down an estimate for China’s growth and the country’s manufacturing expanded at a slower-than-expected pace. Hong Kong’s Hang Seng Index slipped 3.8 percent.
Faltering Growth
Japan’s Nikkei 225 Stock Average lost 5.5 percent, after the yen strengthened for a fourth week, dragging shares of Japanese exporters such as Canon Inc. and Sony Corp. lower. Australia’s S&P/ASX 200 Index dropped 4 percent, while South Korea’s Kospi Index sank 3.4 percent.
Gauges of raw material producers and electronics companies led this week’s decline as economic numbers released this week from China, Europe and the U.S. deteriorated.
Reports on U.S. manufacturing, employment and home sales pointed to slower growth in the second half of the year. The Institute for Supply Management’s manufacturing gauge released on July 1 fell more than forecast. Other data released on the same day showed contracts to buy existing homes tumbled in May, and claims for jobless benefits unexpectedly rose last week. A report by the New York-based Conference Board on June 29 also showed confidence among consumers declined more than forecast last month.
Slower Sales
Canon, which got about 28 percent of sales from the U.S. last year, fell 7.7 percent to 3,260 yen. Sony, the maker of Playstation gaming consoles and Bravia televisions, dropped 5.4 percent to 2,310 yen. Panasonic Corp., the world’s largest maker of plasma TVs, slipped 5.8 percent to 1,098 yen.
Shares of Asian automakers dropped as data released by Autodata Corp. on July 1 showed the growth in sales in the U.S. decelerated to 14 percent last month from a year earlier, after gains of 19 percent in May and 20 percent in April.
Toyota, the world’s biggest carmaker, slid 3.7 percent to 3,020 yen. Honda Motor Co., which counts North America as its biggest market, declined 6.8 percent to 2,495 yen. Hyundai Motor Co., South Korea’s biggest carmaker, dropped 7.7 percent to 132,500 won.
Japanese exporters also declined as a stronger yen threatened to reduce the value of overseas sales when repatriated. The dollar fell for a fourth week against the yen as signs the global recovery is faltering boosted demand for safer assets.
Australia Tax Agreement
Foxconn, controlled by Taiwan’s Hon Hai Precision Industry Co., slumped 13.3 percent to HK$4.88, the third-biggest decline on the MSCI Asia Pacific Index. The company said on June 29 its first-half loss will widen in part because of lower prices for its products and higher depreciation expenses, triggering a wave target price cuts from Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Shares of mining companies declined as weaker commodity prices weighed on the sector even as Australian Prime Minister Julia Gillard scaled back a proposed tax on mining companies.
BHP Billiton Ltd. declined 4.4 percent to A$37.09. Rio Tinto Ltd., the world’s third-biggest mining company, dropped 6.2 percent to A$65.30. Jiangxi Copper Co., China’s biggest supplier of the metal, lost 6 percent to HK$14.46.
The Reuters/Jefferies CRB Index, which tracks prices of commodities from copper to corn, dropped 4.2 percent amid heightened concern over the economic health of the China.
China Forecasts Cut
China’s manufacturing growth slowed more than economists forecast in June, data released on July 1 showed. The Conference Board on June 29 corrected down its April gauge for the nation’s economic outlook due to a calculation error.
Goldman Sachs Group Inc. yesterday cut its real gross domestic product growth forecast for China this year to 10.1 percent from 11.4 percent, joining BNP Paribas, Macquarie Securities Ltd. and China International Capital Corp. in doing so.
Companies with substantial business in Europe dropped after two surveys released on July 1 showed factory output in the 16- member euro region weakened for a second month.
Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its biggest market, dropped 5.5 percent to HK$42. Li & Fung Ltd., the supplier of toys and home furnishings that got 27 percent of sales from Europe last year, dropped 10 percent to HK$34.85. Billabong International Ltd., the world’s biggest publicly traded surfwear maker, lost 2.7 percent to A$8.64.
Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole
CHICAGO — Even by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo.
He picks the papers off his desk and points to a figure in red: $5.01 billion.
“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.
Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”
For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.
Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.
States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.
“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”
As the recession has swept over states and cities, it has laid bare economic weakness and shoddy fiscal practices. Only an infusion of federal stimulus money allowed many states to avert deep layoffs last year.
Cuts in Work Forces
The federal dollars are nearly spent. Last month, local governments nationwide shed more than 20,000 jobs. Should the largest struggling states — like California, New York or Illinois — lay off tens of thousands more in coming months, or default on payments, the reverberations could badly damage a weakened economy and push housing prices down still further.
“You’re not seeing these states bounce back, and that could be a big drag on the national economy,” said Susan K. Urahn of the Pew Center on the States. “It could be a very tough decade.”
In Illinois, the fiscal pain is radiating downward.
From suburban Elgin to Chicago to Rockford to Peoria, school districts have fired thousands of teachers, curtailed kindergarten and electives, drained pools and cut after-school clubs. Drug, family and mental health counseling centers have slashed their work forces and borrowed money to stave off insolvency.
In Beardstown, a small city deep in the western marshes, Ann Johnson plans to shut her century-old pharmacy. Because of late state payments, she could not afford to keep a 10-day supply of drugs. In Chicago, a funeral home owner wonders whether he can afford to bury the impoverished, as the state has fallen six months behind on its charity payments, $1,103 a funeral.
In Peoria — where the city faced a $14.5 million gap this year and could face an additional $10 million budget hole next year — Virginia Holwell, a trainer of child welfare caseworkers, lost her job when the state cut payments to her agency. She sits in her living room high above the Illinois River and calculates the months of savings left before the bank forecloses on her house.
“I’ve got enough to last until the end of August,” she says, matter-of-factly. “I’m 58 and I’m pretty good at what I do, and I got to tell you, I’m pretty devastated.”
He picks the papers off his desk and points to a figure in red: $5.01 billion.
“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.
Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”
For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.
Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.
States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.
“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”
As the recession has swept over states and cities, it has laid bare economic weakness and shoddy fiscal practices. Only an infusion of federal stimulus money allowed many states to avert deep layoffs last year.
Cuts in Work Forces
The federal dollars are nearly spent. Last month, local governments nationwide shed more than 20,000 jobs. Should the largest struggling states — like California, New York or Illinois — lay off tens of thousands more in coming months, or default on payments, the reverberations could badly damage a weakened economy and push housing prices down still further.
“You’re not seeing these states bounce back, and that could be a big drag on the national economy,” said Susan K. Urahn of the Pew Center on the States. “It could be a very tough decade.”
In Illinois, the fiscal pain is radiating downward.
From suburban Elgin to Chicago to Rockford to Peoria, school districts have fired thousands of teachers, curtailed kindergarten and electives, drained pools and cut after-school clubs. Drug, family and mental health counseling centers have slashed their work forces and borrowed money to stave off insolvency.
In Beardstown, a small city deep in the western marshes, Ann Johnson plans to shut her century-old pharmacy. Because of late state payments, she could not afford to keep a 10-day supply of drugs. In Chicago, a funeral home owner wonders whether he can afford to bury the impoverished, as the state has fallen six months behind on its charity payments, $1,103 a funeral.
In Peoria — where the city faced a $14.5 million gap this year and could face an additional $10 million budget hole next year — Virginia Holwell, a trainer of child welfare caseworkers, lost her job when the state cut payments to her agency. She sits in her living room high above the Illinois River and calculates the months of savings left before the bank forecloses on her house.
“I’ve got enough to last until the end of August,” she says, matter-of-factly. “I’m 58 and I’m pretty good at what I do, and I got to tell you, I’m pretty devastated.”
India’s Singh to Open Delhi Airport Terminal 3, Easing Travel
July 3 (Bloomberg) -- Indian Prime Minister Manmohan Singh will today open a terminal at New Delhi airport that will double the airport’s capacity and ease travel into the world’s second- most populous country.
The new terminal, spread over 5.4 million square feet, has 78 gates, 97 automated walkways, 95 immigration counters, 20,000 square meters of retail space and parking for 4,300 cars. The facility, which will begin handling international flights on July 14, will boost the airport’s total capacity to 60 million passengers a year.
The Delhi terminal and another planned in Mumbai are part of a government infrastructure push designed to lure overseas investment and support travel demand stoked by the nation’s surging economic growth. Nationwide, the number of domestic passengers will grow more than fourfold to 180 million by 2020, according to a ministry of civil aviation forecast.
“It is essential for India that T3 is seen as a success,” said Andreas Schimm, director of economics and program development at Airports Council International, a Geneva-based trade group. “If significant investments are not paying off, capacity will not keep pace with demand as investors will shy away from the airport industry.”
$2.7 Billion Terminal
Along with other renovations, construction of Terminal 3 cost about $2.7 billion, according to Kiran Kumar Grandhi, chairman, airports at GMR Group. The facility will be run by a group backed by Bangalore-based GMR, state-run Airports Authority of India Ltd., Frankfurt-based Fraport AG and Malaysia Airports Holdings Bhd.
The new facility may boost travel by drawing more carriers, improving connectivity between flights and easing queues. About 25 million passengers passed through Delhi airport in the year ended March. Dubai handled 40.9 million travelers in 2009 and Singapore’s Changi airport moved 37.2 million, according to Airports Council International data.
“For the first time an Indian airport will rank alongside Changi, Hong Kong and Dubai,” said Binit Somaia, director for South Asia at the Sydney-based Centre for Asia Pacific Aviation. “That is a big step forward.”
The new facility was completed in 37 months compared with the 45 months China took to build the terminal that opened in Beijing ahead of the 2008 Olympics.
Travel Hub
Carriers including Jet Airways (India) Ltd., the nation’s largest, Kingfisher Airlines Ltd. and Air India will move domestic services to Terminal 3 around the end of the month. Low-cost carriers such as SpiceJet Ltd. will use a different facility.
Domestic carriers need to take advantage of the new terminal to develop New Delhi as a hub for both domestic and international travel, Civil Aviation Minister Praful Patel told reporters yesterday.
“Lufthansa, Singapore Airlines and British Airways, which are all reputed in the world, have only become big because they have encashed on the hub,” said Patel in New Delhi. “India did not have that.”
The ministry of civil aviation will pursue other government departments and state administrations to lower taxes on aviation turbine fuel and ease transit visa rules to facilitate development of Delhi as a hub, Patel said.
Airbus A380
Emirates Airline has applied to fly the Airbus SAS A380 superjumbo to Delhi with the opening of the new terminal, India’s Director General of Civil Aviation Nasim Zaidi said last month. AirAsia X, part-owned by Malaysia-based AirAsia Bhd., will add services to the city from Aug. 4. The group may also add flights from Bangkok, AirAsia Chief Executive Officer Tony Fernandes said last month.
“Improved infrastructure such as new terminals help boost air traffic and enhance the travel experience,” he said in an e-mailed response to questions. “This will mean a quicker turnaround time for our aircraft operations, helping keep costs low and enabling us to offer our lower fares.”
Indian air travel has risen alongside an economy growing at an average rate of 8.5 percent annually over the past five years and the rise of discount carriers. The number of airports with scheduled services has climbed to 82 from 50 over the past 10 years, according to the civil aviation ministry.
The new terminal in Mumbai, India’s financial capital, is due to open in 2012. The government has also approved plans for the construction of seven new airports.
The new terminal, spread over 5.4 million square feet, has 78 gates, 97 automated walkways, 95 immigration counters, 20,000 square meters of retail space and parking for 4,300 cars. The facility, which will begin handling international flights on July 14, will boost the airport’s total capacity to 60 million passengers a year.
The Delhi terminal and another planned in Mumbai are part of a government infrastructure push designed to lure overseas investment and support travel demand stoked by the nation’s surging economic growth. Nationwide, the number of domestic passengers will grow more than fourfold to 180 million by 2020, according to a ministry of civil aviation forecast.
“It is essential for India that T3 is seen as a success,” said Andreas Schimm, director of economics and program development at Airports Council International, a Geneva-based trade group. “If significant investments are not paying off, capacity will not keep pace with demand as investors will shy away from the airport industry.”
$2.7 Billion Terminal
Along with other renovations, construction of Terminal 3 cost about $2.7 billion, according to Kiran Kumar Grandhi, chairman, airports at GMR Group. The facility will be run by a group backed by Bangalore-based GMR, state-run Airports Authority of India Ltd., Frankfurt-based Fraport AG and Malaysia Airports Holdings Bhd.
The new facility may boost travel by drawing more carriers, improving connectivity between flights and easing queues. About 25 million passengers passed through Delhi airport in the year ended March. Dubai handled 40.9 million travelers in 2009 and Singapore’s Changi airport moved 37.2 million, according to Airports Council International data.
“For the first time an Indian airport will rank alongside Changi, Hong Kong and Dubai,” said Binit Somaia, director for South Asia at the Sydney-based Centre for Asia Pacific Aviation. “That is a big step forward.”
The new facility was completed in 37 months compared with the 45 months China took to build the terminal that opened in Beijing ahead of the 2008 Olympics.
Travel Hub
Carriers including Jet Airways (India) Ltd., the nation’s largest, Kingfisher Airlines Ltd. and Air India will move domestic services to Terminal 3 around the end of the month. Low-cost carriers such as SpiceJet Ltd. will use a different facility.
Domestic carriers need to take advantage of the new terminal to develop New Delhi as a hub for both domestic and international travel, Civil Aviation Minister Praful Patel told reporters yesterday.
“Lufthansa, Singapore Airlines and British Airways, which are all reputed in the world, have only become big because they have encashed on the hub,” said Patel in New Delhi. “India did not have that.”
The ministry of civil aviation will pursue other government departments and state administrations to lower taxes on aviation turbine fuel and ease transit visa rules to facilitate development of Delhi as a hub, Patel said.
Airbus A380
Emirates Airline has applied to fly the Airbus SAS A380 superjumbo to Delhi with the opening of the new terminal, India’s Director General of Civil Aviation Nasim Zaidi said last month. AirAsia X, part-owned by Malaysia-based AirAsia Bhd., will add services to the city from Aug. 4. The group may also add flights from Bangkok, AirAsia Chief Executive Officer Tony Fernandes said last month.
“Improved infrastructure such as new terminals help boost air traffic and enhance the travel experience,” he said in an e-mailed response to questions. “This will mean a quicker turnaround time for our aircraft operations, helping keep costs low and enabling us to offer our lower fares.”
Indian air travel has risen alongside an economy growing at an average rate of 8.5 percent annually over the past five years and the rise of discount carriers. The number of airports with scheduled services has climbed to 82 from 50 over the past 10 years, according to the civil aviation ministry.
The new terminal in Mumbai, India’s financial capital, is due to open in 2012. The government has also approved plans for the construction of seven new airports.
India opens $1.3bn air terminal in capital
Until now, international travellers arriving in New Delhi transited through a dingy socialist-era terminal that seemed out of kilter with India’s status as one Asia’s fastest-growing economies. As the airport had few aerobridges, most passengers rode rickety buses to reach the gloomy arrivals hall.
But India’s capital is finally getting an international gateway befitting its aspirations as an emerging global superpower, with today’s inauguration of a gleaming new ultra-modern air terminal.
Built at an estimated cost of $1.3bn (€1bn, £860m) by a consortium led by Bangalore-based GMR, the nine-storey glass-and-steel terminal – with 78 aerobridges, upscale boutiques and eateries – can accommodate 34m international and domestic passengers a year and will raise the airport’s total capacity to 60m.
Its inauguration comes as India’s air travel revolution is regaining momentum after last year’s slowdown, with passenger traffic from January to May up 22 per cent over last year.
“We want to show the world what a world-class airport we have,” G.M. Rao, founding chairman of GMR – one of India’s pioneering new breed of infrastructure companies – said in a recent television interview. “It’s a brand for the country.”
New Delhi’s swish new terminal – part of a $2.6bn modernisation of the whole airport – is the jewel in the crown of a once controversial limited airport privatisation programme that has seen India’s four biggest airports put under private investor control, and transformed the flying experience for many Indians.
Bangalore and Hyderabad, the country’s main IT hubs, both opened swanky new airports two years ago, and their overcrowded state-run facilities were shut down. Both airports were “greenfield” facilities – built from scratch on undeveloped sites. GVK, the Hyderabad-based infrastructure company, is building a $2bn new international terminal at Mumbai, though the airport’s small size means air traffic congestion – and long delays – will remain a problem. Plans to build a greenfield airport in Mumbai, however, are still bogged down, awaiting environmental clearance.
International and domestic airlines will start operating from New Delhi’s new terminal in two phases over the next month, four years after GMR was given control of the airport – which handled 25m passengers last year.
Amber Dubey, an analyst with KPMG, calls the rapid completion of the terminal a “remarkable feat,” demonstrating India’s ability to build world-class infrastructure if given a chance. “The message is, ‘we can, and we will,’ ” he said.
But even as India’s political and business elite gear up to celebrate the country’s newest status symbol, dozens of other Indian airports – at business hubs like Chennai, major cities like Calcutta, and tourist sites like Varanasi, Goa and Jaipur – are still firmly under state control, and remain dismal utilitarian relics of the socialist past.
The Airports Authority of India – which holds minority equity stakes in all four privatised airports – has a $3bn plan to upgrade and expand the basic infrastructure of 35 of the busiest of these facilities. But raising funds may prove difficult, as most of the airports AAI operates are loss-making.
Even if cash can be raised, many analysts doubt that the airports authority – with lack of talent at the higher levels and excessive staffing at the lower levels – has the vision and entreprenuerial drive to satisfy India’s increasingly demanding consumers.
“The quality of Indian airports is almost like a national shame,” said one industry analyst, who asked not to be identified. “They are almost worse than the railway stations in Europe.”
But India’s capital is finally getting an international gateway befitting its aspirations as an emerging global superpower, with today’s inauguration of a gleaming new ultra-modern air terminal.
Built at an estimated cost of $1.3bn (€1bn, £860m) by a consortium led by Bangalore-based GMR, the nine-storey glass-and-steel terminal – with 78 aerobridges, upscale boutiques and eateries – can accommodate 34m international and domestic passengers a year and will raise the airport’s total capacity to 60m.
Its inauguration comes as India’s air travel revolution is regaining momentum after last year’s slowdown, with passenger traffic from January to May up 22 per cent over last year.
“We want to show the world what a world-class airport we have,” G.M. Rao, founding chairman of GMR – one of India’s pioneering new breed of infrastructure companies – said in a recent television interview. “It’s a brand for the country.”
New Delhi’s swish new terminal – part of a $2.6bn modernisation of the whole airport – is the jewel in the crown of a once controversial limited airport privatisation programme that has seen India’s four biggest airports put under private investor control, and transformed the flying experience for many Indians.
Bangalore and Hyderabad, the country’s main IT hubs, both opened swanky new airports two years ago, and their overcrowded state-run facilities were shut down. Both airports were “greenfield” facilities – built from scratch on undeveloped sites. GVK, the Hyderabad-based infrastructure company, is building a $2bn new international terminal at Mumbai, though the airport’s small size means air traffic congestion – and long delays – will remain a problem. Plans to build a greenfield airport in Mumbai, however, are still bogged down, awaiting environmental clearance.
International and domestic airlines will start operating from New Delhi’s new terminal in two phases over the next month, four years after GMR was given control of the airport – which handled 25m passengers last year.
Amber Dubey, an analyst with KPMG, calls the rapid completion of the terminal a “remarkable feat,” demonstrating India’s ability to build world-class infrastructure if given a chance. “The message is, ‘we can, and we will,’ ” he said.
But even as India’s political and business elite gear up to celebrate the country’s newest status symbol, dozens of other Indian airports – at business hubs like Chennai, major cities like Calcutta, and tourist sites like Varanasi, Goa and Jaipur – are still firmly under state control, and remain dismal utilitarian relics of the socialist past.
The Airports Authority of India – which holds minority equity stakes in all four privatised airports – has a $3bn plan to upgrade and expand the basic infrastructure of 35 of the busiest of these facilities. But raising funds may prove difficult, as most of the airports AAI operates are loss-making.
Even if cash can be raised, many analysts doubt that the airports authority – with lack of talent at the higher levels and excessive staffing at the lower levels – has the vision and entreprenuerial drive to satisfy India’s increasingly demanding consumers.
“The quality of Indian airports is almost like a national shame,” said one industry analyst, who asked not to be identified. “They are almost worse than the railway stations in Europe.”
Thursday, July 1, 2010
Lobbyist Says It’s About Information, Not Influence
WASHINGTON — On the eve of a critical Congressional vote last week on a sweeping measure to regulate Wall Street, the prominent lobbyist Tony Podesta met with one of the lawmakers to go over some final language and discuss the effect it could have on his many corporate clients.
“He exaggerates our power, but he increases demand for our services,” Tony Podesta said of President Obama.
Related
*
Congressman Seeks Inquiry on Trailers (July 2, 2010)
Once that was over, Mr. Podesta pivoted back to another client, BP, to help the company navigate Congressional waters and, in short, try to prevent an ugly situation from getting even uglier.
For weeks now, the two biggest issues in Congress have been cleaning up Wall Street and cleaning up the Gulf Coast. To the surprise of no one in the capital’s K Street corridor, Mr. Podesta — Democratic fund-raiser, avid art collector and member of a family brand in Washington — has had a big hand in both. And medical companies have also been drawn to his firm, particularly in the wake of the health care legislation.
In a remarkable season of lobbying, business is booming for the Podesta Group, already one of Washington’s biggest players. It has become particularly lucrative for firms like Mr. Podesta’s that are skilled at wielding influence in Congress, the center of epic debates on health care, bailouts and financial regulations.
“We’ve been dealing with some very big issues,” he said with a bit of understatement.
For lobbyists, the Obama legislative agenda has been a veritable full-employment program, with 2,500 working just on financial regulation alone.
The results are often buried deep in the fine print.
On Wall Street regulation, for instance, Mr. Podesta lobbied on 25 different issues for major players like Bank of America as well as smaller companies.
He recently represented a “person to person” lender, Prosper Marketplace, which makes loans over the Internet. The company worried about the prospect of coming under the jurisdiction of the Securities and Exchange Commission, which insisted that Prosper should be treated as an investment firm.
Mr. Podesta and lobbyists at his firm, including Israel Klein, a former top aide to Senator Charles E. Schumer, Democrat of New York, worked through a number of senior Democratic allies in both the House and the Senate.
Among those they lobbied to resist the S.E.C.’s purview included Representative Barney Frank, the Financial Services Committee chairman; Senator Christopher J. Dodd, the banking committee chairman; Senator Barbara Boxer of California; and Mr. Schumer. Once the Podesta team realized it could not defeat the idea, it resorted to an old Washington standby — delay by study.
In the end, House and Senate negotiators agreed last week to a government study, delaying federal jurisdiction and possible S.E.C. oversight.
“It wasn’t a total loss,” Mr. Podesta said. “We ended up in the middle.”
On BP, Mr. Podesta has acted mainly as a liaison between Congressional investigators and the embattled company. For instance, the firm helped to work out a schedule to give BP more time to turn over corporate documents in the face of a dozen Congressional hearings.
Mr. Podesta, a garrulous, gravelly voiced man known for his bold neckwear, is part of the elite group of lobbyists atop the industry who move easily between black-tie fund-raisers on Embassy Row and closed meetings on Capitol Hill. Despite the recession, lobbying scandals and frequent denunciation from President Obama about their outsize influence, lobbyists are more in demand than ever.
“The irony of it is that every time the president says we lobbyists have all this influence, people who don’t have a lobbyist want one,” Mr. Podesta said in an interview. “He exaggerates our power, but he increases demand for our services.”
Revenue for the more than 11,000 federal lobbyists rose 5 percent last year, to more than $3.5 billion, and fees at the Podesta Group have more than doubled since 2006, to $25.7 million last year, according to data from the Center for Responsive Politics.
General Dynamics, the big military contractor, and Genzyme, the biotech company, pay half a million dollars or more a year for the firm’s services. In four years, the Podesta Group has tripled its staff of lobbyists.
Mr. Podesta waves his hand dismissively and chortles when discussing the criticism and new restrictions that lobbyists face from the White House.
“Whatever they’re gonna do, they’ll do,” he said. “They can ban lobbyists from having drivers licenses. We’ll all get cars and drivers.”
The obvious friction between Mr. Podesta and the White House has an added dimension; his brother and former partner, John Podesta, headed up Mr. Obama’s presidential transition and is a crucial presidential ally.
Some prospective clients, in fact, will contact Mr. Podesta because of his brother’s ties to Mr. Obama. “People approach us and say, ‘Can you call your brother and get him to call the president,’ and we’ll say, ‘No.’ It’s not what we do. We don’t do access lobbying.”
Mr. Podesta does some work with the White House despite the tension, but his lobbying is directed mainly on Congress, where debate has focused on huge and historic measures.
In a capital fragmented by politics, the best lobbyists “are able to work across fields and across branches of government — and even across political parties,” said Rogan Kersh, a New York University professor who studies lobbying.
“A Tony Podesta isn’t going to wave a magic wand and make all of BP’s problems go away,” he said, “but his clients are going to get a blueprint for how to succeed in official Washington.”
Mr. Podesta’s status has made him a target, too; advocates for campaign finance reform dressed as “Founding Fathers” picketed in the lobby of his building this week.
“He exaggerates our power, but he increases demand for our services,” Tony Podesta said of President Obama.
Related
*
Congressman Seeks Inquiry on Trailers (July 2, 2010)
Once that was over, Mr. Podesta pivoted back to another client, BP, to help the company navigate Congressional waters and, in short, try to prevent an ugly situation from getting even uglier.
For weeks now, the two biggest issues in Congress have been cleaning up Wall Street and cleaning up the Gulf Coast. To the surprise of no one in the capital’s K Street corridor, Mr. Podesta — Democratic fund-raiser, avid art collector and member of a family brand in Washington — has had a big hand in both. And medical companies have also been drawn to his firm, particularly in the wake of the health care legislation.
In a remarkable season of lobbying, business is booming for the Podesta Group, already one of Washington’s biggest players. It has become particularly lucrative for firms like Mr. Podesta’s that are skilled at wielding influence in Congress, the center of epic debates on health care, bailouts and financial regulations.
“We’ve been dealing with some very big issues,” he said with a bit of understatement.
For lobbyists, the Obama legislative agenda has been a veritable full-employment program, with 2,500 working just on financial regulation alone.
The results are often buried deep in the fine print.
On Wall Street regulation, for instance, Mr. Podesta lobbied on 25 different issues for major players like Bank of America as well as smaller companies.
He recently represented a “person to person” lender, Prosper Marketplace, which makes loans over the Internet. The company worried about the prospect of coming under the jurisdiction of the Securities and Exchange Commission, which insisted that Prosper should be treated as an investment firm.
Mr. Podesta and lobbyists at his firm, including Israel Klein, a former top aide to Senator Charles E. Schumer, Democrat of New York, worked through a number of senior Democratic allies in both the House and the Senate.
Among those they lobbied to resist the S.E.C.’s purview included Representative Barney Frank, the Financial Services Committee chairman; Senator Christopher J. Dodd, the banking committee chairman; Senator Barbara Boxer of California; and Mr. Schumer. Once the Podesta team realized it could not defeat the idea, it resorted to an old Washington standby — delay by study.
In the end, House and Senate negotiators agreed last week to a government study, delaying federal jurisdiction and possible S.E.C. oversight.
“It wasn’t a total loss,” Mr. Podesta said. “We ended up in the middle.”
On BP, Mr. Podesta has acted mainly as a liaison between Congressional investigators and the embattled company. For instance, the firm helped to work out a schedule to give BP more time to turn over corporate documents in the face of a dozen Congressional hearings.
Mr. Podesta, a garrulous, gravelly voiced man known for his bold neckwear, is part of the elite group of lobbyists atop the industry who move easily between black-tie fund-raisers on Embassy Row and closed meetings on Capitol Hill. Despite the recession, lobbying scandals and frequent denunciation from President Obama about their outsize influence, lobbyists are more in demand than ever.
“The irony of it is that every time the president says we lobbyists have all this influence, people who don’t have a lobbyist want one,” Mr. Podesta said in an interview. “He exaggerates our power, but he increases demand for our services.”
Revenue for the more than 11,000 federal lobbyists rose 5 percent last year, to more than $3.5 billion, and fees at the Podesta Group have more than doubled since 2006, to $25.7 million last year, according to data from the Center for Responsive Politics.
General Dynamics, the big military contractor, and Genzyme, the biotech company, pay half a million dollars or more a year for the firm’s services. In four years, the Podesta Group has tripled its staff of lobbyists.
Mr. Podesta waves his hand dismissively and chortles when discussing the criticism and new restrictions that lobbyists face from the White House.
“Whatever they’re gonna do, they’ll do,” he said. “They can ban lobbyists from having drivers licenses. We’ll all get cars and drivers.”
The obvious friction between Mr. Podesta and the White House has an added dimension; his brother and former partner, John Podesta, headed up Mr. Obama’s presidential transition and is a crucial presidential ally.
Some prospective clients, in fact, will contact Mr. Podesta because of his brother’s ties to Mr. Obama. “People approach us and say, ‘Can you call your brother and get him to call the president,’ and we’ll say, ‘No.’ It’s not what we do. We don’t do access lobbying.”
Mr. Podesta does some work with the White House despite the tension, but his lobbying is directed mainly on Congress, where debate has focused on huge and historic measures.
In a capital fragmented by politics, the best lobbyists “are able to work across fields and across branches of government — and even across political parties,” said Rogan Kersh, a New York University professor who studies lobbying.
“A Tony Podesta isn’t going to wave a magic wand and make all of BP’s problems go away,” he said, “but his clients are going to get a blueprint for how to succeed in official Washington.”
Mr. Podesta’s status has made him a target, too; advocates for campaign finance reform dressed as “Founding Fathers” picketed in the lobby of his building this week.
Mahindra & Mahindra, ONGC, Tata Motors, Monnet Ispat: India Equity Preview
The following companies may have unusual price changes in India trading. Stock symbols are in parentheses and share prices are as of the last close.
The Bombay Stock Exchange Sensitive Index, or Sensex, fell 191.57, or 1.1 percent, to 17,509.33, the lowest since June 16. The gauge climbed 1 percent in the three months ended June, completing the longest quarterly winning streak since at least September 1979, according to data compiled by Bloomberg.
The S&P CNX Nifty Index on the National Stock Exchange lost 1.2 percent to 5,251.40. The BSE 200 Index retreated 0.8 percent to 2,229.53. SGX CNX Nifty Index futures for July delivery fell 0.2 to 5,250 at 11:02 a.m. in Singapore.
Axis Bank Ltd. (AXSB IN): The lender and three other banks were raised to “buy” from “hold” by BNP Paribas analysts Vijay Sarathi and Abhishek Bhattacharya, who cited rising loan growth and declining credit costs. Axis Bank is the brokerage’s “top pick,” the analysts said. They also upgraded Bank of India, ICICI Bank Ltd. and Punjab National Bank Ltd. to “buy.”
Axis Bank dropped 0.7 percent to 1,233.65 rupees. Bank of India (BOI IN) gained 2.2 percent to 357 rupees. ICICI Bank (ICICIBC IN) sank 2.4 percent to 841.45 rupees. Punjab National Bank (PNB IN) lost 2.7 percent to 1,020.35 rupees.
Colgate-Palmolive (India) Ltd. (CLGT IN): The maker of toothpaste and soap was cut to “neutral” from “outperform” by Govindarajan Chellappa, an analyst at Credit Suisse AG, with a share-price estimate of 884 rupees. The stock gained 0.4 percent to 840.6 rupees.
Indiabulls Real Estate Ltd. (IBREL IN): The developer was rated “overweight” in new coverage by Morgan Stanley analysts Sameer Baisiwala and Arunabh Chaudhari, who said they expect the company can unlock “significant value in its underlying assets” over the next three years. The analysts have a share- price estimate of 200 rupees. The stock declined 0.8 percent to 156.35 rupees.
Jaypee Infratech Ltd. (JPIN IN): The unit of India’s biggest builder of dams was rated “equal-weight” in new coverage by Morgan Stanley analysts Baisiwala and Chaudhari, who said the value in the company’s assets may take as many as 24 months to be unlocked and that its near-term earnings are dependent on one “micro market” that may slow in coming quarters despite its “strong potential.” The analysts have a share-price estimate of 85 rupees. The shares climbed 1.7 percent to 90.4 rupees.
NIIT Ltd. (NIIT IN): The software company was raised to “buy” from “sell” by Citigroup Inc. analysts Vishal Agarwal and Surendra Goyal, who cited the stock’s “reasonable valuations” and improving operating metrics. The analysts raised their share-price estimate to 85 rupees from 50 rupees. The shares slid 1.7 percent to 63.65 rupees.
Mahindra & Mahindra Ltd. (MM IN): India’s biggest maker of sport-utility vehicles and tractors declined to comment on a newspaper report that it’s in talks with Boeing Co. to buy a plant in Australia, Hemant Luthra, sector president at unit Mahindra Systech, said in an e-mailed statement. The stock fell 1.9 percent to 615.15 rupees.
Monnet Ispat & Energy Ltd. (MISP IN): Blackstone Group LP will invest 2.75 billion rupees ($59 million) to buy a 12.5 percent stake in India’s Monnet Power Co., the world’s biggest private-equity firm said in a statement. Monnet Power is a unit of sponge-iron maker Monnet Ispat & Energy Ltd. Monnet Ispat rose 0.1 percent to 402.80 rupees.
Oil & Natural Gas Corp. (ONGC IN): India’s biggest exploration company has approved in-principle cluster development of four fields in the western offshore area, the company said in a release. ONGC fell 1.4 percent to 1,302.3 rupees.
Persistent Systems Ltd. (PSYS IN): The software company was rated “outperform” in new coverage by Credit Suisse Group AG analysts led by Sunil Tirumalai, who said the stock should trade at a premium to its peers given its growth and margin profile. The analysts have a share-price estimate of 540 rupees. The shares jumped 4.3 percent to 429.85 rupees.
Reliance Communications Ltd. (RCOM IN): India’s second- largest mobile-phone operator acquired cable television operator Digicable in an all-stock deal, according to a statement on the Bombay Stock Exchange. Reliance Communications fell 3.1 percent to 192.25 rupees.
Reliance Power Ltd. (RPWR IN): The company controlled by billionaire Anil Ambani got approval for a $600 million loan from the U.S. Export-Import Bank for a power project in India’s Madhya Pradesh state, the Economic Times reported, citing a letter written by the bank’s Chairman Fred Hochberg. The loan is conditional on Reliance Power investing in the renewable energy sector, according to the report. Reliance shares decreased 1.1 percent to 169.55 rupees.
Steel Authority of India Ltd. (SAIL IN): The nation’s second-biggest producer and Posco’s joint venture to set up a steel mill in the South Asian nation will start in September after a detailed project report is prepared, Business Standard reported, citing Steel Secretary Atul Chaturvedi. The 110 billion rupee project will be located at Bokaro in Jharkhand state where Steel Authority has a mill, according to the report. The two companies may also build another plant in Maharashtra state at a cost of 150 billion rupees, the newspaper said. Steel Authority dropped 1.8 percent to 189.25 rupees.
Sun Pharmaceutical Industries Ltd. (SUNP IN): India’s largest drugmaker by market value introduced a generic version of Novartis AG’s Exelon treatment for mild to moderate dementia, according to an e-mailed statement. Sun Pharmaceutical would share a 180-day marketing exclusivity for the generic drug in the U.S., the statement said. The stock fell 1.8 percent to 1,752.65 rupees.
Tata Motors Ltd. (TTMT IN): The owner of Jaguar and Land Rover sold 67,730 vehicles in June, compared with 45,440 units sold a year earlier, the company said in an e-mailed statement.
Separately, Tata Chief Executive Officer Carl-Peter Forster said Land Rover needs to develop models that produce less carbon. Tata Motors fell 2 percent to 762.75 rupees.
The Bombay Stock Exchange Sensitive Index, or Sensex, fell 191.57, or 1.1 percent, to 17,509.33, the lowest since June 16. The gauge climbed 1 percent in the three months ended June, completing the longest quarterly winning streak since at least September 1979, according to data compiled by Bloomberg.
The S&P CNX Nifty Index on the National Stock Exchange lost 1.2 percent to 5,251.40. The BSE 200 Index retreated 0.8 percent to 2,229.53. SGX CNX Nifty Index futures for July delivery fell 0.2 to 5,250 at 11:02 a.m. in Singapore.
Axis Bank Ltd. (AXSB IN): The lender and three other banks were raised to “buy” from “hold” by BNP Paribas analysts Vijay Sarathi and Abhishek Bhattacharya, who cited rising loan growth and declining credit costs. Axis Bank is the brokerage’s “top pick,” the analysts said. They also upgraded Bank of India, ICICI Bank Ltd. and Punjab National Bank Ltd. to “buy.”
Axis Bank dropped 0.7 percent to 1,233.65 rupees. Bank of India (BOI IN) gained 2.2 percent to 357 rupees. ICICI Bank (ICICIBC IN) sank 2.4 percent to 841.45 rupees. Punjab National Bank (PNB IN) lost 2.7 percent to 1,020.35 rupees.
Colgate-Palmolive (India) Ltd. (CLGT IN): The maker of toothpaste and soap was cut to “neutral” from “outperform” by Govindarajan Chellappa, an analyst at Credit Suisse AG, with a share-price estimate of 884 rupees. The stock gained 0.4 percent to 840.6 rupees.
Indiabulls Real Estate Ltd. (IBREL IN): The developer was rated “overweight” in new coverage by Morgan Stanley analysts Sameer Baisiwala and Arunabh Chaudhari, who said they expect the company can unlock “significant value in its underlying assets” over the next three years. The analysts have a share- price estimate of 200 rupees. The stock declined 0.8 percent to 156.35 rupees.
Jaypee Infratech Ltd. (JPIN IN): The unit of India’s biggest builder of dams was rated “equal-weight” in new coverage by Morgan Stanley analysts Baisiwala and Chaudhari, who said the value in the company’s assets may take as many as 24 months to be unlocked and that its near-term earnings are dependent on one “micro market” that may slow in coming quarters despite its “strong potential.” The analysts have a share-price estimate of 85 rupees. The shares climbed 1.7 percent to 90.4 rupees.
NIIT Ltd. (NIIT IN): The software company was raised to “buy” from “sell” by Citigroup Inc. analysts Vishal Agarwal and Surendra Goyal, who cited the stock’s “reasonable valuations” and improving operating metrics. The analysts raised their share-price estimate to 85 rupees from 50 rupees. The shares slid 1.7 percent to 63.65 rupees.
Mahindra & Mahindra Ltd. (MM IN): India’s biggest maker of sport-utility vehicles and tractors declined to comment on a newspaper report that it’s in talks with Boeing Co. to buy a plant in Australia, Hemant Luthra, sector president at unit Mahindra Systech, said in an e-mailed statement. The stock fell 1.9 percent to 615.15 rupees.
Monnet Ispat & Energy Ltd. (MISP IN): Blackstone Group LP will invest 2.75 billion rupees ($59 million) to buy a 12.5 percent stake in India’s Monnet Power Co., the world’s biggest private-equity firm said in a statement. Monnet Power is a unit of sponge-iron maker Monnet Ispat & Energy Ltd. Monnet Ispat rose 0.1 percent to 402.80 rupees.
Oil & Natural Gas Corp. (ONGC IN): India’s biggest exploration company has approved in-principle cluster development of four fields in the western offshore area, the company said in a release. ONGC fell 1.4 percent to 1,302.3 rupees.
Persistent Systems Ltd. (PSYS IN): The software company was rated “outperform” in new coverage by Credit Suisse Group AG analysts led by Sunil Tirumalai, who said the stock should trade at a premium to its peers given its growth and margin profile. The analysts have a share-price estimate of 540 rupees. The shares jumped 4.3 percent to 429.85 rupees.
Reliance Communications Ltd. (RCOM IN): India’s second- largest mobile-phone operator acquired cable television operator Digicable in an all-stock deal, according to a statement on the Bombay Stock Exchange. Reliance Communications fell 3.1 percent to 192.25 rupees.
Reliance Power Ltd. (RPWR IN): The company controlled by billionaire Anil Ambani got approval for a $600 million loan from the U.S. Export-Import Bank for a power project in India’s Madhya Pradesh state, the Economic Times reported, citing a letter written by the bank’s Chairman Fred Hochberg. The loan is conditional on Reliance Power investing in the renewable energy sector, according to the report. Reliance shares decreased 1.1 percent to 169.55 rupees.
Steel Authority of India Ltd. (SAIL IN): The nation’s second-biggest producer and Posco’s joint venture to set up a steel mill in the South Asian nation will start in September after a detailed project report is prepared, Business Standard reported, citing Steel Secretary Atul Chaturvedi. The 110 billion rupee project will be located at Bokaro in Jharkhand state where Steel Authority has a mill, according to the report. The two companies may also build another plant in Maharashtra state at a cost of 150 billion rupees, the newspaper said. Steel Authority dropped 1.8 percent to 189.25 rupees.
Sun Pharmaceutical Industries Ltd. (SUNP IN): India’s largest drugmaker by market value introduced a generic version of Novartis AG’s Exelon treatment for mild to moderate dementia, according to an e-mailed statement. Sun Pharmaceutical would share a 180-day marketing exclusivity for the generic drug in the U.S., the statement said. The stock fell 1.8 percent to 1,752.65 rupees.
Tata Motors Ltd. (TTMT IN): The owner of Jaguar and Land Rover sold 67,730 vehicles in June, compared with 45,440 units sold a year earlier, the company said in an e-mailed statement.
Separately, Tata Chief Executive Officer Carl-Peter Forster said Land Rover needs to develop models that produce less carbon. Tata Motors fell 2 percent to 762.75 rupees.
Fortis in $3.1bn bid for Parkway
Malaysia’s sovereign wealth fund is expected to raise its partial takeover offer for Singapore’s Parkway Holdings after India’s Fortis Healthcare launched a rival takeover bid valuing the company at $3.1bn.
The Indian move pits Parkway’s two biggest shareholders in a battle for control that reflects interest in private healthcare facilities in Asia, where rising incomes are driving growth in medical tourism.
The battle for the hospital chain comes after Fortis’s $685m acquisition in March of a 23.9 per cent stake in Parkway from TPG, the US private equity group.
The Fortis stake was later raised to 25 per cent.
Khazanah, the Malaysian state investment agency, has a 23.3 per cent stake, but was angered by an arrangement under which Fortis took control of the board through an agreement with three directors.
Khazanah last month offered S$3.78 a share for enough shares to give it a 51 per cent holding, valuing the group at just less than $3bn.
The offer was described in a report to the board by Morgan Stanley as “not compelling”.
Fortis, India’s leading domestic hospital operator, on Thursday offered to buy all outstanding shares for S$3.80 a share, sparking speculation that Khazanah would raise its offer rather than see the Indian group consolidate control.
Lynette Tan, analyst at DMG Partners Securities, said: “They [Khazanah] are unlikely to accept this and I think they will want to counter-offer.”
There was no comment from Kuala Lumpur-based Khazanah.
Parkway shares closed at S$3.57 on Wednesday, but were suspended from trading on Thursday.
Fortis, owned by Malv-inder and Shivinder Singh, will have to pay S$3.2bn ($2.3bn) for the outstanding shares it does not own.
After the deal in March, Malvinder Singh took over as chairman of Parkway, and Fortis was allocated four directors on the 13-member board excluding alternates.
The Morgan Stanley report disclosed Fortis’s formal arrangement with three other directors giving it “the right to direct” how they vote in return for “certain economic benefits”.
The deal did not breach Singapore’s corporate governance code but annoyed Khazanah as it allowed Fortis to control Parkway with a quarter of the shares.
The Indian move pits Parkway’s two biggest shareholders in a battle for control that reflects interest in private healthcare facilities in Asia, where rising incomes are driving growth in medical tourism.
The battle for the hospital chain comes after Fortis’s $685m acquisition in March of a 23.9 per cent stake in Parkway from TPG, the US private equity group.
The Fortis stake was later raised to 25 per cent.
Khazanah, the Malaysian state investment agency, has a 23.3 per cent stake, but was angered by an arrangement under which Fortis took control of the board through an agreement with three directors.
Khazanah last month offered S$3.78 a share for enough shares to give it a 51 per cent holding, valuing the group at just less than $3bn.
The offer was described in a report to the board by Morgan Stanley as “not compelling”.
Fortis, India’s leading domestic hospital operator, on Thursday offered to buy all outstanding shares for S$3.80 a share, sparking speculation that Khazanah would raise its offer rather than see the Indian group consolidate control.
Lynette Tan, analyst at DMG Partners Securities, said: “They [Khazanah] are unlikely to accept this and I think they will want to counter-offer.”
There was no comment from Kuala Lumpur-based Khazanah.
Parkway shares closed at S$3.57 on Wednesday, but were suspended from trading on Thursday.
Fortis, owned by Malv-inder and Shivinder Singh, will have to pay S$3.2bn ($2.3bn) for the outstanding shares it does not own.
After the deal in March, Malvinder Singh took over as chairman of Parkway, and Fortis was allocated four directors on the 13-member board excluding alternates.
The Morgan Stanley report disclosed Fortis’s formal arrangement with three other directors giving it “the right to direct” how they vote in return for “certain economic benefits”.
The deal did not breach Singapore’s corporate governance code but annoyed Khazanah as it allowed Fortis to control Parkway with a quarter of the shares.
Wednesday, June 30, 2010
IPO Filings Hit Post-2007 High Amid Losses; LBO Firms Seek Cash
July 1 (Bloomberg) -- U.S. companies are getting set for the biggest wave of initial public offerings since the last bull market at the same time that IPOs get canceled at the fastest pace since the collapse of Lehman Brothers Holdings Inc.
HCA Inc., Zipcar Inc. and 89 other companies filed with the Securities and Exchange Commission last quarter to sell $23.6 billion of shares, data compiled by Bloomberg show. The last time more companies announced such plans was in 2007. In the past three months, 50 IPOs globally were shelved, the most in six quarters.
Investors in U.S. IPOs lost 7.2 percent so far this year as the Standard & Poor’s 500 Index fell to an almost nine-month low. Leveraged-buyout firms, which spent $2 trillion on takeovers during the credit-market bubble, announced the biggest stock sales and accounted for at least 50 percent of the deals filed with the SEC in April through June.
“Beggars can’t be choosers to a certain extent,” said Scott Billeadeau, who helps oversee $19 billion at Fifth Third Asset Management in Minneapolis. LBO firms are “going through their portfolios going, ‘What is something I can go monetize to get some equity out?’” he said.
The second quarter began with 17 companies completing initial sales in April, the most this year, as the S&P 500 rallied to a 19-month high. Metals USA Holdings Corp., owned by Leon Black’s New York-based Apollo Global Management LLC, and PAA Natural Gas Storage LP of Houston priced their IPOs above the forecast range.
Stock-Market Slump
Gains then evaporated on concern the end of government stimulus and widening budget gaps from Greece to Spain will curb the global economic recovery. The S&P 500 fell as much as 15 percent from its 2010 high in April, while the MSCI World Index of 24 developed nations lost 16 percent.
Price declines led companies from Ron Burkle’s Atlanta- based Americold Realty Trust to Swire Properties Ltd. in Hong Kong to pull $13.2 billion of initial offerings last quarter. IPOs backed by LBO firms, which take controlling stakes in companies and use borrowed money to finance most of the purchase, accounted for four of the five biggest sales announced in the U.S., data compiled by Bloomberg show.
“In volatile markets like this, sponsors want to be ready to launch to capitalize on what may be short windows of opportunity to get deals done,” said Pete Chapman, New York- based co-head of equity-capital markets for the Americas at Bank of America Corp.’s Merrill Lynch & Co. investment banking unit.
Client Distributions
Private-equity owners are using initial offerings to pay down debt and return money to investors after the collapse of New York-based Lehman in September 2008 halted dealmaking and froze credit markets. Distributions to clients last year decreased to the lowest since at least 2000, according to data compiled by London-based Preqin Ltd.
HCA, the hospital chain bought four years ago in a $33 billion LBO led by KKR & Co. and Boston-based Bain Capital LLC, filed with the SEC in May to sell $4.6 billion of shares. The IPO would be the largest in the U.S. since Visa Inc. of San Francisco raised $19.7 billion in March 2008.
The hospital operator will get about 54 percent of the proceeds, which will be used to pay back some of its $25.7 billion in debt. HCA’s owners, who used borrowed money for more than 80 percent of the purchase price, will get the rest.
HCA posted net income of $1.05 billion last year, 26 percent less than in 2005, the year before the Nashville, Tennessee-based company was taken private.
‘The Tsunami’
“The smart ones are trying to get ahead of the tsunami” of debt coming due, said David Weild, New York-based senior adviser at accounting firm Grant Thornton LLP. “The unsettled economic outlook has created a real roller coaster for IPOs.”
Nielsen Holdings BV, the New York-based television-audience rating company owned by KKR and Blackstone Group LP of New York, Washington-based Carlyle Group and Thomas H. Lee Partners LP of Boston, filed last month to raise as much as $1.75 billion.
Toys “R” Us Inc., the toy-store chain acquired by KKR, Bain and Vornado Realty Trust of New York in 2005, said in May that it plans to raise $800 million. The Wayne, New Jersey-based retailer has $5 billion in long-term debt.
Companies supported by venture capital firms are also tapping equity markets.
Zipcar, the car-sharing company that rents vehicles by the hour, will seek $75 million in an IPO to reduce debt and expand its fleet, according to its SEC filing.
Venture Capital
While sales rose almost 10-fold in the past five years, the Cambridge, Massachusetts-based company hasn’t earned a profit since its founding in 2000, and expects to lose money this year. Zipcar is backed by Steve Case’s Washington-based Revolution and Benchmark Capital of Menlo Park, California.
InvenSense Inc., which makes the motion sensors for Kyoto- based Nintendo Co.’s Wii MotionPlus remote video-game controller, filed this week to raise $100 million. The Sunnyvale, California-based company became profitable this fiscal year for the first time since at least 2005.
Venture capital firms Artiman Ventures of Palo Alto, California, Partech International in San Francisco and Menlo Park-based Sierra Ventures own a combined 54 percent stake.
“You go public whenever you can, because you don’t know when you’re going to be able to go public again,” said Steven Kaplan, professor of finance at the University of Chicago’s Booth School of Business. “They’re filing now with the hope that the economy or stock markets will hold or improve, and then they’ll be able to go public.”
HCA Inc., Zipcar Inc. and 89 other companies filed with the Securities and Exchange Commission last quarter to sell $23.6 billion of shares, data compiled by Bloomberg show. The last time more companies announced such plans was in 2007. In the past three months, 50 IPOs globally were shelved, the most in six quarters.
Investors in U.S. IPOs lost 7.2 percent so far this year as the Standard & Poor’s 500 Index fell to an almost nine-month low. Leveraged-buyout firms, which spent $2 trillion on takeovers during the credit-market bubble, announced the biggest stock sales and accounted for at least 50 percent of the deals filed with the SEC in April through June.
“Beggars can’t be choosers to a certain extent,” said Scott Billeadeau, who helps oversee $19 billion at Fifth Third Asset Management in Minneapolis. LBO firms are “going through their portfolios going, ‘What is something I can go monetize to get some equity out?’” he said.
The second quarter began with 17 companies completing initial sales in April, the most this year, as the S&P 500 rallied to a 19-month high. Metals USA Holdings Corp., owned by Leon Black’s New York-based Apollo Global Management LLC, and PAA Natural Gas Storage LP of Houston priced their IPOs above the forecast range.
Stock-Market Slump
Gains then evaporated on concern the end of government stimulus and widening budget gaps from Greece to Spain will curb the global economic recovery. The S&P 500 fell as much as 15 percent from its 2010 high in April, while the MSCI World Index of 24 developed nations lost 16 percent.
Price declines led companies from Ron Burkle’s Atlanta- based Americold Realty Trust to Swire Properties Ltd. in Hong Kong to pull $13.2 billion of initial offerings last quarter. IPOs backed by LBO firms, which take controlling stakes in companies and use borrowed money to finance most of the purchase, accounted for four of the five biggest sales announced in the U.S., data compiled by Bloomberg show.
“In volatile markets like this, sponsors want to be ready to launch to capitalize on what may be short windows of opportunity to get deals done,” said Pete Chapman, New York- based co-head of equity-capital markets for the Americas at Bank of America Corp.’s Merrill Lynch & Co. investment banking unit.
Client Distributions
Private-equity owners are using initial offerings to pay down debt and return money to investors after the collapse of New York-based Lehman in September 2008 halted dealmaking and froze credit markets. Distributions to clients last year decreased to the lowest since at least 2000, according to data compiled by London-based Preqin Ltd.
HCA, the hospital chain bought four years ago in a $33 billion LBO led by KKR & Co. and Boston-based Bain Capital LLC, filed with the SEC in May to sell $4.6 billion of shares. The IPO would be the largest in the U.S. since Visa Inc. of San Francisco raised $19.7 billion in March 2008.
The hospital operator will get about 54 percent of the proceeds, which will be used to pay back some of its $25.7 billion in debt. HCA’s owners, who used borrowed money for more than 80 percent of the purchase price, will get the rest.
HCA posted net income of $1.05 billion last year, 26 percent less than in 2005, the year before the Nashville, Tennessee-based company was taken private.
‘The Tsunami’
“The smart ones are trying to get ahead of the tsunami” of debt coming due, said David Weild, New York-based senior adviser at accounting firm Grant Thornton LLP. “The unsettled economic outlook has created a real roller coaster for IPOs.”
Nielsen Holdings BV, the New York-based television-audience rating company owned by KKR and Blackstone Group LP of New York, Washington-based Carlyle Group and Thomas H. Lee Partners LP of Boston, filed last month to raise as much as $1.75 billion.
Toys “R” Us Inc., the toy-store chain acquired by KKR, Bain and Vornado Realty Trust of New York in 2005, said in May that it plans to raise $800 million. The Wayne, New Jersey-based retailer has $5 billion in long-term debt.
Companies supported by venture capital firms are also tapping equity markets.
Zipcar, the car-sharing company that rents vehicles by the hour, will seek $75 million in an IPO to reduce debt and expand its fleet, according to its SEC filing.
Venture Capital
While sales rose almost 10-fold in the past five years, the Cambridge, Massachusetts-based company hasn’t earned a profit since its founding in 2000, and expects to lose money this year. Zipcar is backed by Steve Case’s Washington-based Revolution and Benchmark Capital of Menlo Park, California.
InvenSense Inc., which makes the motion sensors for Kyoto- based Nintendo Co.’s Wii MotionPlus remote video-game controller, filed this week to raise $100 million. The Sunnyvale, California-based company became profitable this fiscal year for the first time since at least 2005.
Venture capital firms Artiman Ventures of Palo Alto, California, Partech International in San Francisco and Menlo Park-based Sierra Ventures own a combined 54 percent stake.
“You go public whenever you can, because you don’t know when you’re going to be able to go public again,” said Steven Kaplan, professor of finance at the University of Chicago’s Booth School of Business. “They’re filing now with the hope that the economy or stock markets will hold or improve, and then they’ll be able to go public.”
Asian Stocks, Oil Fall on China Manufacturing, Spain’s Rating
July 1 (Bloomberg) -- Asian stocks fell for the third day, continuing the global first-half slump, as China’s manufacturing growth slowed and Moody’s Investors Service said it may cut Spain’s top credit rating. Commodities and the euro declined.
The MSCI Asia Pacific Index of shares sank to a three-week low, dropping 1.4 percent to 111.25 at 10:27 a.m. in Hong Kong. Futures on the Standard & Poor’s 500 Index dropped 0.8 percent. The euro weakened 0.3 percent to $1.2201 and reached a record low against the Swiss franc. Crude oil slipped 1.1 percent to $74.81 a barrel and copper dropped 0.8 percent.
Stock returns trailed bonds by the widest margin in nine years during the first six months on signs growing budget deficits from Greece to Spain would stunt the global economic recovery. Concerns deepened today as Moody’s said Spain faces challenges in meeting fiscal targets and an industry group said China’s manufacturing grew at a slower pace for a second month.
“Investors are already finding difficulty traversing the wall of worry,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “A downgrade of Spanish sovereign debt would be another piece of negative news that adds to demand for perceived safe-haven investments.”
The MSCI World Index of 24 developed countries dropped 9.6 percent including dividends in the first half. Bonds gained 4.2 percent, the Bank of America Merrill Lynch Global Broad Market Index shows. Growing budget gaps in Greece, Spain and Portugal sent the euro down 15 percent and oil dropped 9 percent.
BHP, Nissan
Japan’s Nikkei 225 Stock Average slumped 1.9 percent today and the S&P/ASX 200 Index declined 1.8 percent in Sydney. BHP Billiton Ltd., the world’s largest mining company, sank 2.2 percent to A$36.82. Woodside Petroleum Ltd., Australia’s second- largest oil and gas producer, lost 1.4 percent to A$41.24.
Nissan Motor Co., which gets 13 percent of its revenue in Europe, sank 1.6 percent to 616 yen in Tokyo. Sony Corp., which gets 21 percent of its revenue from Europe, declined 3.4 percent to 2,303 yen. Sony separately said it’s recalling 535,000 Vaio personal computers because they may overheat due to a temperature-control defect.
“Investor sentiment is certainly negative and we’ve seen that reiterated in buying of defensive asset classes,” said Chris Weston, head of institutional dealing at IG Markets in Melbourne. “Traders are pricing in a double dip, which is not a healthy stalking ground for equities.”
South Korea’s Kospi stock index fell 1.5 percent, the most in more than three weeks. Hyundai Motor Co., South Korea’s largest carmaker, retreated 4.5 percent, the most in a month, after Chosun Ilbo reported its parent group may bid for a controlling stake in Hyundai Engineering & Construction Co. Hyundai Engineering gained 4.6 percent.
China Manufacturing
China’s Shanghai Composite Index lost 0.1 percent, led by commodity producers. Jiangxi Copper Co. dropped 1.2 percent, falling for an eighth day. The Purchasing Managers’ Index fell to a lower-than-expected 52.1 in June from 53.9 in May, the Federation of Logistics and Purchasing said today. A reading of above 50 signals expansion.
“Today’s economic data is evidence of weakening growth, but most of that has already been priced into stocks,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai.
Twelve-month yuan non-deliverable forwards weakened 0.2 percent to 6.6755 per dollar. Policy makers have this year raised banks’ reserve requirements three times, tightened mortgage requirements and curbed lending targets.
South Korea’s won declined 1.1 percent to 1,235.41 per dollar, after dropping 7.4 percent last quarter. A purchasing managers’ survey today indicated South Korea’s business conditions in June were the worst this year. The HSBC South Korea PMI fell to 53.3 in June from 54.6 the previous month.
“Risk aversion is being emphasized,” said Ko Kyu Youn, a currency dealer at Korea Exchange Bank in Seoul. “Investors are seeking safe havens.”
Swiss Franc
The Swiss franc traded as high as 1.3085 per euro in Tokyo trading, the strongest since the common currency’s debut, from 1.3184 in New York. The yen rose 0.6 percent to 107.56 per euro near the eight-year high of 107.32 reached on June 29.
“Like most safe-haven assets, the dollar, the yen and the franc are rising at the moment due to risk aversion,” said Gareth Berry, a currency strategist in Singapore at UBS AG, the world’s second-largest foreign-exchange trader. “The weak PMI from China pushed” the franc higher, he said.
Three-month delivery copper fell as much as 1.3 percent to $6,430.75 a metric ton on the London Metal Exchange and dropped more than 16 percent last quarter. Aluminum declined 0.7 percent to $1,963 a ton. The Reuters/Jefferies CRB Index of 19 raw materials fell 5.4 percent in the second quarter, the worst three-month period since the end of 2008.
Crude oil declined for a fourth day in New York, its longest losing streak since May, after gasoline stockpiles unexpectedly increased in the U.S., raising concern about the growth of fuel demand in the world’s biggest energy consumer. The U.S. Energy Information Administration reported gasoline inventories rose 537,000 barrels to 218.1 million last week.
“There’s a lot of concerns about the pace of the U.S. economic recovery,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney.
The MSCI Asia Pacific Index of shares sank to a three-week low, dropping 1.4 percent to 111.25 at 10:27 a.m. in Hong Kong. Futures on the Standard & Poor’s 500 Index dropped 0.8 percent. The euro weakened 0.3 percent to $1.2201 and reached a record low against the Swiss franc. Crude oil slipped 1.1 percent to $74.81 a barrel and copper dropped 0.8 percent.
Stock returns trailed bonds by the widest margin in nine years during the first six months on signs growing budget deficits from Greece to Spain would stunt the global economic recovery. Concerns deepened today as Moody’s said Spain faces challenges in meeting fiscal targets and an industry group said China’s manufacturing grew at a slower pace for a second month.
“Investors are already finding difficulty traversing the wall of worry,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “A downgrade of Spanish sovereign debt would be another piece of negative news that adds to demand for perceived safe-haven investments.”
The MSCI World Index of 24 developed countries dropped 9.6 percent including dividends in the first half. Bonds gained 4.2 percent, the Bank of America Merrill Lynch Global Broad Market Index shows. Growing budget gaps in Greece, Spain and Portugal sent the euro down 15 percent and oil dropped 9 percent.
BHP, Nissan
Japan’s Nikkei 225 Stock Average slumped 1.9 percent today and the S&P/ASX 200 Index declined 1.8 percent in Sydney. BHP Billiton Ltd., the world’s largest mining company, sank 2.2 percent to A$36.82. Woodside Petroleum Ltd., Australia’s second- largest oil and gas producer, lost 1.4 percent to A$41.24.
Nissan Motor Co., which gets 13 percent of its revenue in Europe, sank 1.6 percent to 616 yen in Tokyo. Sony Corp., which gets 21 percent of its revenue from Europe, declined 3.4 percent to 2,303 yen. Sony separately said it’s recalling 535,000 Vaio personal computers because they may overheat due to a temperature-control defect.
“Investor sentiment is certainly negative and we’ve seen that reiterated in buying of defensive asset classes,” said Chris Weston, head of institutional dealing at IG Markets in Melbourne. “Traders are pricing in a double dip, which is not a healthy stalking ground for equities.”
South Korea’s Kospi stock index fell 1.5 percent, the most in more than three weeks. Hyundai Motor Co., South Korea’s largest carmaker, retreated 4.5 percent, the most in a month, after Chosun Ilbo reported its parent group may bid for a controlling stake in Hyundai Engineering & Construction Co. Hyundai Engineering gained 4.6 percent.
China Manufacturing
China’s Shanghai Composite Index lost 0.1 percent, led by commodity producers. Jiangxi Copper Co. dropped 1.2 percent, falling for an eighth day. The Purchasing Managers’ Index fell to a lower-than-expected 52.1 in June from 53.9 in May, the Federation of Logistics and Purchasing said today. A reading of above 50 signals expansion.
“Today’s economic data is evidence of weakening growth, but most of that has already been priced into stocks,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai.
Twelve-month yuan non-deliverable forwards weakened 0.2 percent to 6.6755 per dollar. Policy makers have this year raised banks’ reserve requirements three times, tightened mortgage requirements and curbed lending targets.
South Korea’s won declined 1.1 percent to 1,235.41 per dollar, after dropping 7.4 percent last quarter. A purchasing managers’ survey today indicated South Korea’s business conditions in June were the worst this year. The HSBC South Korea PMI fell to 53.3 in June from 54.6 the previous month.
“Risk aversion is being emphasized,” said Ko Kyu Youn, a currency dealer at Korea Exchange Bank in Seoul. “Investors are seeking safe havens.”
Swiss Franc
The Swiss franc traded as high as 1.3085 per euro in Tokyo trading, the strongest since the common currency’s debut, from 1.3184 in New York. The yen rose 0.6 percent to 107.56 per euro near the eight-year high of 107.32 reached on June 29.
“Like most safe-haven assets, the dollar, the yen and the franc are rising at the moment due to risk aversion,” said Gareth Berry, a currency strategist in Singapore at UBS AG, the world’s second-largest foreign-exchange trader. “The weak PMI from China pushed” the franc higher, he said.
Three-month delivery copper fell as much as 1.3 percent to $6,430.75 a metric ton on the London Metal Exchange and dropped more than 16 percent last quarter. Aluminum declined 0.7 percent to $1,963 a ton. The Reuters/Jefferies CRB Index of 19 raw materials fell 5.4 percent in the second quarter, the worst three-month period since the end of 2008.
Crude oil declined for a fourth day in New York, its longest losing streak since May, after gasoline stockpiles unexpectedly increased in the U.S., raising concern about the growth of fuel demand in the world’s biggest energy consumer. The U.S. Energy Information Administration reported gasoline inventories rose 537,000 barrels to 218.1 million last week.
“There’s a lot of concerns about the pace of the U.S. economic recovery,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney.
SMFG buys stake in Kotak Mahindra
Sumitomo Mitsui Financial Group has agreed to buy a 4.5 per cent stake in India’s fourth-largest private bank, the first investment by a Japanese financial group in an Indian bank.
SMFG and India’s Kotak Mahindra will also explore setting up an infrastructure fund, helping companies in India raise money through samurai bonds and other opportunities as part of a new equity alliance.
“India has domestic growth but could do with [access to more] savings while Japan has savings but could do with some growth,” Uday Kotak, Kotak Mahindra vice-chairman and managing director, told the Financial Times.
The Rs13.7bn ($296.2m) stake purchase by SMFG, which will make it Kotak Mahindra’s biggest shareholder after the founding families and Warburg Pincus, the US investment bank, is part of a push by Japanese companies to expand into markets beyond the ageing population at home.
India’s financial industry has become one of the fastest-growing, fuelled by growth in retail and corporate lending, but the majority of the country’s population of more than 1.1bn people lacks access to banking services.
India’s banking system will need large injections of funds if it is to keep pace with the country’s economic growth, which the government wants to boost to levels approaching 10 per cent.
This is SMFG’s fourth Asian bank investment following its acquisition of a 15 per cent stake in the Export Import Bank of Vietnam, a 4.1 per cent stake in Hong Kong’s Bank of East Asia and a 0.5 per cent stake in South Korea’s Kookmin Bank.
SMFG has a stake of less than 2 per cent in Barclays, which it acquired for about £500m ($748) in 2008.
Mr Kotak said the divestment was necessary to satisfy regulatory requirements to reduce the stake of the controlling shareholders – his family and that of Anand Mahindra, which controls the Mahindra & Mahindra automotive conglomerate – from 51 per cent to below 50 per cent.
The Kotak family holds 48 per cent of the bank and the Mahindra family 3 per cent.
After the transaction, their combined stake will be about 49 per cent while the other large shareholder, Warburg Pincus, will be left with about 10 per cent.
He said the sale of the stake to a strong strategic investor enabled Kotak to command a valuation representing the longer-term fundamentals of the bank rather than one based on “market gyrations”.
SMFG’s strong balance sheet could help Kotak pursue its target of organic and inorganic growth across banking, asset management, capital markets, investment banking, broking, life insurance and other areas.
He said he saw opportunities for co-operation with SMFG’s brokerage Nikko Cordial Securities and other areas.
The partners would be able to serve the increasing number of Japanese companies investing in India in the automotive, infrastructure and other industries.
SMFG and India’s Kotak Mahindra will also explore setting up an infrastructure fund, helping companies in India raise money through samurai bonds and other opportunities as part of a new equity alliance.
“India has domestic growth but could do with [access to more] savings while Japan has savings but could do with some growth,” Uday Kotak, Kotak Mahindra vice-chairman and managing director, told the Financial Times.
The Rs13.7bn ($296.2m) stake purchase by SMFG, which will make it Kotak Mahindra’s biggest shareholder after the founding families and Warburg Pincus, the US investment bank, is part of a push by Japanese companies to expand into markets beyond the ageing population at home.
India’s financial industry has become one of the fastest-growing, fuelled by growth in retail and corporate lending, but the majority of the country’s population of more than 1.1bn people lacks access to banking services.
India’s banking system will need large injections of funds if it is to keep pace with the country’s economic growth, which the government wants to boost to levels approaching 10 per cent.
This is SMFG’s fourth Asian bank investment following its acquisition of a 15 per cent stake in the Export Import Bank of Vietnam, a 4.1 per cent stake in Hong Kong’s Bank of East Asia and a 0.5 per cent stake in South Korea’s Kookmin Bank.
SMFG has a stake of less than 2 per cent in Barclays, which it acquired for about £500m ($748) in 2008.
Mr Kotak said the divestment was necessary to satisfy regulatory requirements to reduce the stake of the controlling shareholders – his family and that of Anand Mahindra, which controls the Mahindra & Mahindra automotive conglomerate – from 51 per cent to below 50 per cent.
The Kotak family holds 48 per cent of the bank and the Mahindra family 3 per cent.
After the transaction, their combined stake will be about 49 per cent while the other large shareholder, Warburg Pincus, will be left with about 10 per cent.
He said the sale of the stake to a strong strategic investor enabled Kotak to command a valuation representing the longer-term fundamentals of the bank rather than one based on “market gyrations”.
SMFG’s strong balance sheet could help Kotak pursue its target of organic and inorganic growth across banking, asset management, capital markets, investment banking, broking, life insurance and other areas.
He said he saw opportunities for co-operation with SMFG’s brokerage Nikko Cordial Securities and other areas.
The partners would be able to serve the increasing number of Japanese companies investing in India in the automotive, infrastructure and other industries.
Tuesday, June 29, 2010
Asian Stocks, Oil Fall on Global Recovery Concern; Won Weakens
June 30 (Bloomberg) -- Asian stocks dropped the most in more than two weeks, oil fell for a third straight day and the won weakened on concern that the global recovery is faltering.
The MSCI Asia Pacific Index retreated 1.4 percent to 112.36 as of 11:35 a.m. in Tokyo, the biggest decline since June 11 and set for its worst first half in two years. Chinese stocks fell to a 14-month low and South Korea’s won led a decline in emerging-market currencies. Crude extended its drop since June 25 to 3.9 percent, the sharpest three-day slide in six weeks.
Shares extended a global rout as an unexpected drop in U.S. consumer confidence added to concern sparked by the downward revision of an economic indicator for China. President Barack Obama said the U.S. economy faces “headwinds” from Europe’s debt crisis, while reports today and tomorrow may show gains in U.S. business activity and Chinese manufacturing are moderating.
“Equity markets are concerned about a slowdown in U.S. economic growth,” said Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management (Asia) Ltd. which oversees about $10 billion. “It’s not a bad thing that the Chinese government is trying to cool down the economy, but it’s having a negative impact on market sentiment.”
More than six stocks declined in the MSCI’s Asian gauge for each one that advanced. Japan’s Nikkei 225 Stock Average lost 2.1 percent, while Australia’s S&P/ASX 200 Index dropped 1.5 percent. The Kospi declined 1 percent in Seoul.
S&P Futures
Futures on the Standard & Poor’s 500 Index rose 0.4 percent. The gauge yesterday slumped 3.1 percent to its lowest since Oct. 30 after the Conference Board’s gauge of confidence among U.S. consumers slumped to 52.9 this month from a revised 62.7 in May.
Nissan Motor Co. and Canon Inc., which get more than a quarter of their revenue in the Americas, slid in Tokyo as a stronger yen dented their profit outlooks. Nissan fell 1 percent while Canon declined 3 percent.
BHP Billiton Ltd., the world’s largest mining company, sank 1.8 percent in Sydney. Rio Tinto Group, the world’s third- biggest mining company, lost 2.8 percent. Mitsubishi Corp., which trades commodities, fell 3 percent in Tokyo.
The Reuters/Jefferies CRB Index of 19 raw materials tumbled 2.8 percent yesterday, the most since Aug. 14. Copper for three- month delivery was little changed at $6,495 a metric ton, after tumbling 5.5 percent yesterday, the most in six weeks.
Crude fell below $76 a barrel in New York on concern a weakening global economic recovery will slow growth in fuel demand.
“Crude has been shellacked due to confidence around the world eroding,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney.
Mining Tax
Australian Prime Minister Julia Gillard said today “good discussions” are continuing with the mining industry amid speculation the government will unveil a compromise as soon as today on its planned resource tax.
The outlook for commodities demand dimmed yesterday after the Conference Board revised down its April leading economic index for China to show the smallest gain in five months. That triggered a global sell-off in riskier assets, with Chinese stocks dropping the most in six weeks.
China’s Shanghai Composite Index fell 1.1 percent to a 14- month low on concern economists may reduce their growth forecasts for the nation on policy tightening measures and the European debt crisis.
Jiangxi Copper Co. and Zhuzhou Smelter Group Co. lost at least 2.7 percent after metal prices retreated. Poly Real Estate Group Co., the second-largest developer by market value, dropped as much as 4.1 percent.
Foxconn Loss
Taiwan’s Taiex index dropped 1.6 percent. Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, slipped the most in three weeks after its unit Foxconn International Holdings Ltd. forecast a wider first-half loss. Foxconn slid 7.7 percent in Hong Kong trading to the lowest since October.
“The view is spreading among investors that a recovery in the global economy won’t be as easy as people had expected,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “Moves by countries around the world to tighten fiscal policies are behind the plunge in markets.”
The Institute for Supply Management-Chicago Inc. will say today its U.S. business barometer fell to 59 this month from 59.7 in May, according to a Bloomberg News survey of economists. The Purchasing Managers’ Index for China dropped to 53.2 in June from 53.9 in May, another survey showed before tomorrow’s data.
Weaker Won
South Korea’s won weakened 1.1 percent to 1,230.09 per dollar, headed for its first quarterly loss in more than a year. Malaysia’s ringgit dropped 0.4 percent to 3.2630 against the U.S. currency. China and the U.S. are South Korea’s two largest export markets.
“The situation at home and abroad is psychologically vulnerable and stocks are not doing as well as we hoped,” said Ha Joon Woo, a currency dealer at Daegu Bank Ltd in Seoul. “We’ll have to see if exporter demand to repatriate foreign income can stop the slide.”
The won fell even as a Bank of Korea report today showed South Korean manufacturers’ confidence held near a seven-year high. The central bank said its index measuring expectations for July stayed at 104, unchanged from June.
The yen traded near the strongest in more than eight years against the euro and the highest in almost eight weeks against the dollar amid higher demand for Japan’s currency as a refuge.
Double Dip?
Japan’s currency was at 108.09 per euro in Tokyo from 107.98 in New York yesterday, when it touched 107.32, the strongest level since November 2001. The yen was at 88.54 per dollar from 88.60. Yesterday it reached 88.29, the strongest level since May 6. The euro fetched $1.2208 from $1.2188.
“Investors are growing more concerned about the global recovery story, with talk of double-dip recession rising,” said Khoon Goh, a senior markets economist at ANZ National Bank Ltd. in Wellington. “The dollar and the yen are back in favor as ‘safe-haven’ currencies.”
The cost of insuring Asian bonds against default rose to the highest in three weeks, according to traders of credit- default swaps.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan added 5 basis points to 147 basis points as of 8:17 a.m. in Singapore, the highest since June 10, Royal Bank of Scotland Group Plc and CMA DataVision prices show.
The MSCI Asia Pacific Index retreated 1.4 percent to 112.36 as of 11:35 a.m. in Tokyo, the biggest decline since June 11 and set for its worst first half in two years. Chinese stocks fell to a 14-month low and South Korea’s won led a decline in emerging-market currencies. Crude extended its drop since June 25 to 3.9 percent, the sharpest three-day slide in six weeks.
Shares extended a global rout as an unexpected drop in U.S. consumer confidence added to concern sparked by the downward revision of an economic indicator for China. President Barack Obama said the U.S. economy faces “headwinds” from Europe’s debt crisis, while reports today and tomorrow may show gains in U.S. business activity and Chinese manufacturing are moderating.
“Equity markets are concerned about a slowdown in U.S. economic growth,” said Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management (Asia) Ltd. which oversees about $10 billion. “It’s not a bad thing that the Chinese government is trying to cool down the economy, but it’s having a negative impact on market sentiment.”
More than six stocks declined in the MSCI’s Asian gauge for each one that advanced. Japan’s Nikkei 225 Stock Average lost 2.1 percent, while Australia’s S&P/ASX 200 Index dropped 1.5 percent. The Kospi declined 1 percent in Seoul.
S&P Futures
Futures on the Standard & Poor’s 500 Index rose 0.4 percent. The gauge yesterday slumped 3.1 percent to its lowest since Oct. 30 after the Conference Board’s gauge of confidence among U.S. consumers slumped to 52.9 this month from a revised 62.7 in May.
Nissan Motor Co. and Canon Inc., which get more than a quarter of their revenue in the Americas, slid in Tokyo as a stronger yen dented their profit outlooks. Nissan fell 1 percent while Canon declined 3 percent.
BHP Billiton Ltd., the world’s largest mining company, sank 1.8 percent in Sydney. Rio Tinto Group, the world’s third- biggest mining company, lost 2.8 percent. Mitsubishi Corp., which trades commodities, fell 3 percent in Tokyo.
The Reuters/Jefferies CRB Index of 19 raw materials tumbled 2.8 percent yesterday, the most since Aug. 14. Copper for three- month delivery was little changed at $6,495 a metric ton, after tumbling 5.5 percent yesterday, the most in six weeks.
Crude fell below $76 a barrel in New York on concern a weakening global economic recovery will slow growth in fuel demand.
“Crude has been shellacked due to confidence around the world eroding,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney.
Mining Tax
Australian Prime Minister Julia Gillard said today “good discussions” are continuing with the mining industry amid speculation the government will unveil a compromise as soon as today on its planned resource tax.
The outlook for commodities demand dimmed yesterday after the Conference Board revised down its April leading economic index for China to show the smallest gain in five months. That triggered a global sell-off in riskier assets, with Chinese stocks dropping the most in six weeks.
China’s Shanghai Composite Index fell 1.1 percent to a 14- month low on concern economists may reduce their growth forecasts for the nation on policy tightening measures and the European debt crisis.
Jiangxi Copper Co. and Zhuzhou Smelter Group Co. lost at least 2.7 percent after metal prices retreated. Poly Real Estate Group Co., the second-largest developer by market value, dropped as much as 4.1 percent.
Foxconn Loss
Taiwan’s Taiex index dropped 1.6 percent. Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, slipped the most in three weeks after its unit Foxconn International Holdings Ltd. forecast a wider first-half loss. Foxconn slid 7.7 percent in Hong Kong trading to the lowest since October.
“The view is spreading among investors that a recovery in the global economy won’t be as easy as people had expected,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “Moves by countries around the world to tighten fiscal policies are behind the plunge in markets.”
The Institute for Supply Management-Chicago Inc. will say today its U.S. business barometer fell to 59 this month from 59.7 in May, according to a Bloomberg News survey of economists. The Purchasing Managers’ Index for China dropped to 53.2 in June from 53.9 in May, another survey showed before tomorrow’s data.
Weaker Won
South Korea’s won weakened 1.1 percent to 1,230.09 per dollar, headed for its first quarterly loss in more than a year. Malaysia’s ringgit dropped 0.4 percent to 3.2630 against the U.S. currency. China and the U.S. are South Korea’s two largest export markets.
“The situation at home and abroad is psychologically vulnerable and stocks are not doing as well as we hoped,” said Ha Joon Woo, a currency dealer at Daegu Bank Ltd in Seoul. “We’ll have to see if exporter demand to repatriate foreign income can stop the slide.”
The won fell even as a Bank of Korea report today showed South Korean manufacturers’ confidence held near a seven-year high. The central bank said its index measuring expectations for July stayed at 104, unchanged from June.
The yen traded near the strongest in more than eight years against the euro and the highest in almost eight weeks against the dollar amid higher demand for Japan’s currency as a refuge.
Double Dip?
Japan’s currency was at 108.09 per euro in Tokyo from 107.98 in New York yesterday, when it touched 107.32, the strongest level since November 2001. The yen was at 88.54 per dollar from 88.60. Yesterday it reached 88.29, the strongest level since May 6. The euro fetched $1.2208 from $1.2188.
“Investors are growing more concerned about the global recovery story, with talk of double-dip recession rising,” said Khoon Goh, a senior markets economist at ANZ National Bank Ltd. in Wellington. “The dollar and the yen are back in favor as ‘safe-haven’ currencies.”
The cost of insuring Asian bonds against default rose to the highest in three weeks, according to traders of credit- default swaps.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan added 5 basis points to 147 basis points as of 8:17 a.m. in Singapore, the highest since June 10, Royal Bank of Scotland Group Plc and CMA DataVision prices show.
China Sinking Like Greece Signals 65% Rally to Morgan
June 30 (Bloomberg) -- China, the worst-performing stock market after Greece, looks like a buy by almost any measure, according to top-ranked analysts of the Asian nation’s shares.
The Shanghai Composite Index’s 26 percent plunge this year, including yesterday’s 4.3 percent slump, sent its price-earnings ratio to 18, the lowest level versus the MSCI Emerging Markets Index in a decade. The largest owners of yuan-denominated stocks have turned net buyers for the first time since equities bottomed in 2008, while international investors are paying the biggest premium in 21 months to bet on a rally in funds that hold China’s yuan-denominated or A shares, data compiled by Macquarie Group Ltd. and Bloomberg show.
Morgan Stanley, BNP Paribas SA and Nomura Holdings Inc. say stocks will rally as China’s June 19 decision to end the yuan’s two-year peg to the dollar helps curb inflation and asset bubbles. The Shanghai index rose 62 percent in 12 months after China last allowed a more flexible exchange rate in July 2005.
“We are very bullish,” said Jerry Lou, the Hong Kong- based strategist at Morgan Stanley, among the top-ranked analysts for China stocks by Institutional Investor, who predicts the Shanghai Composite may climb 65 percent to 4,000 by June 2011. “We like valuations and inflation will peak. All we need is a catalyst such as a change in yuan policy.”
Prospects for a stock rebound may be cut as China’s exports face “strong headwinds” in the second half and loan growth may slow by the end of 2010, Citigroup Inc. said this week, even as the average of 14 economist estimates in a Bloomberg survey calls for economic growth of 10.2 percent this year and 9.2 percent in 2011.
Revision
The Conference Board yesterday revised its leading economic index for China, contributing to the biggest sell-off in Chinese equities in six weeks. Agricultural Bank of China Ltd., which priced the Shanghai portion of its $20.1 billion initial share sale, also drove banking stocks lower.
The Shanghai Composite fell for a sixth day today, losing 0.8 percent to 2,408.46 at 10:14 a.m. Its slump this year is second only to the 35 percent plunge in Greece’s ASE Index among the world’s 60 biggest stock markets, according to data compiled by Bloomberg. Companies on the Shanghai gauge will increase earnings by 40 percent in 12 months, more than double the pace of the ASE, analysts’ estimates by Bloomberg show.
Rising profits reduced the Shanghai Composite’s valuation premium over the MSCI emerging index to 26 percent, down from an average of 140 percent since 1997, based on weekly price- earnings ratios compiled by Bloomberg. The last time the gap was so small in February 2000, the Shanghai Composite gained 27 percent in 12 months, while the MSCI measure sank 26 percent.
Lower Valuations
Lower valuations spurred the biggest Chinese investors to buy last month. Shareholders who own at least 5 percent of a company’s stock boosted their holdings by 1.1 billion yuan ($162 million), according to Macquarie analysts Michael Kurtz and Shirley Zhao in Shanghai, basing their analysis on data from Wind Information. Similar purchases in October 2008 signaled the end of the Shanghai Composite’s year-long bear market, with the gauge rallying 82 percent from its low on Oct. 28, 2008, through October 2009.
Yuan-denominated shares, restricted almost exclusively to local investors, fell below Chinese stocks traded in Hong Kong this month for the first time in almost four years, according to the Hang Seng China AH Premium Index. When A shares last traded at a discount in November 2006, the Shanghai Composite tripled in 12 months, outpacing a 156 percent gain in the Hong Kong benchmark index and a 58 percent rise in the MSCI gauge.
‘Pay for Exposure’
“The premium between A and H shares is disappearing,” said Hao Hong, Beijing-based global equity strategist at China International Capital Corp., the top-ranked brokerage for China research in Asiamoney’s annual survey. That indicates “foreign investors are willing to pay for exposure to China’s stocks.”
International investors pushed the price of BlackRock Inc.’s iShares FTSE/Xinhua A50 China Index exchange-traded fund to 11 percent above the value of its underlying assets last week, the highest level in almost two years, according to data compiled by Bloomberg. The fund trades in Hong Kong and tracks the 50 biggest A-share companies.
The Shanghai Composite fell 22 percent this quarter, lagging behind gauges in the other so-called BRIC markets of the largest developing economies, after China raised banks’ reserve requirements to the highest level in at least three years and curbed real-estate speculation. Property prices rose 12.4 percent in May from a year earlier, the second-fastest pace after April’s 12.8 percent record gain.
BRIC Markets
Brazil’s Bovespa index dropped 8.7 percent during the period and Russia’s Micex slipped 8 percent, while India’s Bombay Stock Exchange Sensitive Index advanced 0.2 percent. The MSCI emerging gauge lost 7.6 percent.
The New York-based Conference Board corrected its April gauge for the outlook of China’s economy this week, saying its leading index for the country rose the least since November, rather than registering the biggest gain in 14 months.
A flood of new stock may also weigh on the market, according to Credit Suisse Group AG’s Sakthi Siva. Chinese companies will sell about 320 billion yuan ($47 billion) of new shares in Shanghai and Shenzhen this year as they fund expansion and banks bolster capital after a record amount of government- led lending, PricewaterhouseCoopers predicts.
Agricultural Bank’s share sale in Shanghai and Hong Kong is the biggest initial public offering since Industrial & Commercial Bank of China Ltd.’s $21.9 billion sale almost four years ago.
‘Quite Cautious’
“I’m still quite cautious,” Siva, the Singapore-based top-ranked Asia strategist in Institutional Investor’s 2010 poll, said in an interview. “There’s quite a lot of supply.”
Ending the fixed 6.83 yuan peg to the dollar should help “contain inflation and asset bubbles,” China’s central bank said in a June 20 statement. Inflation will probably peak at 3.7 percent toward the end of the third quarter then “level off” the rest of the year, according to CICC’s Hong.
Chinese authorities had prevented the currency from strengthening against the dollar since July 2008 to help exporters cope with the global financial crisis.
The yuan appreciated 21 percent in the three years after a managed float against a basket of currencies was introduced in 2005. Twelve-month non-deliverable forwards yesterday indicate investors are betting the yuan will strengthen 1.6 percent. A yuan revaluation won’t happen quickly or fix all of the global economy’s imbalances, International Monetary Fund Managing Director Dominique Strauss-Kahn said this week.
Vanke, China Merchants
China Vanke Co., the Shenzhen-based property developer that sank 37 percent this year, trades for 13 times reported profits, down from 35 times a year ago, according to data compiled by Bloomberg. Earnings growth of 29 percent this year will help lift the stock 42 percent, according to analyst estimates on Bloomberg.
China Merchants Bank Co.’s 2.7 price-to-book ratio is near a record low relative to the MSCI Emerging Markets Financials Index after the Shenzhen-based company declined 24 percent this year. The stock is poised to surge 49 percent in 12 months, according to analysts, who have 35 “buy” ratings and one “sell,” according to data compiled by Bloomberg.
Consumer-related shares will benefit from a shift in the economy to increase domestic spending, said Leo Gao, who helps oversee about $600 million at APS Asset Management Ltd. in Shanghai, whose APS China Alpha Fund has beaten 87 percent of peers in the past year, according to Bloomberg data.
The Shanghai Composite Index’s 26 percent plunge this year, including yesterday’s 4.3 percent slump, sent its price-earnings ratio to 18, the lowest level versus the MSCI Emerging Markets Index in a decade. The largest owners of yuan-denominated stocks have turned net buyers for the first time since equities bottomed in 2008, while international investors are paying the biggest premium in 21 months to bet on a rally in funds that hold China’s yuan-denominated or A shares, data compiled by Macquarie Group Ltd. and Bloomberg show.
Morgan Stanley, BNP Paribas SA and Nomura Holdings Inc. say stocks will rally as China’s June 19 decision to end the yuan’s two-year peg to the dollar helps curb inflation and asset bubbles. The Shanghai index rose 62 percent in 12 months after China last allowed a more flexible exchange rate in July 2005.
“We are very bullish,” said Jerry Lou, the Hong Kong- based strategist at Morgan Stanley, among the top-ranked analysts for China stocks by Institutional Investor, who predicts the Shanghai Composite may climb 65 percent to 4,000 by June 2011. “We like valuations and inflation will peak. All we need is a catalyst such as a change in yuan policy.”
Prospects for a stock rebound may be cut as China’s exports face “strong headwinds” in the second half and loan growth may slow by the end of 2010, Citigroup Inc. said this week, even as the average of 14 economist estimates in a Bloomberg survey calls for economic growth of 10.2 percent this year and 9.2 percent in 2011.
Revision
The Conference Board yesterday revised its leading economic index for China, contributing to the biggest sell-off in Chinese equities in six weeks. Agricultural Bank of China Ltd., which priced the Shanghai portion of its $20.1 billion initial share sale, also drove banking stocks lower.
The Shanghai Composite fell for a sixth day today, losing 0.8 percent to 2,408.46 at 10:14 a.m. Its slump this year is second only to the 35 percent plunge in Greece’s ASE Index among the world’s 60 biggest stock markets, according to data compiled by Bloomberg. Companies on the Shanghai gauge will increase earnings by 40 percent in 12 months, more than double the pace of the ASE, analysts’ estimates by Bloomberg show.
Rising profits reduced the Shanghai Composite’s valuation premium over the MSCI emerging index to 26 percent, down from an average of 140 percent since 1997, based on weekly price- earnings ratios compiled by Bloomberg. The last time the gap was so small in February 2000, the Shanghai Composite gained 27 percent in 12 months, while the MSCI measure sank 26 percent.
Lower Valuations
Lower valuations spurred the biggest Chinese investors to buy last month. Shareholders who own at least 5 percent of a company’s stock boosted their holdings by 1.1 billion yuan ($162 million), according to Macquarie analysts Michael Kurtz and Shirley Zhao in Shanghai, basing their analysis on data from Wind Information. Similar purchases in October 2008 signaled the end of the Shanghai Composite’s year-long bear market, with the gauge rallying 82 percent from its low on Oct. 28, 2008, through October 2009.
Yuan-denominated shares, restricted almost exclusively to local investors, fell below Chinese stocks traded in Hong Kong this month for the first time in almost four years, according to the Hang Seng China AH Premium Index. When A shares last traded at a discount in November 2006, the Shanghai Composite tripled in 12 months, outpacing a 156 percent gain in the Hong Kong benchmark index and a 58 percent rise in the MSCI gauge.
‘Pay for Exposure’
“The premium between A and H shares is disappearing,” said Hao Hong, Beijing-based global equity strategist at China International Capital Corp., the top-ranked brokerage for China research in Asiamoney’s annual survey. That indicates “foreign investors are willing to pay for exposure to China’s stocks.”
International investors pushed the price of BlackRock Inc.’s iShares FTSE/Xinhua A50 China Index exchange-traded fund to 11 percent above the value of its underlying assets last week, the highest level in almost two years, according to data compiled by Bloomberg. The fund trades in Hong Kong and tracks the 50 biggest A-share companies.
The Shanghai Composite fell 22 percent this quarter, lagging behind gauges in the other so-called BRIC markets of the largest developing economies, after China raised banks’ reserve requirements to the highest level in at least three years and curbed real-estate speculation. Property prices rose 12.4 percent in May from a year earlier, the second-fastest pace after April’s 12.8 percent record gain.
BRIC Markets
Brazil’s Bovespa index dropped 8.7 percent during the period and Russia’s Micex slipped 8 percent, while India’s Bombay Stock Exchange Sensitive Index advanced 0.2 percent. The MSCI emerging gauge lost 7.6 percent.
The New York-based Conference Board corrected its April gauge for the outlook of China’s economy this week, saying its leading index for the country rose the least since November, rather than registering the biggest gain in 14 months.
A flood of new stock may also weigh on the market, according to Credit Suisse Group AG’s Sakthi Siva. Chinese companies will sell about 320 billion yuan ($47 billion) of new shares in Shanghai and Shenzhen this year as they fund expansion and banks bolster capital after a record amount of government- led lending, PricewaterhouseCoopers predicts.
Agricultural Bank’s share sale in Shanghai and Hong Kong is the biggest initial public offering since Industrial & Commercial Bank of China Ltd.’s $21.9 billion sale almost four years ago.
‘Quite Cautious’
“I’m still quite cautious,” Siva, the Singapore-based top-ranked Asia strategist in Institutional Investor’s 2010 poll, said in an interview. “There’s quite a lot of supply.”
Ending the fixed 6.83 yuan peg to the dollar should help “contain inflation and asset bubbles,” China’s central bank said in a June 20 statement. Inflation will probably peak at 3.7 percent toward the end of the third quarter then “level off” the rest of the year, according to CICC’s Hong.
Chinese authorities had prevented the currency from strengthening against the dollar since July 2008 to help exporters cope with the global financial crisis.
The yuan appreciated 21 percent in the three years after a managed float against a basket of currencies was introduced in 2005. Twelve-month non-deliverable forwards yesterday indicate investors are betting the yuan will strengthen 1.6 percent. A yuan revaluation won’t happen quickly or fix all of the global economy’s imbalances, International Monetary Fund Managing Director Dominique Strauss-Kahn said this week.
Vanke, China Merchants
China Vanke Co., the Shenzhen-based property developer that sank 37 percent this year, trades for 13 times reported profits, down from 35 times a year ago, according to data compiled by Bloomberg. Earnings growth of 29 percent this year will help lift the stock 42 percent, according to analyst estimates on Bloomberg.
China Merchants Bank Co.’s 2.7 price-to-book ratio is near a record low relative to the MSCI Emerging Markets Financials Index after the Shenzhen-based company declined 24 percent this year. The stock is poised to surge 49 percent in 12 months, according to analysts, who have 35 “buy” ratings and one “sell,” according to data compiled by Bloomberg.
Consumer-related shares will benefit from a shift in the economy to increase domestic spending, said Leo Gao, who helps oversee about $600 million at APS Asset Management Ltd. in Shanghai, whose APS China Alpha Fund has beaten 87 percent of peers in the past year, according to Bloomberg data.
In U.S. Bailout of A.I.G., Forgiveness for Big Banks
At the end of the American International Group’s annual meeting last month, a shareholder approached the microphone with a question for Robert Benmosche, the insurer’s chief executive.
“I’d like to know, what does A.I.G. plan to do with Goldman Sachs?” he asked. “Are you going to get — recoup — some of our money that was given to them?”
Mr. Benmosche, steward of an insurer brought to its knees two years ago after making too many risky, outsize financial bets and paying billions of dollars in claims to Goldman and other banks, said he would continue evaluating his legal options. But, in reality, A.I.G. has precious few.
When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.
But after the Securities and Exchange Commission’s civil fraud suit filed in April against Goldman for possibly misrepresenting a mortgage deal to investors, A.I.G. executives and shareholders are asking whether A.I.G. may have been misled by Goldman into insuring mortgage deals that the bank and others may have known were flawed.
This month, an Australian hedge fund sued Goldman on similar grounds. Goldman is contesting the suit and denies any wrongdoing. A spokesman for A.I.G. declined to comment about any plans to sue Goldman or any other banks with which it worked. A Goldman spokesman said that his firm believed that “all aspects of our relationship with A.I.G. were appropriate.”
Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents. The documents, reviewed by The New York Times, provide the most comprehensive public record of how the Federal Reserve Bank of New York and the Treasury Department orchestrated one of the biggest corporate bailouts in history.
The documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks. It also contrasts with the hard line the White House took in 2008 when it forced Chrysler’s lenders to take losses when the government bailed out the auto giant.
As a Congressional commission convenes hearings Wednesday exploring the A.I.G. bailout and Goldman’s relationship with the insurer, analysts say that the documents suggest that regulators were overly punitive toward A.I.G. and overly forgiving of banks during the bailout — signified, they say, by the fact that the legal waiver undermined A.I.G. and its shareholders’ ability to recover damages.
“Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.”
“This really suggests they had myopia and they were looking at it entirely through the perspective of the banks,” Mr. Skeel said.
Regulators at the New York Fed declined to comment on the legal waiver but disagreed with that viewpoint.
“This was not about the banks,” said Sarah J. Dahlgren, a senior vice president for the New York Fed who oversees A.I.G. “This was about stabilizing the system by preventing the disorderly collapse of A.I.G. and the potentially devastating consequences of that event for the U.S. and global economies.”
This month, the Congressional Oversight Panel, a body charged with reviewing the state of financial markets and the regulators that monitor them, published a 337-page report on the A.I.G. bailout. It concluded that the Federal Reserve Bank of New York did not give enough consideration to alternatives before sinking more and more taxpayer money into A.I.G. “It is hard to escape the conclusion that F.R.B.N.Y. was just ‘going through the motions,’ ” the report said.
About $46 billion of the taxpayer money in the A.I.G. bailout was used to pay to mortgage trading partners like Goldman and Société Générale, a French bank, to make good on their claims. The banks are not expected to return any of that money, leading the Congressional Research Service to say in March that much of the taxpayer money ultimately bailed out the banks, not A.I.G.
A Goldman spokesman said that he did not agree with that report’s assertion, noting that his firm considered itself to be insulated from possible losses on its A.I.G. deals.
Even with the financial reform legislation that Congress introduced last week, David A. Moss, a Harvard Business School professor, said he was concerned that the government had not developed a blueprint for stabilizing markets when huge companies like A.I.G. run aground and, for that reason, regulators’ actions during the financial crisis need continued scrutiny. “We have to vet these things now because otherwise, if we face a similar crisis again, federal officials are likely to follow precedents set this time around,” he said.
Under the new legislation, the Federal Deposit Insurance Corporation will have the power to untangle the financial affairs of troubled entities, but bailed-out companies will pay most of their trading partners 100 cents on the dollar for outstanding contracts. (In some cases, the government will be able to recoup some of those payments later on, which the Treasury Department says will protect taxpayers’ interest. )
Sheila C. Bair, the chairwoman of the F.D.I.C., has said that trading partners should be forced to accept discounts in the middle of a bailout.
Regardless of the financial parameters of bailouts, analysts also say that real financial reform should require regulators to demonstrate much more independence from the firms they monitor.
“I’d like to know, what does A.I.G. plan to do with Goldman Sachs?” he asked. “Are you going to get — recoup — some of our money that was given to them?”
Mr. Benmosche, steward of an insurer brought to its knees two years ago after making too many risky, outsize financial bets and paying billions of dollars in claims to Goldman and other banks, said he would continue evaluating his legal options. But, in reality, A.I.G. has precious few.
When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.
But after the Securities and Exchange Commission’s civil fraud suit filed in April against Goldman for possibly misrepresenting a mortgage deal to investors, A.I.G. executives and shareholders are asking whether A.I.G. may have been misled by Goldman into insuring mortgage deals that the bank and others may have known were flawed.
This month, an Australian hedge fund sued Goldman on similar grounds. Goldman is contesting the suit and denies any wrongdoing. A spokesman for A.I.G. declined to comment about any plans to sue Goldman or any other banks with which it worked. A Goldman spokesman said that his firm believed that “all aspects of our relationship with A.I.G. were appropriate.”
Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents. The documents, reviewed by The New York Times, provide the most comprehensive public record of how the Federal Reserve Bank of New York and the Treasury Department orchestrated one of the biggest corporate bailouts in history.
The documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks. It also contrasts with the hard line the White House took in 2008 when it forced Chrysler’s lenders to take losses when the government bailed out the auto giant.
As a Congressional commission convenes hearings Wednesday exploring the A.I.G. bailout and Goldman’s relationship with the insurer, analysts say that the documents suggest that regulators were overly punitive toward A.I.G. and overly forgiving of banks during the bailout — signified, they say, by the fact that the legal waiver undermined A.I.G. and its shareholders’ ability to recover damages.
“Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.”
“This really suggests they had myopia and they were looking at it entirely through the perspective of the banks,” Mr. Skeel said.
Regulators at the New York Fed declined to comment on the legal waiver but disagreed with that viewpoint.
“This was not about the banks,” said Sarah J. Dahlgren, a senior vice president for the New York Fed who oversees A.I.G. “This was about stabilizing the system by preventing the disorderly collapse of A.I.G. and the potentially devastating consequences of that event for the U.S. and global economies.”
This month, the Congressional Oversight Panel, a body charged with reviewing the state of financial markets and the regulators that monitor them, published a 337-page report on the A.I.G. bailout. It concluded that the Federal Reserve Bank of New York did not give enough consideration to alternatives before sinking more and more taxpayer money into A.I.G. “It is hard to escape the conclusion that F.R.B.N.Y. was just ‘going through the motions,’ ” the report said.
About $46 billion of the taxpayer money in the A.I.G. bailout was used to pay to mortgage trading partners like Goldman and Société Générale, a French bank, to make good on their claims. The banks are not expected to return any of that money, leading the Congressional Research Service to say in March that much of the taxpayer money ultimately bailed out the banks, not A.I.G.
A Goldman spokesman said that he did not agree with that report’s assertion, noting that his firm considered itself to be insulated from possible losses on its A.I.G. deals.
Even with the financial reform legislation that Congress introduced last week, David A. Moss, a Harvard Business School professor, said he was concerned that the government had not developed a blueprint for stabilizing markets when huge companies like A.I.G. run aground and, for that reason, regulators’ actions during the financial crisis need continued scrutiny. “We have to vet these things now because otherwise, if we face a similar crisis again, federal officials are likely to follow precedents set this time around,” he said.
Under the new legislation, the Federal Deposit Insurance Corporation will have the power to untangle the financial affairs of troubled entities, but bailed-out companies will pay most of their trading partners 100 cents on the dollar for outstanding contracts. (In some cases, the government will be able to recoup some of those payments later on, which the Treasury Department says will protect taxpayers’ interest. )
Sheila C. Bair, the chairwoman of the F.D.I.C., has said that trading partners should be forced to accept discounts in the middle of a bailout.
Regardless of the financial parameters of bailouts, analysts also say that real financial reform should require regulators to demonstrate much more independence from the firms they monitor.
Violence erupts in Indian Kashmir
Violence in India’s troubled Kashmir valley escalated on Tuesday, with three local youths, including a 13-year-old boy, shot dead by paramilitary police during widening protests against the heavy military presence in the region.
The deaths brought to 11 the number of men and boys killed by police in Kashmir over the past two weeks in violent clashes between stone-pelting youths and heavily armed members of Central Reserve Police Force.
Authorities imposed a curfew and deployed thousands of troops in Kashmir’s main towns in an effort to restore order in the volatile Muslim-majority province, which is at the centre of a decades-old sovereignty dispute between India and neighbouring Pakistan.
In the town of Anantnag – where thousands of Hindus are gathering to begin an annual pilgrimage to a Himalayan cave – angry youths defied the curfew and confronted paramilitary police, who allegedly opened fire, killing three and injuring others.
On Tuesday evening, Omar Abdullah, the 40-year-old chief minister, of Jammu and Kashmir, said the violent clashes were being deliberately instigated by Kashmiri separatists, who he accused of exploiting “emotional and vulnerable youth”.
He warned that security forces would strictly enforce a curfew across the Kashmir valley, and appealed to Kashmiri parents to keep their children at home and prevent more confrontations with the security forces.
“This cycle of violence has to stop, and the best way to stop this cycle of violence is to stop protesting for the time being,” Mr Abdullah said.
“This is not a simple law and order matter. It’s a battle of wits ...
“It’s a battle of ideologies in which various antinational forces and vested interests have come together to create trouble.”
In the 1990s, Kashmir was wracked by a Pakistan-based armed separatist insurgency, a conflict that lead to the deaths of an estimated 70,000 people, but militant violence has declined sharply in recent years.
However, India maintains nearly 500,000 troops and paramilitary police in the restive region – a intrusive presence that generates tremendous friction, and resentment, among local people.
Elected just 18 months ago, Mr Abduhallah had pledged to reduce the military’s heavy presence in the valley, and end soldiers’ immunity from prosecution for human rights abuses in Kashmir, but he ran into resistance from the armed forces.
Over the weekend, Ali Mohammad Sagar, Kashmir’s law minister, accused the CRPF forces in the state of being “out of control”.
The current cycle of violence started two weeks ago, when a Srinagar teenager was killed by a stray rubber bullet, sparking angry clashes with police that led to more fatalities.
The deaths brought to 11 the number of men and boys killed by police in Kashmir over the past two weeks in violent clashes between stone-pelting youths and heavily armed members of Central Reserve Police Force.
Authorities imposed a curfew and deployed thousands of troops in Kashmir’s main towns in an effort to restore order in the volatile Muslim-majority province, which is at the centre of a decades-old sovereignty dispute between India and neighbouring Pakistan.
In the town of Anantnag – where thousands of Hindus are gathering to begin an annual pilgrimage to a Himalayan cave – angry youths defied the curfew and confronted paramilitary police, who allegedly opened fire, killing three and injuring others.
On Tuesday evening, Omar Abdullah, the 40-year-old chief minister, of Jammu and Kashmir, said the violent clashes were being deliberately instigated by Kashmiri separatists, who he accused of exploiting “emotional and vulnerable youth”.
He warned that security forces would strictly enforce a curfew across the Kashmir valley, and appealed to Kashmiri parents to keep their children at home and prevent more confrontations with the security forces.
“This cycle of violence has to stop, and the best way to stop this cycle of violence is to stop protesting for the time being,” Mr Abdullah said.
“This is not a simple law and order matter. It’s a battle of wits ...
“It’s a battle of ideologies in which various antinational forces and vested interests have come together to create trouble.”
In the 1990s, Kashmir was wracked by a Pakistan-based armed separatist insurgency, a conflict that lead to the deaths of an estimated 70,000 people, but militant violence has declined sharply in recent years.
However, India maintains nearly 500,000 troops and paramilitary police in the restive region – a intrusive presence that generates tremendous friction, and resentment, among local people.
Elected just 18 months ago, Mr Abduhallah had pledged to reduce the military’s heavy presence in the valley, and end soldiers’ immunity from prosecution for human rights abuses in Kashmir, but he ran into resistance from the armed forces.
Over the weekend, Ali Mohammad Sagar, Kashmir’s law minister, accused the CRPF forces in the state of being “out of control”.
The current cycle of violence started two weeks ago, when a Srinagar teenager was killed by a stray rubber bullet, sparking angry clashes with police that led to more fatalities.
Monday, June 28, 2010
Asian Stocks Fall to Two-Week Low on Chinese Growth Concerns
June 29 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to a two-week low, as concerns over Chinese economic growth overshadowed stock buybacks in Japan and Taiwan.
China Minsheng Banking Corp. and Angang Steel Co. sank at least 2 percent in Shanghai and Shenzhen respectively after the Conference Board corrected its April gauge for the outlook of China’s economy to indicate slower growth. Citigroup Inc. said the country’s exports face “strong headwinds.” Asustek Computer Inc. gained 1 percent in Taipei and Tokio Marine Holdings Inc. advanced 0.9 percent in Tokyo on plans to repurchase stock.
The MSCI Asia Pacific Index lost 0.6 percent to 114.97 as of 12:49 p.m. in Tokyo, set for its lowest close since June 15. The gauge has slumped 11 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
“The market is pausing to digest the implications of the macro overhang of the last couple of weeks,” said Jason Teh, who helps manage $3 billion at Investors Mutual in Sydney. “Markets are maybe realizing the growth trajectory may be slower because there is still too much leverage in the system. Today there is more of a focus on stocks specific news.”
China’s Shanghai Composite Index slumped 1.8 percent and Hong Kong’s Hang Seng Index lost 1.1 percent. South Korea’s Kospi dropped 0.6 percent, while Australia’s S&P/ASX 200 Index lost 0.2 percent. Japan’s Nikkei 225 Stock Average sank 0.5 percent.
China Stocks Fall
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The index fell 0.2 percent yesterday, dragging the gauge lower for the fifth time in six days, as oil and metal prices dropped.
Minsheng Banking, the nation’s first privately owned bank, dropped 2.1 percent to 6.22 yuan. Angang Steel lost 2 percent to 7.49 yuan.
The Conference Board said its index of leading Chinese economic indicators rose 0.3 percent in April, less than the 1.7 percent gain reported on June 15. The New York-based research firm said in an e-mailed statement the previous release contained a “calculation error.”
Asustek gained 1 percent to NT$244.5 in Taipei. The maker of the Eee PC low-cost notebook said its board approved plans to buy back and cancel up to 10 million shares, or 1.57 percent of its outstanding stock.
Tokio Marine, a Japanese casualty insurer, gained 0.9 percent to 2,378 yen after announcing plans to buy back as many as 16 million shares, or 2 percent of its stock, for as much as 25 billion yen.
Nippon Telegraph
Nippon Telegraph & Telephone Co. climbed 1.2 percent to 3,670 yen. The company’s NTT Finance Corp. unit may post its first operating profit in three years, Nikkei English News reported, without saying where it got the information.
Government reports today showed that Japan’s industrial production and household spending slipped in May and the unemployment rate unexpectedly increased, in signs that the recovery of the world’s second-largest economy may slow.
“People in the market are wondering how to respond to two opposite trends, the risk of a global economic double dip and robust growth in emerging countries,” said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $310 billion.
China Minsheng Banking Corp. and Angang Steel Co. sank at least 2 percent in Shanghai and Shenzhen respectively after the Conference Board corrected its April gauge for the outlook of China’s economy to indicate slower growth. Citigroup Inc. said the country’s exports face “strong headwinds.” Asustek Computer Inc. gained 1 percent in Taipei and Tokio Marine Holdings Inc. advanced 0.9 percent in Tokyo on plans to repurchase stock.
The MSCI Asia Pacific Index lost 0.6 percent to 114.97 as of 12:49 p.m. in Tokyo, set for its lowest close since June 15. The gauge has slumped 11 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
“The market is pausing to digest the implications of the macro overhang of the last couple of weeks,” said Jason Teh, who helps manage $3 billion at Investors Mutual in Sydney. “Markets are maybe realizing the growth trajectory may be slower because there is still too much leverage in the system. Today there is more of a focus on stocks specific news.”
China’s Shanghai Composite Index slumped 1.8 percent and Hong Kong’s Hang Seng Index lost 1.1 percent. South Korea’s Kospi dropped 0.6 percent, while Australia’s S&P/ASX 200 Index lost 0.2 percent. Japan’s Nikkei 225 Stock Average sank 0.5 percent.
China Stocks Fall
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The index fell 0.2 percent yesterday, dragging the gauge lower for the fifth time in six days, as oil and metal prices dropped.
Minsheng Banking, the nation’s first privately owned bank, dropped 2.1 percent to 6.22 yuan. Angang Steel lost 2 percent to 7.49 yuan.
The Conference Board said its index of leading Chinese economic indicators rose 0.3 percent in April, less than the 1.7 percent gain reported on June 15. The New York-based research firm said in an e-mailed statement the previous release contained a “calculation error.”
Asustek gained 1 percent to NT$244.5 in Taipei. The maker of the Eee PC low-cost notebook said its board approved plans to buy back and cancel up to 10 million shares, or 1.57 percent of its outstanding stock.
Tokio Marine, a Japanese casualty insurer, gained 0.9 percent to 2,378 yen after announcing plans to buy back as many as 16 million shares, or 2 percent of its stock, for as much as 25 billion yen.
Nippon Telegraph
Nippon Telegraph & Telephone Co. climbed 1.2 percent to 3,670 yen. The company’s NTT Finance Corp. unit may post its first operating profit in three years, Nikkei English News reported, without saying where it got the information.
Government reports today showed that Japan’s industrial production and household spending slipped in May and the unemployment rate unexpectedly increased, in signs that the recovery of the world’s second-largest economy may slow.
“People in the market are wondering how to respond to two opposite trends, the risk of a global economic double dip and robust growth in emerging countries,” said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $310 billion.
In Ireland, a Picture of the High Cost of Austerity
DUBLIN — As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.
Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.
Now, the Irish are being warned of more pain to come.
“The facts are that there is no easy way to cut deficits,” Prime Minister Brian Cowen said in an interview. “Those who claim there’s an easier way or a soft option — that’s not the real world.”
Despite its strenuous efforts, Ireland has been thrust into the same ignominious category as Portugal, Italy, Greece and Spain. It now pays a hefty three percentage points more than Germany on its benchmark bonds, in part because investors fear that the austerity program, by retarding growth and so far failing to reduce borrowing, will make it harder for Dublin to pay its bills rather than easier.
Other European nations, including Britain and Germany, are following Ireland’s lead, arguing that the only way to restore growth is to convince investors and their own people that government borrowing will shrink.
The Group of 20 leaders set that in writing this weekend, vowing to make deficit reduction the top priority despite warnings from President Obama that too much austerity could choke a global recovery and warnings from a few economists about the possibility of a much sharper 1930s style downturn.
“Europe is in a tough bind,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a Harvard professor. “If you want to escape default, the Irish path is the only way to go. But the Ireland experience points to the profound challenges that the current strategy implies.”
Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent. About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.
The budget went from surpluses in 2006 and 2007 to a staggering deficit of 14.3 percent of gross domestic product last year — worse than Greece. It continues to deteriorate. Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of G.D.P. this year.
“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.”
Mr. Honohan predicts growth could revive to a rate of about 3 percent by 2012. But that may be optimistic: Ireland, as one of the 16 nations in Europe that has adopted the euro as its common currency, is trying to shrink the deficit to 3 percent of G.D.P. by 2014, a commitment that could weaken its hopes for recovery.
These troubles sting many Irish, given the head start Ireland has on most members of the euro club. Its labor market is one of Europe’s most open and dynamic. After its last major recession in the 1980s, it lured knowledge-based multinationals like Intel and Microsoft — and now Facebook and Linked-In — with a 12.5 percent tax rate, giving Ireland one of the most export-dependent economies in the world.
Now, the government is pinning nearly all its hopes on an export revival to lift the economy. Falling wage and energy costs, and a weaker euro, have improved competitiveness.
Turning statistics into jobs, however, will be a herculean task. “Exports alone don’t drive a significant number of jobs,” said Paul Duffy, a vice president at Pfizer in Ireland.
Wage cuts were easier to impose here because people remembered that leaders moved too slowly to overcome Ireland’s last recession. This time, Mr. Cowen struck accords swiftly with labor unions, which agreed that protests like those in Greece would only delay a recovery.
But pay cuts have spooked consumers into saving, weighing on the prospects for job creation and economic recovery. And after a decade-long boom that encouraged many from the previous years of diaspora to return, the country is facing a new threat: business leaders say thousands of skilled young Irish are now moving out, raising fears of a brain drain.
Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.
Now, the Irish are being warned of more pain to come.
“The facts are that there is no easy way to cut deficits,” Prime Minister Brian Cowen said in an interview. “Those who claim there’s an easier way or a soft option — that’s not the real world.”
Despite its strenuous efforts, Ireland has been thrust into the same ignominious category as Portugal, Italy, Greece and Spain. It now pays a hefty three percentage points more than Germany on its benchmark bonds, in part because investors fear that the austerity program, by retarding growth and so far failing to reduce borrowing, will make it harder for Dublin to pay its bills rather than easier.
Other European nations, including Britain and Germany, are following Ireland’s lead, arguing that the only way to restore growth is to convince investors and their own people that government borrowing will shrink.
The Group of 20 leaders set that in writing this weekend, vowing to make deficit reduction the top priority despite warnings from President Obama that too much austerity could choke a global recovery and warnings from a few economists about the possibility of a much sharper 1930s style downturn.
“Europe is in a tough bind,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a Harvard professor. “If you want to escape default, the Irish path is the only way to go. But the Ireland experience points to the profound challenges that the current strategy implies.”
Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent. About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.
The budget went from surpluses in 2006 and 2007 to a staggering deficit of 14.3 percent of gross domestic product last year — worse than Greece. It continues to deteriorate. Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of G.D.P. this year.
“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.”
Mr. Honohan predicts growth could revive to a rate of about 3 percent by 2012. But that may be optimistic: Ireland, as one of the 16 nations in Europe that has adopted the euro as its common currency, is trying to shrink the deficit to 3 percent of G.D.P. by 2014, a commitment that could weaken its hopes for recovery.
These troubles sting many Irish, given the head start Ireland has on most members of the euro club. Its labor market is one of Europe’s most open and dynamic. After its last major recession in the 1980s, it lured knowledge-based multinationals like Intel and Microsoft — and now Facebook and Linked-In — with a 12.5 percent tax rate, giving Ireland one of the most export-dependent economies in the world.
Now, the government is pinning nearly all its hopes on an export revival to lift the economy. Falling wage and energy costs, and a weaker euro, have improved competitiveness.
Turning statistics into jobs, however, will be a herculean task. “Exports alone don’t drive a significant number of jobs,” said Paul Duffy, a vice president at Pfizer in Ireland.
Wage cuts were easier to impose here because people remembered that leaders moved too slowly to overcome Ireland’s last recession. This time, Mr. Cowen struck accords swiftly with labor unions, which agreed that protests like those in Greece would only delay a recovery.
But pay cuts have spooked consumers into saving, weighing on the prospects for job creation and economic recovery. And after a decade-long boom that encouraged many from the previous years of diaspora to return, the country is facing a new threat: business leaders say thousands of skilled young Irish are now moving out, raising fears of a brain drain.
China Trade Pact Draws Taiwan Into Economic Embrace
June 29 (Bloomberg) -- Taiwan is due to sign its first trade treaty with China today, strengthening commercial ties with the fastest-growing major economy and the island’s biggest trading partner and investment destination.
The accord to be signed in the Chinese city of Chongqing, former headquarters of Taiwan’s ruling Kuomintang when they fought the Japanese from 1937 to 1945, shows how much relations with the mainland have warmed since Taiwanese president Ma Ying- jeou took office in May 2008. China has viewed the island as a renegade province since the Kuomintang fled there after losing to Mao Zedong’s Communists in the nation’s civil war in 1949.
“This would not be imaginable two or three years ago,” Carl Chien, senior country officer at JPMorgan Chase & Co. said by telephone in Taipei. “The mere fact that the two governments are signing some kind of treaty is already a record-breaking thing.”
China set aside its claims over Taiwan to negotiate the Economic Cooperation Framework Agreement, betting that ever- tighter economic integration will achieve what six decades of military threats did not. For Taiwan, the deal restores the island’s competitiveness in the world’s third-biggest economy and may pave the way for agreements with other trading partners.
China will cut tariffs on 539 items from Taiwan valued at $13.8 billion, or about 16 percent of the island’s 2009 exports to the mainland, Zheng Lizhong, vice chairman of the Association for Relations Across the Taiwan Straits, said last week. Taiwan will cut tariffs on 267 items from China worth $2.86 billion, or about 10.5 percent of the country’s shipments to Taiwan in 2009.
Chinese Visitors
Since Ma took office, direct air, shipping and postal links have been established. In the first five months of this year, 70,445 Chinese visited Taiwan, 70 percent more than in the corresponding period a year earlier, according to Taiwan Tourism Bureau numbers.
Taiwan’s benchmark stock index gained 17 percent in the past year as Ma pushed for the trade pact with China. That outpaced the 13 percent advance by the MSCI Asia Pacific Index. The Taiex rose 0.7 percent to 7554.78 points as of 9.01 a.m. in Taipei.
Taiwan is keen to reach the trade deal with China in order to secure for its companies the same preferential treatment the mainland now offers 10 Southeast Asian countries.
In January, a separate trade accord took effect between China and the Association of Southeast Asian Nations, lowering tariffs on two-way trade. Similar deals for China with Japan and South Korea are under discussion.
“It’s vital for us economically, it’s a matter of life and death,” said Philip Yang, a professor of political science at National Taiwan University in Taipei. “If we sign we won’t be in a disadvantageous position with Asean and Korea, our major economic rivals in China.”
Omissions
Still, the proposed trade pact doesn’t include items some Taiwanese companies had wanted, such as tariff cuts for polyvinyl chloride, or PVC, one of the island’s top exports, and easing restrictions in the semiconductor industry.
“The detailed items haven’t been disclosed,” Lee Chih- tsuen, chairman of Formosa Plastics Corp, Taiwan’s biggest polyvinyl chloride maker, told shareholders on June 25. “We aren’t satisfied, but it is acceptable.”
Under the pact, China will open up 11 service sectors such as banking, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in seven areas, including banking and movies, the two sides said.
“China is incorporating Taiwan into its supply chain and Taiwan’s economy will become part of China’s economy, and that is the biggest worry for Taiwan people,” Tsai Ing-wen, chairwoman of the opposition Democratic Progressive Party, said at a rally by more than 30,000 people on June 26 to protest the accord.
Trade Booms
Trade with the mainland, Taiwan’s largest export market, rose 68 percent in the first four months of 2010 compared with same period last year, and Taiwan investment rose 44.7 percent, China’s Tang Wei, head of Taiwan, Hong Kong and Macao affairs at China’s Ministry of Commerce said on June 13. China and Hong Kong accounted for 43 percent of Taiwan’s exports, according to data from the island’s Ministry of Finance.
Under the deal, tariff reductions on items including petrochemicals, auto parts, textiles and machinery will be implemented in three stages over two years, by which time tariffs will be brought to zero.
A trade agreement with China is also vital to Taiwan as it seeks similar accords with other regional trading partners.
The agreement will “ease the concerns of most of the countries in the world and start to bring Taiwan back to a normal position in establishing FTA relationships with its important trading partner countries,” J.T. Wang, chairman of Acer Inc., the world’s largest notebook computer supplier, said in an e-mailed reply to questions.
The accord to be signed in the Chinese city of Chongqing, former headquarters of Taiwan’s ruling Kuomintang when they fought the Japanese from 1937 to 1945, shows how much relations with the mainland have warmed since Taiwanese president Ma Ying- jeou took office in May 2008. China has viewed the island as a renegade province since the Kuomintang fled there after losing to Mao Zedong’s Communists in the nation’s civil war in 1949.
“This would not be imaginable two or three years ago,” Carl Chien, senior country officer at JPMorgan Chase & Co. said by telephone in Taipei. “The mere fact that the two governments are signing some kind of treaty is already a record-breaking thing.”
China set aside its claims over Taiwan to negotiate the Economic Cooperation Framework Agreement, betting that ever- tighter economic integration will achieve what six decades of military threats did not. For Taiwan, the deal restores the island’s competitiveness in the world’s third-biggest economy and may pave the way for agreements with other trading partners.
China will cut tariffs on 539 items from Taiwan valued at $13.8 billion, or about 16 percent of the island’s 2009 exports to the mainland, Zheng Lizhong, vice chairman of the Association for Relations Across the Taiwan Straits, said last week. Taiwan will cut tariffs on 267 items from China worth $2.86 billion, or about 10.5 percent of the country’s shipments to Taiwan in 2009.
Chinese Visitors
Since Ma took office, direct air, shipping and postal links have been established. In the first five months of this year, 70,445 Chinese visited Taiwan, 70 percent more than in the corresponding period a year earlier, according to Taiwan Tourism Bureau numbers.
Taiwan’s benchmark stock index gained 17 percent in the past year as Ma pushed for the trade pact with China. That outpaced the 13 percent advance by the MSCI Asia Pacific Index. The Taiex rose 0.7 percent to 7554.78 points as of 9.01 a.m. in Taipei.
Taiwan is keen to reach the trade deal with China in order to secure for its companies the same preferential treatment the mainland now offers 10 Southeast Asian countries.
In January, a separate trade accord took effect between China and the Association of Southeast Asian Nations, lowering tariffs on two-way trade. Similar deals for China with Japan and South Korea are under discussion.
“It’s vital for us economically, it’s a matter of life and death,” said Philip Yang, a professor of political science at National Taiwan University in Taipei. “If we sign we won’t be in a disadvantageous position with Asean and Korea, our major economic rivals in China.”
Omissions
Still, the proposed trade pact doesn’t include items some Taiwanese companies had wanted, such as tariff cuts for polyvinyl chloride, or PVC, one of the island’s top exports, and easing restrictions in the semiconductor industry.
“The detailed items haven’t been disclosed,” Lee Chih- tsuen, chairman of Formosa Plastics Corp, Taiwan’s biggest polyvinyl chloride maker, told shareholders on June 25. “We aren’t satisfied, but it is acceptable.”
Under the pact, China will open up 11 service sectors such as banking, insurance, hospitals and accounting, while Taiwan agreed to offer wider access in seven areas, including banking and movies, the two sides said.
“China is incorporating Taiwan into its supply chain and Taiwan’s economy will become part of China’s economy, and that is the biggest worry for Taiwan people,” Tsai Ing-wen, chairwoman of the opposition Democratic Progressive Party, said at a rally by more than 30,000 people on June 26 to protest the accord.
Trade Booms
Trade with the mainland, Taiwan’s largest export market, rose 68 percent in the first four months of 2010 compared with same period last year, and Taiwan investment rose 44.7 percent, China’s Tang Wei, head of Taiwan, Hong Kong and Macao affairs at China’s Ministry of Commerce said on June 13. China and Hong Kong accounted for 43 percent of Taiwan’s exports, according to data from the island’s Ministry of Finance.
Under the deal, tariff reductions on items including petrochemicals, auto parts, textiles and machinery will be implemented in three stages over two years, by which time tariffs will be brought to zero.
A trade agreement with China is also vital to Taiwan as it seeks similar accords with other regional trading partners.
The agreement will “ease the concerns of most of the countries in the world and start to bring Taiwan back to a normal position in establishing FTA relationships with its important trading partner countries,” J.T. Wang, chairman of Acer Inc., the world’s largest notebook computer supplier, said in an e-mailed reply to questions.
Petrol stations cautiously eye Indian boost
All along India’s highway network, more than 700 deserted Reliance Industries petrol pumps stand as silent testimony to the ills of the country’s energy sector, distorted by huge subsidies that shield Indian consumers from high global oil prices.
The pumps were shuttered five years ago, when surging global oil prices made it a mug’s game for the three private players – Reliance, Essar, and Royal Dutch Shell – to try to compete with state-owned Hindustan Petroleum, Indian Oil, and Bharat Petroleum, which were selling fuel at highly subsidised, government-mandated prices.
As it grapples with a yawning fiscal deficit, New Delhi has begun chipping away at its huge oil subsidy burden. The Congress-led government last week ended state controls over petrol prices, which promptly rose over 7 per cent. It also pledged to gradually free the price of diesel, which accounts for more than 80 per cent of India’s automotive fuel use, and imposed immediate 5 per cent increases.
Both private and public sector oil companies – and powerful Indian industry groups – have hailed the move as a welcome signal of New Delhi’s ability to undertake tough reforms to the crucial energy sector.
But analysts say that the real test of India’s seriousness will be the pace at which it liberalises more politically sensitive diesel prices – and what happens when global oil prices rise again. S. Sundareshan, the oil secretary, has already said that the government reserved the right to intervene again if prices surged.
“The litmus test for the arrangement is when oil prices do spike, what does the government do?” says Jahangir Aziz, chief economist at JPMorgan.
India, which imports about 70 per cent of its oil, tried to liberalise fuel prices in 2002, with a plan to gradually move to market levels. But when crude prices soared, the Congress-led coalition ordered state-owned oil companies to hold pump prices down.
Though the state-controlled groups were partially compensated for their losses, they still ran into financial difficulties. Private companies received no compensation, however, and could not compete, forcing them to mothball many of their stations.
Crisil, the Indian rating agency, said the move last Friday to deregulate petrol prices would help state-owned oil marketing companies such as Indian Oil to improve their cash flow and reduce dependence on expensive external borrowings. Shares in state-controlled oil companies, which said the moves would help them revive expansion plans, have bounced.
Meanwhile, both Essar, which says it reopened all of its 1,350 retail fuel outlets as global oil prices fell over the past two years, and Shell’s Indian subsidiary say they expect higher sales as petrol prices at state-pumps and privately retailers levels out.
“The three private players are going to get a big boost from this,” says Vikram Singh Mehta, chairman of Shell India, which runs 70 fuel retail outlets, mostly in urban areas where petrol use is higher. “It levels the playing field.”
Naresh Nayyar, the chief executive of Essar Energy, says he is considering an expansion of its fuel retail network. “As the largest private sector fuel retailer in India, we are well placed to capture additional sales for fuel and non-fuel items.”
Yet analysts say companies will probably remain cautious on any expansion of their retail networks, given New Delhi’s record of interference. Much will also depend on what happens to diesel pricing, as the country’s dominant fuel.
So far, the government has given no details about how or when it might move to full deregulation.
That’s hardly encouraging for Reliance. Its deserted petrol stations are primarily located along the major highways, where diesel – used by India’s huge long-distance trucking fleet – is the main fuel in demand.
The pumps were shuttered five years ago, when surging global oil prices made it a mug’s game for the three private players – Reliance, Essar, and Royal Dutch Shell – to try to compete with state-owned Hindustan Petroleum, Indian Oil, and Bharat Petroleum, which were selling fuel at highly subsidised, government-mandated prices.
As it grapples with a yawning fiscal deficit, New Delhi has begun chipping away at its huge oil subsidy burden. The Congress-led government last week ended state controls over petrol prices, which promptly rose over 7 per cent. It also pledged to gradually free the price of diesel, which accounts for more than 80 per cent of India’s automotive fuel use, and imposed immediate 5 per cent increases.
Both private and public sector oil companies – and powerful Indian industry groups – have hailed the move as a welcome signal of New Delhi’s ability to undertake tough reforms to the crucial energy sector.
But analysts say that the real test of India’s seriousness will be the pace at which it liberalises more politically sensitive diesel prices – and what happens when global oil prices rise again. S. Sundareshan, the oil secretary, has already said that the government reserved the right to intervene again if prices surged.
“The litmus test for the arrangement is when oil prices do spike, what does the government do?” says Jahangir Aziz, chief economist at JPMorgan.
India, which imports about 70 per cent of its oil, tried to liberalise fuel prices in 2002, with a plan to gradually move to market levels. But when crude prices soared, the Congress-led coalition ordered state-owned oil companies to hold pump prices down.
Though the state-controlled groups were partially compensated for their losses, they still ran into financial difficulties. Private companies received no compensation, however, and could not compete, forcing them to mothball many of their stations.
Crisil, the Indian rating agency, said the move last Friday to deregulate petrol prices would help state-owned oil marketing companies such as Indian Oil to improve their cash flow and reduce dependence on expensive external borrowings. Shares in state-controlled oil companies, which said the moves would help them revive expansion plans, have bounced.
Meanwhile, both Essar, which says it reopened all of its 1,350 retail fuel outlets as global oil prices fell over the past two years, and Shell’s Indian subsidiary say they expect higher sales as petrol prices at state-pumps and privately retailers levels out.
“The three private players are going to get a big boost from this,” says Vikram Singh Mehta, chairman of Shell India, which runs 70 fuel retail outlets, mostly in urban areas where petrol use is higher. “It levels the playing field.”
Naresh Nayyar, the chief executive of Essar Energy, says he is considering an expansion of its fuel retail network. “As the largest private sector fuel retailer in India, we are well placed to capture additional sales for fuel and non-fuel items.”
Yet analysts say companies will probably remain cautious on any expansion of their retail networks, given New Delhi’s record of interference. Much will also depend on what happens to diesel pricing, as the country’s dominant fuel.
So far, the government has given no details about how or when it might move to full deregulation.
That’s hardly encouraging for Reliance. Its deserted petrol stations are primarily located along the major highways, where diesel – used by India’s huge long-distance trucking fleet – is the main fuel in demand.
Subscribe to:
Posts (Atom)
Posts
