India is among the countries that are most vulnerable to capital outflows as it relies heavily on external funding, global credit rating agency Moody’s cautioned today.
“India and Indonesia are the most vulnerable to capital outflows because of high reliance on external funding,” Moody’s Analytics said in its report — ‘How US Monetary Tightening Affects Asian Markets’
It said the impact of recent Fed announcements on bond yields have exposed structural flaws in Asian economies, particularly in India and Indonesia.
Moody’s said the US Fed’s talk earlier of a likely tapering of monetary stimulus depreciated the rupee by 15 per cent, making it the worst performing currency in Asia.
The US Federal Reserve last week surprised the markets by saying it will continue with its monthly $85 billion bond buying programme and wait for more evidence of growth recovery before thinking of unwinding the stimulus.
Expectations that the stimulus programme would be tapered had led to fears of capital outflows, causing the rupee to depreciate against the dollar and stocks to fall.
The rupee touched a low of 68.86 to the US dollar on August 28. It is currently trading around 62.83 to a dollar. Read More
Christine Lagarde, the managing director of the International Monetary Fund, is taking the global view of Unconventional Monetary Policy (UMP).
The Federal Reserve’s intention to begin to slow its unconventional monetary policy has prompted investors to unwind some global bets made since the financial crisis, hitting emerging market bonds, currencies and equities over the last four months.
In a speech at the gathering of the central banking fraternity in Jackson Hole, Ms Lagarde acknowledged that:
The upshot of all this is that the present calculus of UMP for non-UMP countries is, on balance, still positive. At least for now.
Fonterra’s food contamination scare has shaken the money markets, and wiped as much as $1 billion off the company’s value on the stock market.
The country’s biggest company revealed three batches of whey protein concentrate, totalling 38 tonnes, are contaminated with the bacterium that can cause botulism, prompting product recalls and import bans in some countries.
New Zealand exported $12.5 billion of dairy products during 2012, which is about 27% of all merchandise exports and Fonterra accounts for most of that.
China comprises 21% of all New Zealand milk powder exports, while Russia accounts for 1%. The other countries affected by product recalls together account for 12%.
Well here’s the latest controversy, ice cubes at KFC that are not just dirtier than toilet water, but 13x dirtier. YUM! From Business Week:
Having battered KFC with reports last year that the company sold chicken fattened on illegal drugs,China Central Television now says the ice cubes at a KFC restaurant are dirtier than toilet water. The state-owned broadcaster found that ice in a Beijing outlet had 13 times as much bacteria as water from a toilet bowl and 20 times the national limit. (McDonald’s ice, according to the CCTV report, had less bacteria than toilet water but still didn’t meet national standards.) Read More
Executives of SAC Capital Advisors LP are bracing for what they have estimated could be $3.5 billion in withdrawals as a quarterly deadline approaches for clients of the hedge-fund giant to ask for their money back, according to people briefed on the matter.
The anticipated withdrawals, which the people described as preliminary estimates that were still in flux going into the weekend, would follow requested withdrawals of $1.7 billion by SAC clients in the first quarter. Read More
Iron ore prices tumbled to a seven-month low on Wednesday as negativity spread through the Chinese steel industry.
Analysts said that both traders and steelmakers in China, which accounts for 60 per cent of global seaborne iron ore imports, had been selling down stocks amid widespread anxiety about the outlook for demand, and concerns about overcapacity in the industry.
“Panic is building on panic,” said Melinda Moore, bulk commodity strategist at Standard Bank in London. Read More
Almost 12 years after the September 11 terrorist attacks, the void in New York’s skyline is being filled. The final piece of One World Trade Center – a 408-foot spire – has been installed, raising the building to 1,776 feet and making it the tallest building in the US and third-tallest in the world.
The signature skyscraper is one of four being built around the site of the former Twin Towers – the country’s most notable construction project. But as attention is drawn to the skies, on the ground the complex stop-start $14bn World Trade Center development, led by private developer Larry Silverstein, is still a frenzied construction site, and the buildings that are ready lie half empty.
The World Trade Center has struggled to find tenants as cost-wary corporations, stung by the global financial crisis and its fallout, downsize or search for cheaper office space elsewhere. In particular, financial services companies – traditionally the high-quality tenants that spurred office property development – have been more cautious, leaving many to wonder who will occupy these gleaming skyscrapers.
“The developers are asking for very high rents as these buildings have cost so much to construct,” said Ben Carlos Thypin, director of market analysis at Real Capital Analytics. “They can’t afford to rent them for less.”
Already an expensive architectural and engineering endeavour, years of missed deadlines and ruthless powerplays involving city authorities, developers and insurance companies among others have led to billion dollar cost overruns. Read More
Greece’s securities regulator has extended a short-selling ban on bank shares to the end of July to protect investors while the recapitalisation of the country’s cash-strapped lenders is completed.
Short-selling involves investors borrowing shares to sell on the market and later buying them back at a lower price to make a profit. Greek banking stocks have been heavily shorted as investors bet that stock prices would fall further during the country’s sovereign debt crisis.
“The board took into consideration the ongoing bank recapitalisation process,» the Capital Markets Commission said in a statement, confirming an earlier Reuters story.
A short-selling ban on all stocks was introduced in August 2011 to protect investors from the fallout of the country’s debt crisis. Greece scrapped the ban on short selling non-banking stocks in January as market confidence grew after the country averted bankruptcy last year.
The regulator said that the three-month extension has been approved by the European Securities and Markets Association (ESMA).
Experts from the European Union, European Central Bank and International Monetary Fund are studying the consequences if Cyprus does not receive a bailout, a German newspaper reported on Saturday.”Experts from the troika are calculating, especially under pressure from Berlin, the financial consequences of a Cyprus bankruptcy,” Bild, the most widely read daily in Europe, said without citing a source.Greece would be the country most affected by the failure of the main Cypriot banks which have a network of branches on the island where around 10 percent of Greek savings are stocked.”The banks of the other eurozone countries would, on the other hand, be hardly affected,” Bild said.Cyprus asked for European aid in June, after its two main banks, which were exposed to the crisis in Greece, appealed for government help.On Monday, eurozone finance ministers meeting in Brussels postponed the decision on aid until after Cyprus’ presidential election, whose first round begins on Sunday.Cyprus’ total needs are estimated at more than 17 billion euros (23 million).At the troika’s request, the east Mediterranean island adopted a series of austerity measures to reduce its expenses representing 7.25 percent of gross domestic product over four years.Nevertheless, according to a report in Saturday’s Frankfurter Allgemeine Zeitung, the financing needs of the island’s banks, initially estimated at 10 billion euros, could be in the end considerably lower.Progress has been slow on a bailout for Cyprus given concerns over its banks and allegations of money laundering due to fears that Russian criminal elements are active in the country.
The government and the Liberal Democratic Party are looking to consult with three leading opposition parties on candidates to succeed Bank of Japan Governor Masaaki Shirakawa, The Nikkei learned Tuesday.
The talks would take place before the government presents its nominee to the Diet. Opposition votes are crucial to winning Diet confirmation for the choice, since the LDP-led ruling coalition lacks a majority in the upper house. Shirakawa’s term expires in April.
LDP upper house affairs chief Masashi Waki told his Democratic Party of Japan counterpart, Shuji Ikeguchi, last week that the LDP wants to “sound out” the DPJ, the Japan Restoration Party and Your Party “confidentially” on the matter. Ikeguchi did not immediately respond to the offer.
The LDP and its coalition partner, New Komeito, are 16 seats short of the 118 seats needed for an upper house majority. The DPJ holds 87 seats in the upper house, excluding the chamber’s president. Another option for the ruling coalition would be to partner with Your Party, which has 11 seats, and a combination of smaller parties. Read More