Feb. 11 (Bloomberg) -- Australian employers added the most workers in more than three years in January, sending the currency surging on speculation the central bank will resume its record round of interest-rate increases.
The number of people employed rose 52,700 from December, more than three times the 15,000 median estimate of 21 economists surveyed by Bloomberg News. The jobless rate fell to an 11-month low of 5.3 percent from 5.5 percent, the statistics bureau said in Sydney today.
The biggest hiring boom in five years is increasing pressure on Reserve Bank of Australia Governor Glenn Stevens to resume raising borrowing costs to prevent a surge in wages feeding inflation. Traders doubled bets the bank will raise the benchmark lending rate by a quarter point to 4 percent next month, adding to similar moves in December, November and October.
“It will concern the Reserve Bank that the unemployment rate has peaked at a very low rate,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “Imagine what’s going to happen later this year” to inflation and wages when a forecast surge in mining investment intensifies, she said.
The Australian dollar, which has jumped 36 percent in the last 12 months, rose to 88.57 U.S. cents at 12:48 p.m. in Sydney from 87.72 cents just before the report was released. The two- year government bond yield jumped 11 basis points to 4.28 percent. A basis point is 0.01 percentage point. The S&P/ASX 200 index of stocks rose 1 percent to 4556.3.
Demand for Energy
Today’s report reinforces the central bank’s prediction last week that Australia’s economic growth will accelerate this year as companies such as Chevron Corp. boost investment to meet rising global demand for energy.
Australian employers have added 194,600 jobs since August, the biggest five-month surge since they created 214,000 jobs between September 2004 and January 2005.
The nation’s unemployment rate has also tumbled from 5.8 percent in October, after Prime Minister Kevin Rudd’s government stoked the economy by distributing more than A$20 billion ($18 billion) in cash to consumers. Another A$22 billion is being spent on roads, railways and schools.
In contrast, the unemployment rate in the U.S. was 9.7 percent in January, and 10 percent in November among European Union countries, the highest rate in more than 11 years. New Zealand’s jobless rate climbed to 7.3 percent in the fourth quarter, the highest in more than 10 years, and Japan’s rate was 5.1 percent in December.
Stimulus Measures
The rebound in Australia’s economy, one of the few to skirt last year’s global recession, is being driven by a combination of the government’s stimulus package, Governor Stevens’ decision to slash interest rates to a half-century low of 3 percent in April last year, a stronger Australian dollar and the resilience of China, Treasury Secretary Ken Henry said today in Canberra.
Stevens unexpectedly kept the overnight cash rate target unchanged at 3.75 percent last week, saying information about the impact on the economy of quarter-point gains every month last quarter is still limited.
Today’s report “should be substantial evidence for policy makers that labor-market conditions are tighter than expected,” said Ben Dinte, an economist at Macquarie Group Ltd. in Sydney.
Increased Bets
Investors are betting there is a 100 percent chance of a quarter-point increase in the overnight cash rate target to 4 percent by early May, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. Chances of a move at the central bank’s next meeting on March 2 stood at 48 percent at 12:30 p.m. in Sydney, up from 24 percent prior to today’s report.
The central bank says Australia’s economic growth will accelerate this year, boosted by demand from China for natural resources such as coal and iron ore that will deepen a scarcity of workers.
Gross domestic product will climb 3.25 percent in the three months through December 2010 from a year earlier, after gaining an annual 2 percent in the fourth quarter of 2009, the bank said in its quarterly monetary policy statement published last week.
“It now looks likely that the unemployment rate has peaked around 5.75 percent, a much better outcome than thought likely early last year,” when the government forecast the jobless rate would reach 8.5 percent in 2010, the central bank said on Feb. 5.
Resource Projects
The number of full-time jobs gained 15,900 in January and part-time employment increased 36,900, today’s report showed.
A shortage of workers may increase costs and cause delays at the nation’s liquefied natural gas projects, Fitch Ratings said on Feb. 8.
The Maritime Workers Union of Australia has secured a A$50,000 pay increase over three years for workers at Total Marine Services Ltd., the Australian Broadcasting Corp. reported last week.
Marius Kloppers, chief executive officer of BHP Billiton Ltd., the world’s biggest mining company, said yesterday that the skills shortage in Australia’s resources industry is emerging faster than expected.
Chevron in December announced it signed an $82 billion deal with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone field in Western Australia. The project is forecast to generate 6,500 jobs during construction.
It is in addition to the Chevron-led Gorgon gas venture, which is forecast to create another 10,000 jobs when construction starts this year.
Harvey Norman Holdings Ltd., Australia’s biggest furniture and electronics retailer, was “pretty happy” with Christmas sales at its stores compared with year-earlier numbers that were boosted by government stimulus, its Chairman Gerry Harvey said in an interview last month.
Wednesday, February 10, 2010
Tuesday, February 9, 2010
U.K. Charities, Unions Call for Tax on Foreign Currency Trades
Feb. 10 (Bloomberg) -- Charities, trade unions and faith groups urged U.K. Prime Minister Gordon Brown to impose a tax on foreign exchange transactions to fund aid projects in poor nations.
The campaign is being backed by “Four Weddings and a Funeral” director Richard Curtis, who will open an advertising campaign today to highlight the case for a tax, according to a statement released in London by the Trades Union Congress and charities including Oxfam and Barnados.
The groups want Britain and other European countries to charge 0.05 percent on each foreign exchange transaction. In November, the U.S. rejected Brown’s call for Group of 20 nations to consider the tax.
“A tiny tax on banks would make a massive difference to the millions of ordinary people around the globe forced into extreme poverty by the economic crisis,” Barbara Stocking, Oxfam’s chief executive, said in the statement.
Group of Seven finance ministers last week distanced themselves from Brown’s plan and instead rallied around proposals for an insurance levy on banks to pay for future bailouts.
The campaign is being backed by “Four Weddings and a Funeral” director Richard Curtis, who will open an advertising campaign today to highlight the case for a tax, according to a statement released in London by the Trades Union Congress and charities including Oxfam and Barnados.
The groups want Britain and other European countries to charge 0.05 percent on each foreign exchange transaction. In November, the U.S. rejected Brown’s call for Group of 20 nations to consider the tax.
“A tiny tax on banks would make a massive difference to the millions of ordinary people around the globe forced into extreme poverty by the economic crisis,” Barbara Stocking, Oxfam’s chief executive, said in the statement.
Group of Seven finance ministers last week distanced themselves from Brown’s plan and instead rallied around proposals for an insurance levy on banks to pay for future bailouts.
U.K. Lawmakers Urge Government to Reject EU Hedge Fund Rules
Feb. 10 (Bloomberg) -- U.K. lawmakers advised the government to challenge a proposed European Union law regulating hedge funds and private equity because it could make it harder for EU funds to compete.
The government “should not agree” to the rules unless they are “compatible with equivalent legislation with regulatory regimes in third countries and in particular in the United States,” the House of Lords European Union Committee said in a report today. Fund managers risk losing “competitiveness at a global level” according to the report.
“It will mean Cayman Island funds run by European managers will be more expensive than Cayman funds managed from the U.S., and that is dangerous,” Andrew Shrimpton, a former U.K. regulator who now advises hedge funds at Kinetic Partners LLP, said in a telephone interview. “The asset management industry is an Anglo-American industry.”
Hedge-fund managers have come under fire from politicians and regulators since the collapse of the U.S. subprime mortgage market triggered a global crisis. The European Commission proposed the Alternative Investment Fund Managers directive to tighten supervision of hedge funds last year. Finance ministers from the 27-member EU bloc are scheduled to vote on the rules later this year.
Equivalence Requirements
Investors from Europe won’t be able to access 40 percent of hedge funds and 35 percent of private equity firms under the proposals because of so-called equivalence requirements, Dan Waters, the Financial Services Authority’s asset-management sector leader, said in a speech in London last month.
The U.K. government “should continue to negotiate a solution that does not penalize the marketing of non-EU funds” because of the “negative repercussions on the U.K. and European financial markets,” the committee said in its report.
European lawmakers made hundreds of changes to the commission draft rules last week. Two members of the European Parliament proposed an amendment that would force hedge-fund and private-equity managers to return more than 20 percent of their bonuses to their funds if they don’t properly account for risk levels.
“The U.K. government should do everything it can to ensure that the final proposals that emerge in the AIFM Directive do not damage the EU and U.K. economies to which the City of London makes an important contribution,” Kenneth Woolmer, a member of the House of Lords Sub-Committee on Economic and Financial Affairs, said in an e-mailed statement.
The government “should not agree” to the rules unless they are “compatible with equivalent legislation with regulatory regimes in third countries and in particular in the United States,” the House of Lords European Union Committee said in a report today. Fund managers risk losing “competitiveness at a global level” according to the report.
“It will mean Cayman Island funds run by European managers will be more expensive than Cayman funds managed from the U.S., and that is dangerous,” Andrew Shrimpton, a former U.K. regulator who now advises hedge funds at Kinetic Partners LLP, said in a telephone interview. “The asset management industry is an Anglo-American industry.”
Hedge-fund managers have come under fire from politicians and regulators since the collapse of the U.S. subprime mortgage market triggered a global crisis. The European Commission proposed the Alternative Investment Fund Managers directive to tighten supervision of hedge funds last year. Finance ministers from the 27-member EU bloc are scheduled to vote on the rules later this year.
Equivalence Requirements
Investors from Europe won’t be able to access 40 percent of hedge funds and 35 percent of private equity firms under the proposals because of so-called equivalence requirements, Dan Waters, the Financial Services Authority’s asset-management sector leader, said in a speech in London last month.
The U.K. government “should continue to negotiate a solution that does not penalize the marketing of non-EU funds” because of the “negative repercussions on the U.K. and European financial markets,” the committee said in its report.
European lawmakers made hundreds of changes to the commission draft rules last week. Two members of the European Parliament proposed an amendment that would force hedge-fund and private-equity managers to return more than 20 percent of their bonuses to their funds if they don’t properly account for risk levels.
“The U.K. government should do everything it can to ensure that the final proposals that emerge in the AIFM Directive do not damage the EU and U.K. economies to which the City of London makes an important contribution,” Kenneth Woolmer, a member of the House of Lords Sub-Committee on Economic and Financial Affairs, said in an e-mailed statement.
Monday, February 8, 2010
Macquarie Shares Slump After Forecast Disappoints
Feb. 9 (Bloomberg) -- Macquarie Group Ltd., Australia’s largest investment bank, fell the most in more than eight months in Sydney trading after its forecast for second-half profit failed to match analyst estimates.
The shares dropped 6.6 percent after Macquarie said net income in the six months to March 31 may climb 10 percent from the first half. That indicates second-half profit of A$526.9 million ($455 million), below the A$586 million average estimate of three analysts surveyed by Bloomberg.
“Some investors were looking for a greater upgrade, so on a short-term basis are happy to close out positions,” said Angus Gluskie, who oversees $300 million at White Funds Management Pty in Sydney.
Australian financial companies such as Commonwealth Bank of Australia and Axa Asia Pacific Holdings Ltd. have reported profits that beat analyst estimates as markets and economies recover from the global financial crisis. Macquarie stock more than doubled in the past year as the credit squeeze eased.
Macquarie, which earned A$479 million in the first half, said its forecast is “subject to market conditions, significant swing factors and unexpected one-off items.”
Moore ‘Balancing Act’
“They’ve issued an outlook statement that is qualified with a number of items, which seems to have muddied the water a bit instead of providing the clarity that a statement of this nature seeks to provide,” said Prasad Patkar, who helps manage about $1.5 billion at Platypus Asset Management in Sydney.
The shares tumbled to A$47.07 at 11:55 a.m. local time, posting their biggest percentage drop since May.
Sydney-based Macquarie, with capital of A$4.5 billion above the regulatory minimum at the end of December, said today the completion of acquisitions will add to services on offer worldwide, without detailing any earnings contributions.
Chief Executive Officer Nicholas Moore spent more than $770 million on acquisitions last year in North America, ranging from energy advisory and asset management units to brokerages.
“There’s a fair bit more to come,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. Moore is performing a “balancing act” between buying assets and keeping a capital cushion against volatility, said Dive.
Macquarie last week agreed to buy the equity trading and research operations of Sal. Oppenheim Jr. & Cie KGaA to expand its business in Europe, following a December agreement to purchase the company’s derivatives business.
Corporate Advisory
“I am not ruling out any acquisitions, but in terms of normal trends, you’d expect those to be going back to normal rates as markets settle down,” Moore said on a call with investors today. “We have sufficient capital for the plans we are working on at the moment.”
Profit at Macquarie may almost double in the next two years as takeovers pay off and fees swell from advising on mergers and acquisitions, Bank of America Merrill Lynch said in a Jan. 28 report. Macquarie Capital, which arranges debt and equity sales and gives corporate advice, will drive growth, Bank of America said.
Moore said today the operating result at that unit in the three months ended December fell from the previous quarter, though beat that of the three months ended June. That matched the trend at the securities division, the corporate and asset finance business, and the fixed-income, currencies and commodities division, he said.
‘Cyclical Effect’
In Australia, where Macquarie makes about half its profit, the benchmark S&P/ASX 200 has climbed for three consecutive quarters. If that trend continues, companies are more likely to attempt takeovers, boosting earnings at the banks advising on the deals, said Peter Swan, finance professor at the Australia School of Business at the University of New South Wales.
“There’s always a cyclical effect,” said Swan. “M&A is much more successful when investors are more optimistic. That’s what Macquarie is relying on.”
Australia’s government said on Feb. 7 that it will withdraw on March 31 a guarantee on large deposits and wholesale funding that helped banks access credit after the global financial crisis. That removal is “not expected to impact” Macquarie’s funding position, the bank said today.
The shares dropped 6.6 percent after Macquarie said net income in the six months to March 31 may climb 10 percent from the first half. That indicates second-half profit of A$526.9 million ($455 million), below the A$586 million average estimate of three analysts surveyed by Bloomberg.
“Some investors were looking for a greater upgrade, so on a short-term basis are happy to close out positions,” said Angus Gluskie, who oversees $300 million at White Funds Management Pty in Sydney.
Australian financial companies such as Commonwealth Bank of Australia and Axa Asia Pacific Holdings Ltd. have reported profits that beat analyst estimates as markets and economies recover from the global financial crisis. Macquarie stock more than doubled in the past year as the credit squeeze eased.
Macquarie, which earned A$479 million in the first half, said its forecast is “subject to market conditions, significant swing factors and unexpected one-off items.”
Moore ‘Balancing Act’
“They’ve issued an outlook statement that is qualified with a number of items, which seems to have muddied the water a bit instead of providing the clarity that a statement of this nature seeks to provide,” said Prasad Patkar, who helps manage about $1.5 billion at Platypus Asset Management in Sydney.
The shares tumbled to A$47.07 at 11:55 a.m. local time, posting their biggest percentage drop since May.
Sydney-based Macquarie, with capital of A$4.5 billion above the regulatory minimum at the end of December, said today the completion of acquisitions will add to services on offer worldwide, without detailing any earnings contributions.
Chief Executive Officer Nicholas Moore spent more than $770 million on acquisitions last year in North America, ranging from energy advisory and asset management units to brokerages.
“There’s a fair bit more to come,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. Moore is performing a “balancing act” between buying assets and keeping a capital cushion against volatility, said Dive.
Macquarie last week agreed to buy the equity trading and research operations of Sal. Oppenheim Jr. & Cie KGaA to expand its business in Europe, following a December agreement to purchase the company’s derivatives business.
Corporate Advisory
“I am not ruling out any acquisitions, but in terms of normal trends, you’d expect those to be going back to normal rates as markets settle down,” Moore said on a call with investors today. “We have sufficient capital for the plans we are working on at the moment.”
Profit at Macquarie may almost double in the next two years as takeovers pay off and fees swell from advising on mergers and acquisitions, Bank of America Merrill Lynch said in a Jan. 28 report. Macquarie Capital, which arranges debt and equity sales and gives corporate advice, will drive growth, Bank of America said.
Moore said today the operating result at that unit in the three months ended December fell from the previous quarter, though beat that of the three months ended June. That matched the trend at the securities division, the corporate and asset finance business, and the fixed-income, currencies and commodities division, he said.
‘Cyclical Effect’
In Australia, where Macquarie makes about half its profit, the benchmark S&P/ASX 200 has climbed for three consecutive quarters. If that trend continues, companies are more likely to attempt takeovers, boosting earnings at the banks advising on the deals, said Peter Swan, finance professor at the Australia School of Business at the University of New South Wales.
“There’s always a cyclical effect,” said Swan. “M&A is much more successful when investors are more optimistic. That’s what Macquarie is relying on.”
Australia’s government said on Feb. 7 that it will withdraw on March 31 a guarantee on large deposits and wholesale funding that helped banks access credit after the global financial crisis. That removal is “not expected to impact” Macquarie’s funding position, the bank said today.
China’s Loan Growth, Inflation Probably Accelerated
Feb. 9 (Bloomberg) -- China’s banks probably made more new loans in January than the previous three months combined as lenders sought to head off a credit clampdown by policy makers seeking to stem rising inflation pressures.
New bank lending totaled 1.38 trillion yuan ($201 billion) last month, according to the median estimate of 16 economists in a Bloomberg News survey ahead of a government report scheduled for this week. Separate figures are projected to show consumer prices rose the most since 2008 and export gains accelerated.
Regulators are seeking to slow a credit boom loosed last year that may now be inflating a bubble in China’s property market. The week’s economic reports are likely to reinforce expectations for the central bank to start raising interest rates and loosen controls on the yuan in coming months, moves that might trigger similar steps across the region.
“Central banks are looking at China’s policy moves,” said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong who previously worked at the Federal Reserve Bank of New York and Bank of England. “More aggressive policy tightening from China, including interest-rate increases and yuan appreciation, will make it easier for the rest of the region to move as well.”
Year-on-year percent changes in some of China’s January economic data may have been distorted by the lunar new year holiday, which was in January last year but February in 2010. Most businesses close for the week-long celebration.
Inflation Quickens
At the same time, trends show accelerating price pressures across the economy poised to become world’s second biggest this year, behind the U.S. Aluminum Corp. of China Ltd., the nation’s top producer of the metal, on Jan. 4 raised alumina prices for the third time in five months. Beijing Yanjing Brewery Co. Jan. 15 raised prices for some of its beer about 10 percent, citing rising costs of fuel and rice.
“Inflation fears are beginning to take over from China’s growth euphoria as both consumer and producer inflation continue to climb,” said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. “The central bank must tighten policies more aggressively,” said Lai, who expects the People’s Bank of China to start lifting its benchmark rate as soon as this month.
Consumer prices probably advanced 2.1 percent in January from a year before, a third straight gain, the median estimate shows. Producer price inflation probably quickened to 3.5 percent, according to the survey. Growth of the M2 money supply measure probably slowed for a second month to 25.9 percent, the median projection shows.
Regional Response
Inflation is also accelerating from South Korea to Vietnam as commodity and food prices rise amid the Asia-led global recovery. Still, South Korea, India, Indonesia, Thailand, Malaysia, Taiwan and the Philippines have yet to raise rates and policy makers in countries including Thailand and Taiwan are restraining currency gains, traders say.
In China, authorities have kept the yuan at about 6.83 per dollar since July 2008 to help exporters after letting it appreciate about 21 percent the previous three years. China may allow the yuan to begin appreciate this quarter, which may make its Asian neighbors more comfortable in allowing their currencies to advance, said RBC’s Jackson.
Any need to restrain the yuan may be easing. Exports probably jumped 28 percent last month from a year earlier, and imports probably surged 85 percent, leaving a trade surplus of $20 billion, Bloomberg surveys show.
Growth Quickens
Economic growth accelerated to a 10.7 percent year-on-year pace last quarter, the fastest since 2007, responding to an unprecedented 9.59 trillion yuan of credit extended by banks in 2009 and a 4 trillion yuan two-year fiscal stimulus plan.
The estimate for new lending in January is 48 percent more than the total extended in the last three months of 2009. It’s also 18 percent of the 7.5 trillion yuan Premier Wen Jiabao’s government set as the target for this year.
Property prices in 70 major cities climbed 7.8 percent in December, the most in 18 months, responding in part to the record credit surge. Poly Real Estate Group Co., the nation’s second-largest listed developer, said yesterday evening that its January property sales jumped 142 percent from a year earlier.
The Shanghai Composite Index has slumped 10 percent since the year began on concern the government will curb lending to cool the economy.
Day of ‘Reckoning’
“There are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China,” Neil McDonald, a business restructuring and insolvency partner in Hong Kong with law-firm Lovells LLP, said at conference last week, using another term for the yuan. “At some point there’s going to be a reckoning for that.”
The central bank asked lenders to set aside more money as reserves on Jan. 12, the first such increase since June 2008. Some lenders have since been asked to limit credit, punished by even higher reserve ratios.
Bank of China Ltd., the nation’s third-largest lender by market value, on Feb. 3 reduced discounts for some mortgages, citing concern about rising property-market risks. Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, said Jan. 27 it “stabilized” loan growth after lending rose “relatively fast” in the first half of the month.
New bank lending totaled 1.38 trillion yuan ($201 billion) last month, according to the median estimate of 16 economists in a Bloomberg News survey ahead of a government report scheduled for this week. Separate figures are projected to show consumer prices rose the most since 2008 and export gains accelerated.
Regulators are seeking to slow a credit boom loosed last year that may now be inflating a bubble in China’s property market. The week’s economic reports are likely to reinforce expectations for the central bank to start raising interest rates and loosen controls on the yuan in coming months, moves that might trigger similar steps across the region.
“Central banks are looking at China’s policy moves,” said Brian Jackson, an emerging-market strategist at Royal Bank of Canada in Hong Kong who previously worked at the Federal Reserve Bank of New York and Bank of England. “More aggressive policy tightening from China, including interest-rate increases and yuan appreciation, will make it easier for the rest of the region to move as well.”
Year-on-year percent changes in some of China’s January economic data may have been distorted by the lunar new year holiday, which was in January last year but February in 2010. Most businesses close for the week-long celebration.
Inflation Quickens
At the same time, trends show accelerating price pressures across the economy poised to become world’s second biggest this year, behind the U.S. Aluminum Corp. of China Ltd., the nation’s top producer of the metal, on Jan. 4 raised alumina prices for the third time in five months. Beijing Yanjing Brewery Co. Jan. 15 raised prices for some of its beer about 10 percent, citing rising costs of fuel and rice.
“Inflation fears are beginning to take over from China’s growth euphoria as both consumer and producer inflation continue to climb,” said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. “The central bank must tighten policies more aggressively,” said Lai, who expects the People’s Bank of China to start lifting its benchmark rate as soon as this month.
Consumer prices probably advanced 2.1 percent in January from a year before, a third straight gain, the median estimate shows. Producer price inflation probably quickened to 3.5 percent, according to the survey. Growth of the M2 money supply measure probably slowed for a second month to 25.9 percent, the median projection shows.
Regional Response
Inflation is also accelerating from South Korea to Vietnam as commodity and food prices rise amid the Asia-led global recovery. Still, South Korea, India, Indonesia, Thailand, Malaysia, Taiwan and the Philippines have yet to raise rates and policy makers in countries including Thailand and Taiwan are restraining currency gains, traders say.
In China, authorities have kept the yuan at about 6.83 per dollar since July 2008 to help exporters after letting it appreciate about 21 percent the previous three years. China may allow the yuan to begin appreciate this quarter, which may make its Asian neighbors more comfortable in allowing their currencies to advance, said RBC’s Jackson.
Any need to restrain the yuan may be easing. Exports probably jumped 28 percent last month from a year earlier, and imports probably surged 85 percent, leaving a trade surplus of $20 billion, Bloomberg surveys show.
Growth Quickens
Economic growth accelerated to a 10.7 percent year-on-year pace last quarter, the fastest since 2007, responding to an unprecedented 9.59 trillion yuan of credit extended by banks in 2009 and a 4 trillion yuan two-year fiscal stimulus plan.
The estimate for new lending in January is 48 percent more than the total extended in the last three months of 2009. It’s also 18 percent of the 7.5 trillion yuan Premier Wen Jiabao’s government set as the target for this year.
Property prices in 70 major cities climbed 7.8 percent in December, the most in 18 months, responding in part to the record credit surge. Poly Real Estate Group Co., the nation’s second-largest listed developer, said yesterday evening that its January property sales jumped 142 percent from a year earlier.
The Shanghai Composite Index has slumped 10 percent since the year began on concern the government will curb lending to cool the economy.
Day of ‘Reckoning’
“There are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China,” Neil McDonald, a business restructuring and insolvency partner in Hong Kong with law-firm Lovells LLP, said at conference last week, using another term for the yuan. “At some point there’s going to be a reckoning for that.”
The central bank asked lenders to set aside more money as reserves on Jan. 12, the first such increase since June 2008. Some lenders have since been asked to limit credit, punished by even higher reserve ratios.
Bank of China Ltd., the nation’s third-largest lender by market value, on Feb. 3 reduced discounts for some mortgages, citing concern about rising property-market risks. Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, said Jan. 27 it “stabilized” loan growth after lending rose “relatively fast” in the first half of the month.
Sunday, February 7, 2010
Indian Bourse Boosts System as Volumes Rise, Angel Broking Says
Feb. 8 (Bloomberg) -- National Stock Exchange of India’s upgraded system, tested during a special trading session over the weekend, will help the bourse cope with rising volume and competition, India’s biggest brokerage by branch network said.
The nation’s stocks gained for the first time in three days on Feb. 6 during the 90-minute trading session to test the Indian bourse’s enhanced software. The Bombay Stock Exchange’s Sensitive Index or Sensex climbed 0.8 percent to 15,915.65 after a 4.3 percent two-day slide.
“They are improving their infrastructure to the next level,” said Vinay Agrawal, executive director of equities broking at Angel Broking Ltd. in Mumbai, ranked by Dun & Bradstreet as the brokerage with the biggest distribution network in India. “As the volumes are growing, the exchanges also need to upgrade their infrastructure.”
Foreign fund flows into India’s stock market rose to $17.5 billion in 2009, close to a record set two years ago, as the biggest rally in 18 years lured foreign investors. National Exchange, the bigger of the country’s two bourses, is also upgrading ahead of more competition.
MCX Stock Exchange Ltd., which has partnered London’s FTSE Group, is awaiting regulatory approval to begin trading.
National Exchange and the smaller Bombay Stock Exchange started trading 55 minutes earlier this year at 9 a.m. to lure derivatives traders in Singapore and Hong Kong. The Bombay exchange also followed its rival in conducting a special trading session over the weekend.
Trading volume is expected to increase, driving the Sensex to rise as much as 30 percent this year as consumer spending in the world’s second-most populous nation boosts company earnings, EM Capital Management LLC said last month.
Reserve Bank of India Governor Duvvuri Subbarao said Jan. 29 the nation’s economic growth could “gain momentum” over the next year. India’s $1.2 trillion economy, Asia’s third largest, will expand 7.5 percent in the 12 months through March 31, more than an October forecast of 6 percent, “with an upward bias,” he also said.
The nation’s stocks gained for the first time in three days on Feb. 6 during the 90-minute trading session to test the Indian bourse’s enhanced software. The Bombay Stock Exchange’s Sensitive Index or Sensex climbed 0.8 percent to 15,915.65 after a 4.3 percent two-day slide.
“They are improving their infrastructure to the next level,” said Vinay Agrawal, executive director of equities broking at Angel Broking Ltd. in Mumbai, ranked by Dun & Bradstreet as the brokerage with the biggest distribution network in India. “As the volumes are growing, the exchanges also need to upgrade their infrastructure.”
Foreign fund flows into India’s stock market rose to $17.5 billion in 2009, close to a record set two years ago, as the biggest rally in 18 years lured foreign investors. National Exchange, the bigger of the country’s two bourses, is also upgrading ahead of more competition.
MCX Stock Exchange Ltd., which has partnered London’s FTSE Group, is awaiting regulatory approval to begin trading.
National Exchange and the smaller Bombay Stock Exchange started trading 55 minutes earlier this year at 9 a.m. to lure derivatives traders in Singapore and Hong Kong. The Bombay exchange also followed its rival in conducting a special trading session over the weekend.
Trading volume is expected to increase, driving the Sensex to rise as much as 30 percent this year as consumer spending in the world’s second-most populous nation boosts company earnings, EM Capital Management LLC said last month.
Reserve Bank of India Governor Duvvuri Subbarao said Jan. 29 the nation’s economic growth could “gain momentum” over the next year. India’s $1.2 trillion economy, Asia’s third largest, will expand 7.5 percent in the 12 months through March 31, more than an October forecast of 6 percent, “with an upward bias,” he also said.
India Can’t Be Lax as It Aims to Cool Prices, Chakrabarty Says
Feb. 8 (Bloomberg) -- India can’t afford to be lax about fighting inflation as the nation seeks to slow price gains to 5 percent or less, central bank Deputy Governor K.C. Chakrabarty said yesterday.
“You cannot afford to be in any way lax in monitoring inflation and controlling it,” Chakrabarty said in an interview in Sydney. “We would not like to have more than 4 or 5 percent inflation. That’s the challenge.”
Central Bank Governor Duvvuri Subbarao raised the amount lenders are required to set aside as reserves last month to prevent excess money in the banking system from fanning price gains. India’s wholesale-food inflation rate rose to 17.56 percent in the week to Jan. 23, moving closer to an 11-year high and fueling speculation that Subbarao may raise interest rates.
India’s “inflation is edging up, and that’s why you see we have already exited from the monetary stimulus, almost exited,” Chakrabarty said. “We hope that this will anchor inflation” expectations.
Consumer-price inflation in India is the highest among Asia-Pacific countries, according to data compiled by Bloomberg. Prices paid by industrial workers rose 14.97 percent in December from a year earlier, the most in 11 years, while consumer-price inflation for farm workers in the country accelerated to 17.21 percent.
The benchmark wholesale-price inflation rate was 7.31 percent in December, the highest in 13 months.
Monsoon Rains
Food costs are rising as the June-to-September monsoon rains, the main source of irrigation in Asia’s third-largest economy, were the weakest since 1972, hurting agriculture.
The Reserve Bank of India hopes to cool inflation to 4 percent or 5 percent in 2011 or 2012, Chakrabarty said. Price gains won’t come to that level “so soon,” the deputy governor said, without saying if he was referring to consumer or wholesale prices.
The central bank on Jan. 29 increased the so-called cash reserve ratio by 0.75 percentage points to 5.75 percent, a move it estimates will drain about 360 billion rupees ($7.7 billion) from the banking system. Subbarao left the benchmark reverse repurchase rate unchanged at 3.25 percent.
“Our main policy instruments are all currently at levels that are more consistent with a crisis situation than with a fast-recovering economy,” Subbarao said at the time. “It’s therefore necessary to carry forward the process” of exiting them, he said, signaling the central bank may boost policy rates as growth strengthens.
Growth Forecast
The central bank raised its economic growth forecast to 7.5 percent in the fiscal year through March 2010, from an earlier estimate of 6 percent, and increased its inflation forecast to 8.5 percent from 6.5 percent. The Reserve Bank will give a forecast for the following year in April, Chakrabarty said.
The government injected fiscal and monetary stimulus of more than 12 percent of gross domestic product between September 2008 and April last year, helping the South Asian nation’s economy grow 7.9 percent in the three months ended Sept. 30, the fastest pace in 18 months.
Industrial production climbed 11.7 percent in November, the fastest pace in two years, as stimulus measures stoked demand for cars made by Maruti Suzuki India Ltd., the plasma screens of the Indian unit of LG Electronics Inc., and Hero Honda Motors Ltd. motorcycles.
Global stocks plunged last week while bond default risks soared after Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to implement his plan to cut the European Union’s largest deficit.
“Any time anywhere sovereign crisis is happening, we need to be cautious,” Chakrabarty said. “But we hope that we don’t have much exposure to these small countries until it affects the other economies. I think if it is controlled at the Greece level, I don’t think” it will spread.
India’s financial markets “are more or less stable,” he added. “With higher growth it has to have the stability.”
“You cannot afford to be in any way lax in monitoring inflation and controlling it,” Chakrabarty said in an interview in Sydney. “We would not like to have more than 4 or 5 percent inflation. That’s the challenge.”
Central Bank Governor Duvvuri Subbarao raised the amount lenders are required to set aside as reserves last month to prevent excess money in the banking system from fanning price gains. India’s wholesale-food inflation rate rose to 17.56 percent in the week to Jan. 23, moving closer to an 11-year high and fueling speculation that Subbarao may raise interest rates.
India’s “inflation is edging up, and that’s why you see we have already exited from the monetary stimulus, almost exited,” Chakrabarty said. “We hope that this will anchor inflation” expectations.
Consumer-price inflation in India is the highest among Asia-Pacific countries, according to data compiled by Bloomberg. Prices paid by industrial workers rose 14.97 percent in December from a year earlier, the most in 11 years, while consumer-price inflation for farm workers in the country accelerated to 17.21 percent.
The benchmark wholesale-price inflation rate was 7.31 percent in December, the highest in 13 months.
Monsoon Rains
Food costs are rising as the June-to-September monsoon rains, the main source of irrigation in Asia’s third-largest economy, were the weakest since 1972, hurting agriculture.
The Reserve Bank of India hopes to cool inflation to 4 percent or 5 percent in 2011 or 2012, Chakrabarty said. Price gains won’t come to that level “so soon,” the deputy governor said, without saying if he was referring to consumer or wholesale prices.
The central bank on Jan. 29 increased the so-called cash reserve ratio by 0.75 percentage points to 5.75 percent, a move it estimates will drain about 360 billion rupees ($7.7 billion) from the banking system. Subbarao left the benchmark reverse repurchase rate unchanged at 3.25 percent.
“Our main policy instruments are all currently at levels that are more consistent with a crisis situation than with a fast-recovering economy,” Subbarao said at the time. “It’s therefore necessary to carry forward the process” of exiting them, he said, signaling the central bank may boost policy rates as growth strengthens.
Growth Forecast
The central bank raised its economic growth forecast to 7.5 percent in the fiscal year through March 2010, from an earlier estimate of 6 percent, and increased its inflation forecast to 8.5 percent from 6.5 percent. The Reserve Bank will give a forecast for the following year in April, Chakrabarty said.
The government injected fiscal and monetary stimulus of more than 12 percent of gross domestic product between September 2008 and April last year, helping the South Asian nation’s economy grow 7.9 percent in the three months ended Sept. 30, the fastest pace in 18 months.
Industrial production climbed 11.7 percent in November, the fastest pace in two years, as stimulus measures stoked demand for cars made by Maruti Suzuki India Ltd., the plasma screens of the Indian unit of LG Electronics Inc., and Hero Honda Motors Ltd. motorcycles.
Global stocks plunged last week while bond default risks soared after Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to implement his plan to cut the European Union’s largest deficit.
“Any time anywhere sovereign crisis is happening, we need to be cautious,” Chakrabarty said. “But we hope that we don’t have much exposure to these small countries until it affects the other economies. I think if it is controlled at the Greece level, I don’t think” it will spread.
India’s financial markets “are more or less stable,” he added. “With higher growth it has to have the stability.”
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