Asian currencies strengthened this week by the most in more than two years, led by South Korea’s won, after European leaders agreed measures to tackle a debt crisis that drove investors from emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index and the MSCI Asia- Pacific Index of shares completed their biggest weekly gains since May 2009, after an Oct. 27 report showed the U.S. economy grew at the fastest pace in a year in the third quarter. Overseas investors pumped $2.9 billion into equities in South Korea, Taiwan and Thailand in the last five days, exchange data show. The won rose to a six-week high, supported by a widening current-account surplus.
“There’s definitely progress and that’s what the market is cheering about, especially when expectations were very low to begin with,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “The risk rally will likely linger in the short term.”
The won completed a 3.9 percent gain this week to 1,104.88 per dollar in Seoul, according to data compiled by Bloomberg. The Singapore dollar strengthened 2.9 percent to S$1.2426, Malaysia’s ringgit gained 2.7 percent to 3.0663 and the Thai baht advanced 1.6 percent to 30.53. Taiwan’s dollar appreciated for a fourth week, rising 1.4 percent to NT$29.869.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks Asia’s 10 most-traded currencies excluding the yen, climbed 1.5 percent and the MSCI Asia-Pacific Index rallied 7.4 percent.
China Support
European leaders agreed to expand a bailout fund to $1.4 trillion and persuaded bondholders to take 50 percent losses on Greek debt on Oct. 27. French President Nicolas Sarkozy said China will “cooperate closely” to ensure the Group of 20 will contribute to the enlarged fund, while a person familiar said Japan plans to support the increase.
The won touched a six-week high of 1,100.70 yesterday after the Bank of Korea said the current-account surplus jumped to $3.1 billion in September, from $293 million in August. It last recorded a deficit in February 2010.
“The won will try to strengthen to near 1,090 per dollar, which was the level from which the currency started weakening,” said Kim Doo Hyun, a senior currency dealer at Korea Exchange Bank in Seoul. “Korea has posted current-account surpluses for 19 months, which is also positive for the won.”
Taiwan’s dollar breached the NT$30 level for the first time in a month and the ringgit completed its biggest weekly gain since December 2008.
“Some of these downside risks for the ringgit have been mitigated by the better-than-expected U.S. data and the euro- zone summit outcome,” said Sim at Bank of Singapore.
U.S. Growth
The U.S. economy grew at an annualized pace of 2.5 percent last quarter, the Commerce Department said Oct. 27, matching the median estimate in a Bloomberg News survey. The department said yesterday consumer spending rose 0.6 percent last month after a 0.2 percent gain in August, according to a separate survey.
China’s yuan appreciated 0.4 percent to 6.3586 in Shanghai for its best week in more than two months, according to China Foreign Exchange Trade System. The central bank set its daily reference rate 0.29 percent higher at a record 6.3290 yesterday, the biggest increase since November.
“The record fixing shows China’s determination to tackle inflation as a stronger currency can lower import costs,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. “Market sentiment got a boost after Europe reached an accord.”
The Philippine peso advanced 1.9 percent to 42.62 per dollar, its best performance since December 2009. Indonesia’s rupiah rose 0.8 percent to 8,790 and India’s rupee strengthened 2.6 percent to 48.7663, recouping all of the slump last week to a 2 1/2-year low.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Jiyeun Lee in Seoul at jlee1029@bloomberg.net.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Friday, October 28, 2011
Monday, October 24, 2011
Weaker Rupee Adds to Price Pressure: RBI By Kartik Goyal - Oct 24, 2011
India’s central bank said the rupee’s weakness has emerged as a “new source” of price pressure and that the challenge to tame inflation “remains significant,” signaling the need for higher interest rates.
“The baseline inflation path still remains sticky and broadly unchanged from earlier projections,” the Reserve Bank of India said in a report yesterday before its policy meeting in Mumbai today. “This has made policy choices more complex. Some sacrifice of growth is inevitable in the current milieu of high inflation.”
Inflation in India has exceeded 9 percent since the start of December even after the central bank raised rates by a record from mid-March 2010. India’s monetary stance contrasts with emerging nations from Brazil to Russia, which have cut borrowing costs to shield their economies from Europe’s debt crisis and a faltering U.S. recovery.
“Inflationary pressures in India are acute,” said Anubhuti Sahay, a Mumbai-based economist at Standard Chartered Plc. “Though there are risks to growth, the RBI will prefer to tighten rates in its fight against price gains.”
Sahay is among the 18 of 28 economists in a Bloomberg News survey who expect the Reserve Bank to boost its repurchase rate by a quarter of a percentage point to 8.5 percent today. The rest expect no change. India’s central bank is scheduled to announce its decision at 11 a.m.
Bond Yields
Benchmark 10-year government bonds were little changed at the close of trading in Mumbai yesterday. The yield on the 7.80 percent note due April 2021 held at 8.82 percent, a three-year high. The BSE India Sensitive Index gained 0.9 percent and the rupee strengthened 0.4 percent to 49.83 against the dollar.
India’s main inflation gauge measured by wholesale prices was 9.72 percent in September. By comparison, consumer prices rose 7.3 percent in Brazil, 6.1 percent in China and 7.2 percent in Russia among the BRIC nations.
The depreciation of the rupee has emerged as a “new source of price pressures,” the report said. India’s imports account for 22 percent of the economy and a decline in the rupee increases the risk of imported inflation, according to the report.
India’s rupee has weakened 10.3 percent against the dollar this year as investors sold stocks in emerging markets because of risks to global growth, making the currency the worst performer in Asia.
Inflation Risks
Even so, the central bank said that the rupee’s drop is in line with other emerging-market currencies and “with falling global commodity prices partly offset by rupee depreciation, the risks to inflation projections are now balanced.”
Inflation is a political issue in India as it erodes spending power in a nation where the World Bank estimates more than 75 percent of the population lives on less than $2 a day.
Reserve Bank Governor Duvvuri Subbarao said Oct. 12 that inflation must cool before India’s central bank can start easing monetary policy.
The governor in July predicted inflation to slow to 7 percent by March 31. He forecast India’s economy will expand about 8 percent in the fiscal year through March from 8.5 percent in the previous year.
Subbarao has boosted the central bank’s benchmark rate by 350 basis points in 12 moves since mid-March 2010, the fastest round of increases since the central bank was established in 1935, Bloomberg data show.
Consumer Demand
That’s curbing consumer demand. Sales at companies including Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, fell 1.8 percent in September, the third straight monthly decline, the Society of Indian Automobile Manufacturers said Oct. 10.
India’s industrial production rose less than expected in August, according to the Central Statistical Office. Output at factories, utilities and mines increased 4.1 percent from a year earlier, slower than the 4.7 percent median of 20 estimates in a Bloomberg News survey.
India’s economy may expand 7.6 percent in the fiscal year through March 31, according to the median of forecasts from agencies including the International Monetary Fund and the Asian Development Bank, compiled by the central bank, yesterday’s report showed. The survey in July projected growth of 7.9 percent.
Inflation may average 8.8 percent in the financial year, the survey said, compared with its previous estimate of 8.6 percent.
“The challenge at this juncture is to contain inflationary pressures, while factoring in the lags in monetary transmission, which are long and variable and therefore difficult to assess,” the central bank said.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
“The baseline inflation path still remains sticky and broadly unchanged from earlier projections,” the Reserve Bank of India said in a report yesterday before its policy meeting in Mumbai today. “This has made policy choices more complex. Some sacrifice of growth is inevitable in the current milieu of high inflation.”
Inflation in India has exceeded 9 percent since the start of December even after the central bank raised rates by a record from mid-March 2010. India’s monetary stance contrasts with emerging nations from Brazil to Russia, which have cut borrowing costs to shield their economies from Europe’s debt crisis and a faltering U.S. recovery.
“Inflationary pressures in India are acute,” said Anubhuti Sahay, a Mumbai-based economist at Standard Chartered Plc. “Though there are risks to growth, the RBI will prefer to tighten rates in its fight against price gains.”
Sahay is among the 18 of 28 economists in a Bloomberg News survey who expect the Reserve Bank to boost its repurchase rate by a quarter of a percentage point to 8.5 percent today. The rest expect no change. India’s central bank is scheduled to announce its decision at 11 a.m.
Bond Yields
Benchmark 10-year government bonds were little changed at the close of trading in Mumbai yesterday. The yield on the 7.80 percent note due April 2021 held at 8.82 percent, a three-year high. The BSE India Sensitive Index gained 0.9 percent and the rupee strengthened 0.4 percent to 49.83 against the dollar.
India’s main inflation gauge measured by wholesale prices was 9.72 percent in September. By comparison, consumer prices rose 7.3 percent in Brazil, 6.1 percent in China and 7.2 percent in Russia among the BRIC nations.
The depreciation of the rupee has emerged as a “new source of price pressures,” the report said. India’s imports account for 22 percent of the economy and a decline in the rupee increases the risk of imported inflation, according to the report.
India’s rupee has weakened 10.3 percent against the dollar this year as investors sold stocks in emerging markets because of risks to global growth, making the currency the worst performer in Asia.
Inflation Risks
Even so, the central bank said that the rupee’s drop is in line with other emerging-market currencies and “with falling global commodity prices partly offset by rupee depreciation, the risks to inflation projections are now balanced.”
Inflation is a political issue in India as it erodes spending power in a nation where the World Bank estimates more than 75 percent of the population lives on less than $2 a day.
Reserve Bank Governor Duvvuri Subbarao said Oct. 12 that inflation must cool before India’s central bank can start easing monetary policy.
The governor in July predicted inflation to slow to 7 percent by March 31. He forecast India’s economy will expand about 8 percent in the fiscal year through March from 8.5 percent in the previous year.
Subbarao has boosted the central bank’s benchmark rate by 350 basis points in 12 moves since mid-March 2010, the fastest round of increases since the central bank was established in 1935, Bloomberg data show.
Consumer Demand
That’s curbing consumer demand. Sales at companies including Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, fell 1.8 percent in September, the third straight monthly decline, the Society of Indian Automobile Manufacturers said Oct. 10.
India’s industrial production rose less than expected in August, according to the Central Statistical Office. Output at factories, utilities and mines increased 4.1 percent from a year earlier, slower than the 4.7 percent median of 20 estimates in a Bloomberg News survey.
India’s economy may expand 7.6 percent in the fiscal year through March 31, according to the median of forecasts from agencies including the International Monetary Fund and the Asian Development Bank, compiled by the central bank, yesterday’s report showed. The survey in July projected growth of 7.9 percent.
Inflation may average 8.8 percent in the financial year, the survey said, compared with its previous estimate of 8.6 percent.
“The challenge at this juncture is to contain inflationary pressures, while factoring in the lags in monetary transmission, which are long and variable and therefore difficult to assess,” the central bank said.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, October 23, 2011
Bollywood Exiled by Asia Borrowing Costs By Anoop Agrawal - Oct 23, 2011
The highest borrowing costs among Asia’s biggest economies are forcing Indian filmmakers to shoot fewer movies or rely on tax breaks from the U.S. or Europe.
State-run IDBI Bank Ltd. (IDBI) lends at 16 percent to studios, compared with 13 percent for utilities, Executive Director R.K. Bansal said in an Oct. 17 interview. That’s three times more than six-year funding costs for Burbank, California-based Legendary Pictures Inc. in June. Bollywood can cut costs by 60 percent by tapping tax breaks or loans overseas, Shah Rukh Khan, the best-paid Hindi film actor, said on Oct. 14. Mumbai-based Eros International Media Ltd. (EROS)'s latest movie shows three bachelors flamenco dancing and throwing tomatoes on a road trip in Spain.
Funding costs may rise further in Asia’s third-biggest economy as the central bank tries to stem inflation by boosting interest rates to 8.5 percent tomorrow, the highest among the region’s 10 largest nations, according to the median estimate in a Bloomberg survey. The number of Hindi-language movies released this year may drop below 1,000 for the first time since 2004, from a record 1,325 in 2008, said Komal Nahta, editor of trade magazine Film Information.
“The risks have risen for financing films because of the interest rates, increasing production costs,” said Bansal of IDBI Bank, the biggest lender to the movie industry. “We see no respite in the near future. It’s not lucrative at all.”
The Export-Import Bank of India’s level of outstanding credit to moviemakers fell 20 percent to 865 million rupees ($17 million) in the year ended March 31, said Mukul Sarkar, chief manager at the lender, a government-run bank tasked with supporting global trade.
‘Suffering Will Continue’
“This business is significantly affected by the rising costs,” Mumbai-based Sarkar said in an interview on Oct. 17. “The suffering will continue.”
Movie makers are increasingly using so-called co-production treaties that India has signed with Brazil, Australia, the U.K., Germany, Italy and France to reduce the impact of rising financing costs, said Khan. His film “My Name is Khan,” about a Muslim in San Francisco at the time of the Sept. 11 attacks, was co-produced with Twentieth Century Fox Film Corp.
Actress Ursula Andress presented film maker Yash Chopra with an award from the Swiss government for boosting tourism revenue after shooting sequences of lovers cavorting among its Alpine meadows and chalets, according to the website of Yash Raj Films.
“These are difficult times and all of us should help each other,” Khan, who shot his 2001 movie “Kabhi Khushi Kabhi Gham” in the U.K and plans to make his next movie in Miami, said in an interview in Mumbai. “With treaties we can make bigger and better films.”
Legendary Pictures, the film production company behind “Inception” and the “Hangover” movies, paid about 4.75 percent on a $200 million six-year loan deal signed in June, according to data compiled by Bloomberg.
Fuel Prices
Wholesale-price inflation in India quickened 9.72 percent in September, staying above 9 percent for a 10th month. Price growth has been accelerating as the cost of food and fuel increases. Oil prices have climbed 10 percent this month and India is the world’s fourth-largest petroleum consumer.
The 11 percent drop in India’s rupee, the worst performing among Asia’s 10 most-traded currencies this year, is also increasing costs for filmmakers. The rupee fell 0.4 percent to 50.0250 per dollar in Mumbai on Oct. 21, after touching 50.32, the weakest level since April 2009.
Yields on the government’s 7.8 percent rupee-denominated notes due April 2021 gained three basis points, or 0.03 percentage point, to 8.82 percent on Oct. 21, a three-year high, according to the central bank’s trading system. The yield on the benchmark 10-year bond has climbed 90 basis points in 2011. Indian rupee bonds returned 2.5 percent this year, the worst performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. Chinese yuan debt returned 3.4 percent.
Rising Yields
The difference in yields between India’s notes due in a decade and similar-maturity U.S. Treasuries was 662 basis points, compared with a record-high 676 reached on Oct. 3.
In the corporate bond market, the gap in yields between India’s top-rated five-year rupee debt and similar-maturity government bonds has widened to 100 basis points, near this year’s low of 99 basis point set on July 29.
Countries such as Spain are banking on an increase in tourism revenue by attracting filmmakers from India with tax benefits and lower levies, according to Kamal Jain, chief financial officer at Mumbai-based Eros International.
Tax Breaks
European tourism officials want to attract India’s middle class, which according to McKinsey & Co. may to grow to 583 million in 2025, from 50 million people in 2007.
Eros International, which co-produced the movie “Zindagi Na Milegi Dobara,” along with Mumbai-based Excel Entertainment, saved as much as 30 percent through tax breaks from Spain when making the film, Jain said in an interview on Oct. 15.
“Costs have certainly increased in the past few years, just not for us but the economy as a whole and ways to reduce them are very few,” Jain said. “As producers, we are looking at subsidies from more countries. Producers face the same pressure as that of a machine manufacturer when costs go.”
Amid declining ticket prices, collections from domestic movie-ticket sales dropped 12.7 percent to 64.5 billion rupees in 2010, and 13 percent to 81 billion rupees in 2009, Nahta said.
3-D Boost
The Indian film industry may reverse a two-year decline as producers focus more on 3-D to boost revenue, PricewaterhouseCoopers LLP said in a report released in July. The industry will grow 9.3 percent a year until 2015 after a slowdown of almost 8 percent in 2010, according to PricewaterhouseCoopers estimates.
The cost of insuring the debt of State Bank of India against non-payment using credit-default swaps has almost doubled this year. Five-year swaps on the lender, viewed as a proxy for the nation, cost 310 basis points on Oct. 21, up from 161 basis points at the end of December 2010, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets.
The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
“Two years ago we were able to recover the money before a film was released” as producers signed a lot of marketing deals, while now lenders have to wait for payment after the movie is released, IDBI Bank’s Bansal said. “The overall costs have increased due to inflation and have heightened the risk to the extent that model of financing has changed.”
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
State-run IDBI Bank Ltd. (IDBI) lends at 16 percent to studios, compared with 13 percent for utilities, Executive Director R.K. Bansal said in an Oct. 17 interview. That’s three times more than six-year funding costs for Burbank, California-based Legendary Pictures Inc. in June. Bollywood can cut costs by 60 percent by tapping tax breaks or loans overseas, Shah Rukh Khan, the best-paid Hindi film actor, said on Oct. 14. Mumbai-based Eros International Media Ltd. (EROS)'s latest movie shows three bachelors flamenco dancing and throwing tomatoes on a road trip in Spain.
Funding costs may rise further in Asia’s third-biggest economy as the central bank tries to stem inflation by boosting interest rates to 8.5 percent tomorrow, the highest among the region’s 10 largest nations, according to the median estimate in a Bloomberg survey. The number of Hindi-language movies released this year may drop below 1,000 for the first time since 2004, from a record 1,325 in 2008, said Komal Nahta, editor of trade magazine Film Information.
“The risks have risen for financing films because of the interest rates, increasing production costs,” said Bansal of IDBI Bank, the biggest lender to the movie industry. “We see no respite in the near future. It’s not lucrative at all.”
The Export-Import Bank of India’s level of outstanding credit to moviemakers fell 20 percent to 865 million rupees ($17 million) in the year ended March 31, said Mukul Sarkar, chief manager at the lender, a government-run bank tasked with supporting global trade.
‘Suffering Will Continue’
“This business is significantly affected by the rising costs,” Mumbai-based Sarkar said in an interview on Oct. 17. “The suffering will continue.”
Movie makers are increasingly using so-called co-production treaties that India has signed with Brazil, Australia, the U.K., Germany, Italy and France to reduce the impact of rising financing costs, said Khan. His film “My Name is Khan,” about a Muslim in San Francisco at the time of the Sept. 11 attacks, was co-produced with Twentieth Century Fox Film Corp.
Actress Ursula Andress presented film maker Yash Chopra with an award from the Swiss government for boosting tourism revenue after shooting sequences of lovers cavorting among its Alpine meadows and chalets, according to the website of Yash Raj Films.
“These are difficult times and all of us should help each other,” Khan, who shot his 2001 movie “Kabhi Khushi Kabhi Gham” in the U.K and plans to make his next movie in Miami, said in an interview in Mumbai. “With treaties we can make bigger and better films.”
Legendary Pictures, the film production company behind “Inception” and the “Hangover” movies, paid about 4.75 percent on a $200 million six-year loan deal signed in June, according to data compiled by Bloomberg.
Fuel Prices
Wholesale-price inflation in India quickened 9.72 percent in September, staying above 9 percent for a 10th month. Price growth has been accelerating as the cost of food and fuel increases. Oil prices have climbed 10 percent this month and India is the world’s fourth-largest petroleum consumer.
The 11 percent drop in India’s rupee, the worst performing among Asia’s 10 most-traded currencies this year, is also increasing costs for filmmakers. The rupee fell 0.4 percent to 50.0250 per dollar in Mumbai on Oct. 21, after touching 50.32, the weakest level since April 2009.
Yields on the government’s 7.8 percent rupee-denominated notes due April 2021 gained three basis points, or 0.03 percentage point, to 8.82 percent on Oct. 21, a three-year high, according to the central bank’s trading system. The yield on the benchmark 10-year bond has climbed 90 basis points in 2011. Indian rupee bonds returned 2.5 percent this year, the worst performance among 10 Asian local-currency debt markets monitored by HSBC Holdings Plc. Chinese yuan debt returned 3.4 percent.
Rising Yields
The difference in yields between India’s notes due in a decade and similar-maturity U.S. Treasuries was 662 basis points, compared with a record-high 676 reached on Oct. 3.
In the corporate bond market, the gap in yields between India’s top-rated five-year rupee debt and similar-maturity government bonds has widened to 100 basis points, near this year’s low of 99 basis point set on July 29.
Countries such as Spain are banking on an increase in tourism revenue by attracting filmmakers from India with tax benefits and lower levies, according to Kamal Jain, chief financial officer at Mumbai-based Eros International.
Tax Breaks
European tourism officials want to attract India’s middle class, which according to McKinsey & Co. may to grow to 583 million in 2025, from 50 million people in 2007.
Eros International, which co-produced the movie “Zindagi Na Milegi Dobara,” along with Mumbai-based Excel Entertainment, saved as much as 30 percent through tax breaks from Spain when making the film, Jain said in an interview on Oct. 15.
“Costs have certainly increased in the past few years, just not for us but the economy as a whole and ways to reduce them are very few,” Jain said. “As producers, we are looking at subsidies from more countries. Producers face the same pressure as that of a machine manufacturer when costs go.”
Amid declining ticket prices, collections from domestic movie-ticket sales dropped 12.7 percent to 64.5 billion rupees in 2010, and 13 percent to 81 billion rupees in 2009, Nahta said.
3-D Boost
The Indian film industry may reverse a two-year decline as producers focus more on 3-D to boost revenue, PricewaterhouseCoopers LLP said in a report released in July. The industry will grow 9.3 percent a year until 2015 after a slowdown of almost 8 percent in 2010, according to PricewaterhouseCoopers estimates.
The cost of insuring the debt of State Bank of India against non-payment using credit-default swaps has almost doubled this year. Five-year swaps on the lender, viewed as a proxy for the nation, cost 310 basis points on Oct. 21, up from 161 basis points at the end of December 2010, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets.
The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
“Two years ago we were able to recover the money before a film was released” as producers signed a lot of marketing deals, while now lenders have to wait for payment after the movie is released, IDBI Bank’s Bansal said. “The overall costs have increased due to inflation and have heightened the risk to the extent that model of financing has changed.”
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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