Saturday, July 20, 2013

WHt's wrong with the TPPA

Saturday, July 20, 2013 0

Sunday, July 14, 2013

The Best and Worst Investments of 2013 (So Far)

Sunday, July 14, 2013 0
The first six months of 2013 were a great time to be an electric-car aficionado who owns an oil well. It was a lousy time to be a gold miner and it remained an awful time to be a Spanish banker. That is, at least, if you judge by the performance of financial markets. The arrival of July seems a good time to check in on Bloomberg's list of the Best and Worst Investments. (We're following the same criteria as the 2012 version.) The Best U.S. Large-Cap Stock is Tesla Motors, a company with huge ambitions in electric vehicles but no profits until this year. It's up 217 percent through the end of June and rocketed another 12 percent in the first week of July. The Worst U.S. Large-Cap Stock is Newmont Mining Corp.go, a gold mining company that plunged 35.5 percent in the first half of the year. The stock fell alongside the price of gold, which was down 26.3 percent as of June 28 and off 23.5 percent as of July 11. Gold was not the Worst Commodity of 2013's first half -- that would be silver, which has dropped 34 percent year-to-date. The Best Commodity this year is oil, up 14 percent through July 11. Outside the U.S., the Best International Stock* is literally recovering from disaster. Up 149 percent in the first half of the year, the Tokyo Electric Power Company, or Tepco, was the operator of the Fukushima atomic power station destroyed in Japan's 2011 earthquake and tsunami. Now, it wants to restart one of the plants idled after the tragedy. The Worst International Stock* so far this year is Spanish bank Bankia SA, down 88 percent. Bankia was also the worst international stock of 2012, as it was pummeled by Spain's real estate collapse. Such consistency from year-to-year is rare. Few of last year's best investments were able to stay on top. Apple, up 31 percent in 2012 and down 20 percent this year, is a classic example. Last year's worst U.S. large-cap stock was Hewlett-Packard, but it's up 86 percent in 2013. Wall Street pundits frequently claim that it's a "stock picker's market." The volatility of these rankings is yet another demonstration of how difficult -- some would say impossible -- these stock pickers' tasks are.

Friday, June 21, 2013

Rio’s Copper Dream Stirs Water Worry in Gobi DesertQ View: Republicans Can Help Obamacare TooQ 4:59 Who Won the Order Battle at the Paris Air Show?Q U.S. Weighs Doubling Leverage Standard for Biggest BanksQ 2:21 Half-iPhone, Half Kindle: Russia's First SmartphoneQ BMW, Mercedes Step Up Used Cars Push Amid SlumpQ Rio’s Copper Dream Stirs Water Worry in Gobi DesertQ View: Republicans Can Help Obamacare TooQ 4:59 Who Won the Order Battle at the Paris Air Show?Q U.S. Weighs Doubling Leverage Standard for Biggest BanksQ 2:21 Half-iPhone, Half Kindle: Russia's First SmartphoneQ BMW, Mercedes Step Up Used Cars Push Amid SlumpQ Fed Seen by Economists Trimming QE in September With End in 2014

Friday, June 21, 2013 0
The Federal Reserve (TREFTOTL) will trim its monthly bond purchases to $65 billion in September and end buying in June 2014, according to the plurality of estimates by economists in a Bloomberg survey. The survey of 54 economists was conducted June 19-20, following Chairman Ben S. Bernanke’s press conference, in which he mapped out a timetable for ending one of the most aggressive easing strategies in Fed history. His remarks prompted economists to predict a faster reduction in bond purchases from $85 billion per month: 44 percent of economists see a tapering in September compared with 27 percent in a June 4-5 survey. “It’s a shot heard round the world for global investors -- a reminder that QE is in fact going to end one day,” said Chris Rupkey, the chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, referring to a policy known as quantitative easing. “One thing that would help them wind down quicker would be confirmation the unemployment rate is going to come down quicker.” The jobless rate in May was 7.6 percent. Bernanke, speaking on June 19 after a two-day meeting by the Federal Open Market Committee, said the Fed may begin dialing down its unprecedented bond buying this year and end it in mid-2014 if the economy achieves the Fed’s objectives. His remarks sparked a sell-off in global financial markets, with stocks falling and bond yields rising for two days. Market Rebound Stocks and commodities rebounded today, paring their weekly declines. Standard & Poor’s 500 Index futures rose 0.5 percent to 1,592.7 at 9:42 a.m. in London. Gold for immediate delivery climbed 0.7 percent after yesterday sliding below $1,300 an ounce to the lowest since September 2010. The metal has dropped 7 percent this week, the most since September 2011, while the S&P 500 is down 2.4 percent since June 14. U.S. Treasuries rose today, with 10-year yields falling two basis points to 2.40 percent. Two-year note yields were little changed at 0.33 percent. The dollar is poised for a weekly advance against all of its major counterparts. Fifteen percent of economists in the survey said the Fed will start to taper in October and 28 percent said policy makers will wait until December. The remaining 13 percent said the Fed won’t begin reducing its pace of purchases until at least next year. Policy makers are planning to taper as the economy strengthens. Fed officials forecast growth of as much as 2.6 percent this year and 3.5 percent in 2014. Purchase Pace The central bank’s forecasts for growth are more optimistic than Wall Street’s. The median estimate of private forecasters in a Bloomberg survey calls for an expansion of 1.9 percent this year and 2.7 percent next year. The amount of initial tapering predicted by economists in the most recent survey was unchanged from the prior one. The central bank will halt bond buying entirely in June 2014, according to 44 percent of the economists in the latest survey. If economic data are consistent with the Fed’s forecasts, “the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year,” Bernanke said at the press conference. “We will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.” The impact of tapering is largely reflected in prices of financial assets, said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore who worked at the Fed’s division of monetary affairs from 2004 until 2008. Winding Down “Saying that the Fed will taper later this year tightens financial conditions right now -- a risky strategy when the economy is only just gaining a bit of momentum,” he said. The U.S. central bank began its third round of large-scale asset purchases in September by buying $40 billion a month of mortgage-backed securities. The Fed added $45 billion of Treasury purchases in December. The FOMC has said since September that it will buy bonds until seeing signs of substantial labor-market improvement. Reducing stimulus and winding down the balance sheet without roiling markets is one of the biggest challenges Bernanke’s successor would face, should the chairman not serve a third, four-year term. President Barack Obama said this week that Bernanke, 59, has stayed in his post “longer than he wanted,” one of his clearest signals yet the Fed chief will leave. Fed Vice Chairman Janet Yellen is the likeliest candidate to replace Bernanke when his term ends in January 2014, according to economists in the survey. The economists assigned Yellen a 65 percent chance of ascending to the top job at the central bank. Former Treasury Secretary Timothy F. Geithner was given a 10 percent chance of becoming the next chairman and former Obama adviser Lawrence Summers, Treasury secretary under President Bill Clinton, was given 9 percent odds.

Thursday, May 30, 2013

Vietnam Stock Inflows at 5-Year High on Growth: Southeast Asia

Thursday, May 30, 2013 0
International investors are buying the most Vietnamese stocks in five years, lured by Southeast Asia’s cheapest valuations and government efforts to bolster economic growth. The benchmark index rose the most in Asia to a 27-month high today. Overseas funds bought a net $253 million of Vietnamese stocks this year to May 29, the biggest year-to-date purchases since 2008, speculating corporate profits will grow for the first time since 2010 as inflation eases and borrowing costs decline, data compiled by Bloomberg show. More foreigners opened Vietnamese equity trading accounts in the first four months of this year than the whole of 2012, data from the Vietnam Securities Depository show. Vietnam’s VN Index (VNINDEX) has gained 26 percent this year, making it Southeast Asia’s best performing benchmark gauge, as the central bank cut interest rates this month for an eighth time since the start of 2012 and the government approved the formation of a debt asset management company to soak up banks’ bad loans that were hampering growth. Even after the rally, the MSCI Vietnam Index trades for 13.5 times projected 12-month earnings, 17 percent lower than the average ratio for the region’s five biggest markets. “We like Vietnam as it has some core secular drivers supporting both the economy and the equity market in the long run,” Samir Shah, an investment manager at Advance Emerging Capital Ltd. in London, wrote in an e-mail on May 28. “Setting up a ‘bad bank’ will loosen the credit cycle and stimulate growth. Vietnam has already seen a cut in rates and we should expect more.” Earnings Growth The central bank has reduced policy interest rates by 800 basis points since March 2012. The VN Index climbed 1.2 percent today to close at 521.45, the highest level since Feb. 9, 2011. The MSCI Asia Pacific Index slumped 1.7 percent at 3:28 p.m. Hong Kong time, heading for the lowest close since April 9. As of April 30, 16,238 foreign investors were granted Vietnam stock trading accounts, compared with 16,001 in the whole of 2012, according to data from the Vietnam Securities Depository, which offers trading support services. Earnings of companies in the MSCI Vietnam Index will rise 16 percent this year, the first increase since 2010, according to data compiled by Bloomberg. “Foreign investors’ interest toward Vietnam is the strongest since I’ve been here,” Michael Kokalari, Ho Chi Minh City-based head of research at Maybank Kim Eng Securities Inc., Vietnam’s sixth-largest brokerage, said in a phone interview on May 29. “We are overwhelmed with visitors and calls.” Growth Forecasts The VN Index will climb to 550 by the end of this year, a 5.4 percent advance from today’s close, and is poised for “a bigger year next year,” Kokalari said. The gauge has advanced 9.9 percent in May, heading for the best monthly gain since January. The index is still less than half its March 2007 peak of 1,170.67. The reluctance of banks to lend may result in economic growth of less than 6 percent for a third straight year, based on forecasts from the International Monetary Fund and the World Bank. While the government estimates economic growth will quicken to 5.5 percent from 5 percent in 2012, that’s still lower than average of 7.1 percent a year since 1990, data compiled by Bloomberg show. Concerns among some investors about corporate governance in Vietnam remain. Last year, eight former executives of Vietnam Shipbuilding Industry Corp. and its units were sent to prison for economic mismanagement, two senior banking officials were arrested and the former chairman of Vietnam National Shipping Lines was investigated for falsifying contracts, part of moves to hold executives accountable for mismanagement at state-owned companies. Bad Loans “People are looking at Vietnam as it’s been a disastrous market,” Hugh Young, a managing director at Aberdeen Asset Management Asia Ltd. in Singapore, said in a phone interview on May 28. “Everyone wants to put money there and people will put money there; whether they know what they’re doing or not is another matter. Vietnamese companies need to convince people that they can treat shareholders properly and fairly, and that the law works.” Non-performing loans reported by commercial lenders stood at 4.51 percent at the end of March, Deputy Prime Minister Nguyen Xuan Phuc told the National Assembly on May 20. That compared with a central bank estimate of 7.8 percent at the end of last year. Market participants and credit rating companies estimate bad debt may be between 10 percent and 20 percent, according to JPMorgan Chase & Co. Prime Minister Nguyen Tan Dung approved on May 22 the formation of the asset management company to address bad loans in the banking system and boost sluggish credit growth. Bank Clean-up Moves to clean up banks will reduce bad-debt ratios to less than 5 percent of total loans at the end of this year, central bank Deputy Governor Nguyen Dong Tien said on May 21. Prime Minister Dung may also approve next month a central bank proposal to raise the caps for foreign investment in local lenders as an additional measure to help weak financial institutions, Tien said. “If the debt-asset management company works properly and the government can point things in the right direction as they have been doing, we will see another rally in the market,” Marc Djandji, a partner at the Asean Strategy Group in Ho Chi Minh City, said in a May 20 interview. Improving Health Vietnam’s economy is showing signs of improving health. Inflation (VNCPIYOY) slowed to 6.36 percent in May, the least since August 2012, and exports climbed 15 percent in the first five months from last year. The central bank announced this month a $1.4 billion support package to assist home buyers and developers with subsidized loans for affordable housing. That will help clear an estimated $2 billion overhang of finished and unsold properties, according to Kokalari. The government also plans to start a pilot program to raise the 49 percent foreign ownership limit for some companies, the State Securities Commission said in January. “There are no indications why foreign funds would stop buying, as valuations are still attractive,” Andy Ho, who helps oversee about $1.5 billion in assets at VinaCapital Investment Management Ltd., the country’s largest fund manager, said in phone interview from Ho Chi Minh City on May 27. “The macro economy is stabilizing and will turn very positive in six to 12 months.”

Sunday, February 24, 2013

Affin profit rises 21%

Sunday, February 24, 2013 0
Affin profit rises 21%

Saturday, January 5, 2013

Understanding the Financial Crisis

Saturday, January 5, 2013 0

Friday, December 21, 2012

India’s Unfinished Journey to Economic Success

Friday, December 21, 2012 0
Even if the latest reforms succeed, India will need to do much more to acquire the efficiency, infrastructure, foreign direct investment, free markets and deregulated, corruption-free orientation that will allow the country to move from 5 percent annual real growth to higher sustainable gains. Land reform is required not only to allow foreign supermarkets to become established but also to make it easier for manufacturers to set up factories. A national sales tax would encourage intra-Indian trade by replacing the tangle of state levies. For now, state governments distrust the central administration to give them their fair share of the proceeds. Corruption needs to be reduced by shifting away from a system in which politicians allocate public goods and where many feel entitled to enjoy the lifestyle of the very rich. India inherited its bureaucratic system from the British and added corruption to the formula. The “Licence Raj” system has been weakened since 1991, but is far from dead. Deregulating the distribution of coal would be a big plus. The government could begin by breaking up or selling Coal India Ltd. (COAL), a huge and inefficient state monopoly. Financial Markets Financial-market development would be aided by easing the requirement that banks and other financial institutions hold large quantities of government securities -- a rule that has kept the private-sector credit and corporate-bond markets relatively small. Also, reducing government’s control over three-quarters of India’s banks would make capital allocation more market-driven and efficient. Many Indians have strong entrepreneurial inclinations. The growth that could be produced by shifting economic power from politicians to entrepreneurs would be vital to reducing high poverty rates and corruption. Small- and medium-sized businesses are the largest nonfarm employers and account for 45 percent of manufacturing output. They add about 3.3 million workers annually. That’s still well below the 13 million new labor-force entrants each year. Corruption, a byzantine bureaucracy and poor infrastructure impede entrepreneurs. In recent years, China has added annually about 10 times more power to its electric grid than India. The government’s reluctance to enact land reform and other spurs to agribusiness, as well as barriers to intrastate trade, inhibit entrepreneurial opportunities and rural productivity growth. And 80 percent of entrepreneurs, according to a survey, say that corruption is increasing, a reasonable assumption as economic expansion creates more opportunities for graft. Furthermore, a culture that penalizes risk taking is an obstacle to new ventures. Indian business is concentrated among long-existing and well-connected conglomerates with close ties to the government, much like the state-owned enterprises in China and the chaebols in South Korea. No significant Indian government-owned business has been privatized in years. Compared with the U.S., U.K., Germany and even China, India leads the pack in terms of business-startup costs and is only topped by China in the time it takes to establish a business. According to the World Bank, India ranked 132nd out of 185 countries in a study on the ease of doing business, behind Russia (112th) and Brazil (130th); China was 91st. Many enterprises reduce the cost of bureaucracy and taxes by operating off the books. A landmark study in the mid-1950s found that the underground economy accounted for 4 percent to 5 percent of Indian gross domestic product. That share rose to 40 percent in 1996, and to 50 percent a decade later. Education Deficit Education also ranks high among India’s long-term challenges. About 97 percent of children enter school, but more than half drop out before completing high school. The literacy rate of 63 percent in 2006 -- the latest available data --though an improvement from 52 percent in 1991, is only higher than Pakistan’s 2009 rate of 55 percent among major countries. School enrollment is the lowest, in high school and college, among the so-called BRIC nations: Brazil, Russia, India and China. Even more of a problem is the quality of public education. Business executives complain about the overbearing bureaucracy in highly regulated schools, and the emphasis on rote learning rather than critical thinking and comprehension. An Indian call center found that it could hire only three of every 100 applicants because so few high-school and college graduates could communicate effectively in English and had basic reading comprehension skills. Students in India’s engineering colleges now number 1.5 million, compared with 390,000 in 2000. Yet 75 percent of technical graduates and more than 85 percent of general grads can’t pass the tests for jobs in India’s information-technology industry, call centers and other high- growth global sectors. These businesses directly employ only 2.5 million Indians and are constrained from more rapid growth by shortages of adequately prepared workers. Major Indian outsourcing companies such as Tata Consultancy Services (TCS) and Wipro Ltd. (WPRO) are increasing the length of training programs to bring newly hired graduates up to speed. Both companies made on-site evaluations of India’s 3,000 engineering schools. Tata says 300 students made the cut; Wipro said 100 did. Only two Indian universities rank in the world’s top 500, compared with 22 in China, two in Russia, six in Brazil and 154 in the U.S. Higher training costs are reducing the international competitiveness of India’s outsourcing industry, which contributes $69 billion annually to the economy and accounts for a quarter of exports. Furthermore, competition from other countries, such as the English-speaking Philippines, is increasing. Tablet Computer There is hope for Indian education, however. The new Right to Education law promises to lift quality by setting minimum standards for school buildings, playing fields and student- teacher ratios. Also, some wealthy Indians are endowing universities, financing higher salaries to attract good faculty, hiring Indian academics from abroad and promoting research, as well as teaching. In addition, the Indian government, in partnership with Canada’s DataWind Ltd., recently introduced a low-cost tablet computer to be sold to students for about $35, part of the government’s effort to leverage the Internet in education. Income inequality has always been prevalent in India, and has been rising in recent years. McKinsey & Co. estimates that there are 2.5 million households making more than $34,000 per year, compared with 1 million in 2005. However, those on the bottom, with less than $3,000 a year, have increased to 111 million from 101 million in 2005. India’s millennia-old caste system impedes social mobility and economic growth. Every Indian is the same before the law, though caste determines social status, who a person can marry and what his or her occupation will be. When India moved toward capitalism in 1991, it set out to create equal opportunity for all, regardless of caste. The huge number of lower-caste Indians used their voting power to push the government to more than double the number of jobs and civil- service positions reserved for them. Despite 20 years of efforts to break them down, caste influences play more of a role in wage inequality in India than do social hierarchies in Indonesia, Brazil and China. In 2010, median household income of high caste Indians was more than twice that of the low-caste Dalits. And the higher the caste, the more access there is to indoor plumbing, electricity and vaccinations for children, and the better the English skills and literacy rates for both sexes become. Urbanization also remains a challenge for India. Subsidies and other government policies, at least until now, have encouraged rural life. There are now 377 million city dwellers, or 31 percent of the population, and that number is growing by about 5 million a year as migrants from the hinterland flock to the cities. That’s still a far cry from the situation in China, where 49 percent of the population was urban in 2010, even though migrants from rural areas are legally discouraged from moving to cities. With urbanization comes economic growth and rising incomes as better-paid, high-value-added city jobs replace farm work. City Migration Reducing subsidies for rural Indians could encourage them to move to cities, much as the Enclosure Acts in England in the 18th and 19th centuries pushed landless rural people into factory towns during the Industrial Revolution. India’s rural subsidies might be better spent on social services such as old-age pensions and disability insurance, health care, unemployment benefits and training. India ranks last on the Organization for Economic Cooperation and Development’s list of public social expenditures as a share of GDP. Although a smaller share of India’s GDP is produced by industry than in China, services account for 56 percent of the economy, compared with 43 percent in China. Services range from high-value-added segments such as information technology to restaurant dishwashers and rickshaw drivers, which on average have much lower productivity and wages than industry. The demand for goods is much more volatile than for services, especially in the export arena. So India’s more inward-looking stance and its orientation toward the production of services offer better protection than China and other goods-export-led nations, which are hurt by the global economic weakness and resulting depressed demand for goods. Urbanization must be combined with deregulation, bureaucratic restraint, clean government and adequate infrastructure to result in high efficiency and rapid economic growth. And Indian infrastructure -- roads, railways and electric power -- needs a vast improvement, another long-run challenge. India has limited natural resources, but a lack of local raw materials hasn’t restrained Japan’s growth. India also has to take care of its environment. Like other developing countries, India has major problems with air and water pollution. The Ganges River is sacred, though tanneries, paper mills and other industries dump untreated waste into it. Indians have yet to acquire a sense of responsibility for their environment, their national treasures and public spaces. This may be due to an overreliance on government to fix things; a historic caste culture; the religious conviction that the present is unimportant; a sense of fatalism; and the pressures created by a huge population. And it simply may be part of the early stages of economic development. Visiting India, I realized that this is a very old and deep culture that resists rapid change. After independence in 1947, these traits were reinforced by stifling bureaucracy, corruption, economy-distorting subsidies, veneration of rural life, Soviet-style central planning and an acceptance of slow growth. It will be fascinating to see if India’s problems can be overcome and whether rapid and sustainable economic growth can be established in a robust democracy. I believe India will succeed in the long run. (A. Gary Shilling is president of A. Gary Shilling & Co. and author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation.” The opinions expressed are his own. This is the fifth in a five-part series. Read Part 1, Part 2, Part 3 and Part 4.) To contact the writer of this article: A. Gary Shilling at To contact the editor responsible for this article: Max Berley at
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