Business News

[N.O.R.F]

Dubai Ruler Says `We Are Back' After Restructuring Debt: Video

Sep 27, 2010

 

Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum discusses the emirate's recovery from a debt crisis involving state-controlled holding company Dubai World.

 

He talks with Bloomberg's Margaret Brennan at the FEI World Equestrian Games in Lexington, Kentucky, yesterday. Crown Prince Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum also speaks. (This is an excerpt. Source: Bloomberg)

 

Running time 02:11

 

Bloomberg

[Showqi]

The interview is very short (2 min. 11"). I honstly expected that the Sheikh should explain more about: how did they get there? what steps did they take to solve the problem? and how would they avoid something like that would ever happen again.

 

But instead all he said is we are back and it's a challenge. We will see!!!

[N.O.R.F]

^We will. But things are picking up again.

 

Interesting article on Energy requirements in Africa.

 

Alleviating poverty in Africa demands redoubled energy

Robin M Mills

 

Last Updated: September 27. 2010 6:44PM UAE / September 27. 2010 2:44PM GMT

Mimi is one of the wives of the chief of the village of Bambalang in Cameroon, West Africa. She cooks meals for her children over a wood fire, under the smoke-blackened roof of her hut. Passing along the roads, you see women and children walking long distances with bundles of firewood on their heads.

 

The sun sets early in this tropical country, and there is no electric light for the youngsters to do their schoolwork at night. Down the track, there is a hydroelectric dam, but the electricity goes to the main city, Douala. The village is not connected to the grid. A few of the wealthy people in the village have noisy, expensive petrol generators, to watch television for a few hours.

 

Without electricity, midwives have to deliver babies by the light of a kerosene lamp. In the absence of refrigeration, vaccines overheat in the warm climate and become useless. Meat and fish has to be sold quickly before it spoils, or charred to preserve it.

 

 

The land, with its thick volcanic soils and year-round sun, is very fertile, and the people grow cassava, rice, bananas, sweet potatoes and other crops. It could be the breadbasket of West Africa. But during the dry season, they need irrigation pumps to raise the water from the bottom of streams – and those pumps require electricity or costly fuel to run.

 

A major review summit was held under the auspices of the UN in New York last week, marking the 10th anniversary of the establishment of the Millennium Development Goals (MDGs). These goals are: eradicating extreme poverty and hunger, broadening access to education, promoting gender equality, reducing child mortality, improving maternal health, combating serious diseases, ensuring environmental sustainability and creating a global partnership for development.

 

There are only five years to go until the goals should be achieved, in 2015. Even a small amount of electricity dramatically increases the level of human development. Yet, although the MDGs cannot be achieved without access to modern energy sources, energy itself is not mentioned.

 

This is a surprising omission. When the goals were defined in 2000, energy seemed to be a problem that had been solved. Oil and gas prices were low and stable, and power stations were becoming increasingly efficient, cheap and clean.

 

Yet things were about to change. The success of China, India and other developing countries in growing their economies rapidly created an emerging middle class made up of hundreds of millions of people. For the first time, these nouveaux riches – still poor by the standards of Western countries or the Gulf – could afford a television, a refrigerator, and a motorcycle or perhaps a car.

 

The consequent surge in energy demand drove oil prices to record highs. As the International Energy Agency noted last week, the worst sufferers were those who had remained in poverty, the great majority of them in sub-Saharan Africa and South Asia.

 

A large part of the world, perhaps 1.5 billion people, still has no access to modern energy. In sub-Saharan Africa, a population of 800 million uses only as much energy as the 8 million inhabitants of New York City. The electricity going to the Burj Khalifa could supply the 16 million population of Burkina Faso.

 

At the same time, it became increasingly apparent that soaring emissions of carbon dioxide from deforestation and burning coal, oil and gas, threatens disastrous climate change – again, with the heaviest damage falling on the heads of the world’s poor. Tackling global warming is mentioned in the MDGs only as a subsidiary goal.

Bringing about the final wave of modern energy requires a two-pronged strategy.

 

One part has to emulate how the West, and later China, electrified their countries: large power stations and extension of grids to towns, villages and rural households.

But although wind power and large dams can be part of this, inevitably fossil fuels will be the dominant fuel for decades to come. This raises a conundrum: how can a country such as India increase its energy supply by six times, while its emissions “only” double?

 

The second part needs to be small-scale solutions adapted to local needs. Efficient cooking stoves that burn less wood and give off minimal smoke have become a big success in Kenya. They can be manufactured by local artisans, thus creating employment. They reduce deforestation, save women’s time and ensure healthier air for their families. Solar ovens are another option.

 

For electricity, small-scale hydroelectric power is appealing. Indeed, just along the road from Mimi’s village is a generator powered from a fast-flowing mountain stream, but it serves only the needs of the missionary camp which built it.

 

In agricultural areas, abundant waste – wood shavings, rice husks, banana peel –can be burnt to generate electricity, increasingly popular in Indian villages.

This is complicated work. The best solution is different in every place. New ideas may go against local traditions. They require technical expertise and money – not a lot, but often in short supply in an area where the average income is US$2 per day (Dh7.35).

 

To fulfil the Millennium Development Goals for people like Mimi, we need a renewed focus on bringing them energy, the master resource for achieving health, education, gender equality, economic development and environmental sustainability.

 

Robin M Mills is an energy economist based in Dubai, and author of The Myth of the Oil Crisis

[Showqi]

 

BEIJING, China - Beijing warned Washington on Thursday that economic ties might be damaged after American lawmakers escalated the conflict over China's currency controls, inching the two economic giants closer to a trade war.

 

The Commerce Ministry said a measure approved Wednesday by Congress to allow Washington to penalize governments that manipulate exchange rates violated free-trade rules. It gave no indication whether Beijing might retaliate, though it has imposed anti-dumping duties in recent months on imports of U.S. chicken, steel and nylon.

 

After years of friction, the bill is the first vote by American lawmakers for measures to respond to complaints Beijing keeps its yuan — also known as the renminbi — undervalued, giving its exporters an unfair price advantage and costing U.S. jobs. Passage by a 348-79 margin in the House of Representatives came ahead of November elections in which the economy and 9.6 per cent unemployment are key voter concerns.

 

"This is a step toward a trade war," said economist Dariusz Kowalczyk at Credit Agricole CIB in Hong Kong. "It's just one step, but it increases the odds."

 

Pressures over trade are mounting as the global recovery falters. Washington, Beijing and other governments have pledged to avoid protectionism that might hamper a revival of growth. But U.S. and Chinese authorities have imposed antidumping and other duties on a range of each other's goods including poultry, steel pipes and tires.

 

"Exercising protectionism against China under the excuse of the renminbi exchange rate will only severely damage Chinese-U.S. trade and economic ties," said Jiang Yu, a foreign ministry spokeswoman, at a news briefing.

 

In a separate statement, Commerce Ministry spokesman Yao Jian said, "You cannot say the renminbi exchange rate is undervalued because of the U.S. trade deficit with China and impose such protectionist measures based on this."

 

There was no immediate reaction from financial markets, where traders were focused on fading U.S. growth and European street protests over austerity measures.

 

The U.S. bill would not impose automatic penalties but would expand the definition of improper subsidies to include currency manipulation to gain a trade advantage. The U.S. Commerce Department would decide whether to sanction China or another government.

 

The measure requires Senate approval. Action there is not expected until after November elections, when analysts say pressure to pass the measure is likely to diminish.

 

Years of U.S. impatience with China's currency policies flared anew in recent weeks after China promised in June to allow more exchange-rate flexibility but then allowed the yuan to rise only about 2 per cent since then. The central bank said this week it will increase the role of market forces in setting the exchange rate but announced no major changes that might defuse American anger.

 

Premier Wen Jiabao, China's top economic official, promised to allow a stronger yuan in talks this month with U.S. President Barack Obama. But in a speech in New York ahead of that meeting, Wen rejected a rapid rise, saying that would drive many Chinese companies out of business and destroy jobs.

 

"If this measure passes, it will have a big impact on global trade," said Ding Zhijie, director of the finance school at Beijing's University of International Business and Economics. "The United States can label you according to its own standards and impose anti-subsidy remedies."

 

Beijing might face more pressure at a Nov. 11 meeting with the United States and other Group of 20 major economies in Seoul. The friction is likely to get rougher if many major economies remain anemic, as projected.

 

Brazil's finance minister said this week some countries are trying to boost growth by weakening exchange rates and controlling capital flows. He warned that might lead to a "global currency war."

 

"As the global recovery slows, countries with large current account surpluses will likely come under pressure from countries with large fiscal deficits and high unemployment rates," Goldman Sachs economists said Thursday in a report.

 

The China currency debate has split the U.S. business community. Exporters say they are hurt by underpriced Chinese goods but companies that operate in or export from China worry they might suffer from U.S. sanctions or Chinese retaliation.

 

The American Chamber of Commerce in China, which represents 1,200 companies, appealed to the Senate on Thursday to kill the currency bill. The group said it was unlikely to produce significant U.S. job growth and might harm American exporters.

 

"Blaming China won't help the U.S. economy but this legislation may cost American jobs," said the chamber chairman, John D. Watkins, Jr., in a statement. "We call on the U.S. Senate to thoroughly review the proposed legislation and we hope it does not move forward in the legislative process."

 

Beijing is likely to allow the yuan to rise faster against the dollar before the November elections to defuse pressure for the Senate to approve sanctions, said Kowalczyk.

 

"They do not want a trade war because they are beneficiaries of the trade surplus," he said. "For China it's crucial to placate the U.S. critics. But they cannot placate them the way those critics want to be placated, meaning, by allowing a strong appreciation, because this would be too harmful for their exports and growth."

 

Source

[N.O.R.F]

How can you dictate to another country what the value of their currency should be?

 

Americans :rolleyes:

[Showqi]

It's all about fair play!!! Recently China is winning too much and the house (USA) is not happy at all.

 

Labo tuug iyagaa is og,,,,,

[Showqi]

Australia warns China, Europe on trade

 

Australia's trade minister Craig Emerson

 

Sun Oct 3, SYDNEY (AFP) - Australia's trade minister joined US calls for China to adjust its currency Sunday and warned Europe that Canberra will not allow a revival of protectionism masquerading as environmentalism.

 

The newly-appointed Craig Emerson said he is confident about growth prospects in China, Australia's key trading partner, but echoed warnings from the United States about undervaluing the yuan to gain a trade advantage.

 

"The Americans are basically fed up and I can understand why," Emerson said. "I think that it would be an appropriate response, if the Chinese did adjust the exchange rate."

 

"If they want to present themselves frankly as having market economy status, well let's have a few market forces applied to the exchange rate," he said.

 

Public pressure on Beijing "tend(s) to be counterproductive", added Emerson, saying he would prefer to see it "happen over time as a natural sort of adjustment."

 

"I think there's a real issue here and I know it's not as easy as just clicking your fingers in China to adjust the exchange rate because that will affect the competitiveness of their exports," he said.

 

Strong demand from rapidly-industrialising China for Australia's raw materials helped it become the only advanced economy to avoid recession during the global downturn, and Emerson said the Asian giant would continue to be key.

 

"Just about every time we feel that we've got a fix on what's going on in China, it's bigger than that," he said.

 

"It's enormous what's going on in China and I don't think that there is grounds for pessimism about China's expansion, there are grounds for ongoing optimism about China's expansion."

 

Emerson also warned that Canberra would not tolerate the resurrection of European trade barriers under the "green cloak" of punishing nations not prepared to tax carbon.

 

"Of course we are committed to putting a price on carbon but let's not believe that this is all about climate change," Emerson told Sky News Australia.

 

"There is a very clear European protectionist instinct, old protectionist instinct, under this green cloak of respectability and we won't cop it."

 

Australia would use "whatever rules, trading rules there are through the WTO (World Trade Organisation) to fight against the use of these devices to protect industries in Europe, or anywhere else, against competition," Emerson said.

 

The minister said he opposed the inclusion of labour and environmental standards in trade agreements and he did not see why they should become Australian policy.

 

"I don't think that we have sought to insert those into trade agreements in the past and I don't see that being a problem," he said.

 

Prime Minister Julia Gillard launched a new push to charge for carbon pollution last month after inaction on the issue nearly cost her ruling Labor party government at the August election.

 

Gillard said Australia could not cut pollution to the extent that was necessary without putting a price on carbon, and has flagged an emissions trading scheme, carbon tax or hybrid of both.

 

Source

[N.O.R.F]

EU budget rules could upset markets

 

BERLIN // Europe's attempt to adopt strict new budget rules aimed at preventing a repeat of the euro debt crisis risks ending up in a classic EU fudge that could unsettle markets at a time of growing concern over Ireland's deficit troubles.

 

France, Italy, Spain, Portugal and Greece have voiced opposition this week to a plan by the EU's executive, the European Commission (EC), for a system that would automatically penalise countries that do not keep their budgets under control. The EC's idea, part of a set of proposals submitted yesterday, makes sense because it would lessen the power of member governments to block penalties against themselves, as has happened repeatedly in recent years.

 

Until now, the threat of punishment under the Stability and Growth Pact (SGP), the 1997 accord designed to underpin the euro by enforcing fiscal discipline in the bloc, has been about as scary for rule breakers as the prospect of being savaged by a dead sheep. There is simply too much scope for nations to evade fines. Olli Rehn, the European commissioner for economic and monetary affairs, wants to give the pact some teeth to reassure markets the EU can stave off Greek-style debt crises in future without having to resort to huge bailout packages.

 

He wants a new regime under which fines for excessive deficits are applied automatically unless they are blocked by a qualified majority of EU ministers. At present, penalties are imposed only if a qualified majority votes in favour of them, a sluggish process that is more vulnerable to political influence. France, Europe's second-largest economy after Germany, made plain this week that it will not accept such an automatic procedure. It also opposes Mr Rehn's plan for stiffer penalties on countries whose total debt exceeds the ceiling of 60 per cent of GDP. At present, the SGP is characteristically vague on that point.

 

France's opposition has pitted it against Germany, whose finance minister Wolfgang Schauble said this week the EU's budget rules should be given "more bite" and should include quasi-automatic sanctions. Other commission proposals are less contentious, such as forcing nations that breach the budget deficit cap of 3 per cent of GDP to enter an "excessive deficit procedure" in which they have to make a non-interest bearing deposit of 0.2 per cent of GDP.

 

The deposit would be converted into a fine if recommendations for corrective action from EU finance ministers are ignored. The fine could subsequently be increased. The reforms require the approval of national government leaders and of the European Parliament. Mr Rehn hopes they will come into force by December next year. But, given the controversy over key points, there is a big question mark over how effective the reforms will be.

 

In European capitals, the sense of urgency regarding SGP reform has waned in recent months with the gradual recovery of the single currency and strengthening euro-zone growth in the second quarter. That is dangerous because the debt crisis is far from over and financial markets will be unsettled by any obvious lack of progress. Investors are worried again about the creditworthiness of Spain, Portugal and Ireland, whose bond spreads are widening over German bonds. There is particular concern over Ireland's public finances after Moody's Investors Service cut its ratings on the nationalised lender Anglo Irish Bank.

 

 

Even assuming that Europe does manage to craft tough new budget rules, it remains unclear how strictly those rules will be enforced in future. After all, member states will retain their final say on fiscal policy. Consensus and compromise will continue to dictate policy. That is the European way. The European Central Bank is aware of the problem and has already proposed that the bloc's last line of defence against speculators - the €750 billion (Dh3.74 trillion) rescue fund that put the plug on the crisis in May - be converted into a permanent facility. It is currently limited to three years.

 

With EU politicians wavering in their resolve to impose budget discipline on themselves, the bailout fund may be the only way to keep speculators at bay.

 

Source

[Showqi]

Ex-French trader must pay $6.7 billion for fraud

 

Ex-Societe Generale trader Jerome Kerviel

 

 

Tuesday October 5, 2010 PARIS (AP) -- Former Societe Generale SA trader Jerome Kerviel was convicted on all counts Tuesday in one of history's biggest trading frauds, sentenced to three years in jail and ordered to pay the bank a mind-numbing euro4.9 billion ($6.7 billion) in damages.

 

The ruling marked a huge victory for Societe Generale, one of France's most blue-blooded banks, which has worked to clean up its image and put in place tougher risk controls since the scandal broke in 2008.

 

The 33-year-old former futures index trader stood expressionless as the court convicted him of all charges and pronounced a five-year sentence with two years suspended. Kerviel was found guilty on charges of forgery, breach of trust and unauthorized computer use for covering up bets worth nearly euro50 billion between late 2007 and early 2008.

 

In a stunning blow, the court also ordered Kerviel to pay the bank back the euro4.9 billion that it lost unwinding his complex positions in January 2008 -- a punishment he would almost certainly be unable to pay. That sum marked the largest-ever alleged fraud by a single trader.

 

There were audible gasps and surprised looks when presiding judge Dominique Pauthe read out the damages to a packed courtroom of 150 reporters, court officials and members of the public.

 

Outside the courtroom, defense lawyer Olivier Metzner called the financial penalty "unbelievable."

 

"I have the feeling Jerome Kerviel is paying for an entire system," said Metzner, noting that his client hadn't benefited financially from the fraud.

 

Metzner said Kerviel would appeal and will remain free pending that appeal.

 

The damages are also suspended pending any appeal, so Kerviel wouldn't be ordered to pay right away.

 

French media calculated that based on his current salary of euro2,300 ($3,150) a month as a computer consultant, it would take Kerviel 177,536 years to pay off the damages.

 

While trading for the bank, Kerviel took home a salary and bonus of less than euro100,000, or about $155,700 -- a relatively modest sum in the financial world.

 

Societe Generale spokeswoman Caroline Guillaumin called the verdict "an important ruling that acknowledges the moral and financial harm done to the bank and its staff."

 

"The bank can now turn the page, pursue its strategy and continue to rebound," Guillaumin said in an emailed statement.

 

Kerviel sat with his arms folded and his legs crossed during the first 45 minutes of the hour-long hearing, sitting alone in the front row of the courtroom with seven empty wooden chairs to his left. He barely blinked as each guilty verdict was read out. He stood for sentencing in a dark suit and tie, frowning and silent.

 

"He is disgusted," Metzner said of Kerviel's feeling about the ruling, adding that the court had judged the bank "was responsible for nothing, not responsible for the creature that it had created."

 

"I hope you all will donate a euro to Jerome Kerviel," the lawyer told TV cameras and reporters.

 

Kerviel, a soft-spoken and debonair man from western Brittany, has garnered considerable public appeal in France for his image of being a scapegoat for powerful corporate interests. Kerviel maintained that the bank and his bosses tolerated his massive risk-taking as long as it made money, which he did at first, racking up euro1.4 billion in profits for Societe Generale in 2007, the judge noted.

 

During the proceedings, both sides admitted to mistakes but Kerviel insisted his bank superiors knew what he was doing. Societe Generale's former chairman acknowledged there were problems in monitoring the trader's work.

 

The bank says Kerviel made bets of up to euro50 billion -- more than the bank's total market value -- on futures contracts on three European equity indices, though his net position appeared unremarkable because he balanced his real trades with fictitious transactions.

 

In the ruling, the court said Kerviel acted without the bank's knowledge and said it was "obvious" none of his bosses would have allowed him to bet sums exceeding the bank's capital.

 

"Through his deliberate actions, he endangered the solvency of a bank that employed 140,000 people including himself, and whose future was seriously put at risk," the ruling said. The court also praised the bank's handling of the crisis, saying Kerviel's "actions without a doubt threatened the public order of the world economy" though their "impact was contained in the end by the bank's reactivity."

 

Still, an internal report by the bank found managers failed to follow up on 74 different alarms about Kerviel's activities.

 

The bank's CEO Daniel Bouton and its head of investment banking Jean-Pierre Mustier stepped down in the wake of the scandal, with Bouton saying attacks on him risked hurting the bank.

 

The bank's earnings crumpled in 2007 after taking into account the losses on Kerviel's trades. Its profit rebounded in 2008 but were cut by more than half last year when the bank was hit by billions in new losses stemming from bad bets prior to the financial crisis. So far this year the bank's earnings have bounced back thanks to strong retail banking in its home market.

 

Employed by Societe Generale since 2000, Kerviel worked his way up from a supporting role in an office that monitors trades to a job on the futures desk where he invested the bank's money by hedging on European equity market indices.

 

He was arrested in January 2008 and held for six weeks in Paris' notorious La Sante prison.

 

Societe Generale's shares rose slightly after the announcement of the verdict, trading up 1 percent at euro41.20 ($56.46).

 

Kerviel's fraud eclipsed that of previous lone "rogue traders."

 

In one infamous case, Nick Leeson, a British trader working in Singapore for Barings Bank, made unauthorized futures trades that lost more than $1 billion and led to the venerable bank's collapse in 1995. That case prompted banks worldwide to tighten internal checks.

 

Leeson was released from a Singapore jail in 1998 for good behavior after serving 3 1/2 years of a 6 1/2-year sentence. He claimed he did not make a cent from his disastrous trades.

 

Leeson's agent said Tuesday he was willing to do one exclusive interview on the Kerviel verdict --in exchange for a fee.

 

Source

[N.O.R.F]

World Bank, IDB launch $1b Mena development fund

 

Washington: The World Bank said Sunday that it is setting up a regional initiative in cooperation with the Islamic Development Bank (IDB) that could raise up to $1 billion to close the infrastructure gap in the Middle East and North Africa (Mena), which will undermine the region’s growth if not urgently addressed.

 

The Middle East and North Africa region needs to invest between $75 billion and $100 billion a year to sustain the growth rates that have been achieved in recent years and to boost economic competitiveness, the World Bank said. It added that private sector investment in infrastructure in Mena countries is limited, especially outside the Gulf countries despite huge unmet demand for infrastructure services.

 

Sunday’s announcement aims at addressing this shortfall and brings together the World Bank Group with the Islamic Development Bank as potential anchor investors in a regional investment vehicle to support both conventional and Shariah-compliant investment in infrastructure.

 

“This regional initiative will unlock new flows of private sector investment to help countries like Egypt, Morocco, Jordan or Tunisia eager to push ahead with critical infrastructure projects that will drive competitiveness and boost much needed job creation,” said Robert Zoellick, World Bank Group President.

 

He added that the proposed regional initiative would include technical assistance to help governments tackle legal, policy and institutional constraints to public-private-partnerships and develop cross-border infrastructure projects vital to regional integration and competitiveness.

 

“The Islamic Development Bank is excited to be part of this initiative as we know there is a pipeline of viable infrastructure projects out there and unmet demand,” said Ahmad Mohammad Ali, President of the institution headquartered in Jeddah. “The facility will have the flexibility to structure investments in accordance with Shariah principles which will attract untapped, alternative sources of financing.”

Both the Islamic Development Bank and the International Finance Corporation (IFC), the private sector arm of the World Bank Group, will work together to explore ways of providing project finance in both conventional and Shariah-compliant products, which would seek to attract private investors, especially from Gulf countries.

 

"Infrastructure is one of our most important priorities in the Middle East and North Africa,” said Lars Thunell, Executive Vice President and CEO of IFC. “Large investments in infrastructure are needed across the region. This facility will demonstrate the viability of infrastructure investments for both the private sector and governments, which in turn will help increase investments in this sector and improve services for a rapidly growing population."

 

IFC's approach to infrastructure projects includes advising governments in structuring innovative public-private partnerships and financing precedent-setting transactions. In particular, IFC supports cross-border projects from Gulf countries into emerging markets that commercial banks would consider too risky without IFC’s involvement. Over the past four years, IFC has invested more than $1 billion in infrastructure projects in Mena.

 

Source

[Showqi]

Cash floods into China, raising pressure on yuan

 

BEIJING (Reuters) - China's foreign exchange reserves soared in the third quarter and its trade surplus remained hefty, showing that the country is under both economic and political pressure to let the yuan rise more quickly.

 

China's stockpile of currency reserves, already the world's biggest, increased by $194 billion from July to September, the most ever in a three-month period, to reach $2.65 trillion.

 

Although about a third of that rise could be explained by valuation effects in the form of a weakening dollar, the eye-popping number left little doubt that cash has been flooding into China.

 

A rebound in exports was one main channel, but investment and hot money inflows also powered the flows. Sustained yuan appreciation since August and a bull run in the Chinese stock market appear to be exerting a magnetic pull on investors.

 

"Foreign exchange reserves increased by too much in the third quarter," said Liu Dongliang, an analyst at China Merchants Bank in Shanghai.

 

"We are caught in a dilemma. If the yuan exchange rate continues to rise, more hot money will be sucked in. But we have no better option right now and the yuan will continue to ascend."

 

Against a background of rising pique in the United States, China has let the yuan climb more quickly in recent weeks, making for total appreciation of 2.4 percent against the dollar since it was unshackled from a nearly two-year peg on June 19.

 

DEALING WITH INFLOWS

 

In a sign that the People's Bank of China is already grappling with the problem of capital inflows, it raised reserve requirements for six of the country's biggest lenders this week, a move that will help lock up about 200 billion yuan of cash.

 

With the economy increasingly flush with liquidity, Chinese banks were freer with their lending in September.

 

They extended 596 billion yuan ($89 billion) in new local-currency loans in September, compared with August's 545 billion yuan. Analysts had expected a rise of 500 billion yuan.

 

Beijing will have to redouble its controls on bank lending to keep new credit issuance within its full-year target of 7.5 trillion yuan, an important part of its normalization of monetary policy after an unprecedented loan surge last year to counter the global financial crisis.

 

"We expect the government will continue to control its lending quota in the coming months to ensure it reaches its full-year target," said Wang Han, an economist with advisory firm CEBM in Shanghai.

 

"The central bank will not raise interest rates this year, because it believes the quantitative tools so far are effective."

 

TRADE SURPLUS DIPS

 

In another data release on Wednesday, China's September trade surplus dipped to a five-month low, but was still hefty at $16.9 billion. Analysts had expected an $18.0 billion surplus.

 

"The trade surplus is smaller than expected, but pressure from the United States for yuan revaluation will remain strong because it is an election year," said Thio Chin Thio, a currency strategist with BNP Paribas in Singapore.

 

Beijing did what it could to cast the latest figures in a flattering light ahead of a U.S. decision due on Friday about whether to formally declare for the first time that China manipulates its currency.

 

In its release of the data, the General Administration of Customs noted that that month-on-month import growth hit a record high.

 

But there is little chance that this will silence critics of Beijing's managed exchange rate regime.

 

"Note that $145 billion in exports is only a fraction below the July record high, so there will be plenty of ammunition for those pushing China on the yuan at the G20 meetings," said Sean Callow, a currency strategist with Westpac in Sydney.

 

A G20 summit in Seoul in mid-November and U.S. Congressional midterm elections earlier that month are sensitive political dates, before which many analysts believe China will push through faster yuan appreciation to blunt foreign criticism.

 

A smaller Chinese trade surplus is seen as an essential component of the rebalancing that is needed to put the global economy on sounder footing.

 

While foreign critics often emphasize the importance of a stronger yuan in achieving that goal, Beijing's retort is that this focus is too narrow. It says that a broader series of reforms, such was building up the country's welfare system, will over time encourage more domestic consumption.

 

($1=6.673 Yuan)

 

Source

[Showqi]

'Dumb Money' Returns to Stocks

 

Individual investors are wading back into the U.S. stock market. That ought to make über-bulls think twice. Positive forces including strong corporate earnings, improving economic data and more bond buying by the Federal Reserve have fueled a 17% rally in the Standard & Poor's 500-stock index since late August. The market has now punched through its prior 2010 highs, set in April, to reach levels last seen in 2008 before the collapse of Lehman Brothers.

 

Predictably, that has also triggered a rebound in bullish sentiment and helped coax investors back into the market. The American Association of Individual Investors finds 48% of investors surveyed are bullish on stocks as of last week—the highest level since February 2007. Bearish sentiment, at 27%, is at its lowest since January 2006

 

And it appears their money is following suit. Roughly a quarter of recent flows into U.S. equity funds, including exchange-traded funds, have come from individual investors, according to EPFR Global. Since early September, such retail investors have poured about $2 billion into these funds, which have taken in about $8.4 billion. That is a marked turnaround from the $23 billion yanked out of equity funds in August, when double-dip fears raged.

 

For now, this support could help the market extend its recent run. Yet it may also mean it is late in the rally game. Retail investors are usually a lagging indicator, reacting to past performance rather than predicting future gains. Their flows, says Harvard University lecturer Owen Lamont, can create "a short-term lift" but it rarely lasts beyond a few months. He and Andrea Frazzini of AQR Capital Management have written a series of papers together on this "dumb money" phenomenon.

 

Admittedly, the flow of money from individual investors back into the market has been more a trickle than a flood—from January 2009 through August, individuals pulled around $162 billion from equity funds.

 

Even so, a return of retail investors argues for caution. The prior high in sentiment this year came in late spring, just as the market was headed for a bruising selloff. It may not be wise to fight the Fed, but it can be just as ill-advised to follow the crowd.

 

Source

[N.O.R.F]

China and India get more seats on the IMF at the expense of the EU.

 

The International Monetary Fund (IMF) has agreed to give greater voting rights to the large emerging economies, giving China and India long-sought recognition within the financial body.

 

The move, announced on Friday, makes China the third leading voice of the global lender, ahead of Germany, France and Britain.

 

Dominique Strauss-Kahn, director of the IMF, called the agreement "historic", saying it marked a recognition of the "growing role in the global economy" played by emerging markets.

 

A number of smaller European nations and oil-producing countries such as Saudi Arabia lost votes so that "new changes in the global economy will now be reflected in changes in the fund", according to Strauss-Kahn.

 

As well as benefiting China, the move will lift other large emerging powers India, Brazil and Russia into the top 10 of the 187-member institution.

 

The IMF's member countries will vote on the plan in the coming weeks, after which some legislatures will need to ratify the changes.

 

The shift represents the most significant overhaul at the IMF since the body was set up after World War Two

AJE

[Showqi]

22 comments were placed underneath this article: 'Dumb Money' Returns to Stocks. This one is my favorite:

 

The short hedge funds are getting crushed by the dumb money and coverying there positions that is why we are seeing this pop in the market! Go dumb money cursh the professional hedge funds ,,,,,

[Chimera]

French media calculated that based on his current salary of euro 2,300 ($3,150) a month as a computer consultant, it would take Kerviel 177,536 years to pay off the damages.

 

Oh!