29 March , 2009
TORONTO — A vast electronic spying operation has infiltrated computers and has stolen documents from hundreds of government and private offices around the world, including those of the Dalai Lama, Canadian researchers have concluded.
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Tim Leyes for The New York Times
The Toronto academic researchers who are reporting on the spying operation dubbed GhostNet include, from left, Ronald J. Deibert, Greg Walton, Nart Villeneuve and Rafal A. Rohozinski.
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In a report to be issued this weekend, the researchers said that the system was being controlled from computers based almost exclusively in China, but that they could not say conclusively that the Chinese government was involved.
The researchers, who are based at the Munk Center for International Studies at the University of Toronto, had been asked by the office of the Dalai Lama, the exiled Tibetan leader whom China regularly denounces, to examine its computers for signs of malicious software, or malware.
Their sleuthing opened a window into a broader operation that, in less than two years, has infiltrated at least 1,295 computers in 103 countries, including many belonging to embassies, foreign ministries and other government offices, as well as the Dalai Lama’s Tibetan exile centers in India, Brussels, London and New York.
The researchers, who have a record of detecting computer espionage, said they believed that in addition to the spying on the Dalai Lama, the system, which they called GhostNet, was focused on the governments of South Asian and Southeast Asian countries.
Intelligence analysts say many governments, including those of China, Russia and the United States, and other parties use sophisticated computer programs to covertly gather information.
The newly reported spying operation is by far the largest to come to light in terms of countries affected.
This is also believed to be the first time researchers have been able to expose the workings of a computer system used in an intrusion of this magnitude.
Still going strong, the operation continues to invade and monitor more than a dozen new computers a week, the researchers said in their report, “Tracking ‘GhostNet’: Investigating a Cyber Espionage Network.” They said they had found no evidence that United States government offices had been infiltrated, although a NATO computer was monitored by the spies for half a day and computers of the Indian Embassy in Washington were infiltrated.
The malware is remarkable both for its sweep — in computer jargon, it has not been merely “phishing” for random consumers’ information, but “whaling” for particular important targets — and for its Big Brother-style capacities. It can, for example, turn on the camera and audio-recording functions of an infected computer, enabling monitors to see and hear what goes on in a room. The investigators say they do not know if this facet has been employed.
The researchers were able to monitor the commands given to infected computers and to see the names of documents retrieved by the spies, but in most cases the contents of the stolen files have not been determined. Working with the Tibetans, however, the researchers found that specific correspondence had been stolen and that the intruders had gained control of the electronic mail server computers of the Dalai Lama’s organization.
The electronic spy game has had at least some real-world impact, they said. For example, they said, after an e-mail invitation was sent by the Dalai Lama’s office to a foreign diplomat, the Chinese government made a call to the diplomat discouraging a visit. And a woman working for a group making Internet contacts between Tibetan exiles and Chinese citizens was stopped by Chinese intelligence officers on her way back to Tibet, shown transcripts of her online conversations and warned to stop her political activities.
The Toronto researchers said they had notified international law enforcement agencies of the spying operation, which in their view exposed basic shortcomings in the legal structure of cyberspace. The F.B.I. declined to comment on the operation.
Although the Canadian researchers said that most of the computers behind the spying were in China, they cautioned against concluding that China’s government was involved. The spying could be a nonstate, for-profit operation, for example, or one run by private citizens in China known as “patriotic hackers.”
“We’re a bit more careful about it, knowing the nuance of what happens in the subterranean realms,” said Ronald J. Deibert, a member of the research group and an associate professor of political science at Munk. “This could well be the C.I.A. or the Russians. It’s a murky realm that we’re lifting the lid on.”
A spokesman for the Chinese Consulate in New York dismissed the idea that China was involved. “These are old stories and they are nonsense,” the spokesman, Wenqi Gao, said. “The Chinese government is opposed to and strictly forbids any cybercrime.”
The Toronto researchers, who allowed a reporter for The New York Times to review the spies’ digital tracks, are publishing their findings in Information Warfare Monitor, an online publication associated with the Munk Center.
At the same time, two computer researchers at Cambridge University in Britain who worked on the part of the investigation related to the Tibetans, are releasing an independent report. They do fault China, and they warned that other hackers could adopt the tactics used in the malware operation.
Saturday, March 28, 2009
How Crisis Shapes the Corporate Model
29 March , 2009
EVER since the financial crisis broke in earnest last September, history has been mined for nuggets of insight. The Great Depression, the Panic of 1907, Japan’s lost decade of the 1990s, the Swedish banking crash in the late 1990s, and so on. Each time, though, the focus has tended to be on the lessons learned for economic policy and theory.
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The New York Times, 1946
After the Great Depression, the American railroad system was among several forces that helped to build huge and wide-ranging companies.
Let’s try a different lens. How have past crises shaped management thinking and strategy? Innovation in management, after all, is adaptive. Management is not a science, like physics, with immutable laws and testable theories. Instead, management, at its best, is an intelligent response to outside forces, often disruptive ones.
Times of severe economic duress, management experts say, can serve to sharply accelerate trends already under way.
The Depression and its immediate aftermath, they say, was such a catalyst for forces already in motion. The main development, they note, was the rise of the modern multidivisional enterprise like General Electric, DuPont and General Motors. It was made possible by the mature technologies of transportation and communication — railroads, the telephone and the telegraph.
The technologies made it possible to monitor and coordinate business operations as never before. And the Depression made it imperative for managers to achieve efficient economies of scale to tap national markets, ensuring corporate survival amid a downward spiral in total demand.
A modern version of that kind of technology-aided shift in management practice and corporate organization could be in the offing, says John Hagel III, the co-director of the Deloitte Center for Edge Innovation, a research arm of the consulting firm.
The sharp downturn, according to Mr. Hagel, will force companies to go beyond simple cost-cutting to take a hard look at the economics of their businesses. Most companies, he says, are actually bundles of three different businesses: infrastructure management, product and service development and commercialization, and customer relations.
The current crisis, Mr. Hagel says, opens the door to “an unbundling of the corporation” to achieve greater efficiency and profitability. The trend, he notes, is already exemplified by specialist companies that focus on particular infrastructure fields. In logistics, Mr. Hagel says, many companies farm out those chores to Federal Express and U.P.S.; in call centers, he points to Convergys; and in contract manufacturing, to Flextronics.
Of the three business areas, new product development is the one that lends itself not to size, but to small creative teams, and thus is the most difficult for large corporations. Mr. Hagel cites Procter & Gamble as a big company that understands the benefits of unbundling. It has set a goal of getting half its new-product innovations from outside the company, through licensing and collaboration with partners. And P.& G., Mr. Hagel says, has invested heavily in Web technology and clever software to analyze and nurture customer relations.
To Mr. Hagel, such developments look like an Internet-era rerun of the corporate transformation of the 1930s and ’40s. “We’re facing the potential to have that play out again — this time with digital infrastructures that allow companies to organize and manage their activities in new ways,” he said.
Manufacturing innovations and distribution patterns have been powerfully shaped by economic shifts. Japan’s just-in-time, lean manufacturing system, management experts note, was an adaptation to postwar poverty, a shortage of capital and scarce land for factories, while pro-market policies in China and India opened the door to globalization.
There may well be a different pattern of global production and distribution when the world economy emerges from the current crisis, says George Stalk, senior adviser to the Boston Consulting Group. Assuming that long-term oil prices average $80 a barrel or so, and that roads, ports and airports continue to be congested, smaller factories closer to home — in the Midwest or Mexico, for example — may be more economical and flexible than those in Asia. “For a lot of goods, China will no longer be the preferred source,” Mr. Stalk said.
Times of turmoil also bring changes in social attitudes and politics, which ripple into new management practices. Labor unions, for example, rose to prominence during the Depression. Unions brought large companies a needed dose of industrial stability, as the earlier ideological wars between labor and capital receded. If the workers were less likely to be radicals, the days of robber-baron owners were in eclipse as well.
Their power was supplanted by “a new subspecies of economic man — the salaried manager,” wrote Alfred D. Chandler Jr., in his Pulitzer Prize-winning history, “The Visible Hand: The Managerial Revolution in American Business” (Harvard, 1977). Chandler called the model “managerial capitalism,” and the role of management was to balance the interests of a diverse group of stakeholders including workers, government and shareholders.
That model held sway until the 1980s, when the stagnation of economic growth and corporate profits of the 1970s brought a narrowed focus on stock-market returns as the primary measure of management performance. In politics, the Reagan revolution decreed that government was not the solution, but the problem.
TODAY, the pendulum is swinging back to a model in which corporations will be regarded more as social organizations, whose obligations extend well beyond Wall Street, according to Rakesh Khurana, a professor at Harvard Business School. He says that in seeking government aid, the automakers portray themselves as “pillars of their communities and pillars of American manufacturing, not purely economic entities.”
“The narrative for corporate America has changed,” Professor Khurana observed. “Government is not seen in opposition to the firm, but as a partner.”
Such swings, it seems, are the norm historically. “If there’s an ideology of management,” he said, “it is pragmatism.”
EVER since the financial crisis broke in earnest last September, history has been mined for nuggets of insight. The Great Depression, the Panic of 1907, Japan’s lost decade of the 1990s, the Swedish banking crash in the late 1990s, and so on. Each time, though, the focus has tended to be on the lessons learned for economic policy and theory.
Skip to next paragraph
Enlarge This Image
The New York Times, 1946
After the Great Depression, the American railroad system was among several forces that helped to build huge and wide-ranging companies.
Let’s try a different lens. How have past crises shaped management thinking and strategy? Innovation in management, after all, is adaptive. Management is not a science, like physics, with immutable laws and testable theories. Instead, management, at its best, is an intelligent response to outside forces, often disruptive ones.
Times of severe economic duress, management experts say, can serve to sharply accelerate trends already under way.
The Depression and its immediate aftermath, they say, was such a catalyst for forces already in motion. The main development, they note, was the rise of the modern multidivisional enterprise like General Electric, DuPont and General Motors. It was made possible by the mature technologies of transportation and communication — railroads, the telephone and the telegraph.
The technologies made it possible to monitor and coordinate business operations as never before. And the Depression made it imperative for managers to achieve efficient economies of scale to tap national markets, ensuring corporate survival amid a downward spiral in total demand.
A modern version of that kind of technology-aided shift in management practice and corporate organization could be in the offing, says John Hagel III, the co-director of the Deloitte Center for Edge Innovation, a research arm of the consulting firm.
The sharp downturn, according to Mr. Hagel, will force companies to go beyond simple cost-cutting to take a hard look at the economics of their businesses. Most companies, he says, are actually bundles of three different businesses: infrastructure management, product and service development and commercialization, and customer relations.
The current crisis, Mr. Hagel says, opens the door to “an unbundling of the corporation” to achieve greater efficiency and profitability. The trend, he notes, is already exemplified by specialist companies that focus on particular infrastructure fields. In logistics, Mr. Hagel says, many companies farm out those chores to Federal Express and U.P.S.; in call centers, he points to Convergys; and in contract manufacturing, to Flextronics.
Of the three business areas, new product development is the one that lends itself not to size, but to small creative teams, and thus is the most difficult for large corporations. Mr. Hagel cites Procter & Gamble as a big company that understands the benefits of unbundling. It has set a goal of getting half its new-product innovations from outside the company, through licensing and collaboration with partners. And P.& G., Mr. Hagel says, has invested heavily in Web technology and clever software to analyze and nurture customer relations.
To Mr. Hagel, such developments look like an Internet-era rerun of the corporate transformation of the 1930s and ’40s. “We’re facing the potential to have that play out again — this time with digital infrastructures that allow companies to organize and manage their activities in new ways,” he said.
Manufacturing innovations and distribution patterns have been powerfully shaped by economic shifts. Japan’s just-in-time, lean manufacturing system, management experts note, was an adaptation to postwar poverty, a shortage of capital and scarce land for factories, while pro-market policies in China and India opened the door to globalization.
There may well be a different pattern of global production and distribution when the world economy emerges from the current crisis, says George Stalk, senior adviser to the Boston Consulting Group. Assuming that long-term oil prices average $80 a barrel or so, and that roads, ports and airports continue to be congested, smaller factories closer to home — in the Midwest or Mexico, for example — may be more economical and flexible than those in Asia. “For a lot of goods, China will no longer be the preferred source,” Mr. Stalk said.
Times of turmoil also bring changes in social attitudes and politics, which ripple into new management practices. Labor unions, for example, rose to prominence during the Depression. Unions brought large companies a needed dose of industrial stability, as the earlier ideological wars between labor and capital receded. If the workers were less likely to be radicals, the days of robber-baron owners were in eclipse as well.
Their power was supplanted by “a new subspecies of economic man — the salaried manager,” wrote Alfred D. Chandler Jr., in his Pulitzer Prize-winning history, “The Visible Hand: The Managerial Revolution in American Business” (Harvard, 1977). Chandler called the model “managerial capitalism,” and the role of management was to balance the interests of a diverse group of stakeholders including workers, government and shareholders.
That model held sway until the 1980s, when the stagnation of economic growth and corporate profits of the 1970s brought a narrowed focus on stock-market returns as the primary measure of management performance. In politics, the Reagan revolution decreed that government was not the solution, but the problem.
TODAY, the pendulum is swinging back to a model in which corporations will be regarded more as social organizations, whose obligations extend well beyond Wall Street, according to Rakesh Khurana, a professor at Harvard Business School. He says that in seeking government aid, the automakers portray themselves as “pillars of their communities and pillars of American manufacturing, not purely economic entities.”
“The narrative for corporate America has changed,” Professor Khurana observed. “Government is not seen in opposition to the firm, but as a partner.”
Such swings, it seems, are the norm historically. “If there’s an ideology of management,” he said, “it is pragmatism.”
Australia’s Economy Can Emerge Stronger From Crisis, Swan Says
March 29 (Bloomberg) -- Australia’s economy can emerge stronger from the global recession provided the “right” action is taken internationally and in the domestic market, Treasurer Wayne Swan said.
Swan and Prime Minister Kevin Rudd will be discussing toxic assets at the Group of 20 leaders’ summit in London later this week, the Treasurer said today in an e-mailed note. Swan said he will also meet his counterparts from developed and developing countries to discuss further action to restore economic growth and support jobs.
Leaders of the world’s 20 largest economies will meet April 2 to devise a common approach to combating the global financial crisis, after the International Monetary Fund this month forecast the world economy will shrink as much as 1 percent in 2009. Financial institutions have reported credit-related losses of more than $1.2 trillion since the crisis began in mid-2007, according to data compiled by Bloomberg.
“While there are no quick fixes to this global recession, with the right action globally and here at home, we can come through this stronger and more prosperous than before,” Swan said in the note. Australia’s retail activity and jobs have benefited from the government’s economic stimulus plan, he said.
Australia’s economy shrank in the fourth quarter for the first time in eight years as exports and housing slumped. Gross domestic product fell 0.5 percent from the third quarter, when it increased 0.1 percent, the statistics bureau reported March 4. Data released last week showed that both the U.S. and U.K. economies contracted by 1.6 percent in the final three months of last year, their worst performances since the early 1980s.
The nation’s financial system has so far weathered the global crisis “much better” than those in many other countries, while the housing market has also held up better, Swan said. A temporary guarantee of borrowing by state governments, announced last week, will support jobs and protect infrastructure development plans, he said.
Swan and Prime Minister Kevin Rudd will be discussing toxic assets at the Group of 20 leaders’ summit in London later this week, the Treasurer said today in an e-mailed note. Swan said he will also meet his counterparts from developed and developing countries to discuss further action to restore economic growth and support jobs.
Leaders of the world’s 20 largest economies will meet April 2 to devise a common approach to combating the global financial crisis, after the International Monetary Fund this month forecast the world economy will shrink as much as 1 percent in 2009. Financial institutions have reported credit-related losses of more than $1.2 trillion since the crisis began in mid-2007, according to data compiled by Bloomberg.
“While there are no quick fixes to this global recession, with the right action globally and here at home, we can come through this stronger and more prosperous than before,” Swan said in the note. Australia’s retail activity and jobs have benefited from the government’s economic stimulus plan, he said.
Australia’s economy shrank in the fourth quarter for the first time in eight years as exports and housing slumped. Gross domestic product fell 0.5 percent from the third quarter, when it increased 0.1 percent, the statistics bureau reported March 4. Data released last week showed that both the U.S. and U.K. economies contracted by 1.6 percent in the final three months of last year, their worst performances since the early 1980s.
The nation’s financial system has so far weathered the global crisis “much better” than those in many other countries, while the housing market has also held up better, Swan said. A temporary guarantee of borrowing by state governments, announced last week, will support jobs and protect infrastructure development plans, he said.
Friday, March 27, 2009
Asian Stocks Complete Best Week Since 2007, Enter Bull Market
March 28 (Bloomberg) -- Asian stocks posted their biggest weekly gain since August 2007 amid optimism governments worldwide will succeed in reviving lending and global growth.
The MSCI Asia Pacific Index has rallied 21 percent from a five-year low on March 9, technically entering a bull market. Toyota Motor Corp., which gets 37 percent of its sales from North America, gained 10 percent in Tokyo on optimism the U.S. Treasury’s plan to remove banks’ toxic assets will revive economic growth. BHP Billiton Ltd., the world’s No. 1 mining company, climbed 5.7 percent in Sydney after prices for oil and metals advanced.
“We are building a base for the next bull market,” Mark Mobius, who helps oversee about $20 billion of emerging-market assets at Templeton Asset Management Ltd., said in Hong Kong. “You have to be careful not to miss the opportunity. With all the negative news, there is a tendency to hold back.”
MSCI’s Asian benchmark gauge rose 7.5 percent to 85.49 this week, its best weekly performance since the week ended Aug. 24, 2007. A measure tracking energy stocks on the MSCI gauge rallied 11 percent this week, the sharpest jump among the 10 industry groups on the MSCI Asia Pacific Index.
Hong Kong’s Hang Seng Index rose 10 percent, its best week since October. Japan’s Nikkei 225 Stock Average climbed 8.6 percent while South Korea’s Kospi Index added 5.7 percent.
Governments from the U.S. to Japan are widening measures to ease the financial crisis, which has caused more than $1 trillion of losses worldwide, and to avert what the World Bank predicts will be the first global economic contraction since World War II.
Government Action
The U.S. Treasury announced on March 23 plans to rid banks of toxic real-estate assets. The country and Japan also pledged on March 18 to buy government debt, while banks including Barclays Plc reported strong starts to the year.
Toyota jumped 10 percent to 3,260 yen in Tokyo this week. Sony Corp., which gets a quarter of its sales from the U.S., surged 13 percent to 2,225 yen. Samsung Electronics Co., the world’s biggest maker of computer memory, rose 7.8 percent to 584,000 won in Seoul.
“When you consider how much money governments have thrown at the crisis to get liquidity going, you’d think it’ll have some effect,” said Chris Hall, who helps oversee about $2 billion at Adelaide, South Australia-based Argo Investments. “It’ll take a bit of time to all come through.”
BHP climbed 5.7 percent to A$34.01 in Sydney this week. Cnooc Ltd., China’s biggest offshore oil producer, jumped 11 percent to HK$8.33 in Hong Kong. Crude oil added 2.6 percent to $52.38 a barrel in New York this week. A measure of six primary metals traded in London fell 0.1 percent.
Rising Valuations
Rio Tinto Group, the world’s third-largest mining company, soared 21 percent to A$56.88. The company said March 26 that it had an alternative plan should Aluminum Corp. of China’s $19.5 billion investment deal fail.
MSCI’s Asian benchmark gauge rose 13.7 percent in March, which was the biggest monthly gain since October 1998, when governments were cutting interest rates to alleviate the Asian financial crisis.
The gains pared the measure’s drop this year to 4.6 percent, and raised the average valuation of companies on the MSCI Asia Pacific Index yesterday to 16.7 times profit, the highest level since December 2007, data compiled by Bloomberg show.
The gauge’s 14-day relative strength index, which measures how rapidly prices have risen or fallen, yesterday rose above the level of 70 that some traders use as a signal to sell.
“The market will remain resilient, though technical indicators indicate it is overheating,” said Mitsushige Akino, who oversees the equivalent of $615 million at Tokyo-based Ichiyoshi Investment Management Co.
Industrial & Commercial Bank of China Ltd. jumped 27 percent to HK$4.19 this week in Hong Kong as Goldman Sachs Group Inc. agreed to keep most of its stake in the company for at least another year. ICBC is the world’s most profitable bank.
Elpida Memory Inc. soared 50 percent to 735 yen in Tokyo after computer-chip prices rallied and on optimism share sales by two units will help it avoid early repayment of loans.
The MSCI Asia Pacific Index has rallied 21 percent from a five-year low on March 9, technically entering a bull market. Toyota Motor Corp., which gets 37 percent of its sales from North America, gained 10 percent in Tokyo on optimism the U.S. Treasury’s plan to remove banks’ toxic assets will revive economic growth. BHP Billiton Ltd., the world’s No. 1 mining company, climbed 5.7 percent in Sydney after prices for oil and metals advanced.
“We are building a base for the next bull market,” Mark Mobius, who helps oversee about $20 billion of emerging-market assets at Templeton Asset Management Ltd., said in Hong Kong. “You have to be careful not to miss the opportunity. With all the negative news, there is a tendency to hold back.”
MSCI’s Asian benchmark gauge rose 7.5 percent to 85.49 this week, its best weekly performance since the week ended Aug. 24, 2007. A measure tracking energy stocks on the MSCI gauge rallied 11 percent this week, the sharpest jump among the 10 industry groups on the MSCI Asia Pacific Index.
Hong Kong’s Hang Seng Index rose 10 percent, its best week since October. Japan’s Nikkei 225 Stock Average climbed 8.6 percent while South Korea’s Kospi Index added 5.7 percent.
Governments from the U.S. to Japan are widening measures to ease the financial crisis, which has caused more than $1 trillion of losses worldwide, and to avert what the World Bank predicts will be the first global economic contraction since World War II.
Government Action
The U.S. Treasury announced on March 23 plans to rid banks of toxic real-estate assets. The country and Japan also pledged on March 18 to buy government debt, while banks including Barclays Plc reported strong starts to the year.
Toyota jumped 10 percent to 3,260 yen in Tokyo this week. Sony Corp., which gets a quarter of its sales from the U.S., surged 13 percent to 2,225 yen. Samsung Electronics Co., the world’s biggest maker of computer memory, rose 7.8 percent to 584,000 won in Seoul.
“When you consider how much money governments have thrown at the crisis to get liquidity going, you’d think it’ll have some effect,” said Chris Hall, who helps oversee about $2 billion at Adelaide, South Australia-based Argo Investments. “It’ll take a bit of time to all come through.”
BHP climbed 5.7 percent to A$34.01 in Sydney this week. Cnooc Ltd., China’s biggest offshore oil producer, jumped 11 percent to HK$8.33 in Hong Kong. Crude oil added 2.6 percent to $52.38 a barrel in New York this week. A measure of six primary metals traded in London fell 0.1 percent.
Rising Valuations
Rio Tinto Group, the world’s third-largest mining company, soared 21 percent to A$56.88. The company said March 26 that it had an alternative plan should Aluminum Corp. of China’s $19.5 billion investment deal fail.
MSCI’s Asian benchmark gauge rose 13.7 percent in March, which was the biggest monthly gain since October 1998, when governments were cutting interest rates to alleviate the Asian financial crisis.
The gains pared the measure’s drop this year to 4.6 percent, and raised the average valuation of companies on the MSCI Asia Pacific Index yesterday to 16.7 times profit, the highest level since December 2007, data compiled by Bloomberg show.
The gauge’s 14-day relative strength index, which measures how rapidly prices have risen or fallen, yesterday rose above the level of 70 that some traders use as a signal to sell.
“The market will remain resilient, though technical indicators indicate it is overheating,” said Mitsushige Akino, who oversees the equivalent of $615 million at Tokyo-based Ichiyoshi Investment Management Co.
Industrial & Commercial Bank of China Ltd. jumped 27 percent to HK$4.19 this week in Hong Kong as Goldman Sachs Group Inc. agreed to keep most of its stake in the company for at least another year. ICBC is the world’s most profitable bank.
Elpida Memory Inc. soared 50 percent to 735 yen in Tokyo after computer-chip prices rallied and on optimism share sales by two units will help it avoid early repayment of loans.
Asian Currencies Have Best Weekly Run in a Year on Stock Rally
March 28 (Bloomberg) -- Asian currencies rose for a fourth week, the longest winning streak in almost a year, as a global stock rally revived investor appetite for emerging-market assets.
South Korea’s won touched a two-month high against the dollar after a central bank report showed the economy shrank less than initially estimated in the fourth quarter. Indonesia’s rupiah strengthened for a third week as overseas investors bought $120 million more of the nation’s equities than they sold this month. The MSCI Asia Pacific Index of regional shares jumped 7.5 percent, the biggest weekly gain since August 2007.
“Asian currencies followed sentiment in the global stock market quite closely,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “That’s why we had a solid performance this week.”
The won was at 1,349.00 per dollar as of the 3 p.m. local close, 4.7 percent stronger than last week, according to Seoul Money Brokerage Services Ltd. Malaysia’s ringgit gained 0.8 percent this week to 3.6155 and Taiwan’s dollar appreciated 0.1 percent to NT$33.779. The rupiah rose 2.3 percent to 11,500.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, had a fourth weekly gain, the longest run since April 2008. It rose 0.8 percent this week to 104.88. Eight of the 10 most-active currencies in Asia outside Japan climbed against the greenback.
Growth Outlook
South Korea’s gross domestic product shrank a revised 5.1 percent in the fourth quarter, the central bank reported yesterday. That’s less than the previously reported 5.6 percent decline and follows a 0.2 percent expansion in the three months to September.
“The Korean won had been one of the harder-hit currencies in recent months so it’s reasonable that they enjoy one of the nicer rebounds as investor sentiment has improved in the past few weeks,” said David Cohen, director of Asian forecasting at Action Economics in Singapore.
The rupiah had its biggest weekly advance of the year after better-than-expected earnings at U.S. companies added to speculation a global recession is easing.
“Stock markets are up and that should benefit most of the regional currencies,” said Apratim Chakravarty, head of global markets at HSBC Holdings Plc in Jakarta. “The outlook for the rupiah will also be positive.”
Investors should buy the Indonesian rupiah as its economy will fare better than regional peers, according to Standard Chartered Plc. The Jakarta Composite Index of shares was up 7.5 percent this week.
G-20 Meeting
The Taiwan dollar traded near a six-week high after the central bank on March 26 refrained from cutting the benchmark interest rate from the least on record, saying borrowing costs can’t get any lower. The benchmark Taiex index of shares rose this week by the most in more than six years as purchases by global funds exceeded sales on all but one of the past 12 days.
China said on March 26 stimulus spending has helped stem a slowdown in the world’s third-largest economy. Leaders from the Group of 20 nations may step up efforts to revive global growth when they meet in London on April 2, according to Hideki Hayashi, chief economist at Shinko Securities Co.
“Asian currencies will continue to gain next week because people are more optimistic on stocks and the negative effect of risk is diminishing,” said Hayashi, who is based in Tokyo. “We expect to hear better results from the G-20 summit.”
Elsewhere, the Philippine peso climbed 0.3 percent this week to 48.19 a dollar. The Thai baht traded at 35.32, advancing 0.2 percent in the week. India’s rupee rose 0.1 percent in the week to 50.6025. China’s yuan weakened 0.07 percent to 6.8325. Singapore’s dollar traded at S$1.5138, from S$1.5132 a week ago.
South Korea’s won touched a two-month high against the dollar after a central bank report showed the economy shrank less than initially estimated in the fourth quarter. Indonesia’s rupiah strengthened for a third week as overseas investors bought $120 million more of the nation’s equities than they sold this month. The MSCI Asia Pacific Index of regional shares jumped 7.5 percent, the biggest weekly gain since August 2007.
“Asian currencies followed sentiment in the global stock market quite closely,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “That’s why we had a solid performance this week.”
The won was at 1,349.00 per dollar as of the 3 p.m. local close, 4.7 percent stronger than last week, according to Seoul Money Brokerage Services Ltd. Malaysia’s ringgit gained 0.8 percent this week to 3.6155 and Taiwan’s dollar appreciated 0.1 percent to NT$33.779. The rupiah rose 2.3 percent to 11,500.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, had a fourth weekly gain, the longest run since April 2008. It rose 0.8 percent this week to 104.88. Eight of the 10 most-active currencies in Asia outside Japan climbed against the greenback.
Growth Outlook
South Korea’s gross domestic product shrank a revised 5.1 percent in the fourth quarter, the central bank reported yesterday. That’s less than the previously reported 5.6 percent decline and follows a 0.2 percent expansion in the three months to September.
“The Korean won had been one of the harder-hit currencies in recent months so it’s reasonable that they enjoy one of the nicer rebounds as investor sentiment has improved in the past few weeks,” said David Cohen, director of Asian forecasting at Action Economics in Singapore.
The rupiah had its biggest weekly advance of the year after better-than-expected earnings at U.S. companies added to speculation a global recession is easing.
“Stock markets are up and that should benefit most of the regional currencies,” said Apratim Chakravarty, head of global markets at HSBC Holdings Plc in Jakarta. “The outlook for the rupiah will also be positive.”
Investors should buy the Indonesian rupiah as its economy will fare better than regional peers, according to Standard Chartered Plc. The Jakarta Composite Index of shares was up 7.5 percent this week.
G-20 Meeting
The Taiwan dollar traded near a six-week high after the central bank on March 26 refrained from cutting the benchmark interest rate from the least on record, saying borrowing costs can’t get any lower. The benchmark Taiex index of shares rose this week by the most in more than six years as purchases by global funds exceeded sales on all but one of the past 12 days.
China said on March 26 stimulus spending has helped stem a slowdown in the world’s third-largest economy. Leaders from the Group of 20 nations may step up efforts to revive global growth when they meet in London on April 2, according to Hideki Hayashi, chief economist at Shinko Securities Co.
“Asian currencies will continue to gain next week because people are more optimistic on stocks and the negative effect of risk is diminishing,” said Hayashi, who is based in Tokyo. “We expect to hear better results from the G-20 summit.”
Elsewhere, the Philippine peso climbed 0.3 percent this week to 48.19 a dollar. The Thai baht traded at 35.32, advancing 0.2 percent in the week. India’s rupee rose 0.1 percent in the week to 50.6025. China’s yuan weakened 0.07 percent to 6.8325. Singapore’s dollar traded at S$1.5138, from S$1.5132 a week ago.
Japan’s Bonds Fall Most in 7 Weeks as Stock Gains Damp Demand
March 28 (Bloomberg) -- Japan’s 10-year bonds completed the biggest loss in seven weeks as stock gains sapped demand for the relative safety of government debt.
Benchmark yields approached a six-week high as optimism the worst of the global financial turmoil is over helped propel the Nikkei 225 Stock Average to its third weekly advance. Bonds also fell on speculation the supply of debt will keep increasing as the government raises record amounts to fund measures to combat the deepening recession.
“Bonds are being sold given stronger stocks and this trend may continue,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees $3.3 billion. “As long as there are no negative surprises in economic data, bonds are likely not to be bought.”
The yield on the 1.3 percent bond due March 2019 rose 6.5 basis points this week to 1.32 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.576 yen to 99.823 yen. The yield yesterday reached 1.325 percent, the highest level since Feb. 10.
Ten-year bond futures for June delivery fell 1.36 this week to 138.21 on the Tokyo Stock Exchange.
The Nikkei 225 advanced 8.6 percent over the five trading days, a fourth week of gains, and touched the highest level since Jan. 9, boosted by a rally in U.S. shares.
‘Rising Pressure’
“The Nikkei will be under rising pressure following U.S. stocks” and that is negative for bonds, said Jun Ishii, a fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest bank by assets.
Benchmark bonds have handed investors a loss of 0.03 percent in the three weeks through March 26, according to Merrill Lynch & Co. indexes. The Nikkei has surged 22 percent in the same period.
Japanese bonds are headed for a quarterly loss and Treasuries are set for their worst start to the year since 1996 as the governments of the world’s two biggest economies increase debt sales to fund measures to combat the global recession.
“Even though fundamentals remain weak, supply concerns will dominate the bond market,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA.
Third Package
Japanese Prime Minister Taro Aso, whose approval rating has slumped before elections that must be called by September, is compiling a third stimulus package to add to the amount pledged since he took office six months ago.
The government is likely to pass an additional supplementary budget in June and bond issuance will probably increase by as much as 10 trillion yen ($102 billion), said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. in Tokyo, the top-rated debt analyst in Japan according to Nikkei Veritas newspaper.
The last time Japan stepped up bond sales, in the financial year starting in April 2005, 10-year yields surged 45 basis points. A basis point is 0.01 percentage point.
This week’s drop in bonds was tempered after a government report yesterday showed consumer prices excluding fresh food were unchanged in February from a year earlier. An absence of inflation helps preserve the value of the fixed payments of debt.
Japan will experience a general drop in prices, known as deflation, through the first quarter of next year, according to a Bloomberg News survey of economists. Business sentiment may have slid to the lowest level in 34 years in April, a separate Bloomberg survey of economists showed before the Bank of Japan’s Tankan survey on April 1.
‘Huge Impact’
“Deflation will have a huge impact on markets and monetary policy,” said Kazuhiko Sano, chief strategist in Tokyo at Nikko Citigroup Ltd., a unit of Citigroup Inc. Investors should “buy bonds on dips.”
Inflation-linked bonds signal the world’s second-largest economy may enter a period deflation. Ten-year bonds protected against inflation yielded about 2.12 percentage points more than similar-dated conventional bonds yesterday, Bloomberg data show. The securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Benchmark yields approached a six-week high as optimism the worst of the global financial turmoil is over helped propel the Nikkei 225 Stock Average to its third weekly advance. Bonds also fell on speculation the supply of debt will keep increasing as the government raises record amounts to fund measures to combat the deepening recession.
“Bonds are being sold given stronger stocks and this trend may continue,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees $3.3 billion. “As long as there are no negative surprises in economic data, bonds are likely not to be bought.”
The yield on the 1.3 percent bond due March 2019 rose 6.5 basis points this week to 1.32 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.576 yen to 99.823 yen. The yield yesterday reached 1.325 percent, the highest level since Feb. 10.
Ten-year bond futures for June delivery fell 1.36 this week to 138.21 on the Tokyo Stock Exchange.
The Nikkei 225 advanced 8.6 percent over the five trading days, a fourth week of gains, and touched the highest level since Jan. 9, boosted by a rally in U.S. shares.
‘Rising Pressure’
“The Nikkei will be under rising pressure following U.S. stocks” and that is negative for bonds, said Jun Ishii, a fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest bank by assets.
Benchmark bonds have handed investors a loss of 0.03 percent in the three weeks through March 26, according to Merrill Lynch & Co. indexes. The Nikkei has surged 22 percent in the same period.
Japanese bonds are headed for a quarterly loss and Treasuries are set for their worst start to the year since 1996 as the governments of the world’s two biggest economies increase debt sales to fund measures to combat the global recession.
“Even though fundamentals remain weak, supply concerns will dominate the bond market,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA.
Third Package
Japanese Prime Minister Taro Aso, whose approval rating has slumped before elections that must be called by September, is compiling a third stimulus package to add to the amount pledged since he took office six months ago.
The government is likely to pass an additional supplementary budget in June and bond issuance will probably increase by as much as 10 trillion yen ($102 billion), said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. in Tokyo, the top-rated debt analyst in Japan according to Nikkei Veritas newspaper.
The last time Japan stepped up bond sales, in the financial year starting in April 2005, 10-year yields surged 45 basis points. A basis point is 0.01 percentage point.
This week’s drop in bonds was tempered after a government report yesterday showed consumer prices excluding fresh food were unchanged in February from a year earlier. An absence of inflation helps preserve the value of the fixed payments of debt.
Japan will experience a general drop in prices, known as deflation, through the first quarter of next year, according to a Bloomberg News survey of economists. Business sentiment may have slid to the lowest level in 34 years in April, a separate Bloomberg survey of economists showed before the Bank of Japan’s Tankan survey on April 1.
‘Huge Impact’
“Deflation will have a huge impact on markets and monetary policy,” said Kazuhiko Sano, chief strategist in Tokyo at Nikko Citigroup Ltd., a unit of Citigroup Inc. Investors should “buy bonds on dips.”
Inflation-linked bonds signal the world’s second-largest economy may enter a period deflation. Ten-year bonds protected against inflation yielded about 2.12 percentage points more than similar-dated conventional bonds yesterday, Bloomberg data show. The securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Wednesday, March 25, 2009
Australia’s Banks Better Placed Than Most, RBA Says
March 26 (Bloomberg) -- Australian banks continue to report solid profits, haven’t accumulated large holdings of high-risk securities, and didn’t ease lending standards to the same extent as counterparts around the world, the central bank said.
“The Australian banking system is considerably better placed to weather the current challenges than many other systems around the world,” the Reserve Bank of Australia said in its half-yearly Financial Stability Review published today in Sydney. The nation’s five largest banks, led by Westpac Banking Corp., reported an annualized post-tax return on equity in the latest half year of 15 percent, the report said. Still, the slowing economy has led to an increase in charges for bad and doubtful debts to A$5.3 billion ($3.7 billion) from A$1.4 billion a year earlier.
“Compared with other financial systems around the world, Australia looks to be a shining light,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. The Reserve Bank “has no real concern about a vulnerable or fragile banking system.”
Australia’s dollar traded at 69.96 U.S. cents at 11:43 a.m. in Sydney from 69.95 cents before the central bank’s report was released. The S&P/ASX 200 stock index gained 0.7 percent to 3,633, led by shares in exporters and banks.
“Notwithstanding this positive assessment, the banking system is facing a more difficult environment than it has for some years,” the report said.
Bad Loans
Problem loans have risen from “very low levels” and lending growth has also slowed recently, the Reserve Bank added.
The ratio of non-performing assets to total on-balance- sheets assets was about 1 percent in December, compared with 0.4 percent a year earlier, the central bank said. “This ratio is now marginally higher than that recorded in the 2001 downturn” and “well below” the 6 percent peak in the early 1990s, when the nation’s economy was last in a recession.
Housing loans that were 90 days or more in arrears accounted for 0.48 percent of outstanding loans in December, compared with 0.32 percent a year earlier.
“Looking ahead, the main downside risk to the performance of banks’ housing portfolios is from a rise in unemployment as the economy slows,” the report said.
Australia’s economy unexpectedly shrank 0.5 percent in the three months through December from the previous quarter, the first contraction in eight years, and the jobless rate rose in February to a four-year high of 5.2 percent as companies such as Macquarie Group Ltd. and BHP Billiton Ltd. cut full-time jobs.
Interest Rates
To boost the economy, central bank policy makers led by Governor Glenn Stevens have cut the benchmark lending rate by a record four percentage points since September to a 45-year low of 3.25 percent.
The cuts and government grants to first-time home buyers of as much as A$21,000 are unlikely to cause a U.S.-style subprime crisis, Anthony Richards, head of economic analysis at the Reserve Bank, said in Sydney today.
“The past year and a half has seen lending standards tighten in Australia, with a significant shrinkage in the amount of lo-doc and non-confirming lending,” Richards told a housing conference. Such loans are often compared with U.S. subprime loans.
Reductions in borrowing costs “have helped to alleviate debt-servicing pressures,” the central bank said in today’s report.
Government Guarantee
Many businesses have taken a “more conservative approach to their finances, by paying down debt and raising equity,” the report said. “This is despite the business sector, as a whole, having entered the current period of financial turmoil with its balance sheet in good shape after a number of years of solid profit growth.”
Following the collapse of Lehman Brothers Holdings Inc. in September, which deepened a global credit squeeze, Australia’s government in November provided a guarantee for wholesale funding for the nation’s banks.
“Since these arrangements have been in place, Australian banks have issued A$85 billion of long-term debt,” the report said. Of that, some A$81 billion was issued under the guarantee.
“This compares with just A$3.5 billion of term debt that was issued in the three months to November,” the report said.
The nation’s four largest banks raised a total of A$18 billion from shareholders in the second half of 2008.
Bank Ratings
Moody’s Investors Service this month lowered its outlook on Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia and Westpac Bank to negative from stable. That was the first time Australia’s four biggest banks have had a negative outlook since the 1991 recession.
All four banks remain Aa rated by the New York-based ratings agency. Moody’s revised the outlook for National Australia Bank Ltd. to negative in August.
Today’s report also noted the U.S. government’s plan, announced this week, to support so-called public-private investment funds to purchase troubled loans and securities, has “received widespread market support.”
“Despite this, it could be some time before it is clear whether these initiatives have been sufficient to put the financial sector on the path to recovery,” the report added.
“The Australian banking system is considerably better placed to weather the current challenges than many other systems around the world,” the Reserve Bank of Australia said in its half-yearly Financial Stability Review published today in Sydney. The nation’s five largest banks, led by Westpac Banking Corp., reported an annualized post-tax return on equity in the latest half year of 15 percent, the report said. Still, the slowing economy has led to an increase in charges for bad and doubtful debts to A$5.3 billion ($3.7 billion) from A$1.4 billion a year earlier.
“Compared with other financial systems around the world, Australia looks to be a shining light,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. The Reserve Bank “has no real concern about a vulnerable or fragile banking system.”
Australia’s dollar traded at 69.96 U.S. cents at 11:43 a.m. in Sydney from 69.95 cents before the central bank’s report was released. The S&P/ASX 200 stock index gained 0.7 percent to 3,633, led by shares in exporters and banks.
“Notwithstanding this positive assessment, the banking system is facing a more difficult environment than it has for some years,” the report said.
Bad Loans
Problem loans have risen from “very low levels” and lending growth has also slowed recently, the Reserve Bank added.
The ratio of non-performing assets to total on-balance- sheets assets was about 1 percent in December, compared with 0.4 percent a year earlier, the central bank said. “This ratio is now marginally higher than that recorded in the 2001 downturn” and “well below” the 6 percent peak in the early 1990s, when the nation’s economy was last in a recession.
Housing loans that were 90 days or more in arrears accounted for 0.48 percent of outstanding loans in December, compared with 0.32 percent a year earlier.
“Looking ahead, the main downside risk to the performance of banks’ housing portfolios is from a rise in unemployment as the economy slows,” the report said.
Australia’s economy unexpectedly shrank 0.5 percent in the three months through December from the previous quarter, the first contraction in eight years, and the jobless rate rose in February to a four-year high of 5.2 percent as companies such as Macquarie Group Ltd. and BHP Billiton Ltd. cut full-time jobs.
Interest Rates
To boost the economy, central bank policy makers led by Governor Glenn Stevens have cut the benchmark lending rate by a record four percentage points since September to a 45-year low of 3.25 percent.
The cuts and government grants to first-time home buyers of as much as A$21,000 are unlikely to cause a U.S.-style subprime crisis, Anthony Richards, head of economic analysis at the Reserve Bank, said in Sydney today.
“The past year and a half has seen lending standards tighten in Australia, with a significant shrinkage in the amount of lo-doc and non-confirming lending,” Richards told a housing conference. Such loans are often compared with U.S. subprime loans.
Reductions in borrowing costs “have helped to alleviate debt-servicing pressures,” the central bank said in today’s report.
Government Guarantee
Many businesses have taken a “more conservative approach to their finances, by paying down debt and raising equity,” the report said. “This is despite the business sector, as a whole, having entered the current period of financial turmoil with its balance sheet in good shape after a number of years of solid profit growth.”
Following the collapse of Lehman Brothers Holdings Inc. in September, which deepened a global credit squeeze, Australia’s government in November provided a guarantee for wholesale funding for the nation’s banks.
“Since these arrangements have been in place, Australian banks have issued A$85 billion of long-term debt,” the report said. Of that, some A$81 billion was issued under the guarantee.
“This compares with just A$3.5 billion of term debt that was issued in the three months to November,” the report said.
The nation’s four largest banks raised a total of A$18 billion from shareholders in the second half of 2008.
Bank Ratings
Moody’s Investors Service this month lowered its outlook on Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia and Westpac Bank to negative from stable. That was the first time Australia’s four biggest banks have had a negative outlook since the 1991 recession.
All four banks remain Aa rated by the New York-based ratings agency. Moody’s revised the outlook for National Australia Bank Ltd. to negative in August.
Today’s report also noted the U.S. government’s plan, announced this week, to support so-called public-private investment funds to purchase troubled loans and securities, has “received widespread market support.”
“Despite this, it could be some time before it is clear whether these initiatives have been sufficient to put the financial sector on the path to recovery,” the report added.
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