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Sat, 28th May 2016

Anirudh Sethi Report

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Latest Posts

Toyota to float bonds with record-low coupons

 Toyota Motor will issue 60 billion yen ($546 million) in 10- and 20-year bonds with the lowest interest rates ever seen in Japan’s private sector, becoming the latest company to take advantage of ultralow borrowing costs to feed its appetite for capital.

The terms set Friday put the coupons on the 10- and 20-year notes at 0.09% and 0.343%, respectively. The automaker expanded the 10-year tranche from 20 billion yen to 40 billion yen to meet brisk investor demand. This will mark its first offering of 20-year debt in 18 years. 

The previous all-time low for 10-year bonds had been 0.17%, set by West Nippon Expressway, while Central Japan Railway had held the 20-year record with a 0.421% coupon.

Toyota will use the funds for capital expenditures and as working capital. It sees sustained investment to bolster its competitiveness as essential, even with operating profit projected to fall amid a strengthening yen. Capital spending is set to rise 4% to 1.35 trillion yen and research and development expenditures by 2% to 1.08 trillion yen for the year ending in March. The automaker needs funds for such projects as autonomous driving technology.

Obama in Hiroshima: As it happened

President Obama’s signature in a visitors book at Hiroshima Peace Memorial Museum

HIROSHIMA, Japan — The Nikkei Asian Review is bringing you the latest news and analysis from U.S. President Barack Obama’s historic visit to Hiroshima.

In Stunning Reversal, IMF Blames Globalization For Spreading Inequality, Causing Market Crashes

In a stunning reversal for an organization that rests at the bedrock of the modern “neoliberal” (a term the IMF itself uses generously), aka capitalist system, overnight IMF authors Jonathan D. Ostry, Prakash Loungani, and Davide Furceri issued a research paper titled “Neoliberalism: Oversold?” whose theme is a stunning one: it accuses neoliberalism, and its immediate offshoot, globalization and “financial openness”, for causing not only inequality, but also making capital markets unstable.

To wit: 

There are aspects of the neoliberal agenda that have not delivered as expected. Our assessment of the agenda is confined to the effects of two policies: removing restrictions on the movement of capital across a country’s borders (so-called capital account liberalization); and fiscal  consolidation, sometimes called “austerity,” which is shorthand for policies to reduce fiscal deficits and debt levels. An assessment of these specific policies (rather than the broad neoliberal agenda) reaches three disquieting conclusions:

  • The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries.
  • The costs in terms of increased inequality are prominent. Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
  • Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.

Wait… you mean that the IMF becoming, gasp, Marxist? Did last summer’s dramatic interaction with Greece and its brief but memorable former Marxist finance minister, Yanis Varoufakis, leave such a prominent mark on the IMF’s collective subconsiousness, that it is now overly rejecting the tenets on which the IMF was originally founded?

US : First Quarter GDP Revised Higher To 0.8%, Misses Expectations

Following the terrible initial Q1 GDP print of 0.5% released one month ago, there was some hope that following some subsequent favorable inventory and trade data, the number would be revised substantially higher, with the whisper estimate rising as high as 1% or more, above the consensus estimate of 0.9%. Moments ago the BEA reported that in its first revision of Q1 growth, the US economy grew at only 0.8% annualized, a modest rebound from the original GDP report, however still missing consensus estimates.

On a real basis, GDP rose 2.0%, the same as last quarter, and the lowest annual rate of increase since Q1 2014.

China : An Elevated Bus That Can Run Over Other Cars

elevated-bus.gif

Well, not actually run over them like Bigfoot or Grave Digger would, but it can drive over them. Although that’s not actually the purpose. The purpose is so that cars can drive under the bus, thus eliminating bus-stop related traffic jams. I love jams. Boysenberry is my favorite.

Instead of spending millions to widen roads, the Shenzhen Huashi Future Parking Equipment company is developing a “3D Express Coach” (also called a “three-dimensional fast bus”) that will allow cars less than 2 meters high to travel underneath the upper level carrying passengers.

The model looks like a subway or light-rail train bestriding the road. It is 4-4.5 m high with two levels: passengers board on the upper level while other vehicles lower than 2 m can go through under. Powered by electricity and solar energy, the bus can speed up to 60 km/h carrying 1200-1400 passengers at a time without blocking other vehicles’ way. Also it costs about 500 million yuan to build the bus and a 40-km-long path for it, only 10% of building equivalent subway. It is said that the bus can reduce traffic jams by 20-30%.

All Eyes On Yellen: Global Markets Flat On Dreadful Volumes, Oil Slides

In a world where fundamentals don’t matter, everyone’s attention will be on Janet Yellen who speaks at 1:15pm today in Harvard, hoping to glean some more hints about the Fed’s intentions and next steps, including a possible rate hike in June or July. And with a long holiday in both the US and UK (US bond market closes at 2pm today), it is no surprise overnight trading volumes have been dreadful, helping keep global equities poised for the highest close in three weeks; this won’t change unless Yellen says something that would disrupt the calm that’s settled over financial markets.

Traders are now predicting a higher than 50% chance of an increase in July, so a misstep by Yellen risks upsetting a lull that has sent currency volatility to the lowest since January.

Looking at global markets, stocks were poised for the steepest weekly advance in more than a month on speculation financial risks around the world have eased. The dollar rose versus most peers, pushing oil lower with WTI falling below $49 after rising above $50 for the first time since NOvember yesterday. The British pound was the biggest gainer among major currencies this week on growing confidence the U.K. will remain in the European Union. As emerging markets rebounded, Russia and Qatar returned to international debt markets for the first time in at least three years.

Equity fund outflows surpass $100bn in year to date

Equity markets continued to see strong outflows this week, despite soothing economic data and rising stock prices.

Global equity funds suffered their seventh consecutive week of outflows, shedding another $9.2bn for the week ending May 25, taking their total outflows for the year above $100bn, according to data from EPFR.

It comes off the back of a week of positive news, with signs of a pick-up in US growth and inflation, alongside rising oil prices and dissipating concerns about the Greek debt crisis.
The S&P 500 is up 1.2 per cent for May, with strong gains for financial and technology stocks over the week, which have risen 1.9 per cent and 3 per cent, respectively. In Europe, German, French and UK bourses are all in positive territory for May, with the Euro Stoxx 50 index up 1.42 per cent.
However, investors are still fleeing, with outflows indiscriminate between emerging and developed markets. “It is symptomatic of a pervasive issue,” said Jim Sarni, managing principal at Payden & Rygel. “Investors are very gun-shy right now. They are sceptical of the data because of all the volatility.”
Equity markets have gone on a round-trip since the start of the year, with the S&P 500 plummeting 10.5 per cent into February before climbing back up into positive territory in the second half of March.