India’s industrial production grew at the fastest pace in three months, threatening to strain power and transportation capacities and stoke inflation. Stocks rose.
Output at factories, utilities and mines rose 10.8 percent in October from a year earlier after a 4.4 percent increase in September, the statistics office said in a statement in New Delhi today. The median estimate of 29 economists in a Bloomberg News survey was for an 8.5 percent gain.
Reserve Bank of India Governor Duvvuri Subbarao said this week that inflation remains above “tolerance level,” as the country battles rising prices along with China. India may raise interest rates in January after pausing at the next policy meeting on Dec. 16 because of a cash crunch at lenders, said economists at Kotak Mahindra Bank Ltd. and Nomura Holdings Inc.
“This kind of strong growth will accentuate the pressure on inflation and calls for further monetary tightening,” said Sonal Varma, a Mumbai-based economist at Nomura, Japan’s biggest brokerage. “We think the RBI is likely to raise rates in the January to March quarter.”
The Bombay Stock Exchange’s Sensitive Index rose for the first time in four days, climbing 1.4 percent. Ten-year government bond yields fell four basis points to 8.08 percent as of 5 p.m. in Mumbai. The rupee advanced 0.4 percent to 45.05 against the dollar.
Inflation Data
The central bank’s goal is to keep the benchmark wholesale- price inflation rate between 4 percent and 4.5 percent. It may slow to an 11-month low of 7.5 percent in November, according to the median of 26 estimates in a Bloomberg News survey. The commerce ministry is scheduled to announce the data on Dec. 14.
In China, where industrial output rose 13.1 percent in October from a year earlier, inflation is accelerating following an unprecedented credit expansion, a result of efforts to protect the economy from last year’s global recession. Consumer prices rose 4.4 percent in October from a year earlier, the fastest pace in two years.
The People’s Bank of China today raised lenders’ reserve requirements for the third time in five weeks. In October, it increased the interest rate for the first time since 2007.
The Reserve Bank, which has boosted rates six times in 2010, the most by any central bank in Asia, said Nov. 2 that it probably won’t raise rates until January, giving itself time to see the impact of its monetary tightening. India’s benchmark repurchase rate is 6.25 percent.
Manufacturing Surge
Manufacturing grew 11.3 percent in October after a 4.6 percent gain in September, today’s report showed. Electricity production climbed 8.8 percent while mining rose 6.5 percent.
A cash squeeze at banks after companies including Coal India Ltd. raised funds from share sales and businesses withdrew money to pay taxes may also prompt Subbarao to keep borrowing costs unchanged for now, according to Anubhuti Sahay, an economist at Standard Chartered Plc in Mumbai. Coal India raised 152 billion rupees ($3.4 billion) in October in the nation’s biggest initial share sale.
Commercial banks borrowed an average 809 billion rupees a day this quarter using the RBI’s repurchase-auction window, compared with 239 billion rupees in the previous three months, according to data compiled by Bloomberg, indicating a shortage of funds at lenders.
Subbarao said yesterday that the central bank was “deeply conscious” of the liquidity situation at banks, and that it “will take some steps as may be necessary.”
Bond Auction
The RBI yesterday conducted an auction to purchase 120 billion rupees of securities to ease liquidity. Deputy Governor Subir Gokarn told reporters in Kolkata this week that the move to replenish funds in the banking system isn’t a sign of a change in the central bank’s monetary policy stance.
“Inflation will remain a problem for a long while,” D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group in New Delhi, said before the production data. “When consumer demand rises amid infrastructure constraints, it pushes up the cost of doing business.”
India has a power deficit of 10.5 percent during peak hours, the nation’s Central Electricity Authority estimates, forcing most companies to invest in their own supply back-ups. The target to add 62,000 megawatts of generation capacity in the five years to March 2012 may be missed by about 4,000 megawatts, the government said yesterday.
The average turnaround time for ships unloading and loading cargo at India’s major ports is almost four days, compared with 10 hours in Hong Kong, India’s finance ministry estimates.
“There is a real risk of inflation accelerating in the coming months due to strong growth,” said Dharmakirti Joshi, a Mumbai-based economist at Crisil Ltd., the local unit of Standard & Poor’s Ratings Services. “The RBI may consider raising rates in January.”
Foreign manufacturers, meanwhile, are investing more in India to benefit from growing demand in the nation of 1.2 billion people, the most populous after China.
Daimler AG this week announced plans to invest as much as 3.5 billion rupees by 2012 to expand its India factory that builds Mercedes-Benz cars.
Friday, December 10, 2010
Choosing Recipients of Charity
December is the season of solicitations, and besides the catalogs peddling obscure gadgets and enormous hunks of meat from the Great Plains, you’ve also probably received an impressive pile of pleas from various nonprofit institutions.
Some people immediately throw away these missives from charities. Others find them a helpful reminder of causes that were once important to them or could be now.
To my mind, however, each of these letters is a nagging reminder to our household that we have failed to plan for charitable giving as carefully as we’ve planned for our savings. Even though we’re reasonably deliberate about allocating our investment assets, it usually isn’t until tax time that we tally up what we gave away. And rarely do we stop and ask why or which causes are our highest priorities.
This year, we hope to be more strategic, and I don’t think there’s any downside in anyone taking a less haphazard approach. Start by setting a rough budget for giving, and then divide that pie according to the causes and institutions that are most important to you. Here are five things to think about as you sort through the mail and draw up your own list of priorities.
THE WHY OF GIVING Giving is optional, so why do you give? There’s no right answer to this question, and if you do it just because it makes you feel better about yourself (or how you’ve earned your money), so be it.
But listing honest answers to the question can be clarifying. Jonathan Katz, a physics professor from Clayton, Mo., considers things he believes in and feels responsible for, keeping in mind that belief is necessary, but not enough, for responsibility.
He believes, for example, that diabetes research is a good thing, but he feels no particular responsibility for it because he has no diabetics in his family. But because his mother died of breast cancer, he feels some responsibility for supporting the cause of treating and eradicating it.
Indeed, these personal connections may be the most powerful motivators of all. It’s why so many people give first to PTAs or their alma maters, particularly those like me who received scholarship money and wish to pay it back and then some.
THE WHERE OF GIVING This is, perhaps, the toughest question: How best to divide your budget among neighbors in need (and local cultural institutions that enrich your life) and people in developing countries for whom help from elsewhere may mean the difference between life and death?
In an investing portfolio, making large, single bets is generally a recipe for anxiety and unhappy outcomes. With contributions, too, an equal split among global, national and local causes may be a good approach for the first draft of your giving budget.
That said, many of the people I spoke to this week find themselves swayed by current events, like the earthquake in Haiti. Others devote more of their (often limited) giving budget to local causes when the economy is particularly bad and more people closer to home are suffering.
Here, too, I’m not sure there is a right answer, though I’d be interested in hearing your approach to this tricky allocation question on our Bucks blog (nytimes.com/bucks).
THE WHEN OF GIVING Even outside this season of solicitation, we see opportunities to contribute practically every day. The need out there is acute and ubiquitous, so it’s little wonder that we are often so overwhelmed that we do nothing until a deadline arrives. Then, in the season of giving (and getting the tax deductions by Dec. 31), the solicitations show up and we make hasty choices.
But any institution would welcome your gift at another time of year, and spreading contributions across the calendar may actually make it easier for you to give even more.
One of my favorite Your Money pen pals is Ned Gerber, trained as an accountant and now a brother in the Anglican Benedictine Order of Christ the King in Sydney, Australia. He pointed me to an adage in an early Christian document known as the Didache, which suggests that you should “let your alms sweat in the palms of your hand.”
Wise stewardship, Brother Gerber added, doesn’t happen automatically. It takes time — and work.
DOING YOUR HOMEWORK So how best to know what organization will make the most efficient use of your gifts?
This is the subject of a fair bit of debate, and many people reflexively go to GuideStar or another Web site that offers data on nonprofit groups to make sure that an organization isn’t spending too much on staff salaries or other expenses.
That said, some organizations may play fast and loose when reporting those data. Leaders of other nonprofits note that if members of their staff aren’t constantly worried about making their own ends meet, they can throw themselves further into raising money for the cause.
Melissa Berman, the chief executive of Rockefeller Philanthropy Advisors, offers advice to the kinds of donors who have so much money to give that nonprofit groups are happy to answer any of their queries. If you’re not that kind of giver, however, she suggests asking the institution three questions.
First, what is the problem you are trying to solve? Second, how do you think that will actually get solved? And finally, what evidence do you have that you are helping to solve the problem?
Ms. Berman’s organization, which was spun out of the Rockefeller family office in 2002, has posted other guidance on its Web site.
ROPING IN THE CHILDREN There are a number of ways to make children a part of your family’s giving. You can buy them a piggy bank that has a slot for charity and make sure they understand why you’re dropping off coats or canned food at their schools or community centers.
Then there’s the Hanukkah ritual that Dan and Barbara Aldouby have developed for their six grandsons, ages 5 to 18. Each of them gets a $10 check in the mail with the “to” portion blank. All pick their own cause to support and must report back on how they chose the recipient.
“I was born in 1931, and I can remember the bad old days,” said Mr. Aldouby of Yardley, Pa. “I remember looking at the kids and thinking they we’re living a much different lifestyle than the one that I had, where you maybe got one pair of new shoes for Rosh Hashanah. So how are they going to know that there is a whole different world out there?”
The results have been somewhat unexpected, though the Aldoubys don’t really mind as long as the money is going to help something, somewhere. “One of our grandsons chose the Ronald McDonald House,” he said. “He said the reason he chose it was because they make good hamburgers and they like kids. Who’s to argue with that kind of logic?”
Some people immediately throw away these missives from charities. Others find them a helpful reminder of causes that were once important to them or could be now.
To my mind, however, each of these letters is a nagging reminder to our household that we have failed to plan for charitable giving as carefully as we’ve planned for our savings. Even though we’re reasonably deliberate about allocating our investment assets, it usually isn’t until tax time that we tally up what we gave away. And rarely do we stop and ask why or which causes are our highest priorities.
This year, we hope to be more strategic, and I don’t think there’s any downside in anyone taking a less haphazard approach. Start by setting a rough budget for giving, and then divide that pie according to the causes and institutions that are most important to you. Here are five things to think about as you sort through the mail and draw up your own list of priorities.
THE WHY OF GIVING Giving is optional, so why do you give? There’s no right answer to this question, and if you do it just because it makes you feel better about yourself (or how you’ve earned your money), so be it.
But listing honest answers to the question can be clarifying. Jonathan Katz, a physics professor from Clayton, Mo., considers things he believes in and feels responsible for, keeping in mind that belief is necessary, but not enough, for responsibility.
He believes, for example, that diabetes research is a good thing, but he feels no particular responsibility for it because he has no diabetics in his family. But because his mother died of breast cancer, he feels some responsibility for supporting the cause of treating and eradicating it.
Indeed, these personal connections may be the most powerful motivators of all. It’s why so many people give first to PTAs or their alma maters, particularly those like me who received scholarship money and wish to pay it back and then some.
THE WHERE OF GIVING This is, perhaps, the toughest question: How best to divide your budget among neighbors in need (and local cultural institutions that enrich your life) and people in developing countries for whom help from elsewhere may mean the difference between life and death?
In an investing portfolio, making large, single bets is generally a recipe for anxiety and unhappy outcomes. With contributions, too, an equal split among global, national and local causes may be a good approach for the first draft of your giving budget.
That said, many of the people I spoke to this week find themselves swayed by current events, like the earthquake in Haiti. Others devote more of their (often limited) giving budget to local causes when the economy is particularly bad and more people closer to home are suffering.
Here, too, I’m not sure there is a right answer, though I’d be interested in hearing your approach to this tricky allocation question on our Bucks blog (nytimes.com/bucks).
THE WHEN OF GIVING Even outside this season of solicitation, we see opportunities to contribute practically every day. The need out there is acute and ubiquitous, so it’s little wonder that we are often so overwhelmed that we do nothing until a deadline arrives. Then, in the season of giving (and getting the tax deductions by Dec. 31), the solicitations show up and we make hasty choices.
But any institution would welcome your gift at another time of year, and spreading contributions across the calendar may actually make it easier for you to give even more.
One of my favorite Your Money pen pals is Ned Gerber, trained as an accountant and now a brother in the Anglican Benedictine Order of Christ the King in Sydney, Australia. He pointed me to an adage in an early Christian document known as the Didache, which suggests that you should “let your alms sweat in the palms of your hand.”
Wise stewardship, Brother Gerber added, doesn’t happen automatically. It takes time — and work.
DOING YOUR HOMEWORK So how best to know what organization will make the most efficient use of your gifts?
This is the subject of a fair bit of debate, and many people reflexively go to GuideStar or another Web site that offers data on nonprofit groups to make sure that an organization isn’t spending too much on staff salaries or other expenses.
That said, some organizations may play fast and loose when reporting those data. Leaders of other nonprofits note that if members of their staff aren’t constantly worried about making their own ends meet, they can throw themselves further into raising money for the cause.
Melissa Berman, the chief executive of Rockefeller Philanthropy Advisors, offers advice to the kinds of donors who have so much money to give that nonprofit groups are happy to answer any of their queries. If you’re not that kind of giver, however, she suggests asking the institution three questions.
First, what is the problem you are trying to solve? Second, how do you think that will actually get solved? And finally, what evidence do you have that you are helping to solve the problem?
Ms. Berman’s organization, which was spun out of the Rockefeller family office in 2002, has posted other guidance on its Web site.
ROPING IN THE CHILDREN There are a number of ways to make children a part of your family’s giving. You can buy them a piggy bank that has a slot for charity and make sure they understand why you’re dropping off coats or canned food at their schools or community centers.
Then there’s the Hanukkah ritual that Dan and Barbara Aldouby have developed for their six grandsons, ages 5 to 18. Each of them gets a $10 check in the mail with the “to” portion blank. All pick their own cause to support and must report back on how they chose the recipient.
“I was born in 1931, and I can remember the bad old days,” said Mr. Aldouby of Yardley, Pa. “I remember looking at the kids and thinking they we’re living a much different lifestyle than the one that I had, where you maybe got one pair of new shoes for Rosh Hashanah. So how are they going to know that there is a whole different world out there?”
The results have been somewhat unexpected, though the Aldoubys don’t really mind as long as the money is going to help something, somewhere. “One of our grandsons chose the Ronald McDonald House,” he said. “He said the reason he chose it was because they make good hamburgers and they like kids. Who’s to argue with that kind of logic?”
Thursday, December 9, 2010
On Christmas Shopping Lists, No Credit Slips
Christmas will no longer be on credit for many shoppers, despite tempting offers from retailers and credit card companies trying to coax the plastic out of consumers’ wallets.
The lowest percentage of shoppers in the 27-year-history of a national survey said they used credit cards over the Thanksgiving weekend, while the use of general credit cards like Visa and MasterCard fell 11 percent in the third quarter from a year earlier, according to the credit bureau TransUnion.
“Cash is the route I’m taking this year, from past experiences with credit cards and being in debt and trying to pay it off for so many years,” said Liz Gonzalez, a community-college employee in Signal Hill, Calif. Her debt problems started two Christmases ago, when she charged the gifts that turned into the bills that sent her life into disarray. Ms. Gonzalez, 40, still owes $2,200 from that Christmas, and said her recent divorce had been caused in part by the stress of debt.
So this year, she is buying gifts only for her two children, and will use cash to stay on a $500 budget.
“I was spending so much with them,” she said of the credit cards. “I lost control.”
Britt Beemer, chief executive of America’s Research Group, a survey firm, said that was a common sentiment. “The consumer really feels a lot of pressure from previous debts, and they just aren’t going to dig themselves into that kind of hole,” he said.
After the Thanksgiving shopping weekend, the group found that just about 17 percent were paying with credit — just over half of last year’s level and the lowest rate in the 27 years it has conducted a survey.
Some people are shunning credit cards for budgeting reasons, while others do not have a choice. More than 15 million Americans lost their cards because of strict credit-card regulations that were passed last year, or when issuers cut back on credit during the recession, said David Robertson, publisher of The Nilson Report, a credit card industry newsletter.
If consumers like Ms. Gonzalez are trying to be careful this holiday, retailers, banks and credit card companies are hoping for a little less caution. The amount that consumers said they spent over Black Friday weekend, a crucial shopping period, was up more than 6 percent this year from last year, according to the National Retail Federation.
When people overspend, credit card issuers reap profit from consumers who pay only part of their bills. Shoppers using retailers’ branded cards tend to spend more and visit stores more, said Robert S. Drbul, an analyst at Barclays Capital. So all are offering big incentives to get people to use plastic.
The Chase Freedom and Discover More cards, for instance, are offering $100 bonuses when new credit card customers spend a certain amount within the first three months, along with 5 percent cash back on holiday purchases at department stores and other categories.
Citibank is giving Dividend cardholders 5 percent back on spending at department, clothing and electronics stores through Dec. 31. Target is giving its cardholders a 5 percent discount on purchases, Neiman Marcus is advertising extra rewards points on most purchases on certain days this month, and Sears has been running a variety of no-payment, no-interest offers on its credit cards throughout the holidays.
“The credit card companies are falling all over themselves trying to make those rewards even better,” Mr. Robertson said. But, with customers moving to cash or debit, the companies are “simply less profitable,” he said.
James Hansen has been avoiding credit cards for months. He began accumulating debt when he went on short-term disability leave from his job as a maintenance engineer about three years ago, just after getting married and having a second child.
“Half of my payments were interest,” said Mr. Hansen, 34, who lives in Kihei, Hawaii. “I’m still working on paying off the bills.”
This holiday season, he said, “I’ll buy a few gifts with cash if I can. It’s not going to be easy.”
Even for people with steady income through the recession, like Ms. Gonzalez, credit is no longer attractive.
In 2008, with a new baby and a teenage son, plus a big extended family, she would go grocery shopping using her Sam’s Club and Costco cards, and add Christmas gifts to her cart. “It was so convenient,” she said.
She knew she was charging a lot — she also had Macy’s and Kohl’s cards, and a State Farm Visa that was carrying a balance from an earlier Costco card — but she thought cash-back rewards programs would help.
“In the back of my mind, I was thinking, ‘Well, I’ll get extra cash at the end of the year,’ ” she said. But on the Costco card, for instance, she got about $80 back — a fraction of the $4,000 she had charged, or the $3,000 on her Sam’s card. Mortgage and car payments piled on the debt.
“With the interest rates, it just seemed like I never paid it off,” she said.
She had to face up to the debt when she and her husband began looking for a bigger house to accommodate their growing family. Ms. Gonzalez said she had been paying the bills, and the couple had not discussed their finances in detail until they began house-hunting around Christmas 2008.
“There was too much debt,” she said. That stress, she said, helped lead to divorce.
“One of the main causes of the divorce — I was married for 17 years — other than miscommunication and growing apart, the money was a big one,” she said.
Ms. Gonzalez had to account for how much she owed when she filed for divorce in 2009. She had hit the limit on the Costco and Sam’s cards, and owed smaller amounts on the department store cards. Based on a segment she had seen on “Oprah,” she made a list of what she could pay, and began paying it off little by little.
She has now paid off the State Farm, Sam’s and department store cards. She still owes $2,200 on the Costco card, where her interest rate went up after a few late payments. Ms. Gonzalez hopes to pay that off, finally, by the spring, so she can qualify for a home loan. (She moved in with her mother after the divorce).
To avoid the temptation to charge gifts again, she opened a savings account where she has put spare cash throughout the year — $5 when she skips buying lunch, $10 when she is reimbursed for work expenses. The $500 will go to a camera for her son and clothes for her daughter.“I’m very strict right now,” she said. “I didn’t have a choice.”
The lowest percentage of shoppers in the 27-year-history of a national survey said they used credit cards over the Thanksgiving weekend, while the use of general credit cards like Visa and MasterCard fell 11 percent in the third quarter from a year earlier, according to the credit bureau TransUnion.
“Cash is the route I’m taking this year, from past experiences with credit cards and being in debt and trying to pay it off for so many years,” said Liz Gonzalez, a community-college employee in Signal Hill, Calif. Her debt problems started two Christmases ago, when she charged the gifts that turned into the bills that sent her life into disarray. Ms. Gonzalez, 40, still owes $2,200 from that Christmas, and said her recent divorce had been caused in part by the stress of debt.
So this year, she is buying gifts only for her two children, and will use cash to stay on a $500 budget.
“I was spending so much with them,” she said of the credit cards. “I lost control.”
Britt Beemer, chief executive of America’s Research Group, a survey firm, said that was a common sentiment. “The consumer really feels a lot of pressure from previous debts, and they just aren’t going to dig themselves into that kind of hole,” he said.
After the Thanksgiving shopping weekend, the group found that just about 17 percent were paying with credit — just over half of last year’s level and the lowest rate in the 27 years it has conducted a survey.
Some people are shunning credit cards for budgeting reasons, while others do not have a choice. More than 15 million Americans lost their cards because of strict credit-card regulations that were passed last year, or when issuers cut back on credit during the recession, said David Robertson, publisher of The Nilson Report, a credit card industry newsletter.
If consumers like Ms. Gonzalez are trying to be careful this holiday, retailers, banks and credit card companies are hoping for a little less caution. The amount that consumers said they spent over Black Friday weekend, a crucial shopping period, was up more than 6 percent this year from last year, according to the National Retail Federation.
When people overspend, credit card issuers reap profit from consumers who pay only part of their bills. Shoppers using retailers’ branded cards tend to spend more and visit stores more, said Robert S. Drbul, an analyst at Barclays Capital. So all are offering big incentives to get people to use plastic.
The Chase Freedom and Discover More cards, for instance, are offering $100 bonuses when new credit card customers spend a certain amount within the first three months, along with 5 percent cash back on holiday purchases at department stores and other categories.
Citibank is giving Dividend cardholders 5 percent back on spending at department, clothing and electronics stores through Dec. 31. Target is giving its cardholders a 5 percent discount on purchases, Neiman Marcus is advertising extra rewards points on most purchases on certain days this month, and Sears has been running a variety of no-payment, no-interest offers on its credit cards throughout the holidays.
“The credit card companies are falling all over themselves trying to make those rewards even better,” Mr. Robertson said. But, with customers moving to cash or debit, the companies are “simply less profitable,” he said.
James Hansen has been avoiding credit cards for months. He began accumulating debt when he went on short-term disability leave from his job as a maintenance engineer about three years ago, just after getting married and having a second child.
“Half of my payments were interest,” said Mr. Hansen, 34, who lives in Kihei, Hawaii. “I’m still working on paying off the bills.”
This holiday season, he said, “I’ll buy a few gifts with cash if I can. It’s not going to be easy.”
Even for people with steady income through the recession, like Ms. Gonzalez, credit is no longer attractive.
In 2008, with a new baby and a teenage son, plus a big extended family, she would go grocery shopping using her Sam’s Club and Costco cards, and add Christmas gifts to her cart. “It was so convenient,” she said.
She knew she was charging a lot — she also had Macy’s and Kohl’s cards, and a State Farm Visa that was carrying a balance from an earlier Costco card — but she thought cash-back rewards programs would help.
“In the back of my mind, I was thinking, ‘Well, I’ll get extra cash at the end of the year,’ ” she said. But on the Costco card, for instance, she got about $80 back — a fraction of the $4,000 she had charged, or the $3,000 on her Sam’s card. Mortgage and car payments piled on the debt.
“With the interest rates, it just seemed like I never paid it off,” she said.
She had to face up to the debt when she and her husband began looking for a bigger house to accommodate their growing family. Ms. Gonzalez said she had been paying the bills, and the couple had not discussed their finances in detail until they began house-hunting around Christmas 2008.
“There was too much debt,” she said. That stress, she said, helped lead to divorce.
“One of the main causes of the divorce — I was married for 17 years — other than miscommunication and growing apart, the money was a big one,” she said.
Ms. Gonzalez had to account for how much she owed when she filed for divorce in 2009. She had hit the limit on the Costco and Sam’s cards, and owed smaller amounts on the department store cards. Based on a segment she had seen on “Oprah,” she made a list of what she could pay, and began paying it off little by little.
She has now paid off the State Farm, Sam’s and department store cards. She still owes $2,200 on the Costco card, where her interest rate went up after a few late payments. Ms. Gonzalez hopes to pay that off, finally, by the spring, so she can qualify for a home loan. (She moved in with her mother after the divorce).
To avoid the temptation to charge gifts again, she opened a savings account where she has put spare cash throughout the year — $5 when she skips buying lunch, $10 when she is reimbursed for work expenses. The $500 will go to a camera for her son and clothes for her daughter.“I’m very strict right now,” she said. “I didn’t have a choice.”
Most Asian Stocks Fall on Ireland Rating, China Policy Concern
Most Asian stocks fell after Ireland’s credit rating was lowered and as China’s leadership meets to review the world’s fastest-growing major economy amid speculation policy makers will raise interest rates this weekend.
Honda Motor Co., a Japanese carmaker that gets about 80 percent of its sales abroad, lost 0.9 percent in Tokyo as the euro weakened against the yen, damping the outlook for export earnings. BHP Billiton Ltd., the world’s largest mining company, fell 0.5 percent in Sydney as copper prices fell from a 31-month high in New York yesterday. OZ Minerals Ltd., an Australian copper and gold producer, sank 3 percent.
“Investors are concerned European debt issues will worsen,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Investors may sell exporters, which led market gains in November, on the weaker euro against the yen.”
The MSCI Asia Pacific Index was little changed at 133.33 as of 9:28 a.m. in Tokyo, with almost three stocks declining for each that advanced. The gauge slid 0.6 percent in November after two straight monthly gains as concern grew that China’s anti- inflation measures, Europe’s debt crisis and tensions on the Korean peninsula may cool a global economic recovery.
Japan’s Nikkei 225 Stock Average dropped 0.5 percent. South Korea’s Kospi Index and Australia’s S&P/ASX 200 Index were little changed.
Futures on the Standard & Poor’s 500 Index were little changed today. The index climbed 0.4 percent yesterday to a two- year high after Pacific Investment Management Co., the operator of the world’s largest bond fund, raised its forecast for economic growth and the U.S. Labor Department said applications for unemployment benefits fell.
Ireland, Euro
Fitch Ratings cut its credit rating on Ireland by three levels to the lowest grade among the major rating companies after the country sought international assistance last month to rescue its banks.
The euro depreciated to 111.65 yen yesterday in New York, its lowest level this month. A weaker euro reduces the value of overseas income at Japanese companies when converted into their home currency.
Copper prices for March delivery fell in New York on speculation that China, the world’s biggest metal consumer, may raise interest rates to slow economic growth and inflation. The London Metal Exchange Index of six metals including copper and aluminum slipped 0.8 percent yesterday, the first drop this week.
The MSCI Asia Pacific Index climbed 11 percent this year through yesterday, compared with gains of 11 percent by the Standard & Poor’s 500 Index and 8.7 percent by the Stoxx Europe 600 Index. Shares in the Asian benchmark are valued at 14.7 times estimated earnings on average, versus 14.5 times for the S&P 500 and 12.3 times for the Stoxx 600.
Honda Motor Co., a Japanese carmaker that gets about 80 percent of its sales abroad, lost 0.9 percent in Tokyo as the euro weakened against the yen, damping the outlook for export earnings. BHP Billiton Ltd., the world’s largest mining company, fell 0.5 percent in Sydney as copper prices fell from a 31-month high in New York yesterday. OZ Minerals Ltd., an Australian copper and gold producer, sank 3 percent.
“Investors are concerned European debt issues will worsen,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Investors may sell exporters, which led market gains in November, on the weaker euro against the yen.”
The MSCI Asia Pacific Index was little changed at 133.33 as of 9:28 a.m. in Tokyo, with almost three stocks declining for each that advanced. The gauge slid 0.6 percent in November after two straight monthly gains as concern grew that China’s anti- inflation measures, Europe’s debt crisis and tensions on the Korean peninsula may cool a global economic recovery.
Japan’s Nikkei 225 Stock Average dropped 0.5 percent. South Korea’s Kospi Index and Australia’s S&P/ASX 200 Index were little changed.
Futures on the Standard & Poor’s 500 Index were little changed today. The index climbed 0.4 percent yesterday to a two- year high after Pacific Investment Management Co., the operator of the world’s largest bond fund, raised its forecast for economic growth and the U.S. Labor Department said applications for unemployment benefits fell.
Ireland, Euro
Fitch Ratings cut its credit rating on Ireland by three levels to the lowest grade among the major rating companies after the country sought international assistance last month to rescue its banks.
The euro depreciated to 111.65 yen yesterday in New York, its lowest level this month. A weaker euro reduces the value of overseas income at Japanese companies when converted into their home currency.
Copper prices for March delivery fell in New York on speculation that China, the world’s biggest metal consumer, may raise interest rates to slow economic growth and inflation. The London Metal Exchange Index of six metals including copper and aluminum slipped 0.8 percent yesterday, the first drop this week.
The MSCI Asia Pacific Index climbed 11 percent this year through yesterday, compared with gains of 11 percent by the Standard & Poor’s 500 Index and 8.7 percent by the Stoxx Europe 600 Index. Shares in the Asian benchmark are valued at 14.7 times estimated earnings on average, versus 14.5 times for the S&P 500 and 12.3 times for the Stoxx 600.
Severstal nears $5bn India steel plant deal
Severstal, Russia’s biggest steelmaker, is set to sign a deal with India’s largest iron ore producer to build a $5bn steel plant to meet growing demand from the country’s manufacturers.
NMDC, an Indian state-owned group, and Severstal, which is listed on the London Stock Exchange, will build the 5m tonne plant in the southern state of Karnataka, according to people close to the matter.
The Russian group is the latest in a series of steel groups and miners that have eyed India to make a multibillion investment to develop a plant.
However, steel projects worth more than a total of $80bn have been stalled because of delays in approvals and land acquisition.
Posco, the South Korean steel group, has been struggling to make progress on a planned $12bn integrated steel mill and dedicated port in the eastern state of Orissa for more than five years.
In October, a government-appointed panel advised that the project’s environmental approvals be withdrawn.
Although the advice is not binding, Jairam Ramesh, the Indian environment minister, who has been actively enforcing environmental rules long treated as mere formalities, is likely to implement it.
Mr Ramesh has blocked plans by London-listed Vedanta Resources to source bauxite from a mountain deemed sacred to members of an indigenous tribe.
His tough stance on environmental standards has been criticised by many steel executives and policymakers, who say India needs the projects to boost industrial development.
Kamal Nath, the road, transport and highways minister, and Sharad Pawar, the agriculture minister, have publicly attacked the environment ministry for standing in the way of development.
Rakesh Arora, a basic material analyst at Macquarie in Mumbai, said Severstal would face similar difficulties in setting up its steel plant.
“A lot of companies have announced plans to develop and construct plants but very few have actually gone ahead with anything concrete,” he said.
In Karnataka, where Severstal’s plant is due to be based, the government has faced an uphill struggle to acquire land for other big steel and power projects.
NMDC, an Indian state-owned group, and Severstal, which is listed on the London Stock Exchange, will build the 5m tonne plant in the southern state of Karnataka, according to people close to the matter.
The Russian group is the latest in a series of steel groups and miners that have eyed India to make a multibillion investment to develop a plant.
However, steel projects worth more than a total of $80bn have been stalled because of delays in approvals and land acquisition.
Posco, the South Korean steel group, has been struggling to make progress on a planned $12bn integrated steel mill and dedicated port in the eastern state of Orissa for more than five years.
In October, a government-appointed panel advised that the project’s environmental approvals be withdrawn.
Although the advice is not binding, Jairam Ramesh, the Indian environment minister, who has been actively enforcing environmental rules long treated as mere formalities, is likely to implement it.
Mr Ramesh has blocked plans by London-listed Vedanta Resources to source bauxite from a mountain deemed sacred to members of an indigenous tribe.
His tough stance on environmental standards has been criticised by many steel executives and policymakers, who say India needs the projects to boost industrial development.
Kamal Nath, the road, transport and highways minister, and Sharad Pawar, the agriculture minister, have publicly attacked the environment ministry for standing in the way of development.
Rakesh Arora, a basic material analyst at Macquarie in Mumbai, said Severstal would face similar difficulties in setting up its steel plant.
“A lot of companies have announced plans to develop and construct plants but very few have actually gone ahead with anything concrete,” he said.
In Karnataka, where Severstal’s plant is due to be based, the government has faced an uphill struggle to acquire land for other big steel and power projects.
Kokusai, PineBridge Lead Japan Funds to Rupee on Best Return: India Credit
PineBridge Investments Japan Co. and Kokusai Asset Management Co. are leading Japan’s biggest bond funds to India as banks predict the rupee will deliver the best returns for Japanese investors among major currencies.
The rupee will hand investors total returns of 24 percent by the end of 2011 for yen-based buyers, the most among 33 currencies with forecasts in Bloomberg surveys of analysts, beating the 23 percent prediction for the Polish zloty and 19 percent for Indonesia’s rupiah. Kokusai added to holdings of Indian corporate debt in July, according to data compiled by Bloomberg. PineBridge said last month it would start to invest in India.
Japanese investors are starting to look beyond high-yield developed country debt after the Australian dollar rose 9 percent against the yen in the past six months. They turned net buyers of Indian bonds in the first 10 months from net sellers in 2009, while purchases of Australian notes fell almost 37 percent, data from the Ministry of Finance in Tokyo show.
“The yields are attractive, and we can expect appreciation in the local currency in the long term due to economic growth,” Kazuya Sugiura, managing director at PineBridge’s fund-business development division, said in an interview from Tokyo on Dec. 7. “As the central bank has taken actions to stem price gains, inflation may be stabilizing, which is also quite positive for investment in India.”
The rupee has gained 5.4 percent including interest income against the yen in the past three months.
PineBridge will start buying India’s debt next year for its 160 billion-yen ($1.9 billion) Blue Ocean fund with an initial allocation of a few percent of the fund, Sugiura said. The company plans to gradually expand the portion of such securities, he said. The fund is Japan’s biggest that invests in sovereign bonds of emerging economies.
Climb in Yields
The Reserve Bank of India boosted borrowing costs six times this year while the Bank of Japan has kept its benchmark rate near zero to combat deflation. Indian yields climbed relative to Japanese debt for the past five quarters, the longest stretch of increases since 2005, as the Reserve Bank lifted the repurchase rate to 6.25 percent last month and the reverse repurchase rate to 5.25 percent.
Australia’s central bank kept its key rate at 4.75 percent this month and said borrowing costs are “appropriate.” Indonesia has kept the benchmark rate at 6.5 percent since August 2009.
Australia’s highest short-term yields among developed nations helped make it the biggest recipient of funds from Japan in Asia Pacific. Buying the so-called Aussie offered Japanese investors a 44 percent return since the end of 2008, the third- most among major currencies after the Brazilian real and the South African rand. The rupee was 13th with a return of about 11 percent.
Australian Gap
Indian bonds dropped for a second day yesterday. The 10- year yield in India rose 1 basis point, or 0.01 percentage point, to 8.12 percent. The rate compares with 7.45 percent in Indonesia, 5.63 percent in Australia and 1.265 percent in Japan.
The yield difference between Indian and Australian bonds maturing in a decade has grown 58 basis points from the beginning of this year to 2.48 percentage points, and the spread between India’s and Indonesia’s securities widened to 67 basis points from minus 240 in the same period, according to Bloomberg data.
“We have consistent demand for higher-yielding assets, and with some of them getting relatively expensive, India is becoming more popular,” said Osamu Takashima, chief currency strategist in Tokyo at Citigroup Inc. “The yen may not rise so much from here, while the rupee may remain firm against the dollar. There are lots of yen looking for better returns.”
Cap Lifted
The U.S. bank predicts the yen will trade at 84 per dollar, compared with 83.82 in Tokyo yesterday, and the rupee to rise about 5 percent to 43 over the next six to 12 months, he said. The yen may weaken 7 percent to 90 yen against the dollar by the end of 2011, while the rupee may climb 5 percent to 43, according to analysts surveyed by Bloomberg.
The rupee slipped 0.3 percent yesterday to 45.22. The currency has risen 3 percent against the dollar this year, and is down 7.1 percent against the yen.
Elsewhere in Indian credit markets, Housing Development Finance Corp., India’s largest mortgage lender, plans to raise at least 1.5 billion rupees selling bonds, a person familiar with the matter said yesterday. The Mumbai-based company’s notes will pay a 9.25 percent coupon, the person said, asking not to be identified as the transaction is private.
Default Swaps
The cost of protecting against a default by State Bank of India, which some investors perceive as a proxy for the nation, has fallen 45 basis points in the past six months to 173 in the credit-default swaps market, according to data provider CMA. Such swaps are used to insure against missed debt payments, declining when creditworthiness improves and vice versa.
India lifted the cap on foreign investment in bonds for the first time in 18 months in September, boosting the limit on government notes to $10 billion and that for corporate debentures to $20 billion. Foreign investors won a quota totaling 220 billion rupees ($4.88 billion) to buy long-term government bonds and 201 billion rupees for the debt of infrastructure companies, the Securities and Exchange Board of India said Dec. 3.
Greater Investment
“It’s rational to assume increased investment into their bonds from overseas including funds from Japan,” said Takahide Irimura, head of emerging-market research in Tokyo at Kokusai, which manages about $58 billion of assets. Based on “foreign exchange and yield outlooks, India is definitely not a bad destination to invest,” he said. Irimura declined to provide forecasts or disclose investment positions.
Kokusai Asset, which runs Asia’s biggest bond fund, added holdings of debt of Export-Import Bank of India, Indian Oil Corp. and Indian Railway Finance Corp. for its Asia-Pacific Sovereign Open fund in July, according to the latest filings to the securities exchange compiled by Bloomberg.
The company and Daiwa Asset Management Co., the biggest holders of Australia’s debt based on public filings, were net sellers of the country’s bonds between June and August, according Bloomberg data.
Japan’s purchases of Indian securities totaled a net 12.8 billion yen in the first 10 months, the most since the amount for the whole of 2007, while buying of Australian debt was a net 1.38 trillion yen, down from 2.18 trillion yen in 2009, according to Japan’s Ministry of Finance. Indonesia saw net sales of 4 billion yen in the January-October period of 2010, compared with a net purchase of 60.5 billion yen for 2009.
“It’s possible to see increased flows from Japan into India, especially in short-term bonds such as the three-month notes,” Tadashi Tsukaguchi, a fund manager in Tokyo at Sparx Group Co., the region’s biggest hedge fund with $7.2 billion in assets, said in an interview from Tokyo on Dec. 7. “It’s a good idea to sell the yen against the emerging market currencies, such as the rupee, maybe early next year.”
The rupee will hand investors total returns of 24 percent by the end of 2011 for yen-based buyers, the most among 33 currencies with forecasts in Bloomberg surveys of analysts, beating the 23 percent prediction for the Polish zloty and 19 percent for Indonesia’s rupiah. Kokusai added to holdings of Indian corporate debt in July, according to data compiled by Bloomberg. PineBridge said last month it would start to invest in India.
Japanese investors are starting to look beyond high-yield developed country debt after the Australian dollar rose 9 percent against the yen in the past six months. They turned net buyers of Indian bonds in the first 10 months from net sellers in 2009, while purchases of Australian notes fell almost 37 percent, data from the Ministry of Finance in Tokyo show.
“The yields are attractive, and we can expect appreciation in the local currency in the long term due to economic growth,” Kazuya Sugiura, managing director at PineBridge’s fund-business development division, said in an interview from Tokyo on Dec. 7. “As the central bank has taken actions to stem price gains, inflation may be stabilizing, which is also quite positive for investment in India.”
The rupee has gained 5.4 percent including interest income against the yen in the past three months.
PineBridge will start buying India’s debt next year for its 160 billion-yen ($1.9 billion) Blue Ocean fund with an initial allocation of a few percent of the fund, Sugiura said. The company plans to gradually expand the portion of such securities, he said. The fund is Japan’s biggest that invests in sovereign bonds of emerging economies.
Climb in Yields
The Reserve Bank of India boosted borrowing costs six times this year while the Bank of Japan has kept its benchmark rate near zero to combat deflation. Indian yields climbed relative to Japanese debt for the past five quarters, the longest stretch of increases since 2005, as the Reserve Bank lifted the repurchase rate to 6.25 percent last month and the reverse repurchase rate to 5.25 percent.
Australia’s central bank kept its key rate at 4.75 percent this month and said borrowing costs are “appropriate.” Indonesia has kept the benchmark rate at 6.5 percent since August 2009.
Australia’s highest short-term yields among developed nations helped make it the biggest recipient of funds from Japan in Asia Pacific. Buying the so-called Aussie offered Japanese investors a 44 percent return since the end of 2008, the third- most among major currencies after the Brazilian real and the South African rand. The rupee was 13th with a return of about 11 percent.
Australian Gap
Indian bonds dropped for a second day yesterday. The 10- year yield in India rose 1 basis point, or 0.01 percentage point, to 8.12 percent. The rate compares with 7.45 percent in Indonesia, 5.63 percent in Australia and 1.265 percent in Japan.
The yield difference between Indian and Australian bonds maturing in a decade has grown 58 basis points from the beginning of this year to 2.48 percentage points, and the spread between India’s and Indonesia’s securities widened to 67 basis points from minus 240 in the same period, according to Bloomberg data.
“We have consistent demand for higher-yielding assets, and with some of them getting relatively expensive, India is becoming more popular,” said Osamu Takashima, chief currency strategist in Tokyo at Citigroup Inc. “The yen may not rise so much from here, while the rupee may remain firm against the dollar. There are lots of yen looking for better returns.”
Cap Lifted
The U.S. bank predicts the yen will trade at 84 per dollar, compared with 83.82 in Tokyo yesterday, and the rupee to rise about 5 percent to 43 over the next six to 12 months, he said. The yen may weaken 7 percent to 90 yen against the dollar by the end of 2011, while the rupee may climb 5 percent to 43, according to analysts surveyed by Bloomberg.
The rupee slipped 0.3 percent yesterday to 45.22. The currency has risen 3 percent against the dollar this year, and is down 7.1 percent against the yen.
Elsewhere in Indian credit markets, Housing Development Finance Corp., India’s largest mortgage lender, plans to raise at least 1.5 billion rupees selling bonds, a person familiar with the matter said yesterday. The Mumbai-based company’s notes will pay a 9.25 percent coupon, the person said, asking not to be identified as the transaction is private.
Default Swaps
The cost of protecting against a default by State Bank of India, which some investors perceive as a proxy for the nation, has fallen 45 basis points in the past six months to 173 in the credit-default swaps market, according to data provider CMA. Such swaps are used to insure against missed debt payments, declining when creditworthiness improves and vice versa.
India lifted the cap on foreign investment in bonds for the first time in 18 months in September, boosting the limit on government notes to $10 billion and that for corporate debentures to $20 billion. Foreign investors won a quota totaling 220 billion rupees ($4.88 billion) to buy long-term government bonds and 201 billion rupees for the debt of infrastructure companies, the Securities and Exchange Board of India said Dec. 3.
Greater Investment
“It’s rational to assume increased investment into their bonds from overseas including funds from Japan,” said Takahide Irimura, head of emerging-market research in Tokyo at Kokusai, which manages about $58 billion of assets. Based on “foreign exchange and yield outlooks, India is definitely not a bad destination to invest,” he said. Irimura declined to provide forecasts or disclose investment positions.
Kokusai Asset, which runs Asia’s biggest bond fund, added holdings of debt of Export-Import Bank of India, Indian Oil Corp. and Indian Railway Finance Corp. for its Asia-Pacific Sovereign Open fund in July, according to the latest filings to the securities exchange compiled by Bloomberg.
The company and Daiwa Asset Management Co., the biggest holders of Australia’s debt based on public filings, were net sellers of the country’s bonds between June and August, according Bloomberg data.
Japan’s purchases of Indian securities totaled a net 12.8 billion yen in the first 10 months, the most since the amount for the whole of 2007, while buying of Australian debt was a net 1.38 trillion yen, down from 2.18 trillion yen in 2009, according to Japan’s Ministry of Finance. Indonesia saw net sales of 4 billion yen in the January-October period of 2010, compared with a net purchase of 60.5 billion yen for 2009.
“It’s possible to see increased flows from Japan into India, especially in short-term bonds such as the three-month notes,” Tadashi Tsukaguchi, a fund manager in Tokyo at Sparx Group Co., the region’s biggest hedge fund with $7.2 billion in assets, said in an interview from Tokyo on Dec. 7. “It’s a good idea to sell the yen against the emerging market currencies, such as the rupee, maybe early next year.”
Wednesday, December 8, 2010
Asia Stocks Climb on Australian Jobs Growth, Japan GDP; Westpac, BHP Gain
Asian stocks gained, driving the benchmark index to its sixth advance in seven days, as economic reports from Australia and Japan bolstered confidence in an economic recovery.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, climbed 2 percent after the cabinet office said the nation’s economy grew faster than previously estimated last quarter. Westpac Banking Group Ltd., Australia’s second- largest bank by market, increased 1.7 percent after Australian employers added more than double the number of workers last month than economist had forecast. BHP Billiton Ltd., the world’s largest mining company, gained 1.1 percent in Sydney after copper futures surged to a record yesterday in New York.
The MSCI Asia Pacific Index rose 0.7 percent to 133.31 as of 10:34 a.m. in Tokyo, with about two stocks advancing for each that declined. The gauge slid 0.6 percent in November after two straight monthly gains as concern grew that China’s anti- inflation measures, Europe’s debt crisis and tensions on the Korean peninsula may cool a global economic recovery.
Japan’s Nikkei 225 Stock Average advanced 0.3 percent. Gross domestic product grew at an annualized 4.5 percent rate in the three months ended Sept. 30, faster than the 3.9 percent reported last month, the Cabinet Office said today. The median forecast of 19 economists surveyed by Bloomberg News was for a 4.1 percent expansion.
Australian Hiring
Australia’s S&P/ASX 200 Index climbed 0.5 percent. The number of people employed gained 54,600 from October, the statistics bureau said today. That compares with the median forecast for a 20,000 increase in a Bloomberg News survey of 26 economists. The jobless rate fell to 5.2 percent from 5.4 percent a month earlier.
South Korea’s Kospi Index gained 0.6 percent.
Futures on the Standard & Poor’s 500 Index climbed 0.4 percent today. The index rose 0.4 percent yesterday to a two- year high, buoyed by a possible extension of U.S. tax cuts and after American International Group Inc. said it will repay a credit line to the Federal Reserve.
The London Metal Exchange Index of six metals including copper and aluminum jumped 1.5 percent yesterday to the highest since Nov. 11. Copper futures climbed to a record close in New York on speculation that demand will outpace production as a global recovery sparks construction of new homes and appliances.
The MSCI Asia Pacific Index climbed 9.9 percent this year through yesterday, compared with gains of 10 percent by the Standard & Poor’s 500 Index and 8.3 percent by the Stoxx Europe 600 Index. Shares in the Asian benchmark are valued at 14.6 times estimated earnings on average, compared with 14.4 times for the S&P 500 and 12.2 times for the Stoxx 600.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, climbed 2 percent after the cabinet office said the nation’s economy grew faster than previously estimated last quarter. Westpac Banking Group Ltd., Australia’s second- largest bank by market, increased 1.7 percent after Australian employers added more than double the number of workers last month than economist had forecast. BHP Billiton Ltd., the world’s largest mining company, gained 1.1 percent in Sydney after copper futures surged to a record yesterday in New York.
The MSCI Asia Pacific Index rose 0.7 percent to 133.31 as of 10:34 a.m. in Tokyo, with about two stocks advancing for each that declined. The gauge slid 0.6 percent in November after two straight monthly gains as concern grew that China’s anti- inflation measures, Europe’s debt crisis and tensions on the Korean peninsula may cool a global economic recovery.
Japan’s Nikkei 225 Stock Average advanced 0.3 percent. Gross domestic product grew at an annualized 4.5 percent rate in the three months ended Sept. 30, faster than the 3.9 percent reported last month, the Cabinet Office said today. The median forecast of 19 economists surveyed by Bloomberg News was for a 4.1 percent expansion.
Australian Hiring
Australia’s S&P/ASX 200 Index climbed 0.5 percent. The number of people employed gained 54,600 from October, the statistics bureau said today. That compares with the median forecast for a 20,000 increase in a Bloomberg News survey of 26 economists. The jobless rate fell to 5.2 percent from 5.4 percent a month earlier.
South Korea’s Kospi Index gained 0.6 percent.
Futures on the Standard & Poor’s 500 Index climbed 0.4 percent today. The index rose 0.4 percent yesterday to a two- year high, buoyed by a possible extension of U.S. tax cuts and after American International Group Inc. said it will repay a credit line to the Federal Reserve.
The London Metal Exchange Index of six metals including copper and aluminum jumped 1.5 percent yesterday to the highest since Nov. 11. Copper futures climbed to a record close in New York on speculation that demand will outpace production as a global recovery sparks construction of new homes and appliances.
The MSCI Asia Pacific Index climbed 9.9 percent this year through yesterday, compared with gains of 10 percent by the Standard & Poor’s 500 Index and 8.3 percent by the Stoxx Europe 600 Index. Shares in the Asian benchmark are valued at 14.6 times estimated earnings on average, compared with 14.4 times for the S&P 500 and 12.2 times for the Stoxx 600.
Manufacturing Jump to Boost Prospects for January Rate Rise: India Credit
India’s industrial production is likely to expand at the fastest pace in three months, prompting JPMorgan Chase & Co. to predict the central bank may resume raising interest rates as early as next month to curb inflation.
Factory, utilities and mines output probably rose 8.4 percent in October from a year earlier after a 4.4 percent increase in September, according to the median estimate of 22 economists in a Bloomberg survey before a statistics office report tomorrow. This week Finance Minister Pranab Mukherjee raised the government’s economic growth forecast for the current fiscal year to 9.1 percent, the most in three years.
India’s economy may expand more than China’s in the next 10 years if the world’s second-most populous nation lifts curbs on foreign investment and boosts spending on roads and bridges, New York University Professor Nouriel Roubini, who predicted the global financial crisis, said last week. The rupee has advanced 1.7 percent this month, the best performance among Asia’s 10- most traded currencies, as the difference in yields between Indian debt due in a decade and 10-year Treasuries widened to 492 basis points, or 4.92 percentage point, from 374 on Jan. 1.
“Indian government bonds continue to remain attractive due to interest-rate differentials,” Sajjid Chinoy, a Mumbai-based economist with JPMorgan, said yesterday. “The rate pause is temporary and the RBI will start raising rates as early as the first quarter if inflation continues to remain sticky and above its comfort zone.”
The yield on the 10-year government bond has risen 14 basis points to 8.11 percent since Nov. 2, when the central bank raised rates for the sixth time this year. The RBI will meet to decide borrowing costs on Dec. 16 and Jan. 25.
Repurchase Rate
On Nov. 2 the Reserve Bank of India increased the benchmark repurchase rate by a quarter percentage point to 6.25 percent and the reverse-repurchase rate to 5.25 percent. Inflation continues to remain above the central bank’s “tolerance level,” Governor Duvvuri Subbarao said in Kolkata yesterday. The central bank said it may not raise borrowing costs for the next three months.
Ten of 15 economists surveyed by Bloomberg News expect the central bank to raise borrowing costs by the end of March, while the rest predict no change for the period. Three expect rate increases at the Jan. 25 meeting.
“Immediate future rate action is unlikely barring some shocks,” Subbarao said on Nov. 2. “The question is, what is the immediate future? I would believe it is three months.”
Higher output, as evidenced by record sales of Maruti Suzuki India Ltd. cars and more lending by State Bank of India Ltd., suggests strong domestic consumer demand. The nation’s service industry expanded at the quickest pace in four months in November, HSBC Holdings Plc and Markit Economics said Dec. 3. Exports in November jumped 26.8 percent to $18.9 billion.
‘Growth Momentum’
“The growth momentum in the industrial and consumption sectors continues to be strong and that may help achieve a higher growth,” Deepali Bhargava, a strategist at ING Groep NV in Mumbai, said yesterday. “Growth resurgence and underlying inflationary pressures will likely prompt the RBI to raise rates in the first quarter next year.”
Faster economic gains and wider interest-rate differentials have attracted $9.5 billion into rupee debt and $29.6 billion into stocks, resulting in the rupee appreciating by 3.3 percent this year to 45.06.
“Managing the risks around inflation, capital flows and fragile recovery in advanced economies will be the key near-term policy challenges,” Dharmakirti Joshi, a Mumbai-based economist at Crisil Ltd., the Indian unit of Standard & Poor’s, said yesterday.
Interest-Rate Swaps
Since the first rate increase this year on March 19, the spread between India’s debt due in a decade and 10-year Treasuries has widened 89 basis points to 489 yesterday. The gap, which has averaged 317 in the past decade, reached a 10- year high of 567 on Oct. 20.
The cost of fixing rupee borrowing costs for 12 months in the interest-rate swap market surged 1.89 percentage points this year to 6.95 percent, as investors increased bets Subbarao will raise rates, Bloomberg data show. The swap rate rose 13 basis points this month.
Prices of five-year credit-default swaps used to protect against losses on the debt of India’s largest lenders fell in the past three months, according to data provider CMA. Swap prices dropped 19 basis points for State Bank of India, the nation’s largest lender, and 34.5 basis points for ICICI Bank Ltd., the country’s second-biggest lender.
Growth Projections
Local-currency debt returned 4.1 percent in 2010, according to indexes compiled by HSBC Holdings Plc, as the Reserve Bank raised borrowing costs by 150 basis points. Investors in China earned 1 percent, the least in the region, the indexes show.
India’s $1.3 trillion economy expanded 8.9 percent for a second straight quarter in July to September. India’s finance ministry said on Dec. 7 the economy may expand as much as 9.1 percent compared with an earlier forecast of 8.25 to 8.75 percent.
“We are looking at revising our growth estimate upwards given the strong demand in the economy,” Rajeev Malik, an economist at CLSA Asia Pacific Markets said on Dec. 7. “We think the RBI will have to come back to raise rates in January to keep a lid on inflation fueled by faster growth and higher global commodity prices.”
Not Ideal
The consumer-price inflation rate is running close to 10 percent, the most among the G-20 countries after Argentina, according to data compiled by Bloomberg. The wholesale-price inflation rose 8.58 percent in October, which according to Finance Minister Mukherjee is double the ideal level of 4 percent to 5 percent.
ING raised its growth forecast for India to 8.7 percent from 8.4 percent after the Nov. 30 announcement. Goldman Sachs Group Inc. and Morgan Stanley said there’s a chance that growth may exceed their 8.5 percent forecasts.
“We are bullish on government bonds given the higher yield opportunity due to the higher rate differential,” Navneet Munot, who oversees $8.5 billion as chief investment officer at Mumbai-based SBI Funds Management Pvt., said yesterday. “The central bank will have to come back to consider rate increases early next year as higher commodity prices add to inflation.”
Factory, utilities and mines output probably rose 8.4 percent in October from a year earlier after a 4.4 percent increase in September, according to the median estimate of 22 economists in a Bloomberg survey before a statistics office report tomorrow. This week Finance Minister Pranab Mukherjee raised the government’s economic growth forecast for the current fiscal year to 9.1 percent, the most in three years.
India’s economy may expand more than China’s in the next 10 years if the world’s second-most populous nation lifts curbs on foreign investment and boosts spending on roads and bridges, New York University Professor Nouriel Roubini, who predicted the global financial crisis, said last week. The rupee has advanced 1.7 percent this month, the best performance among Asia’s 10- most traded currencies, as the difference in yields between Indian debt due in a decade and 10-year Treasuries widened to 492 basis points, or 4.92 percentage point, from 374 on Jan. 1.
“Indian government bonds continue to remain attractive due to interest-rate differentials,” Sajjid Chinoy, a Mumbai-based economist with JPMorgan, said yesterday. “The rate pause is temporary and the RBI will start raising rates as early as the first quarter if inflation continues to remain sticky and above its comfort zone.”
The yield on the 10-year government bond has risen 14 basis points to 8.11 percent since Nov. 2, when the central bank raised rates for the sixth time this year. The RBI will meet to decide borrowing costs on Dec. 16 and Jan. 25.
Repurchase Rate
On Nov. 2 the Reserve Bank of India increased the benchmark repurchase rate by a quarter percentage point to 6.25 percent and the reverse-repurchase rate to 5.25 percent. Inflation continues to remain above the central bank’s “tolerance level,” Governor Duvvuri Subbarao said in Kolkata yesterday. The central bank said it may not raise borrowing costs for the next three months.
Ten of 15 economists surveyed by Bloomberg News expect the central bank to raise borrowing costs by the end of March, while the rest predict no change for the period. Three expect rate increases at the Jan. 25 meeting.
“Immediate future rate action is unlikely barring some shocks,” Subbarao said on Nov. 2. “The question is, what is the immediate future? I would believe it is three months.”
Higher output, as evidenced by record sales of Maruti Suzuki India Ltd. cars and more lending by State Bank of India Ltd., suggests strong domestic consumer demand. The nation’s service industry expanded at the quickest pace in four months in November, HSBC Holdings Plc and Markit Economics said Dec. 3. Exports in November jumped 26.8 percent to $18.9 billion.
‘Growth Momentum’
“The growth momentum in the industrial and consumption sectors continues to be strong and that may help achieve a higher growth,” Deepali Bhargava, a strategist at ING Groep NV in Mumbai, said yesterday. “Growth resurgence and underlying inflationary pressures will likely prompt the RBI to raise rates in the first quarter next year.”
Faster economic gains and wider interest-rate differentials have attracted $9.5 billion into rupee debt and $29.6 billion into stocks, resulting in the rupee appreciating by 3.3 percent this year to 45.06.
“Managing the risks around inflation, capital flows and fragile recovery in advanced economies will be the key near-term policy challenges,” Dharmakirti Joshi, a Mumbai-based economist at Crisil Ltd., the Indian unit of Standard & Poor’s, said yesterday.
Interest-Rate Swaps
Since the first rate increase this year on March 19, the spread between India’s debt due in a decade and 10-year Treasuries has widened 89 basis points to 489 yesterday. The gap, which has averaged 317 in the past decade, reached a 10- year high of 567 on Oct. 20.
The cost of fixing rupee borrowing costs for 12 months in the interest-rate swap market surged 1.89 percentage points this year to 6.95 percent, as investors increased bets Subbarao will raise rates, Bloomberg data show. The swap rate rose 13 basis points this month.
Prices of five-year credit-default swaps used to protect against losses on the debt of India’s largest lenders fell in the past three months, according to data provider CMA. Swap prices dropped 19 basis points for State Bank of India, the nation’s largest lender, and 34.5 basis points for ICICI Bank Ltd., the country’s second-biggest lender.
Growth Projections
Local-currency debt returned 4.1 percent in 2010, according to indexes compiled by HSBC Holdings Plc, as the Reserve Bank raised borrowing costs by 150 basis points. Investors in China earned 1 percent, the least in the region, the indexes show.
India’s $1.3 trillion economy expanded 8.9 percent for a second straight quarter in July to September. India’s finance ministry said on Dec. 7 the economy may expand as much as 9.1 percent compared with an earlier forecast of 8.25 to 8.75 percent.
“We are looking at revising our growth estimate upwards given the strong demand in the economy,” Rajeev Malik, an economist at CLSA Asia Pacific Markets said on Dec. 7. “We think the RBI will have to come back to raise rates in January to keep a lid on inflation fueled by faster growth and higher global commodity prices.”
Not Ideal
The consumer-price inflation rate is running close to 10 percent, the most among the G-20 countries after Argentina, according to data compiled by Bloomberg. The wholesale-price inflation rose 8.58 percent in October, which according to Finance Minister Mukherjee is double the ideal level of 4 percent to 5 percent.
ING raised its growth forecast for India to 8.7 percent from 8.4 percent after the Nov. 30 announcement. Goldman Sachs Group Inc. and Morgan Stanley said there’s a chance that growth may exceed their 8.5 percent forecasts.
“We are bullish on government bonds given the higher yield opportunity due to the higher rate differential,” Navneet Munot, who oversees $8.5 billion as chief investment officer at Mumbai-based SBI Funds Management Pvt., said yesterday. “The central bank will have to come back to consider rate increases early next year as higher commodity prices add to inflation.”
Homes of India’s former minister raided
Indian investigators have raided the homes of Andimuthu Raja, the former telecommunications minister as scrutiny of the Congress party-led government’s handling of the fast-growing telecoms sector intensifies.
The Central Bureau of Investigation on Wednesday launched raids on the residences of Mr Raja in New Delhi, India’s capital, and Chennai, the capital of his home state of Tamil Nadu. The homes of his senior aides were also searched.
Mr Raja, a senior member of a Tamil Nadu-based party allied to the ruling Congress party, resigned as the telecoms minister last month. Shortly before his departure, a government audit concluded that the exchequer lost $39bn in potential revenues from the sale of telecoms licences in a non-competitive bidding process.
He denies any wrongdoing, and has complained that he has been put on trial by the Indian media before any judicial process has got under way.
The furore over the allegations of irregularities surrounding the award of 2G telecoms licences two years ago has crippled parliament in the world’s largest democracy, preventing any legislative activity in the winter session.
The scandal has its roots in the severe telecommunications spectrum crunch in India, where much is allocated to the defence establishment, space research, satellites, and other government entities, leaving little available for commercial phone operators.
India’s mobile phone companies are already facing a severe shortage of 2G spectrum, which has resulted in deteriorating call quality, numerous dropped calls, and failures to connect.
In India, “spectrum policy planning is an accident,” Jaikishan Rajaraman, a senior director at the GSM Association, which represents the industry, told the FT on Wednesday. “It’s ad hoc; it doesn’t exist.”
Leading opposition parties have strongly criticised the Central Vigilance Commission and the CBI as being “compromised” and not up to the task of pursuing what they claim is some of the worst corruption in India’s post-independence history. The CBI has been investigating the case for more than a year, and is expected to submit its findings by the end of March. It had previously searched the offices of the Department of Telecommunications.
Kapil Sibal, the new telecoms minister, said that the CBI was acting under the instructions of the Supreme Court, which has raised questions about the conduct of the telecoms ministry.
“It’s in the interests of the people of this country to know [what’s going on] in an open and transparent manner,” he said.
The Supreme Court on Wednesday indicated that it might widen the brief of its investigation into the telecoms scandal to the period when the National Democratic Alliance was in power. In 2001, an auction of spectrum followed similar rules to the 2008 sale.
"What happened in 2001 needs to be looked into. It is for the CBI to investigate and find out,” justices G.S. Singhvi and A.K. Ganguly said in a statement.
The court has also ordered federal investigators to probe bank loans to the companies which were granted 2G licenses in 2008..
The spectrum shortage has led to fierce behind-the-scenes battles among corporate rivals to try to secure spectrum for themselves, over their rivals, which is one of the areas that lobbyist Niira Radia, who worked for Ratan Tata, was involved in.
Meanwhile, the GSMA is calling for to New Delhi to release another 5 megahertz of 3G spectrum for the mobile broadband industry, which it said would increase wireless internet penetration by 1 per cent, potentially adding an additional Rs162bn ($3.6bn) to India’s GDP by 2015.
The court also recommended that a special court, with telecoms expertise, should be formed to handle any corruption or conspiracy charges that might emerge over the telecoms investigation.
“Unless the government is prepared to create a special court, purpose will not be served. It is the need of the hour, we must have exclusive courts to deal with these offences," the bench said.
Suhel Seth, a corporate lobbyist and managing partner of Counselage, said the investigation had ‘teeth’ and threatened to lead to prosecutions. “It’s likely to be the business people [who go to jail]; but the politicians will get away,” he said.
The Central Bureau of Investigation on Wednesday launched raids on the residences of Mr Raja in New Delhi, India’s capital, and Chennai, the capital of his home state of Tamil Nadu. The homes of his senior aides were also searched.
Mr Raja, a senior member of a Tamil Nadu-based party allied to the ruling Congress party, resigned as the telecoms minister last month. Shortly before his departure, a government audit concluded that the exchequer lost $39bn in potential revenues from the sale of telecoms licences in a non-competitive bidding process.
He denies any wrongdoing, and has complained that he has been put on trial by the Indian media before any judicial process has got under way.
The furore over the allegations of irregularities surrounding the award of 2G telecoms licences two years ago has crippled parliament in the world’s largest democracy, preventing any legislative activity in the winter session.
The scandal has its roots in the severe telecommunications spectrum crunch in India, where much is allocated to the defence establishment, space research, satellites, and other government entities, leaving little available for commercial phone operators.
India’s mobile phone companies are already facing a severe shortage of 2G spectrum, which has resulted in deteriorating call quality, numerous dropped calls, and failures to connect.
In India, “spectrum policy planning is an accident,” Jaikishan Rajaraman, a senior director at the GSM Association, which represents the industry, told the FT on Wednesday. “It’s ad hoc; it doesn’t exist.”
Leading opposition parties have strongly criticised the Central Vigilance Commission and the CBI as being “compromised” and not up to the task of pursuing what they claim is some of the worst corruption in India’s post-independence history. The CBI has been investigating the case for more than a year, and is expected to submit its findings by the end of March. It had previously searched the offices of the Department of Telecommunications.
Kapil Sibal, the new telecoms minister, said that the CBI was acting under the instructions of the Supreme Court, which has raised questions about the conduct of the telecoms ministry.
“It’s in the interests of the people of this country to know [what’s going on] in an open and transparent manner,” he said.
The Supreme Court on Wednesday indicated that it might widen the brief of its investigation into the telecoms scandal to the period when the National Democratic Alliance was in power. In 2001, an auction of spectrum followed similar rules to the 2008 sale.
"What happened in 2001 needs to be looked into. It is for the CBI to investigate and find out,” justices G.S. Singhvi and A.K. Ganguly said in a statement.
The court has also ordered federal investigators to probe bank loans to the companies which were granted 2G licenses in 2008..
The spectrum shortage has led to fierce behind-the-scenes battles among corporate rivals to try to secure spectrum for themselves, over their rivals, which is one of the areas that lobbyist Niira Radia, who worked for Ratan Tata, was involved in.
Meanwhile, the GSMA is calling for to New Delhi to release another 5 megahertz of 3G spectrum for the mobile broadband industry, which it said would increase wireless internet penetration by 1 per cent, potentially adding an additional Rs162bn ($3.6bn) to India’s GDP by 2015.
The court also recommended that a special court, with telecoms expertise, should be formed to handle any corruption or conspiracy charges that might emerge over the telecoms investigation.
“Unless the government is prepared to create a special court, purpose will not be served. It is the need of the hour, we must have exclusive courts to deal with these offences," the bench said.
Suhel Seth, a corporate lobbyist and managing partner of Counselage, said the investigation had ‘teeth’ and threatened to lead to prosecutions. “It’s likely to be the business people [who go to jail]; but the politicians will get away,” he said.
Smelling an Opportunity
MASON, Ohio — For more than a decade, some of the nation’s shrewdest marketers have tried to muscle in on the neighborhood dry cleaner, only to give up after years of labor and millions of dollars in investments.
Undeterred, Procter & Gamble is taking a shot at it, again. Having persuaded Americans to buy synthetic laundry detergent, fluorinated toothpaste and disposable diapers, P.& G. believes it has finally cracked the code on the dry cleaning business, too.
Where other dry cleaning entrepreneurs have tried to come up with clever business models for dry cleaning, P.& G.’s primary innovation is in the brand name itself: Tide Dry Cleaners, named after its best-selling laundry detergent.
With more than 800,000 Facebook fans and legions of loyal customers, Tide will draw people into the franchise stores, and superior service — which includes drive-through service, 24-hour pickup and environmentally benign cleaning methods — will keep them coming back, company officials predict.
“The power of our brands represents disruptive innovation in these industries,” said Nathan Estruth, vice president for FutureWorks, P.& G.’s entrepreneurial arm. “Imagine getting to start my new business with the power of Tide.”
And the lure of its fragrance. P.& G. plans to infuse the stores and its dry cleaning fluids with the scent of the brand that’s been cozily familiar to generations of households.
Among the Tide believers is Rick DeAngelis, a 40-year-old who is planning to open a franchise in suburban Cincinnati next year.
“It’s been a trusted name in laundry for 60 years,” he said. “It’s almost synonymous with laundry.”
Already, some local dry cleaners are complaining about the new gorilla on the block, backed by a corporation with roughly $80 billion in annual net sales.
Robert Tran, who owns Monroe Dry Cleaning here in Mason, said his business was off more than 50 percent since a new Tide store opened down the street at the end of October. Customers are being drawn to the Tide store by discounts and giveaways, like P.& G. products and gift cards, he said.
“There is no way I can afford that,” he said. “All my customers just left without giving me a chance to say, ‘Hey, check the quality.’ ”
But for Tide to become synonymous with dry cleaning too, P.& G. will have to overcome problems that have undone other upstarts. The dry cleaning industry has been roiled by unemployment and economic woes, and hurt by a continuing trend toward more casual work clothes.
Competition is fierce, and customers can be prickly: woe to the dry cleaner that ruins a favorite dress, even if it was cheaply made and bought decades ago.
Sanjiv Mehra, who oversaw a short-lived effort by Unilever to break into the dry cleaning business about a decade ago, said the key to success was figuring out a way to do it cheaper or significantly better than the mom-and-pop stores that dominate the industry. At the end of the day, Unilever decided that it couldn’t do either.
“It comes back to, are you fundamentally changing the economics of the business?” he said, adding that P.& G.’s marketing muscle could be the difference. “That’s where they will make a lot of money if they do this right.”
Payam Zamani, co-founder of Autoweb.com, a site for car buyers, who later founded PurpleTie dry cleaners, said he tried to do for dry cleaning what Blockbuster did for video stores, offering efficient and better quality than neighborhood dry cleaners. He said it was hard for his stores to compete with owner-operated stores with little overhead and low-wage employees.
“People were more interested in cheaper service, not better service,” Mr. Zamani said.
P.& G. has dabbled in dry cleaning before. In the late 1990s it introduced Dryel, an at-home dry cleaning product that rattled local dry cleaners, who feared they would lose business. But Dryel was considered a disappointment, and P.& G. sold it in 2008.
In 2000, it opened several stores in suburban Atlanta, called Juvian, that offered at-home pickup and delivery of laundry and dry cleaning. The stores were eventually closed.
The idea for Tide Dry Cleaners came from P.& G.’s FutureWorks, a unit that comes up with ways to expand famous brands like Pampers, Oil of Olay and Crest.
Many of those brands are experiencing robust growth in developing markets, but finding new ways to increase revenue in saturated markets like the United States is more challenging.
Undeterred, Procter & Gamble is taking a shot at it, again. Having persuaded Americans to buy synthetic laundry detergent, fluorinated toothpaste and disposable diapers, P.& G. believes it has finally cracked the code on the dry cleaning business, too.
Where other dry cleaning entrepreneurs have tried to come up with clever business models for dry cleaning, P.& G.’s primary innovation is in the brand name itself: Tide Dry Cleaners, named after its best-selling laundry detergent.
With more than 800,000 Facebook fans and legions of loyal customers, Tide will draw people into the franchise stores, and superior service — which includes drive-through service, 24-hour pickup and environmentally benign cleaning methods — will keep them coming back, company officials predict.
“The power of our brands represents disruptive innovation in these industries,” said Nathan Estruth, vice president for FutureWorks, P.& G.’s entrepreneurial arm. “Imagine getting to start my new business with the power of Tide.”
And the lure of its fragrance. P.& G. plans to infuse the stores and its dry cleaning fluids with the scent of the brand that’s been cozily familiar to generations of households.
Among the Tide believers is Rick DeAngelis, a 40-year-old who is planning to open a franchise in suburban Cincinnati next year.
“It’s been a trusted name in laundry for 60 years,” he said. “It’s almost synonymous with laundry.”
Already, some local dry cleaners are complaining about the new gorilla on the block, backed by a corporation with roughly $80 billion in annual net sales.
Robert Tran, who owns Monroe Dry Cleaning here in Mason, said his business was off more than 50 percent since a new Tide store opened down the street at the end of October. Customers are being drawn to the Tide store by discounts and giveaways, like P.& G. products and gift cards, he said.
“There is no way I can afford that,” he said. “All my customers just left without giving me a chance to say, ‘Hey, check the quality.’ ”
But for Tide to become synonymous with dry cleaning too, P.& G. will have to overcome problems that have undone other upstarts. The dry cleaning industry has been roiled by unemployment and economic woes, and hurt by a continuing trend toward more casual work clothes.
Competition is fierce, and customers can be prickly: woe to the dry cleaner that ruins a favorite dress, even if it was cheaply made and bought decades ago.
Sanjiv Mehra, who oversaw a short-lived effort by Unilever to break into the dry cleaning business about a decade ago, said the key to success was figuring out a way to do it cheaper or significantly better than the mom-and-pop stores that dominate the industry. At the end of the day, Unilever decided that it couldn’t do either.
“It comes back to, are you fundamentally changing the economics of the business?” he said, adding that P.& G.’s marketing muscle could be the difference. “That’s where they will make a lot of money if they do this right.”
Payam Zamani, co-founder of Autoweb.com, a site for car buyers, who later founded PurpleTie dry cleaners, said he tried to do for dry cleaning what Blockbuster did for video stores, offering efficient and better quality than neighborhood dry cleaners. He said it was hard for his stores to compete with owner-operated stores with little overhead and low-wage employees.
“People were more interested in cheaper service, not better service,” Mr. Zamani said.
P.& G. has dabbled in dry cleaning before. In the late 1990s it introduced Dryel, an at-home dry cleaning product that rattled local dry cleaners, who feared they would lose business. But Dryel was considered a disappointment, and P.& G. sold it in 2008.
In 2000, it opened several stores in suburban Atlanta, called Juvian, that offered at-home pickup and delivery of laundry and dry cleaning. The stores were eventually closed.
The idea for Tide Dry Cleaners came from P.& G.’s FutureWorks, a unit that comes up with ways to expand famous brands like Pampers, Oil of Olay and Crest.
Many of those brands are experiencing robust growth in developing markets, but finding new ways to increase revenue in saturated markets like the United States is more challenging.
Tuesday, December 7, 2010
Oil Falls a Second Day, Dropping From 26-Month High on Europe Debt Concern
Oil declined for a second day as concern Europe’s debt crisis is spreading drove speculation fuel demand will drop and an industry report showed U.S. gasoline supplies surged the most since January.
Futures extended yesterday’s 0.8 percent slide as traders secured profits from crude’s rally to $90.76 a barrel, the highest in 26 months. European ministers ruled out immediate aid for Portugal and Spain or an increase in the 750 billion-euro ($1 trillion) crisis fund. The American Petroleum Institute said gasoline stockpiles increased 4.8 million barrels last week.
“There are still concerns about the European economy,” said Ken Hasegawa, a commodity derivative sales manager at Newedge, a brokerage, in Tokyo. “This increase in products is having a larger impact on the crude oil market. Ninety dollars will be a major resistance level. It’s a good time to take profit.”
Crude for January delivery lost as much as 81 cents, or 0.9 percent, to $87.88 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $87.98 at 9:52 a.m. in Singapore. Yesterday, it closed down 0.8 percent after rising to the highest since Oct. 8, 2008.
Europe’s economic situation is serious and its institutions must act more quickly to stem contagion from the sovereign debt crisis, International Monetary Fund Managing Director Dominique Strauss-Kahn told a briefing in Athens yesterday.
“The market continues to worry over Europe’s ability to prevent debt issues from spreading,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “Crude prices lost momentum, potentially as cautious long investors took profits due to uncertainty in the market.”
Brent crude for January settlement fell as much as 83 cents, or 0.9 percent, to $90.56 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 6 cents to end the session at $91.39 yesterday.
Crude Supplies
Crude has risen 11 percent this year in New York, heading for its second consecutive annual increase. It soared 78 percent in 2009, the most since 1999.
U.S. crude stockpiles decreased 7.34 million barrels to 349.3 million last week, the American Petroleum Institute said. An Energy Department report today will probably show they slid 1.4 million barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.
Supplies of distillates, which include heating oil and diesel, advanced 1.7 million barrels to 159.3 million, the API said. The Energy Department report will probably show they declined 900,000 barrels, according to the Bloomberg News survey, while gasoline inventories slipped 300,000 barrels.
“Investors will be closely watching U.S. oil inventory reports for evidence of improved demand,” Pervan said.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
OPEC Maintains
Oil’s rally is unlikely to coax OPEC into raising production quotas at this week’s meeting in Ecuador, as member nations consider the global recovery strong enough to withstand price gains.
The Organization of Petroleum Exporting Countries, which accounts for 40 percent of global supply, will maintain the limits set in 2008 when representatives gather in Quito on Dec. 11, according to all but one of 39 analysts and traders in a Bloomberg News survey. Ministers from Angola, Venezuela and Libya say the group will probably repeat its 24.845 million- barrel-a-day target.
Futures extended yesterday’s 0.8 percent slide as traders secured profits from crude’s rally to $90.76 a barrel, the highest in 26 months. European ministers ruled out immediate aid for Portugal and Spain or an increase in the 750 billion-euro ($1 trillion) crisis fund. The American Petroleum Institute said gasoline stockpiles increased 4.8 million barrels last week.
“There are still concerns about the European economy,” said Ken Hasegawa, a commodity derivative sales manager at Newedge, a brokerage, in Tokyo. “This increase in products is having a larger impact on the crude oil market. Ninety dollars will be a major resistance level. It’s a good time to take profit.”
Crude for January delivery lost as much as 81 cents, or 0.9 percent, to $87.88 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $87.98 at 9:52 a.m. in Singapore. Yesterday, it closed down 0.8 percent after rising to the highest since Oct. 8, 2008.
Europe’s economic situation is serious and its institutions must act more quickly to stem contagion from the sovereign debt crisis, International Monetary Fund Managing Director Dominique Strauss-Kahn told a briefing in Athens yesterday.
“The market continues to worry over Europe’s ability to prevent debt issues from spreading,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “Crude prices lost momentum, potentially as cautious long investors took profits due to uncertainty in the market.”
Brent crude for January settlement fell as much as 83 cents, or 0.9 percent, to $90.56 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 6 cents to end the session at $91.39 yesterday.
Crude Supplies
Crude has risen 11 percent this year in New York, heading for its second consecutive annual increase. It soared 78 percent in 2009, the most since 1999.
U.S. crude stockpiles decreased 7.34 million barrels to 349.3 million last week, the American Petroleum Institute said. An Energy Department report today will probably show they slid 1.4 million barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.
Supplies of distillates, which include heating oil and diesel, advanced 1.7 million barrels to 159.3 million, the API said. The Energy Department report will probably show they declined 900,000 barrels, according to the Bloomberg News survey, while gasoline inventories slipped 300,000 barrels.
“Investors will be closely watching U.S. oil inventory reports for evidence of improved demand,” Pervan said.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
OPEC Maintains
Oil’s rally is unlikely to coax OPEC into raising production quotas at this week’s meeting in Ecuador, as member nations consider the global recovery strong enough to withstand price gains.
The Organization of Petroleum Exporting Countries, which accounts for 40 percent of global supply, will maintain the limits set in 2008 when representatives gather in Quito on Dec. 11, according to all but one of 39 analysts and traders in a Bloomberg News survey. Ministers from Angola, Venezuela and Libya say the group will probably repeat its 24.845 million- barrel-a-day target.
At CNN, Talk Show Tensions
In one sweeping move, the 8 p.m. political talk show “Parker Spitzer” could have turned around CNN’s flailing prime-time ratings, publicly rehabilitated the fallen New York governor Eliot Spitzer, and turned his co-host Kathleen Parker into a television star.
Instead, at the two-month mark, the ratings for CNN’s latest experiment are stagnant. The show has been troubled by backstage tensions that have spilled out in gossip columns and have given rise to speculation — and some wishful thinking among his supporters — that CNN could make Mr. Spitzer the sole host.
CNN executives and the co-hosts flatly ruled out that outcome in interviews last week. Disappointment with the ratings was evident, even as they emphasized that the show was just starting to get its footing.
“We’re creating something that I believe in. I have every confidence that it will be very successful,” said Mr. Spitzer, who resigned the governorship in 2008 after being ensnared in a prostitution scandal.
“Parker Spitzer” amounts to image rehabilitation for Mr. Spitzer, though it has not proved to be much of a platform yet. In its first seven weeks, “Parker Spitzer” averaged only 140,000 viewers ages 25 to 54, a drop of 2,000 from the seven weeks before it started, according to the Nielsen Company. “Countdown,” on at the same time on MSNBC, reaches twice as many people in that demographic, which cable news advertisers covet; “The O’Reilly Factor,” on Fox News, reaches five times as many.
But those two shows started in obscurity, with almost none of the scrutiny that “Parker Spitzer” has endured. Mr. Spitzer and Ms. Parker “launched into the most competitive time on TV, that’s just a fact,” said Bart Feder, a senior vice president at CNN. “That’s a heavy lift. They went into it knowing that. We went into it knowing that, which is why we take it one day at a time.”
In part, the show has been watched carefully because it represents Mr. Spitzer’s return to the public spotlight. But it is also because CNN is adrift, having shed a third of its audience in prime time the last five years.
Making matters even more delicate, Mr. Spitzer was paired with Ms. Parker over the summer by a CNN president, Jonathan Klein, who was dismissed weeks before the program’s Oct. 4 start date. The new executive in charge of CNN, Ken Jautz, is said to be supportive of the program. He declined an interview request.
Now, with Mr. Klein out of the picture, Mr. Spitzer and Ms. Parker, neither of whom had regularly hosted a show before, are learning how to do so in front of its viewers. Neither host was screen-tested before being hired, a fact that later raised eyebrows inside Time Warner, CNN’s parent company.
“It’s absolutely a work in progress,” said Ms. Parker, a Pulitzer Prize-winning columnist for The Washington Post, in an interview last week.
She denied any intent to leave “Parker Spitzer,” and said she recently signed a two-year lease in New York, having moved from Washington to tape the show. She has also cut back her print duties, to one column a week for the Washington Post Writers Group, from her previous output of two a week.
“Parker Spitzer” is intended to be a nightly news-based conversation about a mix of topics, with a mix of opinions. It pairs Mr. Spitzer, a liberal with a prosecutor’s bent, and Ms. Parker, who calls herself a rational conservative. “We wanted very much to bring a nonpartisan alternative to television viewers,” Ms. Parker said, a wink at the red- and blue-hued shows on Fox News and MSNBC.
The hosts and their guests have had smart, surprising debates about deficit reduction (in a recurring challenge to legislators called “Name Your Cuts”), overseas wars and airport security. But the show has been marred by tensions behind the scenes about the balance between the hosts, especially in recent weeks as the scales have tipped more in Mr. Spitzer’s favor, according to several CNN employees who spoke on condition of anonymity because they feared losing their jobs if they spoke publicly.
The tensions spilled into public view last week when the Page Six gossip column in The New York Post said Ms. Parker had stormed off the set in early November. Asked about that claim, Ms. Parker said, “I don’t storm. I saunter.”
She acknowledged that there was some “editorial and political tension,” but cast it as a normal part of television production. “That’s how human beings are made,” she added.
Mr. Spitzer put it this way: “I’ve seen tension in my life — conflict, tension, acrimony — and I haven’t seen anything here that comes close to what I’ve seen.”
There is no doubt that Mr. Spitzer dominates the current iteration of the show, which has been heavy on political and financial news, playing to his strengths. Ms. Parker, in contrast, “can appear decidedly passive, almost meek,” wrote James Rainey, a Los Angeles Times media critic last week, in a column that proposed, “If Parker’s really mad enough to walk off the set, she should turn a little of that animus on her co-host. It would make for livelier discussions, and better TV.”
In the future, Ms. Parker said she expected to have more airtime to talk about the social and cultural issues that she covers in her columns. “We’re definitely going to be mixing it up more,” she said.
In a separate interview, Mr. Spitzer said, “We’ll talk about movies sometimes, sports, we’ll have everything under the sun, but we are clearly a political show.”
To hear him tell it, “Parker Spitzer” is like a courtroom, a place where “smart people can discuss tough issues; go back and forth and challenge each other; probe each other for weaknesses in the argument; and force resolution if possible.”
Some at CNN say they believe that what appear to be problems on “Parker Spitzer” are merely a sign of CNN’s broader identity crisis. The program that precedes it at 7 p.m., a political newscast called “John King USA,” is rated even lower. Barring a shake-up, both shows will lead into “Piers Morgan Tonight,” the interview show that will replace “Larry King Live” in mid-January.
“Campbell Brown,” a traditional newscast that was on at 8 p.m. until July, averaged 152,000 viewers in the demographic on any given day this year.
Mr. Feder indicated no second-guessing about the shift from news to views at 8 p.m. “One of the things we want to do,” he said, “is get more diversity of opinion on our air, and still maintain our position as a nonpartisan news network.”
Instead, at the two-month mark, the ratings for CNN’s latest experiment are stagnant. The show has been troubled by backstage tensions that have spilled out in gossip columns and have given rise to speculation — and some wishful thinking among his supporters — that CNN could make Mr. Spitzer the sole host.
CNN executives and the co-hosts flatly ruled out that outcome in interviews last week. Disappointment with the ratings was evident, even as they emphasized that the show was just starting to get its footing.
“We’re creating something that I believe in. I have every confidence that it will be very successful,” said Mr. Spitzer, who resigned the governorship in 2008 after being ensnared in a prostitution scandal.
“Parker Spitzer” amounts to image rehabilitation for Mr. Spitzer, though it has not proved to be much of a platform yet. In its first seven weeks, “Parker Spitzer” averaged only 140,000 viewers ages 25 to 54, a drop of 2,000 from the seven weeks before it started, according to the Nielsen Company. “Countdown,” on at the same time on MSNBC, reaches twice as many people in that demographic, which cable news advertisers covet; “The O’Reilly Factor,” on Fox News, reaches five times as many.
But those two shows started in obscurity, with almost none of the scrutiny that “Parker Spitzer” has endured. Mr. Spitzer and Ms. Parker “launched into the most competitive time on TV, that’s just a fact,” said Bart Feder, a senior vice president at CNN. “That’s a heavy lift. They went into it knowing that. We went into it knowing that, which is why we take it one day at a time.”
In part, the show has been watched carefully because it represents Mr. Spitzer’s return to the public spotlight. But it is also because CNN is adrift, having shed a third of its audience in prime time the last five years.
Making matters even more delicate, Mr. Spitzer was paired with Ms. Parker over the summer by a CNN president, Jonathan Klein, who was dismissed weeks before the program’s Oct. 4 start date. The new executive in charge of CNN, Ken Jautz, is said to be supportive of the program. He declined an interview request.
Now, with Mr. Klein out of the picture, Mr. Spitzer and Ms. Parker, neither of whom had regularly hosted a show before, are learning how to do so in front of its viewers. Neither host was screen-tested before being hired, a fact that later raised eyebrows inside Time Warner, CNN’s parent company.
“It’s absolutely a work in progress,” said Ms. Parker, a Pulitzer Prize-winning columnist for The Washington Post, in an interview last week.
She denied any intent to leave “Parker Spitzer,” and said she recently signed a two-year lease in New York, having moved from Washington to tape the show. She has also cut back her print duties, to one column a week for the Washington Post Writers Group, from her previous output of two a week.
“Parker Spitzer” is intended to be a nightly news-based conversation about a mix of topics, with a mix of opinions. It pairs Mr. Spitzer, a liberal with a prosecutor’s bent, and Ms. Parker, who calls herself a rational conservative. “We wanted very much to bring a nonpartisan alternative to television viewers,” Ms. Parker said, a wink at the red- and blue-hued shows on Fox News and MSNBC.
The hosts and their guests have had smart, surprising debates about deficit reduction (in a recurring challenge to legislators called “Name Your Cuts”), overseas wars and airport security. But the show has been marred by tensions behind the scenes about the balance between the hosts, especially in recent weeks as the scales have tipped more in Mr. Spitzer’s favor, according to several CNN employees who spoke on condition of anonymity because they feared losing their jobs if they spoke publicly.
The tensions spilled into public view last week when the Page Six gossip column in The New York Post said Ms. Parker had stormed off the set in early November. Asked about that claim, Ms. Parker said, “I don’t storm. I saunter.”
She acknowledged that there was some “editorial and political tension,” but cast it as a normal part of television production. “That’s how human beings are made,” she added.
Mr. Spitzer put it this way: “I’ve seen tension in my life — conflict, tension, acrimony — and I haven’t seen anything here that comes close to what I’ve seen.”
There is no doubt that Mr. Spitzer dominates the current iteration of the show, which has been heavy on political and financial news, playing to his strengths. Ms. Parker, in contrast, “can appear decidedly passive, almost meek,” wrote James Rainey, a Los Angeles Times media critic last week, in a column that proposed, “If Parker’s really mad enough to walk off the set, she should turn a little of that animus on her co-host. It would make for livelier discussions, and better TV.”
In the future, Ms. Parker said she expected to have more airtime to talk about the social and cultural issues that she covers in her columns. “We’re definitely going to be mixing it up more,” she said.
In a separate interview, Mr. Spitzer said, “We’ll talk about movies sometimes, sports, we’ll have everything under the sun, but we are clearly a political show.”
To hear him tell it, “Parker Spitzer” is like a courtroom, a place where “smart people can discuss tough issues; go back and forth and challenge each other; probe each other for weaknesses in the argument; and force resolution if possible.”
Some at CNN say they believe that what appear to be problems on “Parker Spitzer” are merely a sign of CNN’s broader identity crisis. The program that precedes it at 7 p.m., a political newscast called “John King USA,” is rated even lower. Barring a shake-up, both shows will lead into “Piers Morgan Tonight,” the interview show that will replace “Larry King Live” in mid-January.
“Campbell Brown,” a traditional newscast that was on at 8 p.m. until July, averaged 152,000 viewers in the demographic on any given day this year.
Mr. Feder indicated no second-guessing about the shift from news to views at 8 p.m. “One of the things we want to do,” he said, “is get more diversity of opinion on our air, and still maintain our position as a nonpartisan news network.”
Diamond Fund to Turn `Talismans of Magic' Into Commodity Assets
Former Rapaport Group executives are creating a fund that’s looking to transform diamonds from the “talismans of magic” advertised by De Beers into commodity investments like copper and soybeans.
The precedents aren’t good. Diamond Circle Capital Plc, the first publicly listed fund to invest in the stones, has plunged 49 percent since selling shares in 2008, compared with a drop of 14 percent in an index of overall prices for the gems. The first diamond investment trust, set up in the 1980s, also collapsed.
Saul Singer, co-founder of Fusion Alternatives and a former research chief at Rapaport, the world’s main provider of diamond prices, says conditions are right for his firm’s new fund. He sees bottled-up demand from investors, locked out of a trade that sells diamonds through a closed network of dealers or in retailers. Prices have risen 11 percent in 2010, trailing gains in platinum, silver and gold.
“There is increased demand and increased interest from the investment community in diamonds,” Singer, 36, said in an interview. “The main goal is to put all the pieces together to create a marketable investment vehicle for the professional investment community.”
Fusion’s 10-person team also includes Adam Schulman, former head of business development and marketing at Rapaport, and Raphael Bitterman, who ran international trading and compliance at the group. New York-based Rapaport has more than 10,000 clients in 70 countries.
Riding a Wave
Underpinning Fusion’s plans is a steady decline in output of the rough diamonds that are fashioned into cut gems, and anticipation demand will outstrip supply. Diamond production slid 8.5 percent to 161.1 million carats in 2008 from 2005, RBC Capital Markets says, before slumping 30 percent last year as consumption tumbled following the world financial crisis.
Even before the collapse, output in Botswana, the biggest source, fell for three straight years through 2008, and in Australia production slid by more than half, RBC says.
Shrinking output also underscores diamonds’ potential to ride a wave of surging prices of commodities such as gold and silver as central banks print money to buoy stagnant economies.
The U.S. and European banks’ so-called quantitative easing debases their currencies and risks inflation, fueling investor demand for assets other than cash. “Savvy investors” may buy diamond funds to protect against losses on cash holdings, said Russell Mehta, chief operating officer of Rosy Blue (India) Pvt. Ltd., a unit of the world’s biggest manufacturer of cut stones.
‘Crazy Prices’
“Whether it’s the guy on the street, an investment banker or a client of a bank, they’re all asking us, ‘How do we get into diamonds?,’” said Heno Kruger, head trader at Namakwa Diamonds Ltd., which owns mines in South Africa, Namibia and the Democratic Republic of Congo. “There’s a lot of talk about diamonds. They’re fetching crazy prices.”
Fusion faces skepticism from a trading community that Singer recognizes is “very closed, self-centric and complex,” and where reputation is paramount.
Antwerp’s diamond district covers about a square mile of real estate containing more than 1,800 trading businesses that handle 80 percent of the world’s rough stones sold each year and half of the polished gems. The Antwerp Diamond Bourse has been in operation since 1904, according to the exchange’s website.
“We do not want to undermine the emotional and symbolic value of the diamond,” said Caroline Germain, a spokeswoman for the Antwerp World Diamond Centre, representing the industry in Belgium. “Diamonds should remain something magical, mystical, something that you buy and has value for eternity.”
‘Magic, Passion, Success’
Others in the industry are concerned the allure of the stones as luxury items, from the crown jewels worn by Queen Elizabeth II to the gems owned by Hollywood’s Elizabeth Taylor, will be undermined if they trade like any other commodity.
“Diamonds are purchased for emotions,” said Varda Shine, chief executive officer of Diamond Trading Co. International, the rough-diamond distribution arm of De Beers, the second- biggest producer. “We don’t think that diamonds being treated as an investment in the same way as gold is, is the answer.”
De Beers, in its bridal brochure, describes diamonds as “talismans of magic, passion and success,” citing the precious stones given by actor Richard Burton to Taylor and by Archduke Maximilian of Austria to Marie de Bourgogne in the 15th century.
Overall cut-diamond prices have climbed 14 percent since polishedprices.com supplied data from the start of 2002, compared with a threefold gain in platinum, fivefold in gold and almost sixfold in silver.
Jewelers’ Loop
Part of the challenge of investing in diamonds is their worth varies depending on color, quality, cut and size, and the expert with jewelers’ loupe in hand defines that value. Prices for a 3-carat internally flawless and colorless diamond are up 78 percent in 2010, while those for similar 1-carat gems rose 10 percent, according to polishedprices.com figures.
“I don’t want to call a diamond a commodity, because it’s not,” Namakwa’s Kruger said. “As much as the investment community discusses the issue of commoditizing diamonds, those discussions are nowhere close to being solved. Things are done on a handshake and my word is my honor.”
The first diamond investment trust, set up by Thomson McKinnon Securities Inc. in the 1980s, was wound up after a slump in the market, according to reports by the New York Times and Reuters.
Fusion anticipates by investing in sufficient quantities of 1-to-4 carat diamonds of near-uniform quality, more easily valued than larger stones, it can avoid the pitfalls of erratic pricing.
Small Carat, Big Stick
A round polished 4-carat stone may fetch about $120,000, compared with the minimum $1 million gems bought by Diamond Circle when it sought to lure investors to the first publicly listed diamond fund. Diamond Circle Chairman Rupert Cottrell declined to comment when contacted by Bloomberg News.
“If there was a diamond fund that I trusted, I personally would be very happy putting some money in it,” said Charles Wyndham, founder of WWW International Diamond Consultants Ltd. and former director of De Beers’ sales operation. “There aren’t two cocoa beans that are the same. Diamonds like everything else create problems, and problems are there to be solved.”
The precedents aren’t good. Diamond Circle Capital Plc, the first publicly listed fund to invest in the stones, has plunged 49 percent since selling shares in 2008, compared with a drop of 14 percent in an index of overall prices for the gems. The first diamond investment trust, set up in the 1980s, also collapsed.
Saul Singer, co-founder of Fusion Alternatives and a former research chief at Rapaport, the world’s main provider of diamond prices, says conditions are right for his firm’s new fund. He sees bottled-up demand from investors, locked out of a trade that sells diamonds through a closed network of dealers or in retailers. Prices have risen 11 percent in 2010, trailing gains in platinum, silver and gold.
“There is increased demand and increased interest from the investment community in diamonds,” Singer, 36, said in an interview. “The main goal is to put all the pieces together to create a marketable investment vehicle for the professional investment community.”
Fusion’s 10-person team also includes Adam Schulman, former head of business development and marketing at Rapaport, and Raphael Bitterman, who ran international trading and compliance at the group. New York-based Rapaport has more than 10,000 clients in 70 countries.
Riding a Wave
Underpinning Fusion’s plans is a steady decline in output of the rough diamonds that are fashioned into cut gems, and anticipation demand will outstrip supply. Diamond production slid 8.5 percent to 161.1 million carats in 2008 from 2005, RBC Capital Markets says, before slumping 30 percent last year as consumption tumbled following the world financial crisis.
Even before the collapse, output in Botswana, the biggest source, fell for three straight years through 2008, and in Australia production slid by more than half, RBC says.
Shrinking output also underscores diamonds’ potential to ride a wave of surging prices of commodities such as gold and silver as central banks print money to buoy stagnant economies.
The U.S. and European banks’ so-called quantitative easing debases their currencies and risks inflation, fueling investor demand for assets other than cash. “Savvy investors” may buy diamond funds to protect against losses on cash holdings, said Russell Mehta, chief operating officer of Rosy Blue (India) Pvt. Ltd., a unit of the world’s biggest manufacturer of cut stones.
‘Crazy Prices’
“Whether it’s the guy on the street, an investment banker or a client of a bank, they’re all asking us, ‘How do we get into diamonds?,’” said Heno Kruger, head trader at Namakwa Diamonds Ltd., which owns mines in South Africa, Namibia and the Democratic Republic of Congo. “There’s a lot of talk about diamonds. They’re fetching crazy prices.”
Fusion faces skepticism from a trading community that Singer recognizes is “very closed, self-centric and complex,” and where reputation is paramount.
Antwerp’s diamond district covers about a square mile of real estate containing more than 1,800 trading businesses that handle 80 percent of the world’s rough stones sold each year and half of the polished gems. The Antwerp Diamond Bourse has been in operation since 1904, according to the exchange’s website.
“We do not want to undermine the emotional and symbolic value of the diamond,” said Caroline Germain, a spokeswoman for the Antwerp World Diamond Centre, representing the industry in Belgium. “Diamonds should remain something magical, mystical, something that you buy and has value for eternity.”
‘Magic, Passion, Success’
Others in the industry are concerned the allure of the stones as luxury items, from the crown jewels worn by Queen Elizabeth II to the gems owned by Hollywood’s Elizabeth Taylor, will be undermined if they trade like any other commodity.
“Diamonds are purchased for emotions,” said Varda Shine, chief executive officer of Diamond Trading Co. International, the rough-diamond distribution arm of De Beers, the second- biggest producer. “We don’t think that diamonds being treated as an investment in the same way as gold is, is the answer.”
De Beers, in its bridal brochure, describes diamonds as “talismans of magic, passion and success,” citing the precious stones given by actor Richard Burton to Taylor and by Archduke Maximilian of Austria to Marie de Bourgogne in the 15th century.
Overall cut-diamond prices have climbed 14 percent since polishedprices.com supplied data from the start of 2002, compared with a threefold gain in platinum, fivefold in gold and almost sixfold in silver.
Jewelers’ Loop
Part of the challenge of investing in diamonds is their worth varies depending on color, quality, cut and size, and the expert with jewelers’ loupe in hand defines that value. Prices for a 3-carat internally flawless and colorless diamond are up 78 percent in 2010, while those for similar 1-carat gems rose 10 percent, according to polishedprices.com figures.
“I don’t want to call a diamond a commodity, because it’s not,” Namakwa’s Kruger said. “As much as the investment community discusses the issue of commoditizing diamonds, those discussions are nowhere close to being solved. Things are done on a handshake and my word is my honor.”
The first diamond investment trust, set up by Thomson McKinnon Securities Inc. in the 1980s, was wound up after a slump in the market, according to reports by the New York Times and Reuters.
Fusion anticipates by investing in sufficient quantities of 1-to-4 carat diamonds of near-uniform quality, more easily valued than larger stones, it can avoid the pitfalls of erratic pricing.
Small Carat, Big Stick
A round polished 4-carat stone may fetch about $120,000, compared with the minimum $1 million gems bought by Diamond Circle when it sought to lure investors to the first publicly listed diamond fund. Diamond Circle Chairman Rupert Cottrell declined to comment when contacted by Bloomberg News.
“If there was a diamond fund that I trusted, I personally would be very happy putting some money in it,” said Charles Wyndham, founder of WWW International Diamond Consultants Ltd. and former director of De Beers’ sales operation. “There aren’t two cocoa beans that are the same. Diamonds like everything else create problems, and problems are there to be solved.”
Monday, December 6, 2010
Poland’s Currency Lifts Economy, Despite the Frailties of the Euro Zone
WARSAW — With its drab, Soviet-era boulevards and standard-issue glass-and-steel office buildings, Warsaw does not look much like green, elegant Dublin. But there are some striking similarities between Poland today and Ireland in the 1990s.
Like the Irish a couple of decades ago, the Poles are a hardy people battered by history but on the verge of prosperity. Foreign capital is pouring in and investment banks are opening offices, lured by resilient growth and 38.5 million people who are close to shedding the “emerging market” label.
And Poland now, like Ireland then, has its own currency. Being outside the euro zone is working to Poland’s economic advantage.
That is not the only reason Poland is currently that rare species: a financially vibrant member of the European Union. But it is to Poland’s benefit not to be bound by a common currency, at a time when euro zone countries like Ireland will have trouble using cheap exports to grow their way out of trouble.
While Poland remains determined to eventually adopt the common currency, Prime Minister Donald Tusk said Monday in Berlin, the country does not plan to “force the pace,” Bloomberg News reported.
One of the big lessons of the European debt crisis, Polish leaders say, is that countries should not adopt the euro until their economies and labor markets are flexible enough to compensate for the loss of control over exchange rates.
The country will not meet the technical requirements for euro membership until 2015 at the earliest, and policy makers do not sound as though they are in a big hurry to join.
“If you analyze the advantages and disadvantages of euro membership, there are more advantages,” Aleksander Grad, the Polish treasury minister, said in a recent interview here. Advantages include eliminating the foreign-exchange risk with nearby trading partners.
But during the global economic crisis, Mr. Grad acknowledged, “Certainly the fact that the zloty could be adjusted helped us.”
The floating zloty, which has fallen about 18 percent against the euro since early 2009, acted as a pressure release valve, helping to keep Polish products competitive on world markets and insulating Poland from the effects of the sovereign debt crisis.
Poland has proved itself to be Europe’s most dogged economy during the last two years. It was the only member of the European Union to avoid recession, soldiering on even after a plane crash in April killed much of the political elite, including the president and the central bank governor. No banks needed to be rescued.
“I wouldn’t say the crisis helped us,” said Ludwik Sobolewski, president of the Warsaw Stock Exchange. “But the fact we proved relatively resistant to pressure enhanced the reputation of our markets.”
There are important differences, of course. For one, Poland is far larger than Ireland, which has over four million people. And Poland’s nearly miraculous economic performance during the global financial crisis was because of a combination of skill and luck. The government pumped stimulus money into the economy during 2009, and took advantage of an International Monetary Fund credit line that reassured investors.
But Poland was also lucky that, in contrast to Ireland, its banking industry was still small compared with the total size of the economy, with less potential to do damage. Household debt is relatively modest. Poland also benefited from the strong economy in neighboring Germany, which accounts for a quarter of exports.
Output is expected to rise 4 percent or more in 2011, after an estimated 3.6 percent this year. Commercial real estate prices in Warsaw are rising at a 10 percent annual clip. Foreign direct investment is expected to be up 28 percent this year, drawn by the country’s status as one of the few growth stories in Europe. And hardly anybody is complaining about the influx of foreign money.
“That’s the least of our worries,” Mr. Grad said, laughing. “We are really happy to have this foreign investment.”
Still, government borrowing is higher than would seem healthy. The deficit is expected to hit 7.6 percent of gross domestic product this year, pushing total debt uncomfortably close to limits under Polish law that would require the government to make drastic spending cuts.
And the economy still has some underlying problems. Poland ranks 70th out of 183 countries for ease of doing business, according to the World Bank. Executives blame the poor rating on an excessive government bureaucracy that hinders the creation of new business, holds back job creation and ultimately hurts Polish competitiveness.
“Everybody is very happy and very proud that Poland was a green island during the crisis,” said Lucyna Stanczak, the Warsaw-based director for Poland at the European Bank for Reconstruction and Development. But “the big issue is structural reforms and fiscal stability. It doesn’t seem that there is very consistent action.”
Jaroslaw Kochaniak, the deputy mayor of Warsaw, put it more bluntly. “We have to do everything we can to avoid the P.I.G.S. virus,” he said, referring to Portugal, Ireland, Greece and Spain and their failure to use years of cheap credit and fast growth to create durable economies. Mr. Kochaniak was speaking at a conference in Warsaw last week sponsored in part by The International Herald Tribune.
One risk for Poland is that some of its growth is based on an influx of European Union aid and other one-time factors, like the construction of new stadiums and other projects related to the European soccer championship, which Poland and Ukraine will co-host in 2012. The country is practically one big construction site, with numerous road and bridge projects and public works, including a new subway line in Warsaw.
If those projects are done well and make the economy more productive, they will contribute to growth. If not, there could be a slowdown when the flow of money ebbs.
Nor can Poland completely isolate itself from problems in the euro zone. It would be vulnerable to an unexpected slowdown in Germany.
“Poland is not able to fully decouple from the European cycle,” said Gyorgy Kovacs, an economist at UBS in London who focuses on Eastern Europe. “If we see European countries going to another significant slowdown, Poland would be affected.”
Polish leaders insist that they have learned from Ireland’s experience, and will not repeat it, vowing to keep economic exuberance in check to avoid the hangover that Ireland is now suffering. “In good times we don’t have to take the punch bowl away,” Jacek Rostowski, the Polish finance minister, told an audience in Warsaw last week. “Because it will never come out of the pantry.”
Like the Irish a couple of decades ago, the Poles are a hardy people battered by history but on the verge of prosperity. Foreign capital is pouring in and investment banks are opening offices, lured by resilient growth and 38.5 million people who are close to shedding the “emerging market” label.
And Poland now, like Ireland then, has its own currency. Being outside the euro zone is working to Poland’s economic advantage.
That is not the only reason Poland is currently that rare species: a financially vibrant member of the European Union. But it is to Poland’s benefit not to be bound by a common currency, at a time when euro zone countries like Ireland will have trouble using cheap exports to grow their way out of trouble.
While Poland remains determined to eventually adopt the common currency, Prime Minister Donald Tusk said Monday in Berlin, the country does not plan to “force the pace,” Bloomberg News reported.
One of the big lessons of the European debt crisis, Polish leaders say, is that countries should not adopt the euro until their economies and labor markets are flexible enough to compensate for the loss of control over exchange rates.
The country will not meet the technical requirements for euro membership until 2015 at the earliest, and policy makers do not sound as though they are in a big hurry to join.
“If you analyze the advantages and disadvantages of euro membership, there are more advantages,” Aleksander Grad, the Polish treasury minister, said in a recent interview here. Advantages include eliminating the foreign-exchange risk with nearby trading partners.
But during the global economic crisis, Mr. Grad acknowledged, “Certainly the fact that the zloty could be adjusted helped us.”
The floating zloty, which has fallen about 18 percent against the euro since early 2009, acted as a pressure release valve, helping to keep Polish products competitive on world markets and insulating Poland from the effects of the sovereign debt crisis.
Poland has proved itself to be Europe’s most dogged economy during the last two years. It was the only member of the European Union to avoid recession, soldiering on even after a plane crash in April killed much of the political elite, including the president and the central bank governor. No banks needed to be rescued.
“I wouldn’t say the crisis helped us,” said Ludwik Sobolewski, president of the Warsaw Stock Exchange. “But the fact we proved relatively resistant to pressure enhanced the reputation of our markets.”
There are important differences, of course. For one, Poland is far larger than Ireland, which has over four million people. And Poland’s nearly miraculous economic performance during the global financial crisis was because of a combination of skill and luck. The government pumped stimulus money into the economy during 2009, and took advantage of an International Monetary Fund credit line that reassured investors.
But Poland was also lucky that, in contrast to Ireland, its banking industry was still small compared with the total size of the economy, with less potential to do damage. Household debt is relatively modest. Poland also benefited from the strong economy in neighboring Germany, which accounts for a quarter of exports.
Output is expected to rise 4 percent or more in 2011, after an estimated 3.6 percent this year. Commercial real estate prices in Warsaw are rising at a 10 percent annual clip. Foreign direct investment is expected to be up 28 percent this year, drawn by the country’s status as one of the few growth stories in Europe. And hardly anybody is complaining about the influx of foreign money.
“That’s the least of our worries,” Mr. Grad said, laughing. “We are really happy to have this foreign investment.”
Still, government borrowing is higher than would seem healthy. The deficit is expected to hit 7.6 percent of gross domestic product this year, pushing total debt uncomfortably close to limits under Polish law that would require the government to make drastic spending cuts.
And the economy still has some underlying problems. Poland ranks 70th out of 183 countries for ease of doing business, according to the World Bank. Executives blame the poor rating on an excessive government bureaucracy that hinders the creation of new business, holds back job creation and ultimately hurts Polish competitiveness.
“Everybody is very happy and very proud that Poland was a green island during the crisis,” said Lucyna Stanczak, the Warsaw-based director for Poland at the European Bank for Reconstruction and Development. But “the big issue is structural reforms and fiscal stability. It doesn’t seem that there is very consistent action.”
Jaroslaw Kochaniak, the deputy mayor of Warsaw, put it more bluntly. “We have to do everything we can to avoid the P.I.G.S. virus,” he said, referring to Portugal, Ireland, Greece and Spain and their failure to use years of cheap credit and fast growth to create durable economies. Mr. Kochaniak was speaking at a conference in Warsaw last week sponsored in part by The International Herald Tribune.
One risk for Poland is that some of its growth is based on an influx of European Union aid and other one-time factors, like the construction of new stadiums and other projects related to the European soccer championship, which Poland and Ukraine will co-host in 2012. The country is practically one big construction site, with numerous road and bridge projects and public works, including a new subway line in Warsaw.
If those projects are done well and make the economy more productive, they will contribute to growth. If not, there could be a slowdown when the flow of money ebbs.
Nor can Poland completely isolate itself from problems in the euro zone. It would be vulnerable to an unexpected slowdown in Germany.
“Poland is not able to fully decouple from the European cycle,” said Gyorgy Kovacs, an economist at UBS in London who focuses on Eastern Europe. “If we see European countries going to another significant slowdown, Poland would be affected.”
Polish leaders insist that they have learned from Ireland’s experience, and will not repeat it, vowing to keep economic exuberance in check to avoid the hangover that Ireland is now suffering. “In good times we don’t have to take the punch bowl away,” Jacek Rostowski, the Polish finance minister, told an audience in Warsaw last week. “Because it will never come out of the pantry.”
Rupee Rally Threatened as Crude Oil Climbs to Two-Year High: India Credit
A surge in crude-oil prices to the highest level in two years is prompting Barclays Plc and Royal Bank of Scotland Group Plc to predict India’s widening current- account deficit will threaten this year’s rally in the rupee.
Oil for January delivery rose to $89.76 a barrel yesterday on the New York Mercantile Exchange, a level not seen since October 2008. Crude oil imports by Asia’s second fastest-growing major economy surged 41 percent in the first 10 months of this year to $82.1 billion, according to data compiled by Bloomberg.
“Whenever oil prices go up, the risk of the current- account deficit widening increases quite significantly,” Rahul Bajoria, a Singapore-based economist at Barclays, said in an interview on Dec. 3. “We expect the rupee to continue underperforming as the shortfall is pretty much the main point and oil prices are definitely a risk.”
The rupee tumbled 8 percent in the third quarter of 2008 after crude-oil prices rose to a record $147.27 a barrel on July 11 of that year. The currency is little changed this quarter, underperforming the 3.6 percent gain in Taiwan’s dollar, the 1.1 percent advance in Thailand’s baht and the 0.7 percent appreciation in China’s yuan. Barclays predicts the rupee, which rose 0.4 percent yesterday to 44.94 per dollar, will drop 4.6 percent in the coming three months.
Official data show the gap in India’s current account widened to a record $13.7 billion in the three months ended June. The government plans to cap the shortfall at 3.5 percent of gross domestic product in the current financial year, compared with 2.9 percent last year, Finance Minister Pranab Mukherjee said at a conference on Oct. 26.
IMF Trade View
The International Monetary Fund forecasts the deficit will be 3.1 percent of GDP in 2010, wider than Brazil’s 2.6 percent and compared with surpluses in Russia and China.
India, the world’s fourth-largest consumer of oil, imported about 70 percent of its crude last year, according to the U.S. Energy Department. Of the 10 forecasts updated on Bloomberg since Nov. 1, six estimate that crude oil traded on Nymex will cost $90 a barrel or more by the end of 2011. Prices will increase to $120 a barrel before the end of 2012 as consumption grows in emerging economies, JPMorgan Chase & Co. said in a report on Dec. 3.
“Oil prices are something to worry about,” Sanjay Mathur, the Singapore-based chief Asia emerging-markets economist at Royal Bank of Scotland, said in an interview yesterday. “And the current account obviously matters now as it is not at a level where it can be wished away.” The gap is “perilously close” to widening to 4 percent of GDP, he said.
Yields Climb
The yield on India’s bonds increased this quarter as official data show the nation imported $8.4 billion worth of oil in October, the most since May. The rate on the 7.8 percent notes maturing in May 2020 has climbed 36 basis points, headed for the worst quarter this year, to 8.21 percent. A basis point is 0.01 percent.
India’s three-year bond yield rose four basis points this month to 7.40 percent, while the rate on similar-maturity notes in Brazil were little changed at 12.35 percent. The yield on comparable Chinese notes fell four basis points to 3.08 percent and that in Russia slid 15 basis points to 6.96 percent. The difference in yields between India’s debt due in a decade and similar-maturity U.S. Treasuries was 521 basis points. The measure has averaged 317 basis points during the past decade.
India’s bonds have returned 3.8 percent this year, the fourth-worst performance among 10 local-currency debt markets tracked by HSBC Holdings Plc, as average inflation in the first 10 months was almost twice the central bank’s targeted rate of 5.5 percent. By contrast, investors in Indonesia’s debt assets earned 22 percent, the most in the region, according to Europe’s largest bank.
State Bank Debt
The cost of protecting the debt of government-owned State Bank of India, which some investors perceive as a proxy for the nation, has increased 57 basis points this year to 174.68, according to the data provider CMA.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should the bank fail to adhere to its debt agreements. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
“Oil prices are a very important variable in a number of different respects for the Indian economy, none of which are favorable,” Robert Prior-Wandesforde, Singapore-based head of India and Southeast Asia economics at Credit Suisse Group AG, said in an interview on Dec. 3. “With high prices comes a deteriorating trade position and also some negative implications for inflation and growth.”
He forecasts the benchmark wholesale-price index will average 8.5 percent this fiscal year.
Indian Shares
The rupee has appreciated 3.5 percent this year as overseas investors poured a record $29.7 billion into Indian shares to benefit from the nation’s economic growth, according to data published by the Securities & Exchange Board of India.
Shipping Corp. of India Ltd., the country’s biggest sea carrier, drew 55.2 billion rupees ($1.2 billion) of bids in a share sale that closed on Dec. 3. A sale by MOIL Ltd., India’s largest producer of manganese ore, closed on Dec. 1, with bids for 56 times the 33.6 million shares offered, according to the National Stock Exchange.
“We expect the rupee to soften at some point next year, because of the impact of oil prices,” Sebastien Barbe, Paris- based head of emerging-market research at Credit Agricole SA, said in an interview yesterday. “But we are bullish on the rupee in the short term as global liquidity may remain supportive of inflows.”
Barbe forecasts the rupee will depreciate to 45.50 per dollar by the end of 2011.
Oil for January delivery rose to $89.76 a barrel yesterday on the New York Mercantile Exchange, a level not seen since October 2008. Crude oil imports by Asia’s second fastest-growing major economy surged 41 percent in the first 10 months of this year to $82.1 billion, according to data compiled by Bloomberg.
“Whenever oil prices go up, the risk of the current- account deficit widening increases quite significantly,” Rahul Bajoria, a Singapore-based economist at Barclays, said in an interview on Dec. 3. “We expect the rupee to continue underperforming as the shortfall is pretty much the main point and oil prices are definitely a risk.”
The rupee tumbled 8 percent in the third quarter of 2008 after crude-oil prices rose to a record $147.27 a barrel on July 11 of that year. The currency is little changed this quarter, underperforming the 3.6 percent gain in Taiwan’s dollar, the 1.1 percent advance in Thailand’s baht and the 0.7 percent appreciation in China’s yuan. Barclays predicts the rupee, which rose 0.4 percent yesterday to 44.94 per dollar, will drop 4.6 percent in the coming three months.
Official data show the gap in India’s current account widened to a record $13.7 billion in the three months ended June. The government plans to cap the shortfall at 3.5 percent of gross domestic product in the current financial year, compared with 2.9 percent last year, Finance Minister Pranab Mukherjee said at a conference on Oct. 26.
IMF Trade View
The International Monetary Fund forecasts the deficit will be 3.1 percent of GDP in 2010, wider than Brazil’s 2.6 percent and compared with surpluses in Russia and China.
India, the world’s fourth-largest consumer of oil, imported about 70 percent of its crude last year, according to the U.S. Energy Department. Of the 10 forecasts updated on Bloomberg since Nov. 1, six estimate that crude oil traded on Nymex will cost $90 a barrel or more by the end of 2011. Prices will increase to $120 a barrel before the end of 2012 as consumption grows in emerging economies, JPMorgan Chase & Co. said in a report on Dec. 3.
“Oil prices are something to worry about,” Sanjay Mathur, the Singapore-based chief Asia emerging-markets economist at Royal Bank of Scotland, said in an interview yesterday. “And the current account obviously matters now as it is not at a level where it can be wished away.” The gap is “perilously close” to widening to 4 percent of GDP, he said.
Yields Climb
The yield on India’s bonds increased this quarter as official data show the nation imported $8.4 billion worth of oil in October, the most since May. The rate on the 7.8 percent notes maturing in May 2020 has climbed 36 basis points, headed for the worst quarter this year, to 8.21 percent. A basis point is 0.01 percent.
India’s three-year bond yield rose four basis points this month to 7.40 percent, while the rate on similar-maturity notes in Brazil were little changed at 12.35 percent. The yield on comparable Chinese notes fell four basis points to 3.08 percent and that in Russia slid 15 basis points to 6.96 percent. The difference in yields between India’s debt due in a decade and similar-maturity U.S. Treasuries was 521 basis points. The measure has averaged 317 basis points during the past decade.
India’s bonds have returned 3.8 percent this year, the fourth-worst performance among 10 local-currency debt markets tracked by HSBC Holdings Plc, as average inflation in the first 10 months was almost twice the central bank’s targeted rate of 5.5 percent. By contrast, investors in Indonesia’s debt assets earned 22 percent, the most in the region, according to Europe’s largest bank.
State Bank Debt
The cost of protecting the debt of government-owned State Bank of India, which some investors perceive as a proxy for the nation, has increased 57 basis points this year to 174.68, according to the data provider CMA.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should the bank fail to adhere to its debt agreements. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
“Oil prices are a very important variable in a number of different respects for the Indian economy, none of which are favorable,” Robert Prior-Wandesforde, Singapore-based head of India and Southeast Asia economics at Credit Suisse Group AG, said in an interview on Dec. 3. “With high prices comes a deteriorating trade position and also some negative implications for inflation and growth.”
He forecasts the benchmark wholesale-price index will average 8.5 percent this fiscal year.
Indian Shares
The rupee has appreciated 3.5 percent this year as overseas investors poured a record $29.7 billion into Indian shares to benefit from the nation’s economic growth, according to data published by the Securities & Exchange Board of India.
Shipping Corp. of India Ltd., the country’s biggest sea carrier, drew 55.2 billion rupees ($1.2 billion) of bids in a share sale that closed on Dec. 3. A sale by MOIL Ltd., India’s largest producer of manganese ore, closed on Dec. 1, with bids for 56 times the 33.6 million shares offered, according to the National Stock Exchange.
“We expect the rupee to soften at some point next year, because of the impact of oil prices,” Sebastien Barbe, Paris- based head of emerging-market research at Credit Agricole SA, said in an interview yesterday. “But we are bullish on the rupee in the short term as global liquidity may remain supportive of inflows.”
Barbe forecasts the rupee will depreciate to 45.50 per dollar by the end of 2011.
France close to $9bn Indian nuclear deal
France has taken a lead over rivals including the US and Russia for a €7bn ($9.3bn) deal to build two nuclear power plants in India.
This comes amid concerns that new nuclear liability legislation heightens the risks of doing business in India and as France supplies similar reactors to neighbouring China.
Anne Lauvergeon, chief executive of Areva, said on Monday the French energy company had signed a preliminary agreement with India’s Nuclear Power Corp to build the reactors and supply fuel for 25 years. The reactors are expected to be in operation within eight years.
Work on the advanced pressurised water reactors – the first in a series of six that, once built, will generate 10,000MW – could begin within six months once financing is agreed.
Ms Lauvergeon also said Areva was negotiating with its Indian partner over access to the group’s uranium mines, collaboration in other parts of the fuel cycle and making India an export hub for nuclear technology and expertise.
Power companies from Russia, France, the UK, the US and Canada are eager to help India meet its energy demands. The contribution of nuclear energy in India is forecast to increase from 4,000MW to 470,000MW in the next 40 years.
France’s nuclear ambitions in India were the centrepiece of a four-day visit to India by Nicolas Sarkozy, the president.
Ms Lauvergeon said the laws requiring greater compensation payments in the event of a nuclear accident were not a “dealbreaker” but regulators needed to consider where liability should lie for a reactor near the end of its life and under the control of a local utility.
“We would like to develop a strong base in India and [nuclear] exports from India,” she said. However, the legal framework was a concern. “The stability of the system needs to last for decades and decades. You can’t change the rules every 10 years. Stability is mandatory for us,” she said.
The French deal follows a civil nuclear agreement with the US at the end of 2008 that helped clear the way for India to buy plants, technology and fuel from the nuclear club of nations.
India, officially a nuclear weapons power since 1998, had been denied access to civilian nuclear technology since it tested a nuclear device in 1974 and its refusal to sign the 1968 non-proliferation treaty.
During his visit, Mr Sarkozy said France would support Indian membership of multilateral nuclear groups. A similar message was delivered by Barack Obama on his visit last month. However, the US president placed greater emphasis on drawing India into multilateral non-proliferation initiatives.
India operates 17 nuclear plants, and Russia is building two in Tamil Nadu.
This comes amid concerns that new nuclear liability legislation heightens the risks of doing business in India and as France supplies similar reactors to neighbouring China.
Anne Lauvergeon, chief executive of Areva, said on Monday the French energy company had signed a preliminary agreement with India’s Nuclear Power Corp to build the reactors and supply fuel for 25 years. The reactors are expected to be in operation within eight years.
Work on the advanced pressurised water reactors – the first in a series of six that, once built, will generate 10,000MW – could begin within six months once financing is agreed.
Ms Lauvergeon also said Areva was negotiating with its Indian partner over access to the group’s uranium mines, collaboration in other parts of the fuel cycle and making India an export hub for nuclear technology and expertise.
Power companies from Russia, France, the UK, the US and Canada are eager to help India meet its energy demands. The contribution of nuclear energy in India is forecast to increase from 4,000MW to 470,000MW in the next 40 years.
France’s nuclear ambitions in India were the centrepiece of a four-day visit to India by Nicolas Sarkozy, the president.
Ms Lauvergeon said the laws requiring greater compensation payments in the event of a nuclear accident were not a “dealbreaker” but regulators needed to consider where liability should lie for a reactor near the end of its life and under the control of a local utility.
“We would like to develop a strong base in India and [nuclear] exports from India,” she said. However, the legal framework was a concern. “The stability of the system needs to last for decades and decades. You can’t change the rules every 10 years. Stability is mandatory for us,” she said.
The French deal follows a civil nuclear agreement with the US at the end of 2008 that helped clear the way for India to buy plants, technology and fuel from the nuclear club of nations.
India, officially a nuclear weapons power since 1998, had been denied access to civilian nuclear technology since it tested a nuclear device in 1974 and its refusal to sign the 1968 non-proliferation treaty.
During his visit, Mr Sarkozy said France would support Indian membership of multilateral nuclear groups. A similar message was delivered by Barack Obama on his visit last month. However, the US president placed greater emphasis on drawing India into multilateral non-proliferation initiatives.
India operates 17 nuclear plants, and Russia is building two in Tamil Nadu.
Sunday, December 5, 2010
Roubini Says India's Economic Growth May Surpass China's in Next 10 Years
India’s economy may expand more than China’s in the next 10 years if the world’s second- most populous nation lifts curbs on foreign investment in retail and boosts spending on roads and bridges, Nouriel Roubini said.
“I’m very optimistic about India’s future growth” because the economy is driven by domestic demand while China relies more on exports, the New York University professor and chairman of Roubini Global Economics who predicted the global financial crisis said in New Delhi yesterday. “The challenge for India will be to sustain 9 percent growth and at the same time keep inflation under control.”
Roubini joins Morgan Stanley in predicting India will grow faster than China. Prime Minister Manmohan Singh’s government plans to double spending on roads, ports and power plants to $1 trillion in the five years to 2017 to improve the quality of India’s infrastructure, which is ranked below Sri Lanka and war-ravaged Ivory Coast.
The South Asian country’s gross domestic product climbed 8.9 percent for a second straight quarter in July to September, the government said this week. O.P. Bhatt, chairman at the State Bank of India, the country’s biggest, said today 10 percent growth for the nation “is inevitable.”
Small Stores
Indian laws, aimed at protecting small store owners, limit overseas investment to single-brand retail or wholesale operations. Wal-Mart Stores Inc., the world’s largest retailer, and rivals including Carrefour SA and Tesco Plc are pushing the government to allow foreign investment after the trade ministry invited views from the industry on removing the restriction.
Wal-Mart Chief Executive Officer Michael Duke said in October he is “optimistic” that non-Indian companies will be allowed to invest in the country. Organized retail may create as many as 3 million jobs in the next five years in India, according to Duke.
India’s economy bucked a growth slowdown in Asian neighbors from Thailand to Malaysia, where currency appreciation and risks to exports from Europe’s debt crisis and U.S. unemployment have clouded the outlook.
India’s factory output last month grew at the fastest pace in six months, according to the Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit Economics. The nation’s service industry expanded at the quickest pace in four months in November, the companies said in a statement today. Exports in October grew 21.3 percent, a separate report showed.
Young Population
“China is likely to slow in the coming years gradually and India’s growth is likely to accelerate,” boosted by a young population and higher consumption, Roubini said.
India will add 136 million workers, more than the population of Japan, by 2020 compared with 23 million for China, Morgan Stanley economist Chetan Ahya said in August. That will help the nation tap into a rising pool of savings and help finance infrastructure projects, he said.
Morgan Stanley expects India to overtake China as the world’s fastest-growing major economy by 2015. India’s growth may accelerate to 9.5 percent between 2011 and 2015, Ahya said.
India can sustain a growth rate of 9 percent by raising productivity and addressing supply-side issues, Roubini said yesterday.
“I’m very optimistic about India’s future growth” because the economy is driven by domestic demand while China relies more on exports, the New York University professor and chairman of Roubini Global Economics who predicted the global financial crisis said in New Delhi yesterday. “The challenge for India will be to sustain 9 percent growth and at the same time keep inflation under control.”
Roubini joins Morgan Stanley in predicting India will grow faster than China. Prime Minister Manmohan Singh’s government plans to double spending on roads, ports and power plants to $1 trillion in the five years to 2017 to improve the quality of India’s infrastructure, which is ranked below Sri Lanka and war-ravaged Ivory Coast.
The South Asian country’s gross domestic product climbed 8.9 percent for a second straight quarter in July to September, the government said this week. O.P. Bhatt, chairman at the State Bank of India, the country’s biggest, said today 10 percent growth for the nation “is inevitable.”
Small Stores
Indian laws, aimed at protecting small store owners, limit overseas investment to single-brand retail or wholesale operations. Wal-Mart Stores Inc., the world’s largest retailer, and rivals including Carrefour SA and Tesco Plc are pushing the government to allow foreign investment after the trade ministry invited views from the industry on removing the restriction.
Wal-Mart Chief Executive Officer Michael Duke said in October he is “optimistic” that non-Indian companies will be allowed to invest in the country. Organized retail may create as many as 3 million jobs in the next five years in India, according to Duke.
India’s economy bucked a growth slowdown in Asian neighbors from Thailand to Malaysia, where currency appreciation and risks to exports from Europe’s debt crisis and U.S. unemployment have clouded the outlook.
India’s factory output last month grew at the fastest pace in six months, according to the Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit Economics. The nation’s service industry expanded at the quickest pace in four months in November, the companies said in a statement today. Exports in October grew 21.3 percent, a separate report showed.
Young Population
“China is likely to slow in the coming years gradually and India’s growth is likely to accelerate,” boosted by a young population and higher consumption, Roubini said.
India will add 136 million workers, more than the population of Japan, by 2020 compared with 23 million for China, Morgan Stanley economist Chetan Ahya said in August. That will help the nation tap into a rising pool of savings and help finance infrastructure projects, he said.
Morgan Stanley expects India to overtake China as the world’s fastest-growing major economy by 2015. India’s growth may accelerate to 9.5 percent between 2011 and 2015, Ahya said.
India can sustain a growth rate of 9 percent by raising productivity and addressing supply-side issues, Roubini said yesterday.
Sarkozy Pushes for Areva Reactor Accord to Help Meet India's Power Needs
French President Nicolas Sarkozy and Indian Prime Minister Manmohan Singh may sign a draft accord today for Areva SA to build two nuclear reactors to help meet energy demands in Asia’s second-fastest growing major economy.
Areva, the world’s biggest nuclear-power builder, is bidding to supply uranium fuel and build so-called Evolutionary Pressurized Reactors south of Mumbai. An “early works” agreement would precede the final contract by six months, a French official who cannot be named according to government rules, told reporters in New Delhi late yesterday.
Sarkozy, who is traveling with a group of 50 business leaders including Areva’s Anne Lauvergeon on a four-day tour, is also targeting defense contracts including the refurbishment of Indian jet fighters and missile sales. Singh and Sarkozy will meet at Hyderabad House in New Delhi and hold a press briefing.
Areva’s civil nuclear energy project at the Jaitapur site passed a key hurdle when India’s Environment Ministry gave its approval on Nov. 28. India plans to add 60,000 megawatts of nuclear power capacity in the next 14 years, a third of the current total output, to address power shortages.
Sarkozy two days ago said in Bangalore that by participating in the Jaitapur project, Areva “is becoming a key partner in India’s nuclear energy sector.” When the cooperation phase is completed, the six Franco-Indian reactors will supply 10,000 megawatts of capacity.
Preliminary Deal
Nuclear Power Corp. of India Ltd. and Areva signed a preliminary sales agreement in February 2009 that allowed the construction of up to six EPRs.
France was India’s fifth-biggest trading partner in 2009. Trade between the two countries in the first nine months of this year was 5.3 billion euros ($7.1 billion), down from 7.1 billion euros in 2008, according to the French government.
While no major defense deals are likely to be signed during Sarkozy’s stay, some contracts may be signed in the days following his departure, the French official said.
Companies including Thales SA, MBDA and Dassault Aviation SA are working to complete a deal to upgrade 51 Mirage-2000 jet fighters built by Dassault for India’s Air Force 30 years ago. The deal may include new avionics, missiles and radars and be worth up to $2 billion, La Tribune newspaper said on Sept. 28.
Aircraft Motors
Snecma, a unit of France’s Safran SA, is working to conclude a deal with India’s Defense Research and Development Organization to jointly build motors for military airplanes. MBDA is also working with DRDO to build short-range anti- aircraft missiles.
Sarkozy’s visit was also designed to push forward his Group of 20 chairmanship agenda to overhaul the global monetary system and regulate commodities markets. On his first stop in Bangalore he called on India to play a greater role in the G-20 and pledged to support its bid for a permanent seat at the United Nations Security Council.
Singh pledged to support Sarkozy’s agenda, the French official, said citing conversations between the two leaders at a dinner yesterday.
Sarkozy will meet with India’s President Pratibha Patil later today before giving a speech to the French community. Tomorrow he and his wife, Carla Bruni-Sarkozy, will head to Mumbai where the French president will attend a business conference.
Areva, the world’s biggest nuclear-power builder, is bidding to supply uranium fuel and build so-called Evolutionary Pressurized Reactors south of Mumbai. An “early works” agreement would precede the final contract by six months, a French official who cannot be named according to government rules, told reporters in New Delhi late yesterday.
Sarkozy, who is traveling with a group of 50 business leaders including Areva’s Anne Lauvergeon on a four-day tour, is also targeting defense contracts including the refurbishment of Indian jet fighters and missile sales. Singh and Sarkozy will meet at Hyderabad House in New Delhi and hold a press briefing.
Areva’s civil nuclear energy project at the Jaitapur site passed a key hurdle when India’s Environment Ministry gave its approval on Nov. 28. India plans to add 60,000 megawatts of nuclear power capacity in the next 14 years, a third of the current total output, to address power shortages.
Sarkozy two days ago said in Bangalore that by participating in the Jaitapur project, Areva “is becoming a key partner in India’s nuclear energy sector.” When the cooperation phase is completed, the six Franco-Indian reactors will supply 10,000 megawatts of capacity.
Preliminary Deal
Nuclear Power Corp. of India Ltd. and Areva signed a preliminary sales agreement in February 2009 that allowed the construction of up to six EPRs.
France was India’s fifth-biggest trading partner in 2009. Trade between the two countries in the first nine months of this year was 5.3 billion euros ($7.1 billion), down from 7.1 billion euros in 2008, according to the French government.
While no major defense deals are likely to be signed during Sarkozy’s stay, some contracts may be signed in the days following his departure, the French official said.
Companies including Thales SA, MBDA and Dassault Aviation SA are working to complete a deal to upgrade 51 Mirage-2000 jet fighters built by Dassault for India’s Air Force 30 years ago. The deal may include new avionics, missiles and radars and be worth up to $2 billion, La Tribune newspaper said on Sept. 28.
Aircraft Motors
Snecma, a unit of France’s Safran SA, is working to conclude a deal with India’s Defense Research and Development Organization to jointly build motors for military airplanes. MBDA is also working with DRDO to build short-range anti- aircraft missiles.
Sarkozy’s visit was also designed to push forward his Group of 20 chairmanship agenda to overhaul the global monetary system and regulate commodities markets. On his first stop in Bangalore he called on India to play a greater role in the G-20 and pledged to support its bid for a permanent seat at the United Nations Security Council.
Singh pledged to support Sarkozy’s agenda, the French official, said citing conversations between the two leaders at a dinner yesterday.
Sarkozy will meet with India’s President Pratibha Patil later today before giving a speech to the French community. Tomorrow he and his wife, Carla Bruni-Sarkozy, will head to Mumbai where the French president will attend a business conference.
Pfizer Chief Steps Down Unexpectedly
Jeffrey B. Kindler, the CEO of the world's biggest drugmaker, stepped down Sunday unexpectedly — after less than five years heading Pfizer Inc., a period in which he reorganized most of the company's operations and made an imprint on the industry.
His successor, Ian Read, who has run Pfizer's worldwide pharmaceutical operations since 2006, takes over immediately.
Kindler, a lawyer who joined Pfizer in 2002, revamped its sprawling pharmaceutical sales operation into five divisions that gave their leaders more control and responsibility. Among other successes, that significantly boosted revenue in emerging markets and stabilized sales of older medicines hit by generic competition in the wealthiest countries by promoting them heavily elsewhere.
Kindler also pulled off a huge acquisition that ensures Pfizer remains at the top of the pharmaceutical industry for years to come, buying Wyeth for $68 billion in October 2009. And, as the chairman of the trade group Pharmaceutical Research and Manufacturers of America, he helped line up drugmaker support for the health care overhaul in a deal that ultimately will bring those companies more customers and sales.
In a surprise announcement late Sunday evening, Kindler, 55, said he's leaving Pfizer after 4 1/2 "extremely demanding" years to recharge his batteries. Kindler said he plans to spend more time with family for a while and prepare for new challenges.
Read, 57, began his career at New York-based Pfizer as an operational auditor in 1978, but his undergraduate training was in chemical engineering.
He moved up through leadership positions in Pfizer's Latin America operations, then oversaw operations in Europe, Canada and other areas. By 2002, he was head of operations in Latin America, Africa and the Middle East.
Read was promoted in 2006 to head the global pharmaceutical business, which brings in about 85 percent of Pfizer's revenue. It sells everything from blockbuster cholesterol drug Lipitor and impotence pill Viagra to cancer drugs and specialty medicines, generally pricey injected drugs for complex, chronic diseases.
Read is well enough known to industry analysts and others in the business community that Pfizer spokesman Ray Kerins said the company is not planning an analyst conference call or other announcements on Monday.
His successor, Ian Read, who has run Pfizer's worldwide pharmaceutical operations since 2006, takes over immediately.
Kindler, a lawyer who joined Pfizer in 2002, revamped its sprawling pharmaceutical sales operation into five divisions that gave their leaders more control and responsibility. Among other successes, that significantly boosted revenue in emerging markets and stabilized sales of older medicines hit by generic competition in the wealthiest countries by promoting them heavily elsewhere.
Kindler also pulled off a huge acquisition that ensures Pfizer remains at the top of the pharmaceutical industry for years to come, buying Wyeth for $68 billion in October 2009. And, as the chairman of the trade group Pharmaceutical Research and Manufacturers of America, he helped line up drugmaker support for the health care overhaul in a deal that ultimately will bring those companies more customers and sales.
In a surprise announcement late Sunday evening, Kindler, 55, said he's leaving Pfizer after 4 1/2 "extremely demanding" years to recharge his batteries. Kindler said he plans to spend more time with family for a while and prepare for new challenges.
Read, 57, began his career at New York-based Pfizer as an operational auditor in 1978, but his undergraduate training was in chemical engineering.
He moved up through leadership positions in Pfizer's Latin America operations, then oversaw operations in Europe, Canada and other areas. By 2002, he was head of operations in Latin America, Africa and the Middle East.
Read was promoted in 2006 to head the global pharmaceutical business, which brings in about 85 percent of Pfizer's revenue. It sells everything from blockbuster cholesterol drug Lipitor and impotence pill Viagra to cancer drugs and specialty medicines, generally pricey injected drugs for complex, chronic diseases.
Read is well enough known to industry analysts and others in the business community that Pfizer spokesman Ray Kerins said the company is not planning an analyst conference call or other announcements on Monday.
India’s judiciary confronts moral maze
The white dome of India’s Supreme Court rises above the fray of New Delhi’s congested Tilak Marg, one of the city’s main arteries, and sits a short distance from imperious British Raj-era institutions of government.
The court is the final arbiter in the day-to-day loose ends of untidy, and in some cases unseemly, business and government dealings in the fast-growing economy.
Its judges are what stand – in the words of Ratan Tata, one of India’s most revered business leaders – between the world’s largest democracy and a “banana republic”.
The attention of the seasoned jurists inside has narrowed in recent weeks, however, as they have sat in judgment over corruption allegations engulfing the Congress party-led government of Manmohan Singh, the prime minister.
An inquiry into irregularities concerning the 2008 award of 2G telecoms licences by the telecoms ministry – which an official audit claims may have lost the exchequer as much as $39bn – has seen one minister leave the government and is being described by some as India’s Watergate.
While the telecoms scandal is the most threatening, it is not the only corruption scandal confronting the government. It also faces tough questions over graft surrounding the Commonwealth Games, land deals by the military top brass and improper property loans made by state-owned financial institutions.
The opposition scents blood. L.K. Advani, a veteran leader of the Hindu nationalist Bharatiya Janata party, has homed in on Mr Singh’s inability to control venal coalition partners. He has also brought parliament to its knees demanding a bipartisan probe into the telecoms scandal, which he argues demonstrates that “the government is indifferent to the problem of corruption”.
The Supreme Court is the institution that now finds itself in the middle and, some argue, in the lead in seeking to uphold the morals of a republic struggling with what Brinda Karat, a communist leader, calls a “malignant nexus” between politicians, bureaucracy and big business.
Today the court will ponder the credentials of the country’s anti-graft watchdog, the Central Vigilance Commission, and the suitability of its chief, P.J. Thomas, who was appointed to the role by Mr Singh.
Mr Thomas, a career civil servant, was until three months ago a senior official at the telecoms ministry. Opposition leaders have also pointed to his alleged involvement in a 1990s scandal in Kerala over the import of palm oil.
India’s top court has swelled as the country’s economy has grown. Today S.H. Kapadia, the chief justice, is joined by 28 judges. The court’s eminence has been tested heavily this year, as unresolved cases have passed up the chain from high courts to the apex court in a judicial system notorious for slow passage and routine appeals.
Some critics also argue that the decisions before it are not as lofty as had been intended 60 years ago, when it was founded with a chief justice and seven judges who would all sit together to weigh cases, guided by India’s new post-independence constitution.
Many of its headlining decisions increasingly concern the country’s powerful corporate sector as much as the rights of the country’s poorest.
Earlier this year the Supreme Court ruled in a dispute between brothers Anil and Mukesh Ambani, two of India’s leading and richest business leaders.
At issue was the price of natural gas amid a wider fallout in one of India’s biggest family succession feuds.
A few weeks later Vodafone, the UK telecoms company, appealed in the Supreme Court against a high court’s decision that it would be liable for tax on a transaction that had occurred outside of India when it bought Hutchison Essar. The Supreme Court has since ordered that it begin handing over some of the $2.5bn tax claim levelled against it by the Indian authorities.
Most recently, Mr Tata, the chairman of the Tata Group, has found himself before the court after asking it to protect his right to privacy and bar publication of intercepted telephone conversations with a powerful corporate lobbyist discussing the award of telecoms licences.
The court is the final arbiter in the day-to-day loose ends of untidy, and in some cases unseemly, business and government dealings in the fast-growing economy.
Its judges are what stand – in the words of Ratan Tata, one of India’s most revered business leaders – between the world’s largest democracy and a “banana republic”.
The attention of the seasoned jurists inside has narrowed in recent weeks, however, as they have sat in judgment over corruption allegations engulfing the Congress party-led government of Manmohan Singh, the prime minister.
An inquiry into irregularities concerning the 2008 award of 2G telecoms licences by the telecoms ministry – which an official audit claims may have lost the exchequer as much as $39bn – has seen one minister leave the government and is being described by some as India’s Watergate.
While the telecoms scandal is the most threatening, it is not the only corruption scandal confronting the government. It also faces tough questions over graft surrounding the Commonwealth Games, land deals by the military top brass and improper property loans made by state-owned financial institutions.
The opposition scents blood. L.K. Advani, a veteran leader of the Hindu nationalist Bharatiya Janata party, has homed in on Mr Singh’s inability to control venal coalition partners. He has also brought parliament to its knees demanding a bipartisan probe into the telecoms scandal, which he argues demonstrates that “the government is indifferent to the problem of corruption”.
The Supreme Court is the institution that now finds itself in the middle and, some argue, in the lead in seeking to uphold the morals of a republic struggling with what Brinda Karat, a communist leader, calls a “malignant nexus” between politicians, bureaucracy and big business.
Today the court will ponder the credentials of the country’s anti-graft watchdog, the Central Vigilance Commission, and the suitability of its chief, P.J. Thomas, who was appointed to the role by Mr Singh.
Mr Thomas, a career civil servant, was until three months ago a senior official at the telecoms ministry. Opposition leaders have also pointed to his alleged involvement in a 1990s scandal in Kerala over the import of palm oil.
India’s top court has swelled as the country’s economy has grown. Today S.H. Kapadia, the chief justice, is joined by 28 judges. The court’s eminence has been tested heavily this year, as unresolved cases have passed up the chain from high courts to the apex court in a judicial system notorious for slow passage and routine appeals.
Some critics also argue that the decisions before it are not as lofty as had been intended 60 years ago, when it was founded with a chief justice and seven judges who would all sit together to weigh cases, guided by India’s new post-independence constitution.
Many of its headlining decisions increasingly concern the country’s powerful corporate sector as much as the rights of the country’s poorest.
Earlier this year the Supreme Court ruled in a dispute between brothers Anil and Mukesh Ambani, two of India’s leading and richest business leaders.
At issue was the price of natural gas amid a wider fallout in one of India’s biggest family succession feuds.
A few weeks later Vodafone, the UK telecoms company, appealed in the Supreme Court against a high court’s decision that it would be liable for tax on a transaction that had occurred outside of India when it bought Hutchison Essar. The Supreme Court has since ordered that it begin handing over some of the $2.5bn tax claim levelled against it by the Indian authorities.
Most recently, Mr Tata, the chairman of the Tata Group, has found himself before the court after asking it to protect his right to privacy and bar publication of intercepted telephone conversations with a powerful corporate lobbyist discussing the award of telecoms licences.
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