CAIRO — The most important group of religious leaders in Iran called the disputed presidential election and the new government illegitimate on Saturday, an act of defiance against the country’s supreme leader and the most public sign of a major split in the country’s clerical establishment.
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A statement by the group, the Association of Researchers and Teachers of Qum, represents a significant, if so far symbolic, setback for the government and especially the authority of the supreme leader, Ayatollah Ali Khamenei, whose word is supposed to be final. The government has tried to paint the opposition and its top presidential candidate, Mir Hussein Moussavi, as criminals and traitors, a strategy that now becomes more difficult — if not impossible.
“This crack in the clerical establishment, and the fact they are siding with the people and Moussavi, in my view is the most historic crack in the 30 years of the Islamic republic,” said Abbas Milani, director of the Iranian Studies Program at Stanford University. “Remember they are going against an election verified and sanctified by Khamenei.”
The announcement came on a day when Mr. Moussavi released documents detailing a campaign of fraud by the current president’s supporters, and as a close associate of the supreme leader called Mr. Moussavi and former President Mohammad Khatami “foreign agents,” saying they should be treated as criminals. The specific charges of fraud included the printing of millions of extra ballots before the vote.
Since the election, the bulk of the clerical establishment in the holy city of Qum, an important religious and political center of power, has remained largely silent, leaving many to wonder when, or if, the nation’s most senior religious leaders would jump into the controversy that has posed the most significant challenge to the country’s leadership since the Islamic Revolution. With its statement Saturday, the association of clerics — formed under the leadership of the revolution’s founder, Ayatollah Ruhollah Khomeini — came down squarely on the side of the reform movement.
The association includes reformists, but Iranian political analysts describe it as independent, and it did not support any candidate in the recent election. The group had earlier asked for the election to be nullified because so many Iranians objected to the results, but it never directly challenged the legitimacy of the government and, by extension, the supreme leader. The earlier statement also came before the election was certified by the country’s religious leaders, who have since said that opposition to the results must cease.
The clerics’ decision to speak up again is not itself a turning point and could fizzle under pressure from the state, which has continued to threaten its critics. Some seminaries in Qum rely on the government for funds, and Ayatollah Khamenei and the man he has declared the winner of the election, incumbent President Mahmoud Ahmadinejad, have powerful backers there. They also retain the support of the powerful security forces and the elite Revolutionary Guards. In addition, the country’s highest-ranking clerics have yet to speak out individually against the election results.
But the association’s latest statement does give a tactical boost to Mr. Moussavi, Mr. Khatami and the former speaker of Parliament, Mehdi Karroubi, who have been the most vocal in calling the election illegitimate and who, in their attempts to force change, have been hindered by the jailing of many of their influential backers.
While the government could continue vilifying the three as traitors, analysts say it was highly unlikely that the leaders would use the same tactic against the clerical establishment in Qum.
“The significance is that even within the clergy, there are many who refuse to recognize the legitimacy of the election results as announced by the supreme leader,” said an Iranian political analyst who spoke on condition of anonymity for fear of reprisal.
The clerics’ statement chastised the leadership for failing to adequately study complaints of vote rigging and lashed out at the government’s use of force in crushing public protests that drew hundreds of thousands into the streets.
It even directly criticized the Guardian Council, the powerful group of clerics charged with certifying elections.
“Is it possible to consider the results of the election as legitimate by merely the validation of the Guardian Council?” the association said in its statement.
Perhaps more threatening to the supreme leader, the committee called on other clerics to join the fight against the government’s refusal to adequately reconsider the charges of voter fraud. The committee invoked powerful imagery, comparing the 20 protesters killed during demonstrations with the martyrs who died in the early days of the revolution and the war with Iraq, asking other clerics to step in to save what it called “the dignity that was earned with the blood of tens of thousands of martyrs.” In effect, the comparison cast the government as betraying the ideals of the revolution.
“The complaints of other candidates were ignored and people’s protest, which was expressed peacefully, was violently crushed,” the statement said.
The statement was posted on the association’s Web site late Saturday and carried on many other sites, including the Persian BBC, but it was impossible to reach senior clerics in the group to independently confirm its veracity.
The statement was issued after a meeting Mr. Moussavi had with the committee 10 days ago and a decision by the Guardian Council, a body loyal to the supreme leader, to certify the election and declare that all matters concerning the election were closed.
But the defiance has not ended.
With heavy security on the streets, there is a forced calm. But each day, slowly, another link falls from the chain of government control. Last week, in what appeared a coordinated thrust, Mr. Moussavi, Mr. Karroubi and Mr. Khatami all called the new government illegitimate. On Saturday, Mr. Milani of Stanford said, former President Ali Akbar Hashemi Rafsanjani met with families of those who had been arrested, another sign that he was working behind the scenes to keep the issue alive.
“I don’t ever remember in the 20 years of Khamenei’s rule where he was clearly and categorically on one side and so many clergy were on the other side,” Mr. Milani said. “This might embolden other clergy to come forward.”
The committee of clergy was formed in the 1960s. Mr. Milani said that for many years, Ayatollah Khamenei also belonged to the group, and that it has since developed some political clout by backing successful candidates for national office.
As the resistance has continued, so have the government’s attempts to muzzle its critics.
On Saturday, an editorial in a radical right-wing newspaper, Kayhan, that is close to the supreme leader, called for Mr. Moussavi and Mr. Khatami to be treated as criminals and foreign agents. The editorial was written by Hossein Shariatmadari, who was picked by the supreme leader to run the paper and who often knows of actions the government is going to take.
Saturday, July 4, 2009
Indian Railways plans leap into the cyber age
India’s state-owned railways, one of the largest and most profitable networks in the world, plan to leap from the steam to the cyber age with a budget aimed at advancing electronic ticketing and developing 50 world-class stations.
Mamata Banerjee, new railways minister, who presented the budget to parliament on Friday, said the government and private partners would transform big terminuses, including Mumbai, Delhi, Calcutta and Bangalore, to raise them to international standards with shopping, hotels and telecommunications.
EDITOR’S CHOICE
Manager pushes India’s positive story - Jun-28
India reclaims top spot for retail potential - Jun-15
Lex: India - Jun-04
Reliance to test Indian market with IPO - May-24
Indian markets surge on Congress victory - May-18
Tata directors take environmental tour - Apr-19
Indian Railways carries 20m passengers a day and employs 1.4m people. Many stations in big cities are overcrowded and largely uncontrolled, with many passengers camped on the platforms and beside the tracks. Deaths are an everyday occurrence.
Ms Banerjee said the network would expand e-ticketing, introduce automated vending machines and issue SMS updates to travellers to confirm travel plans.
Indian Railways would accelerate the development of its fibre-optic cable network for commercial uses, enlisting the leadership of Sam Pitroda, one of the leading minds behind India’s information technology revolution over the past 20 years.
“Everyone knows that India is changing and changing rapidly. Indian Railways has been trying to keep pace with this change ... [Indians] want better connectivity, more employment opportunities,” Ms Banerjee said.
To modernise its customer service, Indian Railways has already launched a successful internet and telephone booking system, and is considering the introduction of Japanese-style high-speed bullet trains. The rail network of 63,000km of track is supported by a 24-hour call centre service, used by about half a million callers a day.
In spite of the improvements, trains and platforms pose a serious risk to travellers. Alongside the threat of collision and overcrowding, concerns over sanitation run high.
“The minister has mooted a number of projects that will carry the railways to the next technology level,” said Harsh Pati Singhania, president of the Federation of Indian Chambers of Commerce and Industry. He highlighted plans to develop retail at stations and equip passenger trains with entertainment services.
India’s rail network is one of the few mixed traffic systems, carrying both passengers and freight, in the world that generates a cash surplus. It ranks alongside rail systems in the US and Canada as a cash generator. The network was forecast to earn revenues this year of $18.4bn (€13.2bn, £11.3bn), up 10.6 per cent on last year, on expectations that travellers would shift to rail over air travel.
One leading Delhi-based industrialist said railway ministers had learnt to leave the running of the railways to the operators and to limit their political interference to pet coach-building projects in their constituencies. Ms Banerjee, the leader of the Congress party-aligned Trinamool Congress, is expected to concentrate on ousting the Communists from power in her home state of West Bengal over direct management of railways.
But others were less impressed. Akhileshwar Sahay, an executive at Feedback Ventures, an infrastructure company, was disappointed the budget made “no serious attempt” to adopt innovative financing measures to close the country’s infrastructure gap and encourage greater private sector participation.
“If India has to grow sustainably at 9 per cent, Indian Railways has to change its positioning from ‘Train to nowhere’ to ‘Train to somewhere’,” he said.
Copyright The Financial Times Limited 2009
Mamata Banerjee, new railways minister, who presented the budget to parliament on Friday, said the government and private partners would transform big terminuses, including Mumbai, Delhi, Calcutta and Bangalore, to raise them to international standards with shopping, hotels and telecommunications.
EDITOR’S CHOICE
Manager pushes India’s positive story - Jun-28
India reclaims top spot for retail potential - Jun-15
Lex: India - Jun-04
Reliance to test Indian market with IPO - May-24
Indian markets surge on Congress victory - May-18
Tata directors take environmental tour - Apr-19
Indian Railways carries 20m passengers a day and employs 1.4m people. Many stations in big cities are overcrowded and largely uncontrolled, with many passengers camped on the platforms and beside the tracks. Deaths are an everyday occurrence.
Ms Banerjee said the network would expand e-ticketing, introduce automated vending machines and issue SMS updates to travellers to confirm travel plans.
Indian Railways would accelerate the development of its fibre-optic cable network for commercial uses, enlisting the leadership of Sam Pitroda, one of the leading minds behind India’s information technology revolution over the past 20 years.
“Everyone knows that India is changing and changing rapidly. Indian Railways has been trying to keep pace with this change ... [Indians] want better connectivity, more employment opportunities,” Ms Banerjee said.
To modernise its customer service, Indian Railways has already launched a successful internet and telephone booking system, and is considering the introduction of Japanese-style high-speed bullet trains. The rail network of 63,000km of track is supported by a 24-hour call centre service, used by about half a million callers a day.
In spite of the improvements, trains and platforms pose a serious risk to travellers. Alongside the threat of collision and overcrowding, concerns over sanitation run high.
“The minister has mooted a number of projects that will carry the railways to the next technology level,” said Harsh Pati Singhania, president of the Federation of Indian Chambers of Commerce and Industry. He highlighted plans to develop retail at stations and equip passenger trains with entertainment services.
India’s rail network is one of the few mixed traffic systems, carrying both passengers and freight, in the world that generates a cash surplus. It ranks alongside rail systems in the US and Canada as a cash generator. The network was forecast to earn revenues this year of $18.4bn (€13.2bn, £11.3bn), up 10.6 per cent on last year, on expectations that travellers would shift to rail over air travel.
One leading Delhi-based industrialist said railway ministers had learnt to leave the running of the railways to the operators and to limit their political interference to pet coach-building projects in their constituencies. Ms Banerjee, the leader of the Congress party-aligned Trinamool Congress, is expected to concentrate on ousting the Communists from power in her home state of West Bengal over direct management of railways.
But others were less impressed. Akhileshwar Sahay, an executive at Feedback Ventures, an infrastructure company, was disappointed the budget made “no serious attempt” to adopt innovative financing measures to close the country’s infrastructure gap and encourage greater private sector participation.
“If India has to grow sustainably at 9 per cent, Indian Railways has to change its positioning from ‘Train to nowhere’ to ‘Train to somewhere’,” he said.
Copyright The Financial Times Limited 2009
Tax Bill Appeals Take Rising Toll on Governments
Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets.
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Librado Romero/The New York Times
Peggy Tombro listed her New Jersey house for less than the assessed value, but her taxes are rising.
The requests are coming in record numbers, from owners of $10 million estates and one-bedroom bungalows, from residents of the high-tax enclaves surrounding New York City, and from taxpayers in the Rust Belt and states like Arizona, Florida and California, where whole towns have been devastated by the housing bust.
“It’s worthy of a Dickens story,” said Gus Kramer, the assessor in Contra Costa County, Calif., outside San Francisco. “These people are desperate. They know their home’s gone down in value. They’ve watched their neighborhoods being boarded up. They literally stand in there and say: ‘When can I have my refund check? I need to feed my family. I need to pay my electric bill.’ ”
The tax appeals and reassessments present a new budget nightmare for governments. In a survey conducted by the National Association of Counties, 76 percent of large counties said that falling property tax revenue was significantly affecting their budgets, said Jacqueline Byers, the association’s research director.
Officials in some states say their property tax revenue is falling for the first time since World War II.
The recession has already taken a significant toll on states’ budgets, as rising joblessness, a weak business climate and a drop in consumer demand have cut sharply into receipts from taxes on sales, personal income and business earnings.
The pain at the state level is trickling down to county and local governments. To compensate, about 10 percent of large counties are raising the tax rates associated with home values to minimize the revenue loss, the county association said.
Even so, most counties simply have to absorb the lost revenue. Municipalities are laying off workers, renegotiating labor contracts, freezing salaries and cutting services.
The revenue losses are coming as homeowners prod towns for new assessments, and as municipalities conduct regular revaluations of their real estate. While declining residential values weigh heaviest on many governments, the value of commercial real estate is also sliding as businesses shut down and move out of storefronts or shopping malls.
Property taxes are meted out by a disparate patchwork of cities, towns, counties, and school and fire districts, all with their own rules. Because tax formulas vary widely county to county, not every decrease in assessed values automatically lowers a household’s property taxes.
But officials across the country say there is no question that the number of appeals has risen from the usual trickle to a flood.
In suburban Atlanta, thousands of people lined up at government offices to file their requests for reassessments before a March 31 deadline. In parts of Ohio, appeals have multiplied fivefold. Tax lawyers in the northern suburbs of New York say they have never been so busy, and some towns have hired extra employees to sift through the paperwork and are spending hundreds of thousands of dollars on legal fees to deal with the cases in tax courts.
The call for counties to acknowledge the falling price of homes is loudest in states where taxes are highest, or the housing crisis has hit the hardest.
“We’ve been absolutely getting killed,” said Robert W. Singer, the mayor of Lakewood Township, N.J., and a state senator, whose town is setting aside $2 million to pay tax refunds to homeowners. “We’ve never had this before. Usually they’re undervalued. Now, everyone’s overvalued.”
The appeals are not just coming from individual homeowners. Condominium associations and entire subdivisions are pushing for new tax assessments, as are companies that own office towers, industrial parks and shopping malls.
New Jersey, which has the nation’s highest property taxes, has been besieged by tax appeals from homeowners like Peggy Tombro, whose rambling home in Bound Brook is assessed at a value of $1.8 million but is languishing on the market with an asking price of $1.3 million. Her taxes are increasing to $53,000 a year.
“I don’t know what else to do,” said Ms. Tombro, 63, who has gone back to work selling antiques to pay her tax bill.
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Enlarge This Image
Librado Romero/The New York Times
Peggy Tombro listed her New Jersey house for less than the assessed value, but her taxes are rising.
The requests are coming in record numbers, from owners of $10 million estates and one-bedroom bungalows, from residents of the high-tax enclaves surrounding New York City, and from taxpayers in the Rust Belt and states like Arizona, Florida and California, where whole towns have been devastated by the housing bust.
“It’s worthy of a Dickens story,” said Gus Kramer, the assessor in Contra Costa County, Calif., outside San Francisco. “These people are desperate. They know their home’s gone down in value. They’ve watched their neighborhoods being boarded up. They literally stand in there and say: ‘When can I have my refund check? I need to feed my family. I need to pay my electric bill.’ ”
The tax appeals and reassessments present a new budget nightmare for governments. In a survey conducted by the National Association of Counties, 76 percent of large counties said that falling property tax revenue was significantly affecting their budgets, said Jacqueline Byers, the association’s research director.
Officials in some states say their property tax revenue is falling for the first time since World War II.
The recession has already taken a significant toll on states’ budgets, as rising joblessness, a weak business climate and a drop in consumer demand have cut sharply into receipts from taxes on sales, personal income and business earnings.
The pain at the state level is trickling down to county and local governments. To compensate, about 10 percent of large counties are raising the tax rates associated with home values to minimize the revenue loss, the county association said.
Even so, most counties simply have to absorb the lost revenue. Municipalities are laying off workers, renegotiating labor contracts, freezing salaries and cutting services.
The revenue losses are coming as homeowners prod towns for new assessments, and as municipalities conduct regular revaluations of their real estate. While declining residential values weigh heaviest on many governments, the value of commercial real estate is also sliding as businesses shut down and move out of storefronts or shopping malls.
Property taxes are meted out by a disparate patchwork of cities, towns, counties, and school and fire districts, all with their own rules. Because tax formulas vary widely county to county, not every decrease in assessed values automatically lowers a household’s property taxes.
But officials across the country say there is no question that the number of appeals has risen from the usual trickle to a flood.
In suburban Atlanta, thousands of people lined up at government offices to file their requests for reassessments before a March 31 deadline. In parts of Ohio, appeals have multiplied fivefold. Tax lawyers in the northern suburbs of New York say they have never been so busy, and some towns have hired extra employees to sift through the paperwork and are spending hundreds of thousands of dollars on legal fees to deal with the cases in tax courts.
The call for counties to acknowledge the falling price of homes is loudest in states where taxes are highest, or the housing crisis has hit the hardest.
“We’ve been absolutely getting killed,” said Robert W. Singer, the mayor of Lakewood Township, N.J., and a state senator, whose town is setting aside $2 million to pay tax refunds to homeowners. “We’ve never had this before. Usually they’re undervalued. Now, everyone’s overvalued.”
The appeals are not just coming from individual homeowners. Condominium associations and entire subdivisions are pushing for new tax assessments, as are companies that own office towers, industrial parks and shopping malls.
New Jersey, which has the nation’s highest property taxes, has been besieged by tax appeals from homeowners like Peggy Tombro, whose rambling home in Bound Brook is assessed at a value of $1.8 million but is languishing on the market with an asking price of $1.3 million. Her taxes are increasing to $53,000 a year.
“I don’t know what else to do,” said Ms. Tombro, 63, who has gone back to work selling antiques to pay her tax bill.
Friday, July 3, 2009
India Joins Russia, China in Questioning U.S. Dollar Dominance
July 4 (Bloomberg) -- Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.
“The major part of Indian reserves are in dollars -- that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview yesterday in Aix-en-Provence, France, where he was attending an economic conference.
Singh is preparing to join leaders from the Group of Eight industrialized nations -- the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia -- at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representative to the summit.
As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.
“There should be a system to maintain the stability of the major reserve currencies,” Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing yesterday, highlighting China’s concerns about a global financial system dominated by the dollar.
Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.
Russian Proposals
Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar’s future as a global reserve currency. Russia’s proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supranational currency.
“We will resume” talks on the supranational currency proposal at the G-8 summit in L’Aquila on July 8-10, Medvedev aide Sergei Prikhodko told reporters in Moscow yesterday.
Singh adviser Tendulkar said that big dollar holders face a “prisoner’s dilemma” in terms of managing their holdings. “That’s why I’m telling them to do this,” he said.
He also said that world currencies need to adjust to help unwind trade imbalances that have contributed to the global financial crisis.
“The major imbalances which led to the current situation, the current account surpluses and deficits, have to be addressed,” he said. “Currency adjustment is one thing that suggests itself.”
Emerging-Market Dependence
For all the complaints about the dollar, emerging markets such as India remain dependent on the currency of the U.S., the world’s largest economy and a $2.5 trillion export market. The IMF said June 30 that the share of dollars in global foreign- exchange reserves increased to 65 percent in the first three months of this year, the highest since 2007.
Tendulkar said that the matter needs to be taken up in international talks, and that it emphasizes the need for those talks to go beyond the traditional G-8.
“They can meet if they want to,” he said. “The G-20 has a wider role, has representation of the countries that are likely to lead the recovery process.”
“The major part of Indian reserves are in dollars -- that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview yesterday in Aix-en-Provence, France, where he was attending an economic conference.
Singh is preparing to join leaders from the Group of Eight industrialized nations -- the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia -- at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representative to the summit.
As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.
“There should be a system to maintain the stability of the major reserve currencies,” Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing yesterday, highlighting China’s concerns about a global financial system dominated by the dollar.
Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.
Russian Proposals
Russian President Dmitry Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the dollar’s future as a global reserve currency. Russia’s proposals for the Group of 20 major developed and developing nations summit in London in April included the creation of a supranational currency.
“We will resume” talks on the supranational currency proposal at the G-8 summit in L’Aquila on July 8-10, Medvedev aide Sergei Prikhodko told reporters in Moscow yesterday.
Singh adviser Tendulkar said that big dollar holders face a “prisoner’s dilemma” in terms of managing their holdings. “That’s why I’m telling them to do this,” he said.
He also said that world currencies need to adjust to help unwind trade imbalances that have contributed to the global financial crisis.
“The major imbalances which led to the current situation, the current account surpluses and deficits, have to be addressed,” he said. “Currency adjustment is one thing that suggests itself.”
Emerging-Market Dependence
For all the complaints about the dollar, emerging markets such as India remain dependent on the currency of the U.S., the world’s largest economy and a $2.5 trillion export market. The IMF said June 30 that the share of dollars in global foreign- exchange reserves increased to 65 percent in the first three months of this year, the highest since 2007.
Tendulkar said that the matter needs to be taken up in international talks, and that it emphasizes the need for those talks to go beyond the traditional G-8.
“They can meet if they want to,” he said. “The G-20 has a wider role, has representation of the countries that are likely to lead the recovery process.”
Asian Stocks Post Weekly Loss on Jobless Figures, Commodities
July 4 (Bloomberg) -- Asian stocks fell this week, the second weekly decline in three, as government data showed job markets are worsening, stoking concern the global economy will recover soon.
Mazda Motor Corp., a Japanese carmaker that exports most of its production, declined 2.8 percent on the week as jobless rates increased in Japan, the U.S. and Europe. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., dropped 5.4 percent. Indian truckmaker Tata Motors Ltd. plunged 12 percent and Seven & I Holdings Inc. fell 2.7 percent as both reported profit declines. BHP Billiton Ltd., the world’s No. 1 mining company, lost 2.2 percent as oil and copper prices declined.
The MSCI Asia Pacific Index lost 0.8 percent in the past five days, retreating from last weeks 2.2 percent climb. That pared the measure’s record 28 percent in the three months ended June 30 on optimism the global economy is stabilizing.
“We are running out of data points that can boost sentiment, so there’s not much hope for further gains,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co. in Tokyo, which oversees about $5.5 billion. “Stocks are not at reasonable levels when you consider the facts.”
The Asian stock benchmark, which plunged by a record last year as the global economy slipped into recession, has now climbed 47 percent since reaching a more than five-year low on March 9. Stocks on the gauge now trade at 23.5 times estimated earnings, compared with 15 times at the market trough in March and 15.2 for the U.S.’s Standard & Poor’s 500 Index.
Tankan Disappoints
The Bank of Japan’s Tankan survey of manufacturer sentiment rebounded less than estimated, the central bank said on July 1, while government data showed Japan’s unemployment rate reached a five-year high in May. Australia’s exports dropped to a 14-month low, while building approvals declined by the most since 2002, its government said this week.
The Labor Department said yesterday U.S. employers cut 467,000 jobs in June, over 100,000 more than economists had forecast. That pushed the nation’s unemployment rate to 9.5 percent, a level not seen since August 1983. Europe’s unemployment rate also increased to 9.5 percent in May, the highest level since 1999.
Mazda lost 2.8 percent to 242 yen, the lowest since May 22. Sony Corp., maker of the PlayStation 3 game machine, lost 2.4 percent to 2,440 yen, a level not seen since April 3. Li & Fung lost 5.4 percent to HK$20.85 in Hong Kong.
Tata Motors, which owns the Jaguar and Land Rover car brands, plunged 12 percent to 298.5 rupees. The company posted its first annual loss in at least seven years on plunging sales at luxury units amid the global recession.
Lower Commodities
Seven & I plunged 2.7 percent to 2,190 yen. Japan’s biggest retailer said profit dropped 28 percent in the three months ended May 31 as worsening household income and job markets prompted consumers to save money, the company said.
Copper fell on the week on concern a weakening U.S. labor market will damage a recovery in demand for industrial metals. Crude oil declined for a third-straight week.
BHP lost 2.2 percent to A$33.43 in Sydney. Rio Tinto Group, the world’s third-biggest mining company lost 2.8 percent to A$49.60. Inpex Corp., Japan’s biggest petroleum explorer, sank 2.5 percent to 735,000 yen in Tokyo.
Aozora Bank Ltd. and Shinsei Bank Ltd. said this week they are merging to form Japan’s sixth-largest bank with assets of 18 trillion yen ($186 billion) after booking $4 billion in combined losses last year on overseas investments and bad loans.
Their concentration on real estate lending and a shortage of deposits may “become even more serious” after the tie-up, hampering profitability, Credit Suisse Group AG said in a report.
Shinsei tumbled 7 percent to 146 yen on the week, while Aozora lost 6.7 percent to 139 yen.
China Gains
China’s stocks rose, driving the Shanghai Composite Index to a third weekly gain. A government survey showed manufacturing expanded for a fourth month in June, while a report in the China Securities Journal said the nation’s electricity output rose in June, its first monthly advance since October.
China Shenhua Energy Co., the country’s largest coal producer, soared 21 percent to 33.45 yuan in Shanghai. China Coal Energy Co., the second biggest, surged 11 percent to 13.26
Bawang International (Group) Holding Ltd., a herbal shampoo maker that debuted in Hong Kong trading on July 3, jumped 27 percent to HK$3.03. China Qinfa Group Ltd., a coal trader that also had its initial public offering, advanced 6.4 percent to HK$2.68.
“In general there is huge enthusiasm about new IPOs,” Pu Yonghao, chief Asian investment strategist at UBS Wealth Management, told Bloomberg Television. “China has to rely on consumption rather than exports so consumer stocks attract lots of enthusiasm.”
Mazda Motor Corp., a Japanese carmaker that exports most of its production, declined 2.8 percent on the week as jobless rates increased in Japan, the U.S. and Europe. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., dropped 5.4 percent. Indian truckmaker Tata Motors Ltd. plunged 12 percent and Seven & I Holdings Inc. fell 2.7 percent as both reported profit declines. BHP Billiton Ltd., the world’s No. 1 mining company, lost 2.2 percent as oil and copper prices declined.
The MSCI Asia Pacific Index lost 0.8 percent in the past five days, retreating from last weeks 2.2 percent climb. That pared the measure’s record 28 percent in the three months ended June 30 on optimism the global economy is stabilizing.
“We are running out of data points that can boost sentiment, so there’s not much hope for further gains,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co. in Tokyo, which oversees about $5.5 billion. “Stocks are not at reasonable levels when you consider the facts.”
The Asian stock benchmark, which plunged by a record last year as the global economy slipped into recession, has now climbed 47 percent since reaching a more than five-year low on March 9. Stocks on the gauge now trade at 23.5 times estimated earnings, compared with 15 times at the market trough in March and 15.2 for the U.S.’s Standard & Poor’s 500 Index.
Tankan Disappoints
The Bank of Japan’s Tankan survey of manufacturer sentiment rebounded less than estimated, the central bank said on July 1, while government data showed Japan’s unemployment rate reached a five-year high in May. Australia’s exports dropped to a 14-month low, while building approvals declined by the most since 2002, its government said this week.
The Labor Department said yesterday U.S. employers cut 467,000 jobs in June, over 100,000 more than economists had forecast. That pushed the nation’s unemployment rate to 9.5 percent, a level not seen since August 1983. Europe’s unemployment rate also increased to 9.5 percent in May, the highest level since 1999.
Mazda lost 2.8 percent to 242 yen, the lowest since May 22. Sony Corp., maker of the PlayStation 3 game machine, lost 2.4 percent to 2,440 yen, a level not seen since April 3. Li & Fung lost 5.4 percent to HK$20.85 in Hong Kong.
Tata Motors, which owns the Jaguar and Land Rover car brands, plunged 12 percent to 298.5 rupees. The company posted its first annual loss in at least seven years on plunging sales at luxury units amid the global recession.
Lower Commodities
Seven & I plunged 2.7 percent to 2,190 yen. Japan’s biggest retailer said profit dropped 28 percent in the three months ended May 31 as worsening household income and job markets prompted consumers to save money, the company said.
Copper fell on the week on concern a weakening U.S. labor market will damage a recovery in demand for industrial metals. Crude oil declined for a third-straight week.
BHP lost 2.2 percent to A$33.43 in Sydney. Rio Tinto Group, the world’s third-biggest mining company lost 2.8 percent to A$49.60. Inpex Corp., Japan’s biggest petroleum explorer, sank 2.5 percent to 735,000 yen in Tokyo.
Aozora Bank Ltd. and Shinsei Bank Ltd. said this week they are merging to form Japan’s sixth-largest bank with assets of 18 trillion yen ($186 billion) after booking $4 billion in combined losses last year on overseas investments and bad loans.
Their concentration on real estate lending and a shortage of deposits may “become even more serious” after the tie-up, hampering profitability, Credit Suisse Group AG said in a report.
Shinsei tumbled 7 percent to 146 yen on the week, while Aozora lost 6.7 percent to 139 yen.
China Gains
China’s stocks rose, driving the Shanghai Composite Index to a third weekly gain. A government survey showed manufacturing expanded for a fourth month in June, while a report in the China Securities Journal said the nation’s electricity output rose in June, its first monthly advance since October.
China Shenhua Energy Co., the country’s largest coal producer, soared 21 percent to 33.45 yuan in Shanghai. China Coal Energy Co., the second biggest, surged 11 percent to 13.26
Bawang International (Group) Holding Ltd., a herbal shampoo maker that debuted in Hong Kong trading on July 3, jumped 27 percent to HK$3.03. China Qinfa Group Ltd., a coal trader that also had its initial public offering, advanced 6.4 percent to HK$2.68.
“In general there is huge enthusiasm about new IPOs,” Pu Yonghao, chief Asian investment strategist at UBS Wealth Management, told Bloomberg Television. “China has to rely on consumption rather than exports so consumer stocks attract lots of enthusiasm.”
Japanese Bonds Complete Third Weekly Advance as Stocks Decline
July 4 (Bloomberg) -- Japanese bonds rose for a third week as Asian stocks extended a slide in global shares after the world’s biggest economy lost more jobs last month than economists forecast, spurring demand for government debt.
Benchmark 10-year yields dropped to the lowest level since March as reports this week also showed unemployment in the U.S. and Europe increased, fueling speculation the global slump will be prolonged. Bonds posted the longest stretch of weekly gains in two months on speculation the Bank of Japan will keep interest rates near zero to help counter the deepest recession in half a century.
“The U.S. jobs report meant that we shouldn’t be complacent about the prospects of the global economy,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co., a unit of France’s third-largest bank. “Stock prices, which were overvalued, now need to undergo a correction, and bonds may see some support in this process.”
The yield on the 10-year bond sold on July 2 fell 7.5 basis points this week to 1.32 percent, the lowest for a benchmark since March 30, in Tokyo, according to Japan Bond Trading Co.
Ten-year bond futures for September delivery rose 0.78 to 138.44 yen at the Tokyo Stock Exchange.
The Nikkei 225 Stock Average declined 0.6 percent yesterday, a third day of losses.
Job Cuts
U.S. employers cut 467,000 jobs last month, after trimming a revised 322,000 positions in May, the U.S. Labor Department said on July 2. Payrolls were forecast to drop by 365,000, according to a Bloomberg News survey of economists. The unemployment rate increased to 9.5 percent, the highest since August 1983.
“The U.S. jobs report suggested the recovery momentum will remain weak,” said Yasunari Ueno, chief market economist in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest publicly traded lender by assets. “Japan’s 10-year bond yield will decline toward 1 percent.”
Shorter-maturity notes also advanced as signs the global recovery is stalling fueled speculation the Bank of Japan will keep its benchmark rate at 0.1 percent to spur growth.
“As the view is now rife that the policy rate will be left unchanged for the next year or so, bills and shorter-dated notes are likely to continue to draw decent demand,” said Katsutoshi Inadome, a fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest lender.
The yield on the two-year note has declined 6.5 basis points this week to 0.255 percent.
Debt Sales
Gains in bonds were limited by speculation primary dealers will cut holdings before the Ministry of Finance sells 300 billion yen ($3.12 billion) in 40-year debt on July 7.
“As the budget deficit is swelling, investors will eventually start demanding a higher premium to hold government debt,” said Kazuto Uchida, chief economist in Tokyo at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s largest lender by market value.
Japan’s total revenue in the year ended March 31 was 718 billion yen less than its expenditure, the first shortfall in seven years, the Finance Ministry said in Tokyo on July 1.
Japan’s public debt, the world’s largest, will balloon to 197 percent of gross domestic product in 2010, according to the Organization for Economic Cooperation and Development.
Primary dealers, which are required to bid at government debt sales, often reduce holdings of bonds before an auction in case prices decline before they can pass on the new securities to investors.
Ten-year bonds completed their second consecutive quarter of losses in the three months ended in June, the longest slide since the six months ended June 2006 as the Ministry of Finance boosted the size of its auctions as part of a plan to increase total debt sales by 15 percent this fiscal year.
Benchmark 10-year yields dropped to the lowest level since March as reports this week also showed unemployment in the U.S. and Europe increased, fueling speculation the global slump will be prolonged. Bonds posted the longest stretch of weekly gains in two months on speculation the Bank of Japan will keep interest rates near zero to help counter the deepest recession in half a century.
“The U.S. jobs report meant that we shouldn’t be complacent about the prospects of the global economy,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co., a unit of France’s third-largest bank. “Stock prices, which were overvalued, now need to undergo a correction, and bonds may see some support in this process.”
The yield on the 10-year bond sold on July 2 fell 7.5 basis points this week to 1.32 percent, the lowest for a benchmark since March 30, in Tokyo, according to Japan Bond Trading Co.
Ten-year bond futures for September delivery rose 0.78 to 138.44 yen at the Tokyo Stock Exchange.
The Nikkei 225 Stock Average declined 0.6 percent yesterday, a third day of losses.
Job Cuts
U.S. employers cut 467,000 jobs last month, after trimming a revised 322,000 positions in May, the U.S. Labor Department said on July 2. Payrolls were forecast to drop by 365,000, according to a Bloomberg News survey of economists. The unemployment rate increased to 9.5 percent, the highest since August 1983.
“The U.S. jobs report suggested the recovery momentum will remain weak,” said Yasunari Ueno, chief market economist in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest publicly traded lender by assets. “Japan’s 10-year bond yield will decline toward 1 percent.”
Shorter-maturity notes also advanced as signs the global recovery is stalling fueled speculation the Bank of Japan will keep its benchmark rate at 0.1 percent to spur growth.
“As the view is now rife that the policy rate will be left unchanged for the next year or so, bills and shorter-dated notes are likely to continue to draw decent demand,” said Katsutoshi Inadome, a fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest lender.
The yield on the two-year note has declined 6.5 basis points this week to 0.255 percent.
Debt Sales
Gains in bonds were limited by speculation primary dealers will cut holdings before the Ministry of Finance sells 300 billion yen ($3.12 billion) in 40-year debt on July 7.
“As the budget deficit is swelling, investors will eventually start demanding a higher premium to hold government debt,” said Kazuto Uchida, chief economist in Tokyo at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s largest lender by market value.
Japan’s total revenue in the year ended March 31 was 718 billion yen less than its expenditure, the first shortfall in seven years, the Finance Ministry said in Tokyo on July 1.
Japan’s public debt, the world’s largest, will balloon to 197 percent of gross domestic product in 2010, according to the Organization for Economic Cooperation and Development.
Primary dealers, which are required to bid at government debt sales, often reduce holdings of bonds before an auction in case prices decline before they can pass on the new securities to investors.
Ten-year bonds completed their second consecutive quarter of losses in the three months ended in June, the longest slide since the six months ended June 2006 as the Ministry of Finance boosted the size of its auctions as part of a plan to increase total debt sales by 15 percent this fiscal year.
Thursday, July 2, 2009
Australia Faces the ‘Full Brunt’ of Global Recession
July 3 (Bloomberg) -- Australia’s economy, which has so far skirted the global recession, may stall after reports showed exports dropped to a 14-month low, bank lending fell and home- building approvals declined by the most since 2002.
Australia was one of few major economies including China and India to grow in the first quarter as government cash handouts and record interest-rate cuts stoked consumer spending. Gross domestic product expanded 0.4 percent from the previous three months, in contrast to a 3.8 percent decline in Japan and a 1.4 percent contraction in the U.S.
This week’s reports suggest the global recession is biting as stimulus efforts fade, which may prompt the central bank to cut interest rates. Reserve Bank Governor Glenn Stevens said last month that slower growth and inflation give him scope to reduce borrowing costs if it helps secure “a durable upswing.”
“The full brunt of the deepest and most synchronized post- war global recession has yet to fully bear down on Australia,” said Su-Lin Ong, Sydney-based senior economist at RBC Capital Markets. “Export income, the terms of trade and business investment are all set to move substantially lower in 2009.”
The benchmark S&P/ASX 200 stock index dropped 1.8 percent to 3,806.5 at 10:11 a.m. in Sydney. Australia’s dollar slipped 0.2 percent to 79.26 U.S. cents, headed for its biggest weekly decline against its U.S. counterpart in seven weeks.
Economy Flatlines
The local currency fell 1.8 percent yesterday after a government report showed exports slumped 5 percent in May from April, widening the trade deficit to A$556 million ($448 million). Economists surveyed by Bloomberg expected a A$125 million shortfall.
Imports of capital goods, which include trucks and machinery, tumbled 14 percent, a sign businesses are cutting capital spending, yesterday’s report showed.
“As Australia’s GDP flatlines and unemployment climbs, the central bank may have to cut interest rates,” said Annette Beacher, senior strategist at TD Securities Ltd. in Singapore.
All 20 economists surveyed by Bloomberg News prior to this week’s economic reports forecast Stevens would leave the overnight cash rate target unchanged at 3 percent on July 7. The central bank reduced the benchmark by 4.25 percentage points between September and April to a 49-year low.
Lower prices for coal and iron ore have damped a mining boom that has driven Australia’s 17 years of economic expansion. BHP Billiton Ltd., the world’s biggest mining company, and Rio Tinto Group have cut output, fired workers and reduced capital expenditure in response to the slowdown in world demand.
‘Reality Check’
“The numbers this week provide a reality check for markets that continue to price in interest-rate hikes in early 2010,” RBC Capital Market’s Ong said.
Traders expect Australia’s overnight cash rate target will be 42 basis points higher in 12 months, a Credit Suisse Group AG index based on interest-rate swaps showed at 10:15 p.m. in Sydney. Earlier this week, the index was pricing in 63 basis points in rate increases in a year.
Further signs of weakness in the economy include a July 1 report that showed approvals to build or renovate houses and apartments fell 12.5 percent in May from April, the biggest drop since November 2002. The decline was led by apartments, which tumbled 43.6 percent.
Lending by Australian financial institutions slipped 0.1 percent in May, led by a 0.7 percent decline in borrowing by companies, the central bank said this week. Sales of newly built homes slumped 5.7 percent from April, the first drop this year, the Housing Industry Association reported on June 30.
Spending Rises
Still, there was evidence this week of strength in a key area of the Australian economy. Retail sales increased 1 percent in May, twice as much as economists estimated, buoyed by spending at department stores and restaurants. The services industry expanded for the first time in 15 months in June, according to an index today from Commonwealth Bank of Australia and the Australian Industry Group.
Consumer spending rose 0.6 percent in the first quarter, accounting for three-quarters of the Australian economy’s growth in the period.
The S&P/ASX 200 stock index climbed 10 percent in the three months ended June 30, the first increase in seven quarters, on optimism of a recovery. Retailers David Jones Ltd. and JB Hi-Fi Ltd. have both raised their profit forecasts in recent weeks because of a pickup in sales.
The government has distributed A$12 billion in cash handouts to households this year. Adding to stimulus measures, Treasurer Wayne Swan allocated A$22 billion in his May budget to upgrade roads, railways, ports and hospitals over four years.
“Arguably there is still some pain ahead, but clearly Australia has been faring much better than other developed economies,” Rod Pearse, chief executive officer of Sydney-based Boral Ltd., Australia’s largest seller of building materials, said in a speech last week. The government’s “significant” stimulus will provide support to the building industry, he added.
Australia was one of few major economies including China and India to grow in the first quarter as government cash handouts and record interest-rate cuts stoked consumer spending. Gross domestic product expanded 0.4 percent from the previous three months, in contrast to a 3.8 percent decline in Japan and a 1.4 percent contraction in the U.S.
This week’s reports suggest the global recession is biting as stimulus efforts fade, which may prompt the central bank to cut interest rates. Reserve Bank Governor Glenn Stevens said last month that slower growth and inflation give him scope to reduce borrowing costs if it helps secure “a durable upswing.”
“The full brunt of the deepest and most synchronized post- war global recession has yet to fully bear down on Australia,” said Su-Lin Ong, Sydney-based senior economist at RBC Capital Markets. “Export income, the terms of trade and business investment are all set to move substantially lower in 2009.”
The benchmark S&P/ASX 200 stock index dropped 1.8 percent to 3,806.5 at 10:11 a.m. in Sydney. Australia’s dollar slipped 0.2 percent to 79.26 U.S. cents, headed for its biggest weekly decline against its U.S. counterpart in seven weeks.
Economy Flatlines
The local currency fell 1.8 percent yesterday after a government report showed exports slumped 5 percent in May from April, widening the trade deficit to A$556 million ($448 million). Economists surveyed by Bloomberg expected a A$125 million shortfall.
Imports of capital goods, which include trucks and machinery, tumbled 14 percent, a sign businesses are cutting capital spending, yesterday’s report showed.
“As Australia’s GDP flatlines and unemployment climbs, the central bank may have to cut interest rates,” said Annette Beacher, senior strategist at TD Securities Ltd. in Singapore.
All 20 economists surveyed by Bloomberg News prior to this week’s economic reports forecast Stevens would leave the overnight cash rate target unchanged at 3 percent on July 7. The central bank reduced the benchmark by 4.25 percentage points between September and April to a 49-year low.
Lower prices for coal and iron ore have damped a mining boom that has driven Australia’s 17 years of economic expansion. BHP Billiton Ltd., the world’s biggest mining company, and Rio Tinto Group have cut output, fired workers and reduced capital expenditure in response to the slowdown in world demand.
‘Reality Check’
“The numbers this week provide a reality check for markets that continue to price in interest-rate hikes in early 2010,” RBC Capital Market’s Ong said.
Traders expect Australia’s overnight cash rate target will be 42 basis points higher in 12 months, a Credit Suisse Group AG index based on interest-rate swaps showed at 10:15 p.m. in Sydney. Earlier this week, the index was pricing in 63 basis points in rate increases in a year.
Further signs of weakness in the economy include a July 1 report that showed approvals to build or renovate houses and apartments fell 12.5 percent in May from April, the biggest drop since November 2002. The decline was led by apartments, which tumbled 43.6 percent.
Lending by Australian financial institutions slipped 0.1 percent in May, led by a 0.7 percent decline in borrowing by companies, the central bank said this week. Sales of newly built homes slumped 5.7 percent from April, the first drop this year, the Housing Industry Association reported on June 30.
Spending Rises
Still, there was evidence this week of strength in a key area of the Australian economy. Retail sales increased 1 percent in May, twice as much as economists estimated, buoyed by spending at department stores and restaurants. The services industry expanded for the first time in 15 months in June, according to an index today from Commonwealth Bank of Australia and the Australian Industry Group.
Consumer spending rose 0.6 percent in the first quarter, accounting for three-quarters of the Australian economy’s growth in the period.
The S&P/ASX 200 stock index climbed 10 percent in the three months ended June 30, the first increase in seven quarters, on optimism of a recovery. Retailers David Jones Ltd. and JB Hi-Fi Ltd. have both raised their profit forecasts in recent weeks because of a pickup in sales.
The government has distributed A$12 billion in cash handouts to households this year. Adding to stimulus measures, Treasurer Wayne Swan allocated A$22 billion in his May budget to upgrade roads, railways, ports and hospitals over four years.
“Arguably there is still some pain ahead, but clearly Australia has been faring much better than other developed economies,” Rod Pearse, chief executive officer of Sydney-based Boral Ltd., Australia’s largest seller of building materials, said in a speech last week. The government’s “significant” stimulus will provide support to the building industry, he added.
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