The Pound is building momentum on European session, and pair's rally from 1.6230 low, triggered by unexpected improvement on employment levels, has extended above 1.6300 with the pair reaching 1.6360 high, testing the top of the recent trading range.
At the moment, the Pound trades at 1.6330, with next resistance levels at 1.6340/45 (Dec 10/11 high), and above here, 1.6375/90 (Dec 9 high/Dec 1 low) and 1.6450.
On the downside, support levels lie at 1.6275/80 previous session high and below here, 1.6230 (session low) and 1.6190/00 (Range floor).
Wednesday, December 16, 2009
European markets advance after upbeat PMI data; Euro and Pound, sideways
European markets are going through gains on early trading Thursday, with investor's appetite fuelled after positive Eurozone PMI flash estimates; in FX markets Euro remains consolidating after Tuesday's declines.
Eurostoxx 50 Index trades 0.9% up, while German DAX Index advances 0.8%, and French CAC Index adds 0.9%. In the UK, the FTSE Index trades 0.8% up.
On the macroeconomic Eurozone Manufacturing Flash PMI index has ticked up to 51.6 in December ftrom 51.2 in November, while services Flash PMI has been estimated to rise to 53.7 in December from 53.0 in November, showing that Eurozone's manufacturing and services sectors' activity continues growing after a log slump.
Furthermore, UK jobless claims fell in November for the first time since February 08, a decline of 6,300 claims , to 5.0% of the workforce, against market expectations of a 12,300 increase.
Euro and Pound remain in range
EUR/USD remains consolidating between 1.4500 and 1.4560/70 area after its decline from 1.4650 area on Monday. At the moment of writing, the Euro is trading at 1.4560 testing session high, after jumping from 1.4520 on positive flash PMI's.
GBP/USD remains trading within the 1.6200/1.6345 range. During European session, the Pound has dropped to 1.6230 day low before bouncing up to 1.6300 on the back of upbeat employment figures, although 1.6300 has not given way so far, and the Pound trades at 1.6280 at the moment of writing.
USD/JPY pullback from Tuesday high at 89.95 found support at 89.40 on early European session, and the Dollar rose to 89.85 high so far, approaching yesterday's high and 90.00 resistance area.
Eurostoxx 50 Index trades 0.9% up, while German DAX Index advances 0.8%, and French CAC Index adds 0.9%. In the UK, the FTSE Index trades 0.8% up.
On the macroeconomic Eurozone Manufacturing Flash PMI index has ticked up to 51.6 in December ftrom 51.2 in November, while services Flash PMI has been estimated to rise to 53.7 in December from 53.0 in November, showing that Eurozone's manufacturing and services sectors' activity continues growing after a log slump.
Furthermore, UK jobless claims fell in November for the first time since February 08, a decline of 6,300 claims , to 5.0% of the workforce, against market expectations of a 12,300 increase.
Euro and Pound remain in range
EUR/USD remains consolidating between 1.4500 and 1.4560/70 area after its decline from 1.4650 area on Monday. At the moment of writing, the Euro is trading at 1.4560 testing session high, after jumping from 1.4520 on positive flash PMI's.
GBP/USD remains trading within the 1.6200/1.6345 range. During European session, the Pound has dropped to 1.6230 day low before bouncing up to 1.6300 on the back of upbeat employment figures, although 1.6300 has not given way so far, and the Pound trades at 1.6280 at the moment of writing.
USD/JPY pullback from Tuesday high at 89.95 found support at 89.40 on early European session, and the Dollar rose to 89.85 high so far, approaching yesterday's high and 90.00 resistance area.
EUR/USD recovery, capped at 1.4560, remains in range
Euro rebound from 1.4505 low on Tuesday has been capped at 1.4560 at European opening times, and the Euro pulled back to 1.4510. The Euro remains consolidating between 1.4500 and 1.4560/70 after Tuesday's drop.
At the moment, the Euro trades at 1.4535, with next resistance levels at 1.4575/85 (intra-day level/Dec 11 low) and above here, 1.4620/30 and 1.4665. Support levels lie at 1.4505 (Dec 15 low) and 1.4480 (Oct low) and 1.4445 (Aug 5 high).
According to the ecPulse.com analysis team, the pair could dip below 1.4500, unless 1.4585 resistance gives way: "We believe that, the pair will be able to touch minor resistance 1.4585 and then reverse to achieve a possible bearish intraday direction ; targeting start 1.4475 zones followed 1.4400, while keeping an eye on the bearish short term direction which will prevail if 1.4685 remains intact."
At the moment, the Euro trades at 1.4535, with next resistance levels at 1.4575/85 (intra-day level/Dec 11 low) and above here, 1.4620/30 and 1.4665. Support levels lie at 1.4505 (Dec 15 low) and 1.4480 (Oct low) and 1.4445 (Aug 5 high).
According to the ecPulse.com analysis team, the pair could dip below 1.4500, unless 1.4585 resistance gives way: "We believe that, the pair will be able to touch minor resistance 1.4585 and then reverse to achieve a possible bearish intraday direction ; targeting start 1.4475 zones followed 1.4400, while keeping an eye on the bearish short term direction which will prevail if 1.4685 remains intact."
Tuesday, November 17, 2009
ECB's Stark: We Are Closer To Phasing Out Stimulus
FRANKFURT -(Dow Jones)- The time for a tightening of monetary conditions in the euro zone is approaching, European Central Bank executive board member Juergen Stark said Tuesday.
"After extended discussions, we are moving closer to phasing out our liquidity measures, as not all of them will be needed to the same extent as in the past," Stark told a banking conference.
He noted that the revival of world trade, the rebuilding of inventories and the huge influence of fiscal and monetary policy stimulus measures had helped bring the global recession to an end, adding that "recent economic and financial information is encouraging."
Stark said that the most pressing need of the day is to remove moral hazard from financial markets, while ensuring that there is enough liquidity for "markets and solvent institutions" and that proper procedures are in place for resolving the insolvencies of systemically important financial institutions.
"The first line of defense is that market participants must be liable for their actions," Stark said, adding a heavy hint that this appeared not to be the case at present. "As yet, I have...not seen any significant change in the behavior of market participants," Stark said. He stressed that the record amount of liquidity created by central banks across the world in the wake of the 2008 financial crisis "mustn't sow the seeds of new imbalances."
Some analysts have expressed concern that the sharp rebound in equity and, especially, debt markets this year may be more due to excess liquidity, rather than any improvement in the fundamental value of those assets.
Stark also rejected the creation of an 'emergency fund' financed or co-financed by taxpayers to insure the financial system. At a recent meeting of the G-20 group of countries, U.K. Prime Minister Gordon Brown had suggested levying a tax on financial transactions to seed such a fund, but the proposal was resisted by the U.S. and others.
Stark also repeated his opinion that the ECB has no great need to change its approach to monetary policy, saying that its emphasis on monetary analysis had proved its worth. He also argued that the ECB doesn't need any new policy tools to maintain price stability in the future.
Web site: www.ecb.int
-By Geoffrey T. Smith, Dow Jones Newswires (+49 160) 743 40 90; geoffrey.smith@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=a%2B9%2B7AGMLKtlUOD8sI0Q6w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 17, 2009 11:39 ET (16:39 GMT)
Copyright 2009 Dow Jones & Company, Inc.
"After extended discussions, we are moving closer to phasing out our liquidity measures, as not all of them will be needed to the same extent as in the past," Stark told a banking conference.
He noted that the revival of world trade, the rebuilding of inventories and the huge influence of fiscal and monetary policy stimulus measures had helped bring the global recession to an end, adding that "recent economic and financial information is encouraging."
Stark said that the most pressing need of the day is to remove moral hazard from financial markets, while ensuring that there is enough liquidity for "markets and solvent institutions" and that proper procedures are in place for resolving the insolvencies of systemically important financial institutions.
"The first line of defense is that market participants must be liable for their actions," Stark said, adding a heavy hint that this appeared not to be the case at present. "As yet, I have...not seen any significant change in the behavior of market participants," Stark said. He stressed that the record amount of liquidity created by central banks across the world in the wake of the 2008 financial crisis "mustn't sow the seeds of new imbalances."
Some analysts have expressed concern that the sharp rebound in equity and, especially, debt markets this year may be more due to excess liquidity, rather than any improvement in the fundamental value of those assets.
Stark also rejected the creation of an 'emergency fund' financed or co-financed by taxpayers to insure the financial system. At a recent meeting of the G-20 group of countries, U.K. Prime Minister Gordon Brown had suggested levying a tax on financial transactions to seed such a fund, but the proposal was resisted by the U.S. and others.
Stark also repeated his opinion that the ECB has no great need to change its approach to monetary policy, saying that its emphasis on monetary analysis had proved its worth. He also argued that the ECB doesn't need any new policy tools to maintain price stability in the future.
Web site: www.ecb.int
-By Geoffrey T. Smith, Dow Jones Newswires (+49 160) 743 40 90; geoffrey.smith@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=a%2B9%2B7AGMLKtlUOD8sI0Q6w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 17, 2009 11:39 ET (16:39 GMT)
Copyright 2009 Dow Jones & Company, Inc.
Bank Of Portugal Upgrades 2009 GDP Forecast To -2.7%
Bank Of Portugal Upgrades 2009 GDP Forecast To -2.7%
MADRID (Dow Jones)--The Portuguese economy will shrink 2.7% in 2009, the Bank of Portugal said, in a set of improved forecasts signaling that the pace of economic contraction is slowing. The Lisbon-based central bank said in its quarterly economic bulletin, published Tuesday, that its gross domestic product estimate is improved from its previous projection of a drop of 3.5% because exports and private consumption are showing more favorable trends in the second half of 2009.
Portuguese GDP was flat in 2008 and grew 1.8% in 2007.
The Portuguese economy will contract at a slower pace than other euro-zone peers because its banking sector has resisted turbulence from the global financial crisis and the country didn't suffer from a real estate price correction, the central bank added.
Consumer prices are expected to drop faster than expected, with the country's harmonized consumer price index falling 0.9% this year, compared to a previous forecast of a 0.5% drop.
Central Bank Web Site: www.bportugal.pt
-By Madrid Bureau, Dow Jones Newswires; +34-91 395 8120; djmadrid@dowjones.com;
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=a%2B9%2B7AGMLKtlUOD8sI0Q6w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 17, 2009 11:00 ET (16:00 GMT)
Copyright 2009 Dow Jones & Company, Inc.
MADRID (Dow Jones)--The Portuguese economy will shrink 2.7% in 2009, the Bank of Portugal said, in a set of improved forecasts signaling that the pace of economic contraction is slowing. The Lisbon-based central bank said in its quarterly economic bulletin, published Tuesday, that its gross domestic product estimate is improved from its previous projection of a drop of 3.5% because exports and private consumption are showing more favorable trends in the second half of 2009.
Portuguese GDP was flat in 2008 and grew 1.8% in 2007.
The Portuguese economy will contract at a slower pace than other euro-zone peers because its banking sector has resisted turbulence from the global financial crisis and the country didn't suffer from a real estate price correction, the central bank added.
Consumer prices are expected to drop faster than expected, with the country's harmonized consumer price index falling 0.9% this year, compared to a previous forecast of a 0.5% drop.
Central Bank Web Site: www.bportugal.pt
-By Madrid Bureau, Dow Jones Newswires; +34-91 395 8120; djmadrid@dowjones.com;
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=a%2B9%2B7AGMLKtlUOD8sI0Q6w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 17, 2009 11:00 ET (16:00 GMT)
Copyright 2009 Dow Jones & Company, Inc.
Hungarian Min: Exports, Not Consumption To Drive GDP
BUDAPEST -(Dow Jones)- Hungary should continue to rely on exports and not domestic consumption to boost its gross domestic product so as to pursue sustainable growth, Finance Minister Peter Oszko said Tuesday.
"It's possible to generate pro forma growth from debt, domestic --public --consumption, but that wouldn't be real and sustainable," Oszko said in a speech at a conference about the lessons of the global economic crisis.
Growth should be generated while the economy is in equilibrium, Oszko added. The size of sovereign debt and the indebtedness of households should receive a bigger weight than earlier when judging a country's economic health, he added.
Hungary was the first country in the European Union that sought help last year from the International Monetary Fund, when it was hit hard by the crisis because of its large budget deficit and external debt.
It has also seen its exports falling sharply as demand for Hungarian goods has fallen drastically, especially for automotive and consumer electronics, from Western Europe, its main export market, and especially from Germany.
The IMF and the EU, Hungary's biggest creditors, agreed Monday that Hungary won't draw on the next installment of its EUR20-billion credit line but keep it as a reserve should need for it arose.
The IMF also said Monday that it wouldn't tolerate the next government, due to come into power after general elections in spring next year, amassing a budget deficit of 7% or even more of GDP. The Fidesz party, which is widely tipped to make up the next government, has already said that it expects the budget shortfall to widen to 7% or more in 2010.
"The leaders of Fidesz must have realized that they'll have to stick to the main parameters of the IMF-EU agreement" to ensure the financing of the budget, KBC economist Zsolt Papp said earlier Tuesday.
"The interesting question remains how Fidesz will attempt to consolidate the fiscal targets with its general campaign promise of easing the tax burden," Papp added.
Fidesz doesn't support a fiscal policy that would boost the deficit but the current 2010 budget plan fails to include the proper amount of losses expected from the state railways, public transport, state hospitals, foreign exchange losses and a potential shortfall of tax revenues, state news agency quoted Fidesz Vice President Mihaly Varga as saying earlier Tuesday.
Ministry web site: www.pm.gov.hu
-By Margit Feher, Dow Jones Newswires; +36-20-925-2364; margit.feher@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=a%2B9%2B7AGMLKtlUOD8sI0Q6w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 17, 2009 12:22 ET (17:22 GMT)
Copyright 2009 Dow Jones & Company, Inc.
"It's possible to generate pro forma growth from debt, domestic --public --consumption, but that wouldn't be real and sustainable," Oszko said in a speech at a conference about the lessons of the global economic crisis.
Growth should be generated while the economy is in equilibrium, Oszko added. The size of sovereign debt and the indebtedness of households should receive a bigger weight than earlier when judging a country's economic health, he added.
Hungary was the first country in the European Union that sought help last year from the International Monetary Fund, when it was hit hard by the crisis because of its large budget deficit and external debt.
It has also seen its exports falling sharply as demand for Hungarian goods has fallen drastically, especially for automotive and consumer electronics, from Western Europe, its main export market, and especially from Germany.
The IMF and the EU, Hungary's biggest creditors, agreed Monday that Hungary won't draw on the next installment of its EUR20-billion credit line but keep it as a reserve should need for it arose.
The IMF also said Monday that it wouldn't tolerate the next government, due to come into power after general elections in spring next year, amassing a budget deficit of 7% or even more of GDP. The Fidesz party, which is widely tipped to make up the next government, has already said that it expects the budget shortfall to widen to 7% or more in 2010.
"The leaders of Fidesz must have realized that they'll have to stick to the main parameters of the IMF-EU agreement" to ensure the financing of the budget, KBC economist Zsolt Papp said earlier Tuesday.
"The interesting question remains how Fidesz will attempt to consolidate the fiscal targets with its general campaign promise of easing the tax burden," Papp added.
Fidesz doesn't support a fiscal policy that would boost the deficit but the current 2010 budget plan fails to include the proper amount of losses expected from the state railways, public transport, state hospitals, foreign exchange losses and a potential shortfall of tax revenues, state news agency quoted Fidesz Vice President Mihaly Varga as saying earlier Tuesday.
Ministry web site: www.pm.gov.hu
-By Margit Feher, Dow Jones Newswires; +36-20-925-2364; margit.feher@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=a%2B9%2B7AGMLKtlUOD8sI0Q6w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 17, 2009 12:22 ET (17:22 GMT)
Copyright 2009 Dow Jones & Company, Inc.
EUR/USD falls further to hits intra-day low at 1.4807
The Euro has continued falling against the Dollar during the American session with the pair extending decline from yesterday high at 1.5015 to reach lowest level since Nov 4 at 1.4807.
Currently the pair is trading around 1.48300/40, well within oversold territory, and reaching 0.90% daily losses from opening price action at 1.4968.
According to the FastBrokers research team, the EUR/USD is trading lower as investors await more data: “The EUR/USD is trading lower this morning as the S&P futures consolidate just above 1100. The EU is relatively quiet on the data front right now, making the EUR/USD’s present movements more reliant the Dollar’s reaction to upcoming economic data. Thus far we received slightly better than expected CPI and RPI data from Britain earlier in the session followed by weak PPI numbers from the U.S. The most disconcerting release was the -0.6% Core PPI reading (minus food and energy). The -0.6% decline is the largest in the Core number since November 2006. The setback in producer prices adds onto the sluggish EMI, Business Inventories, and Core Retail Sales data investors received yesterday. In other words, prices are declining while manufacturing slows and inventories rise, not to mention retail sales minus autos are weak as well. Hence, the Fed just received more evidence which may support its continued loose monetary policy stance. As a result, one would expect the Dollar to decline and the EUR/USD to benefit after such news. However, we will have to wait and see how the rest of today’s data pans out.”
Currently the pair is trading around 1.48300/40, well within oversold territory, and reaching 0.90% daily losses from opening price action at 1.4968.
According to the FastBrokers research team, the EUR/USD is trading lower as investors await more data: “The EUR/USD is trading lower this morning as the S&P futures consolidate just above 1100. The EU is relatively quiet on the data front right now, making the EUR/USD’s present movements more reliant the Dollar’s reaction to upcoming economic data. Thus far we received slightly better than expected CPI and RPI data from Britain earlier in the session followed by weak PPI numbers from the U.S. The most disconcerting release was the -0.6% Core PPI reading (minus food and energy). The -0.6% decline is the largest in the Core number since November 2006. The setback in producer prices adds onto the sluggish EMI, Business Inventories, and Core Retail Sales data investors received yesterday. In other words, prices are declining while manufacturing slows and inventories rise, not to mention retail sales minus autos are weak as well. Hence, the Fed just received more evidence which may support its continued loose monetary policy stance. As a result, one would expect the Dollar to decline and the EUR/USD to benefit after such news. However, we will have to wait and see how the rest of today’s data pans out.”
Monday, November 16, 2009
EUR/USD: Euro recovery stalls right below 1.5000
Euro recovery from 1.4825 low on Friday extended during Asian session and has stalled after hitting 1.4995 on early European session, and remains trading in a range between 1.4960 and 1.4995.
Despite recent pick up, the Euro is biased to the downside while below 1.5050, according to Ian Coleman, technical analyst at Turtle Futures: "At the moment I still have a wave count. It will become invalid if it breaks higher than 15050. I have no signal to sell as yet but with a previous high at 15017 I am expecting a turnaround soon (I see an ascending wedge formation on the 10 mins). I would then look to 14822 as P1 (profit 1) then 1.4680 area."
Resistance levels lie at 1.4980, and above here at 1.5000/15 (Nov 12 high) and 1.5050 (Nov 11 high). On the downside, support levels lie at 1.4935 (Intra-day low/ Nov 13 high), and below here, 1.4890/00 and 1.4870.
Despite recent pick up, the Euro is biased to the downside while below 1.5050, according to Ian Coleman, technical analyst at Turtle Futures: "At the moment I still have a wave count. It will become invalid if it breaks higher than 15050. I have no signal to sell as yet but with a previous high at 15017 I am expecting a turnaround soon (I see an ascending wedge formation on the 10 mins). I would then look to 14822 as P1 (profit 1) then 1.4680 area."
Resistance levels lie at 1.4980, and above here at 1.5000/15 (Nov 12 high) and 1.5050 (Nov 11 high). On the downside, support levels lie at 1.4935 (Intra-day low/ Nov 13 high), and below here, 1.4890/00 and 1.4870.
USD/CHF opens the week with losses and trades back at 1.0060
The Dollar has begun the current week against the Swissy with negative tone, extending its decline from Friday's high at 1.0182 and after opening the Asian session at 1.0120, pair has continued falling to trade below 1.0100 level and hit 1.0065 as intra-day low.
Currently the pair is trading around 1.0075/85, 0.40% below today's opening price action after using intra-day low as support level. Next supports could be 1.0055, Nov 12 low, below that, 1.0035, Nov 11 low, will be exposed.
Tomas Cedavicius, analyst at Investija.com gives us his scoop on USD/CHF: “Negative channel continued towards support level, selling actions are on a table now.”
Rajoo C, analyst at Precise Trader, comments: “The Hourly trend is in a Range trading with a downside bias expect the bears to struggle near 10070-30 levels , 10145-10205 are the critical levels to watch to maintain the bearish out look . On the 5 min is along the Horizontal Channel and the price patterns are suggesting choppy with lower lows. Fed Chairman Bernanke speaks today.”
Currently the pair is trading around 1.0075/85, 0.40% below today's opening price action after using intra-day low as support level. Next supports could be 1.0055, Nov 12 low, below that, 1.0035, Nov 11 low, will be exposed.
Tomas Cedavicius, analyst at Investija.com gives us his scoop on USD/CHF: “Negative channel continued towards support level, selling actions are on a table now.”
Rajoo C, analyst at Precise Trader, comments: “The Hourly trend is in a Range trading with a downside bias expect the bears to struggle near 10070-30 levels , 10145-10205 are the critical levels to watch to maintain the bearish out look . On the 5 min is along the Horizontal Channel and the price patterns are suggesting choppy with lower lows. Fed Chairman Bernanke speaks today.”
Euro recovery stalls right below 1.5000
Euro recovery from 1.4825 low on Friday extended during Asian session and has stalled after hitting 1.4995 on early European session, and remains trading in a range between 1.4960 and 1.4995. Despite recent pick up, the Euro is biased to the downside while below 1.5050, according to Ian Coleman, technical analyst at Turtle Futures.
Saturday, November 14, 2009
Wall Street rises on Friday; Stocks finish week with gains
U.S. markets rose on Friday and ended the week in positive with moderate gains. The Dow Jones rose 0.72% to finish at 10,270. The index is consolidating above 10,000 and for the week rose more than 2%. Equities worldwide ended mostly in positive for the week, after receiving the boost from the G20 on Monday and on
Friday with the return to growth in Europe.
The ecPulse.com analysis team affirms: “U.S. equity indexes ended this week’s session in green to extend a second straightly weekly rally, whereas better than expected earnings from Walt Disney Co and Abercrombie & Fitch Co managed to boost investors’ confidence, despite that the University of Michigan confidence index failed to meet expectations.
In the macroeconomic side, U.S. deficit in goods and services trade with the rest of the world has widened to $36.5 Billion in September from $30.8 Billion in Agust, well beyond the market consensus of $32.0 Billion. Furthermore, U.Michigan/Reuters Consumer Confidence Index has dropped to 66.1 in November, from 70.6 in October.
Nicole Elliott, senior technical analyst at Mizuho Corporate Bank, comments: “Analysis We continue to feel that stock indices have probably put in this year’s highs, or are about to do so, and are more likely to drift in thin markets over the next six weeks. FX will continue to consolidate, as should most commodities, with a tendency for the Yen to strengthen slightly and for the US dollar to weaken medium term. Treasury yields might drift lower too.”
Friday with the return to growth in Europe.
The ecPulse.com analysis team affirms: “U.S. equity indexes ended this week’s session in green to extend a second straightly weekly rally, whereas better than expected earnings from Walt Disney Co and Abercrombie & Fitch Co managed to boost investors’ confidence, despite that the University of Michigan confidence index failed to meet expectations.
In the macroeconomic side, U.S. deficit in goods and services trade with the rest of the world has widened to $36.5 Billion in September from $30.8 Billion in Agust, well beyond the market consensus of $32.0 Billion. Furthermore, U.Michigan/Reuters Consumer Confidence Index has dropped to 66.1 in November, from 70.6 in October.
Nicole Elliott, senior technical analyst at Mizuho Corporate Bank, comments: “Analysis We continue to feel that stock indices have probably put in this year’s highs, or are about to do so, and are more likely to drift in thin markets over the next six weeks. FX will continue to consolidate, as should most commodities, with a tendency for the Yen to strengthen slightly and for the US dollar to weaken medium term. Treasury yields might drift lower too.”
GBP/USD: Cable ends week below 1.6700
FXstreet.com (Córdoba) – Cable rose sharply on Friday against the Dollar. GBP/USD jumped from 1.6575 to test the 1.6700 zone. The pair peaked at 1.6706 (intra-day high) but failed to hold at those levels. Pound pulled down but found support at 1.6660.
Mohammed Isah, analyst at FXTechstraegy, comments: “To the topside, the pair must break back above the 1.6740 and the 1.6842 levels to reverse its downside threats and bring gains towards the 1.7041 level where its YTD high is standing with a penetration of there triggering the resumption of its medium term uptrend now on hold towards its .50 Ret (2.1160-1.3501)at 1.7314. On the whole, GBP remains pressured to the downside having collapsed off the 1.6842 level.”
The Sterling also rose against the Euro on Friday, for the second day in a row and managed to recover from Wednesday’s losses when EUR/GBP rose to 0.9063 posting a two week high. To continue rising Cable needs to break below 0.8900.
Mohammed Isah, analyst at FXTechstraegy, comments: “To the topside, the pair must break back above the 1.6740 and the 1.6842 levels to reverse its downside threats and bring gains towards the 1.7041 level where its YTD high is standing with a penetration of there triggering the resumption of its medium term uptrend now on hold towards its .50 Ret (2.1160-1.3501)at 1.7314. On the whole, GBP remains pressured to the downside having collapsed off the 1.6842 level.”
The Sterling also rose against the Euro on Friday, for the second day in a row and managed to recover from Wednesday’s losses when EUR/GBP rose to 0.9063 posting a two week high. To continue rising Cable needs to break below 0.8900.
Friday, November 6, 2009
Openness to Foreign Investment
Post-independence scenario
India's post-independence economic policy combined a vigorous private sector with state planning and control, treating foreign investment as a necessary evil. Prior to 1991, foreign firms were allowed to enter the Indian market only if they possessed technology unavailable in India. Almost every aspect of production and marketing was tightly controlled, and many of the foreign companies that came to India eventually abandoned their projects.
New policies
The industrial policy announced in July 1991 was vastly simpler, more liberal and more transparent than its predecessors, and it actively promoted foreign investment as indispensable to India's international competitiveness. The new policy permits automatic approval for foreign equity investments of up to 51 percent, so long as these investments are made in one of 35 "high priority" industries that account for the lion's share of industrial activity.
Hassles earlier
Prior to 1991, foreign equity participation was limited to 40 percent, and foreign investors were saddled by numerous operating constraints. Foreign equity investments in excess of 51 percent, or those which fall outside the specified "high priority" areas, must be approved by the Foreign Investment Promotion Board (FIPB) and approved by a Cabinet Committee.
Constraints: too many
The government on occasion has denied requests for a foreign equity stake exceeding 51 percent. Non-resident Indians (NRI's) and Overseas Corporate Bodies (firms with NRI majority ownership) may hold 100 percent ownership in all industries except those reserved for the public sector.
These reserved industries are:
Improved conditions
To allow more NRI investments, the GOI recently allowed repatriation of investment in all activities, except agriculture and plantations, subject to certain conditions. As of June 1995, NRIs and OCBs may invest on a repatriable basis in new issues of shares/debentures only of industrial or manufacturing companies.
India's post-independence economic policy combined a vigorous private sector with state planning and control, treating foreign investment as a necessary evil. Prior to 1991, foreign firms were allowed to enter the Indian market only if they possessed technology unavailable in India. Almost every aspect of production and marketing was tightly controlled, and many of the foreign companies that came to India eventually abandoned their projects.
New policies
The industrial policy announced in July 1991 was vastly simpler, more liberal and more transparent than its predecessors, and it actively promoted foreign investment as indispensable to India's international competitiveness. The new policy permits automatic approval for foreign equity investments of up to 51 percent, so long as these investments are made in one of 35 "high priority" industries that account for the lion's share of industrial activity.
Hassles earlier
Prior to 1991, foreign equity participation was limited to 40 percent, and foreign investors were saddled by numerous operating constraints. Foreign equity investments in excess of 51 percent, or those which fall outside the specified "high priority" areas, must be approved by the Foreign Investment Promotion Board (FIPB) and approved by a Cabinet Committee.
Constraints: too many
The government on occasion has denied requests for a foreign equity stake exceeding 51 percent. Non-resident Indians (NRI's) and Overseas Corporate Bodies (firms with NRI majority ownership) may hold 100 percent ownership in all industries except those reserved for the public sector.
These reserved industries are:
- arms,
- ammunition and defense equipment;
- atomic energy;
- mineral oils;
- minerals used in atomic energy; and
- railway transport.
Improved conditions
To allow more NRI investments, the GOI recently allowed repatriation of investment in all activities, except agriculture and plantations, subject to certain conditions. As of June 1995, NRIs and OCBs may invest on a repatriable basis in new issues of shares/debentures only of industrial or manufacturing companies.
Foreign Direct Investment Introduction
Foreign Direct Investment (FDI) is permited as under the following forms of investments.
Forbidden Territories:
FDI is not permitted in the following industrial sectors:
Foreign Investment through GDRs (Euro Issues)
Foreign Investment through GDRs is treated as Foreign Direct Investment
Indian companies are allowed to raise equity capital in the international market through the issue of Global Depository Receipt (GDRs). GDRs are designated in dollar and are not subject to any ceilings on investment. An applicant company seeking Government's approval in this regard should have consistent track record for good performance (financial or otherwise) for a minimum period of 3 years. This condition would be relaxed for infrastructure projects such as power generation, telecommunication, petroleum exploration and refining, ports, airports and roads.
Clearance from FIPB
There is no restriction on the number of Euro-issue to be floated by a company or a group of companies in the financial year . A company engaged in the manufacture of items covered under Annex-III of the New Industrial Policy whose direct foreign investment after a proposed Euro issue is likely to exceed 51% or which is implementing a project not contained in Annex-III, would need to obtain prior FIPB clearance before seeking final approval from Ministry of Finance.
Use of GDRs
The proceeds of the GDRs can be used for financing capital goods imports, capital expenditure including domestic purchase/installation of plant, equipment and building and investment in software development, prepayment or scheduled repayment of earlier external borrowings, and equity investment in JV/WOSs in India.
Restrictions
However, investment in stock market and real estate will not be permitted. Companies may retain the proceeds abroad or may remit funds into India in anticiption of the use of funds for approved end uses. Any investment from a foreign firm into India requires the prior approval of the Government of India.
- Through Financial collaborations.
- Through joint ventures and technical collaborations.
- Through capital markets via Euro issues.
- Through private placements or preferential allotments.
Forbidden Territories:
FDI is not permitted in the following industrial sectors:
- Arms and ammunition.
- Atomic Energy.
- Railway Transport.
- Coal and lignite.
- Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc.
Foreign Investment through GDRs (Euro Issues)
Foreign Investment through GDRs is treated as Foreign Direct Investment
Indian companies are allowed to raise equity capital in the international market through the issue of Global Depository Receipt (GDRs). GDRs are designated in dollar and are not subject to any ceilings on investment. An applicant company seeking Government's approval in this regard should have consistent track record for good performance (financial or otherwise) for a minimum period of 3 years. This condition would be relaxed for infrastructure projects such as power generation, telecommunication, petroleum exploration and refining, ports, airports and roads.
Clearance from FIPB
There is no restriction on the number of Euro-issue to be floated by a company or a group of companies in the financial year . A company engaged in the manufacture of items covered under Annex-III of the New Industrial Policy whose direct foreign investment after a proposed Euro issue is likely to exceed 51% or which is implementing a project not contained in Annex-III, would need to obtain prior FIPB clearance before seeking final approval from Ministry of Finance.
Use of GDRs
The proceeds of the GDRs can be used for financing capital goods imports, capital expenditure including domestic purchase/installation of plant, equipment and building and investment in software development, prepayment or scheduled repayment of earlier external borrowings, and equity investment in JV/WOSs in India.
Restrictions
However, investment in stock market and real estate will not be permitted. Companies may retain the proceeds abroad or may remit funds into India in anticiption of the use of funds for approved end uses. Any investment from a foreign firm into India requires the prior approval of the Government of India.
Financial and Banking Sector Reforms
The last decade witnessed the maturity of India's financial markets. Since 1991, every governments of India took major steps in reforming the financial sector of the country. The important achievements in the following fields is discussed under serparate heads:
Financial Markets
In the last decade, Private Sector Institutions played an important role. They grew rapidly in commercial banking and asset management business. With the openings in the insurance sector for these institutions, they started making debt in the market.
Competition among financial intermediaries gradually helped the interest rates to decline. Deregulation added to it. The real interest rate was maintained. The borrowers did not pay high price while depositors had incentives to save. It was something between the nominal rate of interest and the expected rate of inflation.
Regulators
The Finance Ministry continuously formulated major policies in the field of financial sector of the country. The Government accepted the important role of regulators. The Reserve Bank of India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and the insurance Regulatory and Development Authority (IRDA) became important institutions. Opinions are also there that there should be a super-regulator for the financial services sector instead of multiplicity of regulators.
The banking system
Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still dominating the commercial banking system. Shares of the leading PSBs are already listed on the stock exchanges.
The RBI has given licences to new private sector banks as part of the liberalisation process. The RBI has also been granting licences to industrial houses. Many banks are successfully running in the retail and consumer segments but are yet to deliver services to industrial finance, retail trade, small business and agricultural finance.
The PSBs will play an important role in the industry due to its number of branches and foreign banks facing the constrait of limited number of branches. Hence, in order to achieve an efficient banking system, the onus is on the Government to encourage the PSBs to be run on professional lines.
Development finance institutions
FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and equity funds.
Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-lending institutions.
Capital adequacy norms extended to financial institutions.
DFIs such as IDBI and ICICI have entered other segments of financial services such as commercial banking, asset management and insurance through separate ventures. The move to universal banking has started.
Non-banking finance companies
In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net owned funds, has been raised to Rs.2 crores.
Until recently, the money market in India was narrow and circumscribed by tight regulations over interest rates and participants. The secondary market was underdeveloped and lacked liquidity. Several measures have been initiated and include new money market instruments, strengthening of existing instruments and setting up of the Discount and Finance House of India (DFHI).
The RBI conducts its sales of dated securities and treasury bills through its open market operations (OMO) window. Primary dealers bid for these securities and also trade in them. The DFHI is the principal agency for developing a secondary market for money market instruments and Government of India treasury bills. The RBI has introduced a liquidity adjustment facility (LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out through repo auctions.
On account of the substantial issue of government debt, the gilt- edged market occupies an important position in the financial set- up. The Securities Trading Corporation of India (STCI), which started operations in June 1994 has a mandate to develop the secondary market in government securities.
Long-term debt market: The development of a long-term debt market is crucial to the financing of infrastructure. After bringing some order to the equity market, the SEBI has now decided to concentrate on the development of the debt market. Stamp duty is being withdrawn at the time of dematerialisation of debt instruments in order to encourage paperless trading.
The capital market
The number of shareholders in India is estimated at 25 million. However, only an estimated two lakh persons actively trade in stocks. There has been a dramatic improvement in the country's stock market trading infrastructure during the last few years. Expectations are that India will be an attractive emerging market with tremendous potential. Unfortunately, during recent times the stock market have been constrained by some unsavoury developments, which has led to retail investors deserting the stock markets.
Mutual funds
The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996 and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for the establishment of many more players, both Indian and foreign players.
The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly Rs.70,000 crores, but its share is going down. The biggest shock to the mutual fund industry during recent times was the insecurity generated in the minds of investors regarding the US 64 scheme. With the growth in the securities markets and tax advantages granted for investment in mutual fund units, mutual funds started becoming popular.
The foreign owned AMCs are the ones which are now setting the pace for the industry. They are introducing new products, setting new standards of customer service, improving disclosure standards and experimenting with new types of distribution.
The insurance industry is the latest to be thrown open to competition from the private sector including foreign players. Foreign companies can only enter joint ventures with Indian companies, with participation restricted to 26 per cent of equity. It is too early to conclude whether the erstwhile public sector monopolies will successfully be able to face up to the competition posed by the new players, but it can be expected that the customer will gain from improved service.
The new players will need to bring in innovative products as well as fresh ideas on marketing and distribution, in order to improve the low per capita insurance coverage. Good regulation will, of course, be essential.
Overall approach to reforms
The last ten years have seen major improvements in the working of various financial market participants. The government and the regulatory authorities have followed a step-by-step approach, not a big bang one. The entry of foreign players has assisted in the introduction of international practices and systems. Technology developments have improved customer service. Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an active corporate debt market and a developed derivatives market). On the whole, the cumulative effect of the developments since 1991 has been quite encouraging. An indication of the strength of the reformed Indian financial system can be seen from the way India was not affected by the Southeast Asian crisis.
However, financial liberalisation alone will not ensure stable economic growth. Some tough decisions still need to be taken. Without fiscal control, financial stability cannot be ensured. The fate of the Fiscal Responsibility Bill remains unknown and high fiscal deficits continue. In the case of financial institutions, the political and legal structures hve to ensure that borrowers repay on time the loans they have taken. The phenomenon of rich industrialists and bankrupt companies continues. Further, frauds cannot be totally prevented, even with the best of regulation. However, punishment has to follow crime, which is often not the case in India.
Deregulation of banking system
Prudential norms were introduced for income recognition, asset classification, provisioning for delinquent loans and for capital adequacy. In order to reach the stipulated capital adequacy norms, substantial capital were provided by the Government to PSBs.
Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash reserve ratio (CRR) brought down in steps. Interest rates on the deposits and lending sides almost entirely were deregulated.
New private sector banks allowed to promote and encourage competition. PSBs were encouraged to approach the public for raising resources. Recovery of debts due to banks and the Financial Institutions Act, 1993 was passed, and special recovery tribunals set up to facilitate quicker recovery of loan arrears.
Bank lending norms liberalised and a loan system to ensure better control over credit introduced. Banks asked to set up asset liability management (ALM) systems. RBI guidelines issued for risk management systems in banks encompassing credit, market and operational risks.
A credit information bureau being established to identify bad risks. Derivative products such as forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced.
Capital market developments
The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was established in 1992.
Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after registration with the SEBI. Indian companies were permitted to access international capital markets through euro issues.
The National Stock Exchange (NSE), with nationwide stock trading and electronic display, clearing and settlement facilities was established. Several local stock exchanges changed over from floor based trading to screen based trading.
Private mutual funds permitted
The Depositories Act had given a legal framework for the establishment of depositories to record ownership deals in book entry form. Dematerialisation of stocks encouraged paperless trading. Companies were required to disclose all material facts and specific risk factors associated with their projects while making public issues.
To reduce the cost of issue, underwriting by the issuer were made optional, subject to conditions. The practice of making preferential allotment of shares at prices unrelated to the prevailing market prices stopped and fresh guidelines were issued by SEBI.
SEBI reconstituted governing boards of the stock exchanges, introduced capital adequacy norms for brokers, and made rules for making client or broker relationship more transparent which included separation of client and broker accounts.
Buy back of shares allowed
The SEBI started insisting on greater corporate disclosures. Steps were taken to improve corporate governance based on the report of a committee.
SEBI issued detailed employee stock option scheme and employee stock purchase scheme for listed companies.
Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given the freedom to issue dematerialised shares in any denomination.
Derivatives trading starts with index options and futures. A system of rolling settlements introduced. SEBI empowered to register and regulate venture capital funds.
The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating agencies as well as introducing a code of conduct for all credit rating agencies operating in India.
Consolidation imperative
Another aspect of the financial sector reforms in India is the consolidation of existing institutions which is especially applicable to the commercial banks. In India the banks are in huge quantity. First, there is no need for 27 PSBs with branches all over India. A number of them can be merged. The merger of Punjab National Bank and New Bank of India was a difficult one, but the situation is different now. No one expected so many employees to take voluntary retirement from PSBs, which at one time were much sought after jobs. Private sector banks will be self consolidated while co-operative and rural banks will be encouraged for consolidation, and anyway play only a niche role.
In the case of insurance, the Life insurance Corporation of India is a behemoth, while the four public sector general insurance companies will probably move towards consolidation with a bit of nudging. The UTI is yet again a big institution, even though facing difficult times, and most other public sector players are already exiting the mutual fund business. There are a number of small mutual fund players in the private sector, but the business being comparatively new for the private players, it will take some time.
We finally come to convergence in the financial sector, the new buzzword internationally. Hi-tech and the need to meet increasing consumer needs is encouraging convergence, even though it has not always been a success till date. In India organisations such as IDBI, ICICI, HDFC and SBI are already trying to offer various services to the customer under one umbrella. This phenomenon is expected to grow rapidly in the coming years. Where mergers may not be possible, alliances between organisations may be effective. Various forms of bancassurance are being introduced, with the RBI having already come out with detailed guidelines for entry of banks into insurance. The LIC has bought into Corporation Bank in order to spread its insurance distribution network. Both banks and insurance companies have started entering the asset management business, as there is a great deal of synergy among these businesses. The pensions market is expected to open up fresh opportunities for insurance companies and mutual funds.
It is not possible to play the role of the Oracle of Delphi when a vast nation like India is involved. However, a few trends are evident, and the coming decade should be as interesting as the last one.
- Financial markets
- Regulators
- The banking system
- Non-banking finance companies
- The capital market
- Overall approach to reforms
- Deregulation of banking system
- Capital market developments
- Consolidation imperative
Financial Markets
In the last decade, Private Sector Institutions played an important role. They grew rapidly in commercial banking and asset management business. With the openings in the insurance sector for these institutions, they started making debt in the market.
Competition among financial intermediaries gradually helped the interest rates to decline. Deregulation added to it. The real interest rate was maintained. The borrowers did not pay high price while depositors had incentives to save. It was something between the nominal rate of interest and the expected rate of inflation.
Regulators
The Finance Ministry continuously formulated major policies in the field of financial sector of the country. The Government accepted the important role of regulators. The Reserve Bank of India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and the insurance Regulatory and Development Authority (IRDA) became important institutions. Opinions are also there that there should be a super-regulator for the financial services sector instead of multiplicity of regulators.
The banking system
Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still dominating the commercial banking system. Shares of the leading PSBs are already listed on the stock exchanges.
The RBI has given licences to new private sector banks as part of the liberalisation process. The RBI has also been granting licences to industrial houses. Many banks are successfully running in the retail and consumer segments but are yet to deliver services to industrial finance, retail trade, small business and agricultural finance.
The PSBs will play an important role in the industry due to its number of branches and foreign banks facing the constrait of limited number of branches. Hence, in order to achieve an efficient banking system, the onus is on the Government to encourage the PSBs to be run on professional lines.
Development finance institutions
FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and equity funds.
Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-lending institutions.
Capital adequacy norms extended to financial institutions.
DFIs such as IDBI and ICICI have entered other segments of financial services such as commercial banking, asset management and insurance through separate ventures. The move to universal banking has started.
Non-banking finance companies
In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net owned funds, has been raised to Rs.2 crores.
Until recently, the money market in India was narrow and circumscribed by tight regulations over interest rates and participants. The secondary market was underdeveloped and lacked liquidity. Several measures have been initiated and include new money market instruments, strengthening of existing instruments and setting up of the Discount and Finance House of India (DFHI).
The RBI conducts its sales of dated securities and treasury bills through its open market operations (OMO) window. Primary dealers bid for these securities and also trade in them. The DFHI is the principal agency for developing a secondary market for money market instruments and Government of India treasury bills. The RBI has introduced a liquidity adjustment facility (LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out through repo auctions.
On account of the substantial issue of government debt, the gilt- edged market occupies an important position in the financial set- up. The Securities Trading Corporation of India (STCI), which started operations in June 1994 has a mandate to develop the secondary market in government securities.
Long-term debt market: The development of a long-term debt market is crucial to the financing of infrastructure. After bringing some order to the equity market, the SEBI has now decided to concentrate on the development of the debt market. Stamp duty is being withdrawn at the time of dematerialisation of debt instruments in order to encourage paperless trading.
The capital market
The number of shareholders in India is estimated at 25 million. However, only an estimated two lakh persons actively trade in stocks. There has been a dramatic improvement in the country's stock market trading infrastructure during the last few years. Expectations are that India will be an attractive emerging market with tremendous potential. Unfortunately, during recent times the stock market have been constrained by some unsavoury developments, which has led to retail investors deserting the stock markets.
Mutual funds
The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996 and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for the establishment of many more players, both Indian and foreign players.
The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly Rs.70,000 crores, but its share is going down. The biggest shock to the mutual fund industry during recent times was the insecurity generated in the minds of investors regarding the US 64 scheme. With the growth in the securities markets and tax advantages granted for investment in mutual fund units, mutual funds started becoming popular.
The foreign owned AMCs are the ones which are now setting the pace for the industry. They are introducing new products, setting new standards of customer service, improving disclosure standards and experimenting with new types of distribution.
The insurance industry is the latest to be thrown open to competition from the private sector including foreign players. Foreign companies can only enter joint ventures with Indian companies, with participation restricted to 26 per cent of equity. It is too early to conclude whether the erstwhile public sector monopolies will successfully be able to face up to the competition posed by the new players, but it can be expected that the customer will gain from improved service.
The new players will need to bring in innovative products as well as fresh ideas on marketing and distribution, in order to improve the low per capita insurance coverage. Good regulation will, of course, be essential.
Overall approach to reforms
The last ten years have seen major improvements in the working of various financial market participants. The government and the regulatory authorities have followed a step-by-step approach, not a big bang one. The entry of foreign players has assisted in the introduction of international practices and systems. Technology developments have improved customer service. Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an active corporate debt market and a developed derivatives market). On the whole, the cumulative effect of the developments since 1991 has been quite encouraging. An indication of the strength of the reformed Indian financial system can be seen from the way India was not affected by the Southeast Asian crisis.
However, financial liberalisation alone will not ensure stable economic growth. Some tough decisions still need to be taken. Without fiscal control, financial stability cannot be ensured. The fate of the Fiscal Responsibility Bill remains unknown and high fiscal deficits continue. In the case of financial institutions, the political and legal structures hve to ensure that borrowers repay on time the loans they have taken. The phenomenon of rich industrialists and bankrupt companies continues. Further, frauds cannot be totally prevented, even with the best of regulation. However, punishment has to follow crime, which is often not the case in India.
Deregulation of banking system
Prudential norms were introduced for income recognition, asset classification, provisioning for delinquent loans and for capital adequacy. In order to reach the stipulated capital adequacy norms, substantial capital were provided by the Government to PSBs.
Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash reserve ratio (CRR) brought down in steps. Interest rates on the deposits and lending sides almost entirely were deregulated.
New private sector banks allowed to promote and encourage competition. PSBs were encouraged to approach the public for raising resources. Recovery of debts due to banks and the Financial Institutions Act, 1993 was passed, and special recovery tribunals set up to facilitate quicker recovery of loan arrears.
Bank lending norms liberalised and a loan system to ensure better control over credit introduced. Banks asked to set up asset liability management (ALM) systems. RBI guidelines issued for risk management systems in banks encompassing credit, market and operational risks.
A credit information bureau being established to identify bad risks. Derivative products such as forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced.
Capital market developments
The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was established in 1992.
Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after registration with the SEBI. Indian companies were permitted to access international capital markets through euro issues.
The National Stock Exchange (NSE), with nationwide stock trading and electronic display, clearing and settlement facilities was established. Several local stock exchanges changed over from floor based trading to screen based trading.
Private mutual funds permitted
The Depositories Act had given a legal framework for the establishment of depositories to record ownership deals in book entry form. Dematerialisation of stocks encouraged paperless trading. Companies were required to disclose all material facts and specific risk factors associated with their projects while making public issues.
To reduce the cost of issue, underwriting by the issuer were made optional, subject to conditions. The practice of making preferential allotment of shares at prices unrelated to the prevailing market prices stopped and fresh guidelines were issued by SEBI.
SEBI reconstituted governing boards of the stock exchanges, introduced capital adequacy norms for brokers, and made rules for making client or broker relationship more transparent which included separation of client and broker accounts.
Buy back of shares allowed
The SEBI started insisting on greater corporate disclosures. Steps were taken to improve corporate governance based on the report of a committee.
SEBI issued detailed employee stock option scheme and employee stock purchase scheme for listed companies.
Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given the freedom to issue dematerialised shares in any denomination.
Derivatives trading starts with index options and futures. A system of rolling settlements introduced. SEBI empowered to register and regulate venture capital funds.
The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating agencies as well as introducing a code of conduct for all credit rating agencies operating in India.
Consolidation imperative
Another aspect of the financial sector reforms in India is the consolidation of existing institutions which is especially applicable to the commercial banks. In India the banks are in huge quantity. First, there is no need for 27 PSBs with branches all over India. A number of them can be merged. The merger of Punjab National Bank and New Bank of India was a difficult one, but the situation is different now. No one expected so many employees to take voluntary retirement from PSBs, which at one time were much sought after jobs. Private sector banks will be self consolidated while co-operative and rural banks will be encouraged for consolidation, and anyway play only a niche role.
In the case of insurance, the Life insurance Corporation of India is a behemoth, while the four public sector general insurance companies will probably move towards consolidation with a bit of nudging. The UTI is yet again a big institution, even though facing difficult times, and most other public sector players are already exiting the mutual fund business. There are a number of small mutual fund players in the private sector, but the business being comparatively new for the private players, it will take some time.
We finally come to convergence in the financial sector, the new buzzword internationally. Hi-tech and the need to meet increasing consumer needs is encouraging convergence, even though it has not always been a success till date. In India organisations such as IDBI, ICICI, HDFC and SBI are already trying to offer various services to the customer under one umbrella. This phenomenon is expected to grow rapidly in the coming years. Where mergers may not be possible, alliances between organisations may be effective. Various forms of bancassurance are being introduced, with the RBI having already come out with detailed guidelines for entry of banks into insurance. The LIC has bought into Corporation Bank in order to spread its insurance distribution network. Both banks and insurance companies have started entering the asset management business, as there is a great deal of synergy among these businesses. The pensions market is expected to open up fresh opportunities for insurance companies and mutual funds.
It is not possible to play the role of the Oracle of Delphi when a vast nation like India is involved. However, a few trends are evident, and the coming decade should be as interesting as the last one.
Friday, October 30, 2009
Brazil Central Bk Buys Dlrs For BRL1.7420 At Spot Mkt Auction
Brazil Central Bk Buys Dlrs For BRL1.7420 At Spot Mkt Auction
RIO DE JANEIRO (Dow Jones)--Brazil's Central Bank bought U.S. dollars on the spot market at a snap auction Friday for BRL1.7420 per dollar, the bank said.
The bank did not reveal the volume of dollars bought.
Shortly before the auction the real was trading at BRL1.7410 and remained at that level immediately after the auction.
The real opened at BRL1.7300 per dollar Friday, a tad stronger than Thursday's close at BRL1.7301.
The central bank has been buying dollars at spot-market auctions in recent months to curb the appreciation of the Brazilian currency.
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; john.kolodziejski@dowjones.com
RIO DE JANEIRO (Dow Jones)--Brazil's Central Bank bought U.S. dollars on the spot market at a snap auction Friday for BRL1.7420 per dollar, the bank said.
The bank did not reveal the volume of dollars bought.
Shortly before the auction the real was trading at BRL1.7410 and remained at that level immediately after the auction.
The real opened at BRL1.7300 per dollar Friday, a tad stronger than Thursday's close at BRL1.7301.
The central bank has been buying dollars at spot-market auctions in recent months to curb the appreciation of the Brazilian currency.
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; john.kolodziejski@dowjones.com
GBP/USD rebounds sharply at 1.6415 and rises back above 1.6500
Cable tumbled to 1.6415 against the Dollar posting a fresh intra-day low but rebounded sharply and rose back above 1.6500. Currently the pair trades at 1.6502/07, 0.35% below today’s opening price. On the downside support lies at 1.6400 and below at 1.6330/40 (Oct 29 lows). Immediate resistance could be located at 1.6520 and above at 1.6580 (intra-day high).
Andrew Wilkinson, analyst at Interactive Brokers, affirms: “This week the Bank of England completed its £175 billion asset purchase program and next week investors will look for an extension. The pound is not yet discounting that potential as negative, something investors balked at only two weeks ago. Instead sterling is holding up well to the dollar at $1.6514 on Friday after data showed strengthening consumer confidence and the first annual gain for home prices in 19 months.”
Andrew Wilkinson, analyst at Interactive Brokers, affirms: “This week the Bank of England completed its £175 billion asset purchase program and next week investors will look for an extension. The pound is not yet discounting that potential as negative, something investors balked at only two weeks ago. Instead sterling is holding up well to the dollar at $1.6514 on Friday after data showed strengthening consumer confidence and the first annual gain for home prices in 19 months.”
Stocks retreat as worries mount about spending
Evidence that consumers are still holding off on spending drove stocks sharply lower Friday, tempering enthusiasm from the day before over the economy's growth in the third quarter.
Major stock indexes fell about 1.5 percent in midday trading, including the Dow Jones industrials, which tumbled about 150 points, giving back a chunk of the previous day's 200-point gain.
Investors shed stocks after the Labor Department said personal spending fell 0.5 percent in September. Though the decline was in line with forecasts, it was the largest drop in nine months and followed a 1.3 percent jump in August fueled by the government's popular Cash for Clunkers car rebate program.
A drop in the mood of consumers was also discouraging. The Reuters/University of Michigan consumer sentiment index fell to 70.6 in October from 73.5 in September. The reading was revised slightly higher from a preliminary estimate of 69.4 earlier this month, and was roughly in line with expectations.
The market is paying close attention to indicators of consumer spending, which is still in a slump despite improvements in other parts of the economy such as manufacturing and housing. Spending by consumers makes up a major part of the U.S. economy.
The day's news fanned fears that weak spending by consumers will continue to hold the economy back and put a damper on the market's excitement over a 3.5 percent jump in gross domestic product in the third quarter.
The stronger-than-expected GDP growth came after four straight quarters of declines and was the most promising evidence yet that the longest recession since the 1930s has ended. Stocks soared following the report, giving the Dow its best one-day performance since July.
But many economists worry that much of that growth came from government stimulus measures and that without a rebound in consumer spending the economic recovery won't be sustainable.
The Labor Department also reported Friday that personal income, the fuel for future spending, was flat in September compared with the previous month, in line with expectations. A lack of income growth is due, in part, to ongoing high unemployment rates, also a major worry for the market.
"Until we get to better employment numbers, it's hard to get real income growth and real spending ... and we're just not there yet," said Kurt Karl, chief US economist at Swiss Re. "Today is a reaction to a little bit of excess exuberance yesterday."
The Dow fell 153.57, or 1.5 percent, to 9,809.01. The Standard & Poor's 500 index fell 17.86, or 1.7 percent, to 1,048.25, and the Nasdaq composite index lost 31.46, or 1.5 percent, to 2,066.09.
Stocks have fallen for most of the past week on worries about the economy. A stronger dollar, which hurts commodities prices, has also weighed on the market.
The dollar rose again Friday, sending commodity prices lower. On the New York Mercantile Exchange, gold prices slipped about $6 to $1,040 an ounce, while oil prices tumbled $1.52 to $78.35 a barrel.
Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note fell to 3.43 percent from 3.50 percent late Thursday.
Friday marks the end of the fiscal year for many mutual funds, which could be adding to the selling pressure in the market. Fund managers looking to minimize taxes for shareholders often sell some of their investments as the fiscal year comes to a close.
Analysts say trading is likely to remain volatile in the coming week amid a flood of major economic news, including the Institute of Supply Management's readings on the manufacturing and services industries, sales reports from major retailers and the Labor Department's October employment report -- arguably the month's most important piece of economic data. The Federal Reserve will also convene for a two-day policy meeting beginning Tuesday.
Without stronger evidence that the labor market is improving and consumers are feeling more comfortable about spending, investors will have trouble extending the market's massive rally into a ninth month. Even with this week's declines, the S&P 500 index is up about 55 percent since hitting a 12-year low in early March.
More than three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 416.7 million shares, compared with 604.1 million at the same time a day earlier.
In other trading, the Russell 2000 index of smaller companies fell 10.78, or 1.9 percent, to 569.44.
Overseas, Japan's Nikkei stock average rose 1.5 percent. In afternoon trading, Britain's FTSE 100 fell 1.6 percent, Germany's DAX index dropped 2.8 percent, and France's CAC-40 declined 2.7 percent.
Friday, October 23, 2009
Mexico's Stocks Open Higher Peso Loses Ground Against Dollar
Mexico's Stocks Open Higher; Peso Loses Ground Against Dollar
By Anthony Harrup
Of DOW JONES NEWSWIRES
MEXICO CITY (Dow Jones)--Mexico's stocks opened higher Friday as investors remained optimistic about company earnings.
The market's IPC index of leading issues was up 0.4% to 30,898.52 points around 10:30 a.m. EDT. Volume was 44.2 million shares worth 1.32 billion pesos ($102 million).
A Mexico City trader said the market remains volatile, with relatively strong earnings reports lending support despite lingering doubts about the economic recovery.
U.S. stocks started to react positively to better-than-expected U.S. existing home sales for September, but quickly turned lower again as industrials receded from the previous day's rally. The Dow Jones Industrial Average was off 0.5%.
A number of Mexican companies have reported solid third quarters. Bakeries concern Bimbo (BIMBO.MX) said its net profit rose 25% from a year ago, helped by a major acquisition in the U.S. and growth in Latin American sales. Mexican sales fell marginally. Bimbo A shares were up 2% to MXN81.56.
Media conglomerate Televisa (TV, TLEVISA.MX) CPO shares were up 0.1% to MXN52.50. Televisa's net profit in the quarter slipped 2.6% and came in slightly below estimates, although sales rose a more-than-expected 5.5%.
The peso was weaker against the dollar as the U.S. currency gained against major rivals. The peso was quoted in Mexico City at MXN12.9640 to the dollar, compared with MXN12.8920 Thursday.
Focus is likely to turn again to the 2010 budget debates. A group of opposition senators said Thursday they are seriously considering sending the 2010 income bill back to the lower house with changes.
The Ixe brokerage said the budget discussions could push the peso back above MXN13, given concerns about the possibility of a sovereign credit ratings downgrade.
-By Anthony Harrup, Dow Jones Newswires; (5255) 5001 5727, anthony.harrup@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=ZB8C9jZ9uAK8axaKl9M%2FEA%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
By Anthony Harrup
Of DOW JONES NEWSWIRES
MEXICO CITY (Dow Jones)--Mexico's stocks opened higher Friday as investors remained optimistic about company earnings.
The market's IPC index of leading issues was up 0.4% to 30,898.52 points around 10:30 a.m. EDT. Volume was 44.2 million shares worth 1.32 billion pesos ($102 million).
A Mexico City trader said the market remains volatile, with relatively strong earnings reports lending support despite lingering doubts about the economic recovery.
U.S. stocks started to react positively to better-than-expected U.S. existing home sales for September, but quickly turned lower again as industrials receded from the previous day's rally. The Dow Jones Industrial Average was off 0.5%.
A number of Mexican companies have reported solid third quarters. Bakeries concern Bimbo (BIMBO.MX) said its net profit rose 25% from a year ago, helped by a major acquisition in the U.S. and growth in Latin American sales. Mexican sales fell marginally. Bimbo A shares were up 2% to MXN81.56.
Media conglomerate Televisa (TV, TLEVISA.MX) CPO shares were up 0.1% to MXN52.50. Televisa's net profit in the quarter slipped 2.6% and came in slightly below estimates, although sales rose a more-than-expected 5.5%.
The peso was weaker against the dollar as the U.S. currency gained against major rivals. The peso was quoted in Mexico City at MXN12.9640 to the dollar, compared with MXN12.8920 Thursday.
Focus is likely to turn again to the 2010 budget debates. A group of opposition senators said Thursday they are seriously considering sending the 2010 income bill back to the lower house with changes.
The Ixe brokerage said the budget discussions could push the peso back above MXN13, given concerns about the possibility of a sovereign credit ratings downgrade.
-By Anthony Harrup, Dow Jones Newswires; (5255) 5001 5727, anthony.harrup@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=ZB8C9jZ9uAK8axaKl9M%2FEA%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
US Regional and State Unemployment Rates for Sep-STATS
US Regional and State Unemployment Rates for Sep-STATS
WASHINGTON, (Dow Jones)--
Following are U.S. seasonally adjusted regional and state
unemployment rates:
p = preliminary; 1/ Metropolitan division. 2/ Metropolitan
statistical area.
Sep Aug Jul Jun May Apr Sep
Region/State 2009 2009 2009 2009 2009 2009 2008
Alabama 10.7 10.3 10.2 10.1 9.8 9.0 5.4
Alaska 8.4 8.1 8.2 8.3 8.3 7.9 6.7
Arizona 9.1 9.1 9.2 8.7 8.2 7.7 6.0
Arkansas 7.1 7.1 7.4 7.2 7.0 6.5 5.2
California 12.2 12.3 11.9 11.6 11.6 11.1 7.8
Los Angeles-Long
Beach-Glendale 1 12.7 12.2 11.9 11.2 11.6 10.9 8.3
Colorado 7.0 7.3 7.8 7.6 7.6 7.4 5.0
Connecticut 8.4 8.1 7.8 7.9 8.0 7.9 6.0
Delaware 8.3 8.0 8.1 8.4 8.1 7.4 5.2
District of Columbia 11.4 11.1 10.6 10.9 10.7 9.9 7.4
Florida 11.0 10.8 10.8 10.7 10.3 9.7 6.7
Miami-Miami
Beach-Kendall 1/ 10.9 10.9 11.2 10.7 9.9 8.2 6.1
Georgia 10.1 10.1 10.3 10.1 9.6 9.2 6.6
Hawaii 7.2 7.1 7.0 7.3 7.4 6.9 4.4
Idaho 8.8 8.9 8.8 8.4 7.8 7.0 5.4
Illinois 10.5 10.0 10.4 10.3 10.1 9.4 6.7
Chicago-Naperville-
Joliet 1/ 10.5 9.8 10.5 10.5 10.5 9.7 6.4
Indiana 9.6 9.9 10.6 10.7 10.6 9.9 6.1
Iowa 6.7 6.7 6.5 6.2 5.7 5.1 4.2
Kansas 6.9 7.2 7.5 7.0 7.0 6.5 4.6
Kentucky 10.9 11.2 11.1 10.9 10.7 9.9 6.9
Louisiana 7.4 7.8 7.4 6.8 6.6 6.2 5.6
Maine 8.5 8.6 8.5 8.6 8.3 7.9 5.6
Maryland 7.2 7.1 7.2 7.2 7.2 6.8 4.6
Massachusetts 9.3 9.1 8.8 8.6 8.2 8.0 5.6
Michigan 15.3 15.2 15.0 15.2 14.1 12.9 8.9
Detroit-Warren-
Livonia 2/ 17.8 17.3 16.4 16.3 15.3 14.4 9.0
Minnesota 7.3 8.0 8.1 8.4 8.1 8.0 5.4
Mississippi 9.2 9.7 9.7 9.1 9.7 9.1 7.4
Missouri 9.5 9.5 9.3 9.3 9.0 8.1 6.3
Montana 6.7 6.6 6.7 6.4 6.3 6.0 4.7
Nebraska 4.9 5.0 5.0 5.0 4.8 4.5 3.4
Nevada 13.3 13.2 12.5 11.9 11.2 10.6 7.3
New Hampshire 7.2 7.0 6.8 6.8 6.5 6.3 3.9
New Jersey 9.8 9.6 9.3 9.2 8.8 8.4 5.8
New Mexico 7.7 7.4 7.0 6.8 6.5 5.8 4.4
New York 8.9 8.9 8.6 8.7 8.2 7.7 5.8
New York City 10.3 10.2 9.5 9.4 8.9 8.0 6.0
North Carolina 10.8 10.8 10.9 11.0 11.1 10.7 6.8
North Dakota 4.2 4.3 4.2 4.2 4.3 4.1 3.3
Ohio 10.1 10.8 11.2 11.1 10.8 10.2 6.8
Cleveland-Elyria-
Mentor 2/ 8.7 9.2 9.3 9.5 10.1 9.2 6.6
Oklahoma 6.7 6.8 6.6 6.4 6.4 6.2 4.0
Oregon 11.5 12.0 11.8 12.0 12.2 11.8 6.8
Pennsylvania 8.8 8.7 8.5 8.4 8.3 7.8 5.6
Rhode Island 13.0 12.8 12.7 12.4 12.1 11.1 8.5
South Carolina 11.6 11.4 11.7 12.1 12.0 11.4 7.5
South Dakota 4.8 4.9 4.9 5.0 5.0 4.8 3.2
Tennessee 10.5 10.7 10.7 10.8 10.7 9.9 6.9
Texas 8.2 8.0 7.9 7.5 7.1 6.6 5.1
Utah 6.2 6.0 6.0 5.7 5.4 5.2 3.4
Vermont 6.7 6.8 6.8 7.3 7.4 7.3 4.8
Virginia 6.7 6.6 6.9 7.1 7.1 6.8 4.1
Washington 9.3 9.0 8.9 9.2 9.1 9.0 5.5
Seattle-Bellevue-
Everett 1/ 8.9 8.9 8.8 8.8 8.1 7.8 4.7
West Virginia 8.9 8.9 8.9 9.1 8.4 7.7 4.3
Wisconsin 8.3 8.8 9.0 9.0 8.9 8.6 4.7
Wyoming 6.8 6.6 6.5 5.9 5.0 4.5 3.2
Puerto Rico 16.2 15.1 15.5 14.5 14.4 15.4 12.0
NOTE: Data refer to place of residence. Data for Puerto Rico are
derived from a monthly household survey similar to the Current Population
Survey. Area definitions are based on Office of Management and Budget
Bulletin No. 06-01, dated December 5, 2005, and are available at
http://www.bls.gov/lau/lausmsa.htm and in the May issue of Employment
and Earnings. Estimates for the current year are subject to revision
early in the following calendar year.
Data have been revised to incorporate new estimation methods and updated
Census-2000 population controls.
-By Rodney Christian; Dow Jones Newswires; 202-646-1880;
csstat@dowjones.com
GBP/USD falls further to 1.6320
Cable continues to fall across the board. GBP/USD slid further to 1.6320, posting a fresh intra-day low. The pair continues it collapse form 1.6690 (one-month high) reached early on Friday during the European session. Currently it trades at 1.6351/55, 1.60% below today’s opening price. On the downside the next support below 1.6300 lies at 1.6240 (Oct 19 low).
The Sterling is suffering the biggest daily decline in a month and lost a big part of weekly gains.
Andrew Wilkinson, analyst at Interactive Brokers, affirms: “A sixth consecutive quarterly decline in British GDP marked the longest recorded string of negative growth readings since records began in 1955. A 0.4% quarterly decline confounded expectations for a 0.2% gain and created an immediate slump in the value of the pound (…) In Monopoly terms, Britain drew a “miss-a-turn” card from the Community Chest pile. Today’s data gives the British economy the appearance as the clear laggard mired in recession. But when you look at the pound relative to recent lows against its two majors, it’s actually performing rather well.”
The Sterling is suffering the biggest daily decline in a month and lost a big part of weekly gains.
Andrew Wilkinson, analyst at Interactive Brokers, affirms: “A sixth consecutive quarterly decline in British GDP marked the longest recorded string of negative growth readings since records began in 1955. A 0.4% quarterly decline confounded expectations for a 0.2% gain and created an immediate slump in the value of the pound (…) In Monopoly terms, Britain drew a “miss-a-turn” card from the Community Chest pile. Today’s data gives the British economy the appearance as the clear laggard mired in recession. But when you look at the pound relative to recent lows against its two majors, it’s actually performing rather well.”
Monday, October 19, 2009
Dutch court declares regional bank DSB bankrupt
AMSTERDAM (AP) -- A Dutch court declared DSB Bank NV bankrupt on Monday, ending hopes the regional lender, which has suffered a run on deposits, might be sold or bailed out.
The privately-owned bank is the first to go bust in the Netherlands since last year, though the government and regulators insist its failure was not directly related to the credit crisis.
"The court concludes that the utmost was done for DSB to continue as a whole entity, and there is no prospect of that anymore," the Amsterdam District Court said in a summary of its ruling.
DSB was put into receivership of the Netherlands' central bank a week ago. Customers had withdrawn about a sixth of the euro4.3 billion ($6.4 billion) the bank had in deposits at the start of the month.
The government insures the first euro100,000 of retail bank accounts. Finance Minister Wouter Bos said Monday that money will be paid by Christmas.
Meanwhile the bank's new curators will work to wind down operations and pay creditors, who will suffer large losses. Most of the bank's 2,000 employees will lose their jobs and 1,300 were laid off on Monday.
The failure has raised questions about the functioning of Dutch financial institutions, oversight bodies and the government -- as well as DSB's own lending practices.
The catalyst for the run on DSB was a call by Pieter Lakeman, an industry gadfly, for customers to withdraw their deposits in protest because the bank had improperly overcharged mortgage customers.
The central bank and Finance Minister Wouter Bos have recommended that DSB consider trying to hold Lakeman liable for damages.
Lakeman has responded that DSB's fall was inevitable and the central bank, which had been aware of problems at DSB for more than a year, failed in its oversight duties.
The bank's founder and main owner Dirk Scheringa also blames the central bank and the government, saying their intentional leaks to the media created an air of uncertainty around DSB that proved fatal.
In addition, he has questioned why major Dutch financial institutions such as ING Bank NV, ABN Amro, and Aegon NV received multibillion euro bailout packages when they ran into trouble, but DSB could not arrange comparatively modest assistance.
"We didn't go bankrupt, we were destroyed," Scheringa said, adding that he has lost everything except his house.
Finance Minister Bos initially attempted to broker a deal whereby banks that received government bailouts would buy DSB, but they demanded terms that were prohibitively expensive, he said.
Once the bank was in receivership, saving it became impossible because depositors would have pulled their money out instantly if given the chance, his minstry said in a statement Monday.
"The bank brought its problems on itself by its policies, unrest among clients, unclear communication and the insecurity that caused," it said.
DSB was based in a town called Wognum, 50 kilometers north of Amsterdam but well outside the corridors of political power. Its growth in recent years upset the status quo in a market with just a handful of competitors.
It was best known for television commercials that aired frequently promising low rates on personal loans.
Bos has ordered several independent investigations, and legal procedings by the various parties involved are likely to last for years.
Sunday, October 18, 2009
Oil jumps above $79 in Asia to 2009 high
Oil prices jumped above $79 a barrel to a 2009 high Monday in Asia as investors looked to the corporate earnings of big U.S. retailers this week for signs the consumer may be regaining confidence.
Benchmark crude for November delivery rose as much as 52 cents to $79.05 a barrel but later fell back and was up 24 cents at $78.77 by midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract added 95 cents to settle at $78.53 on Friday.
Last week, crude broke out of a five-month trading range between $65 and $75 a barrel on a weakening U.S. dollar and expectations that oil demand will eventually recover as the global economy grows next year.
Investors will be eyeing third quarter results from retailers this week for clues about the strength of the U.S. consumer. Apple Inc., McDonald's Corp., appliance maker Whirlpool Corp. and toy maker Hasbro Inc. are among those reporting this week.
In other Nymex trading, heating oil rose 0.62 cent to $2.03 a gallon. Gasoline for November delivery slipped 0.48 cent to $1.97 a gallon. Natural gas for November delivery jumped 6.2 cents to $4.84 per 1,000 cubic feet.
Colombia IGBC Stock Index Rises On Expectations Of Lower Rates
Colombia IGBC Stock Index Rises On Expectations Of Lower Rates
BOGOTA (Dow Jones)--The Colombian stock index rose Friday on investors' expectations the central bank may further cut interest rates in a bid to slow the peso appreciation.
The benchmark IGBC stock index rose 0.7% to 10,942.50 points.
"Investors bought stocks as some of them expect the country's central bank may cut interest rates," said Cesar Tovar, market analyst with local brokerage Nacional de Valores.
Lower interest rates make companies' financial costs fall.
On Thursday evening, Colombian Finance Minister Oscar Ivan Zuluaga said the central bank will evaluate whether to start buying dollars on the spot market to tame the appreciation of the peso.
He said the bank will evaluate taking other measures.
Shares of Grupo de Inversiones Suramericana SA (GRUPOSURA.BO) rose 1.8% to 23,200 Colombian pesos ($12.58).
Shares of state-controlled telephone company Empresa de Telecomunicaciones de Bogota SA (ETB.BO), or ETB, rose 3.6% to COP901.
The Colombian peso strengthened to 1,843.5 pesos to the dollar, from COP1,846 on Thursday. The yield on the benchmark peso-denominated government bond maturing in 2020 fell to 8.603% from 8.748% on Thursday.
-By Inti Landauro, Dow Jones Newswires; 57-310-867 65 42; colombia@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=keLYY06vnPwnr4LqYCdj5w%3D%3D. You can use this link on the day this article is published and the following day.
BOGOTA (Dow Jones)--The Colombian stock index rose Friday on investors' expectations the central bank may further cut interest rates in a bid to slow the peso appreciation.
The benchmark IGBC stock index rose 0.7% to 10,942.50 points.
"Investors bought stocks as some of them expect the country's central bank may cut interest rates," said Cesar Tovar, market analyst with local brokerage Nacional de Valores.
Lower interest rates make companies' financial costs fall.
On Thursday evening, Colombian Finance Minister Oscar Ivan Zuluaga said the central bank will evaluate whether to start buying dollars on the spot market to tame the appreciation of the peso.
He said the bank will evaluate taking other measures.
Shares of Grupo de Inversiones Suramericana SA (GRUPOSURA.BO) rose 1.8% to 23,200 Colombian pesos ($12.58).
Shares of state-controlled telephone company Empresa de Telecomunicaciones de Bogota SA (ETB.BO), or ETB, rose 3.6% to COP901.
The Colombian peso strengthened to 1,843.5 pesos to the dollar, from COP1,846 on Thursday. The yield on the benchmark peso-denominated government bond maturing in 2020 fell to 8.603% from 8.748% on Thursday.
-By Inti Landauro, Dow Jones Newswires; 57-310-867 65 42; colombia@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=keLYY06vnPwnr4LqYCdj5w%3D%3D. You can use this link on the day this article is published and the following day.
Euro / Dollar Technical Forex Analysis for Forex Traders
Finally, the Euro reached new tops for this year, and came very close to our favorite target 1.4901 (the high until this very moment is 1.4898). By taking a look at the drawn channel we find that the important question now is will 1.50 be the next stop? To answer this question, we must estimate the strength of the resistance levels in this area, especially 1.4901 & 1.4953.
USD / JPY Technical Forex Analysis for Forex Traders
Price could neither break the resistance 90.27, nor the support 88.96 (which was exactly the lowest price after the issuance of the report), and that is why we spent the whole day in a very tight range. What is worth notice this morning, that the falling trendline from 90.44 on the hourly chart, has many touch points with the price.
Wednesday, October 14, 2009
Forex Trading Tips
- Euro / Dollar Technical Forex Analysis for Forex Traders :-
The Euro stopped at the resistance established in Friday's report 1.4772 with amazing accuracy, a stop which was a signal that we are heading to areas below 1.47. And now, there is a resistance that combines the rising trendline drawn from 1.4566, and the falling trendline drawn from 1.4816, and is currently at 1.4725, if price stay below it, we are heading south.
USD / JPY Technical Forex Analysis for Forex Traders:-
The Dollar-Yen is testing the limit of the downtrend, which is represented by the falling trendline from August 9th top, and if it is broken , then the Dollar would be invited to show how deep its real strength is over a series of resistance areas starting at 90.67 and reaches 91.63. The resistance that is attached to this line is 90.29, and if broken, then the line is broken, and the next stop would be 90.67 which is an important stop on the way to the most important stop in these areas 91.63. Short-term support is at 89.32, and if broken the direction would be down to test the important support 88.68, which must hold to prevent another attempt to test 87.97 which survived last week's attempt for a break.
Monday, October 12, 2009
AIG sells Taiwan insurance unit Nan Shan for $2.15B to investor group led by Primus Financial
NEW YORK (AP) -- Insurer American International Group Inc. said late Monday it has agreed to sell its nearly 98 percent stake in Taiwan unit Nan Shan to an investor group led by Hong Kong's Primus Financial for about $2.15 billion.
Nan Shan, which serves more than 4 million life insurance policy holders in Taiwan, is the third-largest life insurer in the country by total premiums. Established in 1963, it operates a network of 24 branches and 450 agency offices.
The Primus consortium, which also includes investment firm China Strategic Holdings Ltd., will maintain the Nan Shan brand. It also has agreed to retain existing compensation and benefits packages for Nan Shan's 4,000 employees and the agency's organizational and commission structure for at least two years after the deal closes. The current Nan Shan management team will remain in place.
When the credit crisis hit last year, the U.S. government rescued New York-based AIG with a loan bailout package worth up to $182.5 billion in exchange for 80 percent ownership of the huge insurer. AIG is shedding assets in an effort to repay government aid. In July AIG completed the sale of 21st Century Insurance Group, part of its personal auto insurance division, to Farmers Group Inc. for $1.9 billion.
AIG said Blackstone Advisory Partners and Morgan Stanley acted as its financial advisers and Debevoise & Plimpton LLP and Lee & Li served as legal advisers on this transaction, which is still subject to regulatory approval.
Wednesday, October 7, 2009
Mortgage applications surge to 4-month high
NEW YORK (Reuters) - U.S. mortgage applications surged last week to their highest since mid-May as consumers sought to take advantage of the lowest interest rates in months, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said rates on 30-year fixed-rate mortgages, the most widely used loan, were below 5 percent for a third straight week, reaching a four-month low. Demand for home refinancing loans was the highest since mid-May.
Appetite for applications to buy a home, a tentative early indicator of sales, climbed to the highest level since early January. The trend bodes well for the hard-hit U.S. housing market, which has been showing signs of stabilization.
The MBA said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week to October 2 increased 16.4 percent to 756.3, the highest since the week ended May 22.
"The residential housing market appears to be stabilizing due to lower mortgage rates," said Alan Rosenbaum, president of Guardhill Financial, a New York-based mortgage banker and brokerage company.
"The affordability factor, which takes into consideration both price and mortgage rates, has been very positive of late," he said.
Low mortgage rates, high affordability and the federal government's $8,000 tax credit for first-time home buyers -- part of the stimulus bill -- have helped pave the way for stabilization.
But with the tax credit set to expire on November 30 and distressed properties making up a high proportion of sales, the recent uptick in activity may mask uncertainty about the long-term outlook.
Rising unemployment is another obstacle. The U.S. Labor Department last week said the jobless rate reached a 26-year high of 9.8 percent in September.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.89 percent, down 0.05 percentage point from the previous week and the lowest since the week ended May 22.
The rate remained above the all-time low of 4.61 percent set in the week ended March 27. The survey has been conducted weekly since 1990. Nevertheless, interest rates were well below the year-ago level of 5.99 percent.
The MBA's seasonally adjusted purchase index rose 13.2 percent to 306.1, its highest since the week ended January 2.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 4.2 percent.
REFINANCING JUMPS
The Mortgage Bankers seasonally adjusted index of refinancing applications increased 18.2 percent to 3,377.1, with the index at its highest since the week ended May 22.
The refinance share of applications increased to 66.3 percent from 65.3 percent the previous week, but remained significantly lower than the peak of 85.3 percent in the week to January 9. The adjustable-rate mortgage share of activity decreased to 6.1 percent, down from 6.2 percent the prior week.
The U.S. housing market has suffered the worst downturn since the Great Depression and its impact has rippled through the recession-hit economy, as well as the rest of the world.
The housing market, however, has been showing signs of stabilization, with sales rising and price declines moderating in many regions of the country. In fact, home prices in some areas have risen.
Some analysts, however, say prices may fall again, with a new wave of foreclosures in the pipeline.
Fixed 15-year mortgage rates averaged 4.32 percent, down from 4.34 percent the previous week. Rates on one-year ARMs increased to 6.56 percent from 6.40 percent.
Oil falls below $70 a barrel as traders focus on weak US demand
Benchmark crude for November delivery lost $1.15 to trade at $69.73 on the New York Mercantile Exchange. In London, Brent crude gave up 68 cents to $67.88 on the ICE Futures exchange.
Prices dropped immediately after the Energy Information Administration reported that the nation's oil supply dropped by 1 million barrels last week. The drop was unexpected -- analysts thought stockpiles would grow by 1.9 million barrels -- but investors found little else to like in the report.
Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said crude demand continues to be unimpressive, noting that the U.S. still has more oil in storage than last year.
NEW YORK (AP) -- Oil prices fell Wednesday as traders shrugged off an unexpected drop in crude supplies and focused instead on government data that showed Americans still have little appetite for more petroleum.
American petroleum consumption has cooled so much that Sunoco, Inc. announced Tuesday that it would idle its Eagle Point refinery in Westville, New Jersey. As part of the decision, Sunoco said it would furlough 400 workers and cut its dividend.
"Most people look at Sunoco and wonder, who else is going to shut down until things improve?" Kloza said.
The EIA report also said that total petroleum supplies grew last week. Gasoline inventories grew by 2.9 million barrels last week and distillate fuel supplies grew by 700,000 barrels. Analysts expected smaller increases for both.
In other Nymex trading, gasoline for November delivery gave up 4.54 cents to trade at $1.7273 per gallon, and heating oil lost 2.53 cents to $1.7889 a gallon. Natural gas for November delivery added 6.1 cents to $4.941 per 1,000 cubic feet.
Prices dropped immediately after the Energy Information Administration reported that the nation's oil supply dropped by 1 million barrels last week. The drop was unexpected -- analysts thought stockpiles would grow by 1.9 million barrels -- but investors found little else to like in the report.
Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said crude demand continues to be unimpressive, noting that the U.S. still has more oil in storage than last year.
NEW YORK (AP) -- Oil prices fell Wednesday as traders shrugged off an unexpected drop in crude supplies and focused instead on government data that showed Americans still have little appetite for more petroleum.
American petroleum consumption has cooled so much that Sunoco, Inc. announced Tuesday that it would idle its Eagle Point refinery in Westville, New Jersey. As part of the decision, Sunoco said it would furlough 400 workers and cut its dividend.
"Most people look at Sunoco and wonder, who else is going to shut down until things improve?" Kloza said.
The EIA report also said that total petroleum supplies grew last week. Gasoline inventories grew by 2.9 million barrels last week and distillate fuel supplies grew by 700,000 barrels. Analysts expected smaller increases for both.
In other Nymex trading, gasoline for November delivery gave up 4.54 cents to trade at $1.7273 per gallon, and heating oil lost 2.53 cents to $1.7889 a gallon. Natural gas for November delivery added 6.1 cents to $4.941 per 1,000 cubic feet.
Monday, October 5, 2009
Service sector grows in Sept., 1st time in year
Private trade group: US service sector grew in Sept. for 1st time in year; jobs remain scarce
NEW YORK (AP) -- The U.S. service sector grew in September for the first time in 13 months, an encouraging sign for the fledgling economic recovery, although jobs remain scarce.
The Institute for Supply Management said Monday that its service index hit 50.9 last month, up from 48.4 in August. Analysts polled by Thomson Reuters had expected a reading of 50, the dividing line between growth and contraction.
The index, which tracks more than 80 percent of the country's economic activity, including hospitals, retailers, financial services companies and truckers, hadn't grown since August 2008.
The good news:
- The new orders index, an indicator of future activity, jumped to 54.2 in September from 49.9 a month before, the first growth reading in a year.
- Businesses' backlog of orders grew for the first time in 14 months.
- Present business activity rose to 55.1 from 51.3 in August, growing for the second straight month after 10 straight contractions.
The ISM report is based on a survey of the institute's members in 18 industries and covers indicators such as new orders, employment and inventories. Five industries grew last month: utilities, health care, retail, construction and wholesale trade. And while activity is rising, only three areas reported an increase in jobs: health care, support services for companies and educational services.
Overall, service-sector employment shrank in September, though at a slightly slower pace than in August. The survey's reading of 44.3, up from 43.5, was the 20th month of contraction in 21 months.
"Better, but still terrible," Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a research note.
Other analysts said any hiring tends to lag increased production.
"We won't likely see increased hiring until January," even if business and new orders keep rising this fall, said Bank of America Merrill Lynch economist Ethan Harris.
"Businesses are more reluctant than in the past to start the hiring process. They really do take the 'prove it to me' attitude" that the recession is over and demand is increasing, he said.
Last week, for example, Little Rock, Arkansas-based telecom services provider Windstream Corp. said it would cut 350 jobs, or 5 percent of its work force, this year.
Despite the overall growth, the chair of the ISM's service survey committee was not "overly excited" about September's report and said several months of increases are needed to establish a pattern of recovery.
"This has to be sustainable," Anthony Nieves said on a conference call with reporters.
The service sector is dependent on consumer spending, which powers about 70 percent of the economy. While Americans' spending rose 1.3 percent in August, the best showing since October 2001, a third of that gain came from the government's now-ended Cash for Clunkers program. The government also reported that incomes rose only 0.2 percent in August.
"We're in this kind of twilight zone of very soft recovery," Harris said.
Subscribe to:
Posts (Atom)