Bharat Forge Ltd., India’s biggest automotive forgings maker, expects its China venture to post an annual profit for the first time since it began four years ago.
“The Chinese joint venture has turned around completely,” Amit Kalyani, executive director at the Pune-based company, said in an e-mail interview. “We are looking at expanding its product portfolio and increasing the customer base.”
Bharat Forge’s billionaire chairman Baba Kalyani aims to tap demand for auto parts in China where car sales may climb by as much as 15 percent in 2011, according to estimates by General Motors Co. and Volkswagen AG. Next year, sales in the world’s largest automobile market may reach 20 million vehicles, according to Booz & Co. and Nomura Holdings Inc. analysts.
“Going by recent performance, I expect significant improvement in the profitability of the venture as future demand in China will continue to be high,” Suprit Nayak, a Noida, India-based analyst at Religare Technova Ltd., said by phone.
Sales of passenger cars to dealers in China increased 29.3 percent in November from a year earlier to a monthly record of 1.34 million units, according to the China Association of Automobile Manufacturers.
Bharat Forge, which makes parts for Toyota Motor Corp. and General Motors, has climbed 37 percent in Mumbai trading this year, outperforming the 14 percent gain in the Bombay Stock Exchange’s Sensitive Index. The shares fell 0.8 percent to 373.35 rupees at the 3.30 p.m. close of trading in the city.
Venture’s Loss
Faw Bharat Forge Changchun Co., 52 percent owned by the Indian company, posted a loss of 315 million rupees ($7 million) in 2009. The venture started operations in 2006.
“The China operations will make a profit for the full year,” said Bharat Forge spokesman, S. Rajhagopalan. “This is due to increase in capacity utilization, restructuring and improvement in efficiency parameters.”
The venture’s profits will be announced in May when Bharat Forge reports its full-year earnings, he said.
India and the Asia-Pacific region contributed 47 percent of Bharat Forge’s sales of 33 billion rupees in the year ended in March, Kalyani said.
“This is expected to increase on the back of strong growth in the domestic automotive market,” he said, without elaborating.
India’s domestic passenger car sales rose 21 percent in November from a year earlier, according to the Society of Indian Automobile Manufacturers. Rising incomes may help boost annual car sales to 3 million vehicles by 2015, according to the government’s estimates.
Bharat Forge also makes components for the power, oil and gas and construction industries. The company plans to double revenue from its non-automotive business to 40 percent by March 2012, Kalyani said.
Thursday, December 23, 2010
Wednesday, December 22, 2010
High growth fails to feed India’s hungry
The toll booths on the expressway between New Delhi, India’s capital, and the satellite city of Gurgaon tell their own story of the country’s fast-paced economic growth.
Interactive map: India’s uneven growth
India's Varying Growth
This interactive map explores the disparity in growth rates between India’s states
When the toll road was built, its architects forecast that by now 120,000 vehicles would pass through its gates daily. Today, about 210,000 stream through in a torrent of commuter traffic.
India’s economic growth is forecast at 8.5 per cent this year, making it the fastest growing large economy after China.
Yet the benefits of that economic boom are far from universal: the rapid growth is concentrated in a handful of states, particularly in the south, and among a tight circle of businesses.
The uneven economic performances in a country of continental proportions, alongside an unhealthy fixation with the headline growth rate among policymakers, have become issues of concern.
On Tuesday, Amartya Sen, the Nobel laureate economist, issued a stark warning to New Delhi about how “stupid” it was to aspire to double-digit economic growth without addressing the chronic undernourishment of tens of millions of Indians.
The country’s emergence as a responsible power hangs on the quality of its growth, and whether it is transforming the lives of its 1.2bn people. A growth map that resembles a patchwork quilt has given rise to a debate about whether India is expanding as one country and tackling poverty.
India’s gathering success is less assured when highly populated states such as Uttar Pradesh, Madhya Pradesh and Chhattisgarh – where per capita incomes are considerably lower than the national average – continue to fall behind.
Undernourishment is a vital indicator. Despite rising growth, the average calorie intake among India’s poorest has been stagnant for more than a decade. Eleven out of 19 states have more than 80 per cent anaemia, and more than half of India’s children under the age of five suffer stunting and poor brain development from inadequate nutrition.
Rather than seeking to drive growth higher, Prof Sen recommends higher public spending on health and education, and to take notice of how China has fed its people better.
This month, Jagdish Bhagwati, another Nobel Prize-winning economist and a professor at Columbia University in New York, stirred up debate by arguing that rising incomes were felt widely across the country and were not bypassing the poor. “[Success in] denting poverty significantly, though nowhere near enough, is that poverty is now seen by India’s poor and underprivileged to be removable,” he said.India economy map Thumbnail
Other academics warn against celebrating the achievements of India’s higher rates of economic growth prematurely.
“The Forbes list of Indian millionaires lingers a lot less in my memory than the images of misery that stare at us when we, the luckier Indians, step out of the comfort of our apartments,” says G. Sabarinathan, of the Indian Institute of Management in Bangalore.
India’s 28 states present a mixed picture, and a largely unchanging one. At the one extreme India is an industrialised and wealthy country, on the other it is stubbornly poor.
The states of Maharashtra, Gujarat, Karnataka, Tamil Nadu and Delhi are the established economies driving India’s growth, with dynamic manufacturing and service sectors. They generate the bulk of exports and attract the most foreign investment. There, incomes are rising among large urbanised workforces.
Then there is the rural and populous hinterland of Uttar Pradesh, Madhya Pradesh, Orissa, Chhattisgarh, Bihar and Jharkhand, long characterised by low growth and some of the lowest per capita income. Of these, Bihar, with a population of 90m, has surprised many by recently recording higher rates of growth. But Uttar Pradesh, with a population similar to Brazil and notorious for social marginalisation, trails badly.
For decades, the rankings of states by income by the International Monetary Fund and others has changed little.
This year, the World Bank warned: “In 2000, the [Indian] state with the highest per capita income average was four and a half times the per capita income of the poorest state. In 2008, the difference ... was almost unchanged.”
Interactive map: India’s uneven growth
India's Varying Growth
This interactive map explores the disparity in growth rates between India’s states
When the toll road was built, its architects forecast that by now 120,000 vehicles would pass through its gates daily. Today, about 210,000 stream through in a torrent of commuter traffic.
India’s economic growth is forecast at 8.5 per cent this year, making it the fastest growing large economy after China.
Yet the benefits of that economic boom are far from universal: the rapid growth is concentrated in a handful of states, particularly in the south, and among a tight circle of businesses.
The uneven economic performances in a country of continental proportions, alongside an unhealthy fixation with the headline growth rate among policymakers, have become issues of concern.
On Tuesday, Amartya Sen, the Nobel laureate economist, issued a stark warning to New Delhi about how “stupid” it was to aspire to double-digit economic growth without addressing the chronic undernourishment of tens of millions of Indians.
The country’s emergence as a responsible power hangs on the quality of its growth, and whether it is transforming the lives of its 1.2bn people. A growth map that resembles a patchwork quilt has given rise to a debate about whether India is expanding as one country and tackling poverty.
India’s gathering success is less assured when highly populated states such as Uttar Pradesh, Madhya Pradesh and Chhattisgarh – where per capita incomes are considerably lower than the national average – continue to fall behind.
Undernourishment is a vital indicator. Despite rising growth, the average calorie intake among India’s poorest has been stagnant for more than a decade. Eleven out of 19 states have more than 80 per cent anaemia, and more than half of India’s children under the age of five suffer stunting and poor brain development from inadequate nutrition.
Rather than seeking to drive growth higher, Prof Sen recommends higher public spending on health and education, and to take notice of how China has fed its people better.
This month, Jagdish Bhagwati, another Nobel Prize-winning economist and a professor at Columbia University in New York, stirred up debate by arguing that rising incomes were felt widely across the country and were not bypassing the poor. “[Success in] denting poverty significantly, though nowhere near enough, is that poverty is now seen by India’s poor and underprivileged to be removable,” he said.India economy map Thumbnail
Other academics warn against celebrating the achievements of India’s higher rates of economic growth prematurely.
“The Forbes list of Indian millionaires lingers a lot less in my memory than the images of misery that stare at us when we, the luckier Indians, step out of the comfort of our apartments,” says G. Sabarinathan, of the Indian Institute of Management in Bangalore.
India’s 28 states present a mixed picture, and a largely unchanging one. At the one extreme India is an industrialised and wealthy country, on the other it is stubbornly poor.
The states of Maharashtra, Gujarat, Karnataka, Tamil Nadu and Delhi are the established economies driving India’s growth, with dynamic manufacturing and service sectors. They generate the bulk of exports and attract the most foreign investment. There, incomes are rising among large urbanised workforces.
Then there is the rural and populous hinterland of Uttar Pradesh, Madhya Pradesh, Orissa, Chhattisgarh, Bihar and Jharkhand, long characterised by low growth and some of the lowest per capita income. Of these, Bihar, with a population of 90m, has surprised many by recently recording higher rates of growth. But Uttar Pradesh, with a population similar to Brazil and notorious for social marginalisation, trails badly.
For decades, the rankings of states by income by the International Monetary Fund and others has changed little.
This year, the World Bank warned: “In 2000, the [Indian] state with the highest per capita income average was four and a half times the per capita income of the poorest state. In 2008, the difference ... was almost unchanged.”
Billionaire Ambani Turns to China to Cut Costs
Billionaire Anil Ambani’s companies borrowed $3 billion from lenders including China Development Bank Corp. to gain cheaper funding after rupee borrowing costs climbed the most in four years.
Reliance Communications Ltd., India’s second-largest mobile phone operator, will borrow a part of $1.9 billion from the state-owned bank, which lends to support China’s policy aims, using $1.3 billion to repay existing credits, the company said Dec. 15. Reliance Power Ltd. will borrow $1.1 billion to help fund an electricity plant. Neither disclosed the cost of the loans. The yield on India’s top-rated five-year rupee corporate debt rose 73 basis points to 8.95 percent this year, the biggest gain since 2006, according to data compiled by Bloomberg.
“Reliance has to repay the debt and the China loans are an immediate solution because interest rates there are 1 to 3 percent cheaper,” Taina Erajuuri, who helps manage the equivalent of $1.2 billion of emerging-market stocks at Helsinki-based Fim Asset Management, including Indian stocks, said in an interview Dec. 21.
India has the highest 10-year government bond yields among Asia’s major economies, and the nation’s companies face rising borrowing costs in rupees and dollars. China Development Bank sold one-year debt last month at a 2.61 percent coupon, letting it support the global expansion of Chinese companies. The bank provided a $10 billion loan to Brazil’s state-run oil company Petroleo Brasileiro SA last year, and a $1 billion credit line in March to Russian bank VEB.
Average dollar yields in India have climbed to 5.17 percent from 4.27 percent in October, according to HSBC Holdings Plc indexes.
Chinese Equipment
The Reliance Anil Dhirubhai Ambani Group is increasing debt to generate 33 times more power and expand its phone connections nationwide. Anil, 51, gained control of telecoms, power and financial services and Mukesh Ambani, 53, kept the oil, gas and refinery and chemicals businesses after the brothers split Reliance Industries Ltd. in 2005. Both agreed to use the Reliance name.
Anil’s group plans to buy phone equipment from ZTE Corp. and Huawei Technologies Co. after India’s government allowed Chinese vendors to supply phone companies in July subject to security inspections.
Chinese companies signed $16 billion of deals with Indian businesses during Premier Wen Jiabao’s visit last week. Adani Power Ltd. placed orders for $3.6 billion of equipment with Chinese companies, while SRM Energy Ltd. gave $1.4 billion of contracts during the visit.
Rate Comparison
China Development Bank, which has lent more than $120 billion to fund China’s overseas projects, is expanding its loans to Reliance as Indian banks’ costs jump amid a cash crunch. The lender opened a Moscow branch in September after setting up an office in Cairo last year. Bank officials didn’t respond yesterday to two telephone calls and a faxed request.
Chinese banks pay less than half as much as their Indian counterparts to borrow even after lending rates more than doubled this year. The Shanghai interbank rate for three-month loans advanced 16 basis points, or 0.16 percentage point, to 4.11 percent yesterday, up from 1.83 percent at the start of 2010, according to the National Interbank Funding Center. Indian three-month rates rose 25 basis points to 9.06 percent on Dec. 21 after starting the year at 4.60 percent, according to the India National Stock Exchange. They fell 6 basis points yesterday.
Treasury Spread
India’s rupee has advanced 1.8 percent this month, the biggest gain among Asia’s 10 most-traded currencies outside the yen. The rupee rose to a one-week high of 45.10 per dollar yesterday. The central bank said Dec. 16 it will repurchase 480 billion rupees ($10.6 billion) of debt over the next month to ease the cash crunch.
The yield on India’s benchmark 10-year bonds climbed 35 basis points this year and reached a two-year high on Dec. 6. Yields on the 7.8 percent bonds maturing in May 2020 held near the lowest in two months yesterday at 7.94 percent.
The rate is 464 basis points more than U.S. Treasuries, compared with 375 at the end of last year.
The cost of protecting the debt of government-owned State Bank of India, which some investors use as a proxy for the nation, increased 1 basis point to 159 on Dec. 21. The cost dropped to an eight-month low of 155 basis points on Dec. 16, according to CMA prices.
Interest Rates
India’s central bank kept interest rates unchanged on Dec. 16 after six increases this year. Reserve Bank of India Governor Duvvuri Subbarao said Dec. 16 that inflation is above the “comfort level.” The RBI aims to slow inflation to 4 percent to 4.5 percent from an 11-month low of 7.48 percent in November, he said Dec. 9.
“The RBI will raise interest rates by 25 basis points in January as inflation will continue to be a problem next year,” Fim Asset’s Erajuuri said. “Banks are going to be very prudent next year with lending. Even if they lend they could demand high interest rates from companies with high debt.”
Reliance Communications, based in Mumbai, has 378 billion rupees in gross debt, its latest results show. Reliance Power, also based in Mumbai, has about 531 billion rupees of bonds and loans, with some maturing in 2049, data compiled by Bloomberg show.
Generator Order
The electricity producer ordered $10 billion of coal-fired generators from Shanghai Electric Group Co. for plants in India, where supply falls short, curtailing growth. For the deal, Reliance Power signed a $12 billion financing agreement with Chinese banks in Shanghai, according to an Oct. 28 statement.
China’s investment in power plants may fall “slightly” this year to 660 billion yuan ($99 billion) as the government invests in cleaner energy sources, the China Electricity Council said in an Oct. 29 statement.
Ambani’s plan to cut debt by selling Reliance Communications’ mobile-phone transmission towers to GTL Infrastructure Ltd. was derailed in September after the companies failed to reach a deal.
India’s telecommunications equipment market faces government scrutiny because of security concerns spurred by mobile phone companies’ growing reliance on Chinese manufacturers. India blocked Huawei and ZTE, both based in Shenzhen, from selling network equipment to domestic phone carriers this year and in July allowed them to sell network gear in India subject to security checks.
Reliance Communications’ relationship with China Development Bank has grown as it started a pan-India GSM network, said Vikas Aggarwal, an analyst at ICRA Ltd., an affiliate of Moody’s Investors Service in New Delhi.
“It was when they did their entire 2G rollout, their dependence on Chinese vendors increased because Chinese vendors are cost-competitive,” Aggarwal said. The company got better terms for refinancing its debt for third-generation spectrum from China Development Bank than from Indian banks, Aggarwal said.
Reliance Communications Ltd., India’s second-largest mobile phone operator, will borrow a part of $1.9 billion from the state-owned bank, which lends to support China’s policy aims, using $1.3 billion to repay existing credits, the company said Dec. 15. Reliance Power Ltd. will borrow $1.1 billion to help fund an electricity plant. Neither disclosed the cost of the loans. The yield on India’s top-rated five-year rupee corporate debt rose 73 basis points to 8.95 percent this year, the biggest gain since 2006, according to data compiled by Bloomberg.
“Reliance has to repay the debt and the China loans are an immediate solution because interest rates there are 1 to 3 percent cheaper,” Taina Erajuuri, who helps manage the equivalent of $1.2 billion of emerging-market stocks at Helsinki-based Fim Asset Management, including Indian stocks, said in an interview Dec. 21.
India has the highest 10-year government bond yields among Asia’s major economies, and the nation’s companies face rising borrowing costs in rupees and dollars. China Development Bank sold one-year debt last month at a 2.61 percent coupon, letting it support the global expansion of Chinese companies. The bank provided a $10 billion loan to Brazil’s state-run oil company Petroleo Brasileiro SA last year, and a $1 billion credit line in March to Russian bank VEB.
Average dollar yields in India have climbed to 5.17 percent from 4.27 percent in October, according to HSBC Holdings Plc indexes.
Chinese Equipment
The Reliance Anil Dhirubhai Ambani Group is increasing debt to generate 33 times more power and expand its phone connections nationwide. Anil, 51, gained control of telecoms, power and financial services and Mukesh Ambani, 53, kept the oil, gas and refinery and chemicals businesses after the brothers split Reliance Industries Ltd. in 2005. Both agreed to use the Reliance name.
Anil’s group plans to buy phone equipment from ZTE Corp. and Huawei Technologies Co. after India’s government allowed Chinese vendors to supply phone companies in July subject to security inspections.
Chinese companies signed $16 billion of deals with Indian businesses during Premier Wen Jiabao’s visit last week. Adani Power Ltd. placed orders for $3.6 billion of equipment with Chinese companies, while SRM Energy Ltd. gave $1.4 billion of contracts during the visit.
Rate Comparison
China Development Bank, which has lent more than $120 billion to fund China’s overseas projects, is expanding its loans to Reliance as Indian banks’ costs jump amid a cash crunch. The lender opened a Moscow branch in September after setting up an office in Cairo last year. Bank officials didn’t respond yesterday to two telephone calls and a faxed request.
Chinese banks pay less than half as much as their Indian counterparts to borrow even after lending rates more than doubled this year. The Shanghai interbank rate for three-month loans advanced 16 basis points, or 0.16 percentage point, to 4.11 percent yesterday, up from 1.83 percent at the start of 2010, according to the National Interbank Funding Center. Indian three-month rates rose 25 basis points to 9.06 percent on Dec. 21 after starting the year at 4.60 percent, according to the India National Stock Exchange. They fell 6 basis points yesterday.
Treasury Spread
India’s rupee has advanced 1.8 percent this month, the biggest gain among Asia’s 10 most-traded currencies outside the yen. The rupee rose to a one-week high of 45.10 per dollar yesterday. The central bank said Dec. 16 it will repurchase 480 billion rupees ($10.6 billion) of debt over the next month to ease the cash crunch.
The yield on India’s benchmark 10-year bonds climbed 35 basis points this year and reached a two-year high on Dec. 6. Yields on the 7.8 percent bonds maturing in May 2020 held near the lowest in two months yesterday at 7.94 percent.
The rate is 464 basis points more than U.S. Treasuries, compared with 375 at the end of last year.
The cost of protecting the debt of government-owned State Bank of India, which some investors use as a proxy for the nation, increased 1 basis point to 159 on Dec. 21. The cost dropped to an eight-month low of 155 basis points on Dec. 16, according to CMA prices.
Interest Rates
India’s central bank kept interest rates unchanged on Dec. 16 after six increases this year. Reserve Bank of India Governor Duvvuri Subbarao said Dec. 16 that inflation is above the “comfort level.” The RBI aims to slow inflation to 4 percent to 4.5 percent from an 11-month low of 7.48 percent in November, he said Dec. 9.
“The RBI will raise interest rates by 25 basis points in January as inflation will continue to be a problem next year,” Fim Asset’s Erajuuri said. “Banks are going to be very prudent next year with lending. Even if they lend they could demand high interest rates from companies with high debt.”
Reliance Communications, based in Mumbai, has 378 billion rupees in gross debt, its latest results show. Reliance Power, also based in Mumbai, has about 531 billion rupees of bonds and loans, with some maturing in 2049, data compiled by Bloomberg show.
Generator Order
The electricity producer ordered $10 billion of coal-fired generators from Shanghai Electric Group Co. for plants in India, where supply falls short, curtailing growth. For the deal, Reliance Power signed a $12 billion financing agreement with Chinese banks in Shanghai, according to an Oct. 28 statement.
China’s investment in power plants may fall “slightly” this year to 660 billion yuan ($99 billion) as the government invests in cleaner energy sources, the China Electricity Council said in an Oct. 29 statement.
Ambani’s plan to cut debt by selling Reliance Communications’ mobile-phone transmission towers to GTL Infrastructure Ltd. was derailed in September after the companies failed to reach a deal.
India’s telecommunications equipment market faces government scrutiny because of security concerns spurred by mobile phone companies’ growing reliance on Chinese manufacturers. India blocked Huawei and ZTE, both based in Shenzhen, from selling network equipment to domestic phone carriers this year and in July allowed them to sell network gear in India subject to security checks.
Reliance Communications’ relationship with China Development Bank has grown as it started a pan-India GSM network, said Vikas Aggarwal, an analyst at ICRA Ltd., an affiliate of Moody’s Investors Service in New Delhi.
“It was when they did their entire 2G rollout, their dependence on Chinese vendors increased because Chinese vendors are cost-competitive,” Aggarwal said. The company got better terms for refinancing its debt for third-generation spectrum from China Development Bank than from Indian banks, Aggarwal said.
Home-Stretch Buying Lifts Merchants’ Spirits
The last-minute holiday surge is heralding the return of the American consumer, who is shedding the recession’s thrifty ways and rediscovering the pleasure of shopping.
The malls are jammed, parking lots snarled and sales expected to stay strong in the few remaining days before Christmas.
With new figures showing in-store sales up 5.5 percent on the final weekend before Christmas compared with last year, this holiday season is on track to be the healthiest since 2006.
Separately, online shopping has been fueling growth in total sales, while spending in stores on this Thursday alone may rival the levels reached the Friday after Thanksgiving.
And Christmas Eve still beckons the procrastinators. Of those with the majority of their shopping left to do, about 10 percent plan to be in stores on Friday, one survey suggests.
From the Pacific Northwest to New Jersey, a few consumers rushing in and out of the mall madness this week gave the sense that a healing economy meant it was fine to splurge a little bit.
“The air alone makes me want to shop,” said Michaya Pollard, 29, who had accompanied her children’s elementary school to Westlake Center mall in downtown Seattle to see the Christmas decorations.
After a particularly good year at the barber shop and salons that she owns, Ms. Pollard said she had spent several hours over the weekend buying extra gifts like a Coach bag for her sister. “I didn’t plan on spending more this year,” she said, but “I’m excited about their faces on Christmas day.”
Some women’s apparel items were sold out, bolstering the notion that women were buying for themselves again. A Patagonia white-fleece jacket in medium was available only at a store in tropical Honolulu, while an Anthropologie sweater coat decorated with poppies was out of stock at the company’s online store but available on eBay at a huge markup.
Retailers have begun to change their approach to the holiday season after two years in which they have had to mark down items as Christmas neared. Retailers now manage their inventory better across sectors like women’s apparel, for instance, and avoid the last-minute price-slashing of Christmases past.
“Retailers have become much better at playing this game,” Sherif Mityas, a partner in the retail practice of the consulting firm A. T. Kearney, said in an e-mail.
Still, promotions were heavy, with Lord & Taylor offering 20 percent off almost the entire store, and Kohl’s giving its Kohl’s cardholders 15 to 30 percent off all purchases.
Many stores were running low on inventory, which was actually a good thing for the retailers, Mr. Mityas said.
“Retailers have learned painful lessons around the balance of inventory, versus margin-crushing fire sales the last days before Christmas,” he said.
“Getting more consumers to pay higher prices earlier in the holiday season in fear of missing out on certain items at the last minute will serve retailers well in subsequent holiday seasons.”
The recession forced stores to regroup after a dismal holiday year in 2008, and one that showed just slight improvement last year.
According to the International Council of Shopping Centers, which tracks sales at chain stores open at least a year, November and December sales rose 1.1 percent in 2007, then declined 5.6 percent in 2008 and rose 2.3 percent in 2009.
This year, the council has already revised its estimates upward, and now expects chain store sales to rise 3.5 to 4 percent. That would rival prerecession spending levels, and be the biggest increase in holiday spending since 2006.
ShopperTrak, which estimates total retail sales, said on Wednesday that dollars spent this last weekend had risen 5.5 percent, to $18.83 billion, from last year, while traffic increased 3 percent.
As for the online shopping, which has outpaced in-store sales this year, the marketing research company comScore indicated that online sales increased 12 percent in the first 49 days of the holiday season, to $28.36 billion, compared with the same period last year.
Over all, apparel sales were strong, up 9.8 percent from Oct. 31 to Dec. 11 compared with last year, according to MasterCard Advisors SpendingPulse, which tracks all forms of payment, including cash and check.
Michael McNamara, vice president for research and analysis at SpendingPulse, noted that women’s apparel was up about 4.4 percent in the early holiday shopping season. “They’re perking up even since Black Friday a little bit — it’s the most positive season we’ve seen there since 2007,” he said. “Women are starting to buy for themselves again.”
Other stores, including J. Crew and a few teenage-oriented retailers, appeared to have ordered too much and were trying to adjust, said John D. Morris, an analyst with BMO Capital Markets. J. Crew, for instance, has been resorting to offers that give 25 or 30 percent off the entire store.
“Not all retailers are crossing the finish line in fighting shape,” Mr. Morris said in an e-mail.
The malls are jammed, parking lots snarled and sales expected to stay strong in the few remaining days before Christmas.
With new figures showing in-store sales up 5.5 percent on the final weekend before Christmas compared with last year, this holiday season is on track to be the healthiest since 2006.
Separately, online shopping has been fueling growth in total sales, while spending in stores on this Thursday alone may rival the levels reached the Friday after Thanksgiving.
And Christmas Eve still beckons the procrastinators. Of those with the majority of their shopping left to do, about 10 percent plan to be in stores on Friday, one survey suggests.
From the Pacific Northwest to New Jersey, a few consumers rushing in and out of the mall madness this week gave the sense that a healing economy meant it was fine to splurge a little bit.
“The air alone makes me want to shop,” said Michaya Pollard, 29, who had accompanied her children’s elementary school to Westlake Center mall in downtown Seattle to see the Christmas decorations.
After a particularly good year at the barber shop and salons that she owns, Ms. Pollard said she had spent several hours over the weekend buying extra gifts like a Coach bag for her sister. “I didn’t plan on spending more this year,” she said, but “I’m excited about their faces on Christmas day.”
Some women’s apparel items were sold out, bolstering the notion that women were buying for themselves again. A Patagonia white-fleece jacket in medium was available only at a store in tropical Honolulu, while an Anthropologie sweater coat decorated with poppies was out of stock at the company’s online store but available on eBay at a huge markup.
Retailers have begun to change their approach to the holiday season after two years in which they have had to mark down items as Christmas neared. Retailers now manage their inventory better across sectors like women’s apparel, for instance, and avoid the last-minute price-slashing of Christmases past.
“Retailers have become much better at playing this game,” Sherif Mityas, a partner in the retail practice of the consulting firm A. T. Kearney, said in an e-mail.
Still, promotions were heavy, with Lord & Taylor offering 20 percent off almost the entire store, and Kohl’s giving its Kohl’s cardholders 15 to 30 percent off all purchases.
Many stores were running low on inventory, which was actually a good thing for the retailers, Mr. Mityas said.
“Retailers have learned painful lessons around the balance of inventory, versus margin-crushing fire sales the last days before Christmas,” he said.
“Getting more consumers to pay higher prices earlier in the holiday season in fear of missing out on certain items at the last minute will serve retailers well in subsequent holiday seasons.”
The recession forced stores to regroup after a dismal holiday year in 2008, and one that showed just slight improvement last year.
According to the International Council of Shopping Centers, which tracks sales at chain stores open at least a year, November and December sales rose 1.1 percent in 2007, then declined 5.6 percent in 2008 and rose 2.3 percent in 2009.
This year, the council has already revised its estimates upward, and now expects chain store sales to rise 3.5 to 4 percent. That would rival prerecession spending levels, and be the biggest increase in holiday spending since 2006.
ShopperTrak, which estimates total retail sales, said on Wednesday that dollars spent this last weekend had risen 5.5 percent, to $18.83 billion, from last year, while traffic increased 3 percent.
As for the online shopping, which has outpaced in-store sales this year, the marketing research company comScore indicated that online sales increased 12 percent in the first 49 days of the holiday season, to $28.36 billion, compared with the same period last year.
Over all, apparel sales were strong, up 9.8 percent from Oct. 31 to Dec. 11 compared with last year, according to MasterCard Advisors SpendingPulse, which tracks all forms of payment, including cash and check.
Michael McNamara, vice president for research and analysis at SpendingPulse, noted that women’s apparel was up about 4.4 percent in the early holiday shopping season. “They’re perking up even since Black Friday a little bit — it’s the most positive season we’ve seen there since 2007,” he said. “Women are starting to buy for themselves again.”
Other stores, including J. Crew and a few teenage-oriented retailers, appeared to have ordered too much and were trying to adjust, said John D. Morris, an analyst with BMO Capital Markets. J. Crew, for instance, has been resorting to offers that give 25 or 30 percent off the entire store.
“Not all retailers are crossing the finish line in fighting shape,” Mr. Morris said in an e-mail.
India's GDP Growth May Lure Record Foreign Fund Inflows, IDBI Federal Says
Indian stock purchases by foreign funds in 2011 could exceed this year’s record inflows as the nation’s robust economic and corporate earnings expansion lures investors, according to the local partner of Ageas, the insurer that groups the remains of Fortis.
“The stage is set for it,” Aneesh Srivastava, who manages about $352 million in assets as the Mumbai-based chief investment officer at IDBI Federal Life Insurance Co., said in an interview today. “Money chases growth. Returns in foreign economies are small and they have no other option but to look at growth opportunities outside.”
Foreign inflows into Indian equities have climbed to a record 1.3 trillion rupees ($28.8 billion) this year, according to data on the website of the Securities and Exchange Board of India, driving the Bombay Stock Exchange’s benchmark Sensitive Index, or Sensex, up 15 percent in 2010, the most among key indexes in the world’s 10 largest stock markets. “We are substantially underestimating the appetite and desire of foreign investors to buy Indian assets.”
Srivastava, 41, predicts India’s $1.3 trillion economy to grow at 8.5 percent for the year through March 2012, accompanied by a 20 percent expansion in corporate earnings. Gross domestic product grew 8.9 percent for a second straight quarter in the three months through September, maintaining the fastest pace among the world’s major economies after China.
‘Crude a Dampener’
Srivastava sees a “high probability” that the Sensex will reach 23,000 by March 2012, a 14 percent gain from today, and is “bullish” on the banking and oil & gas sectors.
“On an average, our bias will be to build portfolios with banks and oil & gas stocks,” he said.
Rising crude oil prices are the biggest risk to markets, Srivastava said. India, which imports more than 75 percent of its crude oil needs, is forecast to account for 15 percent of the global increase in energy demand to 2030, according to the International Energy Agency.
“Crude is a dampener. There is a severe winter in Europe, which is driving up demand for heating fuels and pushing prices up,” he said. If crude oil continues to rise, “economies like India could suffer and stock markets could correct.”
Thousands of airline and train passengers were marooned across Europe during a storm system that produced Britain’s worst early snowfall in 17 years this week.
Crude oil in New York trading reached $90.76 a barrel on Dec. 7, the highest level since 2008. Oil has gained 13 percent this year.
Credit Expansion
A pick-up in corporate demand and government spending will boost lending over the next 12 to 15 months, Srivastava said. He estimates loan growth of 22 percent for Indian lenders in the financial year 2012.
“The best way to play the banking theme is through large and clean private-sector banks,” Srivastava said, as they tend to do better in a rising interest-rate environment. He declined to comment on specific stocks.
Srivastava is also investing in oil companies’ stocks on expectations government policy changes may allow for market- driven fuel prices. India freed gasoline prices from state control in June, while continuing to set rates for other fuels, including diesel. The nation’s government will decide on a gas pricing policy in the next six to eight months, oil secretary S. Sundareshan said on Oct. 30.
“Policy direction is indicating that certain reforms could happen. If reforms clearly pan out, this is one sector that could outperform,” Srivastava said.
“The stage is set for it,” Aneesh Srivastava, who manages about $352 million in assets as the Mumbai-based chief investment officer at IDBI Federal Life Insurance Co., said in an interview today. “Money chases growth. Returns in foreign economies are small and they have no other option but to look at growth opportunities outside.”
Foreign inflows into Indian equities have climbed to a record 1.3 trillion rupees ($28.8 billion) this year, according to data on the website of the Securities and Exchange Board of India, driving the Bombay Stock Exchange’s benchmark Sensitive Index, or Sensex, up 15 percent in 2010, the most among key indexes in the world’s 10 largest stock markets. “We are substantially underestimating the appetite and desire of foreign investors to buy Indian assets.”
Srivastava, 41, predicts India’s $1.3 trillion economy to grow at 8.5 percent for the year through March 2012, accompanied by a 20 percent expansion in corporate earnings. Gross domestic product grew 8.9 percent for a second straight quarter in the three months through September, maintaining the fastest pace among the world’s major economies after China.
‘Crude a Dampener’
Srivastava sees a “high probability” that the Sensex will reach 23,000 by March 2012, a 14 percent gain from today, and is “bullish” on the banking and oil & gas sectors.
“On an average, our bias will be to build portfolios with banks and oil & gas stocks,” he said.
Rising crude oil prices are the biggest risk to markets, Srivastava said. India, which imports more than 75 percent of its crude oil needs, is forecast to account for 15 percent of the global increase in energy demand to 2030, according to the International Energy Agency.
“Crude is a dampener. There is a severe winter in Europe, which is driving up demand for heating fuels and pushing prices up,” he said. If crude oil continues to rise, “economies like India could suffer and stock markets could correct.”
Thousands of airline and train passengers were marooned across Europe during a storm system that produced Britain’s worst early snowfall in 17 years this week.
Crude oil in New York trading reached $90.76 a barrel on Dec. 7, the highest level since 2008. Oil has gained 13 percent this year.
Credit Expansion
A pick-up in corporate demand and government spending will boost lending over the next 12 to 15 months, Srivastava said. He estimates loan growth of 22 percent for Indian lenders in the financial year 2012.
“The best way to play the banking theme is through large and clean private-sector banks,” Srivastava said, as they tend to do better in a rising interest-rate environment. He declined to comment on specific stocks.
Srivastava is also investing in oil companies’ stocks on expectations government policy changes may allow for market- driven fuel prices. India freed gasoline prices from state control in June, while continuing to set rates for other fuels, including diesel. The nation’s government will decide on a gas pricing policy in the next six to eight months, oil secretary S. Sundareshan said on Oct. 30.
“Policy direction is indicating that certain reforms could happen. If reforms clearly pan out, this is one sector that could outperform,” Srivastava said.
Monday, December 20, 2010
For Air Cargo, a Screening Conundrum
Ever since 9/11, each new security threat to airlines has increased the rigor of passenger screening. They have to remove their shoes and carry liquids only in small containers. They have to take off their belts and take laptops out of their cases. Now, they have to submit to full-body scanning machines and intrusive pat-downs.
But since the discovery in October of explosives from Yemen hidden in ink cartridges on cargo planes, the $50 billion freight business has seen little of the same kind of escalating security.
Even in the midst of one of the air cargo industry’s busiest periods of the year, governments and aviation experts continue to struggle to come up with ways to strengthen cargo security without paralyzing a business essential to global trade.
Still, that could change. Cargo safety has suddenly emerged as one of the biggest topics in aviation security. Governments around the world have pledged to tackle the problem, while in Congress, lawmakers are calling for much tougher inspections of cargo.
The cargo industry has resisted one idea: screening all cargo. It argues that such a step is impractical since most airports do not have the space to screen all the packages shipped each day. And some goods, including perishable products and medical supplies, may not survive a long wait at the airport to be screened.
“It’s the old conundrum,” said Billie Vincent, a former security director for the Federal Aviation Administration. “Do you put the industry out of business in the process of making it safe?”
Screening passengers is far simpler than inspecting cargo. More than 1,600 airports worldwide are funneling passengers through security lines and metal detectors.
But air cargo can come from countless sources and comprises countless kinds of goods, including fresh produce, medical supplies and electronic devices. The cargo industry itself is fragmented, too, with door-to-door shippers like DHL, United Parcel Service and FedEx; all-cargo airlines; and shipping companies that rent cargo space on passenger planes. Air cargo represents about 40 percent of the value of global trade.
As a result, the Transportation Security Administration, which handles all passenger screening in the United States, has taken a different approach to air cargo. It mostly relies on the cargo industry to screen its own freight. And freight is inspected in factories or in warehouses, by shippers, freight operators or airlines, in this country or overseas.
Reflecting the T.S.A.’s focus on passenger safety, it received $5.2 billion for aviation security in the last fiscal year and just $123 million for cargo security.
And while new safety procedures were adopted for passengers almost immediately after 9/11, it wasn’t until 2007 that Congress passed a law requiring all cargo on passenger planes to be screened. The new requirement has been in effect since August.
But Representative Edward J. Markey, Democrat of Massachusetts, who wrote the mandate, said it still left a “safety loophole” because freight on cargo planes, which accounts for 85 percent of all air cargo, is not subject to the same screening. After the Yemen incident, Mr. Markey introduced a bill to extend the screening mandate to all cargo planes.
“As the terrorists are turning to cargo planes as a delivery device for their deadly plans, we now need to secure cargo planes,” Mr. Markey said recently. “We simply can’t afford to leave this vulnerability open.”
Cargo experts contend that it is far more effective to focus on packages coming from risky countries, or from unknown shippers with no track record of business or those who pay in cash. Well-established companies that ship goods regularly, the experts say, present much less of a safety risk and therefore require less scrutiny.
“Screening every piece of freight on every single freight aircraft coming or leaving the United States would be a tremendous challenge and would not equate to 100 percent air cargo security,” said Brandon Fried, the president of the Airforwarders Association, an industry trade group. “The focus should be on who is shipping what, and where.”
But since the discovery in October of explosives from Yemen hidden in ink cartridges on cargo planes, the $50 billion freight business has seen little of the same kind of escalating security.
Even in the midst of one of the air cargo industry’s busiest periods of the year, governments and aviation experts continue to struggle to come up with ways to strengthen cargo security without paralyzing a business essential to global trade.
Still, that could change. Cargo safety has suddenly emerged as one of the biggest topics in aviation security. Governments around the world have pledged to tackle the problem, while in Congress, lawmakers are calling for much tougher inspections of cargo.
The cargo industry has resisted one idea: screening all cargo. It argues that such a step is impractical since most airports do not have the space to screen all the packages shipped each day. And some goods, including perishable products and medical supplies, may not survive a long wait at the airport to be screened.
“It’s the old conundrum,” said Billie Vincent, a former security director for the Federal Aviation Administration. “Do you put the industry out of business in the process of making it safe?”
Screening passengers is far simpler than inspecting cargo. More than 1,600 airports worldwide are funneling passengers through security lines and metal detectors.
But air cargo can come from countless sources and comprises countless kinds of goods, including fresh produce, medical supplies and electronic devices. The cargo industry itself is fragmented, too, with door-to-door shippers like DHL, United Parcel Service and FedEx; all-cargo airlines; and shipping companies that rent cargo space on passenger planes. Air cargo represents about 40 percent of the value of global trade.
As a result, the Transportation Security Administration, which handles all passenger screening in the United States, has taken a different approach to air cargo. It mostly relies on the cargo industry to screen its own freight. And freight is inspected in factories or in warehouses, by shippers, freight operators or airlines, in this country or overseas.
Reflecting the T.S.A.’s focus on passenger safety, it received $5.2 billion for aviation security in the last fiscal year and just $123 million for cargo security.
And while new safety procedures were adopted for passengers almost immediately after 9/11, it wasn’t until 2007 that Congress passed a law requiring all cargo on passenger planes to be screened. The new requirement has been in effect since August.
But Representative Edward J. Markey, Democrat of Massachusetts, who wrote the mandate, said it still left a “safety loophole” because freight on cargo planes, which accounts for 85 percent of all air cargo, is not subject to the same screening. After the Yemen incident, Mr. Markey introduced a bill to extend the screening mandate to all cargo planes.
“As the terrorists are turning to cargo planes as a delivery device for their deadly plans, we now need to secure cargo planes,” Mr. Markey said recently. “We simply can’t afford to leave this vulnerability open.”
Cargo experts contend that it is far more effective to focus on packages coming from risky countries, or from unknown shippers with no track record of business or those who pay in cash. Well-established companies that ship goods regularly, the experts say, present much less of a safety risk and therefore require less scrutiny.
“Screening every piece of freight on every single freight aircraft coming or leaving the United States would be a tremendous challenge and would not equate to 100 percent air cargo security,” said Brandon Fried, the president of the Airforwarders Association, an industry trade group. “The focus should be on who is shipping what, and where.”
Asian Stocks Rise as Commodity Firms Gain; Korea Climbs as Tension Eases
Asian stocks rose as commodity prices advanced and a Federal Reserve official said U.S. economic growth next year may be stronger than some economists forecast, boosting confidence in a global economic recovery.
Komatsu Ltd., the world’s second-biggest maker of earthmoving machines, gained 1 percent Tokyo. BHP Billiton Ltd., the world’s No. 1 mining company and Australia’s top oil producer, climbed 0.9 percent in Sydney today. Hyundai Engineering & Construction Co. advanced 4 percent in Seoul after parent Hyundai Group’s bid to buy South Korea’s largest builder collapsed.
“Consensus is forming that the global economy is gradually getting better,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. “Growth in the world economy is boosting commodity prices, and surplus money is going into commodities and stocks.”
The MSCI Asia Pacific Index rose 0.3 percent to 133.73 as of 9:51 a.m. in Tokyo, with three stocks increasing for each that fell. The gauge climbed to a 2 1/2-year intraday high on Dec. 14 as U.S. economic reports boosted confidence in a global recovery, easing concerns that Europe’s debt crisis and China’s measures to slow inflation will hurt growth.
Japan’s Nikkei 225 Stock Average climbed 0.6 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent and New Zealand’s NZX 50 Index both increased 0.3 percent.
South Korea’s Kospi Index gained 0.8 percent as tensions on the Korean peninsula eased after the North did not retaliate to military drills on a disputed island.
Futures on the Standard & Poor’s 500 Index were little changed today. The index climbed 0.3 percent yesterday in New York as Barclays Plc raised its share-price estimate on Amazon.com Inc. and energy shares rallied. The index is near its closing level on Sept. 12, 2008, the last trading day before the bankruptcy filing of Lehman Brothers Holdings Inc.
U.S. Data ‘Bodes Well’
Federal Reserve Bank of St. Louis President James Bullard said provision of stimulus is “reviewable and changeable” depending on economic growth, which may be stronger next year than some economists forecast. Bullard said in an interview with CNBC yesterday that while Europe’s fiscal crisis is “very serious” and may continue for “quite a while,” recent U.S. economic data “bodes well” for 2011.
Crude oil for January delivery increased 79 cents to settle at $88.81 a barrel in New York yesterday on speculation U.S. economic growth will accelerate next year, bolstering demand in the world’s biggest oil-consuming country. The London Metal Exchange Index of six metals including copper and aluminum climbed 1.1 percent yesterday, rising for second day.
The MSCI Asia Pacific Index increased 11 percent this year through yesterday, compared with gains of 12 percent by the S&P 500 and 9.6 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 14.7 times estimated earnings on average at yesterday’s close, versus 14.6 times for the S&P 500 and 12.3 times for the Stoxx 600.
Komatsu Ltd., the world’s second-biggest maker of earthmoving machines, gained 1 percent Tokyo. BHP Billiton Ltd., the world’s No. 1 mining company and Australia’s top oil producer, climbed 0.9 percent in Sydney today. Hyundai Engineering & Construction Co. advanced 4 percent in Seoul after parent Hyundai Group’s bid to buy South Korea’s largest builder collapsed.
“Consensus is forming that the global economy is gradually getting better,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. “Growth in the world economy is boosting commodity prices, and surplus money is going into commodities and stocks.”
The MSCI Asia Pacific Index rose 0.3 percent to 133.73 as of 9:51 a.m. in Tokyo, with three stocks increasing for each that fell. The gauge climbed to a 2 1/2-year intraday high on Dec. 14 as U.S. economic reports boosted confidence in a global recovery, easing concerns that Europe’s debt crisis and China’s measures to slow inflation will hurt growth.
Japan’s Nikkei 225 Stock Average climbed 0.6 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent and New Zealand’s NZX 50 Index both increased 0.3 percent.
South Korea’s Kospi Index gained 0.8 percent as tensions on the Korean peninsula eased after the North did not retaliate to military drills on a disputed island.
Futures on the Standard & Poor’s 500 Index were little changed today. The index climbed 0.3 percent yesterday in New York as Barclays Plc raised its share-price estimate on Amazon.com Inc. and energy shares rallied. The index is near its closing level on Sept. 12, 2008, the last trading day before the bankruptcy filing of Lehman Brothers Holdings Inc.
U.S. Data ‘Bodes Well’
Federal Reserve Bank of St. Louis President James Bullard said provision of stimulus is “reviewable and changeable” depending on economic growth, which may be stronger next year than some economists forecast. Bullard said in an interview with CNBC yesterday that while Europe’s fiscal crisis is “very serious” and may continue for “quite a while,” recent U.S. economic data “bodes well” for 2011.
Crude oil for January delivery increased 79 cents to settle at $88.81 a barrel in New York yesterday on speculation U.S. economic growth will accelerate next year, bolstering demand in the world’s biggest oil-consuming country. The London Metal Exchange Index of six metals including copper and aluminum climbed 1.1 percent yesterday, rising for second day.
The MSCI Asia Pacific Index increased 11 percent this year through yesterday, compared with gains of 12 percent by the S&P 500 and 9.6 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 14.7 times estimated earnings on average at yesterday’s close, versus 14.6 times for the S&P 500 and 12.3 times for the Stoxx 600.
Subscribe to:
Posts (Atom)
Posts
