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indonesia

Indonesian Bonds Offers the Highest Yield


The central bank, which started cutting rates in December, will lower the reference rate tomorrow by a quarter-percentage point to 6.75 percent, 16 of 20 economists predicted in a Bloomberg survey. Four predicted no change. Indonesia's bonds will extend a rally that pushed yields to a 16-month low as cooling inflation allows the central bank to cut interest rates, ING Groep NV, PT Mandiri Sekuritas and Australia & New Zealand Banking Group Ltd. said. Yields on 10-year notes will drop 1.5 percentage points to 9.5 percent by the end of this year, the lowest level since November 2007, said Handy Yunianto, a Jakarta-based bond analyst at Mandiri. Five-year bond yields will drop 70 basis points to 9 percent, ING said. "Falling inflation is positive for bonds," Prakash Sakpal, an economist in Singapore at ING, the largest Dutch financial- services company, said in an interview yesterday. Sakpal said Bank Indonesia will lower borrowing costs at a meeting tomorrow.

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india

Good News for India's Economy


India's exports fell for the eighth consecutive month in May 2009, while industrial output increased 1.4 percent in April 2009. The economy expanded 6.7 percent, which is the most sluggish pace in the past six years, since 2003, where the economy expanded between 8.5 percent and 9 percent. Among India's many strengths is the country's large service sector, which contributes about 55 percent of India's GDP. Furthermore, the government's rural jobs program, which guarantees 100 days of work in a year for the poor has kept "rural income and consumption strong," according to the finance ministry. With income, consumption, growth, output and a strong service sector, India's economy "has shock absorbers" that will ensure the country's economic revival.

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china

China Gives $950 Million to Help Zimbabwe


China was one of the few countries to retain economic support for Zimbabwe in recent years. "We will encourage and facilitate more Chinese companies to seek development in Zimbabwe," Chinese official Zhou Yongkang told state news agency Xinhua. China has agreed to give Zimbabwe a loan of $950m (£573m) to help it revive its battered economy, Prime Minister Morgan Tsvangirai has said. Mr Tsvangirai had been criticised by supporters of President Robert Mugabe for failing to get more support during his recent trip to the West. Mr Tsvangirai and Mr Mugabe formed a power-sharing government in February

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japan

Japan Tankan Signals Business Spending Cuts May Impede Recovery


Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo said, "Companies have started to realize that sales aren't really going to come back, companies are faced with massive excesses in capacity." Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo said, "It could be two or three years before companies are using even three quarters of their production capacity." Aware of this, managers are cutting investment, jobs and wages. Toyota, for instance, is cutting spending 36 percent and is simultaneously cutting wages for factory workers by 15 percent. As profits continue falling, companies will continue to hire less workers (and lay some off) and invest less.

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taiwan

Taiwan Gets Investment from China


Tensions between Taiwan and China eased after Taiwanese President Ma Ying-jeou abandoned his predecessor's pro- independence stance. The island's benchmark stock index rose 23.4 percent this quarter on speculation that closer ties will aid the economy which contracted by a record in the first three months of the year. "This is another major step toward an improving relationship between Taiwan and China," said Kevin Lin, who helps manage NT$1.5 billion ($46 million) at Taishin Securities Investment Trust Co. in Taipei. "The normalization between the two sides will help boost the local economy and corporate earnings in the long run, and thus increase the valuation of local stocks." The benchmark Taiex index climbed by the most since 2001 in the three months to June 30, and Taiwan's dollar rose 3.4 percent against the U.S. currency in the same period.

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thailand

ICBC Bank May Buy Stake in ACL Bank Pcl From Bangkok Bank


Bangkok Bank Pcl, Thailand's biggest lender, agreed to sell its stake in ACL Bank Pcl to Industrial & Commercial Bank of China Ltd., the world's biggest bank by market value. "We are done with the talks, now it's up to the finance ministry," Kosit Panpiemras, the Thai bank's chairman, told reporters today, adding that ICBC also wants to buy the ministry's stake in ACL. Bangkok Bank said Nov. 21 it aimed to complete the sale of a 19.3 percent stake in ACL, worth $33 million at yesterday's close, to ICBC by the end of 2007. The deal was delayed pending a plan to raise overseas ownership limits in Thai banks to 49 percent. Thailand's government holds 30.6 percent of ACL. A deal would add to ICBC's emerging-market holdings as the state-owned bank continues an overseas expansion drive begun in 2006 with the purchase of 90 percent of PT Bank Halim Indonesia. The firm agreed to buy 79.9 percent of Macau's third-biggest bank in August and bought a fifth of South Africa's Standard Bank Group Ltd. in October, the largest overseas acquisition by a Chinese lender.

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china

China and Hong Kong decide on Yuan


"It's an important step to make the yuan an international currency," said Fang Ming, an analyst in Beijing at Bank of China Ltd., the nation's biggest foreign currency trader. "In the long-term, the world reserve currency system will consist of several major currencies, including the yuan and the euro, instead of just the U.S. dollar." Many worry about the $1.95 trillion in foreign-currency reserves but Zhou assures that China will not change its composition suddenly, but will rather do it gradually. Hong Kong Chief Executive Donald Tsang announced, "Our long-term goal to promote Hong Kong as an overseas yuan trade settlement center for China, and today's arrangement is a big step towards this goal." The People's Bank of China has now agreed to provide 650 billion yuan ($495 billion) to Argentina, Belarus, Hong Kong, Indonesia, Malaysia and South Korea through "currency swaps" to begin expanding it use.

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india

Indian Stocks Increased 49% This Year


India's Sensex gained 49 percent advance this year and further gains depend on government policies to boost economic growth and pare a budget deficit, Nomura Holdings Inc. said. The benchmark Bombay Stock Exchange Sensitive Index may rise to 16,400 in the next 12 months, a "muted" 14 percent gain from yesterday's close, Nomura analysts led by Prabhat Awasthi said in a report today. Investors should own a mix of so-called defensive and domestic cyclical shares, they added.

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china

China Prevents Yuan from Strengthening


China is preventing its currency from strengthening against the dollar to support jobs and exports. This would make it easier for Chinese manufacturers to keep prices low for consumers abroad, like the U.S and Europe, which would help more factories stay in business. However, it would restrict China's spending power when importing raw materials and luxury goods, which furthers the stress between China and its trading partners. During the past four years, China has managed its exchange rate against an "undisclosed" basket of currencies "as a step toward making the yuan fully convertible," according to Bloomberg. Timothy Geithner, U.S Treasury Secretary urged China to allow its currency to be more flexible. He also advises the country to rely less on exports and more on imports to work for growth in the economy. He also stresses the importance for market-set interest rates and exchange rates to manage the economy. Trade gaps between its trade partners have "boosted the nation's foreign-exchange reserves." In March 2009, the reserves reached $1.95 trillion The Chinese government will be able to maintain an exchange rate that favors its manufacturers because the U.S. government needs its support to finance it's large budget deficit, said Chris Ruffle who helps oversee $3 billion of assets as co- chairman of Martin Currie Investment Management Ltd.'s China unit in Shanghai. China is the biggest foreign holder of U.S government debt. Its importance in the U.S bond market will keep China in control of its own currency.

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china

Trade Dispute: China, U.S and European Union


Both the U.S and European Union have reportedly criticized China for "unfairly limiting its raw materials exports" and instead giving its domestic industry access to cheaper materials. China denies such claims and affirms that it is following its World Trade Organization obligations and protecting the environment and natural resources. Bauxite, magnesium and coke, which is used to make steel are some of the materials that are causing the two countries to become concerned. Ron Kirk, U.S Trade Representative holds that China is "unfairly restricting exports of raw materials," and is therefore harming American steel, aluminum and chemical manufacturers that rely heavily on these materials to make their products. The U.S and E.U criticisms have resulted in a 60 day consultation period, where the dispute will be resolved. Should the two countries win against China, they would be permitted by the WTO to impose economic sanctions on China.

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newzealand

Oceania's Dollar Rose for a Second Day


The Australian and New Zealand dollars gained for a second day as speculation U.S. interest rates will stay low buoyed demand for higher-yielding assets. The currencies extended yesterday's biggest advance in a week against the U.S. dollar after futures traders added to bets the Federal Reserve will keep the benchmark rate close to zero for the rest of this year. Demand for higher-yielding assets was bolstered after the European Central Bank called for banks to bid in the first auction of 12-month loans, prompting speculation that the funds being made available will be invested in countries with higher benchmark interest rates. "People are afraid of strong comments from Fed officials that will reduce tightening expectations," said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader. "Further ebbing of tightening expectations is weighing on the U.S. dollar, so it's weakening against currencies like the Aussie and kiwi," he said. Australia's currency rose to 79.85 U.S. cents as of 5:02 p.m. in Sydney, from 79.39 cents yesterday in New York. It bought 76.11 yen from 75.60 yen. New Zealand's dollar strengthened to 64.41 U.S. cents from 63.97 cents. It traded at 61.37 yen from 60.92 yen.

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japan

Bank of Japan's Tankan Survey Looks Better


It is predicted that the Bank of Japan's Tankan survey on June 1st will show that important manufacturing companies believe the "worst of the recession" is over on July 1, 2009. Evidence of the new outlook among large makers of electronics and cars is expected to rise from minus 58 in March to minus 43. Although the minus shows that pessimists outnumber optimists, the decrease in number of pessimists is important, especially in the manufacturing industry. As Jan Lambregts, head of financial markets research at Rabobank International in Hong Kong said, "we're seeing a rebound from rock bottom." A large increase in Chinese demand has helped Japan. Thanks to China's government spending, Japan's "heavy equipment" autos and materials have increased in sales. For instance, in China, Nissan sales rose 37 percent in April 20009, due to a subsidy that cut the consumption tax in half on small cars. In the U.S, Mazda Motor Corporations are also predicted to increase because of the Obama administration's "cash for clunkers" which would give consumers some money for trading in their old vehicles. (As much as $4,500 according to Bloomberg.) In Japan, electronics sales have increased 18 percent in the past month, due to the government's introduction of a program to advocate consumers to purchase eco-friendly products.

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