| SBI is now worth a lot more than Citigroup |
| Vivek Kaul / DNA |
|
"May you live in interesting times," goes an old Chinese curse. And these are interesting times for sure. State Bank of India (SBI), the largest bank in India, is now worth more than Citigroup, one of the world's largest banks. The market capitalisation (number of shares outstanding x the closing price of the share) of SBI on Friday closed at Rs66,285 crore. This is around 25 per cent more than the closing market capitalisation of Citigroup on the New York Stock Exchange on Friday. The market capitalisation of Citigroup was Rs52,931 crore. The Citigroup stock fell by 22.3 per cent on Friday to close at $1.95 per share (around Rs97). This was primarily on account of fears of the US government nationalising the bank, which would wipe out the shareholders. Hence the mad rush to get out of the share. A day earlier, the market capitalisation of Citigroup stood at Rs67,944 crore, around Rs700 crore more than that of SBI. Over the last four quarters, Citigroup has earned Rs230,485 crore as revenue, which almost eleven times more than the revenue earned by SBI. But when it comes to profits Citigroup over the last four quarters has suffered total losses of Rs83,474 crore. During the same time SBI has made profits of Rs8,262 crore. And that precisely explains why SBI is now worth more than Citigroup. The market capitalisation of Citigroup has fallen by around 90 per cent in the last one year. As the huge losses clearly tell us, the current financial crisis has hit Citigroup hard and experts now say it is a zombie bank, which is surviving primarily because of the billions of dollars of support that it has been receiving from the government. "Citicorp is now a "zombie bank" — its future is uncertain. I am not confident that they will be able restructure themselves and change their business model in a very challenging economic environment," saysSatyajit Das, an internationally renowned derivatives expert and the author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives. Citi has received $45 billion (Rs2,25,000 crore) out of the troubled asset relief programme (better known as the $700billion financial bailout launched by George Bush and Henry Paulson). Other than this it has also received guarantees worth $301 billion (Rs15,05,000 crore) on its assets from the government. Martin Hutchinson, an economic commentator, recently put out a list on the status of the 12 largest banks in the US. He categorised Citi as a zombie bank. "Citi has been a serial flirter with bankruptcy over the past 30 years and remains a basket case," he wrote. |
Tuesday, February 24, 2009
SBI is now worth a lot more than Citigroup
Govt cuts excise duty by 2percent
Finance ministry says india govt plans for 3rd stimulus package and govt to cut 2% excise duty more on autos& other sectors including cement
Sent from my BlackBerry® smartphone
Bharat Heavy, Infosys, Satyam, Sobha: India Equity Preview
Feb. 24 (Bloomberg) -- The following companies may have unusual price changes in India trading. Stock symbols are in parentheses and share prices are as of close on Feb. 20. Markets were shut yesterday for a holiday. The Bombay Stock Exchange's Sensitive Index, or Sensex, fell 2.2 percent to 8,843.21. The S&P CNX Nifty Index on the National Stock Exchange declined 1.9 percent to 2,736.45. The BSE 200 Index retreated 2.1 percent to 1,044.06. SGX CNX Nifty futures for February delivery dropped 1.2 percent to 2,692 at 10:46 a.m. in Singapore today. Overseas investors sold a net 3.2 billion rupees ($64 million) of Indian stocks on Feb. 19, according to the nation's market regulator. Bharat Heavy Electricals Ltd. (BHEL IN): India's biggest power equipment maker won a 31.5 billion rupee order to supply generating units to a project in central India. The shares fell 1.4 percent to 1,364.10 rupees. Infosys Technologies Ltd. (INFO IN): The nation's second- largest software developer is evaluating BCC and Ciber Novasoft, European providers of services based on SAP AG's software, as acquisition targets, the Economic Times reported yesterday, citing two unidentified persons familiar with the discussions. The shares retreated 2.6 percent to 1,177.15 rupees. Satyam Computer Services Ltd. (SCS IN): The Indian software provider at the center of the nation's biggest corporate fraud inquiry will seek approval from regulators next week for its plan to sell a stake to a strategic investor. The company said it won orders worth $250 million in the last seven weeks. Satyam fell 1.4 percent to 45.55. Sobha Developers Ltd. (SOBHA IN): The Indian real estate developer had its stock rating downgraded to "underweight" from "equal-weight" and had its price target cut 79 percent at Morgan Stanley, citing weak demand. Sobha slid 0.9 percent to 80.60 rupees. Tata Power Ltd. (TPWR IN): India's biggest electricity generator outside state control may not bid for projects that can generate 4,000 megawatts of electricity. Raising funds in the current situation is difficult, said Banmali Agrawala, executive director. Tata Power fell 1.9 percent to 737.9 rupees. UltraTech Cement Ltd. (UTCEM IN): India's second-biggest producer of the material had its rating raised to "equal- weight" from "underweight" at Morgan Stanley. The shares declined 0.5 percent to 416.95.
Indian Railways Scraps Joint Venture Plans for Factories
Feb. 23 (Bloomberg) -- Indian Railways, the state-run network that carries 15 million people daily, abandoned joint venture plans for factories to make locomotives and railcars after failing to identify partners. The monopoly will now build the factories on its own, Home MinisterPalaniappan Chidambaram told reporters after a cabinet meeting in New Delhi today. General Electric Co.'s India unit had planned to build a diesel engine factory in collaboration with Indian Railways and state-run Bharat Heavy Electricals Ltd. if it won the contract for the program. Indian Railways is seeking to add trains to carry more freight and passengers in the world's second-most populous nation as more of its 1.2 billion people traverse the seventh- biggest country by area. The cabinet approved the setting up of a diesel locomotive factory at Marhowra, Bihar, as a fully owned unit of the Indian Railways at a cost of 20.5 billion rupees ($413 million), the minister said. The factory will make 150 locomotives a year. Indian Railways will also build a wholly owned railcar plant at Rae Bareilly in Uttar Pradesh with an investment of 16.85 billion rupees, Chidambaram said. The factory will build 1,000 railcars a year. The cabinet also approved the proposal by Indian Railways to set up a factory as a "departmental production unit" to build electric locomotives at Madhepura in Bihar state, following a failed bid to attract joint venture partners. "In response to the Ministry of Railways Request for Proposals, only one, non-compliant bid was received," the government said in a release today. "Bidders have represented that the joint venture model represents insurmountable challenges and risks." The government didn't give any details about the bid. Before the factories start production, Indian Railways proposes to import 50 electric and 50 diesel locomotives over the next three years, Chidambaram said. http://www.bloomberg.com/apps/news?pid=20601091&sid=akM4nzL_fPqM&refer=india
Global economic data to watch for the day (Feb 24)
The Nifty & The Sensex Are Resting Upon Bank stocks-the collapse is imminent
- Stock market crash: A swift plunge in stocks to about 5000 on the Dow, 500 on the S&P 500 and 900 on the Nasdaq ... or lower.
- Corporate bankruptcies: A chain reaction of Chapter 11 filings or federal takeovers, including not only General Motors and Chrysler, but also Ann Taylor, Best Buy, Jet Blue, Macy's, Saks Fifth Avenue, Sears, Toys "R" Us, U.S. Airways and even giants like Ford or General Electric.
- Megabank failures: Bankruptcies or nationalization not only of Citigroup and Bank of America, but also JPMorgan Chase and HSBC.
- Nationwide epidemic of small and medium-sized bank failures: Outright FDIC takeovers, with little prospect of nationalization.
- Insurance failures: State takeovers of companies like Ambac Assurance, Bankers Life and Casualty, Conseco, FGIC, Medical Liability Mutual, Mortgage Guaranty Insurance, Nuclear Electric Insurance, PMI Mortgage, Standard Life of Indiana and many others. (Our free guide also contains a more extensive list of insurers.)
- Cities and states: An epidemic of defaults by thousands of cities, states and other issuers of tax-exempt municipal bonds.
- Stock market shutdowns: Trading halts on major, big-cap stocks ... plus on-again, off-again exchange shutdowns, making it increasingly difficult for investors to liquidate their holdings at any price.
- Credit market deep freeze: A virtual shutdown in all debt markets except U.S. Treasuries. An avalanche of selling — and virtually no buyers — for corporate bonds, commercial paper, asset-backed securities, municipal bonds and all forms of bank loans.
- Government bond collapse: A steep decline in the price of medium-and long-term government securities, as the U.S. Treasury bids aggressively for scarce funds to finance a ballooning budget deficit.
- George Soros said the financial system has effectively disintegrated, with the turbulence more severe than during the Great Depression and with the decline comparable to the fall of the Soviet Union, while ...
- Paul Volcker said he could not remember any time, even in the Great Depression, when things went down so fast and quite so uniformly around the world.
Tatas may drop another Bengal plan - Jai ho (Mamta) :)
Less than five months after Tata Motors [Get Quote] relocated its Nano project from West Bengal to Gujarat over land issues, another Tata group company, Tata Metaliks [Get Quote], is reviewing its expansion project in the state on similar grounds.
The West Bengal Industrial Development Corporation (WBIDC), which has been acquiring land in Kharagpur for Tata Metaliks' diversification project, has already initiated dialogue with the company. But land prices remain a contentious issue.
Subrata Gupta, managing director, WBIDC, said that land prices in the last three years have doubled. Prices, which were around Rs 3.5-4 lakh an acre three years ago when WBIDC started acquiring land, have now doubled to Rs 8 lakh.
Gupta said the company has been asked to pay a higher price. "Tata Metaliks has sought 15 days to respond," he said, adding that WBIDC officials had recently met a Tata Metaliks team after the company expressed its intent of withdrawing the project from the state.
Harsh K Jha, managing director, Tata Metaliks, confirmed that the company has sought time, but did not elaborate on the details. However, the company's board has decided not to wait for the land indefinitely. The company has already waited for four long years to get the required land, Jha said.
West Bengal Chief Minister Buddhadeb Bhattacharjee had promised Tata Metaliks on February 26, 2005, that the state would allocate land on a "priority basis". The company had applied for land on March 15, 2005.
Tata Metaliks, a pig iron producer, had initially sought 500 acres for its diversification into billets, but the land requirement was later scaled down to around 300 acres as contiguous land was not available.
Gupta said more than 150 acres has been acquired by WBIDC and the company has made an initial payment of Rs 9 crore for the land.
He also added that WBIDC would go ahead with land acquisition irrespective of the Tata Metaliks' decision. "Even if they do not set up the project, we will develop an industrial park," said Gupta.
WBIDC has decided not to acquire land for individual companies. Instead, it will set up industrial parks where companies will become anchor investors in a bid to maximise employment.
Tata Metaliks has also held discussions with the Karnataka government for an iron ore mining lease and for setting up of a plant. A high-level clearance committee of the state has already given approval for a steel plant in Haveri district.
The Next 18 Months: Recession, False Recovery, Depression
The Next 18 Months: Recession, False Recovery, Depression
Sam Vaknin, Ph.D. - 2/22/2009
The Obama stimulus package, worth some 800 billion USD, the 1.9 trillion USD in TARP funds and the endless Fed injections and auctions are bound to revive the moribund American economy by the third and fourth quarter of 2009. The Dow-Jones is likely to touch 10900, consumption will recover, as will housing starts and, in some markets, housing prices.But this "recovery" will prove to be a false dawn. It will last 2 quarters at most and will be followed by a recession so deep and dangerous that it would truly qualify as a Depression. The current recession is merely a prelude to the depression of 2010-5.
Here are the reasons:
(i) The stimulus should have been more sizable, taking into account the dimensions of the crisis.
The fate of modern economies is determined by four types of demand: the demand for consumer goods; the demand for investment goods; the demand for money; and the demand for assets, which represent the expected utility of money (deferred money).
Periods of economic boom are characterized by a heightened demand for goods, both consumer and investment; a rising demand for assets; and low demand for actual money (low savings, low capitalization, high leverage).
Investment booms foster excesses (for instance: excess capacity) that, invariably lead to investment busts. But, economy-wide recessions are not triggered exclusively and merely by investment busts. They are the outcomes of a shift in sentiment: a rising demand for money at the expense of the demand for goods and assets.
In other words, a recession is brought about when people start to rid themselves of assets (and, in the process, deleverage); when they consume and lend less and save more; and when they invest less and hire fewer workers. A newfound predilection for cash and cash-equivalents is a surefire sign of impending and imminent economic collapse.
This etiology indicates the cure: reflation. Printing money and increasing the money supply are bound to have inflationary effects. Inflation ought to reduce the public's appetite for a depreciating currency and push individuals, firms, and banks to invest in goods and assets and reboot the economy. Government funds can also be used directly to consume and invest, although the impact of such interventions is far from certain.
(ii) The US government should have nationalized the big banks, let other financial institutions that are not too big to fail do so, and force mergers and acquisitions on the rest. Half-hearted measures intended to provide balance-sheet relief are unlikely to restore trust in financial intermediaries. In the absence of such trust, banks will not resume their traditional roles of capital allocation and interbank lending. As it is, we are likely to see a run on some of the banks, including at least one major (probably Wells Fargo).
(iii) Europe's real economy as well as its financial sector are a mess. France, in sliding officially into a recession, has joined Spain, Ireland, and, now, the United Kingdom and Germany. Battered by a strong euro, expensive energy, and mighty competition from China, the US, and India, European exports have stagnated. As opposed to the USA (where exports constitute 18% of GDP), Europe is dependent on foreign carbon fuels and foreign markets for its goods and services. Exports constitute more than 40% of Eurozone GDP.
Moreover, Europe's commercial banks are in horrible shape - far worse than America's. This year alone, European banks must pay 1.41 trillion US dollars in principal and interest, mainly to bondholders. They don't have the money and they cannot borrow it from other banks because interbank lending has all but dried up. Many of them are already technically insolvent. They are also over-exposed to emerging markets in Eastern Europe, Latin America, Africa, and Asia.
Car repossessions are up 25% in Romania, as the members of a newly-minted class of consumers are unable to meet their obligations. Austrian, Greek, Swedish, and German banks are exposed to default risks throughout Central and Eastern Europe. Consumers and businesses in Serbia, Ukraine, Hungary, and other teetering economies owe Austrian financial institutions $290 billion - almost the entire GDP of this country!
As local currencies depreciate, debts, denominated in foreign exchange, grow more expensive to service. As the real economy contracts, in the first phase of what appears to be a prolonged recession, bad loans mushroom and reserves are exhausted. This requires cash-strapped governments to recapitalize major banks. Faced with current account and budget deficits, some of these sovereigns are scrambling for outside infusions from the likes of the IMF.
Europe's recession will be profound and protracted. Asia is likely to follow suit: Singapore, Japan, South Korea, and Taiwan are already technically in recession and China's growth rate is abating. A contraction of GDP in both India and China is no longer inconceivable. It seems that yet again, the USA will be faced with the daunting task of dragging the rest of the world back to growth and profitability.
(iv) To finance enormous bailout packages for the financial sector (and potentially the auto and mining industries) as well as fiscal stimulus plans, governments will have to issue trillions of US dollars in new bonds. Consequently, the prices of bonds are bound to come under pressure from the supply side.
But the demand side is likely to drive the next global financial crisis: the crash of the bond markets.
As the Fed takes US dollar interest rates below 1% (and with similar moves by the ECB, the Bank of England, and other central banks), buyers are likely to lose interest in government bonds and move to other high-quality, safe haven assets. Risk-aversion, mitigated by the evident thawing of the credit markets will cause investors to switch their portfolios from cash and cash-equivalents to more hazardous assets.
Moreover, as countries that hold trillions in government bonds (mainly US treasuries) begin to feel the pinch of the global crisis, they will be forced to liquidate their bondholdings in order to finance their needs.
In other words, bond prices are poised to crash precipitously. In the last 50 years, bond prices have collapsed by more than 35% at least on three occasions. This time around, though, such a turn of events will be nothing short of cataclysmic: more than ever, governments are relying on functional primary and secondary bond markets for their financing needs. There is no other way to raise the massive amounts of capital needed to salvage the global economy.
http://www.globalpolitician.com/25449-depression-recession-stimulus-europe-recovery
Bangalore airport to charge a development fee from all passengers
If you are traveling from Bangalore, please note that the Bengaluru International Airport is now charging a User Development Fee of Rs 260. This fee will be charged effective January 16, 2009 and be collected directly by the airport.
Who will be affected?
All passengers travelling out of Bangalore from the Bengaluru International Airport will have to pay Rs 260. However, infants under 2 years are exempted.
Where to pay the UDF?
You can pay the fee at the specially built counters just outside the terminal. You will then have to show the receipt before entering the terminal.
How can I pay?
You can pay by cash, credit cards or debit (only Visa, MasterCard and American Express) at the UDF counters outside the terminal. If you are paying by cash, we would advise you to have the exact change ready.
Will it take time?
While the airport has made provisions to provide enough counters, it may take up to 10 minutes during peak hours - from 6am to 10am and 5:30pm to 8:30pm. While at other times, it may take no more than 3 to 4 minutes.
But why is this extra amount being charged?
The UDF of Rs 260 has been approved by the Ministry of Civil Aviation, Government of India. This amount will be used for the development and maintenance of this state of the art airport and to provide other services and amenities.
For any other information, you can contact the Bengaluru International Airport at 080 - 66782251 or 666782255 or visit their website: www.bengaluruairport.com.
Movies on Stock Market
Following are some I found, along with links to description pages on
the Internet Movie Database. Obviously, some have more to do with the
stock market than others do, but all of them have at least one central
figure who is involved in the market.
Wall Street (1987)
The Family Man
(disillusionment of an investment broker)
http://www.imdb.com/title/tt0218967/
American Psycho
(homicidal stock broker)
http://www.imdb.com/title/tt0144084/
Other People's Money
(ins and outs of hostile takeovers and such; the play was better)
http://www.imdb.com/title/tt0102609/
The Bonfire of the Vanities
(main character is financial wizard)
http://www.imdb.com/title/tt0099165/
The Cheat
(charity money used to buy Wall Street investments)
http://www.imdb.com/title/tt0005078/
The Day the Bubble Burst
(historical TV drama about that day)
http://www.imdb.com/title/tt0082238/
Stocks and Blondes
http://www.imdb.com/title/tt0019423/
Changing Lanes
(one of my favorite movies; story involves questions about business
ethics)
http://www.imdb.com/title/tt0264472/
The Wheeler Dealers
http://www.imdb.com/title/tt0057681/
Money-Go-Round
http://www.imdb.com/title/tt0295449/
The Crash
(yes, that crash)
http://www.imdb.com/title/tt0022784/
The Boss' Wife
(stock broker has affair with title character)
http://www.imdb.com/title/tt0090767/
Net Worth
(trying to get rich quick)
http://www.imdb.com/title/tt0163764/
Buy & Cell
(that's jail cell for stock fraud)
http://www.imdb.com/title/tt0096997/
Wanda Whips Wall Street
(just what it sounds like, rated X)
http://www.imdb.com/title/tt0083314/
Don't Tell the Wife
(stock fraud)
http://www.imdb.com/title/tt0028799/
Wolves of Wall Street
http://www.imdb.com/title/tt0339918/
Monday, February 23, 2009
BSNL slashes mobile STD rate to 50 paise/min
BSNL slashes mobile STD rate to 50 paise/min
Chennai: Ahead of the Lok Sabha elections, BSNL is ringing in good news for lakhs of phone users. Its India Golden 50 scheme will cut mobile STD or long-distance tariffs to 50 paise a minute. The scheme will be launched for pre-paid mobile services on March 1.
Charges for the scheme will be Rs 375 plus applicable taxes with free talk value of Rs 50. In addition, customers can make local and STD calls to select BSNL numbers at 20 paise and 30 paise per minute respectively. Each SMS will be charged 50 paise.
BSNL has also tweaked its landline plans. The hitherto 60-second pulse for a call has been doubled to 120 seconds. This effectively allows the caller to speak for twice the time at the same tariff.
Union telecom minister A Raja said DoT would introduce mobile number portability (MNP) in major cities by August. This service will allow subscribers to migrate from one operator to another without changing their numbers. TNN
Sent from my BlackBerry® smartphone
Equity funds sitting on Rs 20,000-cr cash chest
Equity mutual funds are choosing to hold sizeable cash positions in view of current market uncertainties.
Data from Indsec Securities, based on January-end portfolios, show that average cash positions across equity funds were as high as 20 per cent, amounting to over Rs 20,000 crore across fund houses.
Mutual fund managers say that unprecedented volatility has prompted them to wait on the sidelines for buying opportunities. The proportion of cash to total equity assets has gone up from 10.1 to 20.5 per cent between January 2008 and now. Though the actual cash holdings have only increased from Rs 18,000 crore to Rs 20,000 crore, the contraction in equity fund assets (due to NAV declines and some outflows) has resulted in a larger proportion of cash. Cash includes cash and cash equivalents such as money market instruments and short-term debt instruments.
Among the larger asset management companies (AMCs) Reliance Mutual Fund and UTI Mutual Fund hold cash positions amounting to about 30 per cent of the equity assets while those such as SBI and HSBC Mutual hold about 20-22 per cent.
These cash holdings are not evenly spread across schemes.
Thematic funds, which typically focus on one sector (say, infrastructure) or theme (mid/small-cap stocks), account for a big portion of the cash holdings, while diversified equity funds have lower cash on their portfolios.
Reliance Diversified Power, Reliance Natural Resources, UTI Infrastructure and DSP BlackRock TIGER fund are some thematic funds which are high on cash and cash equivalents.
In some cases, cash positions (for funds such as Reliance or Birla Sun Life) are held against their exposure to derivatives in select schemes.
Are equity fund managers holding high levels of cash anticipating pullouts from the funds? Fund houses deny that that is the case.
Equity funds saw relatively small net outflows (redemptions) of Rs 1,378 crore in the choppy October-December 2008 quarter. In January, there was Rs 338 crore of new outflows.
Fund managers who are high on cash appear to be taking the view that the worst isn't over yet for the stock markets. Mutual funds have made net sales in stocks amounting to Rs 2,521 crore so far in 2009.
Mr Sanjay Dongre, Senior Equity Fund Manager, UTI Mutual Fund, says that redemption pressures faced by the equity funds were at "negligible" levels, as the investor base was mainly retail.
"We are holding higher cash positions on our funds given the uncertainty prevailing in the marketplace, where the risk appetite of investors is extremely low. Our diversified funds hold a 15-18 per cent allocation to cash and the thematic funds hold larger cash positions."
Asked if the fund house is looking for a specific market level (say, a Sensex of 8,000 or 8,500) to deploy this cash, Mr Dongre replied that it is uncertainty rather than the prevailing market valuation, that is prompting the cautious stance. "If we see risk capital returning to the markets and the uncertainty receding, we will go ahead and deploy that cash, even if market levels are higher than they are currently," he said.
At the other end of the spectrum, fund houses such as HDFC Mutual Fund and Franklin Templeton Mutual hold only about 7 per cent of their equity fund portfolios in cash.
These AMCs have consistently followed a practice of remaining more or less fully invested, irrespective of market swings.
Source: http://www.thehindubusinessline.com/2009/02/23/stories/2009022351410100.htm <http://www.thehindubusinessline.com/2009/02/23/stories/2009022351410100.htm>
Sent from my BlackBerry® smartphone
Why China Works?
Why China Works
A look at bright spots in the recession begins with Beijing, where state control is looking smart.
Rana ForooharNEWSWEEK
From the magazine issue dated Jan 19, 2009
China is the only major economy that is likely to show significant growth this year, because it is the only one that routinely breaks every rule in the economic textbook. There is no truly free market in China, where the state doctors statistics, manipulates the stock markets, fixes prices in key industries, owns many strategic industries outright, and staffs key bank posts with Communist Party members and tells them to whom they should lend, and in what they should invest. In fact, the main reason China is not slowing as fast as the other big five economies is its capacity for what economists ridicule, in normal times, as state meddling: it limited foreign investment in the banking sector and didn't embrace the exotic financial innovations that are the melting core of the global credit crisis.
Why does China's brand of command capitalism work? The question has long intrigued economists, who tend to cast the state as hopelessly stupid, the market as naturally brilliant. Now that the United States and Europe are moving toward state control—by nationalizing the banking and car industries, and imposing heavy new regulation on the financial industry—the question has a new urgency. China, the poorest and most chaotic big economy, looks like the one best positioned to navigate what may be the worst global downturn in seven decades.
In a time of crisis, China's bureaucrats can pick from traditional market tools, like their Western counterparts, and from the arsenal of command capitalism. Early last year, as the housing market was overheating, they simply ordered bankers to cut back on housing loans: then as home sales began to fall, they offered market incentives, like lower taxes on home purchases. In recent weeks they launched economic rescue efforts similar to those in the west, including a huge ($600 billion) plan to ramp up government spending and big interest-rate cuts. But they've also issued orders that would be seen as improper "intervention" in the West—for example, calling last week on state industries, including steel and construction, to "actively increase" their roles in the economy by buying up new assets at home and abroad.
Once seen as the bad habit of an immature economy, China's state meddling is now seen as a bulwark of stability. "Government control of the most capital intensive sectors leaves me optimistic about China's prospects," says CLSA economist Andy Rothman. "The government can say to companies in these sectors, 'Continue to spend, don't defer your investment plans'." Despite the falls in its biggest export markets and its own stock markets, China's economy looks likely to grow more than 7 percent in 2009—down from the double-digit pace of recent years, but stronger than most. Corporate loan rates are actually up, as state banks loosen credit. In a nation where investment is "the backbone of sustainable growth," accounting for 40 percent of GDP, the state is once again ramping up investment to fight serious threats to growth, says Morgan Stanley Asia chief Stephen Roach. "What we're seeing is that the Chinese command-and-control system can actually work more effectively than other market based systems in times of economic stress," he says.
When the original capitalist roader, Deng Xiaoping, said "It doesn't matter if a cat is white or black, as long as it catches the mouse," he put economic growth above ideology purity. Now Chinese leaders quote Deng to defend the basic deal he offered the Chinese people: autocratic capitalism would provide economic growth, while the Communist Party would retain absolute political power. Many of these leaders now argue that a democratic China couldn't have survived—let alone flourished—in a global recession. "China isn't ready for a democratic free-market system," says Fang Xinghai, the Western-trained director of the Shanghai Financial Services Office. "Think about what happened in the U.S. elections in 2000—if that had happened in China, there would be a war. The genius of Deng is that when he put China on the path to a market economy 30 years ago, he knew the country needed a stable political system [to withstand the changes of reform]. Whatever our system is, it is suitable for China."
China works because it is governed by a radical pragmatism that has focused on a slow but steady shift toward freer markets. Deng called it "crossing the river by feeling for the stones." The state still exerts a strong and stabilizing hand, but it has unleashed a private sector that now controls at least half the economy, and as much as 70 percent if you include state-owned companies that are in fact allowed to operate as private firms. That's up from around 17 percent in the early 1990s. Some 60 percent of GDP growth, and two thirds of new job creation now come from the private sector, according to CLSA.
In 1995, China began a revolutionary dismantling of state-run industry, laying off 46 million state workers—the equivalent of the entire workforce of France and Italy—over the next six years alone. In the years following, the streamlining has continued, sharply raising profitability at state-run firms (it was up 38 percent between 2004 and 2005, for example), and the private sector was allowed to play an increasingly important role in the economy. Rothman calls it "radical change, but over an extended time period." During this period numerous books on Russia's transition to capitalism were translated into Chinese. Above all, the Chinese wanted to avoid the chaos that followed Russia's "big-bang reforms" of the early '90s, which created a corrupt, Kremlin-sponsored economic oligarchy that still haunts Russia today.
China's crackdowns on political dissent have obscured the daring risks it takes on economic reform, even in crises. China opened to Western investment at an earlier stage of development than either Japan or South Korea—in the early 1980s, when its average yearly income was only 760rmb ($500), because Deng recognized that global trade was the way out of national poverty. He also freed peasants to seek jobs in cities, a risky move in a nation with a long history of mobile peasant rebellions. Even after the Tiananmen massacre of 1989, Deng continued to push economic reform. During the Asian financial crisis of the late 1990s, China joined the World Trade Organization, committing itself to a wider opening of its domestic markets. Around the same time, the government allowed laid-off workers to start businesses and buy up state-owned housing for a song, founding an ownership society almost overnight, and setting the stage for a middle-class society, in what Rothman calls "the biggest one-time transfer of wealth in the history of the world."
Now, as a worse crisis gains momentum, Beijing continues to push market reforms in key sectors, even as it reasserts control in others. Banks are one main target of reform. "Capital markets are still dominated by bank lending. We have too few products and we need to get more institutional investors into the market," says Fang Xinghai. To that end, China is boldly moving beyond stocks into new types of complex securities, including stock index funds, corporate bonds and other debt products, and even options and futures trading—albeit simple oil futures, rather than the complex credit derivatives that tanked Western markets. The fact that Chinese leaders understand even in the midst of the credit crisis that more sophisticated forms of securitization can play a stabilizing role is a sign of strategic thinking, and great skill at learning from others' mistakes. Asked what he admires most in Western counterparts, Jiang Jianqing, chairman of China's largest state bank, ICBC, says, "Innovation. Americans have an endless passion for it. Perhaps in the past, it hasn't been so well regulated, but you can't stop it. It's one of the most important ways to push enterprise forward."
Even more farsighted is the new, landmark land-reform program, which would make it possible for Chinese peasants to rent or lease their land to outsiders (including corporations). Simply figuring out who owns which properties can be a Byzantine task in China, so land reform could take decades—but the idea is already generating excitement. In November, real-estate consulting firm Jones Lang LaSalle estimated that land reform could unlock rural property worth as much as $2.5 trillion. "Land reform will be Hu Jintao's lasting legacy," says JLL national research director Michael Klibaner. Turning peasants into land-owning consumers could go a long way toward creating a consumer society, reducing China's dependence on exports, and rebalancing the world economy.
Once Chinese leaders signal a new direction, they rarely waver, says Rothman. Witness the political battle over American charges that China is deliberately holding down the value of the yuan to boost its exports, a charge that ignores the gradual 21.5 percent rise in the yuan that had already taken place between the summer of 2005 and 2008. While the yuan did fall a bit in recent months, most economists believe Beijing will continue to allow a modest appreciation, weighing its need for export competitiveness against the world's need for more balanced trade flows.
This balance between free and managed markets can also be seen in China's approach to price fixing and state control in key sectors like financial services, telecoms, utilities and energy. Some of these industries are partially privatized—in telecoms, equipment markets are open to foreigners, because they bring capital and expertise that eventually trickles down to local firms, like the now internationally competitive Huawei. But the more lucrative services market is still run by authorities, who set prices on mobile-phone calls. "China does control prices, it's true," says Fang. "But it moves one step behind the market. The market is always the baseline."
Recently, for example, China has been cutting fuel subsidies to bring prices closer to international norms. It's part of a 15-year process, that, according to CLSA's Rothman, has taken the percentage of total consumer prices fixed by the state from 95 percent to as low as 5 percent. The slow easing was designed to avoid the 1,000 percent burst of inflation that hit Russia from 1991 to 1992 after Moscow deregulated prices. "The Chinese don't want shock therapy, which has proven to be all shock, and no therapy," says Cheng Li, a senior fellow at the Brookings Institute.
The leadership's faith in its own ability to mold markets may derive from the fact that most are engineers, trained to build from a plan. Eight out of the nine top party officials come from engineering backgrounds, and the practicality of their profession may also help explain why they didn't buy into risky and Western financial innovation. At a recent Chinese business conference in Barcelona, Xu Kuangdi, vice chairman of the advisory body to China's Parliament, and President of the Chinese Academy of Engineering, mocked the "virtual" products sold over the last decade by Western bankers: "They had Ph.D.s in physics inventing tools that the banks themselves couldn't understand or regulate. Investors listened to their stories and were told how wonderful all this would be, how much better it was than producing real goods. Everyone was working in a dream."
A command-and-control system run by relatively skilled technocrats allows China to get things done, quickly. "I'm always struck by the ability of the Chinese state to move in a coherent manner and to marshal its people and the resources of the country to a common target," noted David Murphy, head of CLSA's China Reality research division, in a recent report on the country's efforts to bolster growth. Contrast this to Russia, where thuggish autocracy has created an "anything goes" environment in which neither investors nor most officials have any idea what might happen from one moment to the next.
The ruling engineers preside over a system that is highly process-oriented and obsessed with performance metrics. One economist who works closely with top government officials notes that many of them serve the same brand of Chateau Lafite Bordeaux at their dinner parties because of its exceptional rating by the Wine Spectator's Robert Parker. Ambassador Wu Jianmin of the Chinese foreign ministry recalls a recent meeting with a deputy mayor from the city of Wuxi who could compare in detail his own local economy with that of the United States in the 1970s. The official was concerned about why his service sector hadn't grown larger, given the respective per capita income growth (the town's party secretary has since been dispatched to America to hunt for service-sector talent).
Leaders who don't meet internal performance standards are, more often than not, held accountable, and do get sacked, which is still unusual in many developing economies. For instance, the scandal in which at least six Chinese kids died and 300,000 fell ill from toxic milk mixed with melamine to give a falsely high protein level led to the swift sacking in September of six city officials—including the mayor and party secretary—in the hometown of milk-powder maker Sanlu. China's top food safety inspector also stepped down and the company's chairwoman has gone to trial. Such moves seldom fully satisfy public anger but they do rattle officials.
Clear performance targets are part of an efficiency ethos that the Chinese also tend to admire in Americans. Four out of five high-ranking officials now train for some period of time at major universities in the United States (the Kennedy School at Harvard has been nicknamed "the fourth Communist Party school"). What the Chinese people still want at this stage is prosperity, and stability, which they are pursuing with a pragmatic, capitalist zeal that arguably surpasses even that of Americans. Huang Ming, who teaches at both Cornell in New York and the Cheung Kong Graduate School of Business in Beijing, jokes that while he can command respect in the United States simply by telling people he's a tenured professor at an Ivy League university, Chinese people say, "OK, that's good, but how much money do you make?"
Of course, the increase in Chinese prosperity has also created more opportunities for corruption, yet steady progress is visible even when it comes to graft. In just under a decade, China has fallen from 52nd most corrupt country to the 72nd, according to Transparency International's ranking of the world's most corrupt regimes. While Chinese and Western business people don't like to be quoted by name on the subject, they seem to agree that corruption in China tends to be of the soft, "wheel-greasing" variety, rather than the violent and disruptive type. "You don't have to worry about someone coming to your door with a bulge under their arm," laughs one British businessman working in Shanghai. One chairman of a large European firm, who has worked in a number of developing markets, makes this comparison: "In Russia, if there's $100 in the bridge-building pot, the official takes $90. In China, they take $30, and at least you know the bridge will eventually get built."
Many point to the current insider-trading case involving the detention of China's richest man, Huang Guangyu (the founder of electronics retailer Gome), as proof that the government is also getting more serious about prosecuting corruption. Independent economist Andy Xie (formerly of Morgan Stanley) says that the more important point is that Gome, the company, will most likely survive regardless of what happens to Huang—a sign that Chinese markets are maturing. Xie also notes that recent legal changes in stock-ownership law have made markets more liquid, putting them farther out of the control of state authorities. That's one reason authorities have tried since August to revive the stock market by scrapping the stamp tax on share purchases but in vain. The market is getting too free for the state to control.
That said, there's no doubt the state's hand in the economy will grow in this downturn. Much of the new stimulus package will flow through state-controlled sectors like transport and power a
Sent from my BlackBerry® smartphone
Sebi mulls norms to let investors decide MF fee
New regulations on entry load likely to be announced within a month; details of the plan yet to be finalized
The Securities and Exchange Board of India, or Sebi, is drafting new norms that would offer mutual fund investors a band or range of entry loads to pick from while purchasing units of a mutual fund, said a senior official at the market regulator. An entry load is the commission that an investor has to pay a distributor while purchasing units. Currently, investors pay an average 2.25% of the sum invested as entry load if they buy the units from a distributor, who is a third party, but they pay nothing if they buy directly from the fund house. The new norms are likely to be announced in a month, the official said requesting anonymity as details of the plan have not yet been finalized. Empowering Investors: Sebi chairman C.B. Bhave. The new Sebi norms are expected to make distributors more competent to justify their role. Abhijit Bhatlekar / MintAccording to the Association of Mutual Funds in India a 13-year old industry lobby, there were about 47 million mutual fund account holders in India at the end of 2008. There were some 35 mutual fund houses with net assets under management of about Rs4.6 trillion, at the end of January. The bulk of mutual fund unit sales in the country, however, are conducted through a large, unorganized network of distributors, which also include a few large players that have their own fund offerings. The largest third party distributors of mutual fund products in India are banks such as ICICI Bank Ltd and HDFC Bank Ltd. Several brokerages and non-banking finance companies also have large mutual fund products distribution businesses. "This (move) will hugely empower mutual fund investors," said the Sebi official, adding that it would force "distributors to stay competent to justify their role".
The move could also help increase the current investor base, this official said. "Penetration of mutual funds can be much more (but) .. without distributors, it would have been even less," said Uttam Aggarwal, who heads the mutual fund distribution business of Bajaj Capital Ltd, which is present in 90 towns and manages about one million investors. "Look at Quantum (Quantum Asset Management Co. Pvt. Ltd), its asset under management is in double digit crore," said Aggarwal. Quantum does not have a distribution model and does not charge entry load from investors. At the same time, financial services firms with established distribution capabilities have now expanded to included funds management business to leverage their strength."We are in this business to leverage our strong distribution capabilities," says Nitin Rakesh, chief executive of asset management with domestic retail brokerage Motilal Oswal Financial Services Ltd, one of the latest players in the funds business. In fact, fund houses recognize the grip that distributors have over access in both directions. The penetration of mutual funds in India, have been "severely limited" by distributors, Ashu Sayash, managing director and country head (India) of Fidelity Advisors International, had said in June last year. He was speaking at the launch of FundsNetwork, an online fund distribution portal that Fidelity International, the world's largest mutual fund manager, had launched. "The existing mutual fund business model is also not as profitable as insurance," said Aggarwal. "Insurance allows you to reach the smallest towns but mutual funds have regulatory issues (such as daily net asset value, or NAV, disclosures and cap on marketing expenses)." Unlike the third party distributors of, say, insurance products, who can only sell policies of one firm, mutual fund distributors are free to sell schemes from any fund house. Not surprisingly, fund houses often fall over each other to woo distributors so they will push their products. Sebi currently allows mutual funds to spend up to 6% of a scheme as marketing expense, and fund houses typically spend part of this allocation on distributors.
Sent from my BlackBerry® smartphone
The Next 18 Months: Recession, False Recovery, Depression
The Next 18 Months: Recession, False Recovery, Depression
Sam Vaknin, Ph.D. - 2/22/2009The Obama stimulus package, worth some 800 billion USD, the 1.9 trillion USD in TARP funds and the endless Fed injections and auctions are bound to revive the moribund American economy by the third and fourth quarter of 2009. The Dow-Jones is likely to touch 10900, consumption will recover, as will housing starts and, in some markets, housing prices.
But this "recovery" will prove to be a false dawn. It will last 2 quarters at most and will be followed by a recession so deep and dangerous that it would truly qualify as a Depression. The current recession is merely a prelude to the depression of 2010-5.
Here are the reasons:
(i) The stimulus should have been more sizable, taking into account the dimensions of the crisis.
The fate of modern economies is determined by four types of demand: the demand for consumer goods; the demand for investment goods; the demand for money; and the demand for assets, which represent the expected utility of money (deferred money).
Periods of economic boom are characterized by a heightened demand for goods, both consumer and investment; a rising demand for assets; and low demand for actual money (low savings, low capitalization, high leverage).
Investment booms foster excesses (for instance: excess capacity) that, invariably lead to investment busts. But, economy-wide recessions are not triggered exclusively and merely by investment busts. They are the outcomes of a shift in sentiment: a rising demand for money at the expense of the demand for goods and assets.
In other words, a recession is brought about when people start to rid themselves of assets (and, in the process, deleverage); when they consume and lend less and save more; and when they invest less and hire fewer workers. A newfound predilection for cash and cash-equivalents is a surefire sign of impending and imminent economic collapse.
This etiology indicates the cure: reflation. Printing money and increasing the money supply are bound to have inflationary effects. Inflation ought to reduce the public's appetite for a depreciating currency and push individuals, firms, and banks to invest in goods and assets and reboot the economy. Government funds can also be used directly to consume and invest, although the impact of such interventions is far from certain.
(ii) The US government should have nationalized the big banks, let other financial institutions that are not too big to fail do so, and force mergers and acquisitions on the rest. Half-hearted measures intended to provide balance-sheet relief are unlikely to restore trust in financial intermediaries. In the absence of such trust, banks will not resume their traditional roles of capital allocation and interbank lending. As it is, we are likely to see a run on some of the banks, including at least one major (probably Wells Fargo).
(iii) Europe's real economy as well as its financial sector are a mess. France, in sliding officially into a recession, has joined Spain, Ireland, and, now, the United Kingdom and Germany. Battered by a strong euro, expensive energy, and mighty competition from China, the US, and India, European exports have stagnated. As opposed to the USA (where exports constitute 18% of GDP), Europe is dependent on foreign carbon fuels and foreign markets for its goods and services. Exports constitute more than 40% of Eurozone GDP.
Moreover, Europe's commercial banks are in horrible shape - far worse than America's. This year alone, European banks must pay 1.41 trillion US dollars in principal and interest, mainly to bondholders. They don't have the money and they cannot borrow it from other banks because interbank lending has all but dried up. Many of them are already technically insolvent. They are also over-exposed to emerging markets in Eastern Europe, Latin America, Africa, and Asia.
Car repossessions are up 25% in Romania, as the members of a newly-minted class of consumers are unable to meet their obligations. Austrian, Greek, Swedish, and German banks are exposed to default risks throughout Central and Eastern Europe. Consumers and businesses in Serbia, Ukraine, Hungary, and other teetering economies owe Austrian financial institutions $290 billion - almost the entire GDP of this country!
As local currencies depreciate, debts, denominated in foreign exchange, grow more expensive to service. As the real economy contracts, in the first phase of what appears to be a prolonged recession, bad loans mushroom and reserves are exhausted. This requires cash-strapped governments to recapitalize major banks. Faced with current account and budget deficits, some of these sovereigns are scrambling for outside infusions from the likes of the IMF.
Europe's recession will be profound and protracted. Asia is likely to follow suit: Singapore, Japan, South Korea, and Taiwan are already technically in recession and China's growth rate is abating. A contraction of GDP in both India and China is no longer inconceivable. It seems that yet again, the USA will be faced with the daunting task of dragging the rest of the world back to growth and profitability.
(iv) To finance enormous bailout packages for the financial sector (and potentially the auto and mining industries) as well as fiscal stimulus plans, governments will have to issue trillions of US dollars in new bonds. Consequently, the prices of bonds are bound to come under pressure from the supply side.
But the demand side is likely to drive the next global financial crisis: the crash of the bond markets.
As the Fed takes US dollar interest rates below 1% (and with similar moves by the ECB, the Bank of England, and other central banks), buyers are likely to lose interest in government bonds and move to other high-quality, safe haven assets. Risk-aversion, mitigated by the evident thawing of the credit markets will cause investors to switch their portfolios from cash and cash-equivalents to more hazardous assets.
Moreover, as countries that hold trillions in government bonds (mainly US treasuries) begin to feel the pinch of the global crisis, they will be forced to liquidate their bondholdings in order to finance their needs.
In other words, bond prices are poised to crash precipitously. In the last 50 years, bond prices have collapsed by more than 35% at least on three occasions. This time around, though, such a turn of events will be nothing short of cataclysmic: more than ever, governments are relying on functional primary and secondary bond markets for their financing needs. There is no other way to raise the massive amounts of capital needed to salvage the global economy.
Sent from my BlackBerry® smartphone
News Updates
Dow +107Point in Future after US Government May Take Up To 40% Stake In Citigroup
US Government May Take Up To 40% Stake In Citigroup, Citigroup is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, people familiar with the situation say. While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%.
Bharat Heavy Electricals Ltd said it had received a 31.5 billion rupee ($635 million) order for supplying two 600 megawatt plants for a power project in central India.
Infosys Technologies has identified European SAP services firms BCC and Ciber Novasoft, among others, as potential acquisition targets. The move is part of the company's plan to increase revenues from SAP-based services and compete more effectively. While Infosys is evaluating the potential acquisition targets, a final transaction could be still far away, the Web site reported two people familiar with the discussions as saying, speaking on condition of anonymity. This is "especially, since there is no agreement yet on the valuation of BCC and the SAP services unit of Ciber.
BCC is headquartered in Poland and has a significant presence in the German market, while Ciber Novasoft is based in Germany. http://economictimes.indiatimes.com/Infosys-identifies-EU-SAP-firms-as-potential-targets/articleshow/4172128.cms <http://economictimes.indiatimes.com/Infosys-identifies-EU-SAP-firms-as-potential-targets/articleshow/4172128.cms>
http://in.reuters.com/article/businessNews/idINIndia-38156820090223 <http://in.reuters.com/article/businessNews/idINIndia-38156820090223>
Reliance Industries will soon acquire clean storages in the U.S. East Coast and Gulf Coast to sell huge volumes of fuel, a senior official said, putting in place its global infrastructure that will cement its swing-supplier role http://in.reuters.com/article/businessNews/idINIndia-38154220090223 <http://in.reuters.com/article/businessNews/idINIndia-38154220090223>
Reliance Power plans to double the capacity of its coal-based Butibori power project to 600 megawatts, the Business Standard reported on its Web site Monday, citing Chief Executive Officer Jayarama Chalasani, following a request by Maharashtra Chief Minster Ashok Chavan. Special purpose vehicle Vidarbha Industries Power was launched by Reliance Power and local industries in the MIDC region of Nagpur and its surrounding areas to construct the first group captive power project in the region. The fast-track project is expected to go on stream by 2011. http://www.business-standard.com/india/news/r-power-to-double-butibori-capacity/04/06/349818 <http://www.business-standard.com/india/news/r-power-to-double-butibori-capacity/04/06/349818>
Oil and Natural Gas Corp has discovered oil in the hydrocarbon-rich Krishna Godavari basin, which may turn out to be significant for the country's largest oil explorer, the Economic Times reported on its Web site Monday, citing a person close to the development. The person, who didn't wish to be named, said the discovery took place in block KG-DWN-98/2 and ONGC is now accessing the reserves, the Web site reported. An announcement on this is expected in a month or so, the person said, the Web site reported. ONGC offshore director Sudhir Vasudeva declined to comment on the discovery, citing confidentiality, http://economictimes.indiatimes.com/Economy/ONGC-strikes-oil-in-KG-basin/articleshow/4172523.cms <http://economictimes.indiatimes.com/Economy/ONGC-strikes-oil-in-KG-basin/articleshow/4172523.cms>
NTPC suspended work on a 600 megawatt hydroelectric project in the northern state of Uttarakhand due to a protest by an environmentalist. The construction of the Loharinag-Pala project began in July 2006 and the first turbine was scheduled to be commissioned in April 2011. NTPC had planned to invest INR32.83 billion in the project. An NTPC executive, who did not wish to be named, told Dow Jones Newswire
Sent from my BlackBerry® smartphone
Wall Street Awaits Bank Rescue Plan
Bears could have the upper hand again next week if Wall Street fails to get assurance that major banks can be rescued without being seized by the U.S. government. The Dow breached a six-year low in the holiday-shortened week amid mounting fears that the White House would nationalize banks, thus wiping out shareholders.
Stocks pared losses in the final hours of trading on Friday after the White House said it strongly believed in a privately held bank system. "We don't care about anything but bank details at this point," said Robert Francello, head of equity trading for Apex Capital hedge fund in San Francisco. "It's all about bank details and a bank rescue."
With indexes at multi-year lows, the focus will be on battered banks Citigroup (C.N) and Bank of America (BAC.N), two of the cheapest stocks on the Dow, after a top U.S. senator on Friday said short-term nationalization for some banks was possible.
The fate of both companies will have important consequences for the sector and the broad U.S. economy that is in the throes of an ever-deepening recession, analysts said.
"We're dependent on seeing some stability in the financial sector," said Steve Goldman, market strategist for Weeden & Co in Greenwich, Connecticut.
"Each day we walk into the market and we see them down 5 to 8 percent. It makes it difficult for stocks to advance." For the week, the Dow fell 6.2 percent and the S&P dropped 6.9 percent, while the Nasdaq stumbled 6.1 percent. It was the Dow's lowest close since October 2002.
The economy's troubles are likely to be confirmed by corporate results to be released next week by bellwethers Home Depot (HD.N), Target Corp (TGT.N) and Dell (DELL.O).
Investors will also parse through reams of data next week, including the Case-Schiller index of home prices, sales of both existing and new homes, and Friday's preliminary report on U.S. gross domestic product for the fourth quarter.
The Commerce Department issued an advance report on fourth-quarter GDP last month that showed the economy had contracted by a 3.8 percent annual rate.
The data will provide some clues as to the state of the fragile U.S. housing market, the eye of the economic storm that triggered the credit crunch. "It will be important to watch the home sales data," said Alan Gayle, senior investment strategist of RidgeWorth Investments. "If home sales are steady or they tick up ever so slightly that will be an encouraging sign."
Gayle added that investors should watch what is happening with the "inventory overhang" of unsold homes. But in coming days, the focus will remain squarely on Washington as Wall Street hope for details on a plan to bolster the financial sector, which suffered steep losses this week.
Citing unnamed U.S. Treasury sources, CNBC said the administration will release some details next week on its bank rescue plan. A Treasury spokesman told Reuters he could not immediately comment on the report.
Federal Reserve Chairman Ben Bernanke is set to testify on monetary policy before the Senate Banking Committee on Tuesday and Paul Volcker, a top economic adviser to President Barack Obama, testifies before a Joint Economic Committee hearing on Thursday.
Investors will be watching both officials for any hints about how the government will bolster banks. Details will be key, especially after Christopher Dodd, chairman of the Senate Banking Committee, told Bloomberg on Friday that the option to nationalize banks, although undesirable, was on the table.
Wall Street is still reeling from Treasury Secretary Timothy Geithner's failure to provide any details when he announced a bank plan.
"People are obviously very anxious to know what's going to be done and trillions of dollars are at stake," said Marc Groz, chief investment officer for Topos, an asset management and risk advisory firm. "It's a battle about who's going to pick up the tab.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Sent from my BlackBerry® smartphone
Osacar - Slumdog Millionaire Won 8 Oscar Awards
Slumdog Millionaire wins Oscar for best motion picture of the year| Danny Boyle wins best director Oscar for Slumdog Millionaire | A R Rahman wins Oscar for Original Score of Slumdog Millionaire | Slumdog Millionaire wins Oscar for best film editing | Slumdog Millionaire bags Oscar for best sound mixing | Slumdog Millionaire bags best cinematography Oscar | Slumdog Millionaire bags Oscar for best adapted screenplay
Sent from my BlackBerry® smartphone
Sunday, February 22, 2009
Long queues outside jewwelerry shops now to sell
Cashing in on high prices: People lining up at jewellery shops at Zaveri Bazar in Mumbai, to sell old gold ornaments. – Paul Noronha
Suresh P. Iyengar
Mumbai, Feb. 20 People have found a golden opportunity in the sharp rise in bullion prices. Even as gold jewellery buyers seem to have almost vanished in thin air, there are long queues outside jewellery shops which buy back old gold ornaments.
Mr Nitendra Jain, Proprietor, Jugraj Kantilal & Co, one of the largest buyers and sellers of gold and silver ornaments in Zaveri Bazar, the hub of gold trade in Mumbai, said, "We have been witnessing huge crowds who have come to sell their gold jewellery for the last ten days and expect it to increase if gold prices continue to rise."
Without revealing the quantity of gold bought back, Mr Jain said, "We are open from 11.30 a.m. to 6.30 p.m. and buy back whatever people offer to us. Our rates are one per cent lower than the market price for gold."
Mr J.A. Khan, who was the last in a serpentine queue outside Jugraj Kantilal & Co, said, "Though currently there are no attractive investment options, I decided to sell some of my old family jewellery as I feel the prices have peaked and may take a beating in the short term."
Mr Khan, who was earlier involved in the jewellery business, said he would invest a portion of the proceeds in mutual funds and fixed deposit schemes.
Gold prices crossed the Rs 15,500-level to an all-time intra-day high of Rs 15,545 for 10 grams, but ended at Rs 15,490 on Wednesday. It gained further on Thursday and closed at Rs 15,660 on Friday.
Mrs Shrikant Shreelekha, homemaker, said, "I was initially reluctant to sell my old jewellery, but then thought it is the right time to do so. I plan to go in for a new design later when prices fall. I had bought these jewels when gold was hovering around the Rs 8,000 to Rs 9,500 level." Demand down
Jewellery shops which do not buy old jewels wore a deserted look despite the peak wedding season round the corner. Mr Kiran Dikshit, Manager, Tribhovandas Bhimji Zaveri, said casual buying of gold, particularly for investments and gifting, was just not happening, but compulsory buying, especially for weddings, was taking place.
"In fact, some people have advanced their jewellery purchases, anticipating that prices will go up further," he added.
Mr Prithviraj Kothari, Chairman, Riddhi Siddhi Bullions, said retail jewellery sales had slowed down and wedding demand was low compared to last year. Mr Harish Galipalli, Head of Research, Karvy Commodities, said gold prices are no longer determined by demand and supply but by investment demand and variations in rupee-dollar value.
Since prices have risen by 20 per cent in the last one month, a sharp fall is expected in the near future before an upward march again. R
Sent from my BlackBerry® smartphone