Monday June 29, 2009

FRANKFURT: German banks are facing a firestorm of criticism from the government and industry federations that accuse them of threatening small businesses with their tight-fisted credit policies. More than 16,600 small and medium-sized companies in Germany failed in the first half of the year, 14 percent more than in the same period of 2008, the association Creditreform has estimated.

The bankruptcies affected 250,000 jobs and Creditreform has warned that a total of 540,000 jobs could be eliminated by the end of the year. Tight credit policies have been a major factor in the failures, according to most official business administrators polled by ZIS, a research group specialising in troubled enterprises. "Getting credit has become very difficult," administrator Markus Ernestus told AFP.

"Even companies that have a temporary need for cash to fill their orders are getting turned down." The tight money approach prevails despite a steady monetary easing by the European Central Bank, whose benchmark interest rate has been brought down from 4.25 percent to a record low 1.0 percent. "Banks have not lowered their rates, in order to build up their profit margins, and have raised their risk surcharges," said Karl-W. Giersberg, head of the federal small- and medium-sized business association BKM.

The banks are also under pressure from capital reserve requirements imposed by their lending. To reassure investors and to shore up their share price, banks often apply stricter standards than those prescribed by international practice.

As a result, warned Anton Boerner, head of the German exporters' association BGA, "a massive credit crisis" looms between now and the middle of September. German banks reject the criticism, arguing that co-operative banks have made loans of 164 billion euros (231 billion dollars) to companies in the first quarter of the year, an annual increase of 4.7 percent.


(AFP)

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Monday June 29, 2009

NEW YORK: As hard-hit Western banks and hedge funds scramble to sell their Asian loans and bonds, one newcomer expects to pick up these choice assets at rarely seen discounts. Opvs Group is launching two Asia-focused credit funds designed to benefit from the region's underlying growth potential by acquiring debt at prices depressed by the global financial crisis.

That's a classic opportunity, said Barry Dick, who left Merrill Lynch last year as its Asia head of debt products distribution and co-founded Opvs. "Asia has been sold off in line with the rest of the world. It really looks like a case of the baby thrown out with the bathwater," Dick said in an interview.

Dick founded the Singapore-based firm with three other Asia veterans: Chris Francis, who ran Asian credit and later equities research at Merrill; Sandeep Gill, former global credit derivatives head at DBS Group Holdings Ltd; and Tommy Kim, co-founder of Singapore-based HFG Investments Pte.

This team spent the past year building a 25-person firm that will be dedicated to the region and, for now, one asset class. "There are a lot of boutique operations in the region - five guys in a garage and a prime broker - but we wanted to build a large asset management company, the best in Asia, with very specialised investment teams."

Opvs is rolling out two funds in the coming month. First will be the Opus Asia Opportunity Fund, which will snap up loans from closely held, high-growth companies in a region reaching from China, Japan and Southeast Asia to India and Australia.

It has been seeded with $50 million and will complete its first round of fund-raising, but will continue adding money through the fall. The fund will hold these credits until maturity, with proceeds paid out as distributions after one year and then every six months until all the loans mature.

Later next month Opvs will launch Fundamental Asia Credit Fund with $50 million initially and growing to a maximum $300 million. The fund will invest in highly liquid and publicly traded bonds and short bonds through the swaps market.

In a sign of the times, both funds will provide shareholders with Internet access to their portfolio holdings. In contrast to just a year or two ago, when Asia was a top priority for every Western bank and fund manager, the fast growing region has become a lot less crowded. These same investors have been forced to shed portfolio holdings and often turn first to their Asian assets.

The potential returns on these investments are high, Opvs says, because loans extended by big banks like Merrill, Goldman Sachs and Morgan Stanley during the boom years of 2005 through 2007 are now being sold off at fire-sale prices.

In recent months, emerging markets funds have become a hot item in the hedge fund community. Still, for the relative few prepared to step in today, what was a sellers' market quickly has became bargain city.

"There's been a big shakeout since the credit crunch," Francis said. "That's left us in a situation where there is an excess of sellers of credit, or people holding credit, but not a lot of people who have balance sheets to take up that capacity."


(Reuters)

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Monday June 29, 2009

HONG KONG: Asian currencies ended the week mostly higher against the dollar after the US Federal Reserve maintained its stimulative monetary policy aimed at lifting the US economy out of recession.

JAPANESE YEN: The yen gained ground this week as the dollar faced selling pressure on expectations that US interest rates will remain low for some time, dealers said. The Japanese currency stood at 95.22 against the dollar in New York late Friday, compared with 96.31 a week earlier.

Lower US bond yields reduced demand for the greenback, dealers said. Investors tend to favour currencies offering higher returns. "The dollar faced selling, reflecting drops in long-term interest rates," said Yuji Saito, forex head at Societe Generale. The market continued digesting Wednesday's decision by the US Federal Reserve to leave its stimulative monetary policy unchanged, giving no sign that it was preparing to scale back its pump-priming measures.

The yen also benefited from safe haven flows after the World Bank on Monday sapped hopes that the global economy would show real signs of strength in the near future. "Investors exited high-yielding global growth sensitive currencies like the Australian and New Zealand dollars in favour of the 'safe haven' yen and US dollar," wrote NAB Capital strategist John Kyriakopoulos in a note to clients.

In times of economic uncertainty the yen and dollar are considered safer for investors who are more risk averse. But the yen's gains remained limited as Japanese consumer prices logged a record fall last month.

Analysts said the prospect of another prolonged bout of deflation in the world's second largest economy increased the chances of Japanese interest rates remaining low for some time, potentially reducing the appeal of the yen. The market is now waiting for the release next week of key US jobs data, dealers said.

AUSTRALIAN DOLLAR: The Australian dollar ended the week little changed, with positive economic news prompting a rally from earlier weakness, dealers said. The commodities-based Aussie closed Friday at 80.45 US cents, the same level as the previous week, after dipping to 78 cents in early trade. "The Australian dollar started the week on a soft note thanks to worries about the global growth outlook which put pressure on commodity prices," said AMP Capital Investors chief economist Shane Oliver.

"But as better economic data came through both commodity prices and the dollar recovered to be little changed," he said. Oliver said the Aussie was going through a period of correction, but was likely to remain broadly strong as commodity prices firmed and share markets recovered. In the short-term, local retail sales and building approvals data, due Wednesday, were likely to trigger a surge in the currency towards 85 US cents, said ANZ economist Amber Rabiniov. "However, the choppy nature of these data could mean that any impact is muted," she said.

NEW ZEALAND DOLLAR: The New Zealand dollar finished local trading Friday at 64.50 US cents, up from 63.85 the previous week. The kiwi moved in a range of around two US cents during the week, responding to moves in the US currency and the fortunes of equity markets.

News Friday that the New Zealand economy shrank one percent in the March quarter in its fifth consecutive quarterly contraction knocked nearly half a cent off the local currency but it recovered to be little changed. On Thursday, figures showing that the annual current account deficit declined in the March quarter to 15.25 billion dollars (9.76 billion US), amounting to 8.5 percent of gross domestic product, had little impact.

CHINESE YUAN: The yuan closed at 6.8338 to the dollar Friday, compared with Thursday's close of 6.8347 and a closing price of 6.8362 the week before. The central bank had set the yuan central parity rate at 6.8328 to the dollar Friday, compared with 6.8331 on Thursday. The People's Bank of China allows a trading band of 0.5 percent on either side of the midpoint.

HONG KONG DOLLAR: The US-pegged Hong Kong unit ended the week unchanged at 7.751.

INDONESIAN RUPIAH: The rupiah ended at 10,270 to the dollar, up from 10,390 the week before.

PHILIPPINE PESO: The Philippine peso rose to 48.305 to the dollar on Friday afternoon from 48.400 on June 19.

SINGAPORE DOLLAR: The dollar was at 1.4548 Singapore dollars Friday from 1.4565 the week before.

SOUTH KOREAN WON: The South Korean currency further weakened to 1,284.30 won to the dollar from 1,268.40 won a week earlier, as overseas players bought the greenback amid unstable global stock markets and concerns over North Korea's nuclear and missile programmes. Dealers said the won was likely to trade within a narrow range of around 1,280 to the dollar in the coming week. South Korea logged a current account surplus for the fourth straight month in May as imports fell faster than exports during the ongoing global economic slump, the central Bank of Korea said Friday.

The current account surplus stood at 3.63 billion dollars in May, compared with 4.25 billion dollars a month earlier.

TAIWAN DOLLAR: The Taiwan dollar closed at 32.925 against the US dollar, down from 32.878 a week earlier.

THAI BAHT: The baht rose against the dollar over the past week in moderate trading because of gains in the stock market and in line with other regional currencies, dealers said. The Thai unit closed Friday at 34.05-07 to the dollar compared with the previous week's close of 34.13-15.


(AFP)

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Monday June 29, 2009

SINGAPORE: The World Bank has launched a programme to help cities in developing countries achieve economic growth and high quality living standards without damaging the environment. With around 90 percent of urban growth world-wide taking place in developing nations and at a rapid pace, city planners are in a race against time to put in place the right policies that will benefit future generations, the bank said.

"Urbanisation in developing countries may be the single greatest change in our century," it said in a book outlining how the bank can help cities achieve economic growth and still have clean air and water and expansive greenery.

The programme was developed by an international team of experts from urban planning, transport, energy water and waste management and draws from the experiences of well-managed cities around the world. It incorporates the best practices from model cities such as Singapore, Stockholm in Sweden, Yokohama in Japan and Curitiba in Brazil. In co-operation with the bank, other cities in developing countries can implement these practices, principles and other practical methods and tools in accordance with their own local conditions.

The programme complements the bank's efforts to promote sustainable development and help cut greenhouse gas emissions blamed for climate change. Entitled "Ecological Cities as Economic Cities", the book cites projections that developing countries will treble their entire built-up urban area from 200,000 square kilometres (77,220 square miles) to 600,000 square km (231,661 square miles) between 2000 and 2030.

"One could say we are building a 'whole new world' at about 10 times the speed in countries with severe resource constraints," says the book, launched in Singapore at the weekend.

The rise of urban centres cannot be avoided because on average about 75 percent of global economic production takes place in cities, the book says. In many developing countries the share of urban centres in the total national economic output is over 60 percent, it notes. But while urbanisation has helped lift millions of people out of poverty, it has also led to an "unprecedented consumption and loss of natural resources", the book says. Lack of planning and an explosion in population growth has led to pollution, urban blight, poor water and sanitation conditions and the mushrooming of slum areas.

"Calculations already show that if developing countries urbanise and consume resources as developed countries have, an ecological resource base as large as four planet Earths would be needed to sustain growth," the book says.

It adds however that cities like Singapore, Stockholm, Yokohama and Curitiba have shown that economic growth, high-quality living standards and protection of the environment can go together. The book notes that many of the solutions adopted by these cities "are affordable even when budgets are limited, and they generate returns including direct benefits to the poor". Yumiko Noda, the deputy mayor of Yokohama, said at a seminar on "liveable cities" held in Singapore to coincide with the book's launching that citizens' involvement was crucial to a city's success. Yokohama in 2001 planned to cut the city's waste by 30 percent within 10 years but achieved its goal in just five years.

This has saved the city money and also slashed its carbon dioxide emissions, she said. Jim Adams, World Bank vice president for East Asia and the Pacific, said the pace of urbanisation has highlighted the urgency for an integrated economic and ecological approach to development. "There is only a short space of time in which to make an impact on how this development takes place," he said in a statement.


(AFP)

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Monday June 29, 2009

KARACHI: Increased budgetary borrowing (by Rs 19 billion) and improved net foreign assets of the banking system (up Rs 16 billion) along with a marginal increase in borrowing for commodity operations (Rs 3 billion) pushed up money supply during the week by Rs 24 billion after netting out the moderating effect of OINs reflecting an increase in other liabilities amounting to some Rs 14 billion.

Overall incremental money supply during FY09 to June 13 thus stood higher at Rs 338 billion, or 7.21 percent, represented by currency in circulation amounting to Rs 220 billion and deposit money amounting to Rs 118 billion. The increase during the week occurred entirely in deposit money, represented by an increase in demand and time deposits. No significant changes were observed in credit utilisation by the corporate sector including both the private sector and the PSEs.

All in all, net domestic assets (NDA) of the banking system, represented by public and private sectors indebtedness to the system's constituents, increased during the week by over Rs 8.5 billion to Rs 536.5 billion. Net foreign assets (NFA) of the banking system, in the meanwhile, improved by Rs 15.7 billion, reflecting lower depletion of foreign assets, which now stood reduced to Rs 198 billion.

The improvement in NFA was in line with the improvement in liquid foreign reserves of the country which surged from $11.515 billion on June 6 to over $11.643 billion on June 13. The surge over the week was shared by an increase of about $101 million in liquid reserves held by the central bank and an increase of about $27 million in liquid reserves held by the scheduled banks.

Among important developments during the week, government borrowing increased by Rs 22 billion to over Rs 600 billion as on June 13, 2009.

Within it, budgetary borrowing increased by Rs 19 billion to Rs 402 billion while borrowing for commodity operations by various government agencies and departments, which is principally for wheat procurement at present, increased by Rs 3 billion to over Rs 200 billion. Break-up of budgetary borrowing showed that almost entire borrowing during the week was made from the State Bank of Pakistan while borrowing from scheduled (mainly commercial) banks rose only by a negligible amount. Government's rising indebtedness to the central bank may pose serious problem for the government when it will come to meet the IMF targets of overall budgetary borrowing and, within it, the downward looking target of borrowing from the central bank. Maybe, the government has to go farther into the already aggressive borrowing made from non-bank elements or seek a benevolent review of the conditionals in view of the on-going operation against the militants in whose success IMF may be as interested as any other stakeholder.

NFA's details for component analytical accounts are available for the month of April 2009. According to this, NFA of the banking system depleted by about Rs 24.6 billion during April.

The entire depletion occurred on account of the State Bank of Pakistan as depletion at scheduled banks was only of a negligible amount. Further analysis of analytical accounts at the central bank showed that net depletion was a result of SBP's incremental claims on the non-residents, which showed an increase of about Rs 44.4 billion, adjusted for SBP's liabilities to the non-residents, which showed a much higher increase, of about Rs 69 billion, during the month.

The claims were in the form of monetary gold, etc, holdings of SDRs, foreign currency, deposits and securities other than shares, whereas liabilities were in the form of deposits, securities other than shares, and loans.


(BRecorder)

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Monday June 29, 2009

KARACHI: The investment under CFS declined by 34 percent, to Rs 6.6 million during the week ended on June 27, 2009. The CFS rate, however, increased to 50 percent till Thursday, while no significant transaction was witnessed on Friday. The top 5 scrips by CFS investment were NBP, POL, OGDC, UBL and DGKC, which cumulatively accounted for 67 percent of total investment.


(BRecorder)

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Monday June 29, 2009

SEOUL: North Korea's economy in 2008, before its latest falling out with the international community, grew to where it was three years ago, helped by a bumper harvest and foreign aid, South Korea's central bank said on Sunday. Even though the reclusive state's per capita income last year rose to around 1.2 million won ($930), it was still barely 5 percent of neighbouring South Korea.

"North Korea is presumed to have benefited from favourable weather for agriculture and international aid of oil and raw materials, mostly temporary supports. So it's hard to say its growth potential has improved much," the Bank of Korea said in a statement. It put growth in gross domestic product at 3.7 percent last year to 21.5 trillion won, or about 2 percent of the annual output of the South's economy which the North outstripped as late as the 1960s.

The economy fell 1.1 percent and 2.3 percent in 2006 and 2007, respectively.

North Korea's economy had grown by 6.2 percent in 1999, the start of a seven-year run of positive growth. But 2006 saw a return to economic decline as the North was hit by UN sanctions for defying the international community with its first nuclear test.

Tough new international sanctions, triggered by recent belligerence that included a second nuclear test in May, are likely to further squeeze the North Korean economy, analysts say.


(Reuters)

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Monday June 29, 2009

FRANKFURT: German luxury car maker Daimler launched its first hybrid model last week, almost 10 years after the market leader, Toyota. The world's best-selling limousine, a favourite of world leaders, the Mercedes Benz S Class, is now available in Europe with two motors, one electric and the other petrol (gasoline), to save fuel and cut pollution.

The "CO2 champion of luxury cars," as Mercedes bills it, nonetheless cranks out 186-189 grams of carbon dioxide per kilometre, remaining one of the biggest polluters on the road, well above the European average of around 160 grams.

A comparable S model with a normal engine can spew out as much as 234 grams, Daimler counters. A spokesman added that "we want to launch at least one hybrid model per year."

It is by all accounts a mini revolution in the German auto sector, which generally produces big, powerful cars by brands including Mercedes, Porsche, BMW and Audi.

Porsche plans to roll out a hybrid version of its Cayenne sports utility vehicle in late 2010, and BMW is preparing a saloon (sedan) from its Series 7 line this year, even though it is "too early to speak of full distribution," according to a BMW spokeswoman. Auto expert Gerd Lottspiesen from the environmental association VCD told AFP that the German car industry "has been asleep for several years."

"It repeatedly dismissed hybrids. If it is finally waking up, it's pretty late" compared with Toyota, which sold its first hybrid Prius model in Europe nine years ago. Lexus, the luxury line from Toyota, has offered a hybrid system for four years.

"For years, the German automobile sector did not believe hybrids had a chance ... but at a certain point, under market pressure, the industry changed its mind," said Stefan Bratzel, professor at a specialised auto centre in the western city of Bergisch Gladbach.

German companies mainly focused on diesel engines, the specialists noted. As a result, the German market is dominated by diesels, while hybrids represented only 0.2 percent of the market last year with the sale of 6,500 Toyota, Lexus or Honda hybrids, according to national registration figures.

Since its launch, Toyota has sold 22,000 Prius in France and around 17,000 in Germany, which has a market three times bigger, according to Toyota data.

"The Prius has never been a best-seller here," a spokeswoman for the Japanese group acknowledged. Germans, who are strongly attached to their national brands, could begin to switch over if domestic hybrid models are available however.

"The environmental trend is becoming dominant," said Frank Schwope, an auto analyst at the NordLB bank. Daimler is a good example.

Until now it has been considered one of the most resistant to environmental trends.

But in the past few months, Daimler has begun to highlight its determination in the area. It recently acquired a battery company and a 10 percent stake in the US electric car maker Tesla. A sign for auto specialists that Germans could be at the leading edge of the next big step, fully electric automobiles.


(AFP)

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