Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.
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Gary D. Cohn, president of Goldman Sachs, went to Athens to pitch complex products to defer debt. Such deals let Greece continue deficit spending, like a consumer with a second mortgage.
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Weekend Business: Floyd Norris on Greece and the Euro Crisis.
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Greek Statistician Is Caught in Limelight (February 14, 2010)
Europe Commits to Action on Greek Debt (February 12, 2010)
Greece’s Woes May Give Pause to Euro Zone Candidates (February 12, 2010)
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As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.
The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.
It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.
Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.
As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.
In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.
Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.
Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.
The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.
A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.
While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.
“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.
Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.
“If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the International Monetary Fund’s capital markets surveillance unit, which monitors vulnerability in global capital markets.
Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments. While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.
Saturday, February 13, 2010
Explosion Kills 9 in Pune; India Says Terror Attack
Feb. 14 (Bloomberg) -- Nine people were killed when a bomb ripped through a bakery popular with international visitors in the Indian city of Pune, in what officials called the biggest terrorist strike in the nation since the 2008 Mumbai attacks.
“Six bodies have been identified,” police official R. Shalake said in a telephone interview from Pune, situated approximately 100 kilometers (62 miles) southeast of India’s financial hub of Mumbai. “There are three unknown bodies. At least 53 people have been injured,” Shalake said.
Television channels showed tables and chairs strewn across the pavement outside the bakery, with billboards ripped from their mountings. The blast occurred at 7:30 p.m. local time yesterday, Home Secretary Gopal K. Pillai said at a New Delhi news conference.
Home Minister Palaniappan Chidambaram said it was “the biggest terror incident in 14 months,” in remarks carried by Indian television channels late yesterday. “All the information available now points to a plot to explode a device at a place frequented by foreigners and locals,” he said.
Both he and Pillai said forensic investigations must be completed before it will be possible to say who was behind the bombing. “I don’t think any particular community was targeted. There is no failure of intelligence and it was an insidious attack. This is not an overt terror attack,” Chidambaram said.
Major Bombing
“The explosion sounded like a Katyusha” rocket, said Betzalel Kupchik, a rabbi at the Chabad House, a Jewish center, across the street from the bakery. The place was “probably targeted because you have a lot of foreigners coming there,” Kupchik said.
The Pune attack is the first major bombing in India since the November 2008 assault on Mumbai that killed 166 people. India blamed the Mumbai attack on the Pakistan-based Lashkar-e- Taiba group and scrapped five years of peace talks with its neighbor. The latest incident may threaten plans to revive negotiations between the two nuclear-armed countries. Foreign secretaries of India and Pakistan are scheduled to meet Feb. 25.
A spiritual center, located near the bakery and also frequented by foreigners, was among five places surveyed by David Coleman Headley, a Chicago man indicted by the U.S. for scouting targets before the Mumbai attacks, Pillai told reporters. Headley has pleaded not guilty to the charges.
Patrols, Training
After the Mumbai attack, Chidambaram created a federal investigation agency, strengthened patrols of coastal areas and improved training for anti-terrorism police as part of a national security overhaul.
Pillai said Dec. 9 that India remains vulnerable to terror attacks even after the revamp. Ports, power plants, nuclear installations, oil refineries and information technology firms are particularly vulnerable as groups based in India and abroad try to “wreck India’s economy,” he said.
Rebel groups in the disputed Himalayan region of Kashmir have been fighting for independence from India or a union with Pakistan since 1989. The country also faces insurgencies in some northeastern states, while Maoist guerillas have attacked economic infrastructure and security forces in southern and eastern parts of the country.
“Six bodies have been identified,” police official R. Shalake said in a telephone interview from Pune, situated approximately 100 kilometers (62 miles) southeast of India’s financial hub of Mumbai. “There are three unknown bodies. At least 53 people have been injured,” Shalake said.
Television channels showed tables and chairs strewn across the pavement outside the bakery, with billboards ripped from their mountings. The blast occurred at 7:30 p.m. local time yesterday, Home Secretary Gopal K. Pillai said at a New Delhi news conference.
Home Minister Palaniappan Chidambaram said it was “the biggest terror incident in 14 months,” in remarks carried by Indian television channels late yesterday. “All the information available now points to a plot to explode a device at a place frequented by foreigners and locals,” he said.
Both he and Pillai said forensic investigations must be completed before it will be possible to say who was behind the bombing. “I don’t think any particular community was targeted. There is no failure of intelligence and it was an insidious attack. This is not an overt terror attack,” Chidambaram said.
Major Bombing
“The explosion sounded like a Katyusha” rocket, said Betzalel Kupchik, a rabbi at the Chabad House, a Jewish center, across the street from the bakery. The place was “probably targeted because you have a lot of foreigners coming there,” Kupchik said.
The Pune attack is the first major bombing in India since the November 2008 assault on Mumbai that killed 166 people. India blamed the Mumbai attack on the Pakistan-based Lashkar-e- Taiba group and scrapped five years of peace talks with its neighbor. The latest incident may threaten plans to revive negotiations between the two nuclear-armed countries. Foreign secretaries of India and Pakistan are scheduled to meet Feb. 25.
A spiritual center, located near the bakery and also frequented by foreigners, was among five places surveyed by David Coleman Headley, a Chicago man indicted by the U.S. for scouting targets before the Mumbai attacks, Pillai told reporters. Headley has pleaded not guilty to the charges.
Patrols, Training
After the Mumbai attack, Chidambaram created a federal investigation agency, strengthened patrols of coastal areas and improved training for anti-terrorism police as part of a national security overhaul.
Pillai said Dec. 9 that India remains vulnerable to terror attacks even after the revamp. Ports, power plants, nuclear installations, oil refineries and information technology firms are particularly vulnerable as groups based in India and abroad try to “wreck India’s economy,” he said.
Rebel groups in the disputed Himalayan region of Kashmir have been fighting for independence from India or a union with Pakistan since 1989. The country also faces insurgencies in some northeastern states, while Maoist guerillas have attacked economic infrastructure and security forces in southern and eastern parts of the country.
Eight die in India’s first big attack since Mumbai
In India’s first terrorist attack since terrorists besieged Mumbai in 2008, a bomb on Saturday evening ripped through a restaurant in Pune, near India’s financial capital, killing at least eight people, reportedly including foreigners, and wounding 33 others.
Indian television reports said between one and four foreigners were among the dead in the blast, which rocked the German Bakery, a cafe popular with tourists staying at the nearby Osho ashram, one of India’s most famous communes, which hosts followers of the teachings of the late Osho Rajneesh, a spiritual guru.
EDITOR’S CHOICE
In depth: India - Jul-12
Mumbai plotter ‘could be an Indian’ - Feb-04
The explosion comes only a day after India and Pakistan agreed to resume high-level peace talks on February 25, which have been suspended since the Mumbai terrorist attacks.
“I was sitting in my living room when a strong blast shattered my windows,” said Niharika Arora, who lives across from the German Bakery, where the bomb was planted. “It is clearly an attack as the bakery is in a strategic spot close to Osho ashram.”
The bakery is also close to Pune’s Chabad House Jewish prayer and community centre.
Osho was one of the potential targets allegedly surveyed by David Coleman Headley, an American accused by US authorities of scouting targets for the Pakistan-based Islamic militant group, Lashkar-e-Taiba, ahead of the Mumbai attacks in 2008.
“Pune was one of the places reportedly visited by him for allegedly collecting target information for the LeT,” said B. Raman, director, Institute of Topical Studies, in Chennai.
Mr Headley has been detained in the US on accusations of helping to plot the Mumbai attacks, in which a group of 10 terrorists killed 166 people in a commando-style assault on three luxury hotels, a tourist cafe – Leopold’s, a railway station and another Jewish centre.
“It’s the Leopold’s of Pune,” said Charu Shree Roy, a film student at the nearby Film and Television Institute of India in Pune, referring to the German Bakery. “A lot of Osho people go there.”
No one has claimed responsibility for the Pune attack, police said.
“There was an abandoned bag which seems to have contained some IED [improvised explosive device],” senior police official Rajendra Sonawane told reporters.
The explosion at German Bakery occurred in the evening, when the restaurant was packed with tourists and foreigners. ”Four women foreigners were killed. Their nationality is not known.” Dilip Band, a senior police official, told India’s CNN-IBN television.
Debris was strewn around the bakery. The impact of the blast knocked the bakery’s sign off, blew out windows and left a large crater inside the restaurant.
”It [the bomb] was under one of the tables ... We transferred lots of people to the ambulances ... there is no German bakery any more,” one foreigner, short of breath and resting against a wall, told local CNN-IBN television.
Indian television reports said between one and four foreigners were among the dead in the blast, which rocked the German Bakery, a cafe popular with tourists staying at the nearby Osho ashram, one of India’s most famous communes, which hosts followers of the teachings of the late Osho Rajneesh, a spiritual guru.
EDITOR’S CHOICE
In depth: India - Jul-12
Mumbai plotter ‘could be an Indian’ - Feb-04
The explosion comes only a day after India and Pakistan agreed to resume high-level peace talks on February 25, which have been suspended since the Mumbai terrorist attacks.
“I was sitting in my living room when a strong blast shattered my windows,” said Niharika Arora, who lives across from the German Bakery, where the bomb was planted. “It is clearly an attack as the bakery is in a strategic spot close to Osho ashram.”
The bakery is also close to Pune’s Chabad House Jewish prayer and community centre.
Osho was one of the potential targets allegedly surveyed by David Coleman Headley, an American accused by US authorities of scouting targets for the Pakistan-based Islamic militant group, Lashkar-e-Taiba, ahead of the Mumbai attacks in 2008.
“Pune was one of the places reportedly visited by him for allegedly collecting target information for the LeT,” said B. Raman, director, Institute of Topical Studies, in Chennai.
Mr Headley has been detained in the US on accusations of helping to plot the Mumbai attacks, in which a group of 10 terrorists killed 166 people in a commando-style assault on three luxury hotels, a tourist cafe – Leopold’s, a railway station and another Jewish centre.
“It’s the Leopold’s of Pune,” said Charu Shree Roy, a film student at the nearby Film and Television Institute of India in Pune, referring to the German Bakery. “A lot of Osho people go there.”
No one has claimed responsibility for the Pune attack, police said.
“There was an abandoned bag which seems to have contained some IED [improvised explosive device],” senior police official Rajendra Sonawane told reporters.
The explosion at German Bakery occurred in the evening, when the restaurant was packed with tourists and foreigners. ”Four women foreigners were killed. Their nationality is not known.” Dilip Band, a senior police official, told India’s CNN-IBN television.
Debris was strewn around the bakery. The impact of the blast knocked the bakery’s sign off, blew out windows and left a large crater inside the restaurant.
”It [the bomb] was under one of the tables ... We transferred lots of people to the ambulances ... there is no German bakery any more,” one foreigner, short of breath and resting against a wall, told local CNN-IBN television.
Friday, February 12, 2010
Japanese Government Bonds Rise on Speculation Rates to Stay Low
Feb. 13 (Bloomberg) -- Japan’s 10-year bonds completed a weekly gain on speculation chronic deflation will encourage the Bank of Japan to keep its benchmark interest rate near zero when policy makers meet next week.
Benchmarkyields stayed near the lowest level in two weeks before a report on Feb. 15 that economists said will show prices fell at a faster pace in the final quarter of 2009 even as economic growth quickened. Bond futures dropped yesterday as stocks advanced for second day after European Union leaders pledged to help Greece tackle it swelling budget deficit.
“A quickening expansion won’t dispel strong deflationary pressure immediately,” said Takeshi Minami, chief economist at Norinchukin Research Institute Ltd. in Tokyo. “The Bank of Japan is still far away from exiting credit easing, which will continue to support the debt market.”
Ten-year yields fell 2.5 basis points this week to 1.33 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. They slid to 1.325 percent on Feb. 10, the lowest level since Feb. 1.
Benchmark yields rose half a basis point yesterday and 10- year bond futures for March delivery slipped 0.06 to 139.37 at the close of the Tokyo Stock Exchange.
The gross domestic product deflator declined 2.3 percent in the fourth quarter from a year earlier, according to a Bloomberg News survey. The deflator is used to calculate real GDP, or economic growth adjusted for price changes.
The economy grew an annual 3.5 percent last quarter, after expanding 1.3 percent in prior three months, according to a separate Bloomberg survey.
‘Stave off’ Recession
“Japan may be able to stave off a double-dip recession,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without stimulus is possible. The economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”
The Bank of Japan will keep its overnight call rate at 0.1 percent throughout 2010, according to Bloomberg News survey. BOJ Governor Masaaki Shirakawa and fellow board members will start a two-day policy meeting on Feb. 17.
Central bank board members this month affirmed their forecasts for Japan’s economy to keep expanding while consumer prices will fall through the year ending March 2012, a third- year of declines.
Stocks Bounce
Bond futures snapped a four-day gain yesterday as Asian stocks extended a worldwide equity rally, limiting demand for the relative safety of government debt.
“Easing concerns over Greece support demand for riskier securities,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “The recent trend of buying flight-to-safety assets will weaken.”
The Nikkei 225 Stock Average advanced 1.3 percent yesterday. Benchmark 10-year yields had a correlation of 0.6 with the Nikkei 225 this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
European leaders promised “determined” action to staunch the worst crisis in the euro’s 11-year history. The agreement reached on Feb. 11 called for closer monitoring of the Greek economy and stopped short of offering concrete steps to help Greece handle a debt load exceeding annual economic output.
“It’s a political message that we wanted to send out,” European Union President Herman Van Rompuy told reporters in Brussels on Feb. 11. “The Greek government will take the responsibility for cleaning up its public finances.”
Benchmarkyields stayed near the lowest level in two weeks before a report on Feb. 15 that economists said will show prices fell at a faster pace in the final quarter of 2009 even as economic growth quickened. Bond futures dropped yesterday as stocks advanced for second day after European Union leaders pledged to help Greece tackle it swelling budget deficit.
“A quickening expansion won’t dispel strong deflationary pressure immediately,” said Takeshi Minami, chief economist at Norinchukin Research Institute Ltd. in Tokyo. “The Bank of Japan is still far away from exiting credit easing, which will continue to support the debt market.”
Ten-year yields fell 2.5 basis points this week to 1.33 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. They slid to 1.325 percent on Feb. 10, the lowest level since Feb. 1.
Benchmark yields rose half a basis point yesterday and 10- year bond futures for March delivery slipped 0.06 to 139.37 at the close of the Tokyo Stock Exchange.
The gross domestic product deflator declined 2.3 percent in the fourth quarter from a year earlier, according to a Bloomberg News survey. The deflator is used to calculate real GDP, or economic growth adjusted for price changes.
The economy grew an annual 3.5 percent last quarter, after expanding 1.3 percent in prior three months, according to a separate Bloomberg survey.
‘Stave off’ Recession
“Japan may be able to stave off a double-dip recession,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without stimulus is possible. The economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”
The Bank of Japan will keep its overnight call rate at 0.1 percent throughout 2010, according to Bloomberg News survey. BOJ Governor Masaaki Shirakawa and fellow board members will start a two-day policy meeting on Feb. 17.
Central bank board members this month affirmed their forecasts for Japan’s economy to keep expanding while consumer prices will fall through the year ending March 2012, a third- year of declines.
Stocks Bounce
Bond futures snapped a four-day gain yesterday as Asian stocks extended a worldwide equity rally, limiting demand for the relative safety of government debt.
“Easing concerns over Greece support demand for riskier securities,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “The recent trend of buying flight-to-safety assets will weaken.”
The Nikkei 225 Stock Average advanced 1.3 percent yesterday. Benchmark 10-year yields had a correlation of 0.6 with the Nikkei 225 this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
European leaders promised “determined” action to staunch the worst crisis in the euro’s 11-year history. The agreement reached on Feb. 11 called for closer monitoring of the Greek economy and stopped short of offering concrete steps to help Greece handle a debt load exceeding annual economic output.
“It’s a political message that we wanted to send out,” European Union President Herman Van Rompuy told reporters in Brussels on Feb. 11. “The Greek government will take the responsibility for cleaning up its public finances.”
Asia Currencies Have Best Week in a Month on Growth, Greece Aid
Feb. 13 (Bloomberg) -- Asian currencies completed the best week in more than a month as a pledge by European leaders to defend Greece boosted investor confidence in emerging-market assets and data added to evidence of a regional recovery.
The Bloomberg-JPMorgan Asia Dollar Index climbed this week for the first time since the period ended Jan. 8, while the MSCI Asia-Pacific Index of shares rallied 1.5 percent. The European Union promised “determined and coordinated action” for Greece, without providing specifics before they meet again on Feb. 15. Reports showed Taiwan exports rose by the most in more than 30 years and Malaysia’s factory output posted the biggest increase in 22 months.
“On the surface, what they want to do is to calm the markets,” said Roland Avante, treasurer at Sterling Bank of Asia in Manila. “The statement should start sparing emerging markets from the effects of the sovereign crisis happening in Europe.”
South Korea’s won led gains among Asian currencies, strengthening 1.5 percent to 1,151.40 per dollar at the 3 p.m. close in Seoul, and Indonesia’s rupiah appreciated 1.1 percent to 9,340, according to data compiled by Bloomberg. Malaysia’s ringgit rose 0.8 percent to 3.4185 and Singapore’s dollar advanced 0.8 percent to S$1.4120.
The European Union pledged to defend Greece from speculative attack and was looking at establishing a lending facility for the country following a summit in Brussels on Feb. 11. Officials said they “fully” support Greece’s efforts to rein in its budget deficit, the largest in the 27-member grouping.
Euro Loss
The statements failed to convince some investors, sending the euro lower against the dollar and yen, while funds pulled money out of equity funds in developing nations.
The euro declined to $1.3632 in New York yesterday. The currency dropped to $1.3596 on Feb. 11, the lowest level since Feb. 5.
Outflows from emerging-market equity funds reached $2.9 billion in the week to Feb. 10, the highest amount since the period ended July 9, 2008, according to data from Cambridge, Massachusetts-based research firm EPFR Global.
Economic reports in the week helped bolster demand for Asian currencies ahead of Lunar New Year holidays next week.
“Export demand in Asia is holding up very well and regional currencies should continue to strengthen,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur.
Export Data
Taiwan’s overseas sales climbed 75.8 percent in January from a year earlier, beating the median estimate in a Bloomberg News survey for a 62.9 percent increase. Shipments out of China gained 21 percent, a second monthly rise, and Philippine exports advanced 23.6 percent. Malaysia’s industrial production was up 8.9 percent in December.
India’s rupee strengthened 0.5 percent in the week to 46.5 per dollar. A government report yesterday showed output at factories, utilities and mines increased 16.8 percent in December from a year earlier, the most since at least 1994. It beat analysts’ expectations of a 12.4 percent increase.
China’s yuan completed its biggest weekly decline in more than one year on speculation importers bought dollar before the weeklong Chinese New Year holidays.
The currency depreciated 0.09 percent in the week to 6.8330 per dollar, the biggest loss since the five days ended Jan. 9, 2009, according to China Foreign Exchange Trade System.
“The wider moves are probably due to the pre-holiday demand for the dollar,” said Chen Yue, a foreign exchange trader at China Merchants Bank China Merchants Bank Co., the nation’s fifth-largest lender by market value. “It’s hard to say if flexibility will increase.”
The central bank yesterday said it will raise banks’ reserve requirement ratio by 50 basis points effective Feb. 25, according to a statement on its Web site. The markets will close next week for the holiday.
Dong Devaluation
Vietnam’s dong weakened to a record low for a second day after the central bank on Feb. 11 devalued the currency to reduce the trade deficit and the gap with black market rates.
The dong fell as much as 2 percent to 19,100 per dollar, trading at the upper limit of the 3 percent band from the daily fixing, according to data compiled by Bloomberg. It dropped 2.3 percent for the week, the biggest loss since the period ended Nov. 27, when the central bank last devalued the currency.
Vietnam, China and Taiwan are closed all next week for the New Year holidays, while markets in Singapore, Hong Kong and Malaysia are shut Feb. 15-16. South Korea closes Monday and reopens on Feb. 16.
Elsewhere in Asian trading this week, the Philippine peso appreciated 0.6 percent to 46.245 versus the greenback and Taiwan’s dollar advanced 0.3 percent to NT$32.10.
--Judy Chen, Karl Lester M. Yap. With assistance from Lilian Karunungan and David Yong in Singapore. Editor: Simon Harvey, Shanthy Nambiar
The Bloomberg-JPMorgan Asia Dollar Index climbed this week for the first time since the period ended Jan. 8, while the MSCI Asia-Pacific Index of shares rallied 1.5 percent. The European Union promised “determined and coordinated action” for Greece, without providing specifics before they meet again on Feb. 15. Reports showed Taiwan exports rose by the most in more than 30 years and Malaysia’s factory output posted the biggest increase in 22 months.
“On the surface, what they want to do is to calm the markets,” said Roland Avante, treasurer at Sterling Bank of Asia in Manila. “The statement should start sparing emerging markets from the effects of the sovereign crisis happening in Europe.”
South Korea’s won led gains among Asian currencies, strengthening 1.5 percent to 1,151.40 per dollar at the 3 p.m. close in Seoul, and Indonesia’s rupiah appreciated 1.1 percent to 9,340, according to data compiled by Bloomberg. Malaysia’s ringgit rose 0.8 percent to 3.4185 and Singapore’s dollar advanced 0.8 percent to S$1.4120.
The European Union pledged to defend Greece from speculative attack and was looking at establishing a lending facility for the country following a summit in Brussels on Feb. 11. Officials said they “fully” support Greece’s efforts to rein in its budget deficit, the largest in the 27-member grouping.
Euro Loss
The statements failed to convince some investors, sending the euro lower against the dollar and yen, while funds pulled money out of equity funds in developing nations.
The euro declined to $1.3632 in New York yesterday. The currency dropped to $1.3596 on Feb. 11, the lowest level since Feb. 5.
Outflows from emerging-market equity funds reached $2.9 billion in the week to Feb. 10, the highest amount since the period ended July 9, 2008, according to data from Cambridge, Massachusetts-based research firm EPFR Global.
Economic reports in the week helped bolster demand for Asian currencies ahead of Lunar New Year holidays next week.
“Export demand in Asia is holding up very well and regional currencies should continue to strengthen,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur.
Export Data
Taiwan’s overseas sales climbed 75.8 percent in January from a year earlier, beating the median estimate in a Bloomberg News survey for a 62.9 percent increase. Shipments out of China gained 21 percent, a second monthly rise, and Philippine exports advanced 23.6 percent. Malaysia’s industrial production was up 8.9 percent in December.
India’s rupee strengthened 0.5 percent in the week to 46.5 per dollar. A government report yesterday showed output at factories, utilities and mines increased 16.8 percent in December from a year earlier, the most since at least 1994. It beat analysts’ expectations of a 12.4 percent increase.
China’s yuan completed its biggest weekly decline in more than one year on speculation importers bought dollar before the weeklong Chinese New Year holidays.
The currency depreciated 0.09 percent in the week to 6.8330 per dollar, the biggest loss since the five days ended Jan. 9, 2009, according to China Foreign Exchange Trade System.
“The wider moves are probably due to the pre-holiday demand for the dollar,” said Chen Yue, a foreign exchange trader at China Merchants Bank China Merchants Bank Co., the nation’s fifth-largest lender by market value. “It’s hard to say if flexibility will increase.”
The central bank yesterday said it will raise banks’ reserve requirement ratio by 50 basis points effective Feb. 25, according to a statement on its Web site. The markets will close next week for the holiday.
Dong Devaluation
Vietnam’s dong weakened to a record low for a second day after the central bank on Feb. 11 devalued the currency to reduce the trade deficit and the gap with black market rates.
The dong fell as much as 2 percent to 19,100 per dollar, trading at the upper limit of the 3 percent band from the daily fixing, according to data compiled by Bloomberg. It dropped 2.3 percent for the week, the biggest loss since the period ended Nov. 27, when the central bank last devalued the currency.
Vietnam, China and Taiwan are closed all next week for the New Year holidays, while markets in Singapore, Hong Kong and Malaysia are shut Feb. 15-16. South Korea closes Monday and reopens on Feb. 16.
Elsewhere in Asian trading this week, the Philippine peso appreciated 0.6 percent to 46.245 versus the greenback and Taiwan’s dollar advanced 0.3 percent to NT$32.10.
--Judy Chen, Karl Lester M. Yap. With assistance from Lilian Karunungan and David Yong in Singapore. Editor: Simon Harvey, Shanthy Nambiar
Thursday, February 11, 2010
Taliban strikes target police in north Pakistan
Pakistan Taliban militants on Thursday launched an audacious bomb and armed attack on two police compounds in the northern city of Bannu in North West Frontier Province, prompting fresh warnings that Islamic militants have the capability to strike at supposedly well protected targets.
A doctor at Bannu’s main hospital told Reuters new agency that 15 people had been killed and about 20 wounded people had been brought in. ”Seven police are among the dead,” said a Bannu police officer. The town’s police chief was among the wounded, police added.
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In depth: Pakistan - Nov-20
Suicide bomb attack kills 17 in Pakistan - Feb-10
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US soldiers killed in Pakistan blast - Feb-03
Pakistan confident of insurgent death - Feb-02
Interactive graphic: Taliban attacks in Pakistan - Feb-05
A senior Pakistani intelligence officer said the attack appeared to be in retaliation for last month’s reported killing of Taliban militant leader Hakimullah Mehsud. “The Taliban are determined to seek revenge from innocent people for the death of their leader,” he said.
Thursday’s attacks came just a day after a suicide car bomber attacked a group of paramilitary soldiers in the northwestern Khyber region just outside Peshawar on Wednesday, killing at least 19 people including 11 policeman.
Thursday’s attack came on the day when James Jones, US national security adviser, met President Asif Ali Zardari. Though no details of the meeting were publicly given, a senior Pakistan foreign ministry official said part of the discussion involved the matter of Pakistan’s potential support to bridge differences between Taliban militants in Afghanistan and the regime of Afghan president Hamid Karzai backed by the US and its NATO allies.
“We are obviously well placed to facilitate a dialogue which eventually helps bring an end to this conflict” he said.
However, western diplomats in Islamabad warned, the Taliban operating on Pakistani soil were likely to become increasingly ferocious in carrying out their attacks after a year of increasingly bloody confrontation with the country’s military. In recent weeks, some western officials have privately criticised Pakistan’s security forces for not taking their fighter deeper inside the tribal region beyond areas which were targeted till the end of last year.
The Pakistani Taliban, allies of the Afghan Taliban, have lost much ground in military offensives over the past year but they have responded with numerous bomb attacks, many of them aimed at the security forces.
There has been speculation over the Taliban leader’s fate since January 14 when security officials said a missile-firing US drone had targeted him. A drone was believed to have attacked him again three days later, officials said.
The government had ”credible information” that Mehsud was dead, Interior Minister Rehman Malik said on Wednesday.
A Taliban spokesman has denied that Mehsud was dead. Militants also denied for weeks the death in August of their previous leader, who was killed by a US drone.
A doctor at Bannu’s main hospital told Reuters new agency that 15 people had been killed and about 20 wounded people had been brought in. ”Seven police are among the dead,” said a Bannu police officer. The town’s police chief was among the wounded, police added.
EDITOR’S CHOICE
In depth: Pakistan - Nov-20
Suicide bomb attack kills 17 in Pakistan - Feb-10
Twin blasts kill at least 25 in Karachi - Feb-05
US soldiers killed in Pakistan blast - Feb-03
Pakistan confident of insurgent death - Feb-02
Interactive graphic: Taliban attacks in Pakistan - Feb-05
A senior Pakistani intelligence officer said the attack appeared to be in retaliation for last month’s reported killing of Taliban militant leader Hakimullah Mehsud. “The Taliban are determined to seek revenge from innocent people for the death of their leader,” he said.
Thursday’s attacks came just a day after a suicide car bomber attacked a group of paramilitary soldiers in the northwestern Khyber region just outside Peshawar on Wednesday, killing at least 19 people including 11 policeman.
Thursday’s attack came on the day when James Jones, US national security adviser, met President Asif Ali Zardari. Though no details of the meeting were publicly given, a senior Pakistan foreign ministry official said part of the discussion involved the matter of Pakistan’s potential support to bridge differences between Taliban militants in Afghanistan and the regime of Afghan president Hamid Karzai backed by the US and its NATO allies.
“We are obviously well placed to facilitate a dialogue which eventually helps bring an end to this conflict” he said.
However, western diplomats in Islamabad warned, the Taliban operating on Pakistani soil were likely to become increasingly ferocious in carrying out their attacks after a year of increasingly bloody confrontation with the country’s military. In recent weeks, some western officials have privately criticised Pakistan’s security forces for not taking their fighter deeper inside the tribal region beyond areas which were targeted till the end of last year.
The Pakistani Taliban, allies of the Afghan Taliban, have lost much ground in military offensives over the past year but they have responded with numerous bomb attacks, many of them aimed at the security forces.
There has been speculation over the Taliban leader’s fate since January 14 when security officials said a missile-firing US drone had targeted him. A drone was believed to have attacked him again three days later, officials said.
The government had ”credible information” that Mehsud was dead, Interior Minister Rehman Malik said on Wednesday.
A Taliban spokesman has denied that Mehsud was dead. Militants also denied for weeks the death in August of their previous leader, who was killed by a US drone.
India’s Visa Rules ‘Out of Line’ for Companies Seeking Expats
Feb. 12 (Bloomberg) -- T.V. Mohandas Pai says he wants to hire more expatriates for Infosys Technologies Ltd., India’s second-largest software exporter, as the global economic recovery boosts sales. Stricter visa rules prompted by unskilled Chinese workers are holding him back.
Infosys has about 20 foreign workers and needs “many more” to help it expand abroad, said Pai, who runs the Bangalore-based company’s human resources department. Companies in Asia’s third-biggest economy are using annual growth averaging 8.7 percent in fiscal years 2006-2009 to reverse a decades-long “brain drain” to the U.S. and Europe.
The government toughened regulations for foreign workers last year after discovering that about 40,000 Chinese building power plants used business visas instead of employment visas, skirting taxes and taking jobs from locals. The crackdown restricted employment visas to skilled people in senior jobs and limited foreigners to 1 percent of a project’s workforce.
“We need to get expats to help us understand the complexity of businesses,” Pai said. “But instead of helping, the government has tightened the visa rules. The problem in India is policymakers are totally out of line with reality.”
Building Power Plants
India is attracting foreign workers facing jobless rates of 9.7 percent in the U.S. and 10 percent in the 16-nation euro region. India doesn’t regularly release unemployment data.
Little attention was paid to visas in the past decade as the government sought investments from abroad. The number of registered foreign nationals more than doubled to 351,999 in 2007 from 137,474 the year before, according to the latest data from the Ministry of Home Affairs Web site.
Three power plants being built by billionaire Anil Ambani’sReliance Power Ltd. placed orders with Shanghai Electric Group Co. Lanco Infratech Ltd. awarded a contract for its 1,015- megawatt plant to Deyang, China-based Dongfang Electric Corp.
“It has come to the notice of the government that a large number of foreign nationals, including Chinese, were coming for execution of projects/contracts in India on Business Visas instead of the Employment Visas,” Harish Rawat, junior minister for labor, said Dec. 16 in a written response to lawmakers.
Foreign workers without employment visas aren’t paying taxes, said Amitabh Singh, a partner at Ernst & Young Pvt. in New Delhi.
7.2 Percent Growth
The government forecasts economic growth will reach 7.2 percent in the year ending March. India recorded the highest average pay increase in the Asia-Pacific region in 2009 at 6.3 percent, Lincolnshire, Illinois-based Hewitt Associates Inc. said in October.
“It has become a hot destination,” said Jeffrey Joerres, chief executive officer of staffing company Manpower Inc. “India and China are on the front end of the recovery.”
Infosys is benefiting from a strong rebound in the financial services industry, Chief Executive Officer S. Gopalakrishnan said Jan. 28. The company on Jan. 12 reported profit that beat analysts’ estimates and raised its annual revenue forecast.
Sales may rise as much as 2 percent to $4.76 billion in the year ending March 31, compared with an earlier prediction of a 1.3 percent drop.
‘Hard Work, Sacrifice’
Matthew Barney, 40, left Wisconsin a year ago and moved his family near Bangalore to become head of leadership development for Infosys.
“Indian culture today is similar to the original cultural values that drove the U.S.,” said Barney, whose wife is Indian. “Both value hard work and sacrifice today for the next generation to have a better standard of living.”
India’s travel and tourism economy is expected to grow 7.7 percent a year in real terms from 2010 to 2019, according to a 2009 report by the World Travel & Tourism Council. Gurgaon-based Air Works India Engineering Pvt. hired American Todd Hattaway as president of airline maintenance last year.
“Aviation is developing so fast and to be a major part of that will definitely enhance my career,” Hattaway said.
Deepak Gupta, country head and managing director of executive-search firm Korn/Ferry International, said the new rules may dim India’s attractiveness to foreign workers.
“The visa system has to be made more friendly,” Gupta said. “It’s not going to help make India a global employment destination.”
Favoring Indians
The government said Nov. 25 that employment visas would only be granted to professionals including technical experts, senior executives and managers. The visas “will not be granted for jobs for which a large number of qualified Indians are available,” M. Ramachandran, a Home Affairs junior minister, said in a written statement to parliament.
The Ministry of Labour and Employment said foreign nationals cannot total more than 1 percent of a workforce, with between five and 20 allowed on a project.
The Chinese government received numerous complaints from companies and said, “We hope India will be considerate of the circumstances of Chinese firms there,” state-run China Daily reported Nov. 3.
In December, India amended the rules to allow up to 40 foreigners on power and steel projects through June. Companies seeking more overseas workers need labor ministry approval.
Pai said limiting foreigners will do more harm than good.
“We need substantial relaxation in work permit policies,” he said. “India needs to get many, many more expats.”
Infosys has about 20 foreign workers and needs “many more” to help it expand abroad, said Pai, who runs the Bangalore-based company’s human resources department. Companies in Asia’s third-biggest economy are using annual growth averaging 8.7 percent in fiscal years 2006-2009 to reverse a decades-long “brain drain” to the U.S. and Europe.
The government toughened regulations for foreign workers last year after discovering that about 40,000 Chinese building power plants used business visas instead of employment visas, skirting taxes and taking jobs from locals. The crackdown restricted employment visas to skilled people in senior jobs and limited foreigners to 1 percent of a project’s workforce.
“We need to get expats to help us understand the complexity of businesses,” Pai said. “But instead of helping, the government has tightened the visa rules. The problem in India is policymakers are totally out of line with reality.”
Building Power Plants
India is attracting foreign workers facing jobless rates of 9.7 percent in the U.S. and 10 percent in the 16-nation euro region. India doesn’t regularly release unemployment data.
Little attention was paid to visas in the past decade as the government sought investments from abroad. The number of registered foreign nationals more than doubled to 351,999 in 2007 from 137,474 the year before, according to the latest data from the Ministry of Home Affairs Web site.
Three power plants being built by billionaire Anil Ambani’sReliance Power Ltd. placed orders with Shanghai Electric Group Co. Lanco Infratech Ltd. awarded a contract for its 1,015- megawatt plant to Deyang, China-based Dongfang Electric Corp.
“It has come to the notice of the government that a large number of foreign nationals, including Chinese, were coming for execution of projects/contracts in India on Business Visas instead of the Employment Visas,” Harish Rawat, junior minister for labor, said Dec. 16 in a written response to lawmakers.
Foreign workers without employment visas aren’t paying taxes, said Amitabh Singh, a partner at Ernst & Young Pvt. in New Delhi.
7.2 Percent Growth
The government forecasts economic growth will reach 7.2 percent in the year ending March. India recorded the highest average pay increase in the Asia-Pacific region in 2009 at 6.3 percent, Lincolnshire, Illinois-based Hewitt Associates Inc. said in October.
“It has become a hot destination,” said Jeffrey Joerres, chief executive officer of staffing company Manpower Inc. “India and China are on the front end of the recovery.”
Infosys is benefiting from a strong rebound in the financial services industry, Chief Executive Officer S. Gopalakrishnan said Jan. 28. The company on Jan. 12 reported profit that beat analysts’ estimates and raised its annual revenue forecast.
Sales may rise as much as 2 percent to $4.76 billion in the year ending March 31, compared with an earlier prediction of a 1.3 percent drop.
‘Hard Work, Sacrifice’
Matthew Barney, 40, left Wisconsin a year ago and moved his family near Bangalore to become head of leadership development for Infosys.
“Indian culture today is similar to the original cultural values that drove the U.S.,” said Barney, whose wife is Indian. “Both value hard work and sacrifice today for the next generation to have a better standard of living.”
India’s travel and tourism economy is expected to grow 7.7 percent a year in real terms from 2010 to 2019, according to a 2009 report by the World Travel & Tourism Council. Gurgaon-based Air Works India Engineering Pvt. hired American Todd Hattaway as president of airline maintenance last year.
“Aviation is developing so fast and to be a major part of that will definitely enhance my career,” Hattaway said.
Deepak Gupta, country head and managing director of executive-search firm Korn/Ferry International, said the new rules may dim India’s attractiveness to foreign workers.
“The visa system has to be made more friendly,” Gupta said. “It’s not going to help make India a global employment destination.”
Favoring Indians
The government said Nov. 25 that employment visas would only be granted to professionals including technical experts, senior executives and managers. The visas “will not be granted for jobs for which a large number of qualified Indians are available,” M. Ramachandran, a Home Affairs junior minister, said in a written statement to parliament.
The Ministry of Labour and Employment said foreign nationals cannot total more than 1 percent of a workforce, with between five and 20 allowed on a project.
The Chinese government received numerous complaints from companies and said, “We hope India will be considerate of the circumstances of Chinese firms there,” state-run China Daily reported Nov. 3.
In December, India amended the rules to allow up to 40 foreigners on power and steel projects through June. Companies seeking more overseas workers need labor ministry approval.
Pai said limiting foreigners will do more harm than good.
“We need substantial relaxation in work permit policies,” he said. “India needs to get many, many more expats.”
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