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Archive for December 11th, 2008

SIEMENS FINANCIAL SERVICES INC. HAS ACQUIRED 30% STAKE IN THE TORP TERMINAL LP, IN HOUSTON, TX

Posted by Gilmour Poincaree on December 11, 2008

Monday, December 10, 2008

Distributed by Press Release

PUBLISHED BY ‘THE EXAMINER’

ISELIN, N.J., Dec. 10 /PRNewswire/ – Siemens Financial Services, Inc. (SFS Inc.), the U.S. financing unit of Siemens AG, has taken a 30% equity interest in TORP Terminal LP. TORP Terminal LP, with headquarters in Houston, TX, is a limited partnership owned by TORP Technology Inc., TORP Technology AS, and SFS Inc.

TORP Technology AS has developed the award winning technology, the HiLoad LNG Regas, which will be applied at the Bienville Offshore Energy Terminal, to receive and re­gasify liquefied natural gas (LNG). TORP Terminal has filed an application for a license under the Deep Water Port Act to build, own and operate the terminal in the Gulf of Mexico.

The Bienville Offshore Energy Terminal will be located 63 miles south of Dauphin Island, Alabama, in 450 ft of water, and will utilize TORP’s proprietary HiLoad Technology in an environmentally sound way for cost­effective offloading of LNG carriers offshore.

Lars Odeskaug, CEO of TORP Technology AS, explained: “The HiLoad Technology enables us to safely dock onto any LNG carrier, unload and re­-gasify the LNG at very attractive rates. TORP selected the site offshore Alabama for the terminal due to its strategic location downstream of Henry Hub and with high takeaway capacity to some of the best gas markets in the U.S. We are pleased that Siemens has arrived at the same conclusion, both with respect to technology and location, and we look forward to move the project forward with Siemens as a strong partner.”

“Siemens thrives on innovation and we recognized in this project another opportunity to invest in an innovative technology” says Johannes Schmidt, Head of Equity & Project Finance. “At SFS, we see ourselves as enabler of business expansion that understands the challenges its customers face and creates customized financial solutions to help solve them.”

About Siemens Financial Services (SFS)

Siemens Financial Services (SFS) is an international provider of financial solutions in the business­to­business area. With about 1,900 employees and an international network of financial companies coordinated by Siemens Financial Services GmbH, Munich, we support Siemens as well as non-­affiliated companies, focusing on the three sectors of energy, industry and healthcare. We finance infrastructure, equipment and working capital and act as a competent manager of financial risks within Siemens. By leveraging our financing expertise and our industrial know­-how we create value for our customers and help them strengthen their competitiveness. For more information see: www.siemens.com/finance.

Siemens Financial Services, Inc. (SFS Inc.) is a leading provider of business­-to-­business financial services in the United States. SFS is a committed business ally that combines deep industry expertise with integrated financing solutions to enhance the efficiency, productivity, and competitiveness of its customers. The company, based in Iselin, NJ, enables business expansion for thousands of customers in the healthcare, energy, and industrial sectors by providing customized solutions that range from equipment financing and working capital to project and export finance, and insurance solutions. Further information on Siemens Financial Services in the United States: www.usa.siemens.com/financial.

About Siemens

Siemens AG (NYSE: SI) is a global powerhouse in electronics and electrical engineering, and operates in the industry, energy and healthcare sectors. For more than 160 years, Siemens has built a reputation for leading­-edge innovation and the quality of its products, services and solutions. With 428,000 employees in 190 countries, Siemens reported worldwide sales of $116.6 billion in fiscal 2008. With its U.S. corporate headquarters in New York City, Siemens in the USA reported sales of $22.4 billion and employs approximately 69,000 people throughout all 50 states and Puerto Rico. For more information on Siemens in the United States, visit www.usa.siemens.com.

About TORP Terminal LP

TORP Terminal LP is based in Houston, TX. The company is a limited partnership owned by TORP Technology Inc., TORP Technology AS (Stavanger, Norway) and Siemens Financial Services Inc. The company has the rights to utilize the HiLoad LNG Re-­gasification technology at the Bienville Offshore Energy Terminal. The HiLoad LNG Re­-gasification unit is a floating L-­shaped terminal that docks onto the LNG carrier using the patented friction based attachment system (rubber suction cups) creating no relative motion between the carrier and the terminal. The HiLoad LNG Re­-gasification unit is equipped with standard re­-gasification equipment (LNG loading arms, pumps and vaporizers) and can accommodate any LNG carrier without the use of any special equipment. The terminal uses air for heating the LNG, saving fuel costs. For more information on TORP Terminal LP, go to http://www.torplng.com.

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PUBLISHED BY ‘THE EXAMINER’

Posted in COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, ENERGY, ENERGY INDUSTRIES, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FINANCIAL SERVICES INDUSTRIES, GERMANY, INDUSTRIAL PRODUCTION, INDUSTRIAL PRODUCTION - USA, INDUSTRIES, INDUSTRIES - USA, INTERNATIONAL, MEXICO, NATIONAL WORK FORCES, NATURAL GAS, RECESSION, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE WORK MARKET, THE WORKERS, USA | Leave a Comment »

BRAZIL GOV’T IN TALKS ON SUBSALT OIL INVESTMENTS

Posted by Gilmour Poincaree on December 11, 2008

Monday, December 08, 2008

by Jeff Fick – Dow Jones Newswires

PUBLISHED BY ‘THE RIGZONE’

RIO DE JANEIRO – Brazil’s government is in talks with a variety of potential investors – besides China – to finance investments in the Mines and Energy Minister Edison Lobaocountry’s promising subsalt oil deposits, the country’s mines and energy minister said Monday.

Mines and Energy Minister Edison Lobao told the local Estado news agency that “it’s not only China. There are a range of opportunities that Petrobras has.”

Lobao confirmed press reports Monday that the Chinese government had offered Brazilian state-run energy giant Petroleo Brasileiro $10 billion to fund subsalt oil development – and that was just to start.

According to Lobao, other possible funding could come from the United Arab Emirates, Japanese groups and Canadian banks. In addition, financing could be arranged with oil-exploration equipment suppliers that have their own sources of financing, Lobao said.

“Petrobras is a solid company. It has a prestigious history abroad. There is no safer investment than in Petrobras,” Lobao said.

“Petrobras will not have any problems. The financing sources will be generous, whether they are domestic or foreign,” the minister added.

The Brazilian government would also consider using its $200 billion in foreign reserves to help finance Petrobras’ investments, Lobao BRAZIL'S SUBSALT BASINSsaid.

“It’s a possibility. It’s a decision that will be made by the government. If Petrobras one day needs it, we could help with these reserves. They’re just sitting there,” Lobao said.

Such financing could help Petrobras overcome a tight credit market and falling international oil prices, which experts and analysts have speculated could slow down development of the subsalt reserves. Full development of the region has been estimated to cost as much as $600 billion.

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PUBLISHED BY ‘THE RIGZONE’

Posted in A QUESTÃO ENERGÉTICA, BRASIL, CANADA, CHINA, CIDADES, COMBATE À DESIGUALDADE E À EXCLUSÃO - BRASIL, COMMERCE, COMMODITIES MARKET, ECONOMIA - BRASIL, ECONOMIC CONJUNCTURE, ECONOMY, ENERGY INDUSTRIES, EXPANSÃO ECONÔMICA, EXPANSÃO INDUSTRIAL, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FLUXO DE CAPITAIS, FOREIGN POLICIES, GÁS NATURAL, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL RELATIONS, MINISTÉRIO DAS MINAS E ENERGIA, NATURAL GAS, O PODER EXECUTIVO FEDERAL, PETRÓLEO, PETROL, POLÍTICA EXTERNA - BRASIL, PROGRAMA DE ACELERAÇÃO DO CRESCIMENTO (PAC), RECESSION, RELAÇÕES COMERCIAIS INTERNACIONAIS - BRASIL, RELAÇÕES DIPLOMÁTICAS - BRASIL, RELAÇÕES INTERNACIONAIS - BRASIL, THE FLOW OF INVESTMENTS | Leave a Comment »

FRENCH ECONOMY SURPASSING U.K., REPORT FINDS

Posted by Gilmour Poincaree on December 11, 2008

December 8, 2008

Bloomberg News

PUBLISHED BY ‘THE INTERNATIONAL HERALD TRIBUNE’ (USA)

PARIS: The financial crisis is recasting the league table of economies, with Britain sliding behind its European neighbors and China gaining on its richer rivals, the Center for Economics and Business Research said in a study released Monday.

A recession and a decline in the pound’s value pushed Britain’s gross domestic product below France’s this year and it will be passed by Italy in 2009, the CEBR said in the report. China has overtaken Germany and will top Japan in 2010 to become the world’s second-largest economy behind the United States, it said.

“The recession associated with the credit crunch will change the position of many countries in the world’s GDP league table,” the London-based CEBR said in the report.

The study shows how countries that ran up debts during expansion, like Britain, will now suffer, while emerging-market economies will wield increasingly more power in the global economy as they develop. Governments from the Group of 7 nations are under pressure to broaden their membership to reflect the changing shape of the world economy.

Brazil will rise to eighth-biggest economy from 10th by 2010 and India to 10th from 12th, the CEBR said. Canada will drop to 13th from ninth in the same period as its currency falls, it said.

The CEBR also said the British and Italian economies would suffer the deepest downturns with 18 quarters of GDP below its previous peaks. Spain’s slump will last 16 quarters and Japan’s 11 quarters. The United States will rebound after nine quarters. China will not suffer a single quarter of contracting growth, the report said.

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PUBLISHED BY ‘THE INTERNATIONAL HERALD TRIBUNE’ (USA)

Posted in BANKING SYSTEMS, BRASIL, CANADA, CHINA, COMMERCE, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, ENGLAND, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, GERMANY, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, ITALY, JAPAN, MACROECONOMY, RECESSION, SPAIN, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, UNITED KINGDOM, USA | Leave a Comment »

RUSSIA WARNS WEST NOT TO MEDDLE IN EX-SOVIET UNION

Posted by Gilmour Poincaree on December 11, 2008

December 11, 2008

Associated Press

PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

MOSCOW (AP) – Russia’s foreign minister warned the West on Wednesday against meddling in its backyard, saying the U.S. and Sergey LavrovEuropean countries must not advance their interests in the former Soviet Union at Russia’s expense.

Sergey Lavrov told a group of foreign business leaders that Russia has no monopoly on relations with neighboring former Soviet republics, and said Moscow understands that the United States and European Union have legitimate interests in the region.

But, he said, the U.S. and EU must forge relations with former Soviet republics “through legal, understandable and transparent methods,” Lavrov said. “Behind-the-scenes meddling only creates a crisis situation. One must respect the people of these nations and give them the right to choose their own fate.”

Already long-deteriorating ties between Moscow and the West were badly damaged by Russia’s August war with Georgia, a small ex-Soviet republic that has enjoyed strong U.S. backing and is seeking NATO membership.

Lavrov gave no examples of alleged meddling. But the U.S. and Europe have been courting ex-Soviet republics as they vie with Russia for access to Central Asian and Caspian Sea energy resources and seek ties with nations close to sources of concern such as Iran and Afghanistan.

Also, Russian leaders have suggested the U.S. encouraged Georgia to launch an offensive that sparked the five-day war, and say Washington has pressed to bring Ukraine closer to NATO despite significant opposition among its people.

Lavrov stressed Russia’s opposition to U.S. missile defense plans and NATO expansion but indicated that Russia is eager for improved ties with the U.S. He suggested that it would be up to the administration of President-elect Barack Obama to make the first move.

“We are counting on the future administration of Barack Obama to confirm what he is now saying about the need to cooperate with Russia in fighting common threats — international terrorism and weapons proliferation,” Lavrov said.

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PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

Posted in BARACK HUSSEIN OBAMA -(DEC. 2008/JAN. 2009), COMMERCE, COMMODITIES MARKET, COMMONWEALTH OF INDEPENDENT STATES, DEFENCE TREATIES, ECONOMIC CONJUNCTURE, ECONOMY, ENERGY, FINANCIAL CRISIS 2008/2009, FOREIGN POLICIES, FOREIGN POLICIES - USA, GEORGIA, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, INTERNATIONAL RELATIONS, IRAN, MILITARY CONTRACTS, NATO, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, RUSSIA, THE ARMS INDUSTRY, THE EUROPEAN UNION, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, UKRAINE, USA, WEAPONS | Leave a Comment »

IRAN HAS NO NUCLEAR WEAPONS PROGRAM: EX-U.S. SPYMASTER – America’s just-retired No.2 intelligence official Tuesday defended a year-old estimate on Iran, saying he stood by its conclusion that Iran has not diverted its nuclear activities to a weapons program

Posted by Gilmour Poincaree on December 11, 2008

December 11, 2008

Source: Washington Times

PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

Thomas Fingar, who stepped down Dec. 1 from the post of deputy director of national intelligence and as chairman THOMAS FINGARof the National Intelligence Council, said he also believed that Iran has not diverted low-enriched uranium produced at a facility at Natanz, 160 miles south of Tehran, to weapons use.

“I still stand by the judgments in that estimate,” Mr. Fingar told a small group of reporters, referring to the November 2007 report. “We’ve had other teams look at this. Everyone who has, has affirmed the judgments we made.”

Iran, as a signatory to the non-proliferation regime, says it wants to enrich uranium for civilian power plants.

Mr. Fingar, a former deputy assistant secretary of state for intelligence, said a decision to make a bomb is a political one that he does not think the Iranian government has made. “We stick with an estimate until we change it,” he said.

A member of the intelligence community for 38 years, Mr. Fingar was part of a team at the State Department’s Bureau of Intelligence and Research (INR) that THOMAS FINGARdoubted whether Iraq had a nuclear program before the U.S. invasion in 2003.

“INR got it less wrong” than other U.S. intelligence agencies, he said, but still thought that Iraq had biological and chemical weapons, which have not been found.

“The analysis was flawed, the underlying intelligence was bad, and the tradecraft was bad,” he said.

Mr. Fingar said the reorganization of intelligence agencies following that failure had improved the quality of intelligence collection and analysis by highlighting diverse views and improving standards for sourcing.

He said coordination among the nation’s 100,000 intelligence professionals, stretched across 16 agencies, had improved significantly.

“We are not broken, and we don’t need to be fixed,” he said, while conceding that the structure was still “far from perfect.”

Mr. Fingar has been advising the transition team of President-elect Barack Obama.

He said he plans to lecture next year at Stanford University, where he received a master’s degree and doctorate in political science, and might write a THOMAS FINGARbook.

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PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

Posted in ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FOREIGN POLICIES, INTERNATIONAL, INTERNATIONAL RELATIONS, IRAN, RECESSION, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, USA | Leave a Comment »

DEUTSCHE POST CEO SEES SHORT RECESSION, ASIA EXPANSION

Posted by Gilmour Poincaree on December 11, 2008

December 11, 2008

Tehran Times Political Desk

PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

SINGAPORE (Reuters) – Deutsche Post chief executive Frank Appel said on Wednesday the firm will continue its Asian expansion and keep job cuts to a minimum outside the United States as it expects a short but sharp global recession.

“We are pretty confident that the recession will be deep but pretty short,” he said, predicting business and consumer confidence can recover as quickly as it had disappeared in recent weeks. “We don’t have to cut too many jobs.”

Appel said that Deutsche Post’s DHL unit, Europe’s largest express courier company, had invested around $2 billion in Asia in recent years, and “we will see similar numbers in coming years”.

DHL last month said it will halt U.S. domestic services and cut 9,500 jobs after failing to gain share in a market dominated by United Parcel Service and FedEx Corp.

FedEx on Monday warned that earnings for its fiscal year ending May 2009 will be lower than expected due to a global economic slump.

Appel, who spoke at a briefing on a global trade study commissioned by DHL, was more bullish about economic prospects, saying he expected the global economy to recover faster than most people thought.

According to the study by the Economist Intelligence Unit, trade between Asia and the West will shrink by about 4 percent in 2009 before recovering in 2010, recovering faster than cross-Atlantic traffic, which will likely remain in the doldrums until 2011.

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PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

Posted in ASIA, COMMERCE, COMMODITIES MARKET, CONSUMERS AND PSYCHOLOGICAL FACTORS, ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FINANCIAL SERVICES INDUSTRIES, FOREIGN POLICIES, GERMANY, INTERNATIONAL RELATIONS, IRAN, MACROECONOMY, RECESSION, SINGAPORE, THE FLOW OF INVESTMENTS | Leave a Comment »

RAFSANJANI CRITICIZES STATE BODIES FOR FAILING TO IMPLEMENT ARTICLE 44 (Iran)

Posted by Gilmour Poincaree on December 11, 2008

December 11, 2008

Tehran Times Political Desk

PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

TEHRAN — Expediency Council Chairman Akbar Hashemi Rafsanjani has criticized state bodies for failing to understand the obstacles preventing the implementation of Article 44 of the Constitution, which calls for the privatization of state companies.

The Majlis, the current administration, and even the Expediency Council have not acted properly in this regard, Rafsanjani told reporters here on Wednesday on the sidelines of a conference organized by basiji university students entitled Article 44, Obstacles and Solutions.

The EC chairman said all three branches of government should take responsibility for the implementation of Article 44, adding, “But we should make sure that the Majlis doesn’t pass laws contrary to Article 44.”

All of Iran’s major accomplishments were the result of the people’s participation, and if it hadn’t been for the people’s efforts, the Islamic Revolution wouldn’t have happened, Rafsanjani stated.

He asked, “Why can’t Iran make use of the people’s participation to build and administer the country, and why should Iran’s capital assets be transferred to Dubai? Why can’t Iran attract billions of Iranian nationals’ capital?”

Article 44 and the 20-Year Outlook Plan will pave the way to do so, he noted.

The 20-Year Outlook Plan defines a macro strategy for the country’s economic, social, and cultural development for the next 20 years.

He also acknowledged the basiji (volunteer) spirit and called on basijis to pursue the matter in an academic manner.

Meanwhile, Expediency Council Secretary Mohsen Rezaii told reporters on Wednesday on the sidelines of the Article 44, Obstacles and Solutions conference, “Article 44 states that the government shouldn’t interfere in the economy, but rather should guide it.”

There is no doubt that Iran has made significant progress in many spheres, but it is falling behind schedule in certain economic, scientific, and technological areas, he said.

The preparation of the Article 44 policies draft was a great step by the administration, which will pave the way for the implementation of Article 44, he noted.

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PUBLISHED BY ‘TEHRAN TIMES’ (Iran)

Posted in BANKING SYSTEMS, ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INDUSTRIES, INTERNATIONAL, IRAN, MACROECONOMY, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STOCK MARKETS, THE FLOW OF INVESTMENTS | Leave a Comment »

MAKING A BET IN A FREE-FALL MARKET

Posted by Gilmour Poincaree on December 11, 2008

Thursday, December 4, 2008

by Ikka C. de Guzman

PUBLISHED BY ‘BUSINESS WORLD’ (Philippines)

The whole world may be standing at the foot of what could be the deepest global financial downturn since the Great FREE FALL - by Jenny IospaDepression of the 1930s, but this does not stop some courageous investors from literally taking a gamble.

Among investment instruments available, the stock market comes as a natural option for investors, albeit with strong caution involve, as numbers continue to falter in most markets.

“The Philippine Stock Exchange has dropped incredibly, reflecting the dip in stock markets worldwide,” said Fernando Jose Sison, president of the Bank of the Philippine Islands (BPI) Investment Management, Inc.

Particularly, the country has been hit by the turmoil in the form of capital outflows as offshore investors caught in the credit crisis dumped even their profitable holdings in the local bourse in order to raise cash to offset their losses abroad.

The steep decline in the value of prized stocks has stoked fears among local investors that the worst is yet to come, prompting them to dump equity shares and head for safer havens.

“There has been massive loss of confidence because the ones who invest in stock markets are also well-read, and they are very aware of what’s been happening around the world,” said Mr. Sison.

Despite the widespread exodus, Teresa Javier, senior vice-president of the Asset Management Group at BPI, believes the local investors have yet to join the global anxiety attack. Stock investors comprise a meager 15 percent of the country’s population.

“Investors are not immune to the general ‘risk aversion’ prevailing in the market, but we have not seen [the] panic,” said Ms. Javier.

What industry experts have been witnessing is a more instinctive flight to less volatile products like fixed-income funds.

“There has been a shift to more conservative vehicles such as special deposit accounts, while some took advantage of higher yielding government bonds to lock in long-term investments,” Ms. Javier added, noting that most asset classes have performed poorly with the exception of high-grade government bonds.

Fight or flight

Expectedly, financial institutions are asking investors to reconsider retreat. The Fund Managers Association of the Philippines (FMAP) expects the impact of the crisis on the local market to be minimal, and suggests that investors should stay put as financial cycles dictate that conditions will stabilize at some point.

“If you go in and out of the market, that’s trading, not investing,” said Francisco Colayco, chairman of the Colayco Foundation for Education, commenting on the likely widespread fight or flight response from investors.

At the 11th annual Wharton Investment Management Conference held last month in Philadelphia, top financial experts agreed that the current bear market offers great opportunity to buy distressed stocks at base prices.

“Now is a good time to start investing because the market has practically been reset to 2004 [values],” agreed Emmanuel Soller, a trader at Equitiworld Securities.

The drastic drop in global equity prices, said PJ Garcia, president of the FMAP, is the perfect opportunity for young investors, or those who can afford greater risks, to make an entrance in the stock market.

“Once the market recovers, it will be a lifetime or two before the world sees it this low again,” said Doby Atilano, a registered financial planner and founder of the Global Investors Center.

Daniel Miller, vice-president of New York-based Gamco Asset Management Inc., agrees. “We are seeing opportunities to buy into companies at prices that you have only dreamed of,” he said in a previous interview.

Marcelo Ayes, Rizal Commercial Banking Corporation senior vice-president for financial markets, said local stocks have shown signs of being oversold, making it a good time for investors to acquire shares of large corporations. These bargains have been made more appealing by incentives from the Bangko Sentral ng Pilipinas (BSP), which extended its postponement of the documentary stamp tax, an added cost to investors in the local bourse.

Supporting the cheery atmosphere is the analysts’ insistence that despite the net selling in the market, pockets of appreciation still exist. The fact that people are still able to sell, said Mr. Colayco, means that other people are still buying.

“Stock market still has the higher yield. It can go up to 10 percent in a day if there’s recovery: no other investment vehicle can provide that,” Mr. Colayco said.

Mr. Soller, for his part, said that the current undervaluation of stocks is due largely to the pessimism of investors; “but value for value, if you look at the fundamentals, the upside potential is still greater than the downside, so this is a good chance for long term investors to gradually accumulate.”

DBP-Daiwa Securities advised investors to focus on stocks with recurring incomes, strong cash flows, a dividend history, meaning those that can give consistent returns — and those with the ability to scale up. “Remain defensive while looking out for opportunities; look for stocks that have strong growth potential,” it said.

Indeed, in such volatile investment conditions, exercising caution is key. Even industry insiders admit that the worst may not be over yet, and advise bargain buyers to use cost averaging — putting in money in small amounts in regular intervals — instead of investing in lump sum, and to remain prudent when selecting stock options.

Mr. Atilano suggests exposing 10 percent of one’s savings each year over a period of 10 years to speculative investments, regardless of the market’s condition.

Safety first

Meanwhile, risk-averse investors concerned with capital preservation can opt to park their cash in fixed-income instruments or interest-bearing products like money market funds — mutual funds that invest in short-term debt instruments — treasury bills, and high-yielding special deposit accounts (SDAs) which have lower risks because of their short-term maturity but can still provide a steady income stream.

“In these times, it’s best to invest in something that can be liquefied when the need for cash arises,” said Mr. Colayco.

Should the tides turn bleaker, investors with more than P250,000 — the maximum deposit amount guaranteed by the Philippine Deposit Insurance Corporation (PDIC) — could start exploring and investing in other jurisdictions through the Internet, said Mr. Atilano, referring to tax-free havens abroad like the Isle of Man, which guarantee up to 90 percent deposit insurance.

Those willing to take a peak out of their safety nooks can have a bit of both worlds. Long-term thinkers can start building up a portfolio of bonds and equities, with the former moderating the effects of market fluctuation and the latter enhancing portfolio returns, at least once market conditions begin to normalize.

Mr. Colayco, for one, stressed the need for liquidity in weathering tough times, suggesting that investors keep their cash or put them in simple, tangible investments like property, over which they can have more control.

Indeed, many investors who sold their stakes are opting to stay liquid, a smart move, said some analysts, even if one is on the lookout for possible opportunities that may surface in the market. “Given the current condition, I’d say you need at least three years’ worth of liquidity just to fund your personal requirements,” added Mr. Atilano.

Back to basics

Investors who do choose to take the plunge are advised to stick to firms that are registered in different jurisdictions and have global operations — hence are not dependent on the domestic market — and to sectors that stay in demand regardless of the state the economy is in.

Among the industries expected to weather the current financial catastrophe are infrastructure, food, services, and resource businesses. Canned goods, and lifestyle vices like cigarettes and alcohol — commodities which thrive in times of economic depression — are also good bets.

“Consumers have shifted their priorities back to their basic needs, so now’s the time to invest in sectors that are resilient and companies, like telcos and utilities,” said Ms. Javier. Despite the 200-percent drop in the prices of oil, governments and private enterprises continue to pour millions in developing green technologies, and some experts say alternative power sources could be a safe investment sanctuary.

“Pawnshops are bound to see a lot of clients if the situation gets any worse,” added Mr. Atilano. Another investment alternative that has been getting a lot of attention especially from returning overseas Filipino workers (OFWs) is franchising, an emerging sector which, according to data from the Association of Filipino Franchisers, Inc. (AFFI), raked in P13.8 billion in sales last year.

“The Philippines has huge potential [for franchise businesses] because certain areas are not developed yet. [And in business] the earlier you are in the game, the better,” said Rommel Juan, president of AFFI.

In Asia, international finance experts have their eyes glued on health care, tourism and real estate, which still hold a lot of potential as emerging economies continue to expand, albeit at a much slower rate.

But local analysts warn against investing in the property stocks as mass layoffs abroad could prompt overseas Filipino workers, which comprise more than half the residential segment’s market, to default on their home loans. “The coming year could be a hard year for condominiums,” said Mr. Atilano.

The country’s real estate sector, which up until the first half of the year enjoyed unprecedented growth, is in danger of coming to a standstill as major developers pare down their budgets and postpone acquisition of raw lands and the launch of new projects until the market stabilizes.

Condo builder Vista Land and Lifescapes reports that buyers have already begun availing themselves of smaller home packages, averaging P2.9 million each as of September from P3.5 in the same period last year.

Road to recovery

While industry insiders refuse to peg a definite date for total recuperation, many agree that rescue steps being implemented by big economies, like the US and China bailouts, should help restore investors’ confidence in the global financial system.

But for now, local industries are bracing themselves for darker days ahead. “The crisis will hover around �til next year, and we may get more affected through our businesses: exports will remain low as long as foreign markets are down, and layoffs of OFWs abroad will definitely affect our consumer spending here,” said Mr. Atilano.

Already, demand for electronics, the country’s top export earner, has already declined as demand for high-tech products fell in the US and Japan, the Philippines’ two biggest trading partners which cumulatively receive over 31 percent of the country’s exports. Reduced consumer spending has also prompted foreign retailers to reduce their volumes.

“Big US department stores like Nieman Marcus have already cancelled orders for Christmas goods from the Philippines,” said Mr. Colayco. On the other hand, the slower increase in commodity prices could bring down local manufacturing costs, making local industries more competitive than their foreign counterparts.

The country may have something to gain in the business processing outsourcing (BPO) arena, as cost-cutting measures could prompt US and European firms to ship more jobs to low salary hubs like the Philippines. Data from the Business Processing Association of the Philippines show that the sector is currently earning $4 billion a year in revenue, and the organization claims there’s room for as much as 40 percent growth next year.

Optimists predict that markets should bounce back by the second half of next year, with the downturn in consumer demand being offset by more efficient inventories.

“In 1930s and in 1997, THEY FORGOT THEIR PARACHUTES ... STUPID HUMANS ...businesses were burdened by their stockpiles when consumers stopped buying, which kept them from recuperating fast after the crisis; but now, just-in-time technology have allowed firms to manufacture products only as needed,” said Mr. Atilano. Still, widespread price drops due to overproduction across all categories in the US show that many producers have yet to adopt these cost-saving measures.

The extent of the damage caused by the�credit crunch�and the strain on companies’ balance sheets have led some experts to believe that it is going to be a very long journey to recovery. “We do not expect stability to happen immediately as there are too many things to fix: financial institutions, market regulations,”risk management practices,” said Ms. Javier.

This sentiment is shared by majority of investors, who stand at the sidelines waiting to enter at better market levels. “If we follow history, stock markets normally recover within eight months following a crisis, but this is a credit crunch and today we are facing uncharted territory,” added Mr. Colayco. The backlash is made more stark by the continued dependence of many developed and emergent markets on trade with the US, an entanglement that was virtually nonexistent in the 1930s.

At the moment, the few souls who are braving the stock market blizzard, according to Mr. Soller, either just got into the markets early this year, or got out of it before the big global crash and are unharmed enough to bite on the bargain prices.

But at some point, said Michael Roth, a founding principal of Wisconsin-based Stark Investments, people are bound to get bored with being afraid and markets will start to have an upside-only scenario.

Despite grim predictions by the country’s business sector, the Asian Development Bank argues that the country will not enter into a recession, but stated that the pullout of investments could result in higher unemployment and sluggish domestic demand in 2009.

There is more good news from foreign financial institutions like JP Morgan, which said that the Philippines is capable of surmounting the global slump, thanks to adequate foreign exchange reserves, a sustained current account surplus, and a strong economic position driven by private consumption and services. Deutsche Bank recently declared the Philippines as the only country in Southeast Asia that had so far eluded the harsh impact of the global turmoil.

Safety nets set up to counter the rice crisis earlier this year, such as fertilizer coupons, cash for the poorest and rice subsidies are also proving themselves useful in the present predicament. Finance Secretary Margarito Teves has said that the government is positioning more funds for infrastructure, education and food security — activities that would pump-prime the economy — to help keep recession at bay.

It remains to be seen whether the country will rebound faster than its neighbors, but in the long run, industry experts maintain that the crisis’ lasting impact is a long term gain.

“We can’t get any lower than where we are now, and those who decide to invest today can always take comfort in the fact that markets emerge more stable after a crash, because banks and companies learn to regulate better,” said Mr. Atilano, adding that the current conundrum, whose highlights are broadcasted daily in the media, is also the perfect time for amateurs to learn the ropes of global investing.

Predictably, analysts say financial institutions will be more conservative in dealing with complicated transactions. But this will not be a one-way street. Mr. Sison predicts the hard lessons learned from the present crisis will also push investors to be more picky in choosing their investment chests. “There will be a shift from excessive risk taking to high risk aversion, particularly in local stocks,” said Ms. Javier.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘BUSINESS WORLD’ (Philippines)

Posted in BANKING SYSTEMS, COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INTERNATIONAL, MACROECONOMY, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STOCK MARKETS, THE FLOW OF INVESTMENTS, USA | Leave a Comment »

MORE ‘HOT MONEY’ LEAVES IN NOV. – More foreign portfolio investments left the country last month, as gloomy economic outlook on markets hard hit by the global financial crisis dampened investor sentiment (Philippines)

Posted by Gilmour Poincaree on December 11, 2008

Friday, December 12, 2008 – Vol. XXII, No. 100

by G. S. dela Peña

PUBLISHED BY ‘BUSINESS WORLD’ (Philippines)

Data released yesterday by the Bangko Sentral ng Pilipinas (BSP) showed that foreign portfolio investments — referred to as “hot money” due to the ease by which they are transfered — posted a net outflow of $399 million for November alone, higher than the $389.8-million net outflow the preceding month.

The November figures were a reversal from the net inflows of $51.2 million in the same month last year.

The 11 months to November saw net outflows totaling $1.3 billion, a sharp contrast to the $3.7-billion net inflows recorded in the same period last year.

“Investors continued to be driven primarily by concerns over the weakening of major economies, particularly that of the US, despite temporary optimism over the results of the presidential elections there,” BSP Governor Amando M. Tetangco, Jr. said in a statement.

On a gross basis, hot money investments totaled $399.5 million, 68% of which were placed in listed shares, 30% in Treasury bonds, and 2% in money market instruments and peso bank deposits.

But capital repatriations reached $798.5 million in November, with outflows traced to withdrawals of investments from listed shares ($88 million or 11%), government securities ($135.4 million or 17%), money market instruments ($3.6 million or less than 1%), and bank deposits ($571.5 million or 72%).

From January to November, investment in listed shares posted a net inflow of $2.1 billion, while placements in peso-denominated government securities, money market instruments and peso bank deposits showed net out-flows of $110.8 million, $300,000, and $3.3 billion, respectively.

Gross investment inflows totaled $8 billion, a 46% contraction from the $14.7 billion recorded in the same period last year.

But outflows were higher than inflows at $9.3 billion, although 15% less than last year’s $10.9 billion. Of this amount, 37% were attributed to investments in listed shares, 22% to funds placed in government securities, while money placed in money market instruments and bank deposits accounted for 41%.

The United Kingdom, Singapore and the US remained the top three investor countries, accounting for 70%.

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PUBLISHED BY ‘BUSINESS WORLD’ (Philippines)

Posted in BANKING SYSTEMS, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INTERNATIONAL, PHILIPPINES, RECESSION, SINGAPORE, STOCK MARKETS, THE FLOW OF INVESTMENTS, UNITED KINGDOM, USA | Leave a Comment »

ANOTHER GROWTH FORECAST CUT FOR RP (Philippines)

Posted by Gilmour Poincaree on December 11, 2008

Friday, December 12, 2008 – Vol. XXII, No. 100

MANILA – PHILIPPINES

PUBLISHED BY ‘BUSINESS WORLD’ (Philippines)

The Asian Development Bank (ADB) has joined other multilateral institutions in downgrading growth forecasts for the region to take into account worsening global financial conditions.

In its Asia Economic Monitor for December, the Manila-based multilateral institution kept its 2008 forecast for the Philippines unchanged at 4.5%, but cut next year’s outlook to 3.5% from 4.7%.

The Washington-based World Bank has revised its Philippine projections to 4% from 5.9% for this year and 3% from 3-4% for 2009, while the International Monetary Fund (IMF) cut its 2008 and 2009 forecasts to 4.4% from 5.8% and 3.5% from 3.8%, respectively.

While the ADB’s forecast for 2008 remains within the government target of 4.1-4.8%, next year’s estimate falls below the official goal of 3.7-4.7%.

The ADB said growth in developing Asia could slow to 5.8% next year from a likely 6.9% this year. Growth in the Association of South East Asian Nations was forecast at 4.8% and 3.5% this year and the next.

“The external economic environment for developing Asia is likely to worsen as major industrial economies contract further, global financial conditions remain constricted, and world trade growth slows sharply,” the ADB said in a report.

While growth remains relatively robust, a sharper or prolonged global recession, persistent financial stress with volatile capital flows, further tightening of external and domestic funding conditions, and excessively volatile foreign exchange markets present downside risks, it added.

Policymakers, the ADB said, should institute reforms aimed at exploring other sources of growth and reduce an over-reliance on exports.

Monetary policy, it added, must remain flexible to allow for a growth stimulus when needed, especially now that the balance of risks is shifting to slower growth from rising inflation.

The Bangko Sentral ng Pilipinas (BSP) raised policy rates by a percentage point earlier this year as inflation peaked on rising commodity prices. But with the numbers having eased in the last three months, expectations of a rate cut are high.

The BSP’s last rate-setting meeting for the year will be held next week. — GSDLP

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PUBLISHED BY ‘BUSINESS WORLD’ (Philippines)

Posted in BANKING SYSTEMS, CENTRAL BANKS, COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, IMF, INDUSTRIES, INFLATION, INTERNATIONAL, PHILIPPINES, RECESSION, THE FLOW OF INVESTMENTS | Leave a Comment »

WHERE HAVE ALL YOUR SAVINGS GONE? – INVESTORS MAY DRAW THE WRONG LESSON FROM HISTORY

Posted by Gilmour Poincaree on December 11, 2008

Dec 4th 2008

From The Economist print edition

PUBLISHED BY ‘THE ECONOMIST’

For American and European savers it has been a lost decade. After two booms and two busts, stockmarkets have earned them nothing, or less, in the past ten years. Low interest rates have made bonds and bank deposits unrewarding too. Were it not for the tax relief they receive, contributors to personal pension plans would have been better off keeping their money under their mattresses. It will be little consolation to Westerners that savers in Japan have known this empty feeling for far longer.

This year’s figures are enough to put anybody off saving. American mutual-fund assets have declined by $2.4 trillion—a fifth of their value—since the start of 2008; in Britain, the drop is more than a quarter, or almost £130 billion ($195 billion). The value of global stockmarkets has shrunk by maybe $30 trillion, or roughly half. These figures put the losses on credit-related securities—where the financial crisis began—into the shade.

Nor has the bad news been confined to equities. This year the value of all manner of risky investments, from corporate bonds to commodities to hedge funds, has been clobbered. The belief that diversification into “alternative assets” could prevent investors losing money in bear markets has proved false. And of course housing, which many people counted on for their retirement nest-eggs, has lost value too (see article).

As a result, saving seems like pouring money into a black hole (see article). Any American who has diligently put $100 a month into a domestic equity mutual fund for the past ten years will find his pot worth less than he put into it; a European who did the same has lost a quarter of his money.

Save your cake and eat it

It may seem an odd time to worry about savings. This week the National Bureau of Economic Research declared that the world’s largest economy, America, had been in recession since December last year. The economies of Japan and much of western Europe have been shrinking. A rapid, global, private-sector shift to thrift is exactly what the world economy does not need. That’s why governments around the world have been passing hurried measures to try to encourage people to spend more of their incomes.

In some countries, they should. Asians (and Germans too — see article), have been squirrelling their money away with excessive enthusiasm. But other countries’ citizens have been putting too little aside for their old age. In America, the household savings ratio (the proportion of disposable income not used for consumption) has been below 2.5% since 1999; in Britain, it has been below 3% in each of the past two years. The Asians’ parsimony made the Anglo-Saxons’ profligacy possible. Through their increasingly sophisticated financial systems, the Americans and British were able to borrow from the thrifty Asians to finance their spending spree. And, because their house prices were rising so fast, they had the collateral and the confidence to do so.

In other words, Anglo-Saxons were able to save their cake and eat it. They did not have to sacrifice consumption in order to build up assets for the future, because lax monetary policies encouraged borrowing that pushed up the prices of housing and other assets, which gave them the illusion of having saved enough. But now this debt burden is being unwound, asset prices are collapsing and savings rates are rising because consumers are unwilling, or unable, to borrow.

Though this is bad news for the American and British economies in the short term, it ought to be good news in the long term. How good, though, depends as much on where people put their savings as on how much they put aside.

Careless caution

If savers treated financial assets as they do other goods, they would sell them when they are expensive and buy them when they are cheap. Actually, they do the opposite. They piled into the market in 1999-2000, at the peak, and are piling out of it now. They should, of course, have got out in 2000, when the global price-earnings ratio was 35; shares look relatively much more attractive now, since the ratio is down to ten. A recent analysis shows that, when American price-earnings ratios are low, returns on equities over the next decade average 8%; when they are high, returns average 3%.

But people’s recent losses have made them cautious. They are putting their money into cash or money-market funds, rather than equities or corporate bonds. The returns they are getting on their savings look increasingly pitiful. Interest rates are falling sharply, with more central banks announcing cuts this week. Savers may initially be shielded from the full impact of those reductions, because commercial banks are competing for retail deposits. But rates in many big economies are heading for, or have already reached, 1-2%.

Caution is understandable, after the trauma of this year. Equity and corporate bond markets could yet fall further, especially as the news on the economy seems to get worse every week. But it is still perverse that investors were happy to buy shares nine years ago, when the ratio of share prices to profits was three times what it is today, and are now determined to keep their money in cash and bonds.

That approach will be hopelessly inadequate for those who want to build a decent pension, especially in defined-contribution, or money-purchase, schemes, where the employee bears all the investment risk. The average American scheme member contributes just 7.8% of salary to his pension scheme. His employer, on average, contributes only 4.4%. He has a pot worth only $68,000. A rule of thumb is that total contributions need to be around 20% of wages to match a traditional final-salary scheme.

Inadequate savings, badly invested, are a problem for individuals and the economy. Cautious savers are putting their money in banks; banks are reluctant to lend; companies therefore find it hard both to borrow money and to raise equity capital. This timidity hurts companies and, in the long term, savers. Implausible as it may sound, right now equities and corporate bonds are a better long-term bet than cash.

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PUBLISHED BY ‘THE ECONOMIST’ (Spain)

Posted in ASIA, BANKING SYSTEM - USA, BANKING SYSTEMS, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, ENGLAND, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FINANCIAL SCAMS, FINANCIAL SERVICES INDUSTRIES, FOREIGN POLICIES, FRAUD, GERMANY, HOUSING CRISIS - USA, INTERNATIONAL, INTERNATIONAL RELATIONS, NORTH AMERICA, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, UNITED KINGDOM, USA | Leave a Comment »

STAR STRUCK – A CAUTIONARY TALE FROM WITHIN THE FUND-MANAGEMENT INDUSTRY

Posted by Gilmour Poincaree on December 11, 2008

Dec 4th 2008

by Buttonwood – From The Economist print edition

PUBLISHED BY ‘THE ECONOMIST’

“THE dullard’s envy of brilliant men is always assuaged by the suspicion that they will come to a bad end.” That line CHARGE BY DAVID SIMONDSfrom Max Beerbohm, an Edwardian novelist, could almost have been dedicated to New Star Asset Management, a British investment group that tempted fate with its brand name and this week arranged a crisis deal with its creditors.

New Star represents the idea of active management writ large. Rather like the fantasy sports teams devised by armchair fans, its founder, John Duffield, recruited people he believed to be the best fund managers in the business. He rewarded them well for outperformance and fired them when they failed. Shrewd salesmanship encouraged investors to hand their money over to this team of titans.

For years, the idea was phenomenally successful. Assets under management grew from £5.9 billion ($10.5 billion) at the end of 2003 to £23.1 billion at the end of last year; a pre-tax loss of £13.2m in 2003 turned into a £62.8m profit last year.

But 2007 proved to be the year when New Star climbed onto the branch of history and invited the gods to saw it off. The biggest mistake was a £364m return of cash to shareholders. Of that some £110m was absorbed by employees and directors as a reward for their past success.

But the payout came at a crippling cost. By the end of last year the group had net debt of £246m. In mid-November covenants on those loans were amended in return for an extra one and a half percentage points on the interest rate. Even that proved a stopgap; on December 3rd it was announced that the banks would swap the debt for 75% of the ordinary equity and a slug of preference shares.

The second problem relates to the firm’s relentless expansion. In last year’s annual report, the launch of the International Property fund was described as “the sales highlight of 2007”. The fund, launched when investors were incredibly enthusiastic about property, was Britain’s biggest seller of the year.

Step forward to November this year and New Star was forced to suspend redemptions in the fund because it lacked the liquidity to meet the demands of investors who wanted to withdraw their money. The announcement further dented the confidence of clients and the stockmarket.

Ironically, the property fund had performed quite well relative to its peers. But launching funds at the top of cycles is one of the abiding sins of the industry. Figures analysed by Jack Bogle, founder of the Vanguard fund-management group, show a clear inverse correlation between performance and the size of a fund manager’s stable; in short, the fewer funds, the better.

Unfortunately what is best for the client is not best for the group. Its fees are directly related to assets under management. In most years, these will grow in line with the market. But if you are a quoted fund-management group and you want to push the share price higher (and reward your best managers), you need funds to grow at an above-average rate. That means launching new funds.

The third problem was the emphasis on individual managers. Some groups avoid this by emphasising a collective process for picking stocks. That way they resist being held hostage by the egos of fund managers, who may be tempted to defect to earn higher pay elsewhere. A star system also attracts hot money from financial advisers who want their clients to own the most fashionable funds.

But beating the market is an incredibly difficult trick to sustain. In many cases, early success can be down to luck; investors can be “fooled by randomness” to use the phrase of Nassim Taleb, an author. The lustre of some of New Star’s managers faded, notably that of Stephen Whittaker, the former joint chief investment officer. The hot money left as quickly as it arrived: New Star’s assets under management were £13.9 billion by the end of November, 40% down from the peak.

The ironies keep compounding. Jupiter, the group Mr Duffield deserted to form New Star, has survived and prospered in his absence. The New Star philosophy of rewarding managers with bonuses in shares, not cash, looks threadbare now that the shares will be both heavily diluted and delisted from the London Stock Exchange.

The New Star saga embodies all the sins of its industry; charging too much and paying its managers too highly, promising performance it could not deliver and launching too many funds. Gearing up its balance-sheet at the height of the credit bubble may have brought a cash bonanza for its managers but weakened the group fatally. Despite the bank rescue, its brand may now have been irredeemably tarnished.

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PUBLISHED BY ‘THE ECONOMIST’

Posted in BANKING SYSTEM - USA, BANKING SYSTEMS, BANKRUPTCIES - USA, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FINANCIAL SCAMS, FINANCIAL SERVICES INDUSTRIES, FRAUD, HOUSING CRISIS - USA, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, USA | Leave a Comment »

BULGARIA GOVT BOOSTS DEVELOPMENT BANK CAPITAL AS ANTI-CRISIS MEASURE

Posted by Gilmour Poincaree on December 11, 2008

10 December 2008, Wednesday

PUBLISHED BY ‘BULGARIAN BUSINESS – NOVINITE.COM’

Bulgaria’s cabinet voted Wednesday to increase the capital of the Bulgarian Development Bank by BGN 330 M as Bulgaria's cabinet voted Wednesday to increase the capital of the Bulgarian Development Bank by BGN 330 M as an anti-crisis measure -  Photo by Yuliana Nikolova - Sofia Photo Agencya measure to counter the effects of the global financial crisis on the real sector.

The government takes such a step for the second time in less than two month after it increased the capital of the Bulgarian Development Bank by BGN 100 M on November 4, 2008.

The Bulgarian Development Bank (BDB) is a top priority financial instrument of the government as it is creating various schemes to support entrepreneurship especially with respect to the export potential and competitiveness of the Bulgarian economy.

Wednesday’s financial injection of the BDB will enable it to grant credits to commercial banks, which in turn would be able to provide loans to small and medium-sized enterprises with more favorable conditions.

The BDB finances its activity by emitting bonds, through EU funds, and though credits from local, and international financial institutions. It was set up in April 2008 as a successor to the former “Encouraging Bank” in order to help for Bulgaria’s economic development.

The increases of the capital of the BDB are not limited by its statutes. The decision to increase its capital are made by the general assembly of its shareholders but the Bulgarian state always holds no fewer than 51% of its shares, which are non-transferable.

The BDB statutes stipulate that its shares could be obtained by the European Investment Bank, the Development Bank of the Council of Europe, the European Investment Fund, and development banks of other EU member states.

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PUBLISHED BY ‘BULGARIAN BUSINESS – NOVINITE.COM’ (Spain)

Posted in BANKING SYSTEMS, BULGARIA, CENTRAL BANKS, ECONOMIC CONJUNCTURE, ECONOMY, EUROPEAN CENTRAL BANK, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, INTERNATIONAL RELATIONS, THE EUROPEAN UNION, THE FLOW OF INVESTMENTS | Leave a Comment »

BULGARGAZ WANTS NATURAL GAS PRICES UP BY 21% FROM JANUARY 1, 2009 – Bulgaria’s gas monopoly Bulgargaz wants a 21,31% increase in the natural gas prices in Bulgaria starting January 1, 2009

Posted by Gilmour Poincaree on December 11, 2008

10 December 2008, Wednesday

PUBLISHED BY ‘BULGARIAN BUSINESS – NOVINITE.COM’

The company, which is already part of the Bulgarian Energy Holding, submitted Wednesday its suggestion for the new gas prices to the State Commission for Energy and Water Regulation (DKEVR).

The Bulgargaz proposal provides for a natural gas price of BGN 653,46 for 1 000 cubic meters, with the 20% value-added tax not included, which is an increase by BGN 114,80. The new price would include a transit fee of BGN 19,73.

Bulgargaz justifies its proposal with the more expensive US dollar, whose value increased has increased by 15,39%. In addition, the statement of the monopoly reminds that the DKEVR did not approve its suggestion to increase the natural gas prices by 36% in the fourth quarter of 2008, and voted for a 24% increase instead.

Bulgaria’s DKEVR will decide on the new natural gas prices during its session on December 22 or 23, when it will also become clear how much the central heating costs would increase as the heating prices depend primarily on the natural gas prices.

On December 5, the Bulgarian cabinet decided to allocate BGN 160 M to Bulgargaz as part of a BGN 400 M anti-crisis package for the Bulgarian Energy Holding.

The funds would be used to cover Bulgargaz’s expenses for deferring the natural gas payments owed to it by Bulgarian businesses until the 300% decrease of the global oil prices kicks in, and brings down the natural gas prices of the Russian provider Gazprom.

According to the present scheme, Gazprom’s natural gas prices for Bulgaria are formed on the basis of the oil prices nine months ago. Thus, the present price levels are still based on the peak oil prices from the summer when a barrel of oil reached USD 147 on the world market.

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PUBLISHED BY ‘BULGARIAN BUSINESS – NOVINITE.COM’ (Spain)

Posted in BULGARIA, COMMERCE, COMMODITIES MARKET, DOLLAR (USA), ECONOMIC CONJUNCTURE, ECONOMY, ENERGY, ENERGY INDUSTRIES, FINANCIAL CRISIS 2008/2009, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, INTERNATIONAL RELATIONS, NATURAL GAS, RECESSION, RUSSIA | Leave a Comment »

ROMANIAN-ENGLISH FERTILIZER PRODUCERS SACKS 5 500 WORKERS

Posted by Gilmour Poincaree on December 11, 2008

10 December 2008, Wednesday

PUBLISHED BY ‘BULGARIAN BUSINESS – NOVINITE.COM’

The Romanian-English fertilizer company InterAgro is going to lay off about 5 500 workers, or about 90% of its employees, the Romanian newspaper Adevarul reported.

The company is going to close down all of its six chemical plants, which produce fertilizers. The only way to save the factories would be if the Romanian state supported the company, the InterAgro President Ioan Niculae is quoted as saying.

Such a step, however, would be a breach of EU competition rules, and is therefore unlikely.

Niculae also said the closure of the company factories would incur losses of USD 100 M. InterAgro exports its fertilizer production, and the declining demand on the international market due to the global financial crisis has affected the company.

Bulgaria’s fertilizer producer Agropolychim has also been troubled by the effects of the global financial crisis, and has had to shut down temporarily its production lines.

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PUBLISHED BY ‘BULGARIAN BUSINESS – NOVINITE.COM’ (Spain)

Posted in AGRICULTURE, BULGARIA, CHEMICALS (processed components), COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, ENGLAND, FERTILIZERS, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FOREIGN POLICIES, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, INTERNATIONAL RELATIONS, JUDICIARY SYSTEMS, NATIONAL WORK FORCES, RECESSION, ROMANIA, STOCK MARKETS, THE EUROPEAN UNION, THE FLOW OF INVESTMENTS, THE WORK MARKET, THE WORKERS, UNITED KINGDOM | Leave a Comment »

SEVEN INVESTORS SUBMIT OFFERS FOR RUNNING KREMIKOVTZI (Bulgaria)

Posted by Gilmour Poincaree on December 11, 2008

11 December 2008, Thursday

PUBLISHED BY ‘BULGARIAN BUSINESS – NOVINITE.COM’

Bulgaria’s Economy Ministry has received seven offers with bids for the purchase or the operation of the troubled Bulgaria's Economy Ministry has received seven offers for Kremikovtzi by Bulgarian and foreign companies - Photo by Yuliana Nikolova - Sofia Photo Agencysteel-maker Kremikovtzi, the Trud Daily reported Thursday.

The paper points out that the most serious bidder is the Ukrainian company Smart Group which offers an emergency plan for saving the factory, and a longer-term recovery program by restructuring and acquisition of new assets. It is expected to present its demands about Bulgarian state guarantees for Kremikovtzi within several days.

The Czech company ML Moran offers to finance Kremikovtzi enabling the plant to buy raw materials, and manufacture and sell its production. The bulk of the revenue, however, would go to the creditor so the main advantage of this plan would be to keep the factory running.

Each of two other foreign companies – the Russian Prominvest, and an unnamed Italian company – are offering to provide raw materials, and working capital for Kremikovtzi in exchange for guarantees by the Bulgarian state.

The former owner of the steel mill Valentin Zahariev, who sold the plant to the Indian tycoon Pramod Mittal in 2005, has offered to run the plant after setting up a new firm for the purpose. In the event of liquidation of the factory, however, he is asking to be allowed to buy out the assets on sale.

The Bulgarian metal wastes trader Econmetal Engineering, whose facilities are located nearby Kremikovtzi, is offering to provide 60.000 tons of raw materials for the steel-maker in exchange for being allowed to realize the manufactured products on the market after that.

A group of bond holders is offering the factory a credit of EUR 345 M in exchange for Bulgarian state securities with a redemption date in 2013.

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Posted in BULGARIA, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FOREIGN POLICIES, INDIA, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, INTERNATIONAL RELATIONS, IRON ORE, ITALY, METALS, METALS INDUSTRY, MINING INDUSTRIES, NATIONAL WORK FORCES, RECESSION, RECYCLING INDUSTRIES, RUSSIA, STEEL, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE WORK MARKET, THE WORKERS, UKRAINE | Leave a Comment »

MARKETS CAN’T RULE THEMSELVES – A ‘made in the U.S.A.’financial crisis highlights the need for more global—and more robust—oversight

Posted by Gilmour Poincaree on December 11, 2008

December 2008 – february 2009

by Joseph Stiglitz – (*)

PUBLISHED BY ‘NEWSWEEK – Special Edition – ISSUES 2009’ (USA)

For years, there has been an ongoing discussion among world leaders and thinkers about deficiencies in the international financial architecture and about economic imbalances, GROUND ZERO - Wall Street exported troubles to the world; it needs world help to fix themincluding the widening U.S. trade deficit. Many worried about a disorderly unwinding of these imbalances. Nothing was done. We are now paying the price for our failure to act. Ten years ago, the fear was that financial turmoil in the developing world might spill over to the advanced industrialized countries. Today, we are in the middle of a “made in the U.S.A.” crisis that is threatening the entire world.

If we are going to address this worldwide crisis and prevent a recurrence, we must reform and reconfigure the global financial system. There are simply too many inter-dependencies to allow each country to go its own way. For example, the United States benefited from its export of toxic mortgages; had it not sent some of them to Europe via complex securitization, its downturn would have been far worse. But the resulting weaknesses in Europe’s banks are now ricocheting back to the United States.

Better regulation would have helped prevent such a situation. But the reform of the global financial system must go much further. For example, there must be better monetary-policy coordination around the world. Europe’s current slowdown is due in part to the fact that while the European Central Bank spent the past year focusing on inflation, the United States was (rightly) focusing on the impending recession. The resulting difference in interest rates led to a strong euro and weak exports. That hurt Europe. But a weak Europe eventually hurts the United States, as Europe is forced to reduce its imports of American goods. With better coordination, perhaps America would have been able to convince Europe of the risks of recession, and that would have led to moderation of Europe’s interest rates.

There is also a need for internationally coordinated stimulus programs to help jump-start growth. It is good news that China, the United States and Japan have now all instigated major programs of fiscal expansion. But they are of vastly different sizes, and so far, Europe’s is lagging behind. Its growth and stability pact imposes constraints that may have global consequences. Beyond this, confidence in financial markets will not be fully restored unless governments take a stronger role in regulating financial institutions, financial products and movements of capital. Banks have shown that they can’t manage their own risk, and the consequences for others have been disastrous. Even former Fed chairman Alan Greenspan, the high priest of deregulation, admits he went too far.

What we need now is a global financial regulatory body to help monitor and gauge systemic risk. If financial rules are allowed to vary too widely from nation to nation, there is a risk of a race to the bottom — some nations will move toward more lax regulation to capture financial business at the expense of their competitors. The financial system will be weakened, with consequences that are now all too apparent.

What should this” new set of global financial rules encompass? For starters, it should ensure that managerial incentive schemes are transparent and do not provide perverse encouragement for bad accounting, myopic behavior and excessive risk taking. Compensation should be based on returns not from a single year but over a longer time period. At the very least, we should require greater transparency in stock options, including making sure that they receive appropriate accounting treatment. And we need to restrict the scope for conflicts of interest — whether among rating agencies being paid by those they are rating, or mortgage companies owning the companies that appraise the properties on which they issue mortgages. We need to restrict excessive leverage, and other very risky behavior. Standardization of financial products would enhance transparency. And financial-product safety and stability commissions could help decide which products were safe for institutions to use, and for what purposes. We have seen what happens if we rely on bankers to regulate banking.

Beyond better global coordination of macroeconomic policy and regulation, there are at least two other actions governments should take. First, we need a reform of the global reserve system. More than 75 years ago, John Maynard Keynes, the greatest economist of his generation, wrote that a global reserve system was necessary for financial stability and prosperity; since then the need has become much more dire. Keynes’s hope was that the International Monetary Fund would create a new global reserve currency that countries would hold instead of sterling (the reserve of the time). Today, such a currency could be used to replace the dollar as the de facto reserve currency. Because it would not depend on the fortunes of any one country, it would be more stable. Supply could be increased on a regular basis, ensuring that reserves kept up with countries’ needs. Issuance could be done on the basis of simple rules—including punishment for countries that caused global weaknesses by having persistent surpluses. This is an idea whose time may have finally come.

The other major reform should be a new system of handling cross-border bankruptcies (including debt defaults by sovereign states). Today, when a bank or firm in one country defaults, it can have global ramifications. With various national legal systems involved, the tangle may take years to unwind. For example, the problems arising from Argentina’s 2001 default are still not resolved, and bankruptcy complications plagued South Korea and Indonesia during their crises a decade ago, slowing down the process of recovery. The world may soon be littered with defaults, and we need a better way of handling them than we have had in the past.

This crisis has highlighted not only the extent of our inter-dependencies but the deficiencies in existing institutions. The IMF, for instance, has done little but talk about global imbalances. And as the world has focused on problems of governance as an impediment to development, deficiencies in the IMF’s own governance meant its lectures had little credibility. Its advice, especially that encouraging deregulation, seems particularly hollow today. Many critics in Asia and the Middle East, where pools of liquid capital dwarf die IMF’s own, are wondering why they should turn over their money to an institution in which the United States, the source of the problem, still has veto power, and in which diey have so little voting power.

This is a Bretton Woods moment — a time for dramatic reforms of existing institutions” or, as was done at the end of World War II, the creation of new ones. Until now, Washington has consistently blocked efforts to create a multilateral global financial system that is stable and fair. It exported the deregulatory philosophy that has proved so costly, both to itself and to the world. President Obama has an opportunity to change all this. Much depends — now and for decades to come — on his response.

(*) – Joseph Stiglitz is a Nobel laureate in economics and a professor at Columbia University.

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¿AGRAVARON LAS AGENCIAS DE CALIFICACIÓN CREDITICIA LA CRISIS CON ‘RATINGS’ INTERESADOS? – Moody’s habría suavizado su postura sobre deuda de Countrywide tras las quejas de ésta

Posted by Gilmour Poincaree on December 11, 2008

10/12/2008 21:59

PUBLISHED BY ‘LA GACETA DE LOS NEGOCIOS’ (Spain)

Estos errores nos presentan como incompetentes en el análisis del crédito o como que hemos vendido el alma al diablo a cambio de ingresos, o un poco de ambas cosas”. Es la JOHN MOODY AND HIS BRIDE - click on this image to open in another window a short bio of John Moody respuesta anónima de un directivo de Moody’s a un estudio de gestión interno, en septiembre de 2007.

La fiebre inmobiliaria estaba en pleno auge en 2005 cuando los analistas de Moody’s Investors Service, la agencia de calificación crediticia más antigua y de más prestigio del país, estaban presionados para que volvieran a empezar.

Moody’s, que juzga la calidad de la deuda que empresas y bancos emiten para captar dinero, acababa de calificar una serie de títulos suscritos por Countrywide Financial, la mayor hipotecaria del país. Pero Couyntrywide se quejaba de que la valoración era demasiado dura.

Cambios ¿justificados?

Al día siguiente, Moody’s cambió su calificación, aunque no había salido a la luz ninguna información nueva significativa, según dos personas conocedoras de este cambio que han pedido anonimato.

Moody’s había asignado altas calificaciones a muchos títulos que contenían hipotecas Countrywide. Estos títulos e hipotecas, emitidos durante la orgía del crédito de los últimos años, más tarde se deterioraron, dejando a los inversores con grandes pérdidas y a los propietarios de casas y comunidades luchando con las ejecuciones.

Esa no fue la última vez que Moody’s suavizó su postura sobre Countrywide. Elevó las calificaciones varias veces después de que Countrywide se quejara, según personas relacionadas con el tema.

Tormenta de críticas

Desde que explotaron las hipotecas subprime, las tres agencias más importantes de calificación crediticia, Moody’s, Standard & Poor’s y Fitch Ratings, se han enfrentado a una tormenta de críticas sobre si sus calificaciones favorables de títulos hipotecarios habían generado miles de millones en pérdidas a los inversores que confiaron en ellas.

Se supone que las agencias ayudan a los inversores a evaluar el riesgo de lo que están comprando. Pero antiguos empleados y muchos inversores dicen que las agencias, a las que se pagaba mucho más por calificar complicados títulos relacionados con hipotecas que por valorar deuda más tradicional, o subestimaron el JOHN MOODY IN 1956riesgo de la deuda hipotecaria o simplemente no tuvieron en cuenta su peligro de forma que pudieron extraer grandes beneficios durante el boom inmobiliario.

Un portavoz de Moody’s, Anthony Mirenda, dice que la compañía no cambiaría las calificaciones sin razones importantes. “Como política, Moody’s está obligada a reconvenir al comité de calificación si un emisor presenta nueva información que pueda tener un impacto sustantivo sobre la calidad del crédito de un título”, dice, “y nuestra política prohíbe realizar cambios por ninguna otra consideración que no sea el crédito”.

Añadió que “Moody’s no tiene conocimiento de ningún caso en el que un comité de calificación introdujera cambios inadecuados en las calificaciones de Countrywide”.

Bank of America, que compró Countrywide a principios de año, dice que no puede verificar detalles de las interacciones de la gestión anterior con Moody’s.

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INDITEX GANÓ 843 MILLONES EN LOS NUEVE PRIMEROS MESES, UN 2% MÁS – Las ventas crecieron un 11% entre febrero y octubre, y alcanzaron los 7.353 millones de euros, un incremento que, a tipo de cambio y perímetro constante, se eleva hasta el 14%

Posted by Gilmour Poincaree on December 11, 2008

11/12/2008 08:07

PUBLISHED BY ‘LA GACETA DE LOS NEGOCIOS’ (Spain)

Madrid. Inditex registró un beneficio neto de 843 millones de euros en los nueve primeros meses de su ejercicio fiscal, lo que supone un incremento del 2% respecto al resultado obtenido en el mismo periodo del año anterior, un 4% más a perímetro constante, informó hoy la compañía a la Comisión Nacional del Mercado de Valores (CNMV).

El grupo textil explicó que sus ventas crecieron un 11% entre febrero y octubre, y alcanzaron los 7.353 millones de euros, un incremento que, a tipo de cambio y perímetro constante, se elevó hasta el 14%.

La compañía precisó que, transcurridas seis semanas desde el inicio del cuarto trimestre del ejercicio 2008, las pautas de crecimiento son “similares a las del tercer trimestre”.

El margen bruto de la compañía avanzó un 12%, con lo que se situó en 4.235 millones de euros, y supuso el 57,6% de las ventas. El beneficio bruto de explotación (Ebitda) subió un 5% y se colocó en los 1.545 millones de euros, mientras que el beneficio neto de explotación (Ebit), por su parte, repuntó un 2%, hasta 1.132 millones de euros.

Crecer sin recurrir al endeudamiento

La compañía que preside Amancio Ortega destacó su “fuerte capacidad de generación de caja”, cuya posición neta se incrementó un 9%, hasta 525 millones de euros, lo que le permitió financiar su crecimiento “sin recurrir al endeudamiento”.

En los nueve primeros meses, el grupo abrió un total de 456 nuevas tiendas, 45 más que en el mismo periodo del año anterior, con una inversión de 806 millones. De esta forma, al cierre de octubre Inditex contaba con 4.147 tiendas en 71 países, 456 más que al inicio del ejercicio.

Apuesta por Asia y Europa del Este

Entre los mercados en los que se produjo un mayor incremento en la presencia comercial destaca Rusia, donde el número de tiendas casi se ha duplicado desde el inicio del ejercicio. Otras aperturas reseñables son la tienda Zara inaugurada en Tokio, con la que el grupo alcanzó los 4.000 puntos de venta, así como las primeras tiendas en Montenegro, donde el grupo ha lanzado simultáneamente las cadenas Zara, Pull and Bear, Bershka, Stradivarius y Oysho.

Por su parte, Uterqüe, cadena especializada en accesorios, alcanzaba un total de 24 tiendas a 31 de octubre, entre ellas las primeras en Portugal.

Asimismo, el grupo creó un total de 7.171 nuevos empleos en los nueve primeros meses, de forma que la plantilla de la compañía estaba integrada por 86.688 personas al cierre de octubre. (ep)

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Posted in ASIA, BANKING SYSTEMS, COMMONWEALTH OF INDEPENDENT STATES, ECONOMIC CONJUNCTURE, ECONOMY, EUROPE, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, GARMENT INDUSTRIES, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, JAPAN, REGULATIONS AND BUSINESS TRANSPARENCY, RUSSIA, SPAIN, STAGFLATION, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE WORK MARKET | Leave a Comment »

INDIA, STILL AN ATTRACTIVE INVESTMENT DESTINATION?

Posted by Gilmour Poincaree on December 11, 2008

10 December 2008

ValueNotes Team – nikhil@valuenotes.com

PUBLISHED BY ‘VALUE NOTES’

Mumbai was struck with terror on 26 November 2008. These attacks were carried out in the city’s central ValueNotes Online Surveybusiness area, which is the nerve center of business activities. The attacks caused significant damage to two premier hotels (the Taj Mahal and the Oberoi). As the world comes to terms with the terror attacks in Mumbai a question arises about the impact of such an incident on the Indian economy. The Indian hospitality and aviation industries have already felt the direct impact in the form of a 20-30% cancellation in hotel and airline ticket bookings. While this may be short term in nature the bigger concern is whether overseas investors will continue to perceive India as an attractive investment destination.

ValueNotes.com conducted an online survey to evaluate whether the Mumbai terror attacks weakens India’s image as an attractive investment destination among foreign investors and adversely affects foreign capital flows. While 42% of respondents felt it would adversely affect foreign capital inflows, 53% thought otherwise.

India has been one of the most popular destinations for foreign investment in the last decade. India has also had a history of terror attacks. Despite these attacks foreign capital has continued to pour into India, as shown in the graph below.

Reserve Bank of India, ValueNotes Research

The foreign portfolio investment has also grown since 1990-91 irrespective of such disasters. India has seen four-fold increase in FII since 1995-96 till 2005-06. A look at the FII investment shows that though there has not been steady flow of FII but overall it depicts a rising trend.

Reserve Bank of India

Today, terrorism is no longer a regional problem but a rising global concern. Further, India is not an isolated exception as cities like New York, London and Madrid have also been targeted.

The global downturn triggered by the recession in the US and Europe have made India more attractive as an investment destination. While no economy is insulated from the global financial crisis, India is still well placed thanks to its strong reserves ($283.94 billion on 3 Oct 2008), robust policy framework, strong GDP growth and steady rise in domestic demand in recent years. The “Trade to GDP” ratio in India which stands at 37% is much lower as compared to Singapore’s 432%, Malaysia’s 218%, Thailand’s 138%, Taiwan’s 120% and China’s 65%.

The terror attack may temporarily increase the risk-perception of India and postpone the business and leisure plans of foreigners. This will affect business and tourism in the short-term with reduction in bookings of hotel and airline tickets. However, such a disaster will not affect the inflow of foreign capital given the past history and strong perspective of India as an attractive investment destination. Moreover, the fast recovery of US post the 9/11 attack also builds-up on the confidence in India. Post the 9/11 attack, the US economy showed resilience and though it incurred short-term costs there has not been a major long-term direct impact on the economy. ValueNotes analyst Nikhil Marathe feels that it is crucial to ensure that terror does not escalate into a chronic problem and towards this, it is imperative that the government initiate sustained and relentless anti-terror measures. Strengthening India’s internal security will help renew investor confidence and improve the risk-return perception of foreign investors.

Disclaimer:

The authors have taken due care and caution in compilation of data and analysis. The opinions expressed above are only the views of the authors, and not a recommendation to buy or sell. The authors do not accept any liability whatsoever arising from the use of any of the above contents.

The authors do not guarantee the accuracy, adequacy or completeness of any information and are not responsible for any errors or omissions or for the results obtained from the use of such information.

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Posted in BANKING SYSTEMS, CENTRAL BANKS, COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INDIA, INTERNATIONAL, RECESSION, RUPEE (India), STOCK MARKETS, THE FLOW OF INVESTMENTS | Leave a Comment »

AMERICA’S SILENT REVOLUTION AND ITS CONSEQUENCES

Posted by Gilmour Poincaree on December 11, 2008

24 Nov 2008

by Juraj Mesik

PUBLISHED BY ‘THE SLOVACK SPECTADOR’

The headlines coming from the United States of America are completely dominated by the collapse of banks and the efforts to save these private institutions by public money through nationalisation of their losses. But Europeans pay much less attention to the fact that alongside the financial crisis that is causing revolutionary changes in the world economy, another revolution is silently gaining speed on the other side of the Atlantic. This revolution is technological, and the consequences for everyday life as well as for the big geopolitical chessboard may turn out to be more fundamental than the consequences of the financial crisis.

In the middle of September, major car producer General Motors unveiled its “production version“ (as opposed to prototype model) of a fully electrically powered Plug In Hybrid Vehicle (PHEV) – called the Chevy Volt. The mass-produced Volt should come on the American market toward the end of 2010.

For trips of less than 65 km all its energy comes from its 16-kWh lithium-ion batteries. When the batteries are empty, the car switches smoothly to its built-in electric generator powered by diesel or E85, which supplies electricity for continued travel powered by the electric engine.

The Chevrolet Volt can be recharged via 120 V or 240 V outlets commonly used in households and garages, and its intelligent recharging system can recharge completely empty batteries in less than three hours from a 240 V outlet or eight hours from a 120 V one. At the current price of electricity in the US, a 60 km ride would cost 80 US cents.

GM’s determination to bring a revolutionary new car to the mass market did not have to wait long for a response from the competition. Just a few days after the GM announcement, car maker Chrysler, which saw a 24-percent decrease in car sales over the first eight months of 2008, announced its plan to start mass production of not one, but three different types of PHEVs. At its headquarters in Auburn Hills, Chrysler presented all three of them – a minivan and an SUV, both with an electric range of 65 km – just like the Chevrolet Volt – and a fully electric Dodge EV built on the Lotus Europa platform, with a 250 to 320 km range on batteries only. Like GM, Chrysler too plans to introduce at least one of these cars on the mass market before the end of 2010 (more at www.chryslergoeselectric.com).

What the announced possible merger between GM and Chrysler will mean for these plans remains unclear, but otherwise Chrysler plans to catch up with GM by using existing platforms instead of developing new cars, and by outsourcing many of the components already produced for existing models.

The most likely supplier of the most critical part of any PHEV – its batteries – will be A123Systems. The final goal of Chrysler is the full transformation of its entire production line to electric driving.

In the meantime, the US Congress, along with the famous bailout package for the collapsing American financial system, approved a bill on energy taxes. This includes tax credits ranging from $2,500 to $7,500, depending on the battery capacity of the PHEVs. These credits will fully cover the price difference between common gasoline cars and PHEVs. The credit has a base of $2,500 plus $417 for each kWh of battery pack capacity in excess of 4 kWh, to a maximum of $7,500 for light-duty vehicles.

As nothing can stay small in the US, it does not end with light personal cars and includes a $10,000 credit for vehicles with gross vehicle weights of more than 10,000 but less than 14,000 pounds; $12,500 for vehicles with a GVW of more than 14,000 but less than 26,000 pounds; and $15,000 for any vehicle with a GVW of more than 26,000 pounds. Phaseout of the credit is to begin when the total number of qualified PHEVs sold in the US after 31 December 2008 reaches 250,000.

To give US car makers an advantage over their more advanced competitors, the vehicles must have a battery pack with at least 4 kWh of capacity to qualify for a credit – a provision that will exclude the first generation of Toyota PHEVs as well as some other lower range all-electric plug-ins.

But it was not concern about the global climate that led American car makers and the Senate to these moves. The power behind them is economy. The inefficient American cars had already been pushed from the global markets by the much more efficient Japanese, European and other cars.

To ignore fuel consumption as a key car quality had proved to be a fundamental strategic mistake. While just four years ago the author of this article was able to fill the empty tank of his personal car for less than $20, gasoline at US gas stations is more than twice as expensive today, and American gas-guzzlers are now unable to compete even in their own domestic markets.

Japanese producer Toyota is the leader in PHEV development, and for a long time it appeared that Detroit was going to lose another strategic battle, as happened with the hybrids. It was this urgent threat that gave up the wake-up call to petrified American automakers and moved them towards revolutionary innovation. Neither was Congress motivated by concerns about climate change. The US pays $7 billion annually for imported oil, mostly to politically problematic countries such as Arabic regimes in the Persian Gulf, Venezuela and Nigeria.

In Europe, the European Commission as well as the more progressive governments and parliaments concentrate on lowering emissions from cars’ combustions engines. This strategic focus alone may prove to be totally obsolete in competition with the rising PHEV revolution in the US and elsewhere. It indeed is obsolete when it comes to the geopolitical challenge of Europe’s dependency on Russian and other foreign oil.

There is no doubts that PHEVs still have several challenges ahead of them, be it quality and longevity of batteries, or additional sources of clean electricity to recharge potentially tens and hundreds of millions if electric cars.

However, the success of PHEV revolution would have such huge environmental and social consequences, that for the EU to ignore it any longer is unacceptable.

Concerning its geopolitical consequences, the success of PHEVs would mean nothing less than a geopolitical earthquake leading to the robust strengthening in position of western democracies. Europe must wake up to these opportunities.

Indeed, the current loud cries of the European automobile industry calling for direct financial support from the EU provide a once-in-a-lifetime opportunity to introduce PHEVs to Europe on a quick and massive scale.

NOTICE – The opinions expressed herein do not reflect the views of The Slovak Spectator. The analysis and opinion pieces published in the newspaper are intended to provide a wider scope of views and opinions and inspire further debate.

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OECD ADVISES CAUTION (Slovakia)

Posted by Gilmour Poincaree on December 11, 2008

8 Dec 2008

by Beata Balogová

PUBLISHED BY ‘THE SLOVACK SPECTADOR’

AMONG the members of a club comprising the world’s most developed economies, many are staring down the wrong end of a protracted recession, the likes of which they have not experienced since the early 1980s.

Over the next two years, 8 million people could join the ranks of the unemployed in the member states of the Organisation for Economic Cooperation and Development (OECD); at the same time, inflation is abating in all of them and some even face the risk of mild deflation, according to the OECD in its latest economic forecast.

Though Slovakia is forecast to remain the OECD’s top performer for the next two years, the organisation expects economic activity to decelerate significantly in 2009, before picking up in the following years.

“In particular, investment spending and trade growth are likely to be adversely affected by the effects of the financial crisis,” said the OECD in its economic outlook, which is published twice a year, analysing major trends and the economic policies required to foster high sustainable growth.

According to the OECD, Slovak growth is expected to return to close to its potential rate towards 2010. Inflation rates should decline from their currently high levels, but stay above euro-area levels, the organisation said. The OECD predicts economic growth in Slovakia to be 4.0 percent at most next year.

“Among the recently published prognoses, the OECD’s is the most pessimistic for Slovakia,” Zuzana Holeščáková, an analyst with Poštová Banka, told The Slovak Spectator. “The autumn estimate of the European Commission stood at 4.9 percent and the recently revised prediction of the Finance Ministry stands at 4.6 percent.”

Radovan Ďurana of the Institute of Economic and Social Studies (INESS), a think tank, said that Slovakia owes its ability to keep economic growth at the highest level among OECD members to foreign investments encouraged by the reforms adopted by the previous government.

“Currently there are no measures taken which would fundamentally influence the interest of investors in increasing their production in Slovakia,” Ďurana told The Slovak Spectator.

The relatively high economic growth should be still driven by domestic production; specifically household consumption, but also by the public administration and thanks to the creation of gross fixed capital, according to Holeščáková.

However, analysts also say that the slower growth of GDP will be reflected in slower growth in domestic consumption.

“The slowdown in economic growth due to the financial crisis should contribute to growing unemployment, a slower growth of salaries and a slowdown in inflation,” senior analyst with the VÚB bank Martin Lenko told The Slovak Spectator.

Holeščáková agrees that unemployment will now fall more slowly in Slovakia, which currently has one of the highest unemployment rates in the European Union.

In terms of foreign trade, the eurozone is Slovakia’s most significant market, but like other world economies it faces a slowdown in consumption and this fact will be reflected in the falling demand by foreign countries for Slovak products and services, which will mean a drop in exports, Holeščáková explained.

“Declining consumption might result in a slowdown of production and related limitations or even the closure of some operations,” Holeščáková said. “However, Slovakia should remain an attractive destination for foreign investors due to its lower costs, including cheaper labour.”

The OECD has also appealed to its member governments to support their economies with stimuli. As for which kind of stimuli these should be in Slovakia, Ďurana listed the “reduction of costs by which the government burdens the creation of jobs by businesses, and maintaining the volume of production”.

According to Ďurana, it should not be a policy of financial stimuli for selected sectors and companies but a flat reduction of the costs which the government itself has helped to cause.

“I am an advocate of revision of tax and payroll tax policies, which in a period of economic slowdown is one of the basic tools of the state to support investment and consumption, since it has a flat rather than just a selective impact,” Lenko told The Slovak Spectator.

Ďurana said that in Slovakia’s case the reduction of the tax and payroll tax burden and reduction of the administrative and regulatory burden would help.

According to Holeščáková, Slovakia should not be affected by the crisis to the same extent as some EU or other developed economies, while the Slovak government does not yet have to support the economy with different stimuli.

The OECD also asked member governments to be more watchful, which is very important in Holeščáková’s view.

“Mainly in the area of fiscal stimuli and due to excessive spending in the economy the public finance deficits could deepen but also the state debts could swell, which in some circumstances might result in Slovakia not fulfilling the [eurozone] stability pact,” Holeščáková said.

Handling the adoption of the euro, which is scheduled for January 1, 2009, will determine policy priorities.

Although the expected slowdown will dampen the danger of a boom-bust cycle induced by low real interest rates, fiscal policy should be used cautiously, the OECD said.

As for the role the euro will play next year in defining the government’s economic policies, Lenko said that the loss of the monetary lever, which in the past took the form of a strengthening Slovak crown, would create greater pressure to follow considerate fiscal policies, which should be targeted on achieving sustainable long-term development of the economy.

“Whether it happens this way all depends on the government,” Lenko said.

Ďurana said that the government should consider the monetary policy of the European Central Bank next year to be beyond its reach and it will be left with only fiscal policies to fight eventual inflationary pressures.

“Thanks to the euro, the Slovak currency, compared to the currencies of neighbouring countries, has significantly strengthened, which has increased wage expenses for foreign investors in Slovakia,” Ďurana said. “The government should compensate for this negative effect by cutting taxes and payroll taxes.”

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Posted in CENTRAL BANKS, COMMERCE, ECONOMIC CONJUNCTURE, ECONOMY, EURO, EUROPE, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INTERNATIONAL, NATIONAL WORK FORCES, ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD), RECESSION, SLOVAKIA, THE FLOW OF INVESTMENTS, THE WORK MARKET, THE WORKERS | Leave a Comment »