Never mind whether your date is smart or good-looking. How do you know you aren’t flirting with a felon?
For a small fee, a nascent crop of companies wants to help you find out by running background checks on the potential flames you encounter on Match.com, eHarmony or any of the nation’s nearly 1,500 dating Web sites.
At the same time, at least two states, New York and New Jersey, have begun regulating Internet dating sites, and legal experts say they believe changes to the liability laws that protect such sites are on the horizon.
And you thought your mother was the only one who wanted to vet your love life.
The focus on background screenings comes as some 20 million Americans are using dating sites, more than double the number five years ago, according to the market research firm IBISWorld. While they are finding casual dates and even love, they are also encountering married people pretending to be single or, worse, sexual predators and convicted felons.
No one has put a number on how much violence stems from dating sites, according to groups that keep track of rape and other violent crimes, like the Department of Justice’s Bureau of Justice Statistics and the National Center for Victims of Crime.
Yet plenty of crime stories begin with two people skimming each other’s online dating profiles. Consider the widely reported case of Jeffrey Marsalis, a serial rapist in Philadelphia who met his victims on Match.com.
Such perils have been around since the dawn of the Internet, an ideal medium for complex cover-ups. But now that online dating is a billion-dollar industry, state officials, public safety advocates and enterprising businesses are calling for further safeguards.
Whether it is possible, however, to effectively screen people and make sites more truthful is unclear. After all, members are not always honest about their age and weight.
“What we want to do is provide some degree of safety,” said Robert Buchholz, a retired New York State Police captain who, with Andrew J. Scott, a former police chief in Boca Raton, Fla., founded MyMatchChecker.com, a Web site that went live in April, enabling people to request background checks on anyone they have met on a dating site.
Mr. Buchholz and Mr. Scott, who each have more than 30 years of law enforcement experience, said that having daughters inspired them to try to make online dating safer. Their company offers a basic background search for $9.95.
In addition to Web sites, a flurry of mobile phone apps aim to make background checks as quick and easy as ordering a pizza: Just plug in a couple of facts like a name and birth date. ValiMate, the creator of the Instant National Criminal Search app, even allows users to send the results of the check to a friend for added safety.
Date Check, from Intelius, encourages users to “look up before you hook up.” The app is marketed to women who want to perform a background check on would-be Romeos “in the time it takes to redo your lip gloss.” (Industry professionals say that predators are usually men.)
State officials are also pushing for safer Internet dating. A law that takes effect this month in New York State, the Internet Dating Safety Act, requires sites to post common-sense safety tips, like “meet in a public place.”
Assemblywoman Audrey I. Pheffer, a sponsor of the Internet law, said that it grew out of her realization that online dating had become ubiquitous, even among people she “never dreamed” would pursue romance online.
Some states have considered similar legislation but ultimately rejected it. New York’s law is like one passed in 2008 by New Jersey, which also requires dating sites with a membership fee to inform users whether they do criminal background checks (most do not).
Such legislation was championed by True.com, one of the first major online dating companies to screen members to determine if they are married, felons or sexual offenders (about 2 percent of those who try to sign up are rejected, they said). Ruben Buell, the company’s president, said that the type of checks it conducted were inexpensive. “You’re talking pennies per check.”
Still, most online dating companies question whether such checks can be effective. They contend that because state and county databases are incomplete, the checks give daters a false sense of security. Even advocates of criminal screenings concede that they are imperfect because the databases vary in quality and availability. Some counties, for instance, do not keep digital records. Others do not provide data about sex offenders.
“If I really knew that there was great ability for us to not let anyone on the site that shouldn’t be on the site, I would do it,” said Mandy Ginsberg, the general manager and executive vice president of Match.com. Background checks, she said, might lead daters to think everyone they encounter on the sites is safe. (Ms. Pheffer said she originally wanted background checks but decided against them for the same reason.)
Critics also point out that companies that conduct background screenings are not necessarily perfect. Some have mishandled information. Another concern involves mobile apps, which can provide personal information to people who may abuse it.
Braden Cox, a policy counsel for NetChoice, a group that advocates for Internet companies, said that background screenings were well intentioned but that most could be thwarted.
“Most people, thankfully, are good people on these Web sites,” said Mr. Cox, who speaks from experience: a few weeks ago he married a woman he met on Match.com.
Dating sites have no incentive to police their members. The Communications Decency Act absolves Internet service providers of liability because the sites are not considered the publishers of the information on their pages — their members are. The reasoning is that sites would not be able to operate if they were responsible for everything posted by their users. Lawyers have tried to get around this law, but “they usually fail,” said Brian Carver, an assistant professor at the School of Information at the University of California, Berkeley. “Every start-up depends on this protection.”
Parry Aftab, a lawyer and safety expert, says she is increasingly hearing about alarming cases involving online dating, like pedophiles who woo single mothers to get near their children. She expects there will be challenges to that immunity if sites accept money from members and have knowledge of criminal behavior.
Meanwhile, she advises singles to be cautious. “Don’t give up your heart so fast,” she said.
Saturday, December 18, 2010
Gandhi warns of Hindu threat in India
Rahul Gandhi, the heir apparent to India’s ruling Congress party, said last year that radical Hindu groups could pose a bigger terrorist threat to India than Pakistan-based Muslim militants, according to diplomatic cables obtained by whistle-blowing website WikiLeaks.
The remark by Mr Gandhi, who is seen as India’s prime minister-in-waiting, was pounced on by the Hindu nationalist opposition Bharatiya Janata party, which said on Friday it would “seriously compromise India’s fight against terror and also our strategic security”.
According to the cable, Mr Gandhi expressed his concern at “homegrown” Hindu extremism to Timothy Roemer, US ambassador, at a lunch last year, after the ambassador asked about the threat posed by Lashkar-e-Taiba, the Pakistan-based group behind the 2008 Mumbai terrorist attacks.
Mr Gandhi cited “evidence of some support” for Lashkar-e-Taiba among India’s Muslim minority but said “the bigger threat may be the growth of radicalised Hindu groups, which create religious tensions and political confrontations with the Muslim community”, the cable said.
While Mr Roemer said Mr Gandhi was referring to tensions created by some of the BJP’s more polarising figures, such as Narendra Modi, the chief minister of Gujarat state, talk of “Hindu terror” has intensified since 2008, when authorities arrested 10 Hindus, including an army officer, on suspicion of responsibility for a bomb attack on a Muslim community.
Manish Tiwari, a Congress party spokesman, said on Friday that Mr Gandhi merely intended to convey that “terrorism and communalism of all kind is a threat to India. We need to remain vigilant against all acts of terrorism of all kinds, no matter who commits them.”
The cable offers insights into the intensely media-shy Mr Gandhi, whom Mr Roemer described in February this year, in a separate cable, as “increasingly sure-footed in his political instincts”. But the leaked documents will inflame tensions between the Congress party and the BJP, at a time when parliament has been paralysed for weeks by a scandal over the allocation of telecommunications spectrum.
Separately, a 2005 cable reported on the frustrations of the International Committee of the Red Cross at India’s “regular and widespread” torture of prisoners in the restive Muslim-majority Kashmir region.
The remark by Mr Gandhi, who is seen as India’s prime minister-in-waiting, was pounced on by the Hindu nationalist opposition Bharatiya Janata party, which said on Friday it would “seriously compromise India’s fight against terror and also our strategic security”.
According to the cable, Mr Gandhi expressed his concern at “homegrown” Hindu extremism to Timothy Roemer, US ambassador, at a lunch last year, after the ambassador asked about the threat posed by Lashkar-e-Taiba, the Pakistan-based group behind the 2008 Mumbai terrorist attacks.
Mr Gandhi cited “evidence of some support” for Lashkar-e-Taiba among India’s Muslim minority but said “the bigger threat may be the growth of radicalised Hindu groups, which create religious tensions and political confrontations with the Muslim community”, the cable said.
While Mr Roemer said Mr Gandhi was referring to tensions created by some of the BJP’s more polarising figures, such as Narendra Modi, the chief minister of Gujarat state, talk of “Hindu terror” has intensified since 2008, when authorities arrested 10 Hindus, including an army officer, on suspicion of responsibility for a bomb attack on a Muslim community.
Manish Tiwari, a Congress party spokesman, said on Friday that Mr Gandhi merely intended to convey that “terrorism and communalism of all kind is a threat to India. We need to remain vigilant against all acts of terrorism of all kinds, no matter who commits them.”
The cable offers insights into the intensely media-shy Mr Gandhi, whom Mr Roemer described in February this year, in a separate cable, as “increasingly sure-footed in his political instincts”. But the leaked documents will inflame tensions between the Congress party and the BJP, at a time when parliament has been paralysed for weeks by a scandal over the allocation of telecommunications spectrum.
Separately, a 2005 cable reported on the frustrations of the International Committee of the Red Cross at India’s “regular and widespread” torture of prisoners in the restive Muslim-majority Kashmir region.
Asian Stocks Gain as China Refrains From Raising Rates, U.S. Data Improves
Asian stocks rose for the second week this month, as steelmakers led gains, after China refrained from raising interest rates and U.S. data improved.
BlueScope Steel Ltd., Australia’s largest steelmaker, advanced 9.1 percent in Sydney. Honda Motor Co., which counts North America as its biggest market, gained 3 percent in Tokyo. China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, lost 2.9 percent after a report that China will toughen controls in the property market. HSBC Holdings Plc, Europe’s largest lender, lost 1.7 percent in Hong Kong after Moody’s Investors Service put Spain and Greece’s credit rating on review.
The MSCI Asia Pacific Index climbed 0.4 percent to 133.59 this week. The gauge closed up on three days this week, and rose the most on Dec. 13, after China refrained from raising interest rates to cool inflation, and U.S. reports on consumer confidence, the trade deficit and claims for jobless benefits beat forecasts.
“Fears of an interest rate increase in China have not come to fruition so far,” said Tim Schroeders, who helps manage $1 billion in Melbourne at Pengana Capital Ltd. “There’s a sense of relief in markets. This may be only temporary as Chinese authorities become increasingly concerned about the possibility of inflationary pressures undermining the economy’s longer-term growth prospects.”
Regional Benchmarks
In Japan, the Nikkei 225 Stock Average gained 0.9 percent, its seventh straight weekly advance and its longest winning streak since the eight-week period ended April 2. Australia’s S&P/ASX 200 Index climbed 0.4 percent. South Korea’s Kospi index rose 2 percent.
Hong Kong’s Hang Seng Index declined 1.9 percent while the Shanghai Composite Index rose 1.9 percent this week. India’s Sensitive Index rose 1.8 percent. The measure was closed on Dec. 17 for a holiday.
Steelmakers led gains this week, with a gauge tracking material shares rising 1 percent, the most among the 10 industry groups on the MSCI Asia Pacific index.
BlueScope Steel, which receives 22 percent of its sales from Asia, rose 9.1 percent to A$2.29 in Sydney. JFE Holdings Inc., Japan’s second-largest steelmaker, rose 2.7 percent to 2,836 yen in Tokyo. JSW Steel Ltd., an Indian producer of the metal, jumped 12 percent to 1,164.75 rupees in Mumbai.
While China’s inflation accelerated to the fastest pace in 28 months in November, building the case for Premier Wen Jiabao to raise interest rates, China instead ordered lenders on Dec. 10 to park more money with the central bank to counter the inflation threat.
Effective Tool
“The government seems to be using reserve requirements at the moment as a more effective tool,” Hugh Simon, co-manager of the Dreyfus Greater China Fund, said in a Bloomberg Television interview. “They need to have some relief about inflation. The market is not expensive.”
The MSCI Asia Pacific Index has risen 11 percent this year, with stocks on the gauge valued at 14.8 times estimated earnings on average, compared with 23 times at the start of the year.
Exporters to the U.S. gained after improving data from the world’s biggest economy boosted confidence the recovery was continuing.
Honda, Japan’s second-largest automaker by market value, gained 3 percent to 3,235 yen this week. Canon Inc., the world’s largest camera maker, climbed 1 percent to 4,145 yen. James Hardie Industries SE, the biggest seller of home siding in the U.S., increased 2.5 percent to A$6.68 in Sydney.
Consumer Confidence
Confidence among U.S. consumers increased more than forecast in December to the highest level in six months at the same time Americans began stepping up holiday spending. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. Economists projected a December reading of 72.5, according to the median estimate in a Bloomberg News survey.
A Commerce Department report showed the U.S. trade deficit shrank to $38.7 billion in October, less than the lowest estimate of 78 economists surveyed by Bloomberg News and the smallest since January.
The number of U.S. workers filing first-time claims for unemployment benefits unexpectedly declined last week, pointing to a labor market that is on the mend. Applications for jobless insurance payments decreased by 3,000 to 420,000, the lowest in three weeks, Labor Department figures showed. Economists in a Bloomberg survey projected a median rise in claims to 425,000.
U.S. Employment
China Overseas Land slid 2.9 percent to HK$14.58. China Resources Land Ltd., a state-controlled developer, declined 1.6 percent to HK$13.54. Guangzhou R&F Properties Co., the biggest builder in the southern Chinese city, dropped 1.9 percent to HK$10.64.
China will strengthen controls in the real-estate market and curb speculative investment from next year through 2015, Xinhua News Agency reported on Dec. 16, citing China’s Ministry of Housing and Urban-Rural Development.
“The next curb on property is likely to be a unit tax,” said Andrew Sullivan, director of institutional sales at OSK Securities Hong Kong Ltd. “Some investors are locking in gains running to year end.”
HSBC Holdings, which receives 36 percent of its revenue in Europe, slid 1.7 percent to HK$80.15 in Hong Kong. Li & Fung Ltd., which is the biggest supplier to Wal-Mart Stores Inc. and gets 27 percent of its sales from Europe, dropped 2.3 percent to HK$43.80.
Spain’s credit rating may be cut from Aa1 by Moody’s Investors Service on concern about rising borrowing costs, potential losses in the banking system and deficits in the country’s regions, the ratings agency said on Dec. 15.
Moody’s also put Greece’s Ba1 bond ratings on review for a possible downgrade, citing heightened concerns about whether the country will be able to reduce its debt to “sustainable levels,” and Ireland’s credit rating was cut five levels by Moody’s on Dec. 17, after the government last month was forced to ask for external aid.
BlueScope Steel Ltd., Australia’s largest steelmaker, advanced 9.1 percent in Sydney. Honda Motor Co., which counts North America as its biggest market, gained 3 percent in Tokyo. China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, lost 2.9 percent after a report that China will toughen controls in the property market. HSBC Holdings Plc, Europe’s largest lender, lost 1.7 percent in Hong Kong after Moody’s Investors Service put Spain and Greece’s credit rating on review.
The MSCI Asia Pacific Index climbed 0.4 percent to 133.59 this week. The gauge closed up on three days this week, and rose the most on Dec. 13, after China refrained from raising interest rates to cool inflation, and U.S. reports on consumer confidence, the trade deficit and claims for jobless benefits beat forecasts.
“Fears of an interest rate increase in China have not come to fruition so far,” said Tim Schroeders, who helps manage $1 billion in Melbourne at Pengana Capital Ltd. “There’s a sense of relief in markets. This may be only temporary as Chinese authorities become increasingly concerned about the possibility of inflationary pressures undermining the economy’s longer-term growth prospects.”
Regional Benchmarks
In Japan, the Nikkei 225 Stock Average gained 0.9 percent, its seventh straight weekly advance and its longest winning streak since the eight-week period ended April 2. Australia’s S&P/ASX 200 Index climbed 0.4 percent. South Korea’s Kospi index rose 2 percent.
Hong Kong’s Hang Seng Index declined 1.9 percent while the Shanghai Composite Index rose 1.9 percent this week. India’s Sensitive Index rose 1.8 percent. The measure was closed on Dec. 17 for a holiday.
Steelmakers led gains this week, with a gauge tracking material shares rising 1 percent, the most among the 10 industry groups on the MSCI Asia Pacific index.
BlueScope Steel, which receives 22 percent of its sales from Asia, rose 9.1 percent to A$2.29 in Sydney. JFE Holdings Inc., Japan’s second-largest steelmaker, rose 2.7 percent to 2,836 yen in Tokyo. JSW Steel Ltd., an Indian producer of the metal, jumped 12 percent to 1,164.75 rupees in Mumbai.
While China’s inflation accelerated to the fastest pace in 28 months in November, building the case for Premier Wen Jiabao to raise interest rates, China instead ordered lenders on Dec. 10 to park more money with the central bank to counter the inflation threat.
Effective Tool
“The government seems to be using reserve requirements at the moment as a more effective tool,” Hugh Simon, co-manager of the Dreyfus Greater China Fund, said in a Bloomberg Television interview. “They need to have some relief about inflation. The market is not expensive.”
The MSCI Asia Pacific Index has risen 11 percent this year, with stocks on the gauge valued at 14.8 times estimated earnings on average, compared with 23 times at the start of the year.
Exporters to the U.S. gained after improving data from the world’s biggest economy boosted confidence the recovery was continuing.
Honda, Japan’s second-largest automaker by market value, gained 3 percent to 3,235 yen this week. Canon Inc., the world’s largest camera maker, climbed 1 percent to 4,145 yen. James Hardie Industries SE, the biggest seller of home siding in the U.S., increased 2.5 percent to A$6.68 in Sydney.
Consumer Confidence
Confidence among U.S. consumers increased more than forecast in December to the highest level in six months at the same time Americans began stepping up holiday spending. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. Economists projected a December reading of 72.5, according to the median estimate in a Bloomberg News survey.
A Commerce Department report showed the U.S. trade deficit shrank to $38.7 billion in October, less than the lowest estimate of 78 economists surveyed by Bloomberg News and the smallest since January.
The number of U.S. workers filing first-time claims for unemployment benefits unexpectedly declined last week, pointing to a labor market that is on the mend. Applications for jobless insurance payments decreased by 3,000 to 420,000, the lowest in three weeks, Labor Department figures showed. Economists in a Bloomberg survey projected a median rise in claims to 425,000.
U.S. Employment
China Overseas Land slid 2.9 percent to HK$14.58. China Resources Land Ltd., a state-controlled developer, declined 1.6 percent to HK$13.54. Guangzhou R&F Properties Co., the biggest builder in the southern Chinese city, dropped 1.9 percent to HK$10.64.
China will strengthen controls in the real-estate market and curb speculative investment from next year through 2015, Xinhua News Agency reported on Dec. 16, citing China’s Ministry of Housing and Urban-Rural Development.
“The next curb on property is likely to be a unit tax,” said Andrew Sullivan, director of institutional sales at OSK Securities Hong Kong Ltd. “Some investors are locking in gains running to year end.”
HSBC Holdings, which receives 36 percent of its revenue in Europe, slid 1.7 percent to HK$80.15 in Hong Kong. Li & Fung Ltd., which is the biggest supplier to Wal-Mart Stores Inc. and gets 27 percent of its sales from Europe, dropped 2.3 percent to HK$43.80.
Spain’s credit rating may be cut from Aa1 by Moody’s Investors Service on concern about rising borrowing costs, potential losses in the banking system and deficits in the country’s regions, the ratings agency said on Dec. 15.
Moody’s also put Greece’s Ba1 bond ratings on review for a possible downgrade, citing heightened concerns about whether the country will be able to reduce its debt to “sustainable levels,” and Ireland’s credit rating was cut five levels by Moody’s on Dec. 17, after the government last month was forced to ask for external aid.
Friday, December 17, 2010
Santa via Cellphone: Shopping Online Without a Computer
This holiday season, consumers are beginning to shop and make purchases on their mobile phones. The shift from buying presents in front of the computer at home or work to doing it during bus commutes or while standing in line at cafes is small, but, for the first time, noticeable and even significant.
Shopping on cellphones and portable tablet computers like iPads accounted for about 5 percent of online sales in November, while last year mobile shopping sales were too insignificant to measure, according to Coremetrics, an e-commerce measurement service owned by I.B.M. Many more shoppers are using their phones to research items and compare prices before making purchases offline or on computers.
“There were early adopters last year, but it’s absolutely real this year,” said Kelly O’Neill, director of industry marketing for ATG, which provides online and mobile commerce technology to retailers like Best Buy and J. C. Penney. And mobile shoppers are buying high-ticket items like diamond rings and cars, not just virtual goods and ring tones.
On Dec. 12, eBay’s busiest mobile shopping day of the year, worldwide mobile sales nearly tripled from last year to $13 million, according to the company, which expects $1.5 billion in mobile sales this year.
Virtually every product that people buy on computers sells in similar proportion on mobile devices, said Steve Yankovich, eBay’s vice president for mobile. He said shoppers bought an average of four Ferraris a month from their cellphones.
Tiffany English, 30, of Hoboken, N.J., bought her mother’s Christmas gift, a painting of a child, when the eBay mobile app alerted her that the auction was about to end while she was out in Greenwich Village. She used eBay’s RedLaser app to compare prices on a set of barbecue tools for her brother, and bought the set on her cellphone from Amazon.com while standing in Bed Bath & Beyond, where the same item cost more.
“It’s saving me time and saving me money,” Ms. English said. “I feel like my grandma: ‘You can do that with your phone?’ ”
EBay is so convinced of the future of mobile phone shopping that on Wednesday it acquired Critical Path Software, a mobile phone app developer, to speed its move into this new arena.
At Blue Nile, the diamond and jewelry e-commerce site, mobile revenue is up sixfold this month from the period a year ago. The company says a mobile shopper recently bought a ring for more than $250,000 via a cellphone.
“A year ago, we really didn’t know whether mobile would be very impactful for our business, because this is a very considered purchase, a high-ticket luxury item,” said Diane Irvine, chief executive of Blue Nile. Now, she said, “we can envision a time when sales from a mobile device will eclipse sales over the desktop Web site.”
Most shoppers still use their phones for finding nearby stores or looking up reviews and comparing prices, rather than for buying goods, retailers and analysts say. Still, that type of research increasingly leads to mobile sales, particularly for online retailers that compete heavily on price, like consumer electronics stores, said Sucharita Mulpuru, principal analyst for e-commerce at Forrester Research.
Perhaps the biggest reason for the spike in mobile shopping is simply that more Web retailers have created mobile Web sites or apps that make it easier to search inventory on a small screen without a mouse, by forgoing fancy Flash graphics and selling a limited number of products on phones.
Mobile apps often have features that Web sites don’t. For example, Amazon’s app lets people scan bar codes, speak into the phone or take a photo of an item to search for products. Bluefly’s sends a cellphone alert when an item that was out of stock becomes available again.
Just as e-commerce made it possible for people to shop in the office and late at night, mobile phones let them shop anywhere. And because shoppers on cellphones often have a purchase in mind, they can be more valuable to retailers. “Mobile shoppers are the hunters, and people sitting at their computer are gathering,” said Jill Dvorak, senior consultant for the e-commerce advisory company FitForCommerce.
Tom Keithley, 49, of Monkton, Md., is one of those hunters. He travels often for his job in financial services, and this year he did half his holiday shopping while on the road. From his cellphone he bought a Blue Nile ring for his wife and a eucalyptus wreath from Gump’s, the home décor shop.
“I’m usually in airports and airplanes, so it’s more convenient for me to use the time to do things I might normally do if I were sitting at my desk,” he said.
Mobile shopping is particularly appropriate for customers of flash sale sites like Gilt. Its limited-time sales start at noon each day and sell out quickly, so people miss out if they are away from their computers. Since Gilt introduced its mobile apps, shoppers have more consistently made purchases at noon, and mobile sales generally account for 10 percent of revenue and close to 20 percent on holidays and weekends, said Carl Sparks, president of the Gilt Groupe.
The iPad has also helped mobile commerce, but in a different way. While cellphone apps are made to complete transactions as quickly as possible, iPad apps tend to be for shopping as sport. For instance, Amazon’s iPad app, called Windowshop, shows many images and lets people browse and view close-up shots of items.
“It makes it much more visual and fluid and entertaining,” said Sam Hall, director of mobile at Amazon, “something that never could have been done on a smaller-screen device.”
Shopping on cellphones and portable tablet computers like iPads accounted for about 5 percent of online sales in November, while last year mobile shopping sales were too insignificant to measure, according to Coremetrics, an e-commerce measurement service owned by I.B.M. Many more shoppers are using their phones to research items and compare prices before making purchases offline or on computers.
“There were early adopters last year, but it’s absolutely real this year,” said Kelly O’Neill, director of industry marketing for ATG, which provides online and mobile commerce technology to retailers like Best Buy and J. C. Penney. And mobile shoppers are buying high-ticket items like diamond rings and cars, not just virtual goods and ring tones.
On Dec. 12, eBay’s busiest mobile shopping day of the year, worldwide mobile sales nearly tripled from last year to $13 million, according to the company, which expects $1.5 billion in mobile sales this year.
Virtually every product that people buy on computers sells in similar proportion on mobile devices, said Steve Yankovich, eBay’s vice president for mobile. He said shoppers bought an average of four Ferraris a month from their cellphones.
Tiffany English, 30, of Hoboken, N.J., bought her mother’s Christmas gift, a painting of a child, when the eBay mobile app alerted her that the auction was about to end while she was out in Greenwich Village. She used eBay’s RedLaser app to compare prices on a set of barbecue tools for her brother, and bought the set on her cellphone from Amazon.com while standing in Bed Bath & Beyond, where the same item cost more.
“It’s saving me time and saving me money,” Ms. English said. “I feel like my grandma: ‘You can do that with your phone?’ ”
EBay is so convinced of the future of mobile phone shopping that on Wednesday it acquired Critical Path Software, a mobile phone app developer, to speed its move into this new arena.
At Blue Nile, the diamond and jewelry e-commerce site, mobile revenue is up sixfold this month from the period a year ago. The company says a mobile shopper recently bought a ring for more than $250,000 via a cellphone.
“A year ago, we really didn’t know whether mobile would be very impactful for our business, because this is a very considered purchase, a high-ticket luxury item,” said Diane Irvine, chief executive of Blue Nile. Now, she said, “we can envision a time when sales from a mobile device will eclipse sales over the desktop Web site.”
Most shoppers still use their phones for finding nearby stores or looking up reviews and comparing prices, rather than for buying goods, retailers and analysts say. Still, that type of research increasingly leads to mobile sales, particularly for online retailers that compete heavily on price, like consumer electronics stores, said Sucharita Mulpuru, principal analyst for e-commerce at Forrester Research.
Perhaps the biggest reason for the spike in mobile shopping is simply that more Web retailers have created mobile Web sites or apps that make it easier to search inventory on a small screen without a mouse, by forgoing fancy Flash graphics and selling a limited number of products on phones.
Mobile apps often have features that Web sites don’t. For example, Amazon’s app lets people scan bar codes, speak into the phone or take a photo of an item to search for products. Bluefly’s sends a cellphone alert when an item that was out of stock becomes available again.
Just as e-commerce made it possible for people to shop in the office and late at night, mobile phones let them shop anywhere. And because shoppers on cellphones often have a purchase in mind, they can be more valuable to retailers. “Mobile shoppers are the hunters, and people sitting at their computer are gathering,” said Jill Dvorak, senior consultant for the e-commerce advisory company FitForCommerce.
Tom Keithley, 49, of Monkton, Md., is one of those hunters. He travels often for his job in financial services, and this year he did half his holiday shopping while on the road. From his cellphone he bought a Blue Nile ring for his wife and a eucalyptus wreath from Gump’s, the home décor shop.
“I’m usually in airports and airplanes, so it’s more convenient for me to use the time to do things I might normally do if I were sitting at my desk,” he said.
Mobile shopping is particularly appropriate for customers of flash sale sites like Gilt. Its limited-time sales start at noon each day and sell out quickly, so people miss out if they are away from their computers. Since Gilt introduced its mobile apps, shoppers have more consistently made purchases at noon, and mobile sales generally account for 10 percent of revenue and close to 20 percent on holidays and weekends, said Carl Sparks, president of the Gilt Groupe.
The iPad has also helped mobile commerce, but in a different way. While cellphone apps are made to complete transactions as quickly as possible, iPad apps tend to be for shopping as sport. For instance, Amazon’s iPad app, called Windowshop, shows many images and lets people browse and view close-up shots of items.
“It makes it much more visual and fluid and entertaining,” said Sam Hall, director of mobile at Amazon, “something that never could have been done on a smaller-screen device.”
Best Buy Feels the Pressure of Rivals on the Web
At barely 10 a.m., holiday shopping was in full swing at a Best Buy on the Upper West Side. A harried father searched for a new Xbox for his children. A personal assistant picked up video game accessories for her boss’s twins. One young woman fiddled with a coffeemaker, while another paid for a DVD player.
Outside, parked along the curb, a Best Buy van displayed the slogan “to serve, install and repair.” Inside, one of Best Buy’s frontline salesmen, known as blue shirts for their uniforms, shouted to no one in particular across the vast showroom: “Anybody have any questions?” And moments later, to a couple trying out some laptops, he said: “You guys O.K.?”
At a time when the nation’s brick-and-mortar electronics retailers are increasingly feeling the squeeze from online sellers and discounters, the scene at the Best Buy store exemplified what the company hoped would keep customers pushing through its glass doors: the service support, the personal touch of its sales staff and the products on display that allow shoppers to see, touch and try.
Its strategy, however, has not worked as well as envisioned in a recovering economy. The challenges faced by electronics stores were highlighted this week when Best Buy, the world’s largest consumer electronics retailer in revenue, reported that third-quarter net income fell 4.4 percent, to $217 million, and sales fell 1.1 percent, to $11.9 billion. Sales at stores open for more than a year declined 5 percent.
The third-quarter results were below analysts’ forecasts and affected other stocks. Shares of Best Buy fell 18 percent during the day Tuesday, after the results were announced. That was the biggest decline since August 2002, and other retailers like Hhgregg and RadioShack followed suit.
For the week, Best Buy shares lost 18 percent, Hhgregg fell 14 percent, and RadioShack 5 percent.
“The market, which is already weak, is dramatically shifting away from stores and toward online,” said Colin A. McGranahan, a senior analyst at Sanford C. Bernstein & Company. “The online share of the market is now a critical mass, and the discount stores are also fierce competitors and willing to sell the product at very low prices to get that customer through the door.”
“You are also seeing another factor where people are going into Best Buy, getting advice on the product and then using smartphones to scan the Web for better deals,” he said.
With the shift toward online destinations, electronics retailers need to adapt to the changing landscape, analysts say, even as they continue to open storefronts. Online sales in the United States are forecast to account for 20 percent of total consumer electronics sales of $250 billion by the end of this year.
“Online has now gotten big enough to encroach on Best Buy,” Mr. McGranahan said.
Best Buy reported for the first time this year that it had started to lose market share. Sales of televisions, computers and video game software were weaker than expected, Brian J. Dunn, Best Buy’s chief executive, said this week.
Separately, in a e-mail he added that the company offered customers “a place where they can talk to knowledgeable, unbiased and engaged salespeople who demonstrate the art of what’s possible” and help them make choices.
Even so, new technology, like 3-D televisions that often need specialists to answer the questions of consumers, was not moving as briskly as hoped. Analysts said the company did not promote lower-tier products as aggressively as it should have. In general, sales were going to Amazon, Wal-Mart, Target, Costco and Sears.
“The results certainly signify how much competition consumer electronic retailers are facing from mass merchants and larger online retailers,” said R. J. Hottovy, director of consumer research at Morningstar. “It is tough to see what the company is going to do,” he said. “I think that a lot of the worries lingering out there were exacerbated by the results.”
Morningstar said it was reducing its fair value estimate for the stock, raising questions about Best Buy’s ability to defend market share from mass merchants, especially while major suppliers like Apple expanded their own outlets. “These factors support the viewpoint that Best Buy lacks an economic moat, in our view,” said the research note.
Analysts downgraded their expectations for the fiscal year.
“We whacked a billion in revenue out of our forecast,” down to $50.2 billion in global sales, Mr. McGranahan said, adding: “It was a pretty bad quarter. Sales declined more than we thought, and the outlook for the fourth is not great.”
And Best Buy said in its third-quarter earnings news release that it was lowering its per-share outlook for the year.
Even so, electronics and appliances retailers are still pressing ahead with new storefronts. Best Buy plans to open 50 to 55 stores by the end of February.
Outside, parked along the curb, a Best Buy van displayed the slogan “to serve, install and repair.” Inside, one of Best Buy’s frontline salesmen, known as blue shirts for their uniforms, shouted to no one in particular across the vast showroom: “Anybody have any questions?” And moments later, to a couple trying out some laptops, he said: “You guys O.K.?”
At a time when the nation’s brick-and-mortar electronics retailers are increasingly feeling the squeeze from online sellers and discounters, the scene at the Best Buy store exemplified what the company hoped would keep customers pushing through its glass doors: the service support, the personal touch of its sales staff and the products on display that allow shoppers to see, touch and try.
Its strategy, however, has not worked as well as envisioned in a recovering economy. The challenges faced by electronics stores were highlighted this week when Best Buy, the world’s largest consumer electronics retailer in revenue, reported that third-quarter net income fell 4.4 percent, to $217 million, and sales fell 1.1 percent, to $11.9 billion. Sales at stores open for more than a year declined 5 percent.
The third-quarter results were below analysts’ forecasts and affected other stocks. Shares of Best Buy fell 18 percent during the day Tuesday, after the results were announced. That was the biggest decline since August 2002, and other retailers like Hhgregg and RadioShack followed suit.
For the week, Best Buy shares lost 18 percent, Hhgregg fell 14 percent, and RadioShack 5 percent.
“The market, which is already weak, is dramatically shifting away from stores and toward online,” said Colin A. McGranahan, a senior analyst at Sanford C. Bernstein & Company. “The online share of the market is now a critical mass, and the discount stores are also fierce competitors and willing to sell the product at very low prices to get that customer through the door.”
“You are also seeing another factor where people are going into Best Buy, getting advice on the product and then using smartphones to scan the Web for better deals,” he said.
With the shift toward online destinations, electronics retailers need to adapt to the changing landscape, analysts say, even as they continue to open storefronts. Online sales in the United States are forecast to account for 20 percent of total consumer electronics sales of $250 billion by the end of this year.
“Online has now gotten big enough to encroach on Best Buy,” Mr. McGranahan said.
Best Buy reported for the first time this year that it had started to lose market share. Sales of televisions, computers and video game software were weaker than expected, Brian J. Dunn, Best Buy’s chief executive, said this week.
Separately, in a e-mail he added that the company offered customers “a place where they can talk to knowledgeable, unbiased and engaged salespeople who demonstrate the art of what’s possible” and help them make choices.
Even so, new technology, like 3-D televisions that often need specialists to answer the questions of consumers, was not moving as briskly as hoped. Analysts said the company did not promote lower-tier products as aggressively as it should have. In general, sales were going to Amazon, Wal-Mart, Target, Costco and Sears.
“The results certainly signify how much competition consumer electronic retailers are facing from mass merchants and larger online retailers,” said R. J. Hottovy, director of consumer research at Morningstar. “It is tough to see what the company is going to do,” he said. “I think that a lot of the worries lingering out there were exacerbated by the results.”
Morningstar said it was reducing its fair value estimate for the stock, raising questions about Best Buy’s ability to defend market share from mass merchants, especially while major suppliers like Apple expanded their own outlets. “These factors support the viewpoint that Best Buy lacks an economic moat, in our view,” said the research note.
Analysts downgraded their expectations for the fiscal year.
“We whacked a billion in revenue out of our forecast,” down to $50.2 billion in global sales, Mr. McGranahan said, adding: “It was a pretty bad quarter. Sales declined more than we thought, and the outlook for the fourth is not great.”
And Best Buy said in its third-quarter earnings news release that it was lowering its per-share outlook for the year.
Even so, electronics and appliances retailers are still pressing ahead with new storefronts. Best Buy plans to open 50 to 55 stores by the end of February.
India Won't Spare Guilty in Mobile-Phone Licenses Probe, Minister Says
India will prosecute any company that violated rules for obtaining mobile-phone licenses from 2001 and won’t spare those found guilty, Communications and Information Technology Minister Kapil Sibal said.
“There should be a message that those who have done wrong and will do wrong will not be spared,” Sibal told Bloomberg-UTV in an interview aired today.
Prime Minister Manmohan Singh’s government has come under fire from opposition parties and the nation’s chief auditor for the way airwave permits were awarded in 2008. India’s highest court has said it will directly monitor a federal probe into the sale of wireless licenses and yesterday ordered investigators to submit a progress report by its next hearing on Feb. 10.
The court’s move raises scrutiny on the probe of a scandal that’s roiled India’s phone industry, led to the resignation of Sibal’s predecessor Andimuthu Raja and subsequent searches of Raja’s residences, and stalled parliamentary proceedings.
India’s top auditor said last month the sale of 157 permits at “unbelievably low” prices two years ago deprived the treasury of as much as 1.4 trillion rupees ($31 billion).
The government was now focused on restoring confidence in the industry and ensuring that the ministry would “function in a transparent, open and non-discriminatory manner,” Sibal said.
‘Industry Survives’
“I want to make sure that the industry survives," he said. "We should not send a message to the industry that we are not bothered about the survival of the industry, or all we are bothered about is sending people to jail.”
The Comptroller and Auditor General of India said in its report the government sold wireless airwaves in 2008 for 123.9 billion rupees, though they could have earned as much as 1.5 trillion rupees from the sale. Raja has denied any wrongdoing.
The auditor also said that the government awarded licenses to 13 ineligible companies at the time. Two of those permits are currently used by units of Norway’s Telenor ASA and Emirates Telecommunications Corp.
The Telenor and Etisalat units said Dec. 14 they will prove the validity of their mobile-phone licenses to the government after the Department of Telecommunications gave the carriers 60 days to prove they followed rules in getting the permits.
Sibal said any changes in the ministry’s rules would occur after due consultation with the industry and consumers.
The aim will be to ensure “people will have confidence in the fact that I am taking these decisions to create a level playing field,” he said. “And I am going to take these decisions after a dialogue and through a transparent process.”
“There should be a message that those who have done wrong and will do wrong will not be spared,” Sibal told Bloomberg-UTV in an interview aired today.
Prime Minister Manmohan Singh’s government has come under fire from opposition parties and the nation’s chief auditor for the way airwave permits were awarded in 2008. India’s highest court has said it will directly monitor a federal probe into the sale of wireless licenses and yesterday ordered investigators to submit a progress report by its next hearing on Feb. 10.
The court’s move raises scrutiny on the probe of a scandal that’s roiled India’s phone industry, led to the resignation of Sibal’s predecessor Andimuthu Raja and subsequent searches of Raja’s residences, and stalled parliamentary proceedings.
India’s top auditor said last month the sale of 157 permits at “unbelievably low” prices two years ago deprived the treasury of as much as 1.4 trillion rupees ($31 billion).
The government was now focused on restoring confidence in the industry and ensuring that the ministry would “function in a transparent, open and non-discriminatory manner,” Sibal said.
‘Industry Survives’
“I want to make sure that the industry survives," he said. "We should not send a message to the industry that we are not bothered about the survival of the industry, or all we are bothered about is sending people to jail.”
The Comptroller and Auditor General of India said in its report the government sold wireless airwaves in 2008 for 123.9 billion rupees, though they could have earned as much as 1.5 trillion rupees from the sale. Raja has denied any wrongdoing.
The auditor also said that the government awarded licenses to 13 ineligible companies at the time. Two of those permits are currently used by units of Norway’s Telenor ASA and Emirates Telecommunications Corp.
The Telenor and Etisalat units said Dec. 14 they will prove the validity of their mobile-phone licenses to the government after the Department of Telecommunications gave the carriers 60 days to prove they followed rules in getting the permits.
Sibal said any changes in the ministry’s rules would occur after due consultation with the industry and consumers.
The aim will be to ensure “people will have confidence in the fact that I am taking these decisions to create a level playing field,” he said. “And I am going to take these decisions after a dialogue and through a transparent process.”
India alleges drones breaching its airspace
The Indian military has complained that Pakistani and Chinese spy drones are regularly straying into Indian airspace, striking a discordant note during this week’s summit between the two countries.
Over the past three years, India has experienced nearly 30 violations of its airspace by foreign aircraft, including unmanned aircraft from neighbouring countries, according to AK Antony, India’s defence minister.
Unmanned aerial vehicles (UAVs) – known as drones – and military aircraft had crossed into Indian airspace over the disputed Kashmir area of the Himalayas, he said, with most of the violations coming from Pakistan.
“The fact that these [violations] are happening is enough. Something needs to be done,” said Shashindra Pal Tyagi, former head of the Indian air force.
Their complaints came against the background of the three-day visit to India by Wen Jiabao, China’s premier, who preached partnership over bi-lateral rivalry in a warm address on local television.
However, Mr Wen acknowledged that the border dispute over the state of Arunachal Pradesh would “not easily be resolved”, and made no mention of the threat of terrorism, a key Indian concern.
A senior Pakistani official told the Financial Times that China was helping Pakistan to develop armed UAVs, providing support where Islamabad’s repeated requests for technology had been denied by the US.
“China is helping Pakistan in this area. Pakistan needs drones for its genuine defence purposes and our Chinese brothers have once again risen to our expectations,” the official said.
Indian military advisers are also worried about China’s development of drone technology. They are urging New Delhi’s defence establishment to invest in drones to patrol the Himalayas, the border with Pakistan and Maoist-held areas in India .
“China has announced to the whole world about the modernisation of its armed forces, so India needs to be prepared. Keep your gunpowder ready,” Mr Tyagi said. “China is getting aggressive; India will have to cope with the entire spectrum of threat.”
Serving commanders believe India has the capability to avoid the kind of humiliating defeat it suffered at the hands of the Chinese almost 50 years ago in a short-lived high altitude combat over the state of Arunachal Pradesh.
“India started [upgrading] its capabilities five or six years ago. China started before that. They have a lead over us,” PV Naik, head of the air force, told commanders earlier this month. “Our aim is to prevent a repeat of 1962. With the capabilities that we have built up and are in the process of building, a repeat of 1962 can never happen.”
US security experts have warned that Beijing has a number of UAVs under development. The US-China Economic and Security Review Commission, which takes a hawkish view towards China, claimed last month that China’s air force had deployed UAVs for reconnaissance and combat.
The People’s Liberation Army has left little doubt that some products are maturing. Two drones were on display at a military parade celebrating the 60th anniversary of Communist rule last year. At the Zhuhai Air Show last month, Chinese companies showed off no less than 25 different unmanned aerial vehicles.
Chinese security experts say UAVs are a vital part of the PLA’s effort to secure the country’s vast borders. They are expected to help locate US aircraft carriers in Asian waters, and patrol China’s disputed land borders.
VK Saraswat, adviser to Indian defence ministry, said India needed to speed up its own development of UAVs and take “a cue from the use of drones [by the US] in Afghanistan”.
Over the past three years, India has experienced nearly 30 violations of its airspace by foreign aircraft, including unmanned aircraft from neighbouring countries, according to AK Antony, India’s defence minister.
Unmanned aerial vehicles (UAVs) – known as drones – and military aircraft had crossed into Indian airspace over the disputed Kashmir area of the Himalayas, he said, with most of the violations coming from Pakistan.
“The fact that these [violations] are happening is enough. Something needs to be done,” said Shashindra Pal Tyagi, former head of the Indian air force.
Their complaints came against the background of the three-day visit to India by Wen Jiabao, China’s premier, who preached partnership over bi-lateral rivalry in a warm address on local television.
However, Mr Wen acknowledged that the border dispute over the state of Arunachal Pradesh would “not easily be resolved”, and made no mention of the threat of terrorism, a key Indian concern.
A senior Pakistani official told the Financial Times that China was helping Pakistan to develop armed UAVs, providing support where Islamabad’s repeated requests for technology had been denied by the US.
“China is helping Pakistan in this area. Pakistan needs drones for its genuine defence purposes and our Chinese brothers have once again risen to our expectations,” the official said.
Indian military advisers are also worried about China’s development of drone technology. They are urging New Delhi’s defence establishment to invest in drones to patrol the Himalayas, the border with Pakistan and Maoist-held areas in India .
“China has announced to the whole world about the modernisation of its armed forces, so India needs to be prepared. Keep your gunpowder ready,” Mr Tyagi said. “China is getting aggressive; India will have to cope with the entire spectrum of threat.”
Serving commanders believe India has the capability to avoid the kind of humiliating defeat it suffered at the hands of the Chinese almost 50 years ago in a short-lived high altitude combat over the state of Arunachal Pradesh.
“India started [upgrading] its capabilities five or six years ago. China started before that. They have a lead over us,” PV Naik, head of the air force, told commanders earlier this month. “Our aim is to prevent a repeat of 1962. With the capabilities that we have built up and are in the process of building, a repeat of 1962 can never happen.”
US security experts have warned that Beijing has a number of UAVs under development. The US-China Economic and Security Review Commission, which takes a hawkish view towards China, claimed last month that China’s air force had deployed UAVs for reconnaissance and combat.
The People’s Liberation Army has left little doubt that some products are maturing. Two drones were on display at a military parade celebrating the 60th anniversary of Communist rule last year. At the Zhuhai Air Show last month, Chinese companies showed off no less than 25 different unmanned aerial vehicles.
Chinese security experts say UAVs are a vital part of the PLA’s effort to secure the country’s vast borders. They are expected to help locate US aircraft carriers in Asian waters, and patrol China’s disputed land borders.
VK Saraswat, adviser to Indian defence ministry, said India needed to speed up its own development of UAVs and take “a cue from the use of drones [by the US] in Afghanistan”.
Thursday, December 16, 2010
The Implants Loophole
A recently recalled artificial hip made by a unit of Johnson & Johnson, designed to last 15 years or more, is failing worldwide at unusually high rates after just a few years.
One of the most troubled orthopedic implants of the past decade, this artificial hip — known as the A.S.R., or Articular Surface Replacement — was originally promoted as a breakthrough in design that would last longer and provide patients more natural movement.
But many patients soon developed inexplicable pain, and surgeons, when replacing the implant, discovered mysterious masses of dead tissue near the thighs of some patients.
Until late summer, officials at the Johnson & Johnson unit, DePuy Orthopaedics, the largest maker of replacement hips worldwide, maintained that the A.S.R. was performing on a par with competing devices. But interviews with doctors indicate that DePuy received repeated warnings that the implant was failing and that surgeons were abandoning it.
The brief and troubled life of DePuy’s A.S.R. hip points to a medical implant system that is piecemeal and broken on many fronts, critics say. Unlike new drugs, many of which go through a series of clinical trials before receiving approval from the Food and Drug Administration, critical implants can be sold without such testing if a device, like an artificial hip, resembles an implant already approved and used on patients.
That way, manufacturers can rapidly make small changes to a device to improve it. But those simpler procedures have also effectively created a loophole, experts say, that lets producers bundle a component from an unapproved implant into an existing design and sell a device with minimal testing. With the A.S.R., that process unfolded with devastating results.
“You are basically testing these devices in an uncontrolled way on a large number of people,” said Dr. Sidney M. Wolfe, the director of the Public Citizen’s Health Research Group and a longtime F.D.A. critic.
Officials at DePuy declined to be interviewed for this article or to respond to specific written questions. In the past, they have said that the company moved promptly to take appropriate action on the A.S.R.
Late last year, DePuy announced that it was phasing the device out, but asserted at that time that the decision reflected lagging sales, not safety issues. And some doctors report good results with the implant.
“We believe we made the appropriate decision to recall at the appropriate time given the available information,” DePuy said in a recent statement.
The faulty DePuy device is one of a number of Johnson & Johnson products that have come under intense scrutiny in the last year, because of defects or manufacturing flaws that have prompted recalls of such household names as children’s Tylenol to Rolaids.
DePuy officials cannot say how many patients in this country received an A.S.R. because the company, like other orthopedic makers, does not track such implants. The Johnson & Johnson unit sold two versions of the A.S.R. hip, one that the F.D.A. never cleared for sale in the United States and one that it did.
DePuy officials estimated that about one-third of some 93,000 patients worldwide who received some version of the implant were in the United States. Both versions of the A.S.R. shared a common component, a so-called cup, or the part of the joint that replaces a patient’s hip socket. It was that cup’s design, experts say, that would prove faulty.
As patients began complaining, doctors and regulators here remained largely unaware that the problem was widespread because no independent monitoring system exists in this country that tracks implant failures. Such a database, used in other countries, might have clued in American orthopedists to the problem. In addition, doctors who tried to sound an alert said they had been rebuffed by DePuy.
The director of Australia’s orthopedic database said he believed that DePuy had been less than forthright about the A.S.R. Data in that country, he said, showed that in 2008 the A.S.R. was failing early at a rate higher than some competing devices.
“When it is clear to the orthopedic community that a company has not been honest, that is a problem,” said Australia’s registry’s director, Dr. Stephen Graves. “I think that J.& J. has a major issue with DePuy.”
One of the most troubled orthopedic implants of the past decade, this artificial hip — known as the A.S.R., or Articular Surface Replacement — was originally promoted as a breakthrough in design that would last longer and provide patients more natural movement.
But many patients soon developed inexplicable pain, and surgeons, when replacing the implant, discovered mysterious masses of dead tissue near the thighs of some patients.
Until late summer, officials at the Johnson & Johnson unit, DePuy Orthopaedics, the largest maker of replacement hips worldwide, maintained that the A.S.R. was performing on a par with competing devices. But interviews with doctors indicate that DePuy received repeated warnings that the implant was failing and that surgeons were abandoning it.
The brief and troubled life of DePuy’s A.S.R. hip points to a medical implant system that is piecemeal and broken on many fronts, critics say. Unlike new drugs, many of which go through a series of clinical trials before receiving approval from the Food and Drug Administration, critical implants can be sold without such testing if a device, like an artificial hip, resembles an implant already approved and used on patients.
That way, manufacturers can rapidly make small changes to a device to improve it. But those simpler procedures have also effectively created a loophole, experts say, that lets producers bundle a component from an unapproved implant into an existing design and sell a device with minimal testing. With the A.S.R., that process unfolded with devastating results.
“You are basically testing these devices in an uncontrolled way on a large number of people,” said Dr. Sidney M. Wolfe, the director of the Public Citizen’s Health Research Group and a longtime F.D.A. critic.
Officials at DePuy declined to be interviewed for this article or to respond to specific written questions. In the past, they have said that the company moved promptly to take appropriate action on the A.S.R.
Late last year, DePuy announced that it was phasing the device out, but asserted at that time that the decision reflected lagging sales, not safety issues. And some doctors report good results with the implant.
“We believe we made the appropriate decision to recall at the appropriate time given the available information,” DePuy said in a recent statement.
The faulty DePuy device is one of a number of Johnson & Johnson products that have come under intense scrutiny in the last year, because of defects or manufacturing flaws that have prompted recalls of such household names as children’s Tylenol to Rolaids.
DePuy officials cannot say how many patients in this country received an A.S.R. because the company, like other orthopedic makers, does not track such implants. The Johnson & Johnson unit sold two versions of the A.S.R. hip, one that the F.D.A. never cleared for sale in the United States and one that it did.
DePuy officials estimated that about one-third of some 93,000 patients worldwide who received some version of the implant were in the United States. Both versions of the A.S.R. shared a common component, a so-called cup, or the part of the joint that replaces a patient’s hip socket. It was that cup’s design, experts say, that would prove faulty.
As patients began complaining, doctors and regulators here remained largely unaware that the problem was widespread because no independent monitoring system exists in this country that tracks implant failures. Such a database, used in other countries, might have clued in American orthopedists to the problem. In addition, doctors who tried to sound an alert said they had been rebuffed by DePuy.
The director of Australia’s orthopedic database said he believed that DePuy had been less than forthright about the A.S.R. Data in that country, he said, showed that in 2008 the A.S.R. was failing early at a rate higher than some competing devices.
“When it is clear to the orthopedic community that a company has not been honest, that is a problem,” said Australia’s registry’s director, Dr. Stephen Graves. “I think that J.& J. has a major issue with DePuy.”
Mitsubishi UFJ Trust Targets India, Asia Asset Management Deals
Mitsubishi UFJ Financial Group Inc.’s trust banking arm aims to sign investment agreements within a year with one to two asset management firms in South and Southeast Asia to keep pace with growth in the regions.
Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s biggest bank by market value, has started searching for investment targets and plans to spend “several” billion yen on each deal, President Kinya Okauchi said.
The trust bank is expanding outside of Japan as domestic demand wanes and it competes with domestic rival Sumitomo Trust & Banking Co., Okauchi, 59, said. In 2008 he acquired a stake in Aberdeen Asset Management Plc, the U.K.’s biggest independent fund manager.
“India, of course, and Thailand, Vietnam and Indonesia are the countries we are interested in for our investment,” Okauchi said in an interview in Tokyo on Dec. 15.
Sumitomo Trust’s Nikko Asset Management Co. unit agreed this month to buy DBS Asset Management from DBS Group Holdings Ltd. to capitalize on growing demand from wealthy Asian clients. Tokyo-based Sumitomo Trust is set to merge with Chuo Mitsui Trust Holdings Inc. to create Japan’s fifth-biggest lender.
Mitsubishi UFJ Trust in 2008 took a 9.9 percent stake in Scotland-based Aberdeen and expanded its shareholding to 16 percent currently. Under the contract, the Japanese company has an option to further boost its stake to as much as 19.9 percent, Okauchi said.
Chief Executive Officer Martin Gilbert expanded Aberdeen’s assets under management 22 percent to 178.7 billion pounds ($282 billion) in the year ended Sept. 30, helped by the acquisition of Royal Bank of Scotland Plc’s fund-management business in January, according to a Nov. 30 financial statement.
Aberdeen held 40 percent of the assets in equities, 25 percent in fixed income, 16 percent in alternative investments and 12 percent in property, the statement said.
Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s biggest bank by market value, has started searching for investment targets and plans to spend “several” billion yen on each deal, President Kinya Okauchi said.
The trust bank is expanding outside of Japan as domestic demand wanes and it competes with domestic rival Sumitomo Trust & Banking Co., Okauchi, 59, said. In 2008 he acquired a stake in Aberdeen Asset Management Plc, the U.K.’s biggest independent fund manager.
“India, of course, and Thailand, Vietnam and Indonesia are the countries we are interested in for our investment,” Okauchi said in an interview in Tokyo on Dec. 15.
Sumitomo Trust’s Nikko Asset Management Co. unit agreed this month to buy DBS Asset Management from DBS Group Holdings Ltd. to capitalize on growing demand from wealthy Asian clients. Tokyo-based Sumitomo Trust is set to merge with Chuo Mitsui Trust Holdings Inc. to create Japan’s fifth-biggest lender.
Mitsubishi UFJ Trust in 2008 took a 9.9 percent stake in Scotland-based Aberdeen and expanded its shareholding to 16 percent currently. Under the contract, the Japanese company has an option to further boost its stake to as much as 19.9 percent, Okauchi said.
Chief Executive Officer Martin Gilbert expanded Aberdeen’s assets under management 22 percent to 178.7 billion pounds ($282 billion) in the year ended Sept. 30, helped by the acquisition of Royal Bank of Scotland Plc’s fund-management business in January, according to a Nov. 30 financial statement.
Aberdeen held 40 percent of the assets in equities, 25 percent in fixed income, 16 percent in alternative investments and 12 percent in property, the statement said.
India Bond-Purchase Plan May Ease Path to January Rate Increase
The Reserve Bank of India’s plan to address the biggest cash crunch in a decade with bond purchases may revive liquidity enough for the central bank to resume raising interest rates next month, say economists at JPMorgan Chase & Co. and Credit Suisse AG.
The RBI yesterday left its benchmark repurchase rate unchanged at 6.25 percent after six increases in 2010 and unveiled plans to buy back 480 billion rupees ($10.6 billion) of government bonds to ease a cash squeeze caused by a record 1.1 trillion rupees of share sales this year.
Governor Duvvuri Subbarao is trying to contain price expectations that have risen in the wake of a jump in costs of fuel and manufactured goods. With the benchmark rate below the 7.48 percent inflation rate, household savings and purchasing power are being eroded, risking a deeper impoverishment of the 828 million people who live on less than $2 a day.
“The bond buyback will certainly bring relief to the extreme tight liquidity conditions,” said Jahangir Aziz, the Mumbai-based chief economist at JPMorgan Chase. “Given the hawkish tone on inflation, the RBI will almost surely come back to raise rates in January.”
The yield on the benchmark 10-year government bond fell 12 basis points to 7.95 percent, the lowest in six weeks, in Mumbai yesterday. The Bombay Stock Exchange’s Sensitive Index gained 1.1 percent, while the rupee rose 0.1 percent to 45.35 against the dollar. India’s financial markets are shut today for a local holiday.
‘Continued Vigilance’
“Inflation pressures persist both from domestic demand and higher global commodity prices,” the RBI said in yesterday’s statement. “There is, therefore, a need for continued vigilance on the inflation front against the buildup of demand-side pressures.” It added that the risk to its inflation forecast of 5.5 percent by March 31 is “on the upside.”
While a report this week showed India’s wholesale-price inflation slowed to an 11-month low in November from 8.58 percent in October, the rate is still higher than the 5.1 percent in China and 5.6 percent in Brazil.
Subbarao, who has boosted the repurchase rate by 1.5 percentage points since mid-March, said yesterday that inflation remains “significantly above the comfort level.” He said last week the RBI aims to slow inflation to between 4 percent and 4.5 percent.
Credit Suisse economist Robert Prior-Wandesforde said yesterday he expects Subbarao to raise borrowing costs as early as January, advancing an earlier prediction of an increase between February and March.
State Elections
Prime Minister Manmohan Singh wants to gain control over inflation before nine states hold elections in the next 18 months.
“A major challenge for the Reserve Bank in the recent period has been liquidity management,” according to the statement. “It is the Reserve Bank’s endeavor to alleviate the liquidity pressure in a manner consistent with the monetary stance of containing inflation.”
The RBI will offer to buy bonds worth 120 billion rupees via open-market auctions in each of the next four weeks, the statement showed. It also cut the statutory liquidity ratio, or the proportion of deposits lenders need to invest in government bonds, to 24 percent from 25 percent starting Dec. 18.
Overnight loan rates between banks averaged 6.6 percent this month, compared with 3.3 percent a year ago. Lenders borrowed an average 816.4 billion rupees a day this quarter using the Reserve Bank’s repurchase auction window, compared with 239 billion rupees in the previous three months, according to data compiled by Bloomberg, indicating a shortage of money.
Bond Buyback
“The bond buyback is a direct injection of funds and will prove more helpful in easing the domestic liquidity crunch,” Credit Suisse’s Prior-Wandesforde said. “The message that I get from the RBI’s statement is that they are clearly worried about inflation risks and are setting us up for a January hike.”
An RBI survey of price expectations of 4,000 households in urban areas indicated consumers anticipate inflation to quicken to 12.7 percent in the next year from a perceived pace of 12.1 percent now, the bank said in a Dec. 9 statement.
Prices are under pressure partly because growth in Asia’s third-largest economy is straining power and transportation capacity, said N. R. Bhanumurthy, an economist at the New Delhi- based National Institute of Public Finance and Policy.
The power deficit in India, for example, is 14 percent during peak hours, according to the finance ministry, forcing most companies to invest in their own supply back-ups.
Consumer Demand
Industrial output jumped 10.8 percent in October from a year earlier, the most in three months. India’s $1.3 trillion economy grew 8.9 percent for a second straight quarter in the three months through September, maintaining the fastest pace of growth among the world’s major economies after China.
Maruti Suzuki India Ltd., the nation’s biggest carmaker, relies on its own power plants to run its factories, which adds to the cost of doing business Chairman R.C. Bhargava said in an interview on Dec. 15. The New Delhi-based company sold a record 1.11 million cars in the 11 months through November.
China is also battling to rein in inflation, which is a result of unprecedented credit expansion to protect the economy from last year’s global recession. Consumer prices rose 5.1 percent in November from a year earlier, the fastest pace in 28 months.
Chinese authorities have refrained from adding to October’s interest-rate increase and instead have ratcheted up banks’ reserve requirements and relied on tools such as sale of food reserves to curb prices.
Fuel Price
Price pressures in India may also emerge after companies, including Bharat Petroleum Corp., raised gasoline prices this week and as the government plans to cut subsidies to state refiners, including Indian Oil Corp., that sell fuel below costs. The government partly compensates refiners for their losses, which increase as crude prices rise.
Crude in New York trading reached $90.76 a barrel on Dec. 7, the highest level since 2008. Oil has gained 11.3 percent this year. India, which imports three-quarters of its crude oil needs, is working on a plan to boost diesel prices, Petroleum Minister Murli Deora said Dec. 13.
The RBI yesterday left its benchmark repurchase rate unchanged at 6.25 percent after six increases in 2010 and unveiled plans to buy back 480 billion rupees ($10.6 billion) of government bonds to ease a cash squeeze caused by a record 1.1 trillion rupees of share sales this year.
Governor Duvvuri Subbarao is trying to contain price expectations that have risen in the wake of a jump in costs of fuel and manufactured goods. With the benchmark rate below the 7.48 percent inflation rate, household savings and purchasing power are being eroded, risking a deeper impoverishment of the 828 million people who live on less than $2 a day.
“The bond buyback will certainly bring relief to the extreme tight liquidity conditions,” said Jahangir Aziz, the Mumbai-based chief economist at JPMorgan Chase. “Given the hawkish tone on inflation, the RBI will almost surely come back to raise rates in January.”
The yield on the benchmark 10-year government bond fell 12 basis points to 7.95 percent, the lowest in six weeks, in Mumbai yesterday. The Bombay Stock Exchange’s Sensitive Index gained 1.1 percent, while the rupee rose 0.1 percent to 45.35 against the dollar. India’s financial markets are shut today for a local holiday.
‘Continued Vigilance’
“Inflation pressures persist both from domestic demand and higher global commodity prices,” the RBI said in yesterday’s statement. “There is, therefore, a need for continued vigilance on the inflation front against the buildup of demand-side pressures.” It added that the risk to its inflation forecast of 5.5 percent by March 31 is “on the upside.”
While a report this week showed India’s wholesale-price inflation slowed to an 11-month low in November from 8.58 percent in October, the rate is still higher than the 5.1 percent in China and 5.6 percent in Brazil.
Subbarao, who has boosted the repurchase rate by 1.5 percentage points since mid-March, said yesterday that inflation remains “significantly above the comfort level.” He said last week the RBI aims to slow inflation to between 4 percent and 4.5 percent.
Credit Suisse economist Robert Prior-Wandesforde said yesterday he expects Subbarao to raise borrowing costs as early as January, advancing an earlier prediction of an increase between February and March.
State Elections
Prime Minister Manmohan Singh wants to gain control over inflation before nine states hold elections in the next 18 months.
“A major challenge for the Reserve Bank in the recent period has been liquidity management,” according to the statement. “It is the Reserve Bank’s endeavor to alleviate the liquidity pressure in a manner consistent with the monetary stance of containing inflation.”
The RBI will offer to buy bonds worth 120 billion rupees via open-market auctions in each of the next four weeks, the statement showed. It also cut the statutory liquidity ratio, or the proportion of deposits lenders need to invest in government bonds, to 24 percent from 25 percent starting Dec. 18.
Overnight loan rates between banks averaged 6.6 percent this month, compared with 3.3 percent a year ago. Lenders borrowed an average 816.4 billion rupees a day this quarter using the Reserve Bank’s repurchase auction window, compared with 239 billion rupees in the previous three months, according to data compiled by Bloomberg, indicating a shortage of money.
Bond Buyback
“The bond buyback is a direct injection of funds and will prove more helpful in easing the domestic liquidity crunch,” Credit Suisse’s Prior-Wandesforde said. “The message that I get from the RBI’s statement is that they are clearly worried about inflation risks and are setting us up for a January hike.”
An RBI survey of price expectations of 4,000 households in urban areas indicated consumers anticipate inflation to quicken to 12.7 percent in the next year from a perceived pace of 12.1 percent now, the bank said in a Dec. 9 statement.
Prices are under pressure partly because growth in Asia’s third-largest economy is straining power and transportation capacity, said N. R. Bhanumurthy, an economist at the New Delhi- based National Institute of Public Finance and Policy.
The power deficit in India, for example, is 14 percent during peak hours, according to the finance ministry, forcing most companies to invest in their own supply back-ups.
Consumer Demand
Industrial output jumped 10.8 percent in October from a year earlier, the most in three months. India’s $1.3 trillion economy grew 8.9 percent for a second straight quarter in the three months through September, maintaining the fastest pace of growth among the world’s major economies after China.
Maruti Suzuki India Ltd., the nation’s biggest carmaker, relies on its own power plants to run its factories, which adds to the cost of doing business Chairman R.C. Bhargava said in an interview on Dec. 15. The New Delhi-based company sold a record 1.11 million cars in the 11 months through November.
China is also battling to rein in inflation, which is a result of unprecedented credit expansion to protect the economy from last year’s global recession. Consumer prices rose 5.1 percent in November from a year earlier, the fastest pace in 28 months.
Chinese authorities have refrained from adding to October’s interest-rate increase and instead have ratcheted up banks’ reserve requirements and relied on tools such as sale of food reserves to curb prices.
Fuel Price
Price pressures in India may also emerge after companies, including Bharat Petroleum Corp., raised gasoline prices this week and as the government plans to cut subsidies to state refiners, including Indian Oil Corp., that sell fuel below costs. The government partly compensates refiners for their losses, which increase as crude prices rise.
Crude in New York trading reached $90.76 a barrel on Dec. 7, the highest level since 2008. Oil has gained 11.3 percent this year. India, which imports three-quarters of its crude oil needs, is working on a plan to boost diesel prices, Petroleum Minister Murli Deora said Dec. 13.
China loan for Reliance Communications
Reliance Communications, India’s debt-stricken mobile phone operator, announced it would receive a $1.93bn loan from China Development Bank on the day China’s premier Wen Jiabao arrived in New Delhi for a state visit to boost ties between the two emerging economic powers.
The new loan, signed on the sidelines of an India-China summit on Wednesday, will help India’s second-largest mobile operator by subscribers repay the outstanding loans it took to acquire 3G spectrum this year.
This is the latest in a series of multibillion-dollar loan agreements clinched with Beijing by Indian billionaire industrialists, as Chinese banks offer much cheaper credit than Indian institutions.
Reliance Power, which is also run by Anil Ambani, one of India’s richest men, this year ordered $10bn of power generation equipment from Shanghai Electric Groupin a deal heavily financed by Chinese banks.
Reliance Power said on Wednesday it had received final commitment from Chinese banks for $1.1bn of loans.
“The Chinese do a great job when it comes to financing deals,” said an executive at Reliance Communications. “We save about $100m a year compared to what we would [have to pay in interest] in India – that’s a lot of money.”
Reliance will pay 5 per cent interest to China Development Bank, compared with the standard 12 per cent it would have to pay an Indian bank.
“Obviously, the Chinese then expect us to give something back, so we will buy their [equipment] but that works well for us,” the executive added.
Reliance has net debt of almost $7bn, giving it a ratio of net debt to earnings before interest, taxation, depreciation and amortisation of 4.4 times, according to GV Giri, an analyst with IIFL, a Mumbai brokerage.
Its competitors, Bharti Airtel and Idea, have debt of about two-thirds or less of this level.
Nearly 70 per cent of the 10-year loan would go to repay Reliance’s short-term debts, while the remainder would be used to acquire Chinese telecoms equipment, said another person close to the Indian company.
Reliance’s financial woes deepened in September when a $9bn deal aimed to reduce debt and attract new investors collapsed.
It had planned to sell its tower assets to Indian group GTL Infrastructure, in a deal that would have prepared it for a possible stake sale to Gulf rival Etisalat.
Reliance launched 3G services in four cities including Mumbai, Delhi, Kolkata, and Chandigarh on Monday.
It spent about $1.9bn to acquire 3G spectrum in 13 cities this year.
India’s telecoms sector is one of the world’s fastest-growing mobile markets with almost 700m subscribers. It is among the most competitive, with 15 operators vying for market share.
The new loan, signed on the sidelines of an India-China summit on Wednesday, will help India’s second-largest mobile operator by subscribers repay the outstanding loans it took to acquire 3G spectrum this year.
This is the latest in a series of multibillion-dollar loan agreements clinched with Beijing by Indian billionaire industrialists, as Chinese banks offer much cheaper credit than Indian institutions.
Reliance Power, which is also run by Anil Ambani, one of India’s richest men, this year ordered $10bn of power generation equipment from Shanghai Electric Groupin a deal heavily financed by Chinese banks.
Reliance Power said on Wednesday it had received final commitment from Chinese banks for $1.1bn of loans.
“The Chinese do a great job when it comes to financing deals,” said an executive at Reliance Communications. “We save about $100m a year compared to what we would [have to pay in interest] in India – that’s a lot of money.”
Reliance will pay 5 per cent interest to China Development Bank, compared with the standard 12 per cent it would have to pay an Indian bank.
“Obviously, the Chinese then expect us to give something back, so we will buy their [equipment] but that works well for us,” the executive added.
Reliance has net debt of almost $7bn, giving it a ratio of net debt to earnings before interest, taxation, depreciation and amortisation of 4.4 times, according to GV Giri, an analyst with IIFL, a Mumbai brokerage.
Its competitors, Bharti Airtel and Idea, have debt of about two-thirds or less of this level.
Nearly 70 per cent of the 10-year loan would go to repay Reliance’s short-term debts, while the remainder would be used to acquire Chinese telecoms equipment, said another person close to the Indian company.
Reliance’s financial woes deepened in September when a $9bn deal aimed to reduce debt and attract new investors collapsed.
It had planned to sell its tower assets to Indian group GTL Infrastructure, in a deal that would have prepared it for a possible stake sale to Gulf rival Etisalat.
Reliance launched 3G services in four cities including Mumbai, Delhi, Kolkata, and Chandigarh on Monday.
It spent about $1.9bn to acquire 3G spectrum in 13 cities this year.
India’s telecoms sector is one of the world’s fastest-growing mobile markets with almost 700m subscribers. It is among the most competitive, with 15 operators vying for market share.
Wen brings finance to cement India ties
China has launched a bold financial move to deepen economic engagement with neighbouring India in an attempt to strengthen the often fractious ties between the world’s fastest- growing big economies.
On his first visit to New Delhi for five years, Wen Jiabao, China’s premier, said his 300-strong business delegation had struck $16bn worth of deals with Indian partners, underwritten by finance from Chinese banks.
The nearly 50 agreements – topping the $10bn orders for US companies that crowned the visit to India last month of Barack Obama, the US president – highlighted Mr Wen’s ambitions to lift trade and investment across the Himalayas.
The Chinese premier urged leaders in both countries, which are home to 2.5bn people, to set aside rivalries and use business to seize the opportunity to bring about “the rejuvenation of two ancient civilisations”.
Mr Wen told local business leaders in the Indian capital: “The 21st century is the Asian century. It is also the century where China and India can make great achievements.”
The wider economic engagement is spearheaded by financing deals between China Development Bank and top Indian companies like Reliance Communications, ICICI Bank, Essar and IDBI Bank. Other financial groups seeking to expand business with India include ICBC and Bank of China.
Debt-laden Reliance Communications, part of the empire controlled by Anil Ambani, is to gain low-cost finance from Chinese banks worth about $2bn.
State-owned China Development Bank has a mandate to transform itself into a market-driven commercial lender but it is continuing to play a political role as a key instrument of Beijing’s foreign policy.
It is often called on by the country’s leaders to provide cheap credit to the ruling Communist Party’s pet projects both at home and abroad.
In recent months CDB has lent money to a German bank, a South African platinum mine, Romanian wind power projects and Australian mining ports – as well as extending $20bn to Venezuela and $1bn to Angola to secure oil supplies for China.
Indian officials said a financial services pact was at the heart of Mr Wen’s three-day visit. While Indian banks operate in China, Chinese banks do not have a similar presence in Asia’s third-largest economy.
Mr Wen said he backed measures to boost business between financial centres like Mumbai and Shanghai, and envisaged the opening of “bank branches in each other’s countries”.
Talks with Manmohan Singh, India’s premier, would also aim to agree early negotiations for a regional trade pact, he said.
Although relations between China and India have been strained by concerns about Beijing’s territorial claims in the region, China has rapidly become India’s largest trading partner in goods. Bilateral trade is estimated at $60bn this year.
However, New Delhi has requested Beijing address a trade imbalance heavily skewed in China’s favour and take steps to improve market access for India’s IT industry, agricultural products and pharmaceuticals.
“The balance of trade lies heavily in favour of China and we would like to take measures to reduce this deficit. Despite crossing $60bn, the potential between our two countries is far bigger,” said Anand Sharma, India’s commerce minister.
On his first visit to New Delhi for five years, Wen Jiabao, China’s premier, said his 300-strong business delegation had struck $16bn worth of deals with Indian partners, underwritten by finance from Chinese banks.
The nearly 50 agreements – topping the $10bn orders for US companies that crowned the visit to India last month of Barack Obama, the US president – highlighted Mr Wen’s ambitions to lift trade and investment across the Himalayas.
The Chinese premier urged leaders in both countries, which are home to 2.5bn people, to set aside rivalries and use business to seize the opportunity to bring about “the rejuvenation of two ancient civilisations”.
Mr Wen told local business leaders in the Indian capital: “The 21st century is the Asian century. It is also the century where China and India can make great achievements.”
The wider economic engagement is spearheaded by financing deals between China Development Bank and top Indian companies like Reliance Communications, ICICI Bank, Essar and IDBI Bank. Other financial groups seeking to expand business with India include ICBC and Bank of China.
Debt-laden Reliance Communications, part of the empire controlled by Anil Ambani, is to gain low-cost finance from Chinese banks worth about $2bn.
State-owned China Development Bank has a mandate to transform itself into a market-driven commercial lender but it is continuing to play a political role as a key instrument of Beijing’s foreign policy.
It is often called on by the country’s leaders to provide cheap credit to the ruling Communist Party’s pet projects both at home and abroad.
In recent months CDB has lent money to a German bank, a South African platinum mine, Romanian wind power projects and Australian mining ports – as well as extending $20bn to Venezuela and $1bn to Angola to secure oil supplies for China.
Indian officials said a financial services pact was at the heart of Mr Wen’s three-day visit. While Indian banks operate in China, Chinese banks do not have a similar presence in Asia’s third-largest economy.
Mr Wen said he backed measures to boost business between financial centres like Mumbai and Shanghai, and envisaged the opening of “bank branches in each other’s countries”.
Talks with Manmohan Singh, India’s premier, would also aim to agree early negotiations for a regional trade pact, he said.
Although relations between China and India have been strained by concerns about Beijing’s territorial claims in the region, China has rapidly become India’s largest trading partner in goods. Bilateral trade is estimated at $60bn this year.
However, New Delhi has requested Beijing address a trade imbalance heavily skewed in China’s favour and take steps to improve market access for India’s IT industry, agricultural products and pharmaceuticals.
“The balance of trade lies heavily in favour of China and we would like to take measures to reduce this deficit. Despite crossing $60bn, the potential between our two countries is far bigger,” said Anand Sharma, India’s commerce minister.
Tuesday, December 14, 2010
Save the Children Backs Away From Soda Tax Campaign
Over the last year, Save the Children emerged as a leader in the push to tax sweetened soft drinks as a way to combat childhood obesity. The nonprofit group supported soda tax campaigns in Mississippi, New Mexico, Washington State, Philadelphia and the District of Columbia.
At the same time, executives at Save the Children were seeking a major grant from Coca-Cola to help finance the health and education programs that the charity conducts here and abroad, including its work on childhood obesity.
The talks with Coke are still going on. But the soda tax work has been stopped. In October, Save the Children surprised activists around the country with an e-mail message announcing that it would no longer support efforts to tax soft drinks.
In interviews this month, Carolyn Miles, chief operating officer of Save the Children, said there was no connection between the group’s about-face on soda taxes and the discussions with Coke. A $5 million grant from PepsiCo also had no influence on the decision, she said. Both companies fiercely oppose soda taxes.
Ms. Miles said that after Save the Children took a prominent role in several soda tax campaigns, executives reviewed the issue and decided it was too controversial to continue.
“We looked at it and said, ‘Is this something we should be out there doing and does this fit with the way that Save the Children works?’ ” she said. “And the answer was no.”
Ms. Miles said the talks with Coke were continuing and the grant under discussion was significantly larger than past donations from the soft drink giant. Coke has given the group about $400,000 since 1991, according to a company spokeswoman.
Save the Children has received much more money from Pepsi through the PepsiCo Foundation, which it has designated as a “corporate partner” in recognition of the $5 million grant for work in India and Bangladesh. PepsiCo awarded the grant in early 2009, before the charity began its soda tax advocacy.
Representatives of both Coca-Cola and Pepsi said they had not asked the charity to alter its position on soda taxes.
But soda tax advocates say that soft drink makers are flexing their muscles in opposition to soda taxes. In Washington State, the American Beverage Association, a trade group that includes Coke and Pepsi, spent $16.5 million to win passage of a November ballot initiative that overturned a small tax on soft drinks enacted by the legislature to help plug a budget gap. The beverage association outspent supporters of the tax by more than 40 to 1, and the tax was repealed.
Jon Gould, deputy director of the Children’s Alliance, an advocacy group in Seattle, said Save the Children’s decision to abandon the issue was “a significant loss, especially at a time when the American Beverage Association has just shown that their resources are unlimited.” The alliance got $25,000 from Save the Children to help advocate for a soda tax.
Kelly D. Brownell, a soda tax advocate and director of the Rudd Center for Food Policy and Obesity at Yale University, said that many food and beverage companies made donations to nonprofit groups fighting hunger but it was less common for them to finance work to address obesity.
“It would be a shame if there were a quid pro quo and the groups felt pressure to oppose something like a soda tax,” Mr. Brownell said.
Public debate about soda taxes has intensified over the last year. Proponents say that if the tax were large enough, perhaps a penny an ounce or more, it could reduce consumption of sugary beverages, which are high in calories and can contribute to obesity. In addition, money raised by the tax could be spent on public health efforts to fight obesity.
The soda companies argue that it is unfair to blame their products for the obesity epidemic, which has complex causes. They say that policies should be focused instead on getting people to exercise more.
So far, tax proposals have gotten little traction. Last year, federal lawmakers considered a soft drink tax to help pay for health care reform, but that idea was dropped. Governors, state lawmakers and mayors have proposed taxes but made little headway.
Save the Children’s involvement in the issue began in late 2009, when it got a $3.5 million grant from the Robert Wood Johnson Foundation to fight childhood obesity through a program it called the Campaign for Healthy Kids. Save the Children initially financed the work of local groups, some of which focused on improving school lunches and requiring health education in schools. But local activists in Mississippi, New Mexico and Washington State used the grants to push for a soda tax.
When politicians in Philadelphia and Washington proposed soda taxes this year, the Campaign for Healthy Kids got more directly involved, paying for lobbyists and polling. “We really took the lead on those and were publicly identified with those,” said Andrew Hysell, an associate vice president for Save the Children and the director of the obesity campaign.
None of the soda tax measures supported by Save the Children passed, although in Washington, the city council removed a sales tax exemption for carbonated beverages.
Save the Children’s prominent role in Philadelphia and Washington led top executives of the charity to review the work. Ms. Miles said they concluded the advocacy was not part of the charity’s mission.
“We made a decision that it was an issue that was controversial among our constituents and really was not core to the work we’re doing in the U.S.,” Ms. Miles said. She said that while the charity’s constituents included corporate donors, concerns over fund-raising were not involved in the decision.
Mr. Hysell informed soda tax advocates of the change in October and the Campaign for Healthy Kids removed declarations of support for soda taxes from its Web site.
Officials of the Robert Wood Johnson Foundation, who had encouraged Save the Children to advocate for soda taxes, are disappointed.
“They were obviously some of the strongest out there working on the issue, and we had such high hopes,” said Dwayne Proctor, team director for childhood obesity at the foundation. He said the two groups would continue to work together on other aspects of the obesity fight.
At the same time, executives at Save the Children were seeking a major grant from Coca-Cola to help finance the health and education programs that the charity conducts here and abroad, including its work on childhood obesity.
The talks with Coke are still going on. But the soda tax work has been stopped. In October, Save the Children surprised activists around the country with an e-mail message announcing that it would no longer support efforts to tax soft drinks.
In interviews this month, Carolyn Miles, chief operating officer of Save the Children, said there was no connection between the group’s about-face on soda taxes and the discussions with Coke. A $5 million grant from PepsiCo also had no influence on the decision, she said. Both companies fiercely oppose soda taxes.
Ms. Miles said that after Save the Children took a prominent role in several soda tax campaigns, executives reviewed the issue and decided it was too controversial to continue.
“We looked at it and said, ‘Is this something we should be out there doing and does this fit with the way that Save the Children works?’ ” she said. “And the answer was no.”
Ms. Miles said the talks with Coke were continuing and the grant under discussion was significantly larger than past donations from the soft drink giant. Coke has given the group about $400,000 since 1991, according to a company spokeswoman.
Save the Children has received much more money from Pepsi through the PepsiCo Foundation, which it has designated as a “corporate partner” in recognition of the $5 million grant for work in India and Bangladesh. PepsiCo awarded the grant in early 2009, before the charity began its soda tax advocacy.
Representatives of both Coca-Cola and Pepsi said they had not asked the charity to alter its position on soda taxes.
But soda tax advocates say that soft drink makers are flexing their muscles in opposition to soda taxes. In Washington State, the American Beverage Association, a trade group that includes Coke and Pepsi, spent $16.5 million to win passage of a November ballot initiative that overturned a small tax on soft drinks enacted by the legislature to help plug a budget gap. The beverage association outspent supporters of the tax by more than 40 to 1, and the tax was repealed.
Jon Gould, deputy director of the Children’s Alliance, an advocacy group in Seattle, said Save the Children’s decision to abandon the issue was “a significant loss, especially at a time when the American Beverage Association has just shown that their resources are unlimited.” The alliance got $25,000 from Save the Children to help advocate for a soda tax.
Kelly D. Brownell, a soda tax advocate and director of the Rudd Center for Food Policy and Obesity at Yale University, said that many food and beverage companies made donations to nonprofit groups fighting hunger but it was less common for them to finance work to address obesity.
“It would be a shame if there were a quid pro quo and the groups felt pressure to oppose something like a soda tax,” Mr. Brownell said.
Public debate about soda taxes has intensified over the last year. Proponents say that if the tax were large enough, perhaps a penny an ounce or more, it could reduce consumption of sugary beverages, which are high in calories and can contribute to obesity. In addition, money raised by the tax could be spent on public health efforts to fight obesity.
The soda companies argue that it is unfair to blame their products for the obesity epidemic, which has complex causes. They say that policies should be focused instead on getting people to exercise more.
So far, tax proposals have gotten little traction. Last year, federal lawmakers considered a soft drink tax to help pay for health care reform, but that idea was dropped. Governors, state lawmakers and mayors have proposed taxes but made little headway.
Save the Children’s involvement in the issue began in late 2009, when it got a $3.5 million grant from the Robert Wood Johnson Foundation to fight childhood obesity through a program it called the Campaign for Healthy Kids. Save the Children initially financed the work of local groups, some of which focused on improving school lunches and requiring health education in schools. But local activists in Mississippi, New Mexico and Washington State used the grants to push for a soda tax.
When politicians in Philadelphia and Washington proposed soda taxes this year, the Campaign for Healthy Kids got more directly involved, paying for lobbyists and polling. “We really took the lead on those and were publicly identified with those,” said Andrew Hysell, an associate vice president for Save the Children and the director of the obesity campaign.
None of the soda tax measures supported by Save the Children passed, although in Washington, the city council removed a sales tax exemption for carbonated beverages.
Save the Children’s prominent role in Philadelphia and Washington led top executives of the charity to review the work. Ms. Miles said they concluded the advocacy was not part of the charity’s mission.
“We made a decision that it was an issue that was controversial among our constituents and really was not core to the work we’re doing in the U.S.,” Ms. Miles said. She said that while the charity’s constituents included corporate donors, concerns over fund-raising were not involved in the decision.
Mr. Hysell informed soda tax advocates of the change in October and the Campaign for Healthy Kids removed declarations of support for soda taxes from its Web site.
Officials of the Robert Wood Johnson Foundation, who had encouraged Save the Children to advocate for soda taxes, are disappointed.
“They were obviously some of the strongest out there working on the issue, and we had such high hopes,” said Dwayne Proctor, team director for childhood obesity at the foundation. He said the two groups would continue to work together on other aspects of the obesity fight.
Swaps Doubling Signal Traders Prepared for January Rate Rise: India Credit
India’s central bank will probably resume Asia’s fastest round of interest-rate increases next month, after pausing tomorrow, on signs money-market traders are bracing for a revival in inflation.
The difference between one-year interest-rate swaps and the benchmark repurchase rate doubled to a six-week high of 73 basis points yesterday from 35.5 basis points when India last lifted rates on Nov. 2. The Reserve Bank of India may raise the repurchase rate to 6.5 percent from 6.25 percent on Jan. 25 after keeping it unchanged at noon tomorrow, according to 11 of 16 economists in Bloomberg News survey. Only three of 15 polled last week saw a January move.
Governor Duvvuri Subbarao, who has boosted the repurchase rate by 1.5 percentage point in 2010, the most in Asia, needs to gain control over costs in a nation where 828 million people live on less than $2 a day. While a report yesterday showed wholesale-price inflation slowed to an 11-month low of 7.48 percent in November from 8.58 percent in October, the rate is still higher than the 5.1 percent in China and 5.6 percent in Brazil.
“The central bank isn’t done yet with rate tightening,” said Rajeev Malik, a senior economist at CLSA Asia Pacific Markets. “The RBI will come back in January and hike rates to contain inflation.”
Swap Rates
The one-year swap rate, the fixed cost to receive a floating interest rate, advanced 36 basis points, or 0.36 percentage point, since Nov. 2 to 6.96 percent, data compiled by Bloomberg show. The similar rate in China climbed 75 basis points in that period to 3.12 percent, while Russia’s rose 47 basis points to 5.20 and Brazil’s climbed 62 basis points to 11.84 percent.
Subbarao said last week that inflation remains above the “tolerance level” of between 4 percent and 4.5 percent.
An RBI survey of price expectations of 4,000 households in urban areas showed a separate inflation index may quicken to 12.7 percent in the next year from 12.1 percent now, according to a Dec. 9 statement from the central bank. A report on Dec. 10 showed India’s industrial production rose 10.8 percent in October, faster than the 8.5 percent median forecast in a Bloomberg survey of economists, signaling consumer demand remains strong in Asia’s third-largest economy.
‘Uncomfortably High’
“Inflation may trend down gradually but the level will remain uncomfortably high,” Tushar Poddar, Mumbai-based economist at Goldman Sachs Group Inc., wrote in a note on Dec. 2. “Core inflation will move sequentially higher due to increasing domestic demand and rising asset and commodity prices.”
Inflation may average 6 percent in the year starting April 1, said Poddar, who predicted 1 percentage point in rate increases by December 2011, more than his previous forecast of between 50 basis points and 75 basis points.
The worst cash crunch in 10 years may prompt the central bank to hold off on interest rates for another month as it buys government securities to alleviate fund shortages, Ashutosh Datar, a strategist at IIFL Ltd., a Mumbai-based Indian brokerage.
“The RBI may pause in December to assess the impact of the previous rate moves and because of the cash crunch,” said Datar. Even so, “inflation pressures are building up strongly,” he said.
Yields Drop
The yield on India’s benchmark 2020 security has dropped 12 basis points from a 26-month high of 8.21 percent in the past week as the Reserve Bank bought back 101 billion rupees ($2.2 billion) of securities. The yield fell 2 basis points to 8.09 percent yesterday.
Overnight loan rates between banks averaged 6.6 percent this month, compared with 3.3 percent a year ago. Banks borrowed an average 816.4 billion rupees a day this quarter using the Reserve Bank’s repurchase auction window, compared with 239 billion rupees in the previous three months, according to data compiled by Bloomberg, indicating a shortage of money.
Deputy Governor Subir Gokarn told reporters in Kolkata last week that the move to replenish funds isn’t a sign of a change in monetary policy.
The rupee, which has appreciated 3.5 percent this year, strengthened 0.4 percent yesterday to 44.95 per dollar, according to data compiled by Bloomberg. The currency advanced as foreign funds poured a record $9.6 billion into rupee debt, driving the Bombay Stock Exchange’s Sensitive Index up by 13 percent.
Rate Differential
While the RBI’s repurchase rate is 6.25 percent, the U.S. Federal Reserve’s target for overnight interbank loans is zero to 0.25 percent, where it has been since December 2008. As a result, the spread between India’s debt due in a decade and 10- year Treasuries, since the South Asian nation’s first rate increase on March 19, has widened 68 basis points to 480 yesterday. The gap, which has averaged 317 in the past decade, reached a decade high of 567 on Oct. 20.
“A widening interest-rate differential coupled with the relatively open stance toward capital inflows points to further rupee appreciation,” said Vishnu Varathan, Singapore-based economist at Capital Economics Ltd. Varathan last week forecast a quarter-point increase in the repurchase rate in January from an earlier prediction of no change. He said the rupee may gain to 42 against the dollar by the end of 2011.
Local-currency debt returned 4.4 percent in 2010, according to indexes compiled by HSBC Holdings Plc, as the Reserve Bank tightened its monetary policy. Investors in China earned 1.5 percent, the least in the region, the indexes show.
State Bank Debt
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 20 basis points for State Bank of India, the nation’s largest lender, and 22 basis points for ICICI Bank Ltd., the country’s second-biggest lender. The swaps are used to protect against missed debt payments.
Price pressures in India may also emerge from Prime Minister Manmohan Singh’s plan to raise diesel prices and cut subsidy to state refiners including Indian Oil Corp. that sell fuel below costs. The government partly compensates refiners for their losses, which increase as crude prices rise.
Crude in New York trading reached $90.76 a barrel on Dec. 7, the highest level since Oct. 8, 2008. Oil has gained 12 percent this year. India, which imports three-quarters of its crude oil needs, is working on a plan to boost diesel prices, Petroleum Minister Murli Deora said Dec. 13.
“Inflation is a big worry,” said Suvodeep Rakshit, an economist at Kotak Securities Ltd in Mumbai. “A rate hike seems to be on the cards in January given the risks to inflation from growth and rising commodity prices.”
The difference between one-year interest-rate swaps and the benchmark repurchase rate doubled to a six-week high of 73 basis points yesterday from 35.5 basis points when India last lifted rates on Nov. 2. The Reserve Bank of India may raise the repurchase rate to 6.5 percent from 6.25 percent on Jan. 25 after keeping it unchanged at noon tomorrow, according to 11 of 16 economists in Bloomberg News survey. Only three of 15 polled last week saw a January move.
Governor Duvvuri Subbarao, who has boosted the repurchase rate by 1.5 percentage point in 2010, the most in Asia, needs to gain control over costs in a nation where 828 million people live on less than $2 a day. While a report yesterday showed wholesale-price inflation slowed to an 11-month low of 7.48 percent in November from 8.58 percent in October, the rate is still higher than the 5.1 percent in China and 5.6 percent in Brazil.
“The central bank isn’t done yet with rate tightening,” said Rajeev Malik, a senior economist at CLSA Asia Pacific Markets. “The RBI will come back in January and hike rates to contain inflation.”
Swap Rates
The one-year swap rate, the fixed cost to receive a floating interest rate, advanced 36 basis points, or 0.36 percentage point, since Nov. 2 to 6.96 percent, data compiled by Bloomberg show. The similar rate in China climbed 75 basis points in that period to 3.12 percent, while Russia’s rose 47 basis points to 5.20 and Brazil’s climbed 62 basis points to 11.84 percent.
Subbarao said last week that inflation remains above the “tolerance level” of between 4 percent and 4.5 percent.
An RBI survey of price expectations of 4,000 households in urban areas showed a separate inflation index may quicken to 12.7 percent in the next year from 12.1 percent now, according to a Dec. 9 statement from the central bank. A report on Dec. 10 showed India’s industrial production rose 10.8 percent in October, faster than the 8.5 percent median forecast in a Bloomberg survey of economists, signaling consumer demand remains strong in Asia’s third-largest economy.
‘Uncomfortably High’
“Inflation may trend down gradually but the level will remain uncomfortably high,” Tushar Poddar, Mumbai-based economist at Goldman Sachs Group Inc., wrote in a note on Dec. 2. “Core inflation will move sequentially higher due to increasing domestic demand and rising asset and commodity prices.”
Inflation may average 6 percent in the year starting April 1, said Poddar, who predicted 1 percentage point in rate increases by December 2011, more than his previous forecast of between 50 basis points and 75 basis points.
The worst cash crunch in 10 years may prompt the central bank to hold off on interest rates for another month as it buys government securities to alleviate fund shortages, Ashutosh Datar, a strategist at IIFL Ltd., a Mumbai-based Indian brokerage.
“The RBI may pause in December to assess the impact of the previous rate moves and because of the cash crunch,” said Datar. Even so, “inflation pressures are building up strongly,” he said.
Yields Drop
The yield on India’s benchmark 2020 security has dropped 12 basis points from a 26-month high of 8.21 percent in the past week as the Reserve Bank bought back 101 billion rupees ($2.2 billion) of securities. The yield fell 2 basis points to 8.09 percent yesterday.
Overnight loan rates between banks averaged 6.6 percent this month, compared with 3.3 percent a year ago. Banks borrowed an average 816.4 billion rupees a day this quarter using the Reserve Bank’s repurchase auction window, compared with 239 billion rupees in the previous three months, according to data compiled by Bloomberg, indicating a shortage of money.
Deputy Governor Subir Gokarn told reporters in Kolkata last week that the move to replenish funds isn’t a sign of a change in monetary policy.
The rupee, which has appreciated 3.5 percent this year, strengthened 0.4 percent yesterday to 44.95 per dollar, according to data compiled by Bloomberg. The currency advanced as foreign funds poured a record $9.6 billion into rupee debt, driving the Bombay Stock Exchange’s Sensitive Index up by 13 percent.
Rate Differential
While the RBI’s repurchase rate is 6.25 percent, the U.S. Federal Reserve’s target for overnight interbank loans is zero to 0.25 percent, where it has been since December 2008. As a result, the spread between India’s debt due in a decade and 10- year Treasuries, since the South Asian nation’s first rate increase on March 19, has widened 68 basis points to 480 yesterday. The gap, which has averaged 317 in the past decade, reached a decade high of 567 on Oct. 20.
“A widening interest-rate differential coupled with the relatively open stance toward capital inflows points to further rupee appreciation,” said Vishnu Varathan, Singapore-based economist at Capital Economics Ltd. Varathan last week forecast a quarter-point increase in the repurchase rate in January from an earlier prediction of no change. He said the rupee may gain to 42 against the dollar by the end of 2011.
Local-currency debt returned 4.4 percent in 2010, according to indexes compiled by HSBC Holdings Plc, as the Reserve Bank tightened its monetary policy. Investors in China earned 1.5 percent, the least in the region, the indexes show.
State Bank Debt
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 20 basis points for State Bank of India, the nation’s largest lender, and 22 basis points for ICICI Bank Ltd., the country’s second-biggest lender. The swaps are used to protect against missed debt payments.
Price pressures in India may also emerge from Prime Minister Manmohan Singh’s plan to raise diesel prices and cut subsidy to state refiners including Indian Oil Corp. that sell fuel below costs. The government partly compensates refiners for their losses, which increase as crude prices rise.
Crude in New York trading reached $90.76 a barrel on Dec. 7, the highest level since Oct. 8, 2008. Oil has gained 12 percent this year. India, which imports three-quarters of its crude oil needs, is working on a plan to boost diesel prices, Petroleum Minister Murli Deora said Dec. 13.
“Inflation is a big worry,” said Suvodeep Rakshit, an economist at Kotak Securities Ltd in Mumbai. “A rate hike seems to be on the cards in January given the risks to inflation from growth and rising commodity prices.”
Alstom, Bharat Heavy Said to Win Orders for 11 Turbines From NTPC, India
Bharat Heavy Electricals Ltd., Alstom SA and Toshiba Corp. are among power equipment makers that are set to win orders for 11 turbines from Indian state-run power producers, according to two people familiar with the matter.
Bharat Heavy will provide four so-called supercritical turbines of 660 megawatts each at two sites, one belonging to NTPC Ltd. and another to state-run Damodar Valley Corp, the people said, declining to be identified before a formal announcement. A venture between Alstom and Bharat Forge Ltd. will be awarded five 660 megawatt units and Toshiba and JSW Energy Ltd. will supply two units, they said today, after NTPC selected the suppliers.
The contracts may be worth 11 million rupees ($244,730) per megawatt, one of the people said. That would value the total orders at about 79.9 billion rupees.
NTPC, India’s biggest power producer, aims to accelerate construction of plants to end blackouts that curtail growth in Asia’s third-biggest economy after failing to meet its expansion target this fiscal year. Chairman Arup Roy Choudhury said today the utility plans to add 3,100 megawatts of capacity in the year ending March 31 and 5,500 megawatts in the following 12 months,.
NTPC, based in New Delhi, plans to place orders worth at least 328.5 billion rupees for generators by March 31, Chairman Choudhury said Nov. 29.
“We haven’t received the awards yet because the projects have yet to receive environmental clearances,” Bharat Heavy Chairman B.P. Rao said by telephone from New Delhi today.
The company will award the contracts for the 660 megawatt boilers in the three months starting Jan. 1, NTPC’s Choudhury said today, without naming the suppliers. The company plans to open bidding for 800 megawatt boilers by March, he said.
Bharat Heavy will provide four so-called supercritical turbines of 660 megawatts each at two sites, one belonging to NTPC Ltd. and another to state-run Damodar Valley Corp, the people said, declining to be identified before a formal announcement. A venture between Alstom and Bharat Forge Ltd. will be awarded five 660 megawatt units and Toshiba and JSW Energy Ltd. will supply two units, they said today, after NTPC selected the suppliers.
The contracts may be worth 11 million rupees ($244,730) per megawatt, one of the people said. That would value the total orders at about 79.9 billion rupees.
NTPC, India’s biggest power producer, aims to accelerate construction of plants to end blackouts that curtail growth in Asia’s third-biggest economy after failing to meet its expansion target this fiscal year. Chairman Arup Roy Choudhury said today the utility plans to add 3,100 megawatts of capacity in the year ending March 31 and 5,500 megawatts in the following 12 months,.
NTPC, based in New Delhi, plans to place orders worth at least 328.5 billion rupees for generators by March 31, Chairman Choudhury said Nov. 29.
“We haven’t received the awards yet because the projects have yet to receive environmental clearances,” Bharat Heavy Chairman B.P. Rao said by telephone from New Delhi today.
The company will award the contracts for the 660 megawatt boilers in the three months starting Jan. 1, NTPC’s Choudhury said today, without naming the suppliers. The company plans to open bidding for 800 megawatt boilers by March, he said.
Singh hits out at India’s business leaders
Manmohan Singh, India’s prime minister, has accused Indian business leaders of having an “ethical deficit” that could impair their ability to expand internationally.
In an unprecedented broadside on Indian business on Tuesday, Mr Singh appealed to corporate leaders to adhere to universal standards of good governance.
“Our business leaders are aware that business practices of some corporate houses have recently come under intense public scrutiny for their perceived ethical deficit,” Mr Singh said at the launch of a week celebrating corporate India's rise.
“Our corporate culture must be attuned to the universally accepted values of good governance ... we must trust corporate India, as indeed [corporate India] must trust us.”
Mr Singh’s comments come as his government is engulfed by several corruption scandals that have dented the credibility of his cabinet and threaten to tar him.
The most damaging scandal is a furore over telecoms licensing that has paralysed the world’s largest democracy for weeks, entirely jamming the winter parliament session.
An official audit citing “serious irregularities” and estimating that as much as $40bn had been lost by the exchequer precipitated the resignation of the telecoms minister last month. It has turned the heat on the leadership of the ruling Congress party.
Mr Singh also warned against business embracing “extreme models of non-regulation”, a reference to the increasingly freewheeling nature of Indian business, and also against concentrating wealth “unethically” in the hands of the few in a country of 1.2bn people.
His comments were his first personal response to the scandals that have erupted around his Congress party-led government in recent weeks. The revelations have precipitated a crisis of trust between government leaders and senior business people.
Sonia Gandhi, the president of the Congress party, has scurried to its defence over an issue that threatens to damage it in coming state elections.
“It is a painful fact that corruption seems to be widespread and I feel strongly that it is our responsibility as well as that of each and every political party to together seriously devise a way, a mechanism, to curb this growing menace,” she said on Monday.
Mr Singh also defended the wide use of phone tapping, including recordings of Ratan Tata, chairman of the Tata Group, and other corporate leaders, saying such covert surveillance was necessary in the “world we live in”.
The prime minister stressed that while phone tapping had to be done with “upmost care”, it was necessary to improve law enforcement in the country.
Meanwhile, more phone taps have surfaced showing the country’s lobbyists and corporate power brokers pushing for the placement of their own loyalists in cabinet jobs.
In one recording, the widely respected Tarun Das, a former senior adviser to the Confederation of Indian Industry, is heard describing his recommendation of Kamal Nath as new highways minister and suggesting that money could be made from the portfolio. Mr Das has since apologised for his remarks.
Business lobby groups fear the damage that corruption is wreaking on the international image of the fastest growing large economy outside of China.
The Federation of Indian Chambers of Commerce and Industry on Tuesday said it was “deeply concerned about the potential damage to brand India and the India story due to brazen acts of corruption by a select few”.
In an unprecedented broadside on Indian business on Tuesday, Mr Singh appealed to corporate leaders to adhere to universal standards of good governance.
“Our business leaders are aware that business practices of some corporate houses have recently come under intense public scrutiny for their perceived ethical deficit,” Mr Singh said at the launch of a week celebrating corporate India's rise.
“Our corporate culture must be attuned to the universally accepted values of good governance ... we must trust corporate India, as indeed [corporate India] must trust us.”
Mr Singh’s comments come as his government is engulfed by several corruption scandals that have dented the credibility of his cabinet and threaten to tar him.
The most damaging scandal is a furore over telecoms licensing that has paralysed the world’s largest democracy for weeks, entirely jamming the winter parliament session.
An official audit citing “serious irregularities” and estimating that as much as $40bn had been lost by the exchequer precipitated the resignation of the telecoms minister last month. It has turned the heat on the leadership of the ruling Congress party.
Mr Singh also warned against business embracing “extreme models of non-regulation”, a reference to the increasingly freewheeling nature of Indian business, and also against concentrating wealth “unethically” in the hands of the few in a country of 1.2bn people.
His comments were his first personal response to the scandals that have erupted around his Congress party-led government in recent weeks. The revelations have precipitated a crisis of trust between government leaders and senior business people.
Sonia Gandhi, the president of the Congress party, has scurried to its defence over an issue that threatens to damage it in coming state elections.
“It is a painful fact that corruption seems to be widespread and I feel strongly that it is our responsibility as well as that of each and every political party to together seriously devise a way, a mechanism, to curb this growing menace,” she said on Monday.
Mr Singh also defended the wide use of phone tapping, including recordings of Ratan Tata, chairman of the Tata Group, and other corporate leaders, saying such covert surveillance was necessary in the “world we live in”.
The prime minister stressed that while phone tapping had to be done with “upmost care”, it was necessary to improve law enforcement in the country.
Meanwhile, more phone taps have surfaced showing the country’s lobbyists and corporate power brokers pushing for the placement of their own loyalists in cabinet jobs.
In one recording, the widely respected Tarun Das, a former senior adviser to the Confederation of Indian Industry, is heard describing his recommendation of Kamal Nath as new highways minister and suggesting that money could be made from the portfolio. Mr Das has since apologised for his remarks.
Business lobby groups fear the damage that corruption is wreaking on the international image of the fastest growing large economy outside of China.
The Federation of Indian Chambers of Commerce and Industry on Tuesday said it was “deeply concerned about the potential damage to brand India and the India story due to brazen acts of corruption by a select few”.
Monday, December 13, 2010
Tax Breaks Bring Hope for Hiring
To many manufacturing companies, the tax cut proposal now being considered in Washington may be just enough to spur additional spending and hiring.
At Yushin America, a Rhode Island company that makes and maintains robotic manufacturing equipment, executives say that the business tax breaks would allow them to invest in new machinery, new employees and even a new roof.
“It’s a chance for us to put it back in the business and grow,” said Michael Greenhalgh, operations manager of the company in Cranston, which employs 60 people and has annual sales of about $21 million.
Tax cuts intended for businesses are a relatively small part of the $858 billion tax bill scheduled for a final vote in the Senate as early as Tuesday.
The Joint Committee on Taxation estimated that about $75 billion of the tax breaks in the plan were aimed at businesses, including $13 billion for a two-year extension of the coveted research and development credit, which helps cover the cost of wages for employees involved in research. The proposal also commits $22 billion for accelerated depreciation, which in 2011 would allow businesses to write off 100 percent of their capital expenditures immediately instead of over several years.
Many economists are skeptical of the tax breaks’ potential to stoke the economy in any meaningful way. Businesses are sitting on more than a trillion in cash, but are reluctant to invest because of lagging demand, a problem that tax incentives are not devised to address.
“The research and development credit is a good thing, with a limited effect, and the accelerated depreciation will get people to move forward with investment that they probably would have done anyway,” said David Wyss, chief economist at Standard & Poor’s. “But when you look at the amount of money involved, you’re not getting a lot of bang for your buck.”
But the Obama administration says it believes that the measure will help the economy gather strength and the recovery grow more robust. The president has asked a group of top business executives to meet with him on Wednesday, when he hopes to rally their support for the tax proposal and to formulate a new strategy for creating jobs and reviving the economy.
“Based on past experience with similar tax incentive programs, the Treasury estimates that the 100 percent expensing provision in the bill could support $50 billion in new investment, while other outside estimates have projected an even larger impact,” said Amy Brundage, a White House spokeswoman.
Through much of the summer and fall, Republicans warned that President Obama’s call to let the Bush-era tax cuts expire for the top 2 percent of earners — individuals with incomes above $200,000 and families making more than $250,000 — would harm small businesses. The income of many business owners is taxed at individual rates. Democrats countered that only 3 percent of all businesses made enough to be affected, but Mr. Obama conceded.
In addition, Congress has added more than $50 billion to extend an assortment of business tax breaks to benefit a variety of industries — including the renewable energy, ethanol, computer and publishing companies and oil drillers.
Some businesses say that the tax breaks are little more than a giveaway, intended to win support of Republicans in Congress and salve the president’s strained relations with business leaders. Dennis Mehiel, chairman of U.S. Corrugated Inc., was one of dozens of millionaires who wrote to Mr. Obama asking that he raise the top tax rates on the wealthy. While Mr. Mehiel says he thinks that the research and development and depreciation breaks will help some businesses, he fears that the overall package is a poor use of public money.
“I have no belief that hiring, business expansion decisions, investment decisions will be materially impacted by maintaining the somewhat lower tax rates,” said Mr. Mehiel, whose company employs 2,500 people at 20 package manufacturing facilities.
To many manufacturing companies, however, the tax deal has the effect of both reducing their own burdens and increasing orders from other businesses that will have incentive to buy equipment and supplies.
“These are catalysts for job creation,” said Monica McGuire, a policy analyst at the National Association of Manufacturers.
At Yushin, company officials say the various tax provisions will allow the robotics company to hire at least four engineers, in addition to spending $95,000 to fix a leaky roof and $90,000 more to replace outdated air-conditioning units.
Company officials at Bison Gear and Engineering, a manufacturer of electric motors in the Chicago area, said the tax savings would help them expand their payroll.
Because Bison is organized as a subchapter S corporation, and its income is taxed at its owners’ individual rate, it will benefit if Congress extends the tax break for the wealthy. The company, which has $50 million in sales and 225 employees, will also reap tax savings from the changes in depreciation and research policies.
Ron Bullock, company chairman, said three positions in the research and development staff had been vacant for months as he tried to gauge the strength of the economic recovery and the prospects of a double-dip recession. With the tax savings, Mr. Bullock said, he expects to hire as well as replace aging equipment.
“Other businesses will use their tax incentives to order products from us, which will allow us to hire and, hopefully, expand,” he said. “That’s the way you turn an economy around, and allay the fears people have about whether this economy is a good place to invest.”
At Yushin America, a Rhode Island company that makes and maintains robotic manufacturing equipment, executives say that the business tax breaks would allow them to invest in new machinery, new employees and even a new roof.
“It’s a chance for us to put it back in the business and grow,” said Michael Greenhalgh, operations manager of the company in Cranston, which employs 60 people and has annual sales of about $21 million.
Tax cuts intended for businesses are a relatively small part of the $858 billion tax bill scheduled for a final vote in the Senate as early as Tuesday.
The Joint Committee on Taxation estimated that about $75 billion of the tax breaks in the plan were aimed at businesses, including $13 billion for a two-year extension of the coveted research and development credit, which helps cover the cost of wages for employees involved in research. The proposal also commits $22 billion for accelerated depreciation, which in 2011 would allow businesses to write off 100 percent of their capital expenditures immediately instead of over several years.
Many economists are skeptical of the tax breaks’ potential to stoke the economy in any meaningful way. Businesses are sitting on more than a trillion in cash, but are reluctant to invest because of lagging demand, a problem that tax incentives are not devised to address.
“The research and development credit is a good thing, with a limited effect, and the accelerated depreciation will get people to move forward with investment that they probably would have done anyway,” said David Wyss, chief economist at Standard & Poor’s. “But when you look at the amount of money involved, you’re not getting a lot of bang for your buck.”
But the Obama administration says it believes that the measure will help the economy gather strength and the recovery grow more robust. The president has asked a group of top business executives to meet with him on Wednesday, when he hopes to rally their support for the tax proposal and to formulate a new strategy for creating jobs and reviving the economy.
“Based on past experience with similar tax incentive programs, the Treasury estimates that the 100 percent expensing provision in the bill could support $50 billion in new investment, while other outside estimates have projected an even larger impact,” said Amy Brundage, a White House spokeswoman.
Through much of the summer and fall, Republicans warned that President Obama’s call to let the Bush-era tax cuts expire for the top 2 percent of earners — individuals with incomes above $200,000 and families making more than $250,000 — would harm small businesses. The income of many business owners is taxed at individual rates. Democrats countered that only 3 percent of all businesses made enough to be affected, but Mr. Obama conceded.
In addition, Congress has added more than $50 billion to extend an assortment of business tax breaks to benefit a variety of industries — including the renewable energy, ethanol, computer and publishing companies and oil drillers.
Some businesses say that the tax breaks are little more than a giveaway, intended to win support of Republicans in Congress and salve the president’s strained relations with business leaders. Dennis Mehiel, chairman of U.S. Corrugated Inc., was one of dozens of millionaires who wrote to Mr. Obama asking that he raise the top tax rates on the wealthy. While Mr. Mehiel says he thinks that the research and development and depreciation breaks will help some businesses, he fears that the overall package is a poor use of public money.
“I have no belief that hiring, business expansion decisions, investment decisions will be materially impacted by maintaining the somewhat lower tax rates,” said Mr. Mehiel, whose company employs 2,500 people at 20 package manufacturing facilities.
To many manufacturing companies, however, the tax deal has the effect of both reducing their own burdens and increasing orders from other businesses that will have incentive to buy equipment and supplies.
“These are catalysts for job creation,” said Monica McGuire, a policy analyst at the National Association of Manufacturers.
At Yushin, company officials say the various tax provisions will allow the robotics company to hire at least four engineers, in addition to spending $95,000 to fix a leaky roof and $90,000 more to replace outdated air-conditioning units.
Company officials at Bison Gear and Engineering, a manufacturer of electric motors in the Chicago area, said the tax savings would help them expand their payroll.
Because Bison is organized as a subchapter S corporation, and its income is taxed at its owners’ individual rate, it will benefit if Congress extends the tax break for the wealthy. The company, which has $50 million in sales and 225 employees, will also reap tax savings from the changes in depreciation and research policies.
Ron Bullock, company chairman, said three positions in the research and development staff had been vacant for months as he tried to gauge the strength of the economic recovery and the prospects of a double-dip recession. With the tax savings, Mr. Bullock said, he expects to hire as well as replace aging equipment.
“Other businesses will use their tax incentives to order products from us, which will allow us to hire and, hopefully, expand,” he said. “That’s the way you turn an economy around, and allay the fears people have about whether this economy is a good place to invest.”
Oil Trades Near Four-Day High Before Report That May Show Stocks Declined
Oil traded near the highest close in four days before a report that may show U.S. crude supplies fell to the lowest in five months.
Futures rose 0.9 percent to $88.61 a barrel yesterday, the highest close since Dec. 7, after China said its refineries ran at record rates last month, signaling demand is increasing in the world’s biggest energy user. U.S. crude stockpiles probably dropped to the lowest since July 9, according to a Bloomberg News survey before an Energy Department report tomorrow.
The January contract traded at $88.53 a barrel, down 8 cents, in electronic trading on the New York Mercantile Exchange at 8:58 a.m. Singapore time. It earlier slid as much as 0.5 percent. Prices are up 12 percent this year.
Crude prices will rise above $100 a barrel by the second half of next year as U.S. demand recovers and global inventories decline, Goldman Sachs Group Inc. said in its 2011 commodities outlook, dated yesterday.
U.S. oil stockpiles fell 2.6 million barrels in the seven days to Dec. 10, according to the median of 11 analysts’ estimates. Gasoline inventories probably increased for a fourth week, gaining 2 million barrels last week from 214 million, according to the survey.
Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably slipped 1 million barrels from 160.2 million. Six of the respondents forecast a decline, four projected a gain and one said there was no change.
The Energy Department is scheduled to release its weekly report at 10:30 a.m. on Dec. 15 in Washington. The industry- funded American Petroleum Institute will publish its own estimates today.
Futures rose 0.9 percent to $88.61 a barrel yesterday, the highest close since Dec. 7, after China said its refineries ran at record rates last month, signaling demand is increasing in the world’s biggest energy user. U.S. crude stockpiles probably dropped to the lowest since July 9, according to a Bloomberg News survey before an Energy Department report tomorrow.
The January contract traded at $88.53 a barrel, down 8 cents, in electronic trading on the New York Mercantile Exchange at 8:58 a.m. Singapore time. It earlier slid as much as 0.5 percent. Prices are up 12 percent this year.
Crude prices will rise above $100 a barrel by the second half of next year as U.S. demand recovers and global inventories decline, Goldman Sachs Group Inc. said in its 2011 commodities outlook, dated yesterday.
U.S. oil stockpiles fell 2.6 million barrels in the seven days to Dec. 10, according to the median of 11 analysts’ estimates. Gasoline inventories probably increased for a fourth week, gaining 2 million barrels last week from 214 million, according to the survey.
Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably slipped 1 million barrels from 160.2 million. Six of the respondents forecast a decline, four projected a gain and one said there was no change.
The Energy Department is scheduled to release its weekly report at 10:30 a.m. on Dec. 15 in Washington. The industry- funded American Petroleum Institute will publish its own estimates today.
Cash Crunch Means RBI Seen Buying 300 Billion Rupees of Debt: India Credit
India’s government may buy more bonds from the market to ease the worst cash crunch in 10 years, according to companies obliged to bid at debt auctions.
The yield on the benchmark 2020 security has dropped 10 basis points from a 26-month high of 8.21 percent in the past week as the Reserve Bank of India bought back 101 billion rupees ($2.2 billion) of securities on behalf of the finance ministry. Policy makers may purchase 300 billion rupees of notes for the rest of the financial year ending March 31, according to ICICI Securities Primary Dealership Ltd. and IDBI Gilts Ltd., including 120 billion rupees tomorrow, the most this quarter.
“The banking system is short of liquidity, and so the RBI may want to address that through bond buybacks,” Manoj Swain, chief executive officer at Morgan Stanley India Primary Dealer Pvt. in Mumbai, said in a phone interview yesterday, without specifying how much policy makers would purchase.
Governor Duvvuri Subbarao said Dec. 9 he is “deeply conscious” of the shortage of cash in the banking system, even as inflation stays above the central bank’s “tolerance level.” A government report today will show benchmark inflation cooled to 7.45 percent in November from 8.58 percent in October, according to the median estimate of economists in a Bloomberg survey, compared with 8.1 percent in Russia, 5.1 percent in China and 5.6 percent in Brazil.
The central bank injected an average 818 billion rupees every day into banks this quarter, the most since 2000, according to data compiled by Bloomberg. The amount the lenders borrowed is an indication of the shortage of funds in the financial system. The government raised 677.2 billion rupees by auctioning third-generation phone licenses in May and 385.4 billion rupees by selling Internet permits a month later, draining cash from lenders.
Yields Climb
The cost of fixing rates on money for three months surged 293 basis points, or 2.93 percentage points, this year to 6.88 percent in the interest-rate swaps market, data compiled by Bloomberg show. Overnight loan rates between banks averaged 6.6 percent this month, twice the rate a year ago.
The yield on the 7.8 percent bond maturing in May 2020 climbed 2 basis points to 8.11 percent yesterday on concern tax payments will deplete cash in the system. Such payments will total 500 billion rupees this week, according to ICICI Securities Primary Dealership.
“Bond purchases may be a key tool policy makers will look at, with corporate-tax outflows set to add to the liquidity tightness,” Namrata Padhye, a fixed-income strategist at Mumbai-based primary dealer IDBI Gilts, said in an interview yesterday.
Bond Returns
India’s three-month Treasury bill yields have more than doubled to 7.16 percent this year as the Reserve Bank lifted borrowing costs by 150 basis points, the most of any central bank in Asia, data compiled by Bloomberg show. The comparable measure climbed 14 basis points to 10.66 percent in Brazil and 8 basis points to 0.12 percent in the U.S. The rate on similar notes from the People’s Bank of China rose 115 basis points to 2.96 percent.
The difference in yields between India’s debt due in a decade and similar-maturity U.S. Treasuries was 477 basis points yesterday, compared with 372 at the start of the year.
India’s bonds have returned 4.1 percent this year, the fourth-worst performance among 10 local-currency debt markets tracked by HSBC Holdings Plc. Investors in Indonesia’s debt assets earned 22.4 percent, the most in the region, according to Europe’s largest bank.
The rupee, which has appreciated 3 percent this year, dropped 0.2 percent yesterday to 45.14 per dollar, according to data compiled by Bloomberg.
Fiscal Deficit
The cost of protecting the debt of government-owned State Bank of India, which some investors perceive as a proxy for the nation, has dropped 77 basis points from this year’s peak of 239 on optimism the nation will meet its fiscal-deficit target, 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.
The government plans to reduce the fiscal deficit to 5.5 percent of gross domestic product in the current financial year from 6.9 percent last year, the sharpest cut in three years, helped by sales of stakes in state-run companies. Prime Minister Manmohan Singh is seeking to raise 400 billion rupees by selling such assets in the year to March to help fund the construction of roads, ports and hospitals.
“The central bank will do more buybacks and try to infuse some money,” Prasanna Ananthasubramaniam, a Mumbai-based chief economist at ICICI Securities Primary Dealership, said in an interview yesterday.
The yield on the benchmark 2020 security has dropped 10 basis points from a 26-month high of 8.21 percent in the past week as the Reserve Bank of India bought back 101 billion rupees ($2.2 billion) of securities on behalf of the finance ministry. Policy makers may purchase 300 billion rupees of notes for the rest of the financial year ending March 31, according to ICICI Securities Primary Dealership Ltd. and IDBI Gilts Ltd., including 120 billion rupees tomorrow, the most this quarter.
“The banking system is short of liquidity, and so the RBI may want to address that through bond buybacks,” Manoj Swain, chief executive officer at Morgan Stanley India Primary Dealer Pvt. in Mumbai, said in a phone interview yesterday, without specifying how much policy makers would purchase.
Governor Duvvuri Subbarao said Dec. 9 he is “deeply conscious” of the shortage of cash in the banking system, even as inflation stays above the central bank’s “tolerance level.” A government report today will show benchmark inflation cooled to 7.45 percent in November from 8.58 percent in October, according to the median estimate of economists in a Bloomberg survey, compared with 8.1 percent in Russia, 5.1 percent in China and 5.6 percent in Brazil.
The central bank injected an average 818 billion rupees every day into banks this quarter, the most since 2000, according to data compiled by Bloomberg. The amount the lenders borrowed is an indication of the shortage of funds in the financial system. The government raised 677.2 billion rupees by auctioning third-generation phone licenses in May and 385.4 billion rupees by selling Internet permits a month later, draining cash from lenders.
Yields Climb
The cost of fixing rates on money for three months surged 293 basis points, or 2.93 percentage points, this year to 6.88 percent in the interest-rate swaps market, data compiled by Bloomberg show. Overnight loan rates between banks averaged 6.6 percent this month, twice the rate a year ago.
The yield on the 7.8 percent bond maturing in May 2020 climbed 2 basis points to 8.11 percent yesterday on concern tax payments will deplete cash in the system. Such payments will total 500 billion rupees this week, according to ICICI Securities Primary Dealership.
“Bond purchases may be a key tool policy makers will look at, with corporate-tax outflows set to add to the liquidity tightness,” Namrata Padhye, a fixed-income strategist at Mumbai-based primary dealer IDBI Gilts, said in an interview yesterday.
Bond Returns
India’s three-month Treasury bill yields have more than doubled to 7.16 percent this year as the Reserve Bank lifted borrowing costs by 150 basis points, the most of any central bank in Asia, data compiled by Bloomberg show. The comparable measure climbed 14 basis points to 10.66 percent in Brazil and 8 basis points to 0.12 percent in the U.S. The rate on similar notes from the People’s Bank of China rose 115 basis points to 2.96 percent.
The difference in yields between India’s debt due in a decade and similar-maturity U.S. Treasuries was 477 basis points yesterday, compared with 372 at the start of the year.
India’s bonds have returned 4.1 percent this year, the fourth-worst performance among 10 local-currency debt markets tracked by HSBC Holdings Plc. Investors in Indonesia’s debt assets earned 22.4 percent, the most in the region, according to Europe’s largest bank.
The rupee, which has appreciated 3 percent this year, dropped 0.2 percent yesterday to 45.14 per dollar, according to data compiled by Bloomberg.
Fiscal Deficit
The cost of protecting the debt of government-owned State Bank of India, which some investors perceive as a proxy for the nation, has dropped 77 basis points from this year’s peak of 239 on optimism the nation will meet its fiscal-deficit target, 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.
The government plans to reduce the fiscal deficit to 5.5 percent of gross domestic product in the current financial year from 6.9 percent last year, the sharpest cut in three years, helped by sales of stakes in state-run companies. Prime Minister Manmohan Singh is seeking to raise 400 billion rupees by selling such assets in the year to March to help fund the construction of roads, ports and hospitals.
“The central bank will do more buybacks and try to infuse some money,” Prasanna Ananthasubramaniam, a Mumbai-based chief economist at ICICI Securities Primary Dealership, said in an interview yesterday.
Reckitt wins tussle for India’s Paras
Reckitt Benckiser, the household products group, has trumped multinational and domestic bidders by agreeing to pay Rs32.6bn (£454m) for India’s Paras Pharmaceuticals.
The tussle for Paras, which combines an over-the-counter drugs business with branded personal care products, reflects a desire to tap the fast-growing Indian market, described by Bart Becht, Reckitt chief executive, as “one of the most promising healthcare markets in the world”.
The deal also demonstrates Reckitt’s growing interest in OTC drugs.
Mr Becht said: “The acquisition of Paras is another step forward in Reckitt’s growth strategy in consumer healthcare.”
Reckitt bought the Indian group, which generated Rs4bn in sales in its last fiscal year, from Actis, the emerging markets-focused private equity company that owns 63 per cent of the company, and from minority owners Sequoia Capital and Girish Patel, the founder of Paras.
Analysts described the price tag, at 30 times trailing earnings before interest, tax, depreciation and amortisation, as full. Chas Manso, Evolution Securities analyst, estimates Reckitt will need to quadruple Paras’ ebitda (of Rs1.1bn in the year to March) to cover its cost of capital, assuming a 9 per cent weighted average cost of capital.
Sarabjit Kour Nangra, a pharmaceuticals analyst at Angel Broking in Mumbai, said: “Although the valuation might look high, it makes sense as it factors in India’s strong growth story.”
The deal follows a series of acquisitions and partnerships between Indian and foreign companies this year, including Abbott Laboratories’ acquisition of Piramal Healthcare for $3.7bn (£2.3bn) in May.
Other groups that have sealed partnerships include GlaxoSmithKline with Dr Reddy’s Laboratories, and Pfizer with Aurobindo and Claris Lifesciences.
Reckitt was advised by JPMorgan, while Paras shareholders were advised by Morgan Stanley.
Reckitt shares closed 64p higher at £35.73.
● FT Comment
Paras ticks two boxes for Reckitt. First, drugs have been good for its shareholders; not just the heroin substitute Suboxone but also OTC drugs such as Nurofen. Second, Reckitt is a relative laggard in emerging markets, which accounted for just one-fifth of net revenues last year. Paras hasn’t come cheap. The enterprise value/ebitda multiple of 30 times is almost 50 per cent more than the multiple it paid for condom and sandal maker SSL. But that comes out in the wash when you turn over £12bn and excel at squeezing out synergies. The real question is Reckitt’s ability to manage a far-away business with its own demons: Evolution Securities’ Chas Manso notes that one of Paras’ founding brothers has set up a rival company. Business in India, as Procter & Gamble and Unilever among others have learnt, is seldom plain sailing.
The tussle for Paras, which combines an over-the-counter drugs business with branded personal care products, reflects a desire to tap the fast-growing Indian market, described by Bart Becht, Reckitt chief executive, as “one of the most promising healthcare markets in the world”.
The deal also demonstrates Reckitt’s growing interest in OTC drugs.
Mr Becht said: “The acquisition of Paras is another step forward in Reckitt’s growth strategy in consumer healthcare.”
Reckitt bought the Indian group, which generated Rs4bn in sales in its last fiscal year, from Actis, the emerging markets-focused private equity company that owns 63 per cent of the company, and from minority owners Sequoia Capital and Girish Patel, the founder of Paras.
Analysts described the price tag, at 30 times trailing earnings before interest, tax, depreciation and amortisation, as full. Chas Manso, Evolution Securities analyst, estimates Reckitt will need to quadruple Paras’ ebitda (of Rs1.1bn in the year to March) to cover its cost of capital, assuming a 9 per cent weighted average cost of capital.
Sarabjit Kour Nangra, a pharmaceuticals analyst at Angel Broking in Mumbai, said: “Although the valuation might look high, it makes sense as it factors in India’s strong growth story.”
The deal follows a series of acquisitions and partnerships between Indian and foreign companies this year, including Abbott Laboratories’ acquisition of Piramal Healthcare for $3.7bn (£2.3bn) in May.
Other groups that have sealed partnerships include GlaxoSmithKline with Dr Reddy’s Laboratories, and Pfizer with Aurobindo and Claris Lifesciences.
Reckitt was advised by JPMorgan, while Paras shareholders were advised by Morgan Stanley.
Reckitt shares closed 64p higher at £35.73.
● FT Comment
Paras ticks two boxes for Reckitt. First, drugs have been good for its shareholders; not just the heroin substitute Suboxone but also OTC drugs such as Nurofen. Second, Reckitt is a relative laggard in emerging markets, which accounted for just one-fifth of net revenues last year. Paras hasn’t come cheap. The enterprise value/ebitda multiple of 30 times is almost 50 per cent more than the multiple it paid for condom and sandal maker SSL. But that comes out in the wash when you turn over £12bn and excel at squeezing out synergies. The real question is Reckitt’s ability to manage a far-away business with its own demons: Evolution Securities’ Chas Manso notes that one of Paras’ founding brothers has set up a rival company. Business in India, as Procter & Gamble and Unilever among others have learnt, is seldom plain sailing.
China warns of ‘fragile’ India relationship
Beijing has warned that its relationship with New Delhi is “very fragile” and can be easily destabilised only days before of a visit by premier Wen Jiabao to India.
Zhang Yan, the Chinese ambassador to India, said on Monday that bilateral relations between two of Asia’s biggest powers were “very fragile, very easy to be damaged and very difficult to repair. Therefore, they need special care in the information age.”
“To achieve this, the [Indian] government should provide guidance to the public to avoid a war of words,” he added.
His comments come as India and China try to resolve a decades-long border dispute over the Indian state of Arunachal Pradesh and to restore balance to a lopsided trading relationship heavily skewed in China’s favour. Trade between the two is worth $60bn annually, but India runs a large trade deficit with China that has been growing steadily for a number of years.
On Wednesday Mr Wen will pay a rare visit to New Delhi, accompanied by a 400-strong trade delegation – one of the largest ever to visit India – amid expectations of striking deals worth as much as $20bn.
In spite of increasing bilateral trade across the Himalayas during the past decade, and co-operation on global issues such as climate change, India and China remain apprehensive about each other’s growing international clout and strengthening economies.
In the face of widespread concerns in India about China’s rise and its future intentions in south Asia, Mr Zhang told Indian business leaders that New Delhi had to prevent “a war of words” in public discourse.
In response, Nirupama Rao, India’s foreign secretary, said China had nothing to fear from India’s “vibrant and noisy democracy”. She said the two countries needed to co-operate in a spirit of “competition and collaboration”.
”Often, our Chinese friends speak of a certain gulf in appreciation of each country vis-a-vis the other, especially when it comes to opinions of that are expressed in the media of the two countries,” Ms Rao said.
“Our Chinese friends are increasingly exposed to the vibrant, I would say, noisy nature of our democracy. The fact that many schools of thought contend, many opinions are expressed which are often at divergence with each other,” she added.
Mr Zhang voiced Beijing’s support for a free-trade agreement between the world’s fastest growing large economies, which he said would be on the agenda of Mr Wen’s visit.
He proposed that “the two neighbouring countries should work together as a world factory and world office”.
“The free trade agreement is the next stage [of India-China relations]. It is our hope that we can start the process,” said Mr Zhang.
India, which is hoping to seal a trade pact with the European Union early next year, is resistant to a free-trade agreement with a neighbour whose cheap goods are already flooding across the border. Anand Sharma, India’s commerce minister, told the Financial Times that India had never promoted the idea of free trade with China.
“The development of diversified trade, tourism and investment co-operation would be crucial for reducing the trade imbalance,” Mr Zhang said. “We want to work with countries to minimise the imbalance because we know that in the long run a big gap in trade is not healthy or sustainable.”
Beijing is also seeking greater access for its financial services sector in India. Mr Zhang said that 10 Indian banks were operating in China, but no Chinese bank had a presence in India.
Chinese authorities have implied that Industrial and Commercial Bank of China, the world’s largest bank, will be given permission soon to start operations in India.
Zhang Yan, the Chinese ambassador to India, said on Monday that bilateral relations between two of Asia’s biggest powers were “very fragile, very easy to be damaged and very difficult to repair. Therefore, they need special care in the information age.”
“To achieve this, the [Indian] government should provide guidance to the public to avoid a war of words,” he added.
His comments come as India and China try to resolve a decades-long border dispute over the Indian state of Arunachal Pradesh and to restore balance to a lopsided trading relationship heavily skewed in China’s favour. Trade between the two is worth $60bn annually, but India runs a large trade deficit with China that has been growing steadily for a number of years.
On Wednesday Mr Wen will pay a rare visit to New Delhi, accompanied by a 400-strong trade delegation – one of the largest ever to visit India – amid expectations of striking deals worth as much as $20bn.
In spite of increasing bilateral trade across the Himalayas during the past decade, and co-operation on global issues such as climate change, India and China remain apprehensive about each other’s growing international clout and strengthening economies.
In the face of widespread concerns in India about China’s rise and its future intentions in south Asia, Mr Zhang told Indian business leaders that New Delhi had to prevent “a war of words” in public discourse.
In response, Nirupama Rao, India’s foreign secretary, said China had nothing to fear from India’s “vibrant and noisy democracy”. She said the two countries needed to co-operate in a spirit of “competition and collaboration”.
”Often, our Chinese friends speak of a certain gulf in appreciation of each country vis-a-vis the other, especially when it comes to opinions of that are expressed in the media of the two countries,” Ms Rao said.
“Our Chinese friends are increasingly exposed to the vibrant, I would say, noisy nature of our democracy. The fact that many schools of thought contend, many opinions are expressed which are often at divergence with each other,” she added.
Mr Zhang voiced Beijing’s support for a free-trade agreement between the world’s fastest growing large economies, which he said would be on the agenda of Mr Wen’s visit.
He proposed that “the two neighbouring countries should work together as a world factory and world office”.
“The free trade agreement is the next stage [of India-China relations]. It is our hope that we can start the process,” said Mr Zhang.
India, which is hoping to seal a trade pact with the European Union early next year, is resistant to a free-trade agreement with a neighbour whose cheap goods are already flooding across the border. Anand Sharma, India’s commerce minister, told the Financial Times that India had never promoted the idea of free trade with China.
“The development of diversified trade, tourism and investment co-operation would be crucial for reducing the trade imbalance,” Mr Zhang said. “We want to work with countries to minimise the imbalance because we know that in the long run a big gap in trade is not healthy or sustainable.”
Beijing is also seeking greater access for its financial services sector in India. Mr Zhang said that 10 Indian banks were operating in China, but no Chinese bank had a presence in India.
Chinese authorities have implied that Industrial and Commercial Bank of China, the world’s largest bank, will be given permission soon to start operations in India.
Sunday, December 12, 2010
As China Rolls Ahead, Fear Follows
SHANGHAI
For nearly two years, China’s turbocharged economy has raced ahead with the aid of a huge government stimulus program and aggressive lending by state-run banks.
But a growing number of economists now worry that China — the world’s fastest growing economy and a pillar of strength during the global financial crisis — could be stalled next year by soaring inflation, mounting government debt and asset bubbles.
Two credit ratings agencies, Moody’s and Fitch Ratings, say China is still poised for growth, yet they have also recently warned about hidden risks in its banking system. Fitch even hinted at the possibility of another wave of nonperforming loans tied to the property market.
In the late 1990s and early this decade, the Chinese government was forced to bail out and recapitalize these same state-run banks because a soaring number of bad loans had left them nearly insolvent.
Those banks are much stronger now, after a series of record public stock offerings in recent years that have raised billions of dollars from global investors.
But last week, an analyst at the Royal Bank of Scotland advised clients to hedge against the risk that a flood of cash into China, coupled with soaring inflation, could result in a “day of reckoning.”
A sharp slowdown in China, which is growing at an annual rate of about 10 percent, would be a serious blow to the global economy since China’s voracious demand for natural resources is helping to prop up growth in Asia and South America, even as the United States and the European Union struggle.
And because China is a major holder of United States Treasury debt and a major destination for American investment in recent years, any slowdown would also hurt American companies.
Aware of the risks, Beijing has moved recently to tame its domestic growth and rein in soaring food and housing prices by raising interest rates, tightening regulations on property sales and restricting lending.
At the end of the Central Economic Work Conference, a high-level annual economic policy meeting that concluded on Sunday, Beijing promised to combat inflation and stabilize the economy. Those pledges came just days after the central bank ordered banks to set aside larger capital reserves in a bid to slow lending, the sixth time it has done so this year. And the government reported on Saturday that the consumer price index had climbed 5.1 percent in November, the sharpest rise in nearly three years.
Analysts say more tightening measures are expected in the coming months but that the challenges are mounting.
“There are so many moving pieces,” said Qu Hongbin, the chief China economist for HSBC in Hong Kong. “It wouldn’t be honest to say things aren’t complicated.”
Optimists say China has been adept at steering the right economic course over the last decade, ramping up growth when needed and tamping it down when things get too hot.
But this time, Beijing is not just struggling with inflation, it is also trying to restructure its economy away from dependence on exports and toward domestic consumption in the hopes of creating more balanced and sustainable growth, analysts say.
China is also facing mounting international pressure to let its currency, the renminbi, rise in value. Some trading partners insist China is keeping its currency artificially low to give Chinese exporters a competitive advantage.
Beijing contends that raising the value of its currency would hurt coastal factories that operate on thin profit margins, forcing them to lay off millions of workers.
The most immediate challenge appears to be inflation, which some analysts say may be even more serious than the new figures suggest. Housing prices have skyrocketed. And prices for milk, vegetables and other foods have soared this year.
“The money supply is too large,” said Andy Xie, an economist based in Shanghai who formerly worked at Morgan Stanley. “They increased the money supply to stimulate the economy. Now land prices have jumped 20 times in some places, 100 times in others. Inflation is broad-based. Go into a supermarket. Milk is more expensive in China than it is in the U.S.”
In Shanghai, where the average monthly wage is about $350, a gallon of milk now costs about $5.50.
Wages have also risen sharply this year in coastal provinces amid reports of labor shortages and worker demands for higher pay. Many analysts expect more wage increases next year.
That may be good for workers, analysts say, but it will also change the dynamics of the Chinese economy and its export sector while contributing to higher inflation.
Beijing is now under pressure to mop up excess liquidity after state banks went on a lending binge during the stimulus program that got under way in early 2009. Analysts say a large portion of that lending was diverted to speculate in the property market.
For nearly two years, China’s turbocharged economy has raced ahead with the aid of a huge government stimulus program and aggressive lending by state-run banks.
But a growing number of economists now worry that China — the world’s fastest growing economy and a pillar of strength during the global financial crisis — could be stalled next year by soaring inflation, mounting government debt and asset bubbles.
Two credit ratings agencies, Moody’s and Fitch Ratings, say China is still poised for growth, yet they have also recently warned about hidden risks in its banking system. Fitch even hinted at the possibility of another wave of nonperforming loans tied to the property market.
In the late 1990s and early this decade, the Chinese government was forced to bail out and recapitalize these same state-run banks because a soaring number of bad loans had left them nearly insolvent.
Those banks are much stronger now, after a series of record public stock offerings in recent years that have raised billions of dollars from global investors.
But last week, an analyst at the Royal Bank of Scotland advised clients to hedge against the risk that a flood of cash into China, coupled with soaring inflation, could result in a “day of reckoning.”
A sharp slowdown in China, which is growing at an annual rate of about 10 percent, would be a serious blow to the global economy since China’s voracious demand for natural resources is helping to prop up growth in Asia and South America, even as the United States and the European Union struggle.
And because China is a major holder of United States Treasury debt and a major destination for American investment in recent years, any slowdown would also hurt American companies.
Aware of the risks, Beijing has moved recently to tame its domestic growth and rein in soaring food and housing prices by raising interest rates, tightening regulations on property sales and restricting lending.
At the end of the Central Economic Work Conference, a high-level annual economic policy meeting that concluded on Sunday, Beijing promised to combat inflation and stabilize the economy. Those pledges came just days after the central bank ordered banks to set aside larger capital reserves in a bid to slow lending, the sixth time it has done so this year. And the government reported on Saturday that the consumer price index had climbed 5.1 percent in November, the sharpest rise in nearly three years.
Analysts say more tightening measures are expected in the coming months but that the challenges are mounting.
“There are so many moving pieces,” said Qu Hongbin, the chief China economist for HSBC in Hong Kong. “It wouldn’t be honest to say things aren’t complicated.”
Optimists say China has been adept at steering the right economic course over the last decade, ramping up growth when needed and tamping it down when things get too hot.
But this time, Beijing is not just struggling with inflation, it is also trying to restructure its economy away from dependence on exports and toward domestic consumption in the hopes of creating more balanced and sustainable growth, analysts say.
China is also facing mounting international pressure to let its currency, the renminbi, rise in value. Some trading partners insist China is keeping its currency artificially low to give Chinese exporters a competitive advantage.
Beijing contends that raising the value of its currency would hurt coastal factories that operate on thin profit margins, forcing them to lay off millions of workers.
The most immediate challenge appears to be inflation, which some analysts say may be even more serious than the new figures suggest. Housing prices have skyrocketed. And prices for milk, vegetables and other foods have soared this year.
“The money supply is too large,” said Andy Xie, an economist based in Shanghai who formerly worked at Morgan Stanley. “They increased the money supply to stimulate the economy. Now land prices have jumped 20 times in some places, 100 times in others. Inflation is broad-based. Go into a supermarket. Milk is more expensive in China than it is in the U.S.”
In Shanghai, where the average monthly wage is about $350, a gallon of milk now costs about $5.50.
Wages have also risen sharply this year in coastal provinces amid reports of labor shortages and worker demands for higher pay. Many analysts expect more wage increases next year.
That may be good for workers, analysts say, but it will also change the dynamics of the Chinese economy and its export sector while contributing to higher inflation.
Beijing is now under pressure to mop up excess liquidity after state banks went on a lending binge during the stimulus program that got under way in early 2009. Analysts say a large portion of that lending was diverted to speculate in the property market.
Glory Targets China, India as Demand for Cash Machines Shifts to Asia
Glory Ltd., Japan’s biggest maker of money-handling machines, plans to expand in India and increase its sales offices in China as demand for the equipment shifts from the U.S. and Europe to Asia.
“The momentum in Asia is completely different,” President Hideto Nishino said last week in an interview at the company’s headquarters in Himeji, west of Osaka. “Economically speaking, the U.S. and Europe still haven’t got back on their feet.”
Glory, which now manages Indian operations from Singapore, plans to establish sales offices in New Delhi or Mumbai as early as next year to meet demand for automatic-teller machines and banknote-counting equipment, Nishino said. Its offices in China will increase to about 40 from 35 this fiscal year, he said.
Asia is compensating for slumping sales in Europe and the U.S., and the region will surpass Europe as Glory’s biggest market in two or three years, Nishino said. Glory is seeking sales abroad after revenue from cigarette-vending machines, of which it is Japan’s biggest supplier, fell about 30 percent in the two years ended March 2010.
The company, whose customers include Bank of America Corp. and Mitsubishi UFJ Financial Group Inc., targets a rebound in annual sales to 170 billion yen ($2 billion) in fiscal 2011 as part of its mid-term plan. Revenue fell 27 percent to 135.1 billion yen over the past two years on lower vending-machine sales and as steps to privatize Japan’s postal-savings banks reduced demand for cash-dispensers.
Japan’s First Coin Counter
Nishino said the company is forecasting sales of 3.5 billion yen in China this fiscal year and expects its annual revenue in the world’s fastest-growing major economy to almost triple within the next two or three years.
Glory, which has fallen 1.9 percent this year, dropped 0.2 percent to 2,021 yen as of the close on the Osaka Securities Exchange on Dec. 10.
Founded in 1918 as Kokuei Machinery Manufacturing, Glory developed Japan’s first coin counter for the Japan Mint in 1950 and later began production of automatic-teller equipment and vending machines, according to the company’s website.
Glory on Nov. 5 reported net income rose 32 percent to 2.94 billion yen for the first half of this fiscal year as sales rose in China and it cut costs by shifting production abroad. China, home to the world’s two largest banks by market value, has a financial market more than three times the size of Japan’s, Nishino said.
“The timing of when companies invest in infrastructure has a big effect on our earnings, and investment in the U.S. and Europe is still being reined in,” Nishino said. “The subprime mortgage loan crisis and problems in Greece and Ireland make the U.S. and Europe difficult markets.”
“The momentum in Asia is completely different,” President Hideto Nishino said last week in an interview at the company’s headquarters in Himeji, west of Osaka. “Economically speaking, the U.S. and Europe still haven’t got back on their feet.”
Glory, which now manages Indian operations from Singapore, plans to establish sales offices in New Delhi or Mumbai as early as next year to meet demand for automatic-teller machines and banknote-counting equipment, Nishino said. Its offices in China will increase to about 40 from 35 this fiscal year, he said.
Asia is compensating for slumping sales in Europe and the U.S., and the region will surpass Europe as Glory’s biggest market in two or three years, Nishino said. Glory is seeking sales abroad after revenue from cigarette-vending machines, of which it is Japan’s biggest supplier, fell about 30 percent in the two years ended March 2010.
The company, whose customers include Bank of America Corp. and Mitsubishi UFJ Financial Group Inc., targets a rebound in annual sales to 170 billion yen ($2 billion) in fiscal 2011 as part of its mid-term plan. Revenue fell 27 percent to 135.1 billion yen over the past two years on lower vending-machine sales and as steps to privatize Japan’s postal-savings banks reduced demand for cash-dispensers.
Japan’s First Coin Counter
Nishino said the company is forecasting sales of 3.5 billion yen in China this fiscal year and expects its annual revenue in the world’s fastest-growing major economy to almost triple within the next two or three years.
Glory, which has fallen 1.9 percent this year, dropped 0.2 percent to 2,021 yen as of the close on the Osaka Securities Exchange on Dec. 10.
Founded in 1918 as Kokuei Machinery Manufacturing, Glory developed Japan’s first coin counter for the Japan Mint in 1950 and later began production of automatic-teller equipment and vending machines, according to the company’s website.
Glory on Nov. 5 reported net income rose 32 percent to 2.94 billion yen for the first half of this fiscal year as sales rose in China and it cut costs by shifting production abroad. China, home to the world’s two largest banks by market value, has a financial market more than three times the size of Japan’s, Nishino said.
“The timing of when companies invest in infrastructure has a big effect on our earnings, and investment in the U.S. and Europe is still being reined in,” Nishino said. “The subprime mortgage loan crisis and problems in Greece and Ireland make the U.S. and Europe difficult markets.”
Bond Sales Freeze for Union Bank, IDBI Treasurers on Yields: India Credit
Corporate treasurers in India say they are delaying bond sales after U.S. President Barack Obama’s tax cuts and Europe’s sovereign debt crisis drove a benchmark for their global borrowing costs to a four-month high.
Rural Electrification Corp, the state-controlled lender to power projects, put off a $500 million bond sale until January on “adverse market conditions,” Finance Director Hari Das Khunteta said in a Dec. 3 interview. Union Bank of India is holding off on a Swiss franc debt offering, General Manager V.K. Khanna said in a Dec. 6 interview. IDBI Bank Ltd. will consider rates as it schedules $500 million of issuance in the first quarter of 2011.
“The money has to be at a reasonable cost,” Melwyn Rego, the Mumbai-based executive director and head of international banking at state-owned IDBI, said in a Dec. 6 interview. “If the costs are high, there won’t be any takers.”
Bond sales in foreign currencies has ground to a halt in December as Indian corporate dollar note yields rose to 5.12 percent, the highest level since July 29, HSBC Holdings Plc indexes show. The European Union’s bailout of Ireland and concern the U.S. budget deficit will expand helped damp demand for bonds from BRIC nations. The cost credit-default swaps tied to the debt of State Bank of India jumped to 179 basis points on Dec. 1 from 155 on Nov. 8.
Debt Offerings
Borrowers in India have raised $8.7 billion in 2010 through international debt offerings, according to data compiled by Bloomberg, short of the record $9.3 billion in 2007. They sold $2 billion in October and $2.2 billion in November.
“I am confident we will see issuances coming back,” said Philippe Petit, a senior investment manager in Singapore at Pictet Asset Management, said in a Dec. 10 interview. The firm manages $17 billion of emerging-market debt. “There is an appetite, definitely, in the market.”
The perceived creditworthiness of Indian banks has held up better than their peers in other emerging markets. Credit- default swaps on State Bank have fallen 45 basis points in the past six months to 172 on Dec. 9, compared with 20 basis points for Bank of China Ltd. and 28 basis points for Sberbank, Russia’s biggest lender. The swaps are used to protect against missed debt payments.
The yield on 10-year U.S. Treasuries touched 3.33 percent last week, the highest since June 4, after Obama agreed to extend U.S. tax cuts to boost growth. German bund yields rose above 3 percent for the first time in seven months.
Bond Buyback
India’s 10-year government bonds gained last week on speculation the central bank’s buyback of 120 billion rupees ($2.7 billion) of debt on Dec. 9 would ease a cash crunch. The yield on the 7.8 percent notes due in May 2020 fell 9 basis points to 8.08 percent.
Banks borrowed an average 816 billion rupees a day this quarter using the Reserve Bank of India’s repurchase-auction window, compared with 239 billion rupees in the previous three months, according to data compiled by Bloomberg.
“Investors are probably taking some comfort on expectation there will be more buybacks,” said Krishnamurthy Harihar, treasurer at FirstRand Ltd. in Mumbai.
The rate on emerging-market debt was 5.69 percent on Dec. 9, after reaching a three-month high of 5.74 percent on Nov. 30, according to an index compiled by JPMorgan Chase & Co. The yield fell to 5.123 percent on Nov. 4, the lowest since the bank started tracking the market in December 1997.
“The higher rates overseas lately don’t change the fact that it’s still cheaper to sell bonds compared with onshore costs,” Alice Chikara, a bond analyst at Elara Capital Plc in Singapore, said in an interview on Dec. 10. “We expect to see a strong pipeline of issuances next year.”
Borrowing Costs
India’s local-currency debt has returned 4.1 percent in 2010, according to indexes compiled by HSBC, as the Reserve Bank raised borrowing costs by 150 basis points. Investors in China earned 1.2 percent, the least in the region, the indexes show. Indian dollar bonds returned 9.6 percent, compared with 10.9 percent on average for dollar debt in Asia, HSBC data show.
The rupee has advanced 3.3 percent against the dollar in 2010, making it cheaper for local companies to borrow overseas. The currency appreciated 0.1 percent last week to 45.0550 per dollar amid a report showing the nation’s industrial output rose in October more than forecast.
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 on Dec. 10. The median estimate of 29 economists in a Bloomberg News survey was for an 8.5 percent gain.
‘Far From Over’
The European Union and the International Monetary Fund agreed on an 85-billion euro ($113 billion) rescue package for Ireland on Nov. 28. IMF Managing Director Dominique Strauss-Kahn said in Geneva Dec. 8 that Europe remains in a “troubling” situation and the effects of the global financial turmoil are “far from over.”
Union Bank will sell bonds “as and when we find the pricing is right,” Khanna said. Rural Electrification’s Khunteta said the company is now “looking at the second week of January” to sell its bonds.
“Moving into next year, markets will be more volatile as the macro background is less conducive to strengthening in the bond markets,” Kenneth Akintewe, a Singapore-based portfolio manager at Aberdeen Asset Management Asia Ltd., which manages $261 billion in assets, said in an interview on Dec. 10. “From India’s perspective, you could see a little bit of delay.”
Rural Electrification Corp, the state-controlled lender to power projects, put off a $500 million bond sale until January on “adverse market conditions,” Finance Director Hari Das Khunteta said in a Dec. 3 interview. Union Bank of India is holding off on a Swiss franc debt offering, General Manager V.K. Khanna said in a Dec. 6 interview. IDBI Bank Ltd. will consider rates as it schedules $500 million of issuance in the first quarter of 2011.
“The money has to be at a reasonable cost,” Melwyn Rego, the Mumbai-based executive director and head of international banking at state-owned IDBI, said in a Dec. 6 interview. “If the costs are high, there won’t be any takers.”
Bond sales in foreign currencies has ground to a halt in December as Indian corporate dollar note yields rose to 5.12 percent, the highest level since July 29, HSBC Holdings Plc indexes show. The European Union’s bailout of Ireland and concern the U.S. budget deficit will expand helped damp demand for bonds from BRIC nations. The cost credit-default swaps tied to the debt of State Bank of India jumped to 179 basis points on Dec. 1 from 155 on Nov. 8.
Debt Offerings
Borrowers in India have raised $8.7 billion in 2010 through international debt offerings, according to data compiled by Bloomberg, short of the record $9.3 billion in 2007. They sold $2 billion in October and $2.2 billion in November.
“I am confident we will see issuances coming back,” said Philippe Petit, a senior investment manager in Singapore at Pictet Asset Management, said in a Dec. 10 interview. The firm manages $17 billion of emerging-market debt. “There is an appetite, definitely, in the market.”
The perceived creditworthiness of Indian banks has held up better than their peers in other emerging markets. Credit- default swaps on State Bank have fallen 45 basis points in the past six months to 172 on Dec. 9, compared with 20 basis points for Bank of China Ltd. and 28 basis points for Sberbank, Russia’s biggest lender. The swaps are used to protect against missed debt payments.
The yield on 10-year U.S. Treasuries touched 3.33 percent last week, the highest since June 4, after Obama agreed to extend U.S. tax cuts to boost growth. German bund yields rose above 3 percent for the first time in seven months.
Bond Buyback
India’s 10-year government bonds gained last week on speculation the central bank’s buyback of 120 billion rupees ($2.7 billion) of debt on Dec. 9 would ease a cash crunch. The yield on the 7.8 percent notes due in May 2020 fell 9 basis points to 8.08 percent.
Banks borrowed an average 816 billion rupees a day this quarter using the Reserve Bank of India’s repurchase-auction window, compared with 239 billion rupees in the previous three months, according to data compiled by Bloomberg.
“Investors are probably taking some comfort on expectation there will be more buybacks,” said Krishnamurthy Harihar, treasurer at FirstRand Ltd. in Mumbai.
The rate on emerging-market debt was 5.69 percent on Dec. 9, after reaching a three-month high of 5.74 percent on Nov. 30, according to an index compiled by JPMorgan Chase & Co. The yield fell to 5.123 percent on Nov. 4, the lowest since the bank started tracking the market in December 1997.
“The higher rates overseas lately don’t change the fact that it’s still cheaper to sell bonds compared with onshore costs,” Alice Chikara, a bond analyst at Elara Capital Plc in Singapore, said in an interview on Dec. 10. “We expect to see a strong pipeline of issuances next year.”
Borrowing Costs
India’s local-currency debt has returned 4.1 percent in 2010, according to indexes compiled by HSBC, as the Reserve Bank raised borrowing costs by 150 basis points. Investors in China earned 1.2 percent, the least in the region, the indexes show. Indian dollar bonds returned 9.6 percent, compared with 10.9 percent on average for dollar debt in Asia, HSBC data show.
The rupee has advanced 3.3 percent against the dollar in 2010, making it cheaper for local companies to borrow overseas. The currency appreciated 0.1 percent last week to 45.0550 per dollar amid a report showing the nation’s industrial output rose in October more than forecast.
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 on Dec. 10. The median estimate of 29 economists in a Bloomberg News survey was for an 8.5 percent gain.
‘Far From Over’
The European Union and the International Monetary Fund agreed on an 85-billion euro ($113 billion) rescue package for Ireland on Nov. 28. IMF Managing Director Dominique Strauss-Kahn said in Geneva Dec. 8 that Europe remains in a “troubling” situation and the effects of the global financial turmoil are “far from over.”
Union Bank will sell bonds “as and when we find the pricing is right,” Khanna said. Rural Electrification’s Khunteta said the company is now “looking at the second week of January” to sell its bonds.
“Moving into next year, markets will be more volatile as the macro background is less conducive to strengthening in the bond markets,” Kenneth Akintewe, a Singapore-based portfolio manager at Aberdeen Asset Management Asia Ltd., which manages $261 billion in assets, said in an interview on Dec. 10. “From India’s perspective, you could see a little bit of delay.”
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