Nitin Negi, a college student in Ghaziabad near Delhi, has a tune by Shakira, the Colombian singer, as his mobile phone ringtone.
The song “Waka Waka”, the anthem of the football World Cup in South Africa, was a big hit in India and was widely distributed by Bharti Airtel, the country’s largest mobile network.
“I don’t know much about the Commonwealth Games,” Mr Negi said. “But if you ask me about Fifa and football I can really tell you about something.”
With just over two weeks before the start of the Commonwealth Games in India’s capital, its own official song has proved less catchy. AR Rahman, the Indian composer known internationally for his work on the Oscar-winning film Slumdog Millionaire, has been forced to redo the theme he wrote because it was not as energetic as Shakira’s World Cup tune.
A panel of government ministers, appointed by Manmohan Singh, prime minister, to try to bring awry preparations for the games back on track, have approved a new version. An accompanying video, featuring the nation’s sporting heroes performing to the soundtrack, is expected to be released in coming days.
The official stamp of approval was only given after “Oh yaaro, yeh India bula liya” (Friends, we have called people to India) was tightened to give it more punch, and has had next to no airing on the country’s radio and television stations.
As athletes from 71 countries start to arrive in Delhi next week, the theme tune is not alone in having a hasty overhaul. A scurry of activity is under way to complete stadiums, improve the city’s street architecture and test ambitious traffic control systems. The latter entails the dedication of lanes on the capital’s road to the exclusive use of games registered users.
Officials such as Mike Fennell, the head of the Commonwealth Games Federation, have repeatedly warned that time was Delhi’s enemy in its preparations. Alongside a nail-biting finish, preparations have also been dogged by allegations of corruption, mismanagement and poor leadership leaving despairing senior Indian officials doubting the wisdom of the world’s largest democracy holding large sporting events.
In the final rush, television advertisements are exhorting citizen volunteers to step forward to help in initiatives such as a last ditch “Clean Delhi” drive. Organisers have even turned to the vuvuzela, a horn popularised at the World Cup, as part of the official merchandise to drum up African-like enthusiasm.
Delhi residents are braced for disruption. Some are preparing to leave the city for the duration of the event. Schools, colleges and markets will close.
In the absence of a stirring musical anthem, MS Gill, the sports minister, is sounding a little more shrill than either Shakira or Mr Rahman as he does his best to drown out the sceptics. On Friday, he described the city as on a “war footing” to prevent the spread of an outbreak of mosquito-borne Dengue fever and assured that 100,000 security personnel would guarantee “foolproof” protection from terror attack.
Saturday, September 18, 2010
Private equity groups eye stake in Hero Honda
Two US private equity groups are eyeing a strategic stake in India-based Hero Honda – the world’s largest motorcycles maker – as India’s Hero and Japan’s Honda seek to end their joint venture, people familiar with the matter said.
TPG Capital and Carlyle have expressed interest in teaming up with Hero’s Munjal family to buy out Honda’s 26 per cent stake in Hero Honda.
But the deal hinges on the two partners finding a consensual way to end their venture, another source said.
Another person familiar with the matter said that the Japanese group was looking for a high offer to quit the venture.
Hero Honda, which was set up in 1984, has a market capitalisation of about Rs348.5bn ($7.6bn), valuing Honda’s stake at nearly $2bn.
“Hero will need a strategic investor to complete the deal, they don’t have the cash to buy [the Honda stake] on their own,” said an Indian private equity executive who did not want to be named.
The volume of private equity deals in Asia in the first six months of this year has reached more than $11bn, almost treble last year’s volume during the same period and the highest seen since 2008, according to figures from Dealogic, the data company.
In particular India’s fast-growing market has attracted several buy-out groups sitting on large piles of cash, said V. Jayasankar, head of private equity at Kotak Investment Banking, who estimates that the total volume of private equity deals in the country this year could top $8bn.
Honda, Japan’s second-largest automaker, and the Munjal family have been in talks to end their partnership for several months, people close to the group said.
Honda wants to exit Hero Honda as it seeks to build up its 100 per cent owned Indian motorcycle subsidiary, which made 1.55m units last year, at the expense of the larger joint venture, which made 4.9m units.
It is believed that the Delhi-based Munjal family, which owns Hero, wants to end the joint venture because of disagreements with the Japanese group over expansion plans.
Hero Honda’s three existing Indian factories are already operating at full capacity, cranking out around 400,000 two-wheelers every month.
Waiting periods for the most popular products are growing and executives at the company are carrying out feasibility studies and scouting potential locations in 10 states across India, for building a fourth factory.
“The Munjals want Honda out of the business to expand their operations,” said one person close to the deal.
TPG Capital and Carlyle have expressed interest in teaming up with Hero’s Munjal family to buy out Honda’s 26 per cent stake in Hero Honda.
But the deal hinges on the two partners finding a consensual way to end their venture, another source said.
Another person familiar with the matter said that the Japanese group was looking for a high offer to quit the venture.
Hero Honda, which was set up in 1984, has a market capitalisation of about Rs348.5bn ($7.6bn), valuing Honda’s stake at nearly $2bn.
“Hero will need a strategic investor to complete the deal, they don’t have the cash to buy [the Honda stake] on their own,” said an Indian private equity executive who did not want to be named.
The volume of private equity deals in Asia in the first six months of this year has reached more than $11bn, almost treble last year’s volume during the same period and the highest seen since 2008, according to figures from Dealogic, the data company.
In particular India’s fast-growing market has attracted several buy-out groups sitting on large piles of cash, said V. Jayasankar, head of private equity at Kotak Investment Banking, who estimates that the total volume of private equity deals in the country this year could top $8bn.
Honda, Japan’s second-largest automaker, and the Munjal family have been in talks to end their partnership for several months, people close to the group said.
Honda wants to exit Hero Honda as it seeks to build up its 100 per cent owned Indian motorcycle subsidiary, which made 1.55m units last year, at the expense of the larger joint venture, which made 4.9m units.
It is believed that the Delhi-based Munjal family, which owns Hero, wants to end the joint venture because of disagreements with the Japanese group over expansion plans.
Hero Honda’s three existing Indian factories are already operating at full capacity, cranking out around 400,000 two-wheelers every month.
Waiting periods for the most popular products are growing and executives at the company are carrying out feasibility studies and scouting potential locations in 10 states across India, for building a fourth factory.
“The Munjals want Honda out of the business to expand their operations,” said one person close to the deal.
Asian Currencies Rise for a Third Week, Led by India's Rupee, on Inflows
Asian currencies strengthened for a third week, led by India’s rupee, as global investors pumped more funds into the world’s fastest-growing economies.
The Bloomberg-JPMorgan Asia Dollar Index climbed to its highest in more than two years month and the MSCI Asia Pacific Index of shares advanced as stock markets in India, South Korea and Taiwan each attracted more than $1 billion from abroad. China’s yuan had its best week since May 2008 as the U.S. called for faster appreciation and government reports showed pickups in industrial output, retail sales and inflation.
“The trend remains for Asian currencies to strengthen,” said Tohru Nishihama, economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Funds will continue to flow into the region as the economic growth outlook in Asia is solid and stocks in the region have been rising.”
The rupee appreciated 1.3 percent this week to 45.845 per dollar in Mumbai, according to data compiled by Bloomberg. The yuan was 0.7 percent stronger at 6.7235, the Korean won climbed 0.4 percent to 1,160.70 and Taiwan’s dollar advanced 0.5 percent to NT$31.739. Thailand’s baht rose 0.4 percent to 30.72, a seventh straight weekly gain.
The Asia Dollar Index, which tracks the region’s 10 most used currencies excluding the yen, added 0.3 percent and the MSCI Asia Pacific Index climbed 2.2 percent. Developing economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in advanced countries, the International Monetary Fund forecast in July.
Stock Inflows
Equity funds investing in Asia excluding Japan recorded the highest inflows in seven weeks during the period through Sept. 15, according to EPFR Global. The trend was “underpinned by renewed faith in the growth stories of the region’s heavyweights, China and India,” the research firm said.
India’s central bank this week increased interest rates for the fifth time in 2010 and Chinese Premier Wen Jiabao said his nation’s economy, the world’s second-largest, was in “good shape.” U.S. Treasury Secretary Timothy F. Geithner called for “significant” gains in the yuan, which yesterday touched the strongest level since official and market exchange rates were unified at the end of 1993.
The Philippine peso dropped 0.2 percent this week to 44.188 per dollar after central bank Governor Amando Tetangco said on Sept. 14 that policy makers were monitoring gains and signaled action may be taken to curb volatility. Japan unilaterally sold the yen on Sept. 15 in an attempt to halt appreciation after the currency climbed to a 15-year high versus the dollar.
“There’s a possibility that the rest of Asia will try to do the same to keep their exports competitive,” said Mohd Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur.
Malaysia’s ringgit rose 0.2 percent this week to 3.1020 per dollar, having reached a 13-year high of 3.0969 on Sept. 13. The Singapore dollar appreciated 0.5 percent to S$1.3340, a fifth straight weekly gain.
The Bloomberg-JPMorgan Asia Dollar Index climbed to its highest in more than two years month and the MSCI Asia Pacific Index of shares advanced as stock markets in India, South Korea and Taiwan each attracted more than $1 billion from abroad. China’s yuan had its best week since May 2008 as the U.S. called for faster appreciation and government reports showed pickups in industrial output, retail sales and inflation.
“The trend remains for Asian currencies to strengthen,” said Tohru Nishihama, economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Funds will continue to flow into the region as the economic growth outlook in Asia is solid and stocks in the region have been rising.”
The rupee appreciated 1.3 percent this week to 45.845 per dollar in Mumbai, according to data compiled by Bloomberg. The yuan was 0.7 percent stronger at 6.7235, the Korean won climbed 0.4 percent to 1,160.70 and Taiwan’s dollar advanced 0.5 percent to NT$31.739. Thailand’s baht rose 0.4 percent to 30.72, a seventh straight weekly gain.
The Asia Dollar Index, which tracks the region’s 10 most used currencies excluding the yen, added 0.3 percent and the MSCI Asia Pacific Index climbed 2.2 percent. Developing economies in Asia will expand 9.2 percent in 2010, outpacing growth of 2.6 percent in advanced countries, the International Monetary Fund forecast in July.
Stock Inflows
Equity funds investing in Asia excluding Japan recorded the highest inflows in seven weeks during the period through Sept. 15, according to EPFR Global. The trend was “underpinned by renewed faith in the growth stories of the region’s heavyweights, China and India,” the research firm said.
India’s central bank this week increased interest rates for the fifth time in 2010 and Chinese Premier Wen Jiabao said his nation’s economy, the world’s second-largest, was in “good shape.” U.S. Treasury Secretary Timothy F. Geithner called for “significant” gains in the yuan, which yesterday touched the strongest level since official and market exchange rates were unified at the end of 1993.
The Philippine peso dropped 0.2 percent this week to 44.188 per dollar after central bank Governor Amando Tetangco said on Sept. 14 that policy makers were monitoring gains and signaled action may be taken to curb volatility. Japan unilaterally sold the yen on Sept. 15 in an attempt to halt appreciation after the currency climbed to a 15-year high versus the dollar.
“There’s a possibility that the rest of Asia will try to do the same to keep their exports competitive,” said Mohd Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur.
Malaysia’s ringgit rose 0.2 percent this week to 3.1020 per dollar, having reached a 13-year high of 3.0969 on Sept. 13. The Singapore dollar appreciated 0.5 percent to S$1.3340, a fifth straight weekly gain.
Toyota Settles Over California Deaths
Toyota has reached an out-of-court settlement with relatives of a family killed when the Lexus sedan they were driving sped out of control and crashed, an accident that put a national spotlight on the sudden acceleration problems that later prompted the automaker to recall millions of vehicles.
Toyota confirmed the settlement Saturday in a statement but did not provide the amount of the settlement or any other details.
“Through mutual respect and cooperation we were able to resolve this matter without the need for litigation,” the statement said.
The crash, which happened in August 2009 near San Diego, was documented with gripping evidence that drew nationwide attention. A backseat passenger called 911 to say that the driver, an off-duty California Highway Patrol officer named Mark Saylor, was unable to stop the 2009 Lexus E350, which went as fast as 120 miles per hour on a freeway before hitting another vehicle and landing in a ravine.
Mr. Saylor, 45; his wife, Cleofe, 45; and their 13-year-old daughter Mahala died, along with Cleofe Saylor’s brother, Chris Lastrella, 39. It was Mr. Lastrella who told the 911 operator that the car’s pedal was stuck and ended the call by saying, “Hold on and pray.” The car was on loan from the nearby Bob Baker Lexus dealership while Mr. Saylor’s car was being repaired.
The settlement, according to Toyota’s statement, resolves product liability claims by the Saylor and Lastrella families against Toyota and the dealership. The families have separate claims against the dealership that were not covered.
Two months after the crash, Toyota began a recall that eventually covered 5.4 million vehicles globally in which the automaker said the driver-side floor mat could trap the accelerator pedal. It later recalled 4.5 million vehicles in which the pedals themselves were determined to be defective. Some vehicles were covered by both recalls, for a total of about eight million vehicles.
In February, Toyota’s chief executive, Akio Toyoda, apologized to Congress and to the Saylors’ family, saying he would “do everything in my power to ensure such a tragedy never happens again.”
The recalls hurt Toyota’s sales and damaged its reputation for building high-quality, reliable vehicles. Thousands of complaints poured in to federal regulators from drivers who said their Toyota-made vehicles accelerated suddenly. In April, the government fined Toyota a record $16.4 million for waiting too long to initiate a recall. The complaints are tied to at least 93 deaths.
Toyota is continuing to defend itself against class-action lawsuits filed by Toyota owners and relatives of people who died in crashes alleged to have resulted from sudden acceleration. The company could face billions of dollars in liabilities if it loses the cases.
Preliminary results released in August from the National Highway Traffic Safety Administration’s investigation into the sudden-acceleration complaints revealed that in many of the crashes the vehicles’ on-board data recorders showed no evidence that the drivers had used the brakes. The findings suggest that some drivers were mistakenly pressing on the accelerator pedal instead of the brake.
Toyota confirmed the settlement Saturday in a statement but did not provide the amount of the settlement or any other details.
“Through mutual respect and cooperation we were able to resolve this matter without the need for litigation,” the statement said.
The crash, which happened in August 2009 near San Diego, was documented with gripping evidence that drew nationwide attention. A backseat passenger called 911 to say that the driver, an off-duty California Highway Patrol officer named Mark Saylor, was unable to stop the 2009 Lexus E350, which went as fast as 120 miles per hour on a freeway before hitting another vehicle and landing in a ravine.
Mr. Saylor, 45; his wife, Cleofe, 45; and their 13-year-old daughter Mahala died, along with Cleofe Saylor’s brother, Chris Lastrella, 39. It was Mr. Lastrella who told the 911 operator that the car’s pedal was stuck and ended the call by saying, “Hold on and pray.” The car was on loan from the nearby Bob Baker Lexus dealership while Mr. Saylor’s car was being repaired.
The settlement, according to Toyota’s statement, resolves product liability claims by the Saylor and Lastrella families against Toyota and the dealership. The families have separate claims against the dealership that were not covered.
Two months after the crash, Toyota began a recall that eventually covered 5.4 million vehicles globally in which the automaker said the driver-side floor mat could trap the accelerator pedal. It later recalled 4.5 million vehicles in which the pedals themselves were determined to be defective. Some vehicles were covered by both recalls, for a total of about eight million vehicles.
In February, Toyota’s chief executive, Akio Toyoda, apologized to Congress and to the Saylors’ family, saying he would “do everything in my power to ensure such a tragedy never happens again.”
The recalls hurt Toyota’s sales and damaged its reputation for building high-quality, reliable vehicles. Thousands of complaints poured in to federal regulators from drivers who said their Toyota-made vehicles accelerated suddenly. In April, the government fined Toyota a record $16.4 million for waiting too long to initiate a recall. The complaints are tied to at least 93 deaths.
Toyota is continuing to defend itself against class-action lawsuits filed by Toyota owners and relatives of people who died in crashes alleged to have resulted from sudden acceleration. The company could face billions of dollars in liabilities if it loses the cases.
Preliminary results released in August from the National Highway Traffic Safety Administration’s investigation into the sudden-acceleration complaints revealed that in many of the crashes the vehicles’ on-board data recorders showed no evidence that the drivers had used the brakes. The findings suggest that some drivers were mistakenly pressing on the accelerator pedal instead of the brake.
Friday, September 17, 2010
Japan’s Bonds Rise Most This Year on Kan Victory, Intervention
Sept. 18 (Bloomberg) -- Japanese bonds completed the biggest weekly advance in 10 months as concern eased that a new government would increase debt sales and amid speculation funds created by currency intervention would flow into debt securities.
Benchmark 10-year yields touched a two-week low after Prime Minister Naoto Kan was re-elected as the head of the ruling party by defeating rival Ichiro Ozawa, who had advocated increased government spending. The Bank of Japan refrained from removing funds in the financial system after selling yen for the first time since 2004, leaving deposits held by institutions there at the highest level this month.
“Kan’s re-election will likely bring a sense of ease over Japan’s fiscal problem, prompting demand for bonds,” said Yasunari Ueno, chief market economist at Tokyo-based Mizuho Securities Co., a unit of Japan’s second-largest bank.
The yield on the benchmark 10-year security dropped eight basis points to 1.07 percent in Tokyo in the five days ended Sept. 17, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. That’s the biggest weekly slide since the period ended Nov. 13. The 1 percent bond due in September 2020 added 0.713 yen to 99.368 yen.
Ten-year bond futures for December delivery rose 0.89 to 142.12 at the Tokyo Stock Exchange.
Kan retained his job after defeating Ozawa, a former secretary general of the ruling Democratic Party of Japan. Ozawa, who heads the DPJ’s largest faction, had said the government may have to issue more bonds for spending measures to boost the economy.
Okada Appointment
Katsuya Okada, a former foreign minister, was named the DPJ’s new secretary-general, the No. 2 spot in the party.
“Okada is distant from Ozawa, and his appointment signifies Ozawa’s dissipating influence over the ruling party,” Shinji Nomura, chief debt strategist at Tokyo-based Nikko Cordial Securities Inc., wrote in a report. “That has reduced concern even further that bonds will fall.”
Japan unilaterally sold the yen on Sept. 15 after it climbed to a 15-year high of 82.88 per dollar. BOJ board member Tadao Noda said the central bank will use intervention funds to provide liquidity.
“Unsterilized intervention increases money in the market, so it’s effectively monetary easing,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “With more money flowing into the market, both bonds and stocks typically go up.”
Sterilization refers to a situation where central banks seek to neutralize the impact of currency sales by draining funds from the market through bill auctions.
Benchmark 10-year yields touched a two-week low after Prime Minister Naoto Kan was re-elected as the head of the ruling party by defeating rival Ichiro Ozawa, who had advocated increased government spending. The Bank of Japan refrained from removing funds in the financial system after selling yen for the first time since 2004, leaving deposits held by institutions there at the highest level this month.
“Kan’s re-election will likely bring a sense of ease over Japan’s fiscal problem, prompting demand for bonds,” said Yasunari Ueno, chief market economist at Tokyo-based Mizuho Securities Co., a unit of Japan’s second-largest bank.
The yield on the benchmark 10-year security dropped eight basis points to 1.07 percent in Tokyo in the five days ended Sept. 17, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. That’s the biggest weekly slide since the period ended Nov. 13. The 1 percent bond due in September 2020 added 0.713 yen to 99.368 yen.
Ten-year bond futures for December delivery rose 0.89 to 142.12 at the Tokyo Stock Exchange.
Kan retained his job after defeating Ozawa, a former secretary general of the ruling Democratic Party of Japan. Ozawa, who heads the DPJ’s largest faction, had said the government may have to issue more bonds for spending measures to boost the economy.
Okada Appointment
Katsuya Okada, a former foreign minister, was named the DPJ’s new secretary-general, the No. 2 spot in the party.
“Okada is distant from Ozawa, and his appointment signifies Ozawa’s dissipating influence over the ruling party,” Shinji Nomura, chief debt strategist at Tokyo-based Nikko Cordial Securities Inc., wrote in a report. “That has reduced concern even further that bonds will fall.”
Japan unilaterally sold the yen on Sept. 15 after it climbed to a 15-year high of 82.88 per dollar. BOJ board member Tadao Noda said the central bank will use intervention funds to provide liquidity.
“Unsterilized intervention increases money in the market, so it’s effectively monetary easing,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “With more money flowing into the market, both bonds and stocks typically go up.”
Sterilization refers to a situation where central banks seek to neutralize the impact of currency sales by draining funds from the market through bill auctions.
India moves towards modernising futures trading
The prospect of India’s commodities exchanges trading options, a move intended to boost liquidity in markets and stabilise prices, has taken a step forward after the cabinet approved proposed legislation.
The government said on Thursday it would introduce legislation in parliament that would permit the trading of options in goods and in commodity derivatives. It would also give the Forward Markets Commission, which regulates four national exchanges and 16 regional ones, greater autonomy and powers to regulate the market.
“New products like options will be allowed in the commodity market,” a statement issued by the government said after the cabinet, headed by prime minister Manmohan Singh, approved amendments to a regulatory bill. “This will benefit various stakeholders including the farmers.”
The bill still has to clear parliament, where issues relating to agricultural commodities can often face stiff debate. The amendment relating to forward contracts had first been introduced to parliament four years ago. In the past there has been widespread mistrust that futures inflate prices, a sensitive issue at a time of high food inflation and low agricultural productivity.
India first allowed futures contracts in commodities trading in 2003. While New Delhi is taking further steps to modernise its markets, restrictions remain in place banning futures in some agricultural commodities, such as rice, for fear that they might encourage speculation and higher food prices. A ban on wheat futures was lifted last year; restrictions on sugar futures are expected to be lifted next month.
Analysts tracking commodities in India said the changes, if passed by parliament, would professionalise the market, improve its regulation and reduce price speculation. The reforms also promise to unlock greater private investment in India’s commodity exchanges by paving the way for the demutualisation of existing commodities exchanges.
Last month, the FMC said the Reliance Exchange Net, owned by Anil Ambani, planned to buy a stake in the Indian Commodity Exchange, ICEX, a metals bourse launched last year, from the Indiabulls group. Jaypee Capital, a Mumbai-based financial services company, has also expressed a desire to buy 26 per cent in the National Commodity and Derivatives Exchange (NCDEX), an agri-bourse.
The FMC regulates commodity futures trading on four national and 16 regional bourses.
“The government’s move will have a significant and positive impact for the commodities trading community,” said Amar Singh, head of commodities research at Aditya Birla Money, a broking firm in Mumbai.
“By opening up the trading of commodity options, we will see more professional players, like banks and mutual funds, enter the market.”
A senior commodities analyst at Angel Broking, a Mumbai-based stockbroker, said farmers would also benefit from the new rules.
“The move by the union cabinet will be appreciated by farmers as it will make life easier for them to predict prices and manage their risk better,” he said.
The government said on Thursday it would introduce legislation in parliament that would permit the trading of options in goods and in commodity derivatives. It would also give the Forward Markets Commission, which regulates four national exchanges and 16 regional ones, greater autonomy and powers to regulate the market.
“New products like options will be allowed in the commodity market,” a statement issued by the government said after the cabinet, headed by prime minister Manmohan Singh, approved amendments to a regulatory bill. “This will benefit various stakeholders including the farmers.”
The bill still has to clear parliament, where issues relating to agricultural commodities can often face stiff debate. The amendment relating to forward contracts had first been introduced to parliament four years ago. In the past there has been widespread mistrust that futures inflate prices, a sensitive issue at a time of high food inflation and low agricultural productivity.
India first allowed futures contracts in commodities trading in 2003. While New Delhi is taking further steps to modernise its markets, restrictions remain in place banning futures in some agricultural commodities, such as rice, for fear that they might encourage speculation and higher food prices. A ban on wheat futures was lifted last year; restrictions on sugar futures are expected to be lifted next month.
Analysts tracking commodities in India said the changes, if passed by parliament, would professionalise the market, improve its regulation and reduce price speculation. The reforms also promise to unlock greater private investment in India’s commodity exchanges by paving the way for the demutualisation of existing commodities exchanges.
Last month, the FMC said the Reliance Exchange Net, owned by Anil Ambani, planned to buy a stake in the Indian Commodity Exchange, ICEX, a metals bourse launched last year, from the Indiabulls group. Jaypee Capital, a Mumbai-based financial services company, has also expressed a desire to buy 26 per cent in the National Commodity and Derivatives Exchange (NCDEX), an agri-bourse.
The FMC regulates commodity futures trading on four national and 16 regional bourses.
“The government’s move will have a significant and positive impact for the commodities trading community,” said Amar Singh, head of commodities research at Aditya Birla Money, a broking firm in Mumbai.
“By opening up the trading of commodity options, we will see more professional players, like banks and mutual funds, enter the market.”
A senior commodities analyst at Angel Broking, a Mumbai-based stockbroker, said farmers would also benefit from the new rules.
“The move by the union cabinet will be appreciated by farmers as it will make life easier for them to predict prices and manage their risk better,” he said.
IPO marks milestone for Indian ‘cram’ schools
Career Point Infosytems, a top Indian “cram” school, has launched an initial public offering, the first public capital-raising from the booming coaching centre industry, which caters to more than 1m young Indians vying for admission to top universities each year.
Founded in 1993 in a garage in the small Rajasthani town of Kota, Career Point had revenues of Rs658m ($14.3m) and profits of Rs177m last year from more than 31,000 students enrolled in its various test preparation classes.
The company – founded by Pramod Maheshwari, a graduate of the prestigious Indian Institute of Technology Delhi – aims to raise $25m for about 20 per cent of the equity, in a deal that would value the firm at about Rs5.6bn.
The funds will be used to expand operations, including building a residential campus for up to 3,000 of its students in Kota, now India’s national cram school hub.
“Our business is to equip them with knowledge and expertise to write the tests,” Mr Maheshawari told the Financial Times from Mumbai, where the IPO was launched on Thursday. “We believe our services definitely add value to the students.”
With up to 1m young Indians competing for just a few thousand places in top state-run engineering, business and medical colleges every year, coaching centres that prepare students for the exams have emerged as lucrative businesses across India.
The main focus of the schools is preparing students for the IIT-JEE, the six-hour admission test of the Indian Institutes of Technology, the country’s top engineering colleges. Last year, around 470,000 young people competed for just 10,000 places in one of the country’s 15 IITs.
Top cram schools such as Career Point, and rivals Kota-based Bansal’s Classes and New Delhi-based FIT-JEE, charge up to Rs75,000 a year for gruelling tuition classes of up to five hours a day, and regular practice tests.
Career Point’s Kota coaching centre – which draws students from across the country – has classrooms, computer laboratories where students can replay lectures on any topic, and a long row of “problem-solving desks,” where students can approach faculty members at any time with academic questions.
The lucrative cram school businesses have attracted the attention of private equity. Franklin Templeton India’s private equity arm last year invested nearly $11m in Career Point, which has also been backed by N.S. Raghavan, the co-founder of Infosys.
Mumbai-based Matrix Partners India has invested around $21m in Career Point’s rival test preparation company FIIT-JEE, which is also expected to list on the Bombay Stock Exchange soon.
Founded in 1993 in a garage in the small Rajasthani town of Kota, Career Point had revenues of Rs658m ($14.3m) and profits of Rs177m last year from more than 31,000 students enrolled in its various test preparation classes.
The company – founded by Pramod Maheshwari, a graduate of the prestigious Indian Institute of Technology Delhi – aims to raise $25m for about 20 per cent of the equity, in a deal that would value the firm at about Rs5.6bn.
The funds will be used to expand operations, including building a residential campus for up to 3,000 of its students in Kota, now India’s national cram school hub.
“Our business is to equip them with knowledge and expertise to write the tests,” Mr Maheshawari told the Financial Times from Mumbai, where the IPO was launched on Thursday. “We believe our services definitely add value to the students.”
With up to 1m young Indians competing for just a few thousand places in top state-run engineering, business and medical colleges every year, coaching centres that prepare students for the exams have emerged as lucrative businesses across India.
The main focus of the schools is preparing students for the IIT-JEE, the six-hour admission test of the Indian Institutes of Technology, the country’s top engineering colleges. Last year, around 470,000 young people competed for just 10,000 places in one of the country’s 15 IITs.
Top cram schools such as Career Point, and rivals Kota-based Bansal’s Classes and New Delhi-based FIT-JEE, charge up to Rs75,000 a year for gruelling tuition classes of up to five hours a day, and regular practice tests.
Career Point’s Kota coaching centre – which draws students from across the country – has classrooms, computer laboratories where students can replay lectures on any topic, and a long row of “problem-solving desks,” where students can approach faculty members at any time with academic questions.
The lucrative cram school businesses have attracted the attention of private equity. Franklin Templeton India’s private equity arm last year invested nearly $11m in Career Point, which has also been backed by N.S. Raghavan, the co-founder of Infosys.
Mumbai-based Matrix Partners India has invested around $21m in Career Point’s rival test preparation company FIIT-JEE, which is also expected to list on the Bombay Stock Exchange soon.
The Illusion of Pension Savings
Earlier this year, Illinois said it had found a way to save billions of dollars. It would slash the pensions of workers it had not yet hired. The real-world savings would not materialize for decades, of course, but thanks to an actuarial trick, the state could start counting the savings this year and use it to help balance its budget.
Actuaries, including some who serve on the profession’s governing boards, got wind of what Illinois was doing and began to look more closely. Many thought Illinois was using an unorthodox maneuver to starve its pension fund of billions of dollars, while papering over a widening gap between what it owed and how much it had. Alarmed, they began looking for a way to discourage Illinois’s method before other states could adopt it.
They are too late. The maneuver, and techniques that have similar effects, are already in use in Rhode Island, Texas, Ohio, Arkansas and a number of other places, allowing those states to harvest savings today by imposing cuts on workers in the future.
Texas saved millions of dollars this year after raising its retirement age for future hires and barring them from counting unused sick leave in their pensions. More savings will appear in coming years. Rhode Island also raised its retirement age for future retirees last year, after being told it could save $90 million in the first year alone.
Actuaries have been using the method for years, it turns out, but nobody noticed, in part because official documents usually describe it in language few can understand.
The technique is fairly innocuous in normal times, allowing governments to smooth out their labor costs over many years. But it becomes much riskier when pension funds have big shortfalls, when they need several decades to pay down their losses and when they are cutting benefits for future workers — precisely the conditions that exist today.
“In a plan that is not well funded, I wouldn’t recommend it,” said Norm Jones, chief actuary for Gabriel Roeder Smith & Company, an actuarial firm that helps Illinois and a number of other states that have adopted the method. He said the firm’s actuaries informed officials of the risks and it was the officials’ decision to use the technique.
Struggling states and cities need to save money, but they run into legal problems if they tamper with the pensions their current workers are building up year by year. So most places have opted to let current workers and retirees go unscathed. Colorado, Minnesota and South Dakota are the exceptions, dialing back cost-of-living increases for people who have already retired. All three states have reaped meaningful savings right away, and all three are being sued.
Cuts for workers not yet hired do not save much money in the present — but that’s where actuaries can work their magic. They capture the future savings for use today by assuming, in essence, that 100 percent of today’s work force is already earning tomorrow’s skimpier benefits. When used in actuarial calculations, that assumption has a powerful effect. It reduces the amount a government must put into its workers’ pension fund every year.
That saves the government money. But it undermines the pension fund, which must still pay the richer benefits of today’s retirees. And because the calculations are esoteric, it is hard for anyone except a seasoned actuary to see what is going on.
“Responsible funding methods do not work this way,” said Jeremy Gold, an independent actuary in New York who has been outspoken about the distortions built into pension numbers. He said the technique was much like the mortgages with very low teaser rates that proliferated during the housing bubble.
“You aren’t paying down your principal,” Mr. Gold said. “You’re not even keeping up with the interest. You are actually increasing your debt every year.”
Dubious pension numbers in Illinois are not easily shrugged off after a warning shot fired by the Securities and Exchange Commission in August. The S.E.C. accused New Jersey of securities fraud, saying the state had manipulated its pension numbers to look like a better credit risk, while selling some $26 billion worth of bonds. The S.E.C. had never before taken action against a state. Now the commission is flexing its muscles, unleashing a team of specialized enforcement officials to look for more misleading public pension numbers.
Actuaries, including some who serve on the profession’s governing boards, got wind of what Illinois was doing and began to look more closely. Many thought Illinois was using an unorthodox maneuver to starve its pension fund of billions of dollars, while papering over a widening gap between what it owed and how much it had. Alarmed, they began looking for a way to discourage Illinois’s method before other states could adopt it.
They are too late. The maneuver, and techniques that have similar effects, are already in use in Rhode Island, Texas, Ohio, Arkansas and a number of other places, allowing those states to harvest savings today by imposing cuts on workers in the future.
Texas saved millions of dollars this year after raising its retirement age for future hires and barring them from counting unused sick leave in their pensions. More savings will appear in coming years. Rhode Island also raised its retirement age for future retirees last year, after being told it could save $90 million in the first year alone.
Actuaries have been using the method for years, it turns out, but nobody noticed, in part because official documents usually describe it in language few can understand.
The technique is fairly innocuous in normal times, allowing governments to smooth out their labor costs over many years. But it becomes much riskier when pension funds have big shortfalls, when they need several decades to pay down their losses and when they are cutting benefits for future workers — precisely the conditions that exist today.
“In a plan that is not well funded, I wouldn’t recommend it,” said Norm Jones, chief actuary for Gabriel Roeder Smith & Company, an actuarial firm that helps Illinois and a number of other states that have adopted the method. He said the firm’s actuaries informed officials of the risks and it was the officials’ decision to use the technique.
Struggling states and cities need to save money, but they run into legal problems if they tamper with the pensions their current workers are building up year by year. So most places have opted to let current workers and retirees go unscathed. Colorado, Minnesota and South Dakota are the exceptions, dialing back cost-of-living increases for people who have already retired. All three states have reaped meaningful savings right away, and all three are being sued.
Cuts for workers not yet hired do not save much money in the present — but that’s where actuaries can work their magic. They capture the future savings for use today by assuming, in essence, that 100 percent of today’s work force is already earning tomorrow’s skimpier benefits. When used in actuarial calculations, that assumption has a powerful effect. It reduces the amount a government must put into its workers’ pension fund every year.
That saves the government money. But it undermines the pension fund, which must still pay the richer benefits of today’s retirees. And because the calculations are esoteric, it is hard for anyone except a seasoned actuary to see what is going on.
“Responsible funding methods do not work this way,” said Jeremy Gold, an independent actuary in New York who has been outspoken about the distortions built into pension numbers. He said the technique was much like the mortgages with very low teaser rates that proliferated during the housing bubble.
“You aren’t paying down your principal,” Mr. Gold said. “You’re not even keeping up with the interest. You are actually increasing your debt every year.”
Dubious pension numbers in Illinois are not easily shrugged off after a warning shot fired by the Securities and Exchange Commission in August. The S.E.C. accused New Jersey of securities fraud, saying the state had manipulated its pension numbers to look like a better credit risk, while selling some $26 billion worth of bonds. The S.E.C. had never before taken action against a state. Now the commission is flexing its muscles, unleashing a team of specialized enforcement officials to look for more misleading public pension numbers.
Thursday, September 16, 2010
India’s NSE offers market data on mobiles
The National Stock Exchange of India on Wednesday took a further step towards launching share trading on mobile phones by offering free market data via cellular phone to traders who sign up on its website.
The move comes after the Bombay Stock Exchange on Friday said it had received approval from the Securities and Exchange Board of India, the market regulator, for internet-based trading via mobile handsets. It said it would launch “soon”.
India is the world’s fastest growing large mobile phone market by user numbers and the introduction of third-generation cellular services could make it easier for investors to access the markets.
The NSE is expected to launch mobile phone trading next month but before any trading can start users must first register with a broker. As a first step it is also offering data by phone.
It said market data could be accessed for equities, derivatives, currency or exchange-traded funds and that “streaming data” on mobiles would be live.
“This facility can be activated by anyone who has a mobile with a GPRS connection, which in effect covers nearly 99 per cent of mobile users, including those who don’t have high-end mobiles,” the NSE said.
“This also means that an individual in a rural or semiurban area … can look at market data and take a decision on whether it is wise to start trading or not.”
The exchange already has 12m users registered through brokers, of which 5m actually trade.
Divya Lahiri, exchange spokeswoman, said guidelines for brokers and clients will be issued this week.
The market data can be accessed from Wednesday by all brokers and registered clients. NSE will start sending SMS, or text, messages to active clients to download the application “in a phased manner,” it said.
The move comes after the Bombay Stock Exchange on Friday said it had received approval from the Securities and Exchange Board of India, the market regulator, for internet-based trading via mobile handsets. It said it would launch “soon”.
India is the world’s fastest growing large mobile phone market by user numbers and the introduction of third-generation cellular services could make it easier for investors to access the markets.
The NSE is expected to launch mobile phone trading next month but before any trading can start users must first register with a broker. As a first step it is also offering data by phone.
It said market data could be accessed for equities, derivatives, currency or exchange-traded funds and that “streaming data” on mobiles would be live.
“This facility can be activated by anyone who has a mobile with a GPRS connection, which in effect covers nearly 99 per cent of mobile users, including those who don’t have high-end mobiles,” the NSE said.
“This also means that an individual in a rural or semiurban area … can look at market data and take a decision on whether it is wise to start trading or not.”
The exchange already has 12m users registered through brokers, of which 5m actually trade.
Divya Lahiri, exchange spokeswoman, said guidelines for brokers and clients will be issued this week.
The market data can be accessed from Wednesday by all brokers and registered clients. NSE will start sending SMS, or text, messages to active clients to download the application “in a phased manner,” it said.
U.S. to Sell G.M. Stake Over Time
DETROIT — He is the fourth chief executive at General Motors in less than 18 months, but Daniel F. Akerson set out Thursday to show there is now stability at the top of the nation’s biggest automaker — and that his ascension signals a clear break with the past.
“I’m not here for the short term,” Mr. Akerson said at a news briefing at the company’s headquarters here.
In his first extended public comments since taking over on Sept. 1, Mr. Akerson said he was “the right guy at the right time” to rebuild G.M. in the aftermath of the government bailout.
“The days of the past are in the past,” he said. “I’m looking out the front windshield.”
Mr. Akerson even distanced himself somewhat from his immediate predecessor, Edward E. Whitacre Jr., who held the chief executive job for just nine months and will step down in January as board chairman.
Mr. Whitacre, for example, said in August that he wanted the Treasury Department to sell the government’s entire stake in G.M. in the company’s initial public stock offering, which is expected later this year.
Not going to happen, said Mr. Akerson. “I don’t think that’s going to be done in one fell swoop,” he said, suggesting it would take several years. “I think that’s unrealistic.”
How long it takes for the government to divest the rest of its holdings will, in part, be determined by G.M.’s success, Mr. Akerson said. The company has posted back-to-back profitable quarters this year, but he said longer term performance was critical to any stock sales by the government.
“We understand that two quarters a trend does not make,” he said. “We need to post numbers consistently.”
He also differed with Mr. Whitacre on whether some consumers were avoiding G.M. cars because of the stigma of government ownership. Federal taxpayers own 61 percent of the company, and Mr. Whitacre had said G.M. was hurt by its image as “Government Motors.”
Mr. Akerson, for his part, put a much rosier perspective on how Americans perceived the $50 billion government rescue. “I think there are a whole lot of people who want this company to succeed,” he said.
The 61-year-old former telecommunications executive is an unknown quantity in the auto industry.
He was among several new directors chosen for G.M.’s board by the Treasury in July 2009, and then was a surprise choice by the board last month to take over as chief executive. On Jan. 1, Mr. Akerson will replace Mr. Whitacre as board chairman.
It has been a meteoric rise for Mr. Akerson, who inherits a company that wants to restore its reputation as a world-class automaker.
As G.M. plans its stock offering, Mr. Akerson has been extolling the company’s strengths, both aspirational and real. G.M.’s products, he suggested on Thursday, “are second to none,” and its global manufacturing structure is the “envy of the industry.”
A former Navy officer and a hardy football fan, Mr. Akerson portrayed himself as a leader who could shift G.M.’s productivity into a higher gear.
“To play offense, whether it’s in sports or in the military, speed is of the essence,” he said. “We’ll shift from being a defensive player to an offensive player.”
He conceded he had much to learn about automotive design and manufacturing, but said he was eager to put his stamp on the company’s strategic direction.
“Any time you open your eyes and open your ears you learn something,” he said. “I did not get to where I am in life by being deaf, dumb and blind.”
That said, Mr. Akerson has a challenge ahead convincing skeptics that G.M. is on firm footing after the most tumultuous two years in its history.
The company came to Washington seeking emergency financial help in the fall of 2008, and was then shepherded through bankruptcy with the aid of government loans.
Its longtime chief executive, Rick Wagoner, was asked to resign by the Treasury in March 2009. Fritz Henderson, Mr. Wagoner’s successor and another tenured G.M. executive, was then forced out by the company’s board and replaced by Mr. Whitacre nine months later.
“Four C.E.O.’s in less than 18 months has to be confusing to rank and file employees at G.M.,” said Jeffrey A. Sonnenfeld, senior associate dean at the Yale University School of Management.
Even Mr. Akerson’s appointment was overshadowed by the abrupt departure of Mr. Whitacre, who was unwilling to stay at G.M. for an extended period of time after the stock sale.
“It’s a big challenge for Akerson,” said Mr. Sonnenfeld. “Whitacre built credibility and looked like he would take this company across the finish line. But it didn’t work out that way.”
Mr. Akerson, whose previous job was with the Carlyle Group private equity firm, is also not as accustomed to the limelight as Mr. Whitacre, the retired chairman of AT&T.
At one point during Thursday’s media session, Mr. Akerson marveled at the number of reporters — 19 — that showed up for the early morning breakfast meeting. And unlike Mr. Whitacre, he said he had no interest in serving as the face of G.M. in its advertising. “I don’t think you’ll ever see me in a TV commercial,” he said.
Mr. Akerson declined to address delicate subjects, like the coming contract talks with the United Auto Workers, or where G.M. might need to make improvements in its product lineup.
“I’m not here for the short term,” Mr. Akerson said at a news briefing at the company’s headquarters here.
In his first extended public comments since taking over on Sept. 1, Mr. Akerson said he was “the right guy at the right time” to rebuild G.M. in the aftermath of the government bailout.
“The days of the past are in the past,” he said. “I’m looking out the front windshield.”
Mr. Akerson even distanced himself somewhat from his immediate predecessor, Edward E. Whitacre Jr., who held the chief executive job for just nine months and will step down in January as board chairman.
Mr. Whitacre, for example, said in August that he wanted the Treasury Department to sell the government’s entire stake in G.M. in the company’s initial public stock offering, which is expected later this year.
Not going to happen, said Mr. Akerson. “I don’t think that’s going to be done in one fell swoop,” he said, suggesting it would take several years. “I think that’s unrealistic.”
How long it takes for the government to divest the rest of its holdings will, in part, be determined by G.M.’s success, Mr. Akerson said. The company has posted back-to-back profitable quarters this year, but he said longer term performance was critical to any stock sales by the government.
“We understand that two quarters a trend does not make,” he said. “We need to post numbers consistently.”
He also differed with Mr. Whitacre on whether some consumers were avoiding G.M. cars because of the stigma of government ownership. Federal taxpayers own 61 percent of the company, and Mr. Whitacre had said G.M. was hurt by its image as “Government Motors.”
Mr. Akerson, for his part, put a much rosier perspective on how Americans perceived the $50 billion government rescue. “I think there are a whole lot of people who want this company to succeed,” he said.
The 61-year-old former telecommunications executive is an unknown quantity in the auto industry.
He was among several new directors chosen for G.M.’s board by the Treasury in July 2009, and then was a surprise choice by the board last month to take over as chief executive. On Jan. 1, Mr. Akerson will replace Mr. Whitacre as board chairman.
It has been a meteoric rise for Mr. Akerson, who inherits a company that wants to restore its reputation as a world-class automaker.
As G.M. plans its stock offering, Mr. Akerson has been extolling the company’s strengths, both aspirational and real. G.M.’s products, he suggested on Thursday, “are second to none,” and its global manufacturing structure is the “envy of the industry.”
A former Navy officer and a hardy football fan, Mr. Akerson portrayed himself as a leader who could shift G.M.’s productivity into a higher gear.
“To play offense, whether it’s in sports or in the military, speed is of the essence,” he said. “We’ll shift from being a defensive player to an offensive player.”
He conceded he had much to learn about automotive design and manufacturing, but said he was eager to put his stamp on the company’s strategic direction.
“Any time you open your eyes and open your ears you learn something,” he said. “I did not get to where I am in life by being deaf, dumb and blind.”
That said, Mr. Akerson has a challenge ahead convincing skeptics that G.M. is on firm footing after the most tumultuous two years in its history.
The company came to Washington seeking emergency financial help in the fall of 2008, and was then shepherded through bankruptcy with the aid of government loans.
Its longtime chief executive, Rick Wagoner, was asked to resign by the Treasury in March 2009. Fritz Henderson, Mr. Wagoner’s successor and another tenured G.M. executive, was then forced out by the company’s board and replaced by Mr. Whitacre nine months later.
“Four C.E.O.’s in less than 18 months has to be confusing to rank and file employees at G.M.,” said Jeffrey A. Sonnenfeld, senior associate dean at the Yale University School of Management.
Even Mr. Akerson’s appointment was overshadowed by the abrupt departure of Mr. Whitacre, who was unwilling to stay at G.M. for an extended period of time after the stock sale.
“It’s a big challenge for Akerson,” said Mr. Sonnenfeld. “Whitacre built credibility and looked like he would take this company across the finish line. But it didn’t work out that way.”
Mr. Akerson, whose previous job was with the Carlyle Group private equity firm, is also not as accustomed to the limelight as Mr. Whitacre, the retired chairman of AT&T.
At one point during Thursday’s media session, Mr. Akerson marveled at the number of reporters — 19 — that showed up for the early morning breakfast meeting. And unlike Mr. Whitacre, he said he had no interest in serving as the face of G.M. in its advertising. “I don’t think you’ll ever see me in a TV commercial,” he said.
Mr. Akerson declined to address delicate subjects, like the coming contract talks with the United Auto Workers, or where G.M. might need to make improvements in its product lineup.
Record Lending Confounds Subbarao as Banks Lag Behind Policy: India Credit
Reserve Bank of India’s five interest-rate increases this year are failing to stem a surge in credit, showing the challenges Governor Duvvuri Subbarao faces in keeping inflation in check as the economy expands.
Loans to companies including Essar Steel Ltd. and Videocon Industries Ltd. climbed 36 percent to 2.1 trillion rupees ($45 billion) this year, the most since Bloomberg started compiling the data in 2002. State Bank of India and ICICI Bank Ltd., the nation’s two biggest, have raised their lending rates by 50 basis points since March, less than half the 1.25 percentage- point increase in the central bank’s benchmark repurchase rate.
The central bank said in a statement yesterday that inflation “may remain high for some months” as policy makers lifted borrowing costs. Neighboring China, facing the same dilemma as India, is using tighter capital rules to slow lending rather than raise interest rates.
“The real concern is that the banks haven’t passed on much of the policy rate hikes and that has fueled asset-price gains,” said Robert Prior-Wandesforde, an economist at Credit Suisse Group AG in Singapore. “The risk is if interest rates remain loose, signs of overheating will intensify.”
Not Enough
Subbarao boosted the repurchase rate to 6 percent from 5.75 percent, and raised the reverse-repurchase rate to 5 percent from 4.5 percent, the RBI said in a statement in Mumbai yesterday. He has increased rates more aggressively than any other policy maker in Asia this year to cool inflation as gross domestic product grew 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
India’s benchmark wholesale-price index rose 8.5 percent in August from a year earlier after July’s 9.8 percent gain, calculated using a new base year, the commerce ministry said in New Delhi on Sept. 14.
While inflation fell below 10 percent in July for the first time in six months, consumer prices paid by industrial and farm workers in India are rising faster than 11 percent, the most after flood-hit Pakistan among the 17 countries in the Asia. The consumer inflation rate is 3.1 percent in Australia, 4 percent in the Philippines, and 1.9 percent in Malaysia.
India’s 10-year bonds declined, pushing yields higher, after the central bank raised interest rates yesterday for the fifth time this year to combat inflation. The yield on the 7.80 percent note due May 2020 rose 1 basis point to 7.96 percent, according to the central bank’s trading system. The rupee, up 0.8 percent this year against the dollar, gained 0.5 percent to 46.1550.
Government Auction
The government’s borrowing cost at the auction of 364-day bills has risen 136 basis points, or 1.36 percentage point, since the central bank started tightening on March 19. The extra yield investors demand to hold corporate bonds rather than similar-maturity government notes signal lower borrowing costs for companies. The spread for five-year securities has dropped by almost 50 percent in the past year to 77 basis points, according to data compiled by Bloomberg.
“The current level of monetary policy tightening may not be enough to slow demand growth significantly, as the still relatively low cost of capital could continue to fuel credit demand in the economy,” said Frederic Neumann, co-head of Asian economic research in Hong Kong at HSBC Holdings Plc.
Rising Demand
Banks will review their base lending rates by the end of this quarter, Arun Kaul, chairman of state-run UCO Bank, said yesterday from the eastern city of Kolkata.
Maruti Suzuki India Ltd., the country’s biggest carmaker, is among companies charging more for their products as demand outstripped capacity. The New Delhi-based automaker, which sold a record 104,791 vehicles last month, raised prices by as much as 7,500 rupees on Aug. 2. The average wholesale-price inflation rate in India rose sixfold this year to about 10 percent.
“I don’t think the rate increase will impact our sales given the fact that income levels are rising and a 25 basis points increase can be absorbed,” said Ajay Seth, Chief Financial Officer, Maruti Suzuki India Ltd. “It will not have any significant impact.”
Videocon Industries, a maker of television and mobile phones, raised 20 billion rupees from term loans maturing in 2012 this week, data compiled by Bloomberg show. Bangalore International Airport Ltd. said it plans to raise 7 billion rupees from loans and bonds.
Credit Risk
Credit-default swaps signaled an increase in the cost of protecting against non-payment of the debt for several Indian companies since December.
Five-year swap prices based on the bonds of Reliance Industries Ltd., India’s most-valued company, climbed 26 basis points this year to 171, according to data compiled by CMA DataVision. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Cash at India’s banks declined this financial year as lending grew faster than deposits. Loans climbed at an average pace of 19 percent from April through August, beating a 15 percent increase in savings, central bank data show.
Banks have been borrowing money from the Reserve Bank since May, indicating a shortage of cash. Lenders raised an average 190 billion rupees a day at the RBI’s daily money-market auctions this quarter, after lending 127 billion rupees a day in the previous three months.
Impediments
“Our transmission mechanism is improving but is yet to reach robust standards,” Subbarao said in a speech on Aug. 5 in the southern Indian city of Hyderabad. “Impediments to monetary transmission diminish our effectiveness as inflation targeters.”
In China, where the economy expanded 10.3 percent last quarter, the banking regulator is considering asking banks to add a capital adequacy ratio buffer of as much as 4 percent to shield against economic swings, a person with knowledge of the matter said Sept. 15.
China’s banks extended a record $1.4 trillion of new loans in 2009, fueling asset bubbles and concerns about bad debts.
In India, higher rates “may have an effect on the real estate industry, but only up to a certain extent,” said Pradeep Jain, chairman, Parsvnath Developers Ltd., a New Delhi-based developer.
Loans to companies including Essar Steel Ltd. and Videocon Industries Ltd. climbed 36 percent to 2.1 trillion rupees ($45 billion) this year, the most since Bloomberg started compiling the data in 2002. State Bank of India and ICICI Bank Ltd., the nation’s two biggest, have raised their lending rates by 50 basis points since March, less than half the 1.25 percentage- point increase in the central bank’s benchmark repurchase rate.
The central bank said in a statement yesterday that inflation “may remain high for some months” as policy makers lifted borrowing costs. Neighboring China, facing the same dilemma as India, is using tighter capital rules to slow lending rather than raise interest rates.
“The real concern is that the banks haven’t passed on much of the policy rate hikes and that has fueled asset-price gains,” said Robert Prior-Wandesforde, an economist at Credit Suisse Group AG in Singapore. “The risk is if interest rates remain loose, signs of overheating will intensify.”
Not Enough
Subbarao boosted the repurchase rate to 6 percent from 5.75 percent, and raised the reverse-repurchase rate to 5 percent from 4.5 percent, the RBI said in a statement in Mumbai yesterday. He has increased rates more aggressively than any other policy maker in Asia this year to cool inflation as gross domestic product grew 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
India’s benchmark wholesale-price index rose 8.5 percent in August from a year earlier after July’s 9.8 percent gain, calculated using a new base year, the commerce ministry said in New Delhi on Sept. 14.
While inflation fell below 10 percent in July for the first time in six months, consumer prices paid by industrial and farm workers in India are rising faster than 11 percent, the most after flood-hit Pakistan among the 17 countries in the Asia. The consumer inflation rate is 3.1 percent in Australia, 4 percent in the Philippines, and 1.9 percent in Malaysia.
India’s 10-year bonds declined, pushing yields higher, after the central bank raised interest rates yesterday for the fifth time this year to combat inflation. The yield on the 7.80 percent note due May 2020 rose 1 basis point to 7.96 percent, according to the central bank’s trading system. The rupee, up 0.8 percent this year against the dollar, gained 0.5 percent to 46.1550.
Government Auction
The government’s borrowing cost at the auction of 364-day bills has risen 136 basis points, or 1.36 percentage point, since the central bank started tightening on March 19. The extra yield investors demand to hold corporate bonds rather than similar-maturity government notes signal lower borrowing costs for companies. The spread for five-year securities has dropped by almost 50 percent in the past year to 77 basis points, according to data compiled by Bloomberg.
“The current level of monetary policy tightening may not be enough to slow demand growth significantly, as the still relatively low cost of capital could continue to fuel credit demand in the economy,” said Frederic Neumann, co-head of Asian economic research in Hong Kong at HSBC Holdings Plc.
Rising Demand
Banks will review their base lending rates by the end of this quarter, Arun Kaul, chairman of state-run UCO Bank, said yesterday from the eastern city of Kolkata.
Maruti Suzuki India Ltd., the country’s biggest carmaker, is among companies charging more for their products as demand outstripped capacity. The New Delhi-based automaker, which sold a record 104,791 vehicles last month, raised prices by as much as 7,500 rupees on Aug. 2. The average wholesale-price inflation rate in India rose sixfold this year to about 10 percent.
“I don’t think the rate increase will impact our sales given the fact that income levels are rising and a 25 basis points increase can be absorbed,” said Ajay Seth, Chief Financial Officer, Maruti Suzuki India Ltd. “It will not have any significant impact.”
Videocon Industries, a maker of television and mobile phones, raised 20 billion rupees from term loans maturing in 2012 this week, data compiled by Bloomberg show. Bangalore International Airport Ltd. said it plans to raise 7 billion rupees from loans and bonds.
Credit Risk
Credit-default swaps signaled an increase in the cost of protecting against non-payment of the debt for several Indian companies since December.
Five-year swap prices based on the bonds of Reliance Industries Ltd., India’s most-valued company, climbed 26 basis points this year to 171, according to data compiled by CMA DataVision. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Cash at India’s banks declined this financial year as lending grew faster than deposits. Loans climbed at an average pace of 19 percent from April through August, beating a 15 percent increase in savings, central bank data show.
Banks have been borrowing money from the Reserve Bank since May, indicating a shortage of cash. Lenders raised an average 190 billion rupees a day at the RBI’s daily money-market auctions this quarter, after lending 127 billion rupees a day in the previous three months.
Impediments
“Our transmission mechanism is improving but is yet to reach robust standards,” Subbarao said in a speech on Aug. 5 in the southern Indian city of Hyderabad. “Impediments to monetary transmission diminish our effectiveness as inflation targeters.”
In China, where the economy expanded 10.3 percent last quarter, the banking regulator is considering asking banks to add a capital adequacy ratio buffer of as much as 4 percent to shield against economic swings, a person with knowledge of the matter said Sept. 15.
China’s banks extended a record $1.4 trillion of new loans in 2009, fueling asset bubbles and concerns about bad debts.
In India, higher rates “may have an effect on the real estate industry, but only up to a certain extent,” said Pradeep Jain, chairman, Parsvnath Developers Ltd., a New Delhi-based developer.
Future of UK aid to India in question
India is considering whether to decline UK government aid should London cut and reshape development assistance to its former colony.
An Indian foreign ministry official said on Wednesday that India would take a decision on the future of a long-standing bilateral aid relationship in “consultation” with Britain.
The outcome is crucial to the Department for International Development, which derives international credibility from its presence in India.
The official’s comments were made after a media report revealed that internal discussions were under way within the Indian government on the desirability of future UK aid to Asia’s third-largest economy.
India receives more UK aid than any other country, worth more than £1.5bn over the past five years.
The Indian Express, a daily newspaper, had reported that a senior Indian diplomat had written to the finance secretary recommending that India stop taking development assistance from April next year in the light of plans by London to restructure it.
Andrew Mitchell, the international development secretary, will meet counterparts at India’s finance ministry in November to discuss the future size of development assistance, a Delhi-based spokesman for Dfid said on Wednesday. A final decision is expected at the end of the year.
“We really think that there’s no reason to panic. At this moment, [speculation about cutting back is] premature; they haven’t made a decision,” the spokesman said.
The talks between the two countries on development assistance take place after David Cameron, the prime minister, put all the country’s overseas aid commitments under review. Questions have been raised by MPs about whether India, the fastest-growing large economy after China, still needs support from the UK.
“All Dfid’s country programmes are currently under review to ensure our aid helps the poorest people in the poorest countries,” said Dfid. “No decision on future funding to India has been made."
India’s ambivalence towards foreign assistance has deepened following years of strong economic growth. In 2004, New Delhi reduced to six the number of foreign countries permitted to provide aid to India.
Pranab Mukherjee, India's finance minister, described the UK’s aid to India as “peanuts” when seen as a proportion of the country’s total GDP. He told parliament last month that India would prefer to surrender assistance should the British government decide to cut it.
New Delhi has boosted its own donor efforts in countries such as Burma and Afghanistan and in sub-Saharan Africa. This, alongside a moon mission and the launch of a nuclear submarine, has left some development partners wondering whether India fits the bill for assistance.
Development experts argue that India’s high rates of economic growth are not translating into greater social investment. They say that a strong focus on poverty alleviation needs to be maintained in India as the country holds the largest concentration of the world’s poor.
Moreover, meeting the United Nations millennium development goals rests on improvements in India, where health indicators, particularly among women and children, remain some of the worst in the world.
An Indian foreign ministry official said on Wednesday that India would take a decision on the future of a long-standing bilateral aid relationship in “consultation” with Britain.
The outcome is crucial to the Department for International Development, which derives international credibility from its presence in India.
The official’s comments were made after a media report revealed that internal discussions were under way within the Indian government on the desirability of future UK aid to Asia’s third-largest economy.
India receives more UK aid than any other country, worth more than £1.5bn over the past five years.
The Indian Express, a daily newspaper, had reported that a senior Indian diplomat had written to the finance secretary recommending that India stop taking development assistance from April next year in the light of plans by London to restructure it.
Andrew Mitchell, the international development secretary, will meet counterparts at India’s finance ministry in November to discuss the future size of development assistance, a Delhi-based spokesman for Dfid said on Wednesday. A final decision is expected at the end of the year.
“We really think that there’s no reason to panic. At this moment, [speculation about cutting back is] premature; they haven’t made a decision,” the spokesman said.
The talks between the two countries on development assistance take place after David Cameron, the prime minister, put all the country’s overseas aid commitments under review. Questions have been raised by MPs about whether India, the fastest-growing large economy after China, still needs support from the UK.
“All Dfid’s country programmes are currently under review to ensure our aid helps the poorest people in the poorest countries,” said Dfid. “No decision on future funding to India has been made."
India’s ambivalence towards foreign assistance has deepened following years of strong economic growth. In 2004, New Delhi reduced to six the number of foreign countries permitted to provide aid to India.
Pranab Mukherjee, India's finance minister, described the UK’s aid to India as “peanuts” when seen as a proportion of the country’s total GDP. He told parliament last month that India would prefer to surrender assistance should the British government decide to cut it.
New Delhi has boosted its own donor efforts in countries such as Burma and Afghanistan and in sub-Saharan Africa. This, alongside a moon mission and the launch of a nuclear submarine, has left some development partners wondering whether India fits the bill for assistance.
Development experts argue that India’s high rates of economic growth are not translating into greater social investment. They say that a strong focus on poverty alleviation needs to be maintained in India as the country holds the largest concentration of the world’s poor.
Moreover, meeting the United Nations millennium development goals rests on improvements in India, where health indicators, particularly among women and children, remain some of the worst in the world.
Wednesday, September 15, 2010
Worst Returns Among Asian Bonds Poised to Become Best Bets: India Credit
India, the bond market’s worst- performer in Asia this year, is poised to provide some of the biggest returns in the region as investors get the benefit of the highest relative yields converging with slowing inflation.
Government notes returned 3 percent this year, the weakest performance among 10 Asian local-currency debt indexes compiled by HSBC Holdings Plc. The yield on notes due in 2015 rose to a 23-month high of 7.76 percent this week, 75 basis points more than the fixed cost for funding using interest-rate swaps and the biggest premium among 10 major markets in the region, according to data compiled by Bloomberg.
Investors are gaining more confidence in central bank Governor Duvvuri Subbarao after the inflation rate fell below 10 percent in July for the first time in six months. Morgan Stanley and Standard Chartered Plc recommend investors buy bonds with fixed borrowing costs.
“Yields look close to a peak as the runaway acceleration in inflation has stopped,” Manoj Swain, the chief executive officer at Morgan Stanley India Primary Dealer in Mumbai, a unit of the New York-based bank, said in an interview yesterday. “People should buy bonds and pay fixed swap rates.”
Five-year yields have added 47 basis points, or 0.47 percentage point, in 2010, extending 2009’s record 186 basis point advance, as the average inflation rate jumped sevenfold to 10.5 percent. The notes yield the most among Asia’s local- currency debt markets excluding Pakistan and Vietnam, data compiled by Bloomberg show.
Slowing Inflation
The five-year swap rate, a fixed cost to receive a variable payment, slid 42 basis points from a two-year high of 7.42 percent reached on Aug. 5 as annual wholesale-price gains decreased for a second month in August to 8.5 percent, a government report showed this week. The central bank predicted in July that the rate will decline to 6 percent by March.
The difference between the bond and swap rates will narrow 30 basis points in three months, Morgan Stanley predicts. A drop in the five-year yield of that magnitude would deliver an annualized return of 13 percent, Bloomberg data show.
Locking in a fixed rate in money markets makes sense because five-year swap rates are poised to rebound as quarterly corporate-tax payments drain cash from banks, Standard Chartered and Morgan Stanley said. Swap rates in India are pegged to the cost at which banks borrow overnight from one another and track fluctuations in that measure.
‘Historical Averages’
“Bond-swap spreads will narrow toward historical averages as tax outflows tighten cash,” Arvind Sampath, the head of interest-rate trading at Standard Chartered, the London-based lender that earns most of its profit from Asia, said in an interview yesterday. The rate difference between bonds and swaps due in five years will shrink to 50 basis points, Mumbai-based Sampath said, without specifying a time frame. The gap has averaged 40 basis points since 2005.
Indian lenders borrowed every day from the central bank since Sept. 9 to bridge cash shortages after domestic companies paid taxes. They raised 221.4 billion rupees ($4.8 billion) at the Reserve Bank of India’s securities-repurchase auction on Sept. 14, the most in a month. The overnight borrowing rate between banks climbed to 5.75 percent yesterday from 4.65 percent at the start of the month.
Central Bank
Subbarao, who has raised the benchmark repurchase rate by 1 percentage point this year, will today boost the measure by a quarter percentage point to 6 percent, according to 11 of 16 economists surveyed by Bloomberg, with five forecasting no change. Thirteen predict an increase of that much or more in the reverse repurchase rate.
The spread between the RBI’s reverse repurchase rate and the price of the one-year swap, a measure of expectations for changes in borrowing costs, peaked last month at 196 basis points, the most since October 2008. The spread is now at 171.
Foreign holdings of India’s corporate and government debt more than doubled in 2010 to touch an all-time high of $16.4 billion on Sept. 13 as yields rose. Five-year government bonds now yield 7.45 percentage points more than the three-month dollar London interbank offered rate, a measure of funding costs for global investors that is currently at 0.29 percent. The spread is near the widest since September 2008.
Yield Difference
Swings in yields on Indian bonds due 2015 have narrowed from a two-month high of 12 percent on Aug. 24, signaling a smaller potential for losses. A measure of the five-year yield’s 10-day volatility fell to 7.3 percent yesterday, data compiled by Bloomberg show. The gauge peaked in February this year, rising as high as 27.5 percent.
Indian bonds also were Asia’s worst performers in 2009, losing 5 percent, according to indexes compiled by London-based HSBC Holdings, Europe’s largest bank. Indonesia’s securities rewarded investors with a return of 22 percent last year. The notes have returned 17.3 percent this year, the best performance in the region for a second straight year.
India’s five-year bonds offer an extra yield of 629 basis points over similar-maturity securities in the U.S., near a two- year high of 641 reached Aug. 24, data compiled by Bloomberg show. The difference is 637 basis points over comparable bonds in Germany and 742 over bonds in Japan.
Boosting Rupee
The accelerated debt inflows have helped the rupee rebound almost 3 percent from an eight-month low of 47.745 per dollar reached on May 25, data compiled by Bloomberg show. The currency, which has advanced 0.4 percent this year, traded at 46.3650 yesterday.
“The bond market is entering a consolidation phase,” J. Moses Harding, a Mumbai-based executive vice president at IndusInd Bank Ltd., the second-best performer this year on the Bombay Stock Exchange’s index of bank shares, said in an interview yesterday. “With inflation stabilizing, there are no significant negatives now on the horizon for bond investors.”
Government notes returned 3 percent this year, the weakest performance among 10 Asian local-currency debt indexes compiled by HSBC Holdings Plc. The yield on notes due in 2015 rose to a 23-month high of 7.76 percent this week, 75 basis points more than the fixed cost for funding using interest-rate swaps and the biggest premium among 10 major markets in the region, according to data compiled by Bloomberg.
Investors are gaining more confidence in central bank Governor Duvvuri Subbarao after the inflation rate fell below 10 percent in July for the first time in six months. Morgan Stanley and Standard Chartered Plc recommend investors buy bonds with fixed borrowing costs.
“Yields look close to a peak as the runaway acceleration in inflation has stopped,” Manoj Swain, the chief executive officer at Morgan Stanley India Primary Dealer in Mumbai, a unit of the New York-based bank, said in an interview yesterday. “People should buy bonds and pay fixed swap rates.”
Five-year yields have added 47 basis points, or 0.47 percentage point, in 2010, extending 2009’s record 186 basis point advance, as the average inflation rate jumped sevenfold to 10.5 percent. The notes yield the most among Asia’s local- currency debt markets excluding Pakistan and Vietnam, data compiled by Bloomberg show.
Slowing Inflation
The five-year swap rate, a fixed cost to receive a variable payment, slid 42 basis points from a two-year high of 7.42 percent reached on Aug. 5 as annual wholesale-price gains decreased for a second month in August to 8.5 percent, a government report showed this week. The central bank predicted in July that the rate will decline to 6 percent by March.
The difference between the bond and swap rates will narrow 30 basis points in three months, Morgan Stanley predicts. A drop in the five-year yield of that magnitude would deliver an annualized return of 13 percent, Bloomberg data show.
Locking in a fixed rate in money markets makes sense because five-year swap rates are poised to rebound as quarterly corporate-tax payments drain cash from banks, Standard Chartered and Morgan Stanley said. Swap rates in India are pegged to the cost at which banks borrow overnight from one another and track fluctuations in that measure.
‘Historical Averages’
“Bond-swap spreads will narrow toward historical averages as tax outflows tighten cash,” Arvind Sampath, the head of interest-rate trading at Standard Chartered, the London-based lender that earns most of its profit from Asia, said in an interview yesterday. The rate difference between bonds and swaps due in five years will shrink to 50 basis points, Mumbai-based Sampath said, without specifying a time frame. The gap has averaged 40 basis points since 2005.
Indian lenders borrowed every day from the central bank since Sept. 9 to bridge cash shortages after domestic companies paid taxes. They raised 221.4 billion rupees ($4.8 billion) at the Reserve Bank of India’s securities-repurchase auction on Sept. 14, the most in a month. The overnight borrowing rate between banks climbed to 5.75 percent yesterday from 4.65 percent at the start of the month.
Central Bank
Subbarao, who has raised the benchmark repurchase rate by 1 percentage point this year, will today boost the measure by a quarter percentage point to 6 percent, according to 11 of 16 economists surveyed by Bloomberg, with five forecasting no change. Thirteen predict an increase of that much or more in the reverse repurchase rate.
The spread between the RBI’s reverse repurchase rate and the price of the one-year swap, a measure of expectations for changes in borrowing costs, peaked last month at 196 basis points, the most since October 2008. The spread is now at 171.
Foreign holdings of India’s corporate and government debt more than doubled in 2010 to touch an all-time high of $16.4 billion on Sept. 13 as yields rose. Five-year government bonds now yield 7.45 percentage points more than the three-month dollar London interbank offered rate, a measure of funding costs for global investors that is currently at 0.29 percent. The spread is near the widest since September 2008.
Yield Difference
Swings in yields on Indian bonds due 2015 have narrowed from a two-month high of 12 percent on Aug. 24, signaling a smaller potential for losses. A measure of the five-year yield’s 10-day volatility fell to 7.3 percent yesterday, data compiled by Bloomberg show. The gauge peaked in February this year, rising as high as 27.5 percent.
Indian bonds also were Asia’s worst performers in 2009, losing 5 percent, according to indexes compiled by London-based HSBC Holdings, Europe’s largest bank. Indonesia’s securities rewarded investors with a return of 22 percent last year. The notes have returned 17.3 percent this year, the best performance in the region for a second straight year.
India’s five-year bonds offer an extra yield of 629 basis points over similar-maturity securities in the U.S., near a two- year high of 641 reached Aug. 24, data compiled by Bloomberg show. The difference is 637 basis points over comparable bonds in Germany and 742 over bonds in Japan.
Boosting Rupee
The accelerated debt inflows have helped the rupee rebound almost 3 percent from an eight-month low of 47.745 per dollar reached on May 25, data compiled by Bloomberg show. The currency, which has advanced 0.4 percent this year, traded at 46.3650 yesterday.
“The bond market is entering a consolidation phase,” J. Moses Harding, a Mumbai-based executive vice president at IndusInd Bank Ltd., the second-best performer this year on the Bombay Stock Exchange’s index of bank shares, said in an interview yesterday. “With inflation stabilizing, there are no significant negatives now on the horizon for bond investors.”
Indian Central Bank's Subbarao to Weigh Raising Rates as Inflation Slows
India’s central bank will consider tomorrow whether to raise interest rates for a fifth time this year as strengthening growth threatens to reverse gains made in reining in inflation.
Governor Duvvuri Subbarao will boost the benchmark repurchase rate by a quarter-point to 6 percent, according to 11 of 16 economists surveyed by Bloomberg News, with five seeing no change. Thirteen expect an increase of that much or more in the reverse repurchase rate by the Reserve Bank of India.
Subbarao is under pressure after millions of workers went on strike over the hit to spending power from inflation, which at 8.5 percent in August remained among the world’s highest even as it eased for a fourth month. A rate move would contrast with pauses by Malaysia and South Korea this month amid concern the global recovery is slowing, and with signals in the interest- rate swaps market of the approach of an end to increases.
“Inflation is a much, much bigger problem in India than in any other country in the region,” said Frederic Neumann, co- head of Asian economic research in Hong Kong at HSBC Holdings Plc. “The RBI should worry about the local factors rather than the global factors over which it has little control.”
Economic reports in the past week indicated both a pick-up in growth and moderation in prices. Industrial production expanded 13.8 percent in July from a year earlier, more than twice the pace in June, a report showed last week. Maruti Suzuki India Ltd., the nation’s biggest carmaker, sold a record 104,791 vehicles last month, and India’s merchandise exports increased 22.5 percent from a year earlier to $16.6 billion in August, Commerce Secretary Rahul Khullar said today.
Bonds, Rupee
The Reserve Bank is scheduled to announce its interest-rate decision at noon in Mumbai tomorrow.
Wholesale prices rose 8.5 percent in August from a year earlier after July’s 9.8 percent gain, the commerce ministry said yesterday. The yield on the benchmark 10-year government bond was little changed at 7.95 percent at 5 p.m. close in Mumbai today. The rupee climbed as much as 0.2 percent as a stock rally spurred optimism foreign investors will boost buying.
Prime Minister Manmohan Singh’s government has signaled increased acceptance of higher borrowing costs amid public protests over inflation, which most affects the three quarters of the population who live on less than $2 a day.
Interest-Rate Swaps
At the same time, one gauge of the outlook for rates suggests Subbarao may be approaching the end of the series of increases. The cost of fixing rates on money for three years in the market for so-called interest-rate swaps tumbled 37 basis points in August, the most in 20 months.
Nomura Holdings Inc., Japan’s biggest brokerage, forecasts an increase of 0.25 percentage point this week that will be the last in the year through March.
The government is consulting the central bank to take “appropriate measures at the appropriate time” to control inflation, Finance Minister Pranab Mukherjee said yesterday in New Delhi. By contrast, he warned on Aug. 4 that growth will suffer if interest rates rise too fast.
Consumer prices paid by industrial and rural workers in India are rising more than 11 percent, faster than the consumer inflation in any other Group of 20 nation.
Worker unions, supported by the opposition communist parties, organized a nationwide strike on Sept. 7 to protest rising prices and state asset sales, prompting millions of workers to stay away from work and forcing banks to shut offices in some cities and airlines to cancel flights.
‘Remain Loose’
India’s accelerating economy has lifted incomes and stoked demand for Maruti Suzuki cars, TVS Motor Co. motorbikes and other consumer goods, fuelling inflation. Gross domestic product expanded 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
“Strong demand and low borrowing costs are adding to inflation,” said N.R. Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy. “Monetary policy continues to remain loose given the robust momentum in the economic activity.”
Tomorrow’s meeting is the first of an expanded series of RBI meetings to consider monetary policy. The bank previously met quarterly, and has now increased that to eight times a year.
As India’s role in the global economy rises, the central bank is also examining how it conducts monetary policy. The RBI has used banks’ reserve requirements along with the repo and reverse repo rates to manage liquidity and price pressures in the past year.
Reviewing Tools
The RBI set up a panel this week to review its tools, including the difference between the repo and reverse-repo rates, which are respectively used to inject or remove funds from the system.
Among the central bank’s challenges are price pressures from a lack of investment in electricity and transportation networks. India’s investment in power, ports, roads and other infrastructure was $99 billion in 2009, or 7.5 percent of GDP, while China invested $539 billion, or 10.8 percent of the economy, according to Morgan Stanley.
“The main reason why China can continue to expand at a faster pace without seeing higher inflation is because China invested hugely in creating capacities, while India is still struggling to make a significant progress,” said Bhanumurthy.
Governor Duvvuri Subbarao will boost the benchmark repurchase rate by a quarter-point to 6 percent, according to 11 of 16 economists surveyed by Bloomberg News, with five seeing no change. Thirteen expect an increase of that much or more in the reverse repurchase rate by the Reserve Bank of India.
Subbarao is under pressure after millions of workers went on strike over the hit to spending power from inflation, which at 8.5 percent in August remained among the world’s highest even as it eased for a fourth month. A rate move would contrast with pauses by Malaysia and South Korea this month amid concern the global recovery is slowing, and with signals in the interest- rate swaps market of the approach of an end to increases.
“Inflation is a much, much bigger problem in India than in any other country in the region,” said Frederic Neumann, co- head of Asian economic research in Hong Kong at HSBC Holdings Plc. “The RBI should worry about the local factors rather than the global factors over which it has little control.”
Economic reports in the past week indicated both a pick-up in growth and moderation in prices. Industrial production expanded 13.8 percent in July from a year earlier, more than twice the pace in June, a report showed last week. Maruti Suzuki India Ltd., the nation’s biggest carmaker, sold a record 104,791 vehicles last month, and India’s merchandise exports increased 22.5 percent from a year earlier to $16.6 billion in August, Commerce Secretary Rahul Khullar said today.
Bonds, Rupee
The Reserve Bank is scheduled to announce its interest-rate decision at noon in Mumbai tomorrow.
Wholesale prices rose 8.5 percent in August from a year earlier after July’s 9.8 percent gain, the commerce ministry said yesterday. The yield on the benchmark 10-year government bond was little changed at 7.95 percent at 5 p.m. close in Mumbai today. The rupee climbed as much as 0.2 percent as a stock rally spurred optimism foreign investors will boost buying.
Prime Minister Manmohan Singh’s government has signaled increased acceptance of higher borrowing costs amid public protests over inflation, which most affects the three quarters of the population who live on less than $2 a day.
Interest-Rate Swaps
At the same time, one gauge of the outlook for rates suggests Subbarao may be approaching the end of the series of increases. The cost of fixing rates on money for three years in the market for so-called interest-rate swaps tumbled 37 basis points in August, the most in 20 months.
Nomura Holdings Inc., Japan’s biggest brokerage, forecasts an increase of 0.25 percentage point this week that will be the last in the year through March.
The government is consulting the central bank to take “appropriate measures at the appropriate time” to control inflation, Finance Minister Pranab Mukherjee said yesterday in New Delhi. By contrast, he warned on Aug. 4 that growth will suffer if interest rates rise too fast.
Consumer prices paid by industrial and rural workers in India are rising more than 11 percent, faster than the consumer inflation in any other Group of 20 nation.
Worker unions, supported by the opposition communist parties, organized a nationwide strike on Sept. 7 to protest rising prices and state asset sales, prompting millions of workers to stay away from work and forcing banks to shut offices in some cities and airlines to cancel flights.
‘Remain Loose’
India’s accelerating economy has lifted incomes and stoked demand for Maruti Suzuki cars, TVS Motor Co. motorbikes and other consumer goods, fuelling inflation. Gross domestic product expanded 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
“Strong demand and low borrowing costs are adding to inflation,” said N.R. Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy. “Monetary policy continues to remain loose given the robust momentum in the economic activity.”
Tomorrow’s meeting is the first of an expanded series of RBI meetings to consider monetary policy. The bank previously met quarterly, and has now increased that to eight times a year.
As India’s role in the global economy rises, the central bank is also examining how it conducts monetary policy. The RBI has used banks’ reserve requirements along with the repo and reverse repo rates to manage liquidity and price pressures in the past year.
Reviewing Tools
The RBI set up a panel this week to review its tools, including the difference between the repo and reverse-repo rates, which are respectively used to inject or remove funds from the system.
Among the central bank’s challenges are price pressures from a lack of investment in electricity and transportation networks. India’s investment in power, ports, roads and other infrastructure was $99 billion in 2009, or 7.5 percent of GDP, while China invested $539 billion, or 10.8 percent of the economy, according to Morgan Stanley.
“The main reason why China can continue to expand at a faster pace without seeing higher inflation is because China invested hugely in creating capacities, while India is still struggling to make a significant progress,” said Bhanumurthy.
Warren to Unofficially Lead Consumer Agency
WASHINGTON — Elizabeth Warren, who conceived of the Consumer Financial Protection Bureau, will oversee its establishment as an assistant to President Obama, an official briefed on the decision said Wednesday evening.
The decision, which Mr. Obama is to announce this week, would allow Ms. Warren, a Harvard law professor, to effectively run the new agency without having to go through a potentially contentious confirmation battle in the Senate. The creation of the bureau is a centerpiece of the Wall Street financial overhaul that Mr. Obama signed in July.
Ms. Warren will be named an assistant to the president, a designation that is held by senior White House staff members, including Rahm Emanuel, the chief of staff. She will also be a special adviser to the Treasury secretary, Timothy F. Geithner, and report jointly to Mr. Obama and Mr. Geithner. The financial regulation law delegated to the Treasury Department the powers of the bureau until a permanent director was appointed and confirmed by the Senate to a five-year term.
The decision does not preclude the possibility that Ms. Warren could eventually be named director, and at the least, she would play a pivotal role in deciding whom to appoint to the job, according to the official, who spoke on the condition of anonymity so as not to pre-empt the formal announcement. Several organizations, including ABC, reported the news of Ms. Warren’s impending appointment on Wednesday.
Ms. Warren, 61, an authority on bankruptcy law, has developed a following among liberals for her writings and advocacy on behalf of working-class and middle-class families. She has described their financial strains in two books, one of them written with her daughter.
But she has drawn fire from financial institutions for her persistent attacks on abusive, deceptive and unfair lending practices; some banking executives believe she has been overly broad in criticizing those practices.
Labor unions and consumer advocacy groups called Ms. Warren particularly suited for the job she helped to create, and have lobbied the White House for months to make the appointment official. Some called on Mr. Obama to formally nominate Ms. Warren to lead the bureau even if it led to a confirmation battle, arguing that Democrats should embrace such a battle as a means of drawing attention to the bureau’s significance.
However, the White House saw drawbacks to that approach, according to the official. If Ms. Warren’s nomination were in limbo for months, she would be generally precluded from serving fully as the public face of the bureau, or even testifying before Congress.
“The stakes are too high to delay the standing up of this agency,” the official said.
The bureau will consolidate employees and responsibilities from a host of other regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation and even the Department of Housing and Urban Development. It is expected to have hundreds of employees and a budget of up to $500 million.
The bureau will nominally be part of the Fed, which is obligated to finance its budget, but the central bank may not influence its personnel or rules.
The bureau will have the authority to write and enforce new standards for mortgages, credit cards, payday loans and a wide array of other financial products, and the White House said it believed it was imperative that Ms. Warren promptly begin to shape that process.
A consequence of the arrangement is that Ms. Warren will be working closely with Mr. Geithner, with whom she has occasionally clashed.
Ms. Warren was picked by the Senate majority leader, Harry Reid, Democrat of Nevada, as chairwoman of the Congressional panel that oversees the Troubled Asset Relief Program, the Wall Street bailout effort enacted during the Bush administration.
Under her leadership, the panel has produced a series of reports, many of them critical of how the program has been carried out under Mr. Geithner, who was one of its architects.
The decision, which Mr. Obama is to announce this week, would allow Ms. Warren, a Harvard law professor, to effectively run the new agency without having to go through a potentially contentious confirmation battle in the Senate. The creation of the bureau is a centerpiece of the Wall Street financial overhaul that Mr. Obama signed in July.
Ms. Warren will be named an assistant to the president, a designation that is held by senior White House staff members, including Rahm Emanuel, the chief of staff. She will also be a special adviser to the Treasury secretary, Timothy F. Geithner, and report jointly to Mr. Obama and Mr. Geithner. The financial regulation law delegated to the Treasury Department the powers of the bureau until a permanent director was appointed and confirmed by the Senate to a five-year term.
The decision does not preclude the possibility that Ms. Warren could eventually be named director, and at the least, she would play a pivotal role in deciding whom to appoint to the job, according to the official, who spoke on the condition of anonymity so as not to pre-empt the formal announcement. Several organizations, including ABC, reported the news of Ms. Warren’s impending appointment on Wednesday.
Ms. Warren, 61, an authority on bankruptcy law, has developed a following among liberals for her writings and advocacy on behalf of working-class and middle-class families. She has described their financial strains in two books, one of them written with her daughter.
But she has drawn fire from financial institutions for her persistent attacks on abusive, deceptive and unfair lending practices; some banking executives believe she has been overly broad in criticizing those practices.
Labor unions and consumer advocacy groups called Ms. Warren particularly suited for the job she helped to create, and have lobbied the White House for months to make the appointment official. Some called on Mr. Obama to formally nominate Ms. Warren to lead the bureau even if it led to a confirmation battle, arguing that Democrats should embrace such a battle as a means of drawing attention to the bureau’s significance.
However, the White House saw drawbacks to that approach, according to the official. If Ms. Warren’s nomination were in limbo for months, she would be generally precluded from serving fully as the public face of the bureau, or even testifying before Congress.
“The stakes are too high to delay the standing up of this agency,” the official said.
The bureau will consolidate employees and responsibilities from a host of other regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation and even the Department of Housing and Urban Development. It is expected to have hundreds of employees and a budget of up to $500 million.
The bureau will nominally be part of the Fed, which is obligated to finance its budget, but the central bank may not influence its personnel or rules.
The bureau will have the authority to write and enforce new standards for mortgages, credit cards, payday loans and a wide array of other financial products, and the White House said it believed it was imperative that Ms. Warren promptly begin to shape that process.
A consequence of the arrangement is that Ms. Warren will be working closely with Mr. Geithner, with whom she has occasionally clashed.
Ms. Warren was picked by the Senate majority leader, Harry Reid, Democrat of Nevada, as chairwoman of the Congressional panel that oversees the Troubled Asset Relief Program, the Wall Street bailout effort enacted during the Bush administration.
Under her leadership, the panel has produced a series of reports, many of them critical of how the program has been carried out under Mr. Geithner, who was one of its architects.
Tuesday, September 14, 2010
Subbarao to Consider Rates as Inflation Slows, Production Gains
Sept. 15 (Bloomberg) -- India’s central bank will tomorrow consider whether to raise interest rates for a fifth time this year as strengthening growth threatens to reverse gains made in reining in inflation.
Governor Duvvuri Subbarao will boost the benchmark repurchase rate by a quarter-point to 6 percent, according to 11 of 16 economists surveyed by Bloomberg News, with five seeing no change. Thirteen expect an increase of that much or more in the reverse repurchase rate by the Reserve Bank of India.
Subbarao is under pressure after millions of workers went on strike over the hit to spending power from inflation, which at 8.5 percent in August remained among the world’s highest even as it eased for a fourth month. A rate move would contrast with pauses by Malaysia and South Korea this month amid concern the global recovery is slowing, and with signals in the interest- rate swaps market of the approach of an end to increases.
“Inflation is a much, much bigger problem in India than in any other country in the region,” said Frederic Neumann, co- head of Asian economic research in Hong Kong at HSBC Holdings Plc. “The RBI should worry about the local factors rather than the global factors over which it has little control.”
Economic reports in the past week indicated both a pick-up in growth and moderation in prices. Industrial production expanded 13.8 percent in July from a year earlier, more than twice the pace in June, a government report showed. Maruti Suzuki India Ltd., the nation’s biggest carmaker, sold a record 104,791 vehicles last month.
Bonds, Rupee
Wholesale prices rose 8.5 percent in August from a year before after July’s 9.8 percent gain, the commerce ministry said in New Delhi yesterday. Benchmark 10-year government bonds rose, sending yields down 2 basis points to 7.94 percent at 4:27 p.m. in Mumbai. The rupee climbed as much as 0.2 percent as a stock rally spurred optimism foreign investors will boost buying.
Prime Minister Manmohan Singh’s government has signaled increased acceptance of higher borrowing costs amid public protests over inflation, which most affects the three quarters of the population who live on less than $2 a day.
At the same time, one gauge of the outlook for rates suggests Subbarao may be approaching the end of the series of increases. The cost of fixing rates on money for three years in the market for so-called interest-rate swaps tumbled 37 basis points in August, the most in 20 months.
Nomura Holdings Inc., Japan’s biggest brokerage, forecasts an increase of 0.25 percentage point this week that will be the last in the year through March.
Government’s Take
The government is consulting the central bank to take “appropriate measures at the appropriate time” to control inflation, Finance Minister Pranab Mukherjee said yesterday in New Delhi. By contrast, he warned on Aug. 4 that growth will suffer if interest rates rise too fast.
Consumer prices paid by industrial and rural workers in India are rising more than 11 percent, faster than the consumer inflation in any other Group of 20 nation.
Worker unions, supported by the opposition communist parties, organized a nationwide strike on Sept. 7 to protest rising prices and state asset sales, prompting millions of workers to stay away from work and forcing banks to shut offices in some cities and airlines to cancel flights.
India’s accelerating economy has lifted incomes and stoked demand for Maruti Suzuki cars, TVS Motor Co. motorbikes and other consumer goods, fuelling inflation. Gross domestic product expanded 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
‘Remain Loose’
“Strong demand and low borrowing costs are adding to inflation,” said N.R. Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy. “Monetary policy continues to remain loose given the robust momentum in the economic activity.”
Tomorrow’s meeting is the first of an expanded series of RBI meetings to consider monetary policy. The bank previously met quarterly, and has now increased that to eight times a year.
As India’s role in the global economy rises, the central bank is also examining how it conducts monetary policy. The RBI has used banks’ reserve requirements along with the repo and reverse repo rates to manage liquidity and price pressures in the past year.
The RBI set up a panel this week to review its tools, including the difference between the repo and reverse-repo rates, which are respectively used to inject or remove funds from the system.
Among the central bank’s challenges are price pressures from a lack of investment in electricity and transportation networks. India’s investment in power, ports, roads and other infrastructure was $99 billion in 2009, or 7.5 percent of GDP, while China invested $539 billion, or 10.8 percent of the economy, according to Morgan Stanley.
“The main reason why China can continue to expand at a faster pace without seeing higher inflation is because China invested hugely in creating capacities, while India is still struggling to make a significant progress,” said Bhanumurthy.
Governor Duvvuri Subbarao will boost the benchmark repurchase rate by a quarter-point to 6 percent, according to 11 of 16 economists surveyed by Bloomberg News, with five seeing no change. Thirteen expect an increase of that much or more in the reverse repurchase rate by the Reserve Bank of India.
Subbarao is under pressure after millions of workers went on strike over the hit to spending power from inflation, which at 8.5 percent in August remained among the world’s highest even as it eased for a fourth month. A rate move would contrast with pauses by Malaysia and South Korea this month amid concern the global recovery is slowing, and with signals in the interest- rate swaps market of the approach of an end to increases.
“Inflation is a much, much bigger problem in India than in any other country in the region,” said Frederic Neumann, co- head of Asian economic research in Hong Kong at HSBC Holdings Plc. “The RBI should worry about the local factors rather than the global factors over which it has little control.”
Economic reports in the past week indicated both a pick-up in growth and moderation in prices. Industrial production expanded 13.8 percent in July from a year earlier, more than twice the pace in June, a government report showed. Maruti Suzuki India Ltd., the nation’s biggest carmaker, sold a record 104,791 vehicles last month.
Bonds, Rupee
Wholesale prices rose 8.5 percent in August from a year before after July’s 9.8 percent gain, the commerce ministry said in New Delhi yesterday. Benchmark 10-year government bonds rose, sending yields down 2 basis points to 7.94 percent at 4:27 p.m. in Mumbai. The rupee climbed as much as 0.2 percent as a stock rally spurred optimism foreign investors will boost buying.
Prime Minister Manmohan Singh’s government has signaled increased acceptance of higher borrowing costs amid public protests over inflation, which most affects the three quarters of the population who live on less than $2 a day.
At the same time, one gauge of the outlook for rates suggests Subbarao may be approaching the end of the series of increases. The cost of fixing rates on money for three years in the market for so-called interest-rate swaps tumbled 37 basis points in August, the most in 20 months.
Nomura Holdings Inc., Japan’s biggest brokerage, forecasts an increase of 0.25 percentage point this week that will be the last in the year through March.
Government’s Take
The government is consulting the central bank to take “appropriate measures at the appropriate time” to control inflation, Finance Minister Pranab Mukherjee said yesterday in New Delhi. By contrast, he warned on Aug. 4 that growth will suffer if interest rates rise too fast.
Consumer prices paid by industrial and rural workers in India are rising more than 11 percent, faster than the consumer inflation in any other Group of 20 nation.
Worker unions, supported by the opposition communist parties, organized a nationwide strike on Sept. 7 to protest rising prices and state asset sales, prompting millions of workers to stay away from work and forcing banks to shut offices in some cities and airlines to cancel flights.
India’s accelerating economy has lifted incomes and stoked demand for Maruti Suzuki cars, TVS Motor Co. motorbikes and other consumer goods, fuelling inflation. Gross domestic product expanded 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
‘Remain Loose’
“Strong demand and low borrowing costs are adding to inflation,” said N.R. Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy. “Monetary policy continues to remain loose given the robust momentum in the economic activity.”
Tomorrow’s meeting is the first of an expanded series of RBI meetings to consider monetary policy. The bank previously met quarterly, and has now increased that to eight times a year.
As India’s role in the global economy rises, the central bank is also examining how it conducts monetary policy. The RBI has used banks’ reserve requirements along with the repo and reverse repo rates to manage liquidity and price pressures in the past year.
The RBI set up a panel this week to review its tools, including the difference between the repo and reverse-repo rates, which are respectively used to inject or remove funds from the system.
Among the central bank’s challenges are price pressures from a lack of investment in electricity and transportation networks. India’s investment in power, ports, roads and other infrastructure was $99 billion in 2009, or 7.5 percent of GDP, while China invested $539 billion, or 10.8 percent of the economy, according to Morgan Stanley.
“The main reason why China can continue to expand at a faster pace without seeing higher inflation is because China invested hugely in creating capacities, while India is still struggling to make a significant progress,” said Bhanumurthy.
India watchdog blocks Lafarge plant plan
Lafarge’s plans to build a cement plant in the Himalayas have been blocked by India in a further sign of a tougher approach to environmental regulation of major industrial projects by the country.
A tribunal that rules on environment projects reversed last year’s clearance of the plan by the environment ministry.
EDITOR’S CHOICE
Caracas to pay Holcim $650m for seized assets - Sep-13
Oman feels weight of cement influx - Sep-08
India rejects Vedanta bauxite plans for Orissa - Aug-24
Holcim wary over economic outlook - Aug-19
The decision, made by the National Environmental Appellate Authority, came just weeks after New Delhi rejected London-listed Vedanta’s plans to mine bauxite from a mountain held sacred by a tribe in the eastern Orissa state.
Jairam Ramesh, India’s environment minister, has expressed a determination to enforce environmental and social protection laws more aggressively.
Enforcement remains erratic, however, due to the weakness and small size of the responsible agencies compared with the vast number of projects. This has fuelled suspicions that politics is influencing decisions on which companies are targeted.
“If I was an industrialist, I would try to be a little more careful because I don’t know when the axe will fall on me,” said Sridhar Ramamurthi, a trustee of the Environics Trust, which works for sustainable community development in environmentally sensitive areas.
Lafarge wants to build an integrated, $187m plant and mine producing 3m tonnes of cement per year in the mountainous state of Himachal Pradesh, which is known for its scenery and horticulture.
The planned project – not far from a plant owned by Ambuja Cement, the Indian subsidiary of Lafarge’s rival Holcim – has been backed by local state legislators and some villagers, who argued it would generate jobs.
The environment ministry approved the plan in June 2009, but opponents appealed against the decision to the NEAA.
In its judgment, made public this week, the NEAA found that Lafarge’s environmental impact assessment report failed accurately to convey the impact the quarry and cement plant would have on natural resources and the livelihoods of local people, especially those who would be displaced by a limestone mine.
Expressing concern about the project’s impact on a wildlife sanctuary just 5km away, the tribunal concluded it was not “desirable” for the area.
Lafarge said it remained committed to the project, which it said had widespread support from a majority of those in the community. “The company is considering the order and will decide on the future course of action soon,” it said.
Himachal is not Lafarge’s first difficulty in India. The Supreme Court in February ordered Bangladeshi subsidiary Lafarge Umium Mining to stop mining limestone in the north-eastern state of Meghalaya, while it considered whether the mining required additional clearances.
A tribunal that rules on environment projects reversed last year’s clearance of the plan by the environment ministry.
EDITOR’S CHOICE
Caracas to pay Holcim $650m for seized assets - Sep-13
Oman feels weight of cement influx - Sep-08
India rejects Vedanta bauxite plans for Orissa - Aug-24
Holcim wary over economic outlook - Aug-19
The decision, made by the National Environmental Appellate Authority, came just weeks after New Delhi rejected London-listed Vedanta’s plans to mine bauxite from a mountain held sacred by a tribe in the eastern Orissa state.
Jairam Ramesh, India’s environment minister, has expressed a determination to enforce environmental and social protection laws more aggressively.
Enforcement remains erratic, however, due to the weakness and small size of the responsible agencies compared with the vast number of projects. This has fuelled suspicions that politics is influencing decisions on which companies are targeted.
“If I was an industrialist, I would try to be a little more careful because I don’t know when the axe will fall on me,” said Sridhar Ramamurthi, a trustee of the Environics Trust, which works for sustainable community development in environmentally sensitive areas.
Lafarge wants to build an integrated, $187m plant and mine producing 3m tonnes of cement per year in the mountainous state of Himachal Pradesh, which is known for its scenery and horticulture.
The planned project – not far from a plant owned by Ambuja Cement, the Indian subsidiary of Lafarge’s rival Holcim – has been backed by local state legislators and some villagers, who argued it would generate jobs.
The environment ministry approved the plan in June 2009, but opponents appealed against the decision to the NEAA.
In its judgment, made public this week, the NEAA found that Lafarge’s environmental impact assessment report failed accurately to convey the impact the quarry and cement plant would have on natural resources and the livelihoods of local people, especially those who would be displaced by a limestone mine.
Expressing concern about the project’s impact on a wildlife sanctuary just 5km away, the tribunal concluded it was not “desirable” for the area.
Lafarge said it remained committed to the project, which it said had widespread support from a majority of those in the community. “The company is considering the order and will decide on the future course of action soon,” it said.
Himachal is not Lafarge’s first difficulty in India. The Supreme Court in February ordered Bangladeshi subsidiary Lafarge Umium Mining to stop mining limestone in the north-eastern state of Meghalaya, while it considered whether the mining required additional clearances.
Companies May Fail, but Directors Are in Demand
For 16 years, Marshall A. Cohen served as a director of the American International Group, stepping down just months before the company’s near-collapse in 2008. Several months later, Mr. Cohen was again in demand, joining the board of Gleacher & Company, a New York investment bank.
Gleacher expanded its board last year to include not only Mr. Cohen but Henry S. Bienen, who served as a director of Bear Stearns from 2004 until its rescue by JPMorgan Chase in March 2008.
On the second anniversary of the Lehman Brothers bankruptcy, appointments like those of Mr. Cohen and Mr. Bienen highlight how the directors of the companies at the center of the financial crisis — A.I.G., Bear Stearns and Lehman itself — still play an active role in the governance of corporate America.
“In too many cases, the radioactivity of a board member of a collapsed company has a half life measured in milliseconds,” said John Gillespie, a longtime Wall Street investment banker and the co-author of “Money for Nothing” (Free Press), a recent book on corporate boards.
While in some cases investors are suing members of the boards of the failed companies, shareholder advocates have for the most part focused their energies on other issues. And public outrage over the financial crisis has been mainly focused on the executives in charge of firms like Bear and Lehman.
Some, like James E. Cayne of Bear, have not re-emerged at other companies. Richard S. Fuld Jr. of Lehman, which filed for bankruptcy on Sept. 15, 2008, is running a small advisory firm.
Yet the decisions that led to the collapse of the firms they steered were not theirs alone. Directors are elected by shareholders to oversee the activities of a company and play an important role in appointing senior officers and setting corporate strategy. In many cases during the real estate bubble, directors approved the strategy that paved the way for executives to make risky investments on borrowed money.
These directors also approved pay packages that fed the risk-taking.
“The C.E.O.’s get most of the attention because there’s so little expectation that the board should have done something,” Mr. Gillespie said. “In our corporate system the directors are supposed to be in charge, not the C.E.O., yet they rarely get any of the blame because they’re typically dominated by the C.E.O.”
A Gleacher spokesman declined to comment. Mr. Cohen, a Toronto lawyer and businessman, did not return a telephone call and e-mail seeking comment. Mr. Bienen, president emeritus of Northwestern University, did not return a telephone call and e-mail seeking comment.
Marsha J. Evans, a former director of Lehman Brothers.Sam Greenwood/Getty ImagesMarsha J. Evans, a former director of Lehman Brothers who continues to serve on other corporate boards.
Charles Rossotti, a former board member of Merrill Lynch who became a director of Bank of America.Jay Mallin/Bloomberg NewsCharles Rossotti, a former board member of Merrill Lynch who became a director of Bank of America.
Many directors of failed financial institutions have kept the other director posts they had before the financial crisis.
Marsha J. Evans, a former Lehman director, has not landed any new board seats, but continues to serve as a director of Weight Watchers, Huntsman and Office Depot, positions that earned her about $500,000 in compensation in 2009. Ms. Evans declined to comment.
Some directors were named to the boards of the companies that acquired their ailing firms. Bank of America named two longtime Merrill Lynch directors, Charles O. Rossotti and Virgis W. Colbert, to its board after acquiring the ailing investment bank for $29 billion. Mr. Rossotti and Mr. Virgis did not respond to requests for comment.
Merrill’s former chief executive, E. Stanley O’Neal, resigned from the firm in 2007 after billions of dollars of mortgage-securities losses, but he was soon snapped up as a board member by Alcoa. An Alcoa spokesman declined to comment. Mr. O’Neal did not respond to requests for comment.
Some board members, who spoke on the condition of anonymity, say their experience on the boards of troubled companies, made them stronger directors, giving them hands-on experience that will help them stop other companies from repeating the same mistakes.
“Directors of these financial institutions may or may not have been asleep at the switch, and if they were, they had a lot of company,” said Michael Klausner, a corporate law professor at Stanford. “Leaving that question aside, they may well have gained valuable experience that will make them good directors today.”
Two months after Wells Fargo acquired Wachovia in a government-forced transaction, a former Wachovia director, Robert A. Ingram, was named to the board of the semiconductor company Cree. Mr. Ingram, the former chairman of OSI Pharmaceuticals, had served as a Wachovia board member since 2001. Cree will pay Mr. Ingram $303,000 in compensation for 2010, a filing shows.
A spokeswoman for Cree declined to comment but cited a December 2008 press release on Mr. Ingram’s appointment citing his “wealth of experience.”
In 2008, the Outstanding Directors Exchange, a unit of the media company Pearson, named Stephen E. Frank an “outstanding director” for “the masterful chairmanship of Washington Mutual’s audit committee during a period of intense change.” Mr. Frank, a longtime utility industry executive, had served on the board of Washington Mutual for more than a decade when the savings and loan — buffeted by excessive exposure to subprime loans — was seized by the government in September 2008 and sold off to JPMorgan Chase.
Last year, the Las Vegas utility NV Energy elected Mr. Frank to its board and he earned $109,000 in compensation.
A spokesman for NV Energy declined to comment. Mr. Frank could not be reached. In a 2008 interview with Agenda, a corporate-governance newsletter, referring to his experience at Washington Mutual, he said that “to suggest, with 20/20 hindsight, that an audit committee or a finance committee could easily have prevented these things, I think, is naïve.”
Rakesh Khurana, a Harvard Business School professor specializing in corporate-governance issues, says there are legitimate questions surrounding these boards. “When selecting individuals to oversee an organization, what criteria should we be using other than their previous performance on a corporate board?” he said. “If there’s no accountability here, then what is the system of accountability?”
Inquiries into the 2008 financial crisis have spent relatively little time looking at the role of corporate boards.
The Senate Permanent Subcommittee on Investigations held four hearings on the causes of the financial crisis, none of which focused on the role of directors.
The Financial Crisis Inquiry Commission, appointed by Congress, has held myriad hearings and interviews with executives of failed institutions. Although the public sessions have not included testimony from any outside directors, the hearings did touch on corporate governance, and the commission has privately interviewed directors, according to Phil Angelides, the commission’s chairman.
“I don’t think there’s any question that a dramatic failure of corporate governance was a central issue of the crisis,” Mr. Angelides said. “You’re going to find when our report is released that this will be a major point.”
Gleacher expanded its board last year to include not only Mr. Cohen but Henry S. Bienen, who served as a director of Bear Stearns from 2004 until its rescue by JPMorgan Chase in March 2008.
On the second anniversary of the Lehman Brothers bankruptcy, appointments like those of Mr. Cohen and Mr. Bienen highlight how the directors of the companies at the center of the financial crisis — A.I.G., Bear Stearns and Lehman itself — still play an active role in the governance of corporate America.
“In too many cases, the radioactivity of a board member of a collapsed company has a half life measured in milliseconds,” said John Gillespie, a longtime Wall Street investment banker and the co-author of “Money for Nothing” (Free Press), a recent book on corporate boards.
While in some cases investors are suing members of the boards of the failed companies, shareholder advocates have for the most part focused their energies on other issues. And public outrage over the financial crisis has been mainly focused on the executives in charge of firms like Bear and Lehman.
Some, like James E. Cayne of Bear, have not re-emerged at other companies. Richard S. Fuld Jr. of Lehman, which filed for bankruptcy on Sept. 15, 2008, is running a small advisory firm.
Yet the decisions that led to the collapse of the firms they steered were not theirs alone. Directors are elected by shareholders to oversee the activities of a company and play an important role in appointing senior officers and setting corporate strategy. In many cases during the real estate bubble, directors approved the strategy that paved the way for executives to make risky investments on borrowed money.
These directors also approved pay packages that fed the risk-taking.
“The C.E.O.’s get most of the attention because there’s so little expectation that the board should have done something,” Mr. Gillespie said. “In our corporate system the directors are supposed to be in charge, not the C.E.O., yet they rarely get any of the blame because they’re typically dominated by the C.E.O.”
A Gleacher spokesman declined to comment. Mr. Cohen, a Toronto lawyer and businessman, did not return a telephone call and e-mail seeking comment. Mr. Bienen, president emeritus of Northwestern University, did not return a telephone call and e-mail seeking comment.
Marsha J. Evans, a former director of Lehman Brothers.Sam Greenwood/Getty ImagesMarsha J. Evans, a former director of Lehman Brothers who continues to serve on other corporate boards.
Charles Rossotti, a former board member of Merrill Lynch who became a director of Bank of America.Jay Mallin/Bloomberg NewsCharles Rossotti, a former board member of Merrill Lynch who became a director of Bank of America.
Many directors of failed financial institutions have kept the other director posts they had before the financial crisis.
Marsha J. Evans, a former Lehman director, has not landed any new board seats, but continues to serve as a director of Weight Watchers, Huntsman and Office Depot, positions that earned her about $500,000 in compensation in 2009. Ms. Evans declined to comment.
Some directors were named to the boards of the companies that acquired their ailing firms. Bank of America named two longtime Merrill Lynch directors, Charles O. Rossotti and Virgis W. Colbert, to its board after acquiring the ailing investment bank for $29 billion. Mr. Rossotti and Mr. Virgis did not respond to requests for comment.
Merrill’s former chief executive, E. Stanley O’Neal, resigned from the firm in 2007 after billions of dollars of mortgage-securities losses, but he was soon snapped up as a board member by Alcoa. An Alcoa spokesman declined to comment. Mr. O’Neal did not respond to requests for comment.
Some board members, who spoke on the condition of anonymity, say their experience on the boards of troubled companies, made them stronger directors, giving them hands-on experience that will help them stop other companies from repeating the same mistakes.
“Directors of these financial institutions may or may not have been asleep at the switch, and if they were, they had a lot of company,” said Michael Klausner, a corporate law professor at Stanford. “Leaving that question aside, they may well have gained valuable experience that will make them good directors today.”
Two months after Wells Fargo acquired Wachovia in a government-forced transaction, a former Wachovia director, Robert A. Ingram, was named to the board of the semiconductor company Cree. Mr. Ingram, the former chairman of OSI Pharmaceuticals, had served as a Wachovia board member since 2001. Cree will pay Mr. Ingram $303,000 in compensation for 2010, a filing shows.
A spokeswoman for Cree declined to comment but cited a December 2008 press release on Mr. Ingram’s appointment citing his “wealth of experience.”
In 2008, the Outstanding Directors Exchange, a unit of the media company Pearson, named Stephen E. Frank an “outstanding director” for “the masterful chairmanship of Washington Mutual’s audit committee during a period of intense change.” Mr. Frank, a longtime utility industry executive, had served on the board of Washington Mutual for more than a decade when the savings and loan — buffeted by excessive exposure to subprime loans — was seized by the government in September 2008 and sold off to JPMorgan Chase.
Last year, the Las Vegas utility NV Energy elected Mr. Frank to its board and he earned $109,000 in compensation.
A spokesman for NV Energy declined to comment. Mr. Frank could not be reached. In a 2008 interview with Agenda, a corporate-governance newsletter, referring to his experience at Washington Mutual, he said that “to suggest, with 20/20 hindsight, that an audit committee or a finance committee could easily have prevented these things, I think, is naïve.”
Rakesh Khurana, a Harvard Business School professor specializing in corporate-governance issues, says there are legitimate questions surrounding these boards. “When selecting individuals to oversee an organization, what criteria should we be using other than their previous performance on a corporate board?” he said. “If there’s no accountability here, then what is the system of accountability?”
Inquiries into the 2008 financial crisis have spent relatively little time looking at the role of corporate boards.
The Senate Permanent Subcommittee on Investigations held four hearings on the causes of the financial crisis, none of which focused on the role of directors.
The Financial Crisis Inquiry Commission, appointed by Congress, has held myriad hearings and interviews with executives of failed institutions. Although the public sessions have not included testimony from any outside directors, the hearings did touch on corporate governance, and the commission has privately interviewed directors, according to Phil Angelides, the commission’s chairman.
“I don’t think there’s any question that a dramatic failure of corporate governance was a central issue of the crisis,” Mr. Angelides said. “You’re going to find when our report is released that this will be a major point.”
Most Asian Stocks Advance on Yen Speculation; Newcrest Climbs
Sept. 15 (Bloomberg) -- Most Asian stocks rose, led by gains in Japan on speculation the government had taken steps to weaken the yen. Mining companies rose on higher metal prices.
Canon Inc., a camera maker that gets almost 85 percent of sales outside Japan, climbed 1.3 percent in Tokyo after Kyodo News reported the country had likely sold yen and bought dollars. Newcrest Mining Ltd., Australia’s biggest gold producer, jumped 1.9 percent in Sydney after gold futures rose to a record. Advantest Corp., the world’s No. 1 maker of memory-chip testers, dropped 0.4 percent after JPMorgan Chase & Co. cut its rating.
“People in the market are trading shares while watching currency moves,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc. “The market won’t be falling much as excessive pessimism about the global economy, led by the U.S., is receding.”
The MSCI Asia Pacific Index rose 0.3 percent to 124.60 as of 10:51 a.m. in Tokyo. About three stocks advanced for each one that dropped. The measure has climbed 7.6 percent from a one- month low on Aug. 25 amid speculation the U.S. will avoid slipping into its second recession in three years.
Canon Inc., a camera maker that gets almost 85 percent of sales outside Japan, climbed 1.3 percent in Tokyo after Kyodo News reported the country had likely sold yen and bought dollars. Newcrest Mining Ltd., Australia’s biggest gold producer, jumped 1.9 percent in Sydney after gold futures rose to a record. Advantest Corp., the world’s No. 1 maker of memory-chip testers, dropped 0.4 percent after JPMorgan Chase & Co. cut its rating.
“People in the market are trading shares while watching currency moves,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc. “The market won’t be falling much as excessive pessimism about the global economy, led by the U.S., is receding.”
The MSCI Asia Pacific Index rose 0.3 percent to 124.60 as of 10:51 a.m. in Tokyo. About three stocks advanced for each one that dropped. The measure has climbed 7.6 percent from a one- month low on Aug. 25 amid speculation the U.S. will avoid slipping into its second recession in three years.
Monday, September 13, 2010
Asian Commodity Stocks Rise on Growth Optimism; Japan Shares Fall on Yen
Asian commodity stocks rose as a forecast for faster European economic growth boosted confidence in a global recovery. Japanese shares fell as a stronger yen dented prospects for export earnings.
BHP Billiton Ltd., the world’s largest mining company, climbed 1.1 percent in Sydney after commodity prices increased. Mitsubishi Corp., which receives about 40 percent off its sales from commodities, rose 1.3 percent in Tokyo. Toyota Motor Corp. fell 0.7 percent on speculation Japanese Prime Minister Naoto Kan will survive a leadership challenge from Ichiro Ozawa, who advocates intervention to weaken the yen.
The MSCI Asia Pacific Index gained 0.1 percent to 123.92 as of 9:51 a.m. in Tokyo, with about two stocks falling for each one that rose. The measure has climbed 6.9 percent from a one- month low on Aug. 25 amid speculation the U.S. will avoid slipping back into recession.
“The sense of uncertainty about the future of the global economy is easing,” said Masumi Yamamoto, a market analyst at Tokyo-based Daiwa Securities Capital Markets Co.
BHP Billiton Ltd., the world’s largest mining company, climbed 1.1 percent in Sydney after commodity prices increased. Mitsubishi Corp., which receives about 40 percent off its sales from commodities, rose 1.3 percent in Tokyo. Toyota Motor Corp. fell 0.7 percent on speculation Japanese Prime Minister Naoto Kan will survive a leadership challenge from Ichiro Ozawa, who advocates intervention to weaken the yen.
The MSCI Asia Pacific Index gained 0.1 percent to 123.92 as of 9:51 a.m. in Tokyo, with about two stocks falling for each one that rose. The measure has climbed 6.9 percent from a one- month low on Aug. 25 amid speculation the U.S. will avoid slipping back into recession.
“The sense of uncertainty about the future of the global economy is easing,” said Masumi Yamamoto, a market analyst at Tokyo-based Daiwa Securities Capital Markets Co.
Reserve Bank of India Sets Up Group to Review Policy Procedure, Bank Rate
India’s central bank may overhaul its decade-old monetary policy to make local credit markets more responsive to changes in benchmark interest rates, as Governor Duvvuri Subbarao seeks to damp Asia’s second-fastest inflation.
A panel headed by Executive Director Deepak Mohanty will review the difference between the repurchase and reverse- repurchase rates and the frequency and timing of auctions, and assess the role of the bank rate, which has remained unchanged at 6 percent since 2003, the Reserve Bank of India said in a statement on its website.
“The RBI may be doing a reality check on the effectiveness of policy as India’s markets and economy have undergone a lot of change in the past decade,” said Bekxy Kuriakose, who manages the equivalent of $440 million in Indian debt at L&T Investment Management Ltd. in Mumbai. “Certain policy instruments may have lost their relevance while some others probably aren’t used often enough.”
Subbarao, 61, has vowed to cool inflation to 6 percent by the end of March from an average 10.5 percent in the first seven months of this year. He raised both key signaling rates four times since March, while the median forecast of eight economists surveyed by Bloomberg shows he will increase rates by a further half-percentage point by Dec. 31. The central bank’s next decision is due on Sept. 16.
Money Markets
Fluctuations in liquidity, a measure of surplus funds in the banking system, have prompted the Reserve Bank to use two signaling rates to influence money markets. The overnight money- market rate rose to an average 5.23 percent since June 1, from 3.9 percent in May, after companies paid license fees for the third-generation airwaves they won in an auction, which drained funds from the banking system.
India’s increasing integration with the global economy, large volatility in capital flows and sharp fluctuations in government cash balances have posed several challenges to liquidity management, the central bank said in its statement.
“The objective is to make the monetary policy transmission more effective and arm itself to deal with the volatile market conditions more efficiently,” said Shubhada Rao, chief economist at Yes Bank Ltd. in Mumbai. The huge gap between the two operative rates can sometimes hinder the central bank’s broader objective of controlling inflation, she said.
The difference between the repurchase rate, at which the central bank injects funds, and the reverse-repurchase rate, at which it mops up surplus, narrowed to 1.25 percentage point on July 27 as Subbarao increased the latter by 50 basis points to 4.5 percent.
The RBI panel will also have representation from bond traders and bankers, the central bank said.
“We’re unlikely to see any immediate change as the RBI group may take time to complete its study,” L&T Investment’s Kuriakose said.
A panel headed by Executive Director Deepak Mohanty will review the difference between the repurchase and reverse- repurchase rates and the frequency and timing of auctions, and assess the role of the bank rate, which has remained unchanged at 6 percent since 2003, the Reserve Bank of India said in a statement on its website.
“The RBI may be doing a reality check on the effectiveness of policy as India’s markets and economy have undergone a lot of change in the past decade,” said Bekxy Kuriakose, who manages the equivalent of $440 million in Indian debt at L&T Investment Management Ltd. in Mumbai. “Certain policy instruments may have lost their relevance while some others probably aren’t used often enough.”
Subbarao, 61, has vowed to cool inflation to 6 percent by the end of March from an average 10.5 percent in the first seven months of this year. He raised both key signaling rates four times since March, while the median forecast of eight economists surveyed by Bloomberg shows he will increase rates by a further half-percentage point by Dec. 31. The central bank’s next decision is due on Sept. 16.
Money Markets
Fluctuations in liquidity, a measure of surplus funds in the banking system, have prompted the Reserve Bank to use two signaling rates to influence money markets. The overnight money- market rate rose to an average 5.23 percent since June 1, from 3.9 percent in May, after companies paid license fees for the third-generation airwaves they won in an auction, which drained funds from the banking system.
India’s increasing integration with the global economy, large volatility in capital flows and sharp fluctuations in government cash balances have posed several challenges to liquidity management, the central bank said in its statement.
“The objective is to make the monetary policy transmission more effective and arm itself to deal with the volatile market conditions more efficiently,” said Shubhada Rao, chief economist at Yes Bank Ltd. in Mumbai. The huge gap between the two operative rates can sometimes hinder the central bank’s broader objective of controlling inflation, she said.
The difference between the repurchase rate, at which the central bank injects funds, and the reverse-repurchase rate, at which it mops up surplus, narrowed to 1.25 percentage point on July 27 as Subbarao increased the latter by 50 basis points to 4.5 percent.
The RBI panel will also have representation from bond traders and bankers, the central bank said.
“We’re unlikely to see any immediate change as the RBI group may take time to complete its study,” L&T Investment’s Kuriakose said.
Consumer Candidate May Avoid a Vote
WASHINGTON — The Obama administration is considering appointing the legal scholar Elizabeth Warren to run a new consumer bureau on a temporary basis to avoid a potentially bruising confirmation battle in the Senate, according to people who have been briefed on the search.
The Consumer Financial Protection Bureau, a centerpiece of the Dodd-Frank Wall Street regulatory overhaul law that Mr. Obama signed in July, was established to prevent abusive, deceptive and fraudulent terms for mortgages, credit cards, payday loans and a vast array of other financial products. It is to be led by a director, appointed by the president to a five-year term with the consent of the Senate.
Two people who have been briefed on the appointment process, who spoke on condition of anonymity because they feared reprisal, said the White House was exploring ways to have Ms. Warren effectively run the bureau without having to endure a confirmation battle and, potentially, the threat of a Republican filibuster.
The law appears to permit Mr. Obama to name an acting director until a permanent director is named. Mr. Obama could also name Ms. Warren using a recess appointment, but such an appointment would last only until the end of next year.
In addition, the law would permit Ms. Warren to run the bureau’s day-to-day affairs while it is nominally under the supervision of the Treasury Department. The bureau, which will consolidate employees and functions from a host of other agencies, could have a budget as large as $500 million.
On Friday, Mr. Obama credited Ms. Warren, a Harvard law professor, with coming up with “the idea for this agency,” and he praised her as “a dear friend” and “a tremendous advocate.” He said he had had conversations with her but was not yet ready to make an official announcement.
Amy Brundage, a White House spokeswoman, declined Monday evening to discuss the possibility of a temporary appointment.
“Elizabeth Warren has been a stalwart voice for American consumers and families and she was the architect of the idea that became the Consumer Financial Protection Bureau,” Ms. Brundage said in a statement. “The president will have more to say about the agency and its mission soon.”
The Dodd-Frank law gave the Treasury secretary, Timothy F. Geithner, power to “perform the functions of the bureau” until a director is confirmed. The bureau will have vast powers to write and enforce new rules, and Treasury aides have already begun administrative work to get the bureau running.
Under the law, Mr. Geithner has until Sunday — 60 days from the signing of the act — to designate a date for transferring to the new bureau functions currently performed by the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation and other agencies.
The transfer date is supposed to be anywhere between six and 18 months from July 21, when Mr. Obama signed the law.
But under the law, Mr. Geithner could delay that transfer until 24 months — or July 2012 — if he explained to Congress that “orderly implementation” of the law was “not feasible” within the 18-month limit.
Ms. Warren, 61, is widely admired by consumer groups and labor unions, while banks and other financial institutions have indicated that they would oppose her appointment. Senator Harry Reid, Democrat of Nevada and the majority leader, picked her to lead the panel overseeing the 2008 Wall Street bailout program.
An Oklahoma native, Ms. Warren is an authority on bankruptcy law and contracts. She taught at law schools in New Jersey, Michigan, Texas and Pennsylvania before joining Harvard in 1995.
Ms. Warren has been a front-runner to lead the new bureau, though a leading Democratic senator, Christopher J. Dodd of Connecticut, who is the chairman of the Banking Committee, has raised doubts about whether she could be confirmed. (Mr. Dodd has pledged to support Ms. Warren if she is nominated.)
A temporary appointment would permit Ms. Warren to shape the bureau from its inception, while avoiding the delays that could accompany a lengthy confirmation fight.
But some Democrats also say they believe the Obama administration might benefit from taking a prominent stance in support of Ms. Warren, and said the White House might relish a public battle rather than shy away from it.
The Consumer Financial Protection Bureau, a centerpiece of the Dodd-Frank Wall Street regulatory overhaul law that Mr. Obama signed in July, was established to prevent abusive, deceptive and fraudulent terms for mortgages, credit cards, payday loans and a vast array of other financial products. It is to be led by a director, appointed by the president to a five-year term with the consent of the Senate.
Two people who have been briefed on the appointment process, who spoke on condition of anonymity because they feared reprisal, said the White House was exploring ways to have Ms. Warren effectively run the bureau without having to endure a confirmation battle and, potentially, the threat of a Republican filibuster.
The law appears to permit Mr. Obama to name an acting director until a permanent director is named. Mr. Obama could also name Ms. Warren using a recess appointment, but such an appointment would last only until the end of next year.
In addition, the law would permit Ms. Warren to run the bureau’s day-to-day affairs while it is nominally under the supervision of the Treasury Department. The bureau, which will consolidate employees and functions from a host of other agencies, could have a budget as large as $500 million.
On Friday, Mr. Obama credited Ms. Warren, a Harvard law professor, with coming up with “the idea for this agency,” and he praised her as “a dear friend” and “a tremendous advocate.” He said he had had conversations with her but was not yet ready to make an official announcement.
Amy Brundage, a White House spokeswoman, declined Monday evening to discuss the possibility of a temporary appointment.
“Elizabeth Warren has been a stalwart voice for American consumers and families and she was the architect of the idea that became the Consumer Financial Protection Bureau,” Ms. Brundage said in a statement. “The president will have more to say about the agency and its mission soon.”
The Dodd-Frank law gave the Treasury secretary, Timothy F. Geithner, power to “perform the functions of the bureau” until a director is confirmed. The bureau will have vast powers to write and enforce new rules, and Treasury aides have already begun administrative work to get the bureau running.
Under the law, Mr. Geithner has until Sunday — 60 days from the signing of the act — to designate a date for transferring to the new bureau functions currently performed by the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation and other agencies.
The transfer date is supposed to be anywhere between six and 18 months from July 21, when Mr. Obama signed the law.
But under the law, Mr. Geithner could delay that transfer until 24 months — or July 2012 — if he explained to Congress that “orderly implementation” of the law was “not feasible” within the 18-month limit.
Ms. Warren, 61, is widely admired by consumer groups and labor unions, while banks and other financial institutions have indicated that they would oppose her appointment. Senator Harry Reid, Democrat of Nevada and the majority leader, picked her to lead the panel overseeing the 2008 Wall Street bailout program.
An Oklahoma native, Ms. Warren is an authority on bankruptcy law and contracts. She taught at law schools in New Jersey, Michigan, Texas and Pennsylvania before joining Harvard in 1995.
Ms. Warren has been a front-runner to lead the new bureau, though a leading Democratic senator, Christopher J. Dodd of Connecticut, who is the chairman of the Banking Committee, has raised doubts about whether she could be confirmed. (Mr. Dodd has pledged to support Ms. Warren if she is nominated.)
A temporary appointment would permit Ms. Warren to shape the bureau from its inception, while avoiding the delays that could accompany a lengthy confirmation fight.
But some Democrats also say they believe the Obama administration might benefit from taking a prominent stance in support of Ms. Warren, and said the White House might relish a public battle rather than shy away from it.
Doubts on Coal India’s coal reserves
Coal India is set to begin a roadshow to promote what is expected to be India’s biggest stock listing, even as tightened environmental regulations and a Maoist insurgency threaten to render much of the state-owned miner’s reserves inaccessible.
The company’s biggest coal fields are located in remote regions dominated by Maoist rebels who often target business activities for extortion, disrupt roads and railway lines used to transport coal and are suspected of involvement in coal theft.
Moreover, the coal ministry has yet to persuade Manmohan Singh, the prime minister, to roll back an order by the environment ministry that this year designated areas covering about 40 per cent of Coal India’s reserves as “no-go areas” for mining to stop the wholesale felling of eastern forests.
“Although India has large reserves, actual production of coal has only been growing at 6-7 per cent per year,” said Arvind Mahajan, head of natural resources at KPMG.
Coal India hopes to raise up to Rs150bn ($3.2bn) from the sale of a 10 per cent stake. That would make its initial public offering bigger than India’s largest completed listing, the $3bn offering of domestic electricity producer Reliance Power in early 2008.
Coal India claims to be the world’s largest coal producer and accounts for 85 per cent of production in India, which has the fourth-largest reserves on the globe. But it recently revised down its annual production target from 520m tonnes to 486m tonnes, citing delays in environmental clearance for mine expansion. Meanwhile, Indian coal imports are surging, with KPMG estimating a domestic shortfall of 189m tonnes a year by 2015.
India’s coal ministry has urged Mr Singh to pare back the environment ministry’s designated “no-go” order to regions accounting for just 10 per cent of coal reserves. Coal India’s prospectus said the issue should be resolved in a few months through “mutual consultation”. But it said: “If we are unable to produce coal from such designated areas, estimates of our reserves could be adversely affected.” In its prospectus, Coal India admits to problems with insurgency and theft from its mines by illegal miners and others, especially in eastern regions with a heavy Maoist presence.
In spite of the problems, bankers expect a strong reception for the offering given its near monopoly status and demand from the power sector. “It just depends on the price,” said one person familiar with the deal.
Citigroup, Morgan Stanley, Kotak Mahindra Capital, Enam Securities, Deutsche Bank, and Bank of America-Merrill Lynch are managing the IPO. The offering is part of government plans to raise $8.6bn through stake sales in the fiscal year to March 2011.
The company’s biggest coal fields are located in remote regions dominated by Maoist rebels who often target business activities for extortion, disrupt roads and railway lines used to transport coal and are suspected of involvement in coal theft.
Moreover, the coal ministry has yet to persuade Manmohan Singh, the prime minister, to roll back an order by the environment ministry that this year designated areas covering about 40 per cent of Coal India’s reserves as “no-go areas” for mining to stop the wholesale felling of eastern forests.
“Although India has large reserves, actual production of coal has only been growing at 6-7 per cent per year,” said Arvind Mahajan, head of natural resources at KPMG.
Coal India hopes to raise up to Rs150bn ($3.2bn) from the sale of a 10 per cent stake. That would make its initial public offering bigger than India’s largest completed listing, the $3bn offering of domestic electricity producer Reliance Power in early 2008.
Coal India claims to be the world’s largest coal producer and accounts for 85 per cent of production in India, which has the fourth-largest reserves on the globe. But it recently revised down its annual production target from 520m tonnes to 486m tonnes, citing delays in environmental clearance for mine expansion. Meanwhile, Indian coal imports are surging, with KPMG estimating a domestic shortfall of 189m tonnes a year by 2015.
India’s coal ministry has urged Mr Singh to pare back the environment ministry’s designated “no-go” order to regions accounting for just 10 per cent of coal reserves. Coal India’s prospectus said the issue should be resolved in a few months through “mutual consultation”. But it said: “If we are unable to produce coal from such designated areas, estimates of our reserves could be adversely affected.” In its prospectus, Coal India admits to problems with insurgency and theft from its mines by illegal miners and others, especially in eastern regions with a heavy Maoist presence.
In spite of the problems, bankers expect a strong reception for the offering given its near monopoly status and demand from the power sector. “It just depends on the price,” said one person familiar with the deal.
Citigroup, Morgan Stanley, Kotak Mahindra Capital, Enam Securities, Deutsche Bank, and Bank of America-Merrill Lynch are managing the IPO. The offering is part of government plans to raise $8.6bn through stake sales in the fiscal year to March 2011.
Sunday, September 12, 2010
At Goldman, Partners Are Made, and Unmade
On Wall Street, becoming a partner at Goldman Sachs is considered the equivalent of winning the lottery.
This fall, in a secretive process, some 100 executives will be chosen to receive this golden ticket, bestowing rich pay packages and an inside track to the top jobs at the company.
What few outside Goldman know is that this ticket can also be taken away.
As many as 60 Goldman executives could be stripped of their partnerships this year to make way for new blood, people with firsthand knowledge of the process say. Inside the firm, the process is known as “de-partnering.” Goldman does not disclose who is no longer a partner, and many move on to jobs elsewhere; some stay, telling few of their fate.
“I have friends who have been de-partnered who are still there, and most people inside think they are still partners,” said one former Goldman executive, who spoke only on the condition of anonymity. “It is something you just don’t talk about.”
Goldman has roughly 35,000 employees, but only 375 or so partners. The former Treasury Secretaries Henry M. Paulson Jr. and Robert E. Rubin, and former Gov. Jon S. Corzine of New Jersey, now chief executive of financial firm MF Global, were all partners.
It can take years to make partner, and being pushed from the inner circle can be wrenching.
“Being partner at Goldman is the pinnacle of Wall Street; if you make it, you are considered set for life,” said Michael Driscoll, a visiting professor at Adelphi University and a senior managing director at Bear Stearns before that firm collapsed in 2008. “To have it taken away would just be devastating to an individual. There is just no other word for it.”
The financial blow can be substantial as well. Executives stripped of partnership would retain their base salary, roughly $200,000, but their bonuses could be diminished, potentially costing them millions of dollars in a good year.
Goldman weeds out partners because it is worried that if the partnership becomes too big, it will lose its cachet and become less of a motivational tool for talented up-and-comers, people involved in the process say. If too many people stay, it creates a logjam. The average tenure of a partner is about eight years, in part because of natural attrition and retirements. Goldman insiders also note they have what they call an “up-and-out” culture, leading to the active management of the pool.
The process of vetting new candidates for partner and deciding which existing partners must go began in earnest in recent weeks, according to people with knowledge of the process, which takes place every two years. They spoke on the condition of anonymity. The 2010 partners will most likely be announced in November.
Candidates are judged on many qualities, primarily their financial contribution to the firm. But lawyers and risk managers — who are not big revenue producers — can also make it to the inner circle. The executives responsible for running the partner process this year are the vice chairmen, J. Michael Evans, Michael S. Sherwood and John S. Weinberg; the head of human resources, Edith W. Cooper; and the bank’s president, Gary D. Cohn.
Goldman typically removes 30 or so partners every two years, said those people who described the process. The number is expected to be significantly higher this year because fewer senior executives have left the firm as a sluggish economy and uncertain markets limit their opportunities elsewhere.
Removing partners like this is unique to Goldman. When companies go public, they shed the private partnership system, and ownership of the company is transferred to shareholders. Goldman’s ownership was also transferred to shareholders, but it created a hybrid partner model as an incentive for employees.
At most firms, employees aspire to become so-called managing directors, a title that typically bestows higher pay and perks. Goldman also appoints managing directors, but partners are a cut above that — they are called “partner managing directors” — and that selection process is much more elaborate. There are still a handful of smaller, privately held financial companies on Wall Street, and executives can be stripped of their partnerships at those.
Those whom Goldman does not want to keep are likely to be quietly told in the coming weeks. Each situation is handled differently, the people with knowledge of the process say. Some partners are given time to find other jobs outside the firm. Others are told they will not be made partner and are asked to consider what they want to do next within the company.
While Goldman is on track to remove many more executives than usual, the process is in its early stages and no final decisions have been made, these people caution.
A Goldman spokesman declined to comment on how it selects and removes partners.
This fall, in a secretive process, some 100 executives will be chosen to receive this golden ticket, bestowing rich pay packages and an inside track to the top jobs at the company.
What few outside Goldman know is that this ticket can also be taken away.
As many as 60 Goldman executives could be stripped of their partnerships this year to make way for new blood, people with firsthand knowledge of the process say. Inside the firm, the process is known as “de-partnering.” Goldman does not disclose who is no longer a partner, and many move on to jobs elsewhere; some stay, telling few of their fate.
“I have friends who have been de-partnered who are still there, and most people inside think they are still partners,” said one former Goldman executive, who spoke only on the condition of anonymity. “It is something you just don’t talk about.”
Goldman has roughly 35,000 employees, but only 375 or so partners. The former Treasury Secretaries Henry M. Paulson Jr. and Robert E. Rubin, and former Gov. Jon S. Corzine of New Jersey, now chief executive of financial firm MF Global, were all partners.
It can take years to make partner, and being pushed from the inner circle can be wrenching.
“Being partner at Goldman is the pinnacle of Wall Street; if you make it, you are considered set for life,” said Michael Driscoll, a visiting professor at Adelphi University and a senior managing director at Bear Stearns before that firm collapsed in 2008. “To have it taken away would just be devastating to an individual. There is just no other word for it.”
The financial blow can be substantial as well. Executives stripped of partnership would retain their base salary, roughly $200,000, but their bonuses could be diminished, potentially costing them millions of dollars in a good year.
Goldman weeds out partners because it is worried that if the partnership becomes too big, it will lose its cachet and become less of a motivational tool for talented up-and-comers, people involved in the process say. If too many people stay, it creates a logjam. The average tenure of a partner is about eight years, in part because of natural attrition and retirements. Goldman insiders also note they have what they call an “up-and-out” culture, leading to the active management of the pool.
The process of vetting new candidates for partner and deciding which existing partners must go began in earnest in recent weeks, according to people with knowledge of the process, which takes place every two years. They spoke on the condition of anonymity. The 2010 partners will most likely be announced in November.
Candidates are judged on many qualities, primarily their financial contribution to the firm. But lawyers and risk managers — who are not big revenue producers — can also make it to the inner circle. The executives responsible for running the partner process this year are the vice chairmen, J. Michael Evans, Michael S. Sherwood and John S. Weinberg; the head of human resources, Edith W. Cooper; and the bank’s president, Gary D. Cohn.
Goldman typically removes 30 or so partners every two years, said those people who described the process. The number is expected to be significantly higher this year because fewer senior executives have left the firm as a sluggish economy and uncertain markets limit their opportunities elsewhere.
Removing partners like this is unique to Goldman. When companies go public, they shed the private partnership system, and ownership of the company is transferred to shareholders. Goldman’s ownership was also transferred to shareholders, but it created a hybrid partner model as an incentive for employees.
At most firms, employees aspire to become so-called managing directors, a title that typically bestows higher pay and perks. Goldman also appoints managing directors, but partners are a cut above that — they are called “partner managing directors” — and that selection process is much more elaborate. There are still a handful of smaller, privately held financial companies on Wall Street, and executives can be stripped of their partnerships at those.
Those whom Goldman does not want to keep are likely to be quietly told in the coming weeks. Each situation is handled differently, the people with knowledge of the process say. Some partners are given time to find other jobs outside the firm. Others are told they will not be made partner and are asked to consider what they want to do next within the company.
While Goldman is on track to remove many more executives than usual, the process is in its early stages and no final decisions have been made, these people caution.
A Goldman spokesman declined to comment on how it selects and removes partners.
Asia Stocks Rise as U.S. Inventory, China Production Boost Growth Optimism
Asian stocks rose, extending a two- week rally, after higher-than-forecast wholesale inventories in the U.S. and China’s industrial output increased at a faster pace than economists estimated.
Honda Motor Co., which generates 46 percent of its sales in North America, increased 1.4 percent in Tokyo. Komatsu Ltd., which counts China as its biggest market, advanced 1.3 percent. Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, rose 2.8 percent in Taipei after saying sales in August surged. BHP Billiton Ltd., the world’s largest mining company, gained 1.5 percent on higher commodity prices.
“Concerns are easing about the future of the global economy,” Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc.
The MSCI Asia Pacific Index gained 0.9 percent to 122.86 as of 10:51 a.m. in Tokyo, with almost four stocks rising for each one that fell. The measure has climbed 6 percent from a one- month low on Aug. 25 amid speculation the U.S. will avoid slipping back into recession.
Japan’s Nikkei 225 Stock Average jumped 1.1 percent and the Kospi index increased 0.4 percent in Seoul. Australia’s S&P/ASX 200 Index advanced 1 percent while China’s Shanghai Composite Index gained 0.2 percent.
Futures on the Standard & Poor’s 500 Index climbed 0.6 percent. The index rose 0.5 percent in New York on Sept. 10 after a government report showed inventories at U.S. wholesalers rose in July by the most in two years as a rebound in demand prompted companies to add to stockpiles.
Toyota, Sony Rise
Honda, which counts North America as its biggest market for sales, rose 1.4 percent to 2,825 yen in Tokyo. In Seoul, Hyundai Motor Co., which gets 13 percent of its revenue in North America, advanced 1.4 percent to 150,000 won.
In China, industrial production gained 13.9 percent in August from a year earlier, more than the 13 percent median estimate of 29 economists, a statistics bureau report showed in Beijing on Sept. 11. Consumer prices jumped 3.5 percent, the most in 22 months, as food costs climbed while retail sales increased 18.4 percent.
A gauge of industrial companies in the MSCI Asia Pacific Index, which includes trading houses, machinery makers and railway companies, rose 0.9 percent, the second-biggest increase of 10 industry groups.
Komatsu, which receives 26 percent of its revenue from China, rose 1.3 percent to 1,850 yen in Tokyo. Fanuc Ltd., the robotics maker which counts Asia excluding Japan as its biggest market, rose 1.7 percent to 9,860 yen.
Copper, Oil
In Taipei, Hon Hai jumped 2.8 percent to NT$111. The company said non-consolidated sales almost doubled in August from the same month last year.
The gauge of raw-material producers in the MSCI Asia Pacific Index rose 1.2 percent. Copper futures in New York climbed 1.9 percent in after-hours trading, while crude oil jumped 1.1 percent as the economic data from China boosted prospects for commodity demand.
BHP rose 1.4 percent to A$38.51 in Sydney and was the biggest contributor to the MSCI Asia Pacific Index’s advance today. Rio Tinto Group, the world’s third-biggest mining company, climbed 1.3 percent to A$75.19. Inpex Corp., Japan’s largest oil and gas explorer, increased 2.4 percent to 418,500 yen in Tokyo.
Honda Motor Co., which generates 46 percent of its sales in North America, increased 1.4 percent in Tokyo. Komatsu Ltd., which counts China as its biggest market, advanced 1.3 percent. Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, rose 2.8 percent in Taipei after saying sales in August surged. BHP Billiton Ltd., the world’s largest mining company, gained 1.5 percent on higher commodity prices.
“Concerns are easing about the future of the global economy,” Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc.
The MSCI Asia Pacific Index gained 0.9 percent to 122.86 as of 10:51 a.m. in Tokyo, with almost four stocks rising for each one that fell. The measure has climbed 6 percent from a one- month low on Aug. 25 amid speculation the U.S. will avoid slipping back into recession.
Japan’s Nikkei 225 Stock Average jumped 1.1 percent and the Kospi index increased 0.4 percent in Seoul. Australia’s S&P/ASX 200 Index advanced 1 percent while China’s Shanghai Composite Index gained 0.2 percent.
Futures on the Standard & Poor’s 500 Index climbed 0.6 percent. The index rose 0.5 percent in New York on Sept. 10 after a government report showed inventories at U.S. wholesalers rose in July by the most in two years as a rebound in demand prompted companies to add to stockpiles.
Toyota, Sony Rise
Honda, which counts North America as its biggest market for sales, rose 1.4 percent to 2,825 yen in Tokyo. In Seoul, Hyundai Motor Co., which gets 13 percent of its revenue in North America, advanced 1.4 percent to 150,000 won.
In China, industrial production gained 13.9 percent in August from a year earlier, more than the 13 percent median estimate of 29 economists, a statistics bureau report showed in Beijing on Sept. 11. Consumer prices jumped 3.5 percent, the most in 22 months, as food costs climbed while retail sales increased 18.4 percent.
A gauge of industrial companies in the MSCI Asia Pacific Index, which includes trading houses, machinery makers and railway companies, rose 0.9 percent, the second-biggest increase of 10 industry groups.
Komatsu, which receives 26 percent of its revenue from China, rose 1.3 percent to 1,850 yen in Tokyo. Fanuc Ltd., the robotics maker which counts Asia excluding Japan as its biggest market, rose 1.7 percent to 9,860 yen.
Copper, Oil
In Taipei, Hon Hai jumped 2.8 percent to NT$111. The company said non-consolidated sales almost doubled in August from the same month last year.
The gauge of raw-material producers in the MSCI Asia Pacific Index rose 1.2 percent. Copper futures in New York climbed 1.9 percent in after-hours trading, while crude oil jumped 1.1 percent as the economic data from China boosted prospects for commodity demand.
BHP rose 1.4 percent to A$38.51 in Sydney and was the biggest contributor to the MSCI Asia Pacific Index’s advance today. Rio Tinto Group, the world’s third-biggest mining company, climbed 1.3 percent to A$75.19. Inpex Corp., Japan’s largest oil and gas explorer, increased 2.4 percent to 418,500 yen in Tokyo.
India moves into mobile phone shares trading
Millions of Indian investors will be able to trade shares using their mobile phones after the South Asian nation approved the move and the Bombay Stock Exchange unveiled plans for the service.
Trading on mobile phones is catching on globally, especially in Asia, where mobile phone penetration is growing rapidly.
Interactive Brokers, one of the largest US-based brokers, launched trading on mobile devices in 2002, including in the US and Britain.
But the phenomenon’s arrival in India is a sign that Asia is taking the lead in opening up the capital markets to the masses.
Mobile phone trading has made inroads in Japan and South Korea, where the local stock exchange says it accounts for 3 per cent of trading volume.
Madhu Kannan, chief executive of the Bombay exchange, said on Friday it had received approval from the Securities and Exchange Board of India (Sebi), the market regulator, for internet-based trading via mobile handset.
“We’ll be launching very soon,” he told the Financial Times. “This is something very core to our technology focused strategy. We’re trying to bring more people close to the market.
“It has the ability to significantly advance the concept of financial inclusion and the penetration of capital markets throughout the entire country,” Mr Kannan said.
Vinay Agrawal, executive director at Angel Broking, said that Sebi’s approval of mobile trading would have a significant impact on his business “because mobile penetration around the country is very high.”
India is the world’s fastest growing large mobile market by user numbers and the upcoming introduction of third-generation cellular services could make it easier for investors to access the markets.
The country’s subscriber base was 652.4m users as of the end of July, with 17m users added that month alone, according to the Telecom Regulatory Authority of India.
The National Stock Exchange, India’s biggest exchange, is also expected to receive Sebi’s approval for mobile phone trading and has lined up about 800 brokerage houses to launch its wireless facility.
In South Korea mobile phone share trading is growing as more people use smartphones to trade stocks. But the portion is still small as smartphones were introduced in Korea relatively late with the adoption of the iPhone late last year.
Mobile phone trading amounted to Won5,619bn as of March, according to Korea Exchange. The industry predicts that the current 3 per cent share of all trading done by mobile phone could rise to around 10 per cent in a couple of years.
Most retail, or individual, investors still prefer trading at home on their personal computers.
Gerald Perez, London-based managing director at Interactive Brokers, said his company planned to offer mobile phone trading India shortly. In September last year it launched iPhone and Blackberry apps to allow customers to log into their account and non-customers to view free stock, option, futures and forex quotes around the world. “I think growth is pretty good especially in Asia, everyone has mobile phones and everyone is on the go,” he said.
Trading on mobile phones is catching on globally, especially in Asia, where mobile phone penetration is growing rapidly.
Interactive Brokers, one of the largest US-based brokers, launched trading on mobile devices in 2002, including in the US and Britain.
But the phenomenon’s arrival in India is a sign that Asia is taking the lead in opening up the capital markets to the masses.
Mobile phone trading has made inroads in Japan and South Korea, where the local stock exchange says it accounts for 3 per cent of trading volume.
Madhu Kannan, chief executive of the Bombay exchange, said on Friday it had received approval from the Securities and Exchange Board of India (Sebi), the market regulator, for internet-based trading via mobile handset.
“We’ll be launching very soon,” he told the Financial Times. “This is something very core to our technology focused strategy. We’re trying to bring more people close to the market.
“It has the ability to significantly advance the concept of financial inclusion and the penetration of capital markets throughout the entire country,” Mr Kannan said.
Vinay Agrawal, executive director at Angel Broking, said that Sebi’s approval of mobile trading would have a significant impact on his business “because mobile penetration around the country is very high.”
India is the world’s fastest growing large mobile market by user numbers and the upcoming introduction of third-generation cellular services could make it easier for investors to access the markets.
The country’s subscriber base was 652.4m users as of the end of July, with 17m users added that month alone, according to the Telecom Regulatory Authority of India.
The National Stock Exchange, India’s biggest exchange, is also expected to receive Sebi’s approval for mobile phone trading and has lined up about 800 brokerage houses to launch its wireless facility.
In South Korea mobile phone share trading is growing as more people use smartphones to trade stocks. But the portion is still small as smartphones were introduced in Korea relatively late with the adoption of the iPhone late last year.
Mobile phone trading amounted to Won5,619bn as of March, according to Korea Exchange. The industry predicts that the current 3 per cent share of all trading done by mobile phone could rise to around 10 per cent in a couple of years.
Most retail, or individual, investors still prefer trading at home on their personal computers.
Gerald Perez, London-based managing director at Interactive Brokers, said his company planned to offer mobile phone trading India shortly. In September last year it launched iPhone and Blackberry apps to allow customers to log into their account and non-customers to view free stock, option, futures and forex quotes around the world. “I think growth is pretty good especially in Asia, everyone has mobile phones and everyone is on the go,” he said.
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