New Delhi has approved imports of Chinese telecom equipment by Indian mobile operators Reliance Communications and Tata Teleser-vices, ending a temporary ban that had threatened to choke the world’s fastest-growing mobile industry.
Chinese telecom equipment makers Huawei and ZTE paved the way for a resolution by agreeing in principle to give Indian security agencies access to their network source codes – a condition that had prompted outrage among western vendors, who complained it was a violation of their intellectual property.
The import approvals, sent to Reliance and Tata on Thursday night, follow eight months in which India’s 15 mobile operators could not buy foreign equipment even as the industry began preparing for third-generation services.
India harbours a deep distrust of its neighbour. It fought a war with China in 1962 and the two countries still dispute parts of their mountainous border.
New Delhi in December ordered that Chinese telecom equipment imports be screened for security reasons, worrying Huawei and ZTE, which cannot afford to miss out on a market that is second only to China in terms of subscriber numbers with 636m users.
In the ensuing months, the Indian government proposed a slew of regulatory requirements for telecom equipment imports.
The most controversial was the proposal requiring vendors to deposit their network source code in an escrow account with the authorities, a plan that provoked outrage among European vendors, which said it was a violation of international trade rules.
“We are confident these concerns will be resolved in a way that allows us to continue to do business in India,” said Rajeev Singh-Molares, president of Asia Pacific for Alcatel-Lucent.
However, even as European vendors resisted the plan, the Chinese equipment companies “called New Delhi’s bluff” by agreeing to the idea, said a telecom executive in Mumbai.
One Chinese senior executive said: “We are ready to comply with any country’s regulations as long as they are in line with international practice. Putting source code in escrow . . . is not unheard of.”
Industry insiders said while the Chinese vendors had agreed in principle, it was unclear when the government would implement the escrow proposal.
The contracts approved this week required only a guarantee from the Chinese vendors and from the network operator that the equipment contained no “malware” used for spying.
Any violations carry a Rs500m ($11m, €8m, £7m) fine plus a fine equivalent to the value of the order, said the industry executive.
ZTE said on Thursday the temporary ban had caused a fall in its revenue from Asia in the first six months.
Saturday, August 21, 2010
In Case of Emergency: What Not to Do
WHOEVER suggested that all publicity is good publicity clearly never envisioned the wave of catastrophe engulfing high-profile corporations over the last year, laying waste to some of the most meticulously tailored reputations on earth.
Toyota, celebrated for engineering cars so utterly reliable that they seemed boring, endured revelations that its most popular models sometimes accelerated for mysterious reasons. The energy giant BP, which once packaged itself as an environmental visionary, now confronts the future with a new identity: progenitor of the worst oil spill in American history. And the Wall Street icon Goldman Sachs, an elite player in the white-collar-and-suspenders set, found itself derided in Rolling Stone as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Last month, Goldman agreed to pay $550 million to settle federal securities fraud charges.
“These were real reputational implosions,” says Howard Rubinstein, the public relations luminary who represents the New York Yankees and the News Corporation. “In all three cases, the companies found themselves under attack over the very traits that were central to their strong global brands and corporate identities.”
Image implosions, of course, haven’t been confined to the business world. The basketball wizard LeBron James found himself scorned as a narcissist after his nationally televised abandonment of Cleveland. Taped conversations of the Hollywood star Mel Gibson with his former girlfriend have secured him seemingly permanent billing as The Worst Guy Ever.
But for members of the protective tribe known as the crisis management industry, the scandals capturing headlines in the corporate realm involve far higher stakes, threatening the lifeblood of global behemoths worth hundreds of billions of dollars. The calamities have served up a lifetime supply of case studies to be mined for lessons on best practices, as well as pitfalls to avoid when disaster arrives.
As conventional wisdom has it, the three companies at the center of these fiascos worsened their problems by failing to heed established protocol: When the story is bad, disclose it immediately — awful parts included — lest you be forced to backtrack and slide into the death spiral of lost credibility.
Exhibit A in the lesson book on forthright crisis management is the mass recall of Tylenol in 1982, after the deaths of seven people who ingested tainted painkillers. Johnson & Johnson promptly acknowledged that some of its product had been poisoned and pulled bottles off store shelves.
In the view of many who are paid to extract corporations from terrible situations, Toyota, BP and Goldman exacerbated their woes by either declining to fess up promptly, casting blame elsewhere or striking adversarial postures with the public, the government and the news media.
“Companies that typically handle crises well, you never hear about them,” says James Donnelly, senior vice president for crisis management at the public relations colossus Ketchum, who — like many practitioners contacted for this article — required elaborate promises that he would not be portrayed as speaking about any particular company. “There’s not a lot of news when the company takes responsibility and moves on. The good crisis-management examples rarely end waving the flag of victory. They end with a whisper, and it’s over in a day or two.”
Alas, recent months have featured little whispering and a good deal of high-decibel theatrics: sirens headed to another Toyota accident; recriminations over how birds in the Gulf of Mexico became covered in black goo; debate over the propriety of Goldman selling investments engineered to fail. The basic facts were so unpalatable that they subdued the cleansing power of the American industrial additive known as spin.
Which raises a question: Are some crises so dire that public relations victory is simply not on the menu? And, if so, what’s an embattled company to do?
Eric Dezenhall, a communications strategist in Washington who worked in the White House for President Ronald Reagan, argues that the standard playbook is useless when the facts are sufficiently distasteful. (He would know. He once represented Michael Jackson after allegations of child molestation.)
Mr. Dezenhall is particularly scornful of the classic imperative to “get out in front of the story,” as if swift disclosure provides inoculation against all ugly realities. When the facts are horrible, he argues, the best P.R. fix may simply be to absorb the pounding and get back to business, while eschewing the sort of foolish communications gimmicks that can make things worse.
Consider Tiger Woods. His now-infamous fondness for women other than his wife enthralled the nation, all the while torturing corporate sponsors who paid gargantuan sums to associate their brands with his winning image.
“What was Woods supposed to do?” Mr. Dezenhall asks in an essay in the publication Ethical Corporation. “Call an immediate press conference and rattle through a list of lady friends declaring, ‘Tiffany, yes; Trixy, no, Amber, don’t remember ...’? And if Woods had pre-empted with a confession, would this have caused the news media, bloggers, pundits, Hooters waitresses and everyone else to collectively reward him with their silence? Not a chance.”
Toyota, celebrated for engineering cars so utterly reliable that they seemed boring, endured revelations that its most popular models sometimes accelerated for mysterious reasons. The energy giant BP, which once packaged itself as an environmental visionary, now confronts the future with a new identity: progenitor of the worst oil spill in American history. And the Wall Street icon Goldman Sachs, an elite player in the white-collar-and-suspenders set, found itself derided in Rolling Stone as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Last month, Goldman agreed to pay $550 million to settle federal securities fraud charges.
“These were real reputational implosions,” says Howard Rubinstein, the public relations luminary who represents the New York Yankees and the News Corporation. “In all three cases, the companies found themselves under attack over the very traits that were central to their strong global brands and corporate identities.”
Image implosions, of course, haven’t been confined to the business world. The basketball wizard LeBron James found himself scorned as a narcissist after his nationally televised abandonment of Cleveland. Taped conversations of the Hollywood star Mel Gibson with his former girlfriend have secured him seemingly permanent billing as The Worst Guy Ever.
But for members of the protective tribe known as the crisis management industry, the scandals capturing headlines in the corporate realm involve far higher stakes, threatening the lifeblood of global behemoths worth hundreds of billions of dollars. The calamities have served up a lifetime supply of case studies to be mined for lessons on best practices, as well as pitfalls to avoid when disaster arrives.
As conventional wisdom has it, the three companies at the center of these fiascos worsened their problems by failing to heed established protocol: When the story is bad, disclose it immediately — awful parts included — lest you be forced to backtrack and slide into the death spiral of lost credibility.
Exhibit A in the lesson book on forthright crisis management is the mass recall of Tylenol in 1982, after the deaths of seven people who ingested tainted painkillers. Johnson & Johnson promptly acknowledged that some of its product had been poisoned and pulled bottles off store shelves.
In the view of many who are paid to extract corporations from terrible situations, Toyota, BP and Goldman exacerbated their woes by either declining to fess up promptly, casting blame elsewhere or striking adversarial postures with the public, the government and the news media.
“Companies that typically handle crises well, you never hear about them,” says James Donnelly, senior vice president for crisis management at the public relations colossus Ketchum, who — like many practitioners contacted for this article — required elaborate promises that he would not be portrayed as speaking about any particular company. “There’s not a lot of news when the company takes responsibility and moves on. The good crisis-management examples rarely end waving the flag of victory. They end with a whisper, and it’s over in a day or two.”
Alas, recent months have featured little whispering and a good deal of high-decibel theatrics: sirens headed to another Toyota accident; recriminations over how birds in the Gulf of Mexico became covered in black goo; debate over the propriety of Goldman selling investments engineered to fail. The basic facts were so unpalatable that they subdued the cleansing power of the American industrial additive known as spin.
Which raises a question: Are some crises so dire that public relations victory is simply not on the menu? And, if so, what’s an embattled company to do?
Eric Dezenhall, a communications strategist in Washington who worked in the White House for President Ronald Reagan, argues that the standard playbook is useless when the facts are sufficiently distasteful. (He would know. He once represented Michael Jackson after allegations of child molestation.)
Mr. Dezenhall is particularly scornful of the classic imperative to “get out in front of the story,” as if swift disclosure provides inoculation against all ugly realities. When the facts are horrible, he argues, the best P.R. fix may simply be to absorb the pounding and get back to business, while eschewing the sort of foolish communications gimmicks that can make things worse.
Consider Tiger Woods. His now-infamous fondness for women other than his wife enthralled the nation, all the while torturing corporate sponsors who paid gargantuan sums to associate their brands with his winning image.
“What was Woods supposed to do?” Mr. Dezenhall asks in an essay in the publication Ethical Corporation. “Call an immediate press conference and rattle through a list of lady friends declaring, ‘Tiffany, yes; Trixy, no, Amber, don’t remember ...’? And if Woods had pre-empted with a confession, would this have caused the news media, bloggers, pundits, Hooters waitresses and everyone else to collectively reward him with their silence? Not a chance.”
Saudi Shares Drop to One-Month Low on Oil Price, Slow Recovery
Saudi Arabian shares declined to a one-month low, led by petrochemical companies and banks, after oil prices and European markets retreated this week as U.S. economic reports heightened investor concern that the global recovery may be faltering.
The Tadawul All Share Index fell 0.5 percent to 6,090.22, the lowest since July 21, at the 3:30 p.m. close in Riyadh. Saudi Basic Industries Corp., the world’s largest petrochemicals maker, known as Sabic, retreated to a seven-week low after oil prices dropped $1.93 in the past week.
“The corrective mode is due to global growth jitters that is the dominant guiding force now for the Saudi stock market,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “It’s very little to do with seasonality and the Ramadan effect.”
European and U.S. stocks declined this week, as reports showed U.S. jobless-benefit claims climbed to the highest level in nine months and Japan’s economy grew at the slowest pace in three quarters. The benchmark Stoxx Europe 600 Index fell 1.3 percent, the biggest drop since July 2. The Standard & Poor’s 500 Index declined 0.7 percent.
Crude oil fell to a six-week low, settling at $73.46 a barrel on the New York Mercantile Exchange yesterday. Futures fell 2.6 percent this week. Saudi Arabia holds one-fifth of the world’s proven oil reserves.
Sabic, Samba
Sabic declined 1.2 percent to 84.5 riyals, the lowest since July 5. Its Saudi Kayan Petrochemical Co. unit dropped 1.5 percent to 16.45 riyals, the lowest since May 25. Riyad Bank, the kingdom’s third-largest lender by market value, tumbled to a seven-month low, dropping 1.1 percent. The shares closed at 26 riyals. Saudi British Bank declined 2.1 percent to 42.6 riyals, the lowest since July 14.
Zain Saudi Arabia, a unit of Kuwait’s biggest mobile-phone company, rose 3.1 percent to 8.3 riyals after the Riyadh-based company announced it’s seeking investor approval to reduce its capital by 48 percent, then raise it by 60 percent to absorb accumulated losses.
Trading volume on the 11th day of Ramadan, the Islamic holy month when Muslims fast from sunrise to sunset and business slows, was lower than the year’s daily average. About 107 million shares traded, compared with this year’s daily average of 146 million.
Tadawul has retreated 12.1 percent from this year’s high in April on fewer better-than-expected corporate results and the gradual pace of the global economic recovery.
Saudi Arabia’s index is the only Gulf Arab benchmark tracked by Bloomberg that trades on a Saturday.
The Tadawul All Share Index fell 0.5 percent to 6,090.22, the lowest since July 21, at the 3:30 p.m. close in Riyadh. Saudi Basic Industries Corp., the world’s largest petrochemicals maker, known as Sabic, retreated to a seven-week low after oil prices dropped $1.93 in the past week.
“The corrective mode is due to global growth jitters that is the dominant guiding force now for the Saudi stock market,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh. “It’s very little to do with seasonality and the Ramadan effect.”
European and U.S. stocks declined this week, as reports showed U.S. jobless-benefit claims climbed to the highest level in nine months and Japan’s economy grew at the slowest pace in three quarters. The benchmark Stoxx Europe 600 Index fell 1.3 percent, the biggest drop since July 2. The Standard & Poor’s 500 Index declined 0.7 percent.
Crude oil fell to a six-week low, settling at $73.46 a barrel on the New York Mercantile Exchange yesterday. Futures fell 2.6 percent this week. Saudi Arabia holds one-fifth of the world’s proven oil reserves.
Sabic, Samba
Sabic declined 1.2 percent to 84.5 riyals, the lowest since July 5. Its Saudi Kayan Petrochemical Co. unit dropped 1.5 percent to 16.45 riyals, the lowest since May 25. Riyad Bank, the kingdom’s third-largest lender by market value, tumbled to a seven-month low, dropping 1.1 percent. The shares closed at 26 riyals. Saudi British Bank declined 2.1 percent to 42.6 riyals, the lowest since July 14.
Zain Saudi Arabia, a unit of Kuwait’s biggest mobile-phone company, rose 3.1 percent to 8.3 riyals after the Riyadh-based company announced it’s seeking investor approval to reduce its capital by 48 percent, then raise it by 60 percent to absorb accumulated losses.
Trading volume on the 11th day of Ramadan, the Islamic holy month when Muslims fast from sunrise to sunset and business slows, was lower than the year’s daily average. About 107 million shares traded, compared with this year’s daily average of 146 million.
Tadawul has retreated 12.1 percent from this year’s high in April on fewer better-than-expected corporate results and the gradual pace of the global economic recovery.
Saudi Arabia’s index is the only Gulf Arab benchmark tracked by Bloomberg that trades on a Saturday.
Friday, August 20, 2010
Nespresso Rivals Vie for Dominance in Coffee War
PARIS — George Clooney and John Malkovich aren’t the only coffee lovers fighting over a Nespresso these days.
A coffee war has broken out in Europe pitting the Swiss food giant Nestlé against the struggling American food group Sara Lee as well as a former Nestlé executive. They are at odds over the worldwide monopoly Nespresso has long held on the lucrative espresso pods that fit its coffee-making machines.
Helping propel its popularity in Europe is a sleekly wry English-language ad campaign featuring Mr. Clooney and Mr. Malkovich.
With billions at stake, Nespresso has sued its rivals, accusing them of making cheaper copycat pods that violate the intellectual property it created in developing a system to make a convenient homemade cup of espresso that it claims can best a barista.
The first court test could begin next month here, where Nespresso’s competitors recently put their pods on grocery store shelves in hopes of establishing a beachhead to make inroads throughout Europe and into the United States.
“Nestlé has spent millions of dollars on innovation and research in Nespresso over many years,” said Richard Girardot, chief executive of Nestlé Nespresso. “So when someone comes along with a pure copy of the product, we have to protect ourselves.”
But Nespresso’s rivals say that Nestlé is trying to lock them out of one of the fastest-growing segments of the coffee market: pods now account for 20 to 40 percent of the value of ground coffee sales in the $17 billion European coffee market, according to Euromonitor International.
“What they’re doing is similar to Hewlett-Packard or Epson trying to forbid generic cartridges,” said Jean-Paul Gaillard, who ran Nespresso for a decade but who now is being sued by Nestlé for devising a biodegradable version of its capsule. “They are trying to stop copies — but our product is not a copy,” he said.
Competitors have emerged to other single-serve coffee products, but Nestlé is the first to take legal action to try to ward generics away from the gold mine of coffee by the pod.
“The real margins now are in capsulized coffee,” Mr. Gaillard said, “where you basically sell five grams of coffee for five times the price of what you’d get from regular roasted ground.”
Sales have leapt 30 percent a year, on average, over the last decade, ever since Nespresso underwent an aggressive makeover that transformed it from a humdrum office coffee product to a must-have item among chic urbanites. Through star-studded advertising in Europe and Asia and a growing network of clubby boutiques now numbering 200, it lures upscale customers, whether in New York, Paris or Shanghai.
Since 2000, when Nespresso started to break even, the company has sold more than 20 billion capsules through its boutiques and Web site at about 43 to 62 cents apiece. The price of its machines start around $190 and soar beyond $2,500.
Given similar projections for future growth, others started trying to angle in. Nestlé has not made that easy: it owns the patents — 1,700 of them — on its personal espresso system, which Mr. Malkovich, playing God in Nespresso’s most recent European ads, trades for Mr. Clooney’s soul.
Many of the patents are set to expire in 2012, and Nestlé has been working on other ways to prevent competitors from hacking a system that uses unique water dynamics to pump an espresso kissed with foam out of a hermetically sealed aluminum capsule.
Sara Lee, which has been trying since 2005 to engineer a recovery, recently broke through. In mid-July, it put its own plastic perforated version of the capsule, the L’Or, in French supermarkets, at a price of 37 cents. So far, it has sold 30 million capsules, a spokesman said.
“Coffee is Sara Lee’s No. 1 business; it accounts for well over 50 percent of their earnings,” said Tim Ramey, an analyst at D. A. Davidson & Company in Portland, Ore. “The single-serve coffee business is the piece that’s growing fast, so it’s important for them.”
Sara Lee has its own low-cost version of a personal espresso machine, the Senseo, whose pods alone had sales of $555 million in the fiscal year that ended June 30. Senseo is a top seller in the American market and a rival to other single-serve coffees in the United States, like Green Mountain.
About 27 million Senseo machines were sold in the last decade, compared to about eight million Nespresso machines. But the real gold mine is in pods.
A coffee war has broken out in Europe pitting the Swiss food giant Nestlé against the struggling American food group Sara Lee as well as a former Nestlé executive. They are at odds over the worldwide monopoly Nespresso has long held on the lucrative espresso pods that fit its coffee-making machines.
Helping propel its popularity in Europe is a sleekly wry English-language ad campaign featuring Mr. Clooney and Mr. Malkovich.
With billions at stake, Nespresso has sued its rivals, accusing them of making cheaper copycat pods that violate the intellectual property it created in developing a system to make a convenient homemade cup of espresso that it claims can best a barista.
The first court test could begin next month here, where Nespresso’s competitors recently put their pods on grocery store shelves in hopes of establishing a beachhead to make inroads throughout Europe and into the United States.
“Nestlé has spent millions of dollars on innovation and research in Nespresso over many years,” said Richard Girardot, chief executive of Nestlé Nespresso. “So when someone comes along with a pure copy of the product, we have to protect ourselves.”
But Nespresso’s rivals say that Nestlé is trying to lock them out of one of the fastest-growing segments of the coffee market: pods now account for 20 to 40 percent of the value of ground coffee sales in the $17 billion European coffee market, according to Euromonitor International.
“What they’re doing is similar to Hewlett-Packard or Epson trying to forbid generic cartridges,” said Jean-Paul Gaillard, who ran Nespresso for a decade but who now is being sued by Nestlé for devising a biodegradable version of its capsule. “They are trying to stop copies — but our product is not a copy,” he said.
Competitors have emerged to other single-serve coffee products, but Nestlé is the first to take legal action to try to ward generics away from the gold mine of coffee by the pod.
“The real margins now are in capsulized coffee,” Mr. Gaillard said, “where you basically sell five grams of coffee for five times the price of what you’d get from regular roasted ground.”
Sales have leapt 30 percent a year, on average, over the last decade, ever since Nespresso underwent an aggressive makeover that transformed it from a humdrum office coffee product to a must-have item among chic urbanites. Through star-studded advertising in Europe and Asia and a growing network of clubby boutiques now numbering 200, it lures upscale customers, whether in New York, Paris or Shanghai.
Since 2000, when Nespresso started to break even, the company has sold more than 20 billion capsules through its boutiques and Web site at about 43 to 62 cents apiece. The price of its machines start around $190 and soar beyond $2,500.
Given similar projections for future growth, others started trying to angle in. Nestlé has not made that easy: it owns the patents — 1,700 of them — on its personal espresso system, which Mr. Malkovich, playing God in Nespresso’s most recent European ads, trades for Mr. Clooney’s soul.
Many of the patents are set to expire in 2012, and Nestlé has been working on other ways to prevent competitors from hacking a system that uses unique water dynamics to pump an espresso kissed with foam out of a hermetically sealed aluminum capsule.
Sara Lee, which has been trying since 2005 to engineer a recovery, recently broke through. In mid-July, it put its own plastic perforated version of the capsule, the L’Or, in French supermarkets, at a price of 37 cents. So far, it has sold 30 million capsules, a spokesman said.
“Coffee is Sara Lee’s No. 1 business; it accounts for well over 50 percent of their earnings,” said Tim Ramey, an analyst at D. A. Davidson & Company in Portland, Ore. “The single-serve coffee business is the piece that’s growing fast, so it’s important for them.”
Sara Lee has its own low-cost version of a personal espresso machine, the Senseo, whose pods alone had sales of $555 million in the fiscal year that ended June 30. Senseo is a top seller in the American market and a rival to other single-serve coffees in the United States, like Green Mountain.
About 27 million Senseo machines were sold in the last decade, compared to about eight million Nespresso machines. But the real gold mine is in pods.
Asian Stocks Gain as Earnings Offset Global Growth Concerns
Aug. 21 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to its sixth advance in seven weeks, as better-than-estimated earnings from Cnooc Ltd. to Westfield Group offset concerns the global recovery is faltering.
Cnooc Ltd., China’s biggest offshore oil producer, advanced 3.4 percent this week in Hong Kong. Westfield, the world’s largest owner of shopping malls, rose 1.1 percent in Sydney. Tokyo Electron Ltd., the world’s second-biggest producer of chipmaking equipment, climbed 2.7 percent in Tokyo after larger rival Applied Materials Inc. forecast higher-than-estimated profit.
“I’m telling people not to be too pessimistic,” said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which oversees about $73 billion in Tokyo. “The market in the second half of this year will reflect positive earnings more explicitly than the latest earnings season.”
The MSCI Asia Pacific Index gained 0.4 percent this week to 118.29, following last week’s 3.7 percent retreat. The index has slumped about 8.4 percent from its high this year on April 15 as Europe’s debt crisis, China’s measures to curb property-price inflation and disappointing economic reports in the U.S. fueled concern global growth may stall.
China’s Shanghai Composite Index advanced 1.4 percent this week as the nation’s economy surpassed Japan as the world’s second largest last quarter. Japan’s Nikkei 225 Stock Average fell 0.8 percent.
Australia’s S&P/ASX 200 Index fell 0.6 percent. Hong Kong’s Hang Seng Index dropped 0.4 percent. South Korea’s Kospi Index advanced 1.7 percent as sales at the nation’s major department stores increased in July for a 17th month amid an economic recovery.
Energy Stocks Rally
Profits for companies in the MSCI Asia Pacific are forecast to rise 26 percent in the next 12 months. That compares with 27 percent growth for the MSCI World Index of stocks in 24 developed nations, according to data compiled by Bloomberg.
Energy-related stocks posted the biggest gain among 10 industry group on the MSCI Pacific Index this week.
Cnooc increased 3.4 percent to HK$13.26 as the oil explorer’s first-half profit more than doubled, beating estimates as a rebound in the nation’s economic growth spurred demand and helped drive a rally in crude prices. Woodside Petroleum Ltd., Australia’s second-largest oil producer, advanced 4.1 percent to A$43.22 in Sydney.
China Shenhua Energy Co., a unit of the nation’s biggest coal company, increased 5.9 percent to HK$29.70 as the company said it plans to buy assets from its parent. It did not elaborate.
Westfield Gains
In Australia, Westfield Group gained 1.1 percent to A$12.45. The company said Aug. 18 net income climbed to A$960.9 million ($855 million) in the first half, compared to a loss of A$708 million a year ago. Earnings excluding property revaluations and costs were A$1.03 billion, beating a forecast of A$1.01 billion, according to the median of five analyst estimates compiled by Bloomberg.
Brambles Ltd. surged 8 percent to A$5.65 after the world’s biggest supplier of wooden pallets posted earnings that beat estimates and said operating profit may rise this year as markets grow in China and India.
The MSCI Asia Pacific Index yesterday declined for the first time in five days after U.S. jobless claims unexpectedly increased and an index of manufacturing in the Philadelphia area slumped. Companies in the gauge trade at 13.7 times estimated earnings, compared with about 20.3 times at the beginning of the year.
Jobless Claims
The U.S. Labor Department reported initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14. Economists surveyed by Bloomberg News had a median forecast of 478,000. The Federal Reserve Bank of Philadelphia’s general economic index fell this month to the lowest reading since July 2009.
“The U.S. economic recovery is slowing,” said Kazuhiro Takahashi, a general manager at Tokyo-based Daiwa Securities Capital Markets Co. “The economy has come to a tipping point -- it will level off or decline.”
Tokyo Electron increased 2.7 percent to 4,370 yen in Tokyo. Hynix Semiconductor Inc., the world’s second-largest computer- memory chipmaker, advanced 1.6 percent to 22,000 won in Seoul.
U.S.-based Applied Materials, Tokyo Electron’s larger rival, forecast on Aug. 18 quarterly profit that exceeded analysts’ estimates as semiconductor manufacturers order equipment to boost their output amid rising demand.
PICC Property and Casualty Co. surged 17 percent to HK$9.43, the second-biggest advance on the MSCI Asia Pacific Index. China’s biggest non-life insurer said first-half profit climbed to 2.65 billion yuan from 80 million yuan a year ago.
Genting Bhd., Asia’s second-biggest listed casino operator, rose 5.3 percent to 8.61 ringgit in Kuala Lumpur as its Singapore unit rallied to a record high and Citigroup Inc. and UOB-Kay Hian Holdings raised their ratings. Genting Singapore Plc, operator of one of two casinos in the city-state, has surged 2.7 percent since saying on Aug. 12 that it has returned to profit in the second quarter.
Cnooc Ltd., China’s biggest offshore oil producer, advanced 3.4 percent this week in Hong Kong. Westfield, the world’s largest owner of shopping malls, rose 1.1 percent in Sydney. Tokyo Electron Ltd., the world’s second-biggest producer of chipmaking equipment, climbed 2.7 percent in Tokyo after larger rival Applied Materials Inc. forecast higher-than-estimated profit.
“I’m telling people not to be too pessimistic,” said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which oversees about $73 billion in Tokyo. “The market in the second half of this year will reflect positive earnings more explicitly than the latest earnings season.”
The MSCI Asia Pacific Index gained 0.4 percent this week to 118.29, following last week’s 3.7 percent retreat. The index has slumped about 8.4 percent from its high this year on April 15 as Europe’s debt crisis, China’s measures to curb property-price inflation and disappointing economic reports in the U.S. fueled concern global growth may stall.
China’s Shanghai Composite Index advanced 1.4 percent this week as the nation’s economy surpassed Japan as the world’s second largest last quarter. Japan’s Nikkei 225 Stock Average fell 0.8 percent.
Australia’s S&P/ASX 200 Index fell 0.6 percent. Hong Kong’s Hang Seng Index dropped 0.4 percent. South Korea’s Kospi Index advanced 1.7 percent as sales at the nation’s major department stores increased in July for a 17th month amid an economic recovery.
Energy Stocks Rally
Profits for companies in the MSCI Asia Pacific are forecast to rise 26 percent in the next 12 months. That compares with 27 percent growth for the MSCI World Index of stocks in 24 developed nations, according to data compiled by Bloomberg.
Energy-related stocks posted the biggest gain among 10 industry group on the MSCI Pacific Index this week.
Cnooc increased 3.4 percent to HK$13.26 as the oil explorer’s first-half profit more than doubled, beating estimates as a rebound in the nation’s economic growth spurred demand and helped drive a rally in crude prices. Woodside Petroleum Ltd., Australia’s second-largest oil producer, advanced 4.1 percent to A$43.22 in Sydney.
China Shenhua Energy Co., a unit of the nation’s biggest coal company, increased 5.9 percent to HK$29.70 as the company said it plans to buy assets from its parent. It did not elaborate.
Westfield Gains
In Australia, Westfield Group gained 1.1 percent to A$12.45. The company said Aug. 18 net income climbed to A$960.9 million ($855 million) in the first half, compared to a loss of A$708 million a year ago. Earnings excluding property revaluations and costs were A$1.03 billion, beating a forecast of A$1.01 billion, according to the median of five analyst estimates compiled by Bloomberg.
Brambles Ltd. surged 8 percent to A$5.65 after the world’s biggest supplier of wooden pallets posted earnings that beat estimates and said operating profit may rise this year as markets grow in China and India.
The MSCI Asia Pacific Index yesterday declined for the first time in five days after U.S. jobless claims unexpectedly increased and an index of manufacturing in the Philadelphia area slumped. Companies in the gauge trade at 13.7 times estimated earnings, compared with about 20.3 times at the beginning of the year.
Jobless Claims
The U.S. Labor Department reported initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14. Economists surveyed by Bloomberg News had a median forecast of 478,000. The Federal Reserve Bank of Philadelphia’s general economic index fell this month to the lowest reading since July 2009.
“The U.S. economic recovery is slowing,” said Kazuhiro Takahashi, a general manager at Tokyo-based Daiwa Securities Capital Markets Co. “The economy has come to a tipping point -- it will level off or decline.”
Tokyo Electron increased 2.7 percent to 4,370 yen in Tokyo. Hynix Semiconductor Inc., the world’s second-largest computer- memory chipmaker, advanced 1.6 percent to 22,000 won in Seoul.
U.S.-based Applied Materials, Tokyo Electron’s larger rival, forecast on Aug. 18 quarterly profit that exceeded analysts’ estimates as semiconductor manufacturers order equipment to boost their output amid rising demand.
PICC Property and Casualty Co. surged 17 percent to HK$9.43, the second-biggest advance on the MSCI Asia Pacific Index. China’s biggest non-life insurer said first-half profit climbed to 2.65 billion yuan from 80 million yuan a year ago.
Genting Bhd., Asia’s second-biggest listed casino operator, rose 5.3 percent to 8.61 ringgit in Kuala Lumpur as its Singapore unit rallied to a record high and Citigroup Inc. and UOB-Kay Hian Holdings raised their ratings. Genting Singapore Plc, operator of one of two casinos in the city-state, has surged 2.7 percent since saying on Aug. 12 that it has returned to profit in the second quarter.
Obama accused of muting Bhopal disaster
US president Barack Obama faced angry accusations on Thursday that his government was putting pressure on India to bury the highly emotive 1984 Bhopal disaster only weeks before he is to visit New Delhi.
An exchange of e-mails between two US and Indian officials, obtained by the Indian press, suggested Washington was uncomfortable with the renewed attention being given to one of the world’s worst industrial accidents at a pesticide plant owned by Union Carbide, a US chemicals company, in the state of Madhya Pradesh.
An Indian court recently found local managers of Union Carbide’s Indian subsidiary guilty of criminal negligence 26 years after the gas leak that killed more than 8,000 people.
The e-mails were interpreted in India as the US linking its future investment in the country while muting the outcry surrounding the still open wounds suffered in the Bhopal disaster.
Renewed publicity around Bhopal has triggered calls for the extradition of Warren Anderson, the elderly former chairman of Union Carbide, and for greater compensation from Dow Chemicals, the US multinational that now owns Union Carbide.
A ministerial panel has also recommended pursuit of Dow Chemicals for redress.
Activists in Bhopal have drawn comparisons between the 1984 accident and the recent BP oil spill in the Gulf of Mexico. They accuse the US of double standards when it comes to US companies poisoning communities and the environment in the developing world.
An e-mail from Michael Froman, US deputy national security adviser, to Montek Singh Ahluwalia, deputy chairman of India’s power planning commission, had warned of “developments” that threatened to have a “chilling effect on our investment relationship”.
Mr Froman had raised his concerns about the spotlight on Dow Chemicals when responding to Mr Ahluwalia’s request for US support in getting World Bank loans.
In a statement released on Thursday night, Mr Froman insisted that the US did not “seek to interfere” with resolution of the Bhopal disaster, and that he had not linked future investment with the Bhopal controversy.
“With regard to recent reports about my private correspondence with Mr Ahluwalia, I want to make clear that I was not making any link between what are two separate and distinct issues nor issuing a ‘threat’ of any sort.”
An exchange of e-mails between two US and Indian officials, obtained by the Indian press, suggested Washington was uncomfortable with the renewed attention being given to one of the world’s worst industrial accidents at a pesticide plant owned by Union Carbide, a US chemicals company, in the state of Madhya Pradesh.
An Indian court recently found local managers of Union Carbide’s Indian subsidiary guilty of criminal negligence 26 years after the gas leak that killed more than 8,000 people.
The e-mails were interpreted in India as the US linking its future investment in the country while muting the outcry surrounding the still open wounds suffered in the Bhopal disaster.
Renewed publicity around Bhopal has triggered calls for the extradition of Warren Anderson, the elderly former chairman of Union Carbide, and for greater compensation from Dow Chemicals, the US multinational that now owns Union Carbide.
A ministerial panel has also recommended pursuit of Dow Chemicals for redress.
Activists in Bhopal have drawn comparisons between the 1984 accident and the recent BP oil spill in the Gulf of Mexico. They accuse the US of double standards when it comes to US companies poisoning communities and the environment in the developing world.
An e-mail from Michael Froman, US deputy national security adviser, to Montek Singh Ahluwalia, deputy chairman of India’s power planning commission, had warned of “developments” that threatened to have a “chilling effect on our investment relationship”.
Mr Froman had raised his concerns about the spotlight on Dow Chemicals when responding to Mr Ahluwalia’s request for US support in getting World Bank loans.
In a statement released on Thursday night, Mr Froman insisted that the US did not “seek to interfere” with resolution of the Bhopal disaster, and that he had not linked future investment with the Bhopal controversy.
“With regard to recent reports about my private correspondence with Mr Ahluwalia, I want to make clear that I was not making any link between what are two separate and distinct issues nor issuing a ‘threat’ of any sort.”
Thursday, August 19, 2010
G.M. Chief Sees I.P.O. As Exit Sign
ETROIT — Since he became chief executive of General Motors in December, Edward E. Whitacre Jr. has lived for the day that G.M. would become a public company again and shed the stigma of government ownership.
Enlarge This Image
Jeff Kowalsky/Bloomberg News
Ed Whitacre, chief executive of G.M., thinks a long-term leader should be in place before the carmaker’s stock offering.
Related
*
New G.M. Chief Known as a Pragmatic Leader (August 13, 2010)
*
Profit Strong, G.M. Names a New Chief (August 13, 2010)
*
Times Topic: Edward E. Whitacre Jr.
Now that G.M. has finally filed for its initial public offering, Mr. Whitacre is hoping consumers will quickly forgive and forget its $50 billion bailout by American taxpayers.
“It’s getting better, but there’s still a substantial number that’s unhappy with the government bailing us out,” Mr. Whitacre said in an interview on Thursday. “This helps, but it still has a ways to go.”
Mr. Whitacre, somewhat reluctantly, will not be around to enjoy G.M.’s metamorphosis from a government-owned entity to a public company.
He will step down as chief executive on Sept. 1 and as chairman at year’s end, turning both jobs over to Daniel F. Akerson, a former telecommunications executive who was one of several new G.M. directors picked last year by the Obama administration to oversee the automaker’s revival.
Mr. Whitacre, the 68-year-old retired head of AT&T, said he was leaving because prospective investors needed to know that G.M. had a long-term leader in place beyond the stock offering.
“I’m sad about it,” he said. “But if I stay through the I.P.O., I think I’d be obligated to stay a long time beyond that. And that’s not what I came here for.”
Mr. Whitacre said the exact timing and size of G.M.’s stock offering had yet to be decided. But he expects strong interest in G.M.’s plan to sell preferred shares as well as its creation of a market for its common-stock shareholders — including the Treasury Department — to sell off their holdings.
“I would think so, because this company is going to make a lot of money,” he said.
Last week, G.M. announced a second-quarter profit of $1.3 billion, its strongest quarterly performance in six years. Analysts credit much of its turnaround to the forceful leadership of Mr. Whitacre, who stripped down G.M.’s organizational chart, replaced dozens of executives and tried to instill confidence in employees that they were working for a winner in the marketplace again.
“Whitacre brought stability to G.M. and a sense of confidence that it badly needed, after going through bankruptcy,” said David Cole, head of the Center for Automotive Research in Ann Arbor, Mich.
Mr. Akerson, a 61-year-old partner in the Carlyle Group investment firm, has a tall task filling the big — size 14 — shoes of Mr. Whitacre.
G.M. has yet to make Mr. Akerson available for interviews, partly out of deference to Mr. Whitacre during his last weeks on the job. In turn, Mr. Whitacre has been circumspect about setting an agenda for his successor.
The two executives were working together on Thursday at G.M.’s headquarters in downtown Detroit, and Mr. Akerson is beginning to meet with crucial members of the automaker’s revamped management team.
“He’s obviously been successful and he’s run a number of companies, so this is a good choice,” Mr. Whitacre said of Mr. Akerson. “It’s just logical. He’s been involved in this pretty deeply on the board.”
G.M.’s vehicle sales in the United States have increased 13 percent so far this year, slightly trailing an overall increase in the market, which is about 15 percent through July. Mr. Whitacre left little doubt that he expected Mr. Akerson to continue emphasizing better sales and marketing as G.M.’s top priority.
“The thing this company has to do is keep selling its vehicles,” Mr. Whitacre said. “That’s his No. 1 challenge, is to stay focused on that.”
That effort should gain immediate momentum, he said, once the government begins selling off its 61 percent ownership stake in the company.
“It’s been our top objective to pay the taxpayer back and have the government not be involved in any way, shape or form with this company,” he said. “We’ve improved our reputation quite a bit, but we still have a long way to go.”
Mr. Whitacre has often said he joined G.M. as a public service, first as a board chairman handpicked by the Obama administration and then as chief executive. As he enters the final stretch of his commitment, he said he would most miss the passion of G.M.’s employees to restore the battered automotive icon to its former status as an industry leader.
He said G.M. had a “strong chance” of one day reclaiming from Toyota its title as the world’s largest carmaker and expressed regret that he would not be in Detroit to see it happen.
Enlarge This Image
Jeff Kowalsky/Bloomberg News
Ed Whitacre, chief executive of G.M., thinks a long-term leader should be in place before the carmaker’s stock offering.
Related
*
New G.M. Chief Known as a Pragmatic Leader (August 13, 2010)
*
Profit Strong, G.M. Names a New Chief (August 13, 2010)
*
Times Topic: Edward E. Whitacre Jr.
Now that G.M. has finally filed for its initial public offering, Mr. Whitacre is hoping consumers will quickly forgive and forget its $50 billion bailout by American taxpayers.
“It’s getting better, but there’s still a substantial number that’s unhappy with the government bailing us out,” Mr. Whitacre said in an interview on Thursday. “This helps, but it still has a ways to go.”
Mr. Whitacre, somewhat reluctantly, will not be around to enjoy G.M.’s metamorphosis from a government-owned entity to a public company.
He will step down as chief executive on Sept. 1 and as chairman at year’s end, turning both jobs over to Daniel F. Akerson, a former telecommunications executive who was one of several new G.M. directors picked last year by the Obama administration to oversee the automaker’s revival.
Mr. Whitacre, the 68-year-old retired head of AT&T, said he was leaving because prospective investors needed to know that G.M. had a long-term leader in place beyond the stock offering.
“I’m sad about it,” he said. “But if I stay through the I.P.O., I think I’d be obligated to stay a long time beyond that. And that’s not what I came here for.”
Mr. Whitacre said the exact timing and size of G.M.’s stock offering had yet to be decided. But he expects strong interest in G.M.’s plan to sell preferred shares as well as its creation of a market for its common-stock shareholders — including the Treasury Department — to sell off their holdings.
“I would think so, because this company is going to make a lot of money,” he said.
Last week, G.M. announced a second-quarter profit of $1.3 billion, its strongest quarterly performance in six years. Analysts credit much of its turnaround to the forceful leadership of Mr. Whitacre, who stripped down G.M.’s organizational chart, replaced dozens of executives and tried to instill confidence in employees that they were working for a winner in the marketplace again.
“Whitacre brought stability to G.M. and a sense of confidence that it badly needed, after going through bankruptcy,” said David Cole, head of the Center for Automotive Research in Ann Arbor, Mich.
Mr. Akerson, a 61-year-old partner in the Carlyle Group investment firm, has a tall task filling the big — size 14 — shoes of Mr. Whitacre.
G.M. has yet to make Mr. Akerson available for interviews, partly out of deference to Mr. Whitacre during his last weeks on the job. In turn, Mr. Whitacre has been circumspect about setting an agenda for his successor.
The two executives were working together on Thursday at G.M.’s headquarters in downtown Detroit, and Mr. Akerson is beginning to meet with crucial members of the automaker’s revamped management team.
“He’s obviously been successful and he’s run a number of companies, so this is a good choice,” Mr. Whitacre said of Mr. Akerson. “It’s just logical. He’s been involved in this pretty deeply on the board.”
G.M.’s vehicle sales in the United States have increased 13 percent so far this year, slightly trailing an overall increase in the market, which is about 15 percent through July. Mr. Whitacre left little doubt that he expected Mr. Akerson to continue emphasizing better sales and marketing as G.M.’s top priority.
“The thing this company has to do is keep selling its vehicles,” Mr. Whitacre said. “That’s his No. 1 challenge, is to stay focused on that.”
That effort should gain immediate momentum, he said, once the government begins selling off its 61 percent ownership stake in the company.
“It’s been our top objective to pay the taxpayer back and have the government not be involved in any way, shape or form with this company,” he said. “We’ve improved our reputation quite a bit, but we still have a long way to go.”
Mr. Whitacre has often said he joined G.M. as a public service, first as a board chairman handpicked by the Obama administration and then as chief executive. As he enters the final stretch of his commitment, he said he would most miss the passion of G.M.’s employees to restore the battered automotive icon to its former status as an industry leader.
He said G.M. had a “strong chance” of one day reclaiming from Toyota its title as the world’s largest carmaker and expressed regret that he would not be in Detroit to see it happen.
SEBI rejects RIL's plea to settle insider charges
MUMBAI: The capital market regulator has rejected a second attempt by India’s largest private sector firm, Reliance Industries (RIL), to settle charges of insider trading out of court.
The Securities and Exchange Board of India, or Sebi, will instead continue its investigation into trades carried out by entities allegedly linked to RIL, in November 2007, said a senior official. It’s not clear when the so-called consent application, akin to a negotiated settlement, was rejected, but it is believed to be fairly recent.
The regulator is probing the sale of stock futures of Reliance Petroleum (RPL), in the first week of November 2007, a few days before parent RIL, India’s most valuable company by market capitalisation, started trimming its stake in its refining arm. The sellers were not well-known market players, but they were allegedly located at the address of some RIL group companies, according to information provided to Sebi by unknown complainants.
The regulator has not issued a final order on the veracity of these complaints. It will now pass a final order after hearing RIL. Sebi’s orders can be challenged before the Securities Appellate Tribunal, or SAT.
After Sebi set in motion quasi-judicial proceedings against RIL, the company sought a consent order or a negotiated settlement between the regulator and a capital market entity. The firm or person facing a probe can submit an application for such an order, without admission of guilt and without denial of liability. This practice is common in advanced markets like the US.
RIL’s external spokesman said it would not be able to comment for the story.
The first such attempt was rejected last year and the second application for a consent order has also been rejected, according to a senior official in the regulator’s office.
In the first consent offer, RIL offered to pay a penalty of Rs 2 crore, according to a person close to the company. Details of the terms of the second application, which has also been rebuffed by the regulator, are not in the public domain.
Sebi’s notice to RIL says the company has to provide reasons as to why action should not be taken against it. If Sebi is able to conclude that the charges are true, it has the powers to impose a ban on the company from accessing the securities market and also to prohibit it from buying, selling and dealing in securities directly or indirectly or to force the company to disgorge the proceeds earned by indulging in the transactions.
The entire mechanism of consent is a discretionary exercise on the part of the regulator, whether a case is to be settled or not. The regulator’s internal guidelines clearly make a distinction between grave offences such as violations affecting the integrity of the market and technical violations.
Somasekhar Sundaresan, partner of law firm J Sagar Associates, said consent orders were an important feature of any mature market. “It is important not to waste taxpayers’ funds on regulatory litigation as far as possible. If one can inflict serious commercial injury keeping the regulatory track record intact, one should always opt for that,” he said.
The Securities and Exchange Board of India, or Sebi, will instead continue its investigation into trades carried out by entities allegedly linked to RIL, in November 2007, said a senior official. It’s not clear when the so-called consent application, akin to a negotiated settlement, was rejected, but it is believed to be fairly recent.
The regulator is probing the sale of stock futures of Reliance Petroleum (RPL), in the first week of November 2007, a few days before parent RIL, India’s most valuable company by market capitalisation, started trimming its stake in its refining arm. The sellers were not well-known market players, but they were allegedly located at the address of some RIL group companies, according to information provided to Sebi by unknown complainants.
The regulator has not issued a final order on the veracity of these complaints. It will now pass a final order after hearing RIL. Sebi’s orders can be challenged before the Securities Appellate Tribunal, or SAT.
After Sebi set in motion quasi-judicial proceedings against RIL, the company sought a consent order or a negotiated settlement between the regulator and a capital market entity. The firm or person facing a probe can submit an application for such an order, without admission of guilt and without denial of liability. This practice is common in advanced markets like the US.
RIL’s external spokesman said it would not be able to comment for the story.
The first such attempt was rejected last year and the second application for a consent order has also been rejected, according to a senior official in the regulator’s office.
In the first consent offer, RIL offered to pay a penalty of Rs 2 crore, according to a person close to the company. Details of the terms of the second application, which has also been rebuffed by the regulator, are not in the public domain.
Sebi’s notice to RIL says the company has to provide reasons as to why action should not be taken against it. If Sebi is able to conclude that the charges are true, it has the powers to impose a ban on the company from accessing the securities market and also to prohibit it from buying, selling and dealing in securities directly or indirectly or to force the company to disgorge the proceeds earned by indulging in the transactions.
The entire mechanism of consent is a discretionary exercise on the part of the regulator, whether a case is to be settled or not. The regulator’s internal guidelines clearly make a distinction between grave offences such as violations affecting the integrity of the market and technical violations.
Somasekhar Sundaresan, partner of law firm J Sagar Associates, said consent orders were an important feature of any mature market. “It is important not to waste taxpayers’ funds on regulatory litigation as far as possible. If one can inflict serious commercial injury keeping the regulatory track record intact, one should always opt for that,” he said.
Asia boosted by Mumbai 30-month high
A fresh 30-month high for Mumbai stocks and Shanghai shares hitting a three-month peak helped drive Asian markets to their fifth consecutive day of gains.
EDITOR’S CHOICE
Verbal intervention gives yen rocky ride - Aug-12
Money Supply: BoJ governor on the yen - Aug-12
Lex: Yen - Aug-12
Investors sceptical over yen intervention - Aug-11
Yen’s rise spoils party for Japan’s exporters - Aug-09
Insight: Yen has edge over gold - Aug-04
The FTSE Asia-Pacific rose 0.8 per cent on Thursday to 230.63, extending its bounce-back from last week’s worst weekly losses in six.
Even Japanese stocks that remain under heavy pressure from the strong yen made gains – rebounding from the eight-month lows reached this week.
But market commentators expressed wariness about the extent of the gains.
“No bad news is getting to be good news for the market,” said Gajendra Nagpal, chief executive of Unicon Financial. “I would not go ga-ga about this rally. Interest of foreign institutional investors is there but domestic money is eluding us [in India]. It is time to get cautious.”
“The whole world is sort of holding its breath to see what happens, especially in the [US],” said Alex Boggis, of Aberdeen Asset Management.
Financials led the gains for the Shanghai Composite, which rose 0.8 per cent to 2,688.0, as analysts said banking shares were set for further progress due to increasing investor confidence in the sector.
“Banks have had good earnings results recently and China Everbright Bank’s listing [on Wednesday] has given them momentum to rise further,” said Chen Xingyu, of Phillip Securities.
On its second day of trading, Everbright added 1.1 per cent to Rmb3.70 following its robust gains of 18 per cent on debut.
Another boost for banks came after Central Huijin Investment, the state investment company that is the largest shareholder in China’s state-controlled banks, said it would sell up to $5.9bn of bonds.
Industrial & Commercial Bank of China rose 0.7 per cent to Rmb4.18 and China Construction Bank climbed 0.8 per cent to Rmb4.82 – Huijin owns stakes in both banks.
China Shenhua Energy led gains among coal producers on talk that the nation’s biggest producer of the fuel will receive an asset injection by parent company Shenhua Group to become more competitive.
Shenhua Energy climbed 5.4 per cent to Rmb25.71, the highest since May 5.
Shandong Gold Mining added 2.5 per cent to Rmb43.73, its highest since December, as bullion prices rose.
In Mumbai, the BSE Sensex climbed 1.1 per cent to 18,454.94, its highest close since February 2008, supported by the outlook for robust domestic growth.
Financials also led the way with ICICI Bank, the second-largest lender, rising 4.7 per cent to Rs1,013, its highest since March 2008.
Housing Development Finance Corp, the biggest mortgage lender, added 3.8 per cent to Rs645.05, its highest close since at least January 1991.
In Tokyo, the Nikkei 225 Average rose 1.3 per cent to 9,362.68, lifted by bargain-hunting and hopes of renewed stimulus spending by the government.
Mitsubishi Estate, Japan’s biggest property developer by market value, jumped 3.4 per cent to Y1,323 after a report that the country’s home loan agency will extend low mortgage rates.
Elsewhere, the Hang Seng index in Hong Kong edged forward 0.2 per cent to 21,072.46 and the S&P/ASX 200 in Sydney by 0.1 per cent to 4,479.0.
BHP Billiton, the world’s largest miner, slipped 0.3 per cent to A$38.30 after ratings agency Standard and Poor’s said it would downgrade its credit rating if it were to proceed with its $39bn bid for PotashCorp, the Canadian fertiliser group.
EDITOR’S CHOICE
Verbal intervention gives yen rocky ride - Aug-12
Money Supply: BoJ governor on the yen - Aug-12
Lex: Yen - Aug-12
Investors sceptical over yen intervention - Aug-11
Yen’s rise spoils party for Japan’s exporters - Aug-09
Insight: Yen has edge over gold - Aug-04
The FTSE Asia-Pacific rose 0.8 per cent on Thursday to 230.63, extending its bounce-back from last week’s worst weekly losses in six.
Even Japanese stocks that remain under heavy pressure from the strong yen made gains – rebounding from the eight-month lows reached this week.
But market commentators expressed wariness about the extent of the gains.
“No bad news is getting to be good news for the market,” said Gajendra Nagpal, chief executive of Unicon Financial. “I would not go ga-ga about this rally. Interest of foreign institutional investors is there but domestic money is eluding us [in India]. It is time to get cautious.”
“The whole world is sort of holding its breath to see what happens, especially in the [US],” said Alex Boggis, of Aberdeen Asset Management.
Financials led the gains for the Shanghai Composite, which rose 0.8 per cent to 2,688.0, as analysts said banking shares were set for further progress due to increasing investor confidence in the sector.
“Banks have had good earnings results recently and China Everbright Bank’s listing [on Wednesday] has given them momentum to rise further,” said Chen Xingyu, of Phillip Securities.
On its second day of trading, Everbright added 1.1 per cent to Rmb3.70 following its robust gains of 18 per cent on debut.
Another boost for banks came after Central Huijin Investment, the state investment company that is the largest shareholder in China’s state-controlled banks, said it would sell up to $5.9bn of bonds.
Industrial & Commercial Bank of China rose 0.7 per cent to Rmb4.18 and China Construction Bank climbed 0.8 per cent to Rmb4.82 – Huijin owns stakes in both banks.
China Shenhua Energy led gains among coal producers on talk that the nation’s biggest producer of the fuel will receive an asset injection by parent company Shenhua Group to become more competitive.
Shenhua Energy climbed 5.4 per cent to Rmb25.71, the highest since May 5.
Shandong Gold Mining added 2.5 per cent to Rmb43.73, its highest since December, as bullion prices rose.
In Mumbai, the BSE Sensex climbed 1.1 per cent to 18,454.94, its highest close since February 2008, supported by the outlook for robust domestic growth.
Financials also led the way with ICICI Bank, the second-largest lender, rising 4.7 per cent to Rs1,013, its highest since March 2008.
Housing Development Finance Corp, the biggest mortgage lender, added 3.8 per cent to Rs645.05, its highest close since at least January 1991.
In Tokyo, the Nikkei 225 Average rose 1.3 per cent to 9,362.68, lifted by bargain-hunting and hopes of renewed stimulus spending by the government.
Mitsubishi Estate, Japan’s biggest property developer by market value, jumped 3.4 per cent to Y1,323 after a report that the country’s home loan agency will extend low mortgage rates.
Elsewhere, the Hang Seng index in Hong Kong edged forward 0.2 per cent to 21,072.46 and the S&P/ASX 200 in Sydney by 0.1 per cent to 4,479.0.
BHP Billiton, the world’s largest miner, slipped 0.3 per cent to A$38.30 after ratings agency Standard and Poor’s said it would downgrade its credit rating if it were to proceed with its $39bn bid for PotashCorp, the Canadian fertiliser group.
Wednesday, August 18, 2010
General Motors Files for an Initial Public Offering
DETROIT — General Motors filed Wednesday for a landmark public stock offering that would let the federal government begin selling off its stake in the automaker as well as raise money for G.M.’s turnaround.
G.M. said that it would offer both common stock and preferred stock in the offering, which could begin as early as October, when the Obama administration will be seeking to portray its aid to the auto industry as a success before midterm elections in November.
The common shares will be sold by G.M.’s current shareholders, the largest of which is the federal government. It exchanged about $43 billion in aid to G.M. for a 61 percent interest in the automaker.
G.M. will also offer preferred shares, which have a fixed return similar to a dividend, to institutional investors. Proceeds from the preferred shares will be used to finance operations and improve G.M.’s balance sheet.
The automaker will not sell any common shares directly, and therefore will not generate any money from them.
G.M. did not set a price range for its shares, which will trade on the New York Stock Exchange and the Toronto Stock Exchange. For the government to fully recover its investment in G.M., the Treasury Department would have to sell its 304 million shares at an average price of about $141 each.
The Treasury is expected to sell enough stock in the initial offering to bring its overall ownership position in G.M. below 50 percent — freeing the automaker of the stigma of being called “Government Motors,” which executives have said is hurting its reputation in the marketplace. G.M.’s 734-page filing said taxpayers would “continue to own a substantial interest in us following this offering.”
The Treasury, in a statement on Wednesday, said it would “retain the right, at all times, to decide whether and at what level to participate in the offering.” The statement said the offering would not include the government’s preferred G.M. shares, worth $2.1 billion.
The stock offering has been a top priority both for G.M.’s management and the Obama administration, which orchestrated the automaker’s bankruptcy last year.
“There’s always a trade-off between getting out quickly and getting out at the highest possible price,” said Steven L. Rattner, the former head of President Obama’s auto task force. “The priority for the government is getting out quickly.”
Taxpayers have poured about $50 billion into G.M. since late 2008, when the struggling automaker was careening toward insolvency. The company has already repaid about $6.7 billion in loans, but most of the rest was converted into equity and can be repaid only by selling those shares.
G.M. did not specify how many of its 500 million outstanding shares would go on the market at first, saying that would depend on market conditions and other factors.
A little more than a year since its bankruptcy, G.M. has managed to earn $2.2 billion in the first half of 2010. In the four and a half years leading up to the Chapter 11 filing, it lost a total of $88 billion.
“A successful I.P.O. will be even more evidence that the steps the government took in 2008 and 2009 were good for workers, good for Michigan and good for the nation,” Senator Carl Levin, Democrat of Michigan, said in a statement. “I’m optimistic this success story is going to keep getting better.”
The offering has the potential to be the second-largest in United States history, after that of the credit card giant Visa, which raised more than $19 billion in March 2008.
The lead underwriters are Morgan Stanley, JPMorgan Chase, Bank of America and Citigroup. They are expected to earn a total of $120 million on the deal, about one-quarter what such an offering might normally generate, because another bank, Goldman Sachs, offered to take a cut-rate fee and the Treasury imposed those terms on the banks it selected to play top roles.
Though the starting price for G.M.’s stock is unknown, more successful introductions of new vehicles should generate continued profits and increasing share values throughout 2011, said James Bell, executive market analyst with the automotive information firm Kelley Blue Book. Mr. Bell said the government did not need to rush the sale of its full stake in the company.
“I don’t think the general consumer cares how much stake the government still has in G.M., as long as consumers see positive progress in the company,” Mr. Bell said.
Some analysts say they believe G.M. may be moving too quickly to go public amid continued economic volatility.
“I don’t think the financial markets are even near the ideal set of conditions for an I.P.O. of this magnitude,” said Jesse Toprak, vice president for industry trends at TrueCar.com, which tracks industry sales and pricing. “By waiting for the financial markets to stabilize, they would have the potential to earn more.”
G.M.’s filing listed 31 “risk factors” that it faces, including economic conditions, its ability to attract consumers into its dealerships and its money-losing European operations. It also notes that several top officials, including the incoming chief executive, Daniel F. Akerson, “have no outside automotive industry experience” and that G.M.’s performance could be affected if they “are unable to provide effective guidance and leadership.”
Last week, Edward E. Whitacre Jr. revealed plans to step down as chief executive on Sept. 1 and as chairman by year’s end. He will be succeeded in both roles by Mr. Akerson, a G.M. director appointed by the Treasury last year after the carmaker emerged from bankruptcy.
Mr. Akerson, a former telecommunications executive currently with a private equity firm, the Carlyle Group, will be G.M.’s fourth chief executive since March 2009.
Though Mr. Whitacre was not expected to stay on for much longer, his departure had not been expected until after the share sale took place. With the change in leadership, G.M. will be seeking to assure potential investors that Mr. Akerson will provide stability at the top.
“The new G.M. is on the right track,” Mr. Whitacre said last week when he announced his plans to retire.
By eliminating most of its debt in the reorganization, G.M. has been able to generate profits even though sales remain near the lowest levels in decades. It is operating with fewer plants and workers, and its vehicles are commanding higher prices.
G.M. said that it would offer both common stock and preferred stock in the offering, which could begin as early as October, when the Obama administration will be seeking to portray its aid to the auto industry as a success before midterm elections in November.
The common shares will be sold by G.M.’s current shareholders, the largest of which is the federal government. It exchanged about $43 billion in aid to G.M. for a 61 percent interest in the automaker.
G.M. will also offer preferred shares, which have a fixed return similar to a dividend, to institutional investors. Proceeds from the preferred shares will be used to finance operations and improve G.M.’s balance sheet.
The automaker will not sell any common shares directly, and therefore will not generate any money from them.
G.M. did not set a price range for its shares, which will trade on the New York Stock Exchange and the Toronto Stock Exchange. For the government to fully recover its investment in G.M., the Treasury Department would have to sell its 304 million shares at an average price of about $141 each.
The Treasury is expected to sell enough stock in the initial offering to bring its overall ownership position in G.M. below 50 percent — freeing the automaker of the stigma of being called “Government Motors,” which executives have said is hurting its reputation in the marketplace. G.M.’s 734-page filing said taxpayers would “continue to own a substantial interest in us following this offering.”
The Treasury, in a statement on Wednesday, said it would “retain the right, at all times, to decide whether and at what level to participate in the offering.” The statement said the offering would not include the government’s preferred G.M. shares, worth $2.1 billion.
The stock offering has been a top priority both for G.M.’s management and the Obama administration, which orchestrated the automaker’s bankruptcy last year.
“There’s always a trade-off between getting out quickly and getting out at the highest possible price,” said Steven L. Rattner, the former head of President Obama’s auto task force. “The priority for the government is getting out quickly.”
Taxpayers have poured about $50 billion into G.M. since late 2008, when the struggling automaker was careening toward insolvency. The company has already repaid about $6.7 billion in loans, but most of the rest was converted into equity and can be repaid only by selling those shares.
G.M. did not specify how many of its 500 million outstanding shares would go on the market at first, saying that would depend on market conditions and other factors.
A little more than a year since its bankruptcy, G.M. has managed to earn $2.2 billion in the first half of 2010. In the four and a half years leading up to the Chapter 11 filing, it lost a total of $88 billion.
“A successful I.P.O. will be even more evidence that the steps the government took in 2008 and 2009 were good for workers, good for Michigan and good for the nation,” Senator Carl Levin, Democrat of Michigan, said in a statement. “I’m optimistic this success story is going to keep getting better.”
The offering has the potential to be the second-largest in United States history, after that of the credit card giant Visa, which raised more than $19 billion in March 2008.
The lead underwriters are Morgan Stanley, JPMorgan Chase, Bank of America and Citigroup. They are expected to earn a total of $120 million on the deal, about one-quarter what such an offering might normally generate, because another bank, Goldman Sachs, offered to take a cut-rate fee and the Treasury imposed those terms on the banks it selected to play top roles.
Though the starting price for G.M.’s stock is unknown, more successful introductions of new vehicles should generate continued profits and increasing share values throughout 2011, said James Bell, executive market analyst with the automotive information firm Kelley Blue Book. Mr. Bell said the government did not need to rush the sale of its full stake in the company.
“I don’t think the general consumer cares how much stake the government still has in G.M., as long as consumers see positive progress in the company,” Mr. Bell said.
Some analysts say they believe G.M. may be moving too quickly to go public amid continued economic volatility.
“I don’t think the financial markets are even near the ideal set of conditions for an I.P.O. of this magnitude,” said Jesse Toprak, vice president for industry trends at TrueCar.com, which tracks industry sales and pricing. “By waiting for the financial markets to stabilize, they would have the potential to earn more.”
G.M.’s filing listed 31 “risk factors” that it faces, including economic conditions, its ability to attract consumers into its dealerships and its money-losing European operations. It also notes that several top officials, including the incoming chief executive, Daniel F. Akerson, “have no outside automotive industry experience” and that G.M.’s performance could be affected if they “are unable to provide effective guidance and leadership.”
Last week, Edward E. Whitacre Jr. revealed plans to step down as chief executive on Sept. 1 and as chairman by year’s end. He will be succeeded in both roles by Mr. Akerson, a G.M. director appointed by the Treasury last year after the carmaker emerged from bankruptcy.
Mr. Akerson, a former telecommunications executive currently with a private equity firm, the Carlyle Group, will be G.M.’s fourth chief executive since March 2009.
Though Mr. Whitacre was not expected to stay on for much longer, his departure had not been expected until after the share sale took place. With the change in leadership, G.M. will be seeking to assure potential investors that Mr. Akerson will provide stability at the top.
“The new G.M. is on the right track,” Mr. Whitacre said last week when he announced his plans to retire.
By eliminating most of its debt in the reorganization, G.M. has been able to generate profits even though sales remain near the lowest levels in decades. It is operating with fewer plants and workers, and its vehicles are commanding higher prices.
Asian Stocks Rise on Applied Materials Forecast; Euro Declines
Aug. 19 (Bloomberg) -- Asian stocks rose after Applied Materials Inc. forecast higher-than-estimated profit, adding to signs demand is recovering for the region’s chipmakers. The Malaysian ringgit and Taiwan dollar climbed.
The MSCI Asia Pacific Index gained 0.3 percent to 119.38 as of 10:49 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index rose 0.1 percent. Malaysia’s ringgit advanced to the strongest level since October 1997 after the central bank relaxed currency controls and reported better-than-expected economic growth. The euro weakened for a second day on speculation Europe’s rebound is flagging.
Technology stocks accounted for a third of the MSCI Asia- Pacific Index rally as Applied Materials, the world’s largest producer of chipmaking equipment, reported “strong” orders from all of its customers. Japanese shares rose for a second day and government bonds fell on speculation policy makers will introduce measures to stimulate the economy.
“I’m telling people not to be too pessimistic,” said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which oversees about $73 billion in Tokyo. “The market in the second half of this year will reflect positive earnings more explicitly than the latest earnings season.”
A measure of technology shares in the MSCI Asia Pacific increased 0.7 percent, the most among 10 industries in the index. Japan’s Nikkei 225 Stock Average increased 0.7 percent and South Korea’s Kospi index climbed 0.8 percent.
Chip Stocks
Tokyo Electron Ltd., the No. 2 maker of chip making machinery, climbed 4.3 percent. Hynix Semiconductor Inc., the world’s second-largest maker of computer-memory chips, jumped 3 percent in Seoul. Applied Materials said profit in the current period will be 28 cents to 32 cents a share, excluding certain items, compared with an average estimate of 26 cents in a Bloomberg survey.
In Australia, Brambles Ltd., the world’s biggest supplier of wooden pallets, gained 5.7 percent to A$5.60. The company said full-year profit was $448.8 million, exceeding the average forecast of $427 million from four analyst estimates compiled by Bloomberg.
The S&P 500 rose 0.2 percent yesterday, reversing earlier losses as homebuilders rallied after Citigroup Inc. said takeovers in the industry may increase and Target Corp. said third-quarter earnings will match analysts’ estimates.
Mitsubishi Estate Co., Japan’s biggest property developer, jumped 3.8 percent after the Yomiuri newspaper said the housing- loan agency will extend low mortgage rates. Fanuc Ltd., an industrial robot maker that earns almost 80 percent of its revenue abroad, rose 1.6 percent after the Sankei newspaper said the central bank will seek to weaken the yen.
Japan Stimulus
Japan’s 10-year government bonds fell for the first time in seven days. The yield advanced as much as two basis points to 0.92 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The Bank of Japan may increase the amount of a corporate loan program to 30 trillion yen ($351 billion) from 20 trillion yen, Sankei reported today, without saying where it got the information. The duration of the loan may be doubled to six months, the report said.
The cost of protecting Asia-Pacific bonds from non-payment declined, according to traders of credit-default swaps. The Markit iTraxx Japan index dropped 2 basis points to 111 basis points, Morgan Stanley prices show. Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality.
Currencies Rally
Taiwan’s dollar gained 0.3 percent to NT$31.89. Gross domestic product increased 10.2 percent in the second quarter after having expanded 13.3 percent in the first, economists forecast before a government report due today.
The ringgit advanced 0.4 percent to 3.1283 per dollar. Bank Negara Malaysia said late yesterday local companies can use ringgit to settle cross-border transactions. Gross domestic product rose 8.9 percent in the second quarter, more than the 8.4 percent gain forecast by economists in a Bloomberg survey.
The euro dropped against 13 of its 16 major counterparts after Germany’s Der Spiegel magazine reported that social tensions are rising in Greece as austerity measures shrink the economy. A German producer price index rose 0.1 percent in July after gaining 0.6 percent the previous month, according to a Bloomberg News survey of economists before today’s report. Europe’s currency slipped to $1.2808 from $1.2853 yesterday in New York and slid to 109.61 yen from 109.84 yen.
“The fundamentals of most of the euro zone haven’t really improved,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. based in Tokyo.
Wheat for December delivery advanced for a second day as its 19 percent decline from the highest level in almost two years attracted investors. The grain rallied as much as 2.2 percent to $7.0375 a bushel on the Chicago Board of Trade.
Oil was near the lowest in two days after the U.S. government said total petroleum stockpiles surged to the highest level in at least 20 years. Crude for September delivery fell 16 cents to $75.26 a barrel on the New York Mercantile Exchange.
The MSCI Asia Pacific Index gained 0.3 percent to 119.38 as of 10:49 a.m. in Tokyo. Futures on the Standard & Poor’s 500 Index rose 0.1 percent. Malaysia’s ringgit advanced to the strongest level since October 1997 after the central bank relaxed currency controls and reported better-than-expected economic growth. The euro weakened for a second day on speculation Europe’s rebound is flagging.
Technology stocks accounted for a third of the MSCI Asia- Pacific Index rally as Applied Materials, the world’s largest producer of chipmaking equipment, reported “strong” orders from all of its customers. Japanese shares rose for a second day and government bonds fell on speculation policy makers will introduce measures to stimulate the economy.
“I’m telling people not to be too pessimistic,” said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which oversees about $73 billion in Tokyo. “The market in the second half of this year will reflect positive earnings more explicitly than the latest earnings season.”
A measure of technology shares in the MSCI Asia Pacific increased 0.7 percent, the most among 10 industries in the index. Japan’s Nikkei 225 Stock Average increased 0.7 percent and South Korea’s Kospi index climbed 0.8 percent.
Chip Stocks
Tokyo Electron Ltd., the No. 2 maker of chip making machinery, climbed 4.3 percent. Hynix Semiconductor Inc., the world’s second-largest maker of computer-memory chips, jumped 3 percent in Seoul. Applied Materials said profit in the current period will be 28 cents to 32 cents a share, excluding certain items, compared with an average estimate of 26 cents in a Bloomberg survey.
In Australia, Brambles Ltd., the world’s biggest supplier of wooden pallets, gained 5.7 percent to A$5.60. The company said full-year profit was $448.8 million, exceeding the average forecast of $427 million from four analyst estimates compiled by Bloomberg.
The S&P 500 rose 0.2 percent yesterday, reversing earlier losses as homebuilders rallied after Citigroup Inc. said takeovers in the industry may increase and Target Corp. said third-quarter earnings will match analysts’ estimates.
Mitsubishi Estate Co., Japan’s biggest property developer, jumped 3.8 percent after the Yomiuri newspaper said the housing- loan agency will extend low mortgage rates. Fanuc Ltd., an industrial robot maker that earns almost 80 percent of its revenue abroad, rose 1.6 percent after the Sankei newspaper said the central bank will seek to weaken the yen.
Japan Stimulus
Japan’s 10-year government bonds fell for the first time in seven days. The yield advanced as much as two basis points to 0.92 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The Bank of Japan may increase the amount of a corporate loan program to 30 trillion yen ($351 billion) from 20 trillion yen, Sankei reported today, without saying where it got the information. The duration of the loan may be doubled to six months, the report said.
The cost of protecting Asia-Pacific bonds from non-payment declined, according to traders of credit-default swaps. The Markit iTraxx Japan index dropped 2 basis points to 111 basis points, Morgan Stanley prices show. Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality.
Currencies Rally
Taiwan’s dollar gained 0.3 percent to NT$31.89. Gross domestic product increased 10.2 percent in the second quarter after having expanded 13.3 percent in the first, economists forecast before a government report due today.
The ringgit advanced 0.4 percent to 3.1283 per dollar. Bank Negara Malaysia said late yesterday local companies can use ringgit to settle cross-border transactions. Gross domestic product rose 8.9 percent in the second quarter, more than the 8.4 percent gain forecast by economists in a Bloomberg survey.
The euro dropped against 13 of its 16 major counterparts after Germany’s Der Spiegel magazine reported that social tensions are rising in Greece as austerity measures shrink the economy. A German producer price index rose 0.1 percent in July after gaining 0.6 percent the previous month, according to a Bloomberg News survey of economists before today’s report. Europe’s currency slipped to $1.2808 from $1.2853 yesterday in New York and slid to 109.61 yen from 109.84 yen.
“The fundamentals of most of the euro zone haven’t really improved,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. based in Tokyo.
Wheat for December delivery advanced for a second day as its 19 percent decline from the highest level in almost two years attracted investors. The grain rallied as much as 2.2 percent to $7.0375 a bushel on the Chicago Board of Trade.
Oil was near the lowest in two days after the U.S. government said total petroleum stockpiles surged to the highest level in at least 20 years. Crude for September delivery fell 16 cents to $75.26 a barrel on the New York Mercantile Exchange.
Blackstone to invest $4bn in India
Blackstone, the private equity group, said on Wednesday it expects to invest up to nearly $4bn in India over the next five years after it announced its biggest single transaction in the country so far, a $300m purchase of a stake in a local power generation company.
The deal shows how US private equity companies are ramping up their interest in the country, with rival Kohlberg Kravis Roberts also announcing two big deals this year.
V. Jayasankar, head of private equity at Kotak Investment Banking, estimates the total volume of private equity deals in India this year could top $8bn, or about two-thirds of the peak of two years ago.
Akhil Gupta, chairman and managing director of Blackstone Advisors India, said the group had already invested $1.25bn in India in equity commitments.
“If you look at our performance over the last five years and the fact that we’re a much bigger team now and much more experienced in India.
“We think that in the next five years we should be able to do two to three times what we’ve done in the last five years,” Mr Gupta said.
In Blackstone’s latest deal, the group is to invest $300m in exchange for a “significant” minority stake in Moser Baer Projects Private.
Last month, Blackstone took a small stake in Monnet Power, a subsidiary of listed Monnet Ispat and Energy, for about $59m. Monnet’s core asset is a coal-fired plant in Orissa, on India’s east coast. The deal is expected to close by the end of the year.
Moser Baer Projects has a diverse pipeline of thermal, solar and hydro power generation as well as coal mining operations.
Its parent, Moser Baer India, is a high-tech company but with a strong manufacturing base. It is the world’s second-largest maker of optical storage devices such as CDs and DVDs.
Mr Gupta said he expected to invest up to $1bn in India’s power sector in the coming years but any deals would depend on whether the projects had acceptable execution risk.
Power is a difficult sector in India because of challenges obtaining coal and other fuel sources, land issues, government regulations and political risk.
Sushil Bhagat, chief financial officer of Moser Baer Projects, said it is planning to build 5,000 megawatts of power generation capacity by 2016, 80 per cent consisting of coal-fired thermal plants.
This would require total investment of nearly $7bn for which the company had already secured about $1.1bn in debt.
Blackstone, the private equity group, is to invest $300m in exchange for a significant minority stake in Indian power developer Moser Baer Projects Private, marking the buy-out group’s second energy deal in as many months in the country.
The deal, which is expected to be announced on Wednesday, comes just days after Blackstone reached agreement with Dynegy to acquire the US independent power producer for $4.7bn, the biggest private equity transaction this year.
In the past, private equity groups viewed power companies as safe investments. But in recent years, they have proved risky because of volatile energy prices. The risk is magnified by the fact that buy-out companies place so much debt on their companies, meaning they have less flexibility to ride out hard times.
But the calculus is different in emerging markets, where economic growth is strong, especially in countries such as India, where demand vastly exceeds supply. “If you are bullish on economic growth in India, you have to be bullish on power in India,” said Dave Foley, who led the investment for Blackstone.
The risks of investing in energy in India, where power theft is a big problem, would have been far more daunting a few years ago. Regulatory interference in pricing has also been a big issue for independent power producers.
But in recent years, these energy merchants have been able to deal with Power Trading Corp, which functions as a clearing house, enabling power providers to minimise their sales to state electricity boards and the frequent disputes over pricing. In addition, the new venture will not sell power directly to retail customers, further reducing any political sensitivities.
Blackstone now has more than $1bn invested in India, with in excess of half of that dedicated to infrastructure and logistics. In July, Blackstone took a small stake in Monnet Power, a subsidiary of listed Monnet Ispat and Energy, for about $59m. That company’s core asset is a coal-fired plant in Orissa, on India’s east coast. The deal is expected to close by the end of the year.
Moser Baer Projects has a diverse pipeline of thermal, solar and hydro power generation as well as coal mining operations.
Its parent, Moser Baer India, is a high-tech company but with a strong manufacturing base, rather than specialising in software, the traditional comparative advantage of Indian high-tech businesses. It is the world’s second-largest maker of optical storage devices such as CDs and DVDs and also manufactures solar panels.
The deal shows how US private equity companies are ramping up their interest in the country, with rival Kohlberg Kravis Roberts also announcing two big deals this year.
V. Jayasankar, head of private equity at Kotak Investment Banking, estimates the total volume of private equity deals in India this year could top $8bn, or about two-thirds of the peak of two years ago.
Akhil Gupta, chairman and managing director of Blackstone Advisors India, said the group had already invested $1.25bn in India in equity commitments.
“If you look at our performance over the last five years and the fact that we’re a much bigger team now and much more experienced in India.
“We think that in the next five years we should be able to do two to three times what we’ve done in the last five years,” Mr Gupta said.
In Blackstone’s latest deal, the group is to invest $300m in exchange for a “significant” minority stake in Moser Baer Projects Private.
Last month, Blackstone took a small stake in Monnet Power, a subsidiary of listed Monnet Ispat and Energy, for about $59m. Monnet’s core asset is a coal-fired plant in Orissa, on India’s east coast. The deal is expected to close by the end of the year.
Moser Baer Projects has a diverse pipeline of thermal, solar and hydro power generation as well as coal mining operations.
Its parent, Moser Baer India, is a high-tech company but with a strong manufacturing base. It is the world’s second-largest maker of optical storage devices such as CDs and DVDs.
Mr Gupta said he expected to invest up to $1bn in India’s power sector in the coming years but any deals would depend on whether the projects had acceptable execution risk.
Power is a difficult sector in India because of challenges obtaining coal and other fuel sources, land issues, government regulations and political risk.
Sushil Bhagat, chief financial officer of Moser Baer Projects, said it is planning to build 5,000 megawatts of power generation capacity by 2016, 80 per cent consisting of coal-fired thermal plants.
This would require total investment of nearly $7bn for which the company had already secured about $1.1bn in debt.
Blackstone, the private equity group, is to invest $300m in exchange for a significant minority stake in Indian power developer Moser Baer Projects Private, marking the buy-out group’s second energy deal in as many months in the country.
The deal, which is expected to be announced on Wednesday, comes just days after Blackstone reached agreement with Dynegy to acquire the US independent power producer for $4.7bn, the biggest private equity transaction this year.
In the past, private equity groups viewed power companies as safe investments. But in recent years, they have proved risky because of volatile energy prices. The risk is magnified by the fact that buy-out companies place so much debt on their companies, meaning they have less flexibility to ride out hard times.
But the calculus is different in emerging markets, where economic growth is strong, especially in countries such as India, where demand vastly exceeds supply. “If you are bullish on economic growth in India, you have to be bullish on power in India,” said Dave Foley, who led the investment for Blackstone.
The risks of investing in energy in India, where power theft is a big problem, would have been far more daunting a few years ago. Regulatory interference in pricing has also been a big issue for independent power producers.
But in recent years, these energy merchants have been able to deal with Power Trading Corp, which functions as a clearing house, enabling power providers to minimise their sales to state electricity boards and the frequent disputes over pricing. In addition, the new venture will not sell power directly to retail customers, further reducing any political sensitivities.
Blackstone now has more than $1bn invested in India, with in excess of half of that dedicated to infrastructure and logistics. In July, Blackstone took a small stake in Monnet Power, a subsidiary of listed Monnet Ispat and Energy, for about $59m. That company’s core asset is a coal-fired plant in Orissa, on India’s east coast. The deal is expected to close by the end of the year.
Moser Baer Projects has a diverse pipeline of thermal, solar and hydro power generation as well as coal mining operations.
Its parent, Moser Baer India, is a high-tech company but with a strong manufacturing base, rather than specialising in software, the traditional comparative advantage of Indian high-tech businesses. It is the world’s second-largest maker of optical storage devices such as CDs and DVDs and also manufactures solar panels.
CBS joins Reliance to launch in India
Audiences from Mumbai to New Delhi could soon be watching a Bollywood version of the Hollywood gossip show Entertainment Tonight as part of a foray by the programme’s producer, US network CBS, into the country.
CBS on Wednesday announced its first foray into global emerging markets as a network operator, with a tie-up with Reliance Broadcast Network, controlled by Indian industrialist Anil Ambani. It joins the growing number of American media groups targeting India, Asia’s most liberal market for foreign broadcasters.
As part of the deal, the partners plan to launch three English-language channels in India by October and to launch original programming every quarter, including possible variations of some popular CBS programmes.
“I can see the opportunity for local production utilising some of the existing CBS brands,” Armando Nunez, president of CBS Studios International told the Financial Times. “Like creating a local version of Entertainment Tonight with news about Bollywood.”
India is the world’s second-largest pay-television market by viewers after China, with 105m households signed up to terrestrial analogue cable, satellite and digital networks.
The market is also the most liberal for foreign broadcasters, leading to an influx of western media groups, with Rupert Murdoch’s Star, as well as Sony, Viacom, Turner and Disney building a strong presence.
However, the market is highly competitive, with cable operators charging subscribers as little as $4 per month per household.
Media Partners Asia, a Hong Kong-based research house, estimates the market generated domestic revenue last year of $2.3bn. Advertising revenue comprised 70 per cent of this.
Net profit was $410m, of which the leading operators, Star and domestic channels Zee and Sun, accounted for more than $350m.
CBS and Reliance declined to reveal financial details of their joint venture other than that it would be a 50:50 equity partnership.
They will start with three English language channels – a general entertainment channel, Big CBS Prime; a women’s channel, Big CBS Love; and a children’s channel, Big CBS Spark. Local language channels were not currently planned.
Tarun Katial, chief executive of Reliance Broadcast, said the English language audience was among the fastest growing, youngest and most prosperous demographic group in the country and was under-served by existing networks.
Vivek Couto, MPA executive director, said revenue in India from English language programming was about $350m covering all categories except sport.
CBS on Wednesday announced its first foray into global emerging markets as a network operator, with a tie-up with Reliance Broadcast Network, controlled by Indian industrialist Anil Ambani. It joins the growing number of American media groups targeting India, Asia’s most liberal market for foreign broadcasters.
As part of the deal, the partners plan to launch three English-language channels in India by October and to launch original programming every quarter, including possible variations of some popular CBS programmes.
“I can see the opportunity for local production utilising some of the existing CBS brands,” Armando Nunez, president of CBS Studios International told the Financial Times. “Like creating a local version of Entertainment Tonight with news about Bollywood.”
India is the world’s second-largest pay-television market by viewers after China, with 105m households signed up to terrestrial analogue cable, satellite and digital networks.
The market is also the most liberal for foreign broadcasters, leading to an influx of western media groups, with Rupert Murdoch’s Star, as well as Sony, Viacom, Turner and Disney building a strong presence.
However, the market is highly competitive, with cable operators charging subscribers as little as $4 per month per household.
Media Partners Asia, a Hong Kong-based research house, estimates the market generated domestic revenue last year of $2.3bn. Advertising revenue comprised 70 per cent of this.
Net profit was $410m, of which the leading operators, Star and domestic channels Zee and Sun, accounted for more than $350m.
CBS and Reliance declined to reveal financial details of their joint venture other than that it would be a 50:50 equity partnership.
They will start with three English language channels – a general entertainment channel, Big CBS Prime; a women’s channel, Big CBS Love; and a children’s channel, Big CBS Spark. Local language channels were not currently planned.
Tarun Katial, chief executive of Reliance Broadcast, said the English language audience was among the fastest growing, youngest and most prosperous demographic group in the country and was under-served by existing networks.
Vivek Couto, MPA executive director, said revenue in India from English language programming was about $350m covering all categories except sport.
Monday, August 16, 2010
U.S. to Tighten Reviews for New Offshore Drilling Plans Aaron M. Sprecher/Bloomberg News Permits for offshore drilling rigs will be subjected to new
WASHINGTON — The Obama administration said Monday that it would require significantly more environmental review before approving new offshore drilling permits, ending a practice in which government regulators essentially rubber-stamped potentially hazardous deep-water projects like BP’s out-of-control well. The administration has come under sharp criticism for granting BP an exemption from environmental oversight for the Macondo well, which blew out on April 20, killing 11 workers and spewing nearly five million barrels of oil into the Gulf of Mexico.
The more stringent environmental reviews are part of a wave of new regulation and legislation that promises to fundamentally remake an industry that has operated hand-in-glove with its government overseers for decades.
Many oil industry officials worry that the new environmental, safety, technical and financial requirements will drive some companies out of business, discourage future exploration and worsen the nation’s dependence on imported oil. The highly competitive oil industry has always operated under tremendous cost and time pressures; the new rules will most likely slow the development of new wells while raising costs.
Bruce H. Vincent, chairman of the Independent Petroleum Association of America, said the industry feared that the BP accident would be a turning point for oil exploration the way the Three Mile Island nuclear plant accident in 1979 contributed to a virtual 30-year moratorium on nuclear plant construction.
“Let’s hope it’s not our Three Mile Island,” said Mr. Vincent, who is also president of Swift Energy, a midsize oil company based in Houston. “It all depends on whether government adopts the wrong policies in response. The country can’t afford that.”
Drillers are already chafing under a moratorium on deep-water drilling in the gulf and strict new rules on shallow-water wells. The new environmental rules provide a foretaste of what the regulatory climate will be once the moratorium is lifted later this year. The House and Senate are moving legislation that will tighten regulatory standards for offshore drilling and put a higher multibillion-dollar limit on liability for damages from any future oil spill.
The administration is moving on a parallel track. After three months of review of federal environmental law, the White House Council on Environmental Quality on Monday recommended that the Interior Department suspend use of so-called categorical exclusions, which allow oil companies to sink offshore wells based on environmental impact statements for supposedly similar areas, while the department reviews the environmental impact. Permits for the Macondo well were based on exemptions written in 1981 and 1986. The waiver granted to BP in April 2009, as part of the permitting process for the doomed well, was based on the company’s claim that a blowout was unlikely and that if a spill did occur, it would cause minimal damage.
The Interior Department’s Minerals Management Service, recently renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, issued hundreds of these exemptions in recent years to reduce the paperwork burden for oil companies seeking new wells and for government workers. As a result, there was no meaningful plan in place to cope with the BP spill and its impact on aquatic life and gulf shorelines.
The White House and the Interior Department announced in mid-May that they would review all actions taken by the minerals agency under the National Environmental Policy Act, known as NEPA. The law, a foundation of environmental policy enacted after a 1969 oil spill off Santa Barbara, Calif., requires federal agencies to complete a detailed environmental assessment before approving any potentially damaging project like an offshore oil well.
Ken Salazar, the interior secretary, and Michael R. Bromwich, director of the offshore energy service, said Monday that they would conduct a thorough environmental review of all future drilling in the Gulf of Mexico and elsewhere on the Outer Continental Shelf. The moratorium on most deep-water drilling in the gulf will continue as the study proceeds, they said.
The new policy will require much more extensive environmental scrutiny once the moratorium is lifted and will lengthen the process of granting new drilling permits. Under current policy, the agency has only 30 days to decide whether to approve a drilling application, and few are denied. The new policy will also suspend the issuing of automatic exemptions from environmental review for virtually all new wells in the gulf. Such waivers have become common in recent years.
“In light of the increasing levels of complexity and risk — and the consequent potential environmental impacts — associated with deep-water drilling, we are taking a fresh look at the NEPA process and the types of environmental reviews that should be required for offshore activity,” Mr. Salazar said.
An Interior Department spokesman said the agency would not grant environmental waivers for potentially risky wells while the environmental policy was being reviewed, a process that he said would take several months. It was not clear how much time the new policy, when completed, would add to the permit process for new wells.
Mr. Salazar and Mr. Bromwich said drilling in shallow waters would be allowed to continue if operators met certain new safety and environmental standards, like certifying that the blowout protectors in use had been recently inspected and tested.
The Center for Biological Diversity, an environmental group that has drawn attention to the use of categorical exclusions for offshore oil wells, called the new Interior Department policy a step in the right direction.
Bill Snape, senior counsel for the center, said in an e-mail that it should be broadened to include shallow-water wells and wells that have already been granted permits but have yet to be started. Mr. Snape also said that in many instances, the government should produce an environmental impact statement, which is more detailed than the environmental assessment the new policy requires.
Erik Milito of the American Petroleum Institute, the lobby for big oil companies, said the new rules could slow approval of new wells and cost jobs. “We’re concerned the change could add significantly to the department’s workload, stretching the timeline for approval of important energy development projects with no clear return in environmental protection,” Mr. Milito said.
Representative Nick J. Rahall II, Democrat of West Virginia and chairman of the House Natural Resources Committee, said the White House report highlighted one of many problems with the Interior Department’s regulation of offshore drilling.
He called for enactment of his bill, the Consolidated Land, Energy and Aquatic Resources Act, to change the agency and tighten oversight of oil operations. It would eliminate the use of categorical exclusions for all exploration and development wells.
“I applaud Secretary Salazar for the steps he is taking,” Mr. Rahall said, “but permanent reform requires passage of my Clear Act, which would put the last nail in the coffin to the practice of allowing Big Oil to jam through offshore drilling projects with minimal review.”
The more stringent environmental reviews are part of a wave of new regulation and legislation that promises to fundamentally remake an industry that has operated hand-in-glove with its government overseers for decades.
Many oil industry officials worry that the new environmental, safety, technical and financial requirements will drive some companies out of business, discourage future exploration and worsen the nation’s dependence on imported oil. The highly competitive oil industry has always operated under tremendous cost and time pressures; the new rules will most likely slow the development of new wells while raising costs.
Bruce H. Vincent, chairman of the Independent Petroleum Association of America, said the industry feared that the BP accident would be a turning point for oil exploration the way the Three Mile Island nuclear plant accident in 1979 contributed to a virtual 30-year moratorium on nuclear plant construction.
“Let’s hope it’s not our Three Mile Island,” said Mr. Vincent, who is also president of Swift Energy, a midsize oil company based in Houston. “It all depends on whether government adopts the wrong policies in response. The country can’t afford that.”
Drillers are already chafing under a moratorium on deep-water drilling in the gulf and strict new rules on shallow-water wells. The new environmental rules provide a foretaste of what the regulatory climate will be once the moratorium is lifted later this year. The House and Senate are moving legislation that will tighten regulatory standards for offshore drilling and put a higher multibillion-dollar limit on liability for damages from any future oil spill.
The administration is moving on a parallel track. After three months of review of federal environmental law, the White House Council on Environmental Quality on Monday recommended that the Interior Department suspend use of so-called categorical exclusions, which allow oil companies to sink offshore wells based on environmental impact statements for supposedly similar areas, while the department reviews the environmental impact. Permits for the Macondo well were based on exemptions written in 1981 and 1986. The waiver granted to BP in April 2009, as part of the permitting process for the doomed well, was based on the company’s claim that a blowout was unlikely and that if a spill did occur, it would cause minimal damage.
The Interior Department’s Minerals Management Service, recently renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, issued hundreds of these exemptions in recent years to reduce the paperwork burden for oil companies seeking new wells and for government workers. As a result, there was no meaningful plan in place to cope with the BP spill and its impact on aquatic life and gulf shorelines.
The White House and the Interior Department announced in mid-May that they would review all actions taken by the minerals agency under the National Environmental Policy Act, known as NEPA. The law, a foundation of environmental policy enacted after a 1969 oil spill off Santa Barbara, Calif., requires federal agencies to complete a detailed environmental assessment before approving any potentially damaging project like an offshore oil well.
Ken Salazar, the interior secretary, and Michael R. Bromwich, director of the offshore energy service, said Monday that they would conduct a thorough environmental review of all future drilling in the Gulf of Mexico and elsewhere on the Outer Continental Shelf. The moratorium on most deep-water drilling in the gulf will continue as the study proceeds, they said.
The new policy will require much more extensive environmental scrutiny once the moratorium is lifted and will lengthen the process of granting new drilling permits. Under current policy, the agency has only 30 days to decide whether to approve a drilling application, and few are denied. The new policy will also suspend the issuing of automatic exemptions from environmental review for virtually all new wells in the gulf. Such waivers have become common in recent years.
“In light of the increasing levels of complexity and risk — and the consequent potential environmental impacts — associated with deep-water drilling, we are taking a fresh look at the NEPA process and the types of environmental reviews that should be required for offshore activity,” Mr. Salazar said.
An Interior Department spokesman said the agency would not grant environmental waivers for potentially risky wells while the environmental policy was being reviewed, a process that he said would take several months. It was not clear how much time the new policy, when completed, would add to the permit process for new wells.
Mr. Salazar and Mr. Bromwich said drilling in shallow waters would be allowed to continue if operators met certain new safety and environmental standards, like certifying that the blowout protectors in use had been recently inspected and tested.
The Center for Biological Diversity, an environmental group that has drawn attention to the use of categorical exclusions for offshore oil wells, called the new Interior Department policy a step in the right direction.
Bill Snape, senior counsel for the center, said in an e-mail that it should be broadened to include shallow-water wells and wells that have already been granted permits but have yet to be started. Mr. Snape also said that in many instances, the government should produce an environmental impact statement, which is more detailed than the environmental assessment the new policy requires.
Erik Milito of the American Petroleum Institute, the lobby for big oil companies, said the new rules could slow approval of new wells and cost jobs. “We’re concerned the change could add significantly to the department’s workload, stretching the timeline for approval of important energy development projects with no clear return in environmental protection,” Mr. Milito said.
Representative Nick J. Rahall II, Democrat of West Virginia and chairman of the House Natural Resources Committee, said the White House report highlighted one of many problems with the Interior Department’s regulation of offshore drilling.
He called for enactment of his bill, the Consolidated Land, Energy and Aquatic Resources Act, to change the agency and tighten oversight of oil operations. It would eliminate the use of categorical exclusions for all exploration and development wells.
“I applaud Secretary Salazar for the steps he is taking,” Mr. Rahall said, “but permanent reform requires passage of my Clear Act, which would put the last nail in the coffin to the practice of allowing Big Oil to jam through offshore drilling projects with minimal review.”
VIX populi? Falling index points to complacency
Volatality Index
Gainers & losers
MUMBAI: India’s volatility index, VIX — a measure of investors’ perception about risk — is trading at its lowest level since November 2007, leading a section of market participants to think that investors could be getting complacent.
The India VIX touched an intra-day low of 15.8% before closing the day at 18% on Monday. It had risen to a high of 85% in November 2008, when the crisis in global financial markets intensified, following the bankruptcy of US investment bank Lehman Brothers. The index was trading around 30% levels as recent as May this year as concerns of sovereign debt default in the Eurozone, mounted.
“Our markets have had a fair bout of positive news flows which have kept the liquidity intact in the past few months as reflected in the FII inflows against the nervousness mood in global markets,” says Prakash Diwan, head-institutional business at Networth Stock Broking, on one of the reasons for the fall in VIX. He adds that volatility could rise over the next week, as the current derivatives settlement cycle draws to a close, but that may not be a cause for concern unless the situation in world markets worsens.
Many brokers are advising their clients to be selective in their derivatives bets, fearing a sharp move in the near term.
“Contrary to global trends, the Indian market has been hovering in a narrow band. This has made investors complacent as the market is finding strong support at current levels,” says Ravi Sharma from derivatives sales and research desk at Prabhudas Lilladher. “One can initiate long option strategies depending on the view on the markets,” he added.
Benchmark indices, the Nifty and the Sensex, have been moving in a narrow range for nearly 10 months now. At the same time, Chicago Board Option Exchange’s VIX (CBOE VIX) — the most-widely tracked volatility index — which measures the implied volatility of S&P 500 options, has been inching up of late. It closed at 26% on last Friday from 22% at the beginning of the month.
Some analysts believe that the India VIX may decline further in the short term. “Earnings season results in higher volatility as investors try to adjust their portfolios based on new financial numbers. This causes volatility and rise in volatility and VIX. Surprisingly, it has only gone down so far. With no major events likely to happen in the next few weeks, it could only fall further,” feels a senior derivatives dealer at a foreign broking firm.
But Mr Diwan advocates a more cautious approach. “It is prudent to sit on cash to the extent of around 8-10% and use volatility to take positions at lower, more profitable levels as in any momentum-driven market,” he says.
Gainers & losers
MUMBAI: India’s volatility index, VIX — a measure of investors’ perception about risk — is trading at its lowest level since November 2007, leading a section of market participants to think that investors could be getting complacent.
The India VIX touched an intra-day low of 15.8% before closing the day at 18% on Monday. It had risen to a high of 85% in November 2008, when the crisis in global financial markets intensified, following the bankruptcy of US investment bank Lehman Brothers. The index was trading around 30% levels as recent as May this year as concerns of sovereign debt default in the Eurozone, mounted.
“Our markets have had a fair bout of positive news flows which have kept the liquidity intact in the past few months as reflected in the FII inflows against the nervousness mood in global markets,” says Prakash Diwan, head-institutional business at Networth Stock Broking, on one of the reasons for the fall in VIX. He adds that volatility could rise over the next week, as the current derivatives settlement cycle draws to a close, but that may not be a cause for concern unless the situation in world markets worsens.
Many brokers are advising their clients to be selective in their derivatives bets, fearing a sharp move in the near term.
“Contrary to global trends, the Indian market has been hovering in a narrow band. This has made investors complacent as the market is finding strong support at current levels,” says Ravi Sharma from derivatives sales and research desk at Prabhudas Lilladher. “One can initiate long option strategies depending on the view on the markets,” he added.
Benchmark indices, the Nifty and the Sensex, have been moving in a narrow range for nearly 10 months now. At the same time, Chicago Board Option Exchange’s VIX (CBOE VIX) — the most-widely tracked volatility index — which measures the implied volatility of S&P 500 options, has been inching up of late. It closed at 26% on last Friday from 22% at the beginning of the month.
Some analysts believe that the India VIX may decline further in the short term. “Earnings season results in higher volatility as investors try to adjust their portfolios based on new financial numbers. This causes volatility and rise in volatility and VIX. Surprisingly, it has only gone down so far. With no major events likely to happen in the next few weeks, it could only fall further,” feels a senior derivatives dealer at a foreign broking firm.
But Mr Diwan advocates a more cautious approach. “It is prudent to sit on cash to the extent of around 8-10% and use volatility to take positions at lower, more profitable levels as in any momentum-driven market,” he says.
Pentagon hits at Beijing’s military secrecy
China’s reluctance to come clean about the scope of its military activities increases the risk of misunderstandings in a highly charged part of the world, the Pentagon has argued.
In its annual report to Congress on China’s military and security developments, the US defence department also notes a steady increase in Beijing’s military capabilities, including hundreds of missiles in the Taiwan strait.
EDITOR’S CHOICE
Opinion: America must find new China strategy - Aug-08
US ventures into troubled Asian waters - Aug-03
Editorial: Spat over Spratlys - Aug-03
US tells China not to exploit Iran sanctions - Aug-02
China blasts Clinton’s maritime venture - Jul-30
Lex: Renminbi internationalisation - Jul-28
While Beijing announced in March a military budget of $78.6bn (£50.2bn) – the latest in 20 years of annual increases – the Pentagon estimates China’s total military-related spending for 2009 at more than $150bn.
“The limited transparency in China’s military and security affairs enhances uncertainty and increases the potential for misunderstanding and miscalculation,” the report says, in a seeming allusion to the risk of confrontation. While the People’s Liberation Army has made “modest” improvements in this respect, “many uncertainties remain regarding how China will use its expanding military capabilities”.
The Obama administration has been pushing China to boost mutual understanding by permitting more military-to-military contact, which Beijing largely put on hold in the wake of the US announcement in January of $6.4bn in arms sales to Taiwan.
Despite prodding by President Barack Obama for Beijing to do so, it has yet to extend an invitation this year for Robert Gates, US defence secretary, to visit.
Last month, bilateral relations appeared to sour further when China responded angrily to a suggestion by Hillary Clinton, US secretary of state, that Washington could help resolve territorial disputes in the South China Sea. Many in Beijing saw her words as an effort to unite other regional powers against China.
The report welcomes China’s increased contributions to international peacekeeping and humanitarian and anti-piracy drives, which have been largely made possible by its greater ability to project power at a distance. In other contexts, this ability, although limited, causes the US concern.
The Pentagon notes that, while relations with Taiwan have improved, by December last year China had more than 1,000 short-range missiles opposite the island and was “upgrading the lethality of this force”.
It says nationalist, demographic, regional and other pressures could jeopardise China’s decision to allow its economy to develop by “managing” external tensions at least until 2020.
It says China has the world’s “most active land-based ballistic and cruise missile programme” and is modernising nuclear forces.
It adds that the PLA’s navy has the largest force of fighting ships in Asia, with more than 60 submarines, 55 medium and large amphibious vessels and roughly 85 missile-equipped patrol craft. Its ground forces number 1.25m, with about a third of them stationed in the three military regions opposite Taiwan.
In its annual report to Congress on China’s military and security developments, the US defence department also notes a steady increase in Beijing’s military capabilities, including hundreds of missiles in the Taiwan strait.
EDITOR’S CHOICE
Opinion: America must find new China strategy - Aug-08
US ventures into troubled Asian waters - Aug-03
Editorial: Spat over Spratlys - Aug-03
US tells China not to exploit Iran sanctions - Aug-02
China blasts Clinton’s maritime venture - Jul-30
Lex: Renminbi internationalisation - Jul-28
While Beijing announced in March a military budget of $78.6bn (£50.2bn) – the latest in 20 years of annual increases – the Pentagon estimates China’s total military-related spending for 2009 at more than $150bn.
“The limited transparency in China’s military and security affairs enhances uncertainty and increases the potential for misunderstanding and miscalculation,” the report says, in a seeming allusion to the risk of confrontation. While the People’s Liberation Army has made “modest” improvements in this respect, “many uncertainties remain regarding how China will use its expanding military capabilities”.
The Obama administration has been pushing China to boost mutual understanding by permitting more military-to-military contact, which Beijing largely put on hold in the wake of the US announcement in January of $6.4bn in arms sales to Taiwan.
Despite prodding by President Barack Obama for Beijing to do so, it has yet to extend an invitation this year for Robert Gates, US defence secretary, to visit.
Last month, bilateral relations appeared to sour further when China responded angrily to a suggestion by Hillary Clinton, US secretary of state, that Washington could help resolve territorial disputes in the South China Sea. Many in Beijing saw her words as an effort to unite other regional powers against China.
The report welcomes China’s increased contributions to international peacekeeping and humanitarian and anti-piracy drives, which have been largely made possible by its greater ability to project power at a distance. In other contexts, this ability, although limited, causes the US concern.
The Pentagon notes that, while relations with Taiwan have improved, by December last year China had more than 1,000 short-range missiles opposite the island and was “upgrading the lethality of this force”.
It says nationalist, demographic, regional and other pressures could jeopardise China’s decision to allow its economy to develop by “managing” external tensions at least until 2020.
It says China has the world’s “most active land-based ballistic and cruise missile programme” and is modernising nuclear forces.
It adds that the PLA’s navy has the largest force of fighting ships in Asia, with more than 60 submarines, 55 medium and large amphibious vessels and roughly 85 missile-equipped patrol craft. Its ground forces number 1.25m, with about a third of them stationed in the three military regions opposite Taiwan.
Sunday, August 15, 2010
Vedanta Said to Seek 55% Stake in Cairn Energy's India Unit
Vedanta Resources Plc, controlled by billionaire Anil Agarwal, is near an agreement to buy 40 percent of Cairn Energy Plc’s Indian oil unit for about $6.5 billion and plans to purchase shares from investors to boost its stake to about 55 percent, said three people with knowledge of the plan.
Vedanta will buy the stake in Cairn India Ltd. and then purchase the additional shares through a so-called off-market tender offer, said the people who declined to be identified as the talks are private. The deal, valued at about $8.5 billion, may be announced as soon as today, and London-based Vedanta will finance the transaction partly with loans from Standard Chartered Plc, the people said.
Vedanta expects to be able to buy between 10 percent and 15 percent through the tender, the people said. Under India’s takeover regulations, investors seeking 15 percent or more of a listed company must make a public offer for at least a 20 percent stake. Cairn India, 62 percent held by Edinburgh-based Cairn Energy, is listed in Mumbai and valued at about $14.4 billion.
Spokesmen for Cairn Energy and Vedanta declined to comment.
Vedanta’s planned foray into the oil industry, which will give it access to Cairn India’s Mangala deposit, the country’s biggest oilfield on land, marks a departure from mining zinc, copper and iron ore. Agarwal, 57, has already sought to expand in power generation, helping his Sterlite Industries unit compete with rivals such as Reliance Energy Ventures Ltd. and NTPC Ltd.
Vedanta follows BHP Billiton Ltd., the world’s largest mining company, in adding oil assets. BHP, which moved into oil and gas with its 2001 acquisition of Billiton Plc for $11.6 billion, reported sales of $7.2 billion for its petroleum business, or 15 percent of total revenue, in fiscal 2009.
Mangala Field
Cairn India started output a year ago from the Mangala field in Rajasthan, selling to customers including Indian Oil Corp. In March, the company raised its production target from the field to 240,000 barrels a day. Cairn India has interests in 10 blocks in India and one in Sri Lanka. It has three in production, including Mangala. Petroliam Nasional Bhd., known as Petronas, holds a 14.9 percent stake in the company, according to data compiled by Bloomberg.
Vedanta was the first Indian company to list its shares on the London Stock Exchange in 2003, according to its website, and employs 30,000 people with operations in India, Australia and Zambia. The company said in 2008 it would spend $20 billion in India over four years on mines and power plants.
Cairn shareholders may receive at least 1 billion pounds ($1.6 billion) in special dividends as a result of the transaction, the Sunday Telegraph reported yesterday, citing people it didn’t identify.
Vedanta will buy the stake in Cairn India Ltd. and then purchase the additional shares through a so-called off-market tender offer, said the people who declined to be identified as the talks are private. The deal, valued at about $8.5 billion, may be announced as soon as today, and London-based Vedanta will finance the transaction partly with loans from Standard Chartered Plc, the people said.
Vedanta expects to be able to buy between 10 percent and 15 percent through the tender, the people said. Under India’s takeover regulations, investors seeking 15 percent or more of a listed company must make a public offer for at least a 20 percent stake. Cairn India, 62 percent held by Edinburgh-based Cairn Energy, is listed in Mumbai and valued at about $14.4 billion.
Spokesmen for Cairn Energy and Vedanta declined to comment.
Vedanta’s planned foray into the oil industry, which will give it access to Cairn India’s Mangala deposit, the country’s biggest oilfield on land, marks a departure from mining zinc, copper and iron ore. Agarwal, 57, has already sought to expand in power generation, helping his Sterlite Industries unit compete with rivals such as Reliance Energy Ventures Ltd. and NTPC Ltd.
Vedanta follows BHP Billiton Ltd., the world’s largest mining company, in adding oil assets. BHP, which moved into oil and gas with its 2001 acquisition of Billiton Plc for $11.6 billion, reported sales of $7.2 billion for its petroleum business, or 15 percent of total revenue, in fiscal 2009.
Mangala Field
Cairn India started output a year ago from the Mangala field in Rajasthan, selling to customers including Indian Oil Corp. In March, the company raised its production target from the field to 240,000 barrels a day. Cairn India has interests in 10 blocks in India and one in Sri Lanka. It has three in production, including Mangala. Petroliam Nasional Bhd., known as Petronas, holds a 14.9 percent stake in the company, according to data compiled by Bloomberg.
Vedanta was the first Indian company to list its shares on the London Stock Exchange in 2003, according to its website, and employs 30,000 people with operations in India, Australia and Zambia. The company said in 2008 it would spend $20 billion in India over four years on mines and power plants.
Cairn shareholders may receive at least 1 billion pounds ($1.6 billion) in special dividends as a result of the transaction, the Sunday Telegraph reported yesterday, citing people it didn’t identify.
Ban calls for more aid for Pakistan
Ban Ki-moon, the United Nations secretary-general, has urged international donors to back the UN’s $460m emergency appeal to aid victims of the Pakistan floods, saying the disaster was “far from over”.
After a day-long tour of flood-stricken areas with Asif Ali Zardari, Pakistan’s president, on Sunday Mr Ban described the situation in the troubled region as worse than that caused by the 2005 earthquake in northern Pakistan, which Islamabad at the time said had killed more than 70,000 people.
Although about 1,500 people have been reported killed in the floods so far, Pakistani officials say, the loss to the country’s infrastructure is far greater than in the earthquake.
Islamabad says 20m people have been hit by the disaster, which has affected an area roughly the size of Italy. But the epic scale of the crisis has yet to trigger the kind of outpouring of aid by donor countries witnessed in the aftermath of calamities such as the 2004 Indian Ocean tsunami or the Haiti earthquake in January.
The UN says it has raised just over a quarter of its appeal target. The sluggish contributions have come against a backdrop of international concerns over the relationship between Pakistan’s security forces and militants and popular anger at Mr Zardari’s government, although UN officials have downplayed the likelihood of a link.
“I just think it’s a bit soon to conclude that people have something against Pakistan because of terrorism or because of corruption,” John Holmes, the UN humanitarian aid chief, who travelled with Mr Ban, told the Associated Press.
Some donors have also made bilateral contributions that fall outside the scope of the appeal. The US and UK have made the biggest overall donations to flood relief in Pakistan, having pledged at least $76m and $32m respectively.
Nevertheless, the response to the appeal stands in sharp contrast to the outpouring of funds that followed the Haiti earthquake, which elicited almost $1bn in pledges within 10 days.
In Pakistan, aid workers are struggling to keep up with a crisis that seems to grow by the hour. Water levels rose again on Sunday in parts of the southern Sindh province, where hundreds of thousands of people have fled their homes for crowded camps.
“We’ve received nothing,” said Mohammed Mithal Dool, who abandoned his farm for a tent in the town of Sukkur. “It’s only local people and shopkeepers who are giving us food and water.”
Mr Zardari has faced widespread criticism for his government’s handling of the crisis. The military – which remains Pakistan’s most powerful institution – has taken the lead. Army helicopters flew over Sindh province at the weekend, their crews dropping bottled water to people waiting with outstretched hands in semi-submerged villages.
Pakistan’s relief officials warned that more than 30,000 people were still trapped in devastated areas and waiting to be rescued. The US has committed 19 helicopters for flood-related missions in Pakistan.
Yusuf Raza Gilani, the prime minister, said in an independence day address on Saturday that 20m people had been displaced by the floods and drew comparisons with the bloody 1947 partition of the subcontinent, which ripped families apart and triggered a migration of 10m refugees. The UN has issued lower estimates for the numbers affected by the flood, saying some 5m have had their houses damaged or destroyed.
The world body says health workers are preparing facilities to cope with up to 140,000 cases of cholera after confirming the first case of the disease in the flood-ravaged north-west this weekend.
After a day-long tour of flood-stricken areas with Asif Ali Zardari, Pakistan’s president, on Sunday Mr Ban described the situation in the troubled region as worse than that caused by the 2005 earthquake in northern Pakistan, which Islamabad at the time said had killed more than 70,000 people.
Although about 1,500 people have been reported killed in the floods so far, Pakistani officials say, the loss to the country’s infrastructure is far greater than in the earthquake.
Islamabad says 20m people have been hit by the disaster, which has affected an area roughly the size of Italy. But the epic scale of the crisis has yet to trigger the kind of outpouring of aid by donor countries witnessed in the aftermath of calamities such as the 2004 Indian Ocean tsunami or the Haiti earthquake in January.
The UN says it has raised just over a quarter of its appeal target. The sluggish contributions have come against a backdrop of international concerns over the relationship between Pakistan’s security forces and militants and popular anger at Mr Zardari’s government, although UN officials have downplayed the likelihood of a link.
“I just think it’s a bit soon to conclude that people have something against Pakistan because of terrorism or because of corruption,” John Holmes, the UN humanitarian aid chief, who travelled with Mr Ban, told the Associated Press.
Some donors have also made bilateral contributions that fall outside the scope of the appeal. The US and UK have made the biggest overall donations to flood relief in Pakistan, having pledged at least $76m and $32m respectively.
Nevertheless, the response to the appeal stands in sharp contrast to the outpouring of funds that followed the Haiti earthquake, which elicited almost $1bn in pledges within 10 days.
In Pakistan, aid workers are struggling to keep up with a crisis that seems to grow by the hour. Water levels rose again on Sunday in parts of the southern Sindh province, where hundreds of thousands of people have fled their homes for crowded camps.
“We’ve received nothing,” said Mohammed Mithal Dool, who abandoned his farm for a tent in the town of Sukkur. “It’s only local people and shopkeepers who are giving us food and water.”
Mr Zardari has faced widespread criticism for his government’s handling of the crisis. The military – which remains Pakistan’s most powerful institution – has taken the lead. Army helicopters flew over Sindh province at the weekend, their crews dropping bottled water to people waiting with outstretched hands in semi-submerged villages.
Pakistan’s relief officials warned that more than 30,000 people were still trapped in devastated areas and waiting to be rescued. The US has committed 19 helicopters for flood-related missions in Pakistan.
Yusuf Raza Gilani, the prime minister, said in an independence day address on Saturday that 20m people had been displaced by the floods and drew comparisons with the bloody 1947 partition of the subcontinent, which ripped families apart and triggered a migration of 10m refugees. The UN has issued lower estimates for the numbers affected by the flood, saying some 5m have had their houses damaged or destroyed.
The world body says health workers are preparing facilities to cope with up to 140,000 cases of cholera after confirming the first case of the disease in the flood-ravaged north-west this weekend.
Outdoors and Out of Reach, Studying the Brain
GLEN CANYON NATIONAL RECREATION AREA, Utah — Todd Braver emerges from a tent nestled against the canyon wall. He has a slight tan, except for a slim pale band around his
For the first time in three days in the wilderness, Mr. Braver is not wearing his watch. “I forgot,” he says.
It is a small thing, the kind of change many vacationers notice in themselves as they unwind and lose track of time. But for Mr. Braver and his companions, these moments lead to a question: What is happening to our brains?
Mr. Braver, a psychology professor at Washington University in St. Louis, was one of five neuroscientists on an unusual journey. They spent a week in late May in this remote area of southern Utah, rafting the San Juan River, camping on the soft banks and hiking the tributary canyons.
It was a primitive trip with a sophisticated goal: to understand how heavy use of digital devices and other technology changes how we think and behave, and how a retreat into nature might reverse those effects.
Cellphones do not work here, e-mail is inaccessible and laptops have been left behind. It is a trip into the heart of silence — increasingly rare now that people can get online even in far-flung vacation spots.
As they head down the tight curves the San Juan has carved from ancient sandstone, the travelers will, not surprisingly, unwind, sleep better and lose the nagging feeling to check for a phone in the pocket. But the significance of such changes is a matter of debate for them.
Some of the scientists say a vacation like this hardly warrants much scrutiny. But the trip’s organizer, David Strayer, a psychology professor at the University of Utah, says that studying what happens when we step away from our devices and rest our brains — in particular, how attention, memory and learning are affected — is important science.
“Attention is the holy grail,” Mr. Strayer says.
“Everything that you’re conscious of, everything you let in, everything you remember and you forget, depends on it.”
Echoing other researchers, Mr. Strayer says that understanding how attention works could help in the treatment of a host of maladies, like attention deficit disorder, schizophrenia and depression. And he says that on a day-to-day basis, too much digital stimulation can “take people who would be functioning O.K. and put them in a range where they’re not psychologically healthy.”
The quest to understand the impact on the brain of heavy technology use — at a time when such use is exploding — is still in its early stages. To Mr. Strayer, it is no less significant than when scientists investigated the effects of consuming too much meat or alcohol.
But stepping away is easier for some than others. The trip begins with a strong defense of digital connectedness, a debate that revolves around one particularly important e-mail.
On the Road
The five scientists on the trip can be loosely divided into two groups: the believers and the skeptics.
The believers are Mr. Strayer and Paul Atchley, 40, a professor at the University of Kansas who studies teenagers’ compulsive use of cellphones. They argue that heavy technology use can inhibit deep thought and cause anxiety, and that getting out into nature can help. They take pains in their own lives to regularly log off.
The skeptics use their digital gadgets without reservation. They are not convinced that anything lasting will come of the trip — personally or scientifically.
This group includes the fast-talking Mr. Braver, 41, a brain imaging expert; Steven Yantis, 54, the tall and contemplative chairman of the psychological and brain sciences department at Johns Hopkins, who studies how people switch between tasks; and Art Kramer, 57, a white-bearded professor at the University of Illinois who has gained attention for his studies of the neurological benefits of exercise.
Also on the trip are a reporter and a photographer, and Richard Boyer, a quiet outdoorsman and accomplished landscape painter, who helps Mr. Strayer lead the journey.
Among the bright academic lights in the group, Mr. Kramer is the most prominent. At the time of the trip he was about to take over a $300,000-a-year position as director of the Beckman Institute, a leading research center at the University of Illinois with around 1,000 scientists and staff workers and tens of millions of dollars in grant financing.
He is also intense personally — someone who has been challenging himself since early in life; he says he left home when he was a teenager, became an amateur boxer and, later, flew airplanes, rock-climbed and smashed his knee in a “high-speed skiing accident.”
They are driving six hours from Salt Lake City to the river, and they stop at a camping store for last-minute supplies. Mr. Kramer waits out front, checking e-mail on his BlackBerry Curve. This sets off a debate between the believers and skeptics.
Back in the car, Mr. Kramer says he checked his phone because he was waiting for important news: whether his lab has received a $25 million grant from the military to apply neuroscience to the study of ergonomics. He has instructed his staff to send a text message to an emergency satellite phone the group will carry with them.
Mr. Atchley says he doesn’t understand why Mr. Kramer would bother. “The grant will still be there when you get back,” he says.
For the first time in three days in the wilderness, Mr. Braver is not wearing his watch. “I forgot,” he says.
It is a small thing, the kind of change many vacationers notice in themselves as they unwind and lose track of time. But for Mr. Braver and his companions, these moments lead to a question: What is happening to our brains?
Mr. Braver, a psychology professor at Washington University in St. Louis, was one of five neuroscientists on an unusual journey. They spent a week in late May in this remote area of southern Utah, rafting the San Juan River, camping on the soft banks and hiking the tributary canyons.
It was a primitive trip with a sophisticated goal: to understand how heavy use of digital devices and other technology changes how we think and behave, and how a retreat into nature might reverse those effects.
Cellphones do not work here, e-mail is inaccessible and laptops have been left behind. It is a trip into the heart of silence — increasingly rare now that people can get online even in far-flung vacation spots.
As they head down the tight curves the San Juan has carved from ancient sandstone, the travelers will, not surprisingly, unwind, sleep better and lose the nagging feeling to check for a phone in the pocket. But the significance of such changes is a matter of debate for them.
Some of the scientists say a vacation like this hardly warrants much scrutiny. But the trip’s organizer, David Strayer, a psychology professor at the University of Utah, says that studying what happens when we step away from our devices and rest our brains — in particular, how attention, memory and learning are affected — is important science.
“Attention is the holy grail,” Mr. Strayer says.
“Everything that you’re conscious of, everything you let in, everything you remember and you forget, depends on it.”
Echoing other researchers, Mr. Strayer says that understanding how attention works could help in the treatment of a host of maladies, like attention deficit disorder, schizophrenia and depression. And he says that on a day-to-day basis, too much digital stimulation can “take people who would be functioning O.K. and put them in a range where they’re not psychologically healthy.”
The quest to understand the impact on the brain of heavy technology use — at a time when such use is exploding — is still in its early stages. To Mr. Strayer, it is no less significant than when scientists investigated the effects of consuming too much meat or alcohol.
But stepping away is easier for some than others. The trip begins with a strong defense of digital connectedness, a debate that revolves around one particularly important e-mail.
On the Road
The five scientists on the trip can be loosely divided into two groups: the believers and the skeptics.
The believers are Mr. Strayer and Paul Atchley, 40, a professor at the University of Kansas who studies teenagers’ compulsive use of cellphones. They argue that heavy technology use can inhibit deep thought and cause anxiety, and that getting out into nature can help. They take pains in their own lives to regularly log off.
The skeptics use their digital gadgets without reservation. They are not convinced that anything lasting will come of the trip — personally or scientifically.
This group includes the fast-talking Mr. Braver, 41, a brain imaging expert; Steven Yantis, 54, the tall and contemplative chairman of the psychological and brain sciences department at Johns Hopkins, who studies how people switch between tasks; and Art Kramer, 57, a white-bearded professor at the University of Illinois who has gained attention for his studies of the neurological benefits of exercise.
Also on the trip are a reporter and a photographer, and Richard Boyer, a quiet outdoorsman and accomplished landscape painter, who helps Mr. Strayer lead the journey.
Among the bright academic lights in the group, Mr. Kramer is the most prominent. At the time of the trip he was about to take over a $300,000-a-year position as director of the Beckman Institute, a leading research center at the University of Illinois with around 1,000 scientists and staff workers and tens of millions of dollars in grant financing.
He is also intense personally — someone who has been challenging himself since early in life; he says he left home when he was a teenager, became an amateur boxer and, later, flew airplanes, rock-climbed and smashed his knee in a “high-speed skiing accident.”
They are driving six hours from Salt Lake City to the river, and they stop at a camping store for last-minute supplies. Mr. Kramer waits out front, checking e-mail on his BlackBerry Curve. This sets off a debate between the believers and skeptics.
Back in the car, Mr. Kramer says he checked his phone because he was waiting for important news: whether his lab has received a $25 million grant from the military to apply neuroscience to the study of ergonomics. He has instructed his staff to send a text message to an emergency satellite phone the group will carry with them.
Mr. Atchley says he doesn’t understand why Mr. Kramer would bother. “The grant will still be there when you get back,” he says.
India attacks resistant superbug study
India’s medical establishment has strongly criticised a study published in a leading UK medical journal that suggests Indian hospitals are the source of a new drug-resistant superbug that is spreading globally and that warns against travel to the subcontinent for medical treatments.
Health officials called the findings published in The Lancet “unscientific” and “economically motivated”, taking particular umbrage at the naming of the gene found to have made bacteria resistant to antibiotics as New Delhi metallo-beta lactamese, or NDM-1.
“Drug resistance is all around the world. To try to . . . make a web around this whole story and say the consequence is that ‘people should not come to India’ smacks of a larger interest somewhere,” said Dr Naresh Trehan, chairman and managing director of Medanta, a 1,250-bed hospital outside New Delhi.
Dr Raman Sardana, secretary of the National Hospital Infection Society of India, asserted that the Lancet study’s design was faulty and did not prove where the bug originated. “We feel this is economically motivated,” he said.
The study said the drug-resistant bacteria were found in patients in India, Pakistan and Bangladesh and some UK residents who had been treated in Indian hospitals.
The authors warned that India’s growing medical tourism business could be a conduit for the superbug’s global spread.
“It is disturbing . . . to read calls in the popular press for UK patients to opt for corrective surgery in India with the aim of saving the [National Health Service] money,” the study said. “Such a proposal might ultimately cost the NHS substantially more than the short-term saving.”
But the Indian health ministry said the inference that the superbug originated in the country was “not supported by scientific data”. It accused the researchers of conflicts of interest, citing funding from the European Union, the Wellcome Trust and Wyeth. The researchers have said that they had no conflict of interest.
Professor Tim Walsh from Cardiff University, the lead researcher on the study, said he was “disappointed” by reports of intimidation against several of his India-based co-authors. He stressed that the Wellcome Trust was a charity and that just 2 per cent of support – a travel grant – came from Wyeth, while a key antibiotic that could kill the superbug had long been off patent.
India’s upmarket private hospital chains – including Apollo Hospitals, Fortis Healthcare and Medanta – have been attracting a growing number of European and US patients seeking treatment at a lower cost, or faster, than at home.
The Confederation of Indian Industry has forecast that India's medical tourism business could generate annual revenues of $2.4bn by 2012.
Health officials called the findings published in The Lancet “unscientific” and “economically motivated”, taking particular umbrage at the naming of the gene found to have made bacteria resistant to antibiotics as New Delhi metallo-beta lactamese, or NDM-1.
“Drug resistance is all around the world. To try to . . . make a web around this whole story and say the consequence is that ‘people should not come to India’ smacks of a larger interest somewhere,” said Dr Naresh Trehan, chairman and managing director of Medanta, a 1,250-bed hospital outside New Delhi.
Dr Raman Sardana, secretary of the National Hospital Infection Society of India, asserted that the Lancet study’s design was faulty and did not prove where the bug originated. “We feel this is economically motivated,” he said.
The study said the drug-resistant bacteria were found in patients in India, Pakistan and Bangladesh and some UK residents who had been treated in Indian hospitals.
The authors warned that India’s growing medical tourism business could be a conduit for the superbug’s global spread.
“It is disturbing . . . to read calls in the popular press for UK patients to opt for corrective surgery in India with the aim of saving the [National Health Service] money,” the study said. “Such a proposal might ultimately cost the NHS substantially more than the short-term saving.”
But the Indian health ministry said the inference that the superbug originated in the country was “not supported by scientific data”. It accused the researchers of conflicts of interest, citing funding from the European Union, the Wellcome Trust and Wyeth. The researchers have said that they had no conflict of interest.
Professor Tim Walsh from Cardiff University, the lead researcher on the study, said he was “disappointed” by reports of intimidation against several of his India-based co-authors. He stressed that the Wellcome Trust was a charity and that just 2 per cent of support – a travel grant – came from Wyeth, while a key antibiotic that could kill the superbug had long been off patent.
India’s upmarket private hospital chains – including Apollo Hospitals, Fortis Healthcare and Medanta – have been attracting a growing number of European and US patients seeking treatment at a lower cost, or faster, than at home.
The Confederation of Indian Industry has forecast that India's medical tourism business could generate annual revenues of $2.4bn by 2012.
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