BIGCAPITAL's Blog

December 31, 2010

Estonia Joins Euro Club Currency 2011

Filed under: Uncategorized — bigcapital @ 10:21 am
Tags: , , , , , , , , , , ,

Estonia Joins Euro Club Currency 2011

via Bloomberg.com – Dec 31, 2010

Estonia Joins Euro Club as Currency Expands East Into Former Soviet Union

Estonia tomorrow becomes the first former Soviet republic to join the euro, putting at least a temporary cap on the currency bloc’s expansion as the sovereign debt crisis ripples through Europe.

Wedged between Russia and Latvia on the Baltic Sea, Estonia will at midnight become the 17th country to switch to the currency. Gross domestic product of 14 billion euros ($19 billion) makes it the second smallest euro economy after Malta.

As Europe grapples with the financial crisis, Estonia is likely to be the last addition to the euro club for several years. Lithuania and Latvia, the next in line, are aiming for 2014 and bigger eastern countries have shied away from setting target dates.

“The euro is still generally seen as a positive for the applicant countries as long as the conversion rate is somewhat competitive,” Elisabeth Gruie, an emerging-markets strategist at BNP Paribas SA in London, said in an email. High deficits are keeping Poland out and an “inner desire for independence” is the obstacle in the Czech Republic, she said.

Debt estimated by the European Union at 8 percent of GDP in 2010 will make Estonia the fiscally soundest country in a currency bloc plagued by budget woes that forced Greece and Ireland to fall back on European and International Monetary Fund aid.

Confidence in Euro

“It is a sign of the confidence of Estonia toward the euro, despite the current difficulties, which will be a positive signal to the markets,” Joseph Daul of France, floor leader of center-right parties in the European Parliament, said in an e- mailed statement.

Estonia’s central bank chief, Andres Lipstok, 53, will join the European Central Bank’s policy-setting council, taking part in his first interest-rate vote on Jan. 13 in Frankfurt.

Some 85 million euro coins featuring a map of Estonia and 12 million banknotes go into circulation tomorrow, according to the central bank, starting a two-week phase out of the national currency, the kroon. One euro buys 15.6466 krooni.

The 1.3 million Estonians have little experience of monetary autonomy. In June 1992, less than a year after regaining independence from the Soviet Union, Estonia shifted from the Russian ruble to a national currency that it immediately pegged to the German mark. The exchange rate was locked to the euro when the first 11 countries began using it in 1999.

Source: http://marketpin.blogspot.com/

Rogers: Europe is Doomed…but I’m Still Long The Euro (and Breakfast)

Filed under: Uncategorized — bigcapital @ 9:30 am
Tags: , , , , , , , , , , ,

 

Rogers: Europe is Doomed…but I’m Still Long The Euro (and Breakfast)

Via CNBC Television – December 2010

 

http://plus.cnbc.com/rssvideosearch/action/player/id/1687065072/code/cnbcplayershare

I’ve never brought a guest such an elaborate breakfast- but when legendary investor Jim Rogers wants to come on my show- I go all out. Truth be told, it wasn’t entirely Suzy Anchorwoman of me—it was secretly a good jumping off point for his favorite topic these days- inflation.

“Have you tried to buy any cotton recently? Have you tried to buy any sugar recently?” he said pointing down to the spread in front of him.

Co-hosting with me this morning on “Worldwide Exchange” over a breakfast of Diet Coke, candy and bagels, CEO of Rogers Holdings Jim Rogers was as usual all about commodities as an inflation hedge: the sugar he adores along with gold and silver

“Prices are going up. I don’t know who these guys are who say prices are not going up. I look in the real world, and I see what’s happening. And everybody watching this show knows that prices are going up.”

Knowing Rogers’ vehement opposition to printing money (he said in a recent interview that Fed chairman Bernanke is “a disaster” and that “all he understands is printing money”), I asked him about the rumors that there would be more money printing in QE3 and QE4.

“I know there’s talk of it. It’s dumbfounding,” he said. “It’s stupefying to me that we have a Central Bank in the United States that thinks all they have to do is print money. That has never worked, anywhere in the world in the long term or the medium term.

He added that US central bankers see printing money as an easy solution, “Because that’s all they know.”

On the other hand, he said that the Central Bank’s current policy of printing money is “not good for the world, but at least they’re not raising taxes.”

So he’s staying far away from debt, saying it’s all overpriced and sticking his beloved commodities along with currencies.

“I own the Euro, I’m long the Euro, and I’m staying with it,” he said even though he knows Europe is doomed.

“You need to let Ireland go bankrupt,” he told me. “They are bankrupt. Why should innocent Germans, or innocent Poles, or innocent anybody pay for mistakes made by Irish politicians and Irish banks? That is unbelievably bad morality and it’s bad economics as well.”

“Let the bank’s shareholders lose money. Let the bank bondholders lose money. Let Ireland reorganize and start over. That’s the only thing that’s going to work. Propping people up and carrying lots of zombie banks and zombie companies is not going to work.”

“Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been faking the books for a long time, Italy’s been faking the books for a long time. The UK is totally insolvent,” he said.

EUR/CHF hits another fresh all-time low after having earlier dropped to a series of all-time lows. Pair dips as low as 1.2678 from 1.2785 late Friday, according to EBS via CQG. Investors pressuring EUR over continued worries over the region’s sovereign debt. SNB not likely to step in to stem CHF strength, says Landesbank Baden-Wurttemberg’s Martin Guth, noting he would expect the Swiss central bank to stay on the sidelines at least until the pair drops to 1.25. “So far, especially [in] last month’s interest rate decision, in my opinion they didn’t give any hints that they are about to intervene,” he says.

UBS, Switzerland’s largest bank, is one of the biggest financial institutions in the world said : “No Sharp Decline In Global Risk Appetite”; – The Eurozone sovereign debt crisis remains contained, and has not yet leaked out to affect emerging market currencies and risk appetite more broadly, said UBS, judging on the basis of its own flow data from lat week. “There was no sign of the broad-based and indiscriminate selling that would be associated with a sharp decline in global risk appetite,” it said in a note to clients.

Goldman Sachs Boosts Global Growth Forecasts 2011

 

Goldman Sachs Boosts Global Growth Forecasts 2011

 Economists at Goldman Sachs Group Inc., the most profitable Wall Street firm, increased their forecasts for U.S. and global growth in 2011, predicted an acceleration in 2012 and recommended investors buy banks.

 The U.S. economy will grow at a 2.7 percent rate next year, up from a previous forecast of 2 percent, and 3.6 percent in 2012, economists led by Jan Hatzius in New York said in a report today. The global economy will grow 4.6 percent in 2011 and 4.8 percent in 2012, Dominic Wilson, senior global economist, said in a separate report.

 They recommended U.S. bank stocks, junk bonds, commodities, Japanese stocks and China’s currency as the first of the firm’s “top trades” for 2011. The forecasts are a departure from the pessimism that characterized Goldman Sachs’ projections since 2006.

 “This outlook represents a fundamental shift in the thinking that has governed our forecast for at least the last five years,” Hatzius said in the report. “The hand-off from policy stimulus to private demand — which seemed elusive just a couple of months ago — now appears to be developing.”

 U.S. stocks started what is historically their best month with a rally today after ADP Employer Services data showed companies added 93,000 jobs last month, the Federal Reserve said the economy gained strength across most of the nation and manufacturing in China expanded at the fastest pace in seven months. The Standard & Poor’s 500 Index advanced as much as 2.3 percent, the most since Sept. 1.

 Underlying Demand

 The Goldman Sachs economists said underlying demand, a measure of growth that excludes the effects of fiscal stimulus and inventory restocking, has strengthened and is on track to expand at a 5 percent rate in the fourth quarter.

 On average, economists surveyed by Bloomberg expect the U.S. economy to grow 2.5 percent next year and 3.1 percent in 2012. The Organization for Economic Cooperation and Development lowered its forecast for global growth last month to 4.2 percent for 2011 from 4.5 percent, and predicted 4.6 percent for 2012.

 Even as growth accelerates, U.S. unemployment will remain elevated by historical standards, declining to 8.5 percent by the end of 2012 from 9.6 percent in October, the economists said. The jobless rate increased to 10.1 percent in October 2009, the highest monthly figure since 1983.

 Inflation, Unemployment

 Core inflation, which excludes food and energy prices, is likely to be 0.5 percent in each of the next two years, Goldman Sachs said. The combination of high unemployment and low inflation is likely to keep the Federal Reserve from raising interest rates, the economists said.

 Conditions will be “positive for risky assets,” they wrote. The S&P 500, the main benchmark for American equities, will likely end next year at 1,450, up 20 percent from 1,206.07 at 4 p.m. in New York.

 The S&P 500 has gained 8.2 percent this year and recouped three-fifths of its decline from a record in October 2007. Concerns about the economic fallout from government debt reduction by some European countries caused rallies to stall in April and November and are the principal risk to Goldman’s outlook, the economists said.

 Growth in emerging markets may slow next year as acceleration in the U.S. prompts China, other Asian economies and Brazil to tighten monetary policy, the economists said.

 For its top trades, Goldman recommended betting on a decline in the value of the U.S. dollar against the Chinese renminbi via two-year non-deliverable forwards for an expected return of 6 percent.

 Bets on the KBW Bank Index will return 25 percent, and selling protection on high-yield corporate bonds via credit- default swaps will return 8.7 percent, they predicted.

 Japan’s Nikkei 225 Stock Average is likely to return 20 percent next year, while a basket of crude oil, copper, cotton, soybeans and platinum will gain 28 percent, they said.

December 30, 2010

Hedge Funds Flock Back to Asia

Filed under: Uncategorized — bigcapital @ 9:28 am
Tags: , , , , ,

 

Hedge Funds Flock Back to Asia

HONG KONG — Global hedge fund managers are beefing up their presence in Asia, particularly Hong Kong, in the hope of raising more capital amid a swell of investor interest in the region.

Bloomberg News George Soros, chairman of Soros Fund Management LLC. The hedge-fund firm opened its Hong Kong office in November.

Among the big names hanging out their shingles in Asia are Soros Fund Management LLC, Viking Global Investors and GLG Partners LP. D.E. Shaw recently said a member of its six-person executive committee is moving to Hong Kong and Maverick Capital, Ltd. raised the number of analysts in its Hong Kong office to four in August.

David Gray, head of prime services for UBS AG in the Asia-Pacific region.
 

The Wall Street JournaL – WSJ.com

 

< READ FULL STORY >

HONG KONG—Global hedge fund managers are beefing up their presence in Asia, particularly Hong Kong, in the hope of raising more capital amid a swell of investor interest in the region.

Among the big names hanging out their shingles in Asia are Soros Fund Management LLC, Viking Global Investors and GLG Partners LP. D.E. Shaw recently said a member of its six-person executive committee is moving to Hong Kong and Maverick Capital, Ltd. raised the number of analysts in its Hong Kong office to four in August.

David Gray, head of prime services for UBS AG in the Asia-Pacific region, said he knows of about 10 global groups that are putting stakes in the ground in Asia.”They’ve said, time to get a little serious, because to be credible with investors they need people on the ground,” Mr. Gray said. Prime brokers provide a wide range of services to hedge funds, including helping them set up and trade shares.

Investors allocated a net $19 billion of new capital to the hedge-fund industry globally in the third quarter, the largest inflow since the fourth quarter of 2007, according to industry data providers Hedge Fund Research Inc.

The biggest funds that can invest around the world say part of the reason money is pouring into their coffers again, especially from U.S. pension funds, is because of their increasing exposure to Asia. As a result, they are ramping up staffing in the region. In contrast, smaller funds and funds of funds remain starved of capital.

“We’ve seen a shift internally of allocations towards Asia because we feel you get a better bang for your buck here at present,” said Des Anderson, a partner in Marshall Wace LLP. The London-based, multibillion-dollar fund has about a quarter of its assets invested in Asia. Its Hong Kong office has doubled in size over the past two years to 30 people, Mr. Anderson said.

Buoyant Asian economies are spurring the hedge-fund charge. The International Monetary Fund forecasts Asian economic growth of 8% this year, with China and India leading the wayat 10.5% and 9.7% respectively.

Tax rates are also a factor. Hong Kong and Singapore compare favorably given their relatively low personal income taxes for higher earners. For Hong Kong, the rate is 17%, and in Singapore it is 20%, compared with 50% in Britain

In one sign that hedge funds are eager to bet on China, revenues generated in Hong Kong from lending stock to hedge funds for short selling recently overtook revenues generated in Japan, historically one of the most heavily traded Asian markets. October is the first time this has happened, according to Dataexplorers, an industry service provider.

Hedge funds often sell short one stock at the same time as they buy another, a tactic known in the industry as a pair trade. Chinese-listed companies are more accessible to investors in Hong Kong than on any other exchange.

The industry’s move eastward comes at a time when the industry is under siege in the West. Investigations into insider trading at hedge funds in the U.S. are roiling the industry. Strict new rules on capital and disclosure requirements for hedge funds in the European Union are prompting some to move to places where they may feel more welcome.

“The EU doesn’t seem to particularly like hedge funds—a move to Hong Kong or Singapore would be natural,” said Ian Mukherjee, chief investment officer of London-headquartered Amiya Capital, which has $1.75 billion under management focused on emerging markets.

Hong Kong and Singapore are both eager to court hedge funds to help boost their credentials as regional financial centers, although evidence of any wrongdoing in other jurisdictions could prompt tougher scrutiny of funds’ activities in Asia too.

This isn’t the first time hedge funds have flocked to Asia. Many set up offices in 2006 and 2007, but either closed or severely cut back their Asian operations during the global financial crisis.

That history raises concerns that the current influx of hedge funds represent hot money flowing into a region where veteran investors are needed to eke out gains. Asia’s markets are relatively shallow compared with those in the U.S. and Europe. Short selling is banned in some places, such as South Korea, and heavily restricted in others, including Australia.

Already, some Asian governments are implementing limited capital controls in order to cope with a flood of money in search of higher yields. Quantitative easing in the U.S. and Japan has speeded up that flow of cash. Capital controls could trip up hedge funds that find themselves unable to exit markets as quickly as they would like during times of turbulence.

Chicago-based Citadel Investment Group LLC ramped up staffing aggressively in Asia during 2005, but closed its Tokyo office and cut jobs in Hong Kong during 2008.

“It feels like we are going back to 2003 where people rushed into the space wanting to spend their money,” said UBS’s Mr. Gray, “but there is not enough people with enough experience of running an Asian portfolio.”

Many hedge funds are also using similar strategies in Asia, which could make it harder for them to make a profit in the region’s less liquid markets. Nearly two thirds of the capital deployed in the region is in long-short strategies, in which funds take long and short positions in stocks at the same time, compared with a third globally.

While big funds are seeing an inflow of money, smaller funds are struggling. In part, that is because big investors such as U.S. pension funds are pouring money directly into large funds, cutting out fund-of-funds middlemen that normally screen start-ups with niche strategies. Globally, funds-of-funds have had net inflows of capital in only two of the last nine quarters, according to HFR.

“Smaller hedge funds are consolidating as they are finding it difficult to raise capital,” said Martin Wheatley, chief executive of Hong Kong’s Securities and Futures Commission. “Bigger hedge funds are benefiting from the environment.”

Making a profit will also be made tougher by rising compliance costs and risk management as regulators beef up oversight of the hedge-fund industry. People in the industry say funds have to make at least $75 million to cover these costs, up from $40 million to $50 million previously

< END OF STORY >

The Federal Want To Pressure Down U.S Dollar Worldwide

Filed under: Uncategorized — bigcapital @ 9:23 am
Tags: , , , , , , , , , , , , , , , , ,

 

 

The Federal Want To Pressure Down U.S Dollar Worldwide

There is a saying in the investment business, “don’t fight the Fed.”

Fed Swap Lines Purposely Keeping Dollar Weak

Central banks provided two pieces of market supportive news in the past 48 hours.

China announced its intent to buy Portuguese bonds, and the Federal Reserve extended its “swap lines” deep into 2011:

# China Ready to Buy Up to $6.6B in Portugal Debt (Reuters : http://www.reuters.com/article/idUSTRE6BL0Y220101222 )

# Fed Extends USD Swaps With Major Central Banks (Reuters : http://www.reuters.com/article/idUSTRE6BK3PS20101221 )

Via Reuters, the swap lines, at first set to expire next month, will now run til August 1st.

The lines were first opened to the ECB and SNB — the European and Swiss central banks respectively — and were later expanded to multiple additional central banks, including those of Sweden, Mexico and Brazil.

The August extension applies to the Fed’s counterparts in Europe, Japan, Canada, England and Switzerland.

So why is the Fed doing this? Straight from the horse’s mouth (official Fed statement):

“[The swap lines] are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets.”

That’s the official justification. A between the lines reading is slightly more self serving: The Fed wants to keep the dollar weak — or otherwise keep it from rising too much.

As you can see, from 2002 onward the $USD had been declining — a trend perceived as good for everyone. As Americans gorged on “stuff,” the vendor finance arrangements put in place by China and Middle East oil exporters allowed the party to continue unabated.

Long term interest rates were kept low via the recycling of $USD back into treasury bonds, in turn keeping mortgage rates low and perpetuating the housing bubble. Meanwhile many emerging markets enjoyed rapid growth — courtesy of a binging U.S. consumer — as the leverage and credit boom radiated outward.

But then, as things fell apart in 2008, the $USD saw a dramatic surge. A wave of panic swept the globe as the supernova debt boom collapsed. Trillions of dollars in credit flows evaporated, and American investors effectively “short” dollars (via overseas investments and ‘carry trade” type arrangements) had to cover with a vengeance.

As the chart shows, the $USD saw another upward surge in early 2010, first on China fears, and then eurozone sovereign debt fears as the Greek situation ignited. (This is when the Economist’s Acropolis Now cover was published — a keepsake to be sure.)

So, as you can guess, one of the many fears keeping Ben Bernanke awake at night is the possibility of a surging $USD.

Not only is the dollar a “risk-off” fulcrum, balanced against “risk on” for all other paper asset classes, a rising buck is also a political headache for the Obama White House and other American interests seeking a U.S. export revival.

So, back to those swap lines. Why and how would they be an attempt to keep the dollar down?

Well, first consider what a swap line actually is. From the Federal Reserve website:

In general, these swaps involve two transactions. When a foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve. Dollar liquidity swaps have maturities ranging from overnight to three months.

In layman’s terms, we can think of a swap line as a standing guarantee of U.S. dollar liquidity. If you (as a central banker) ever need greenbacks in a pinch, you know you’ll be able to procure them instantly, no matter how “tight” the open market may be.

This standing guarantee reduces the odds of another violent $USD spike of the type we saw in late 2008. In a way, one can think of it as “short squeeze insurance.”

The many players around the world who are “short” U.S. dollars — by way of lending arrangements denominated in dollars and so on — have spiking dollar risk implicit in their positioning.

What the Fed has essentially said to these players is, “It’s okay for you to keep borrowing in dollars, because in the event of a new liquidity crisis we will create accessible dollars for you (via the channel of your local CB).”

Consider, too, the conditions under which all these central banks would be pushed to draw on their $USD swap lines at the same time.

By definition, these would be crisis conditions in which availability of $USD was scarce relative to near-term surging demand.

In such conditions, the Federal Reserve would have to create more dollars to meet existing outsized demand (as crisis-driven preferences for holding $USD, or covering short $USD obligations, would create a shortage).

So the liquidity promise is also a sort of printing-press promise: In the event of another crisis, the Fed will be on its toes and ready to “print” however much fresh $USD the world needs.

The really neat trick is, simply in making this promise, the Federal Reserve can achieve its aim of keeping the $USD down. This effect is produced even without the Fed doing anything.

How? Simple:

* The Fed has promised $USD liquidity will be there “if needed.”
* This promise can be “taken to the bank” — literally.
* Commercial institutions can thus rest easier with short-dollar liabilities.
* To wit, whether one is a bank, a commercial operator or a speculator, it’s very tempting to borrow in $USD these days — to leverage the greenback via some form of debt arrangement and participate in the “carry trade.”

But this move could also be considered risky due to the possibility of carry trade reversal and crisis-driven supply/demand crunch … and so, with the extension of the Fed swap lines, Uncle Ben has stepped up and said “Hey, no problem, carry trade away — we’ll be there in a tight spot (via printing press) to provide liquidity for you.”

And so the dollar stays suppressed, and everyone stays happy (apart from those pesky “non-core” inflation watchers, and anyone else feeling a cost of living crunch).

December 26, 2010

M&A tops $2.2 trillion in first yearly rise since 2007

M&A tops $2.2 trillion in first yearly rise since 2007

LONDON/HONG KONG (Reuters) – Mergers and acquisitions rose for the first year since 2007, potentially marking the start of a new, multiyear M&A cycle in which emerging economies account for a bigger share of global dealmaking.

Thomson Reuters data showed announced M&A grew nearly a fifth this year, to $2.25 trillion globally. The preliminary figures show emerging markets made up a record 17 percent of transactions, and energy was the busiest sector.

Next year could be busier still. Executives, bankers, big investors such as Schroders, and analysts at banks including Credit Suisse, Nomura, and Societe Generale are among those predicting a further rise.

Cheap debt, record cash piles, the need to outpace sluggish economic growth, and positive market reactions to many deals in 2010 should embolden companies to strike more deals, they say.

“We feel M&A volumes will improve next year, there’s certainly going to be more cross-border activity than ever, and Asia — again — will be a bigger part of the equation,” said Scott Matlock, chairman of international M&A at Morgan Stanley .

Deutsche Bank , the world’s fifth-busiest merger adviser, said next year could bring a bigger rise.

“The increase in M&A activity in 2011 should exceed that of 2010,” said Henrik Aslaksen, Deutsche’s global head of M&A.

“There’s more confidence, there’s ample liquidity, financing costs are attractive, and there’s an intense focus amongst corporates to identify growth opportunities,” he added. “The pipeline is very broad-based. It’s not just confined to one to two sectors.”

Senior executives on average expect $3 trillion of M&A next year, a recent Thomson Reuters/Freeman survey found.

GOLDMAN LEADS

That means 2011 could be the second of several years of rising deals — earlier this year Citi analysts said the world was “in the foothills” of a new M&A cycle. These cycles typically last years: the last peaks came in 2000 and 2007.

Bankers say a combination of cheap stocks, as measured by price-to-earnings ratios, and even cheaper debt means many deals would offer a big boost to earnings.

The optimism comes despite a slower fourth quarter and the worst spate of withdrawn deals since the height of the credit crisis: two collapsed BHP Billiton deals, in Canada and Australia, alone cut $100 billion from M&A volumes.

Jeffrey Kaplan, global head of M&A at Bank of America Merrill Lynch , said it was still “challenging to get deals done,” despite “good momentum going into 2011 for both corporate and private equity activity.”

With about a fortnight to go, Morgan Stanley is lagging archrival Goldman Sachs , after beating it to the No. 1 ranking last year for the first time in 13 years.

Goldman Sachs, under M&A head Gordon Dyal, has advised on $513.1 billion of deals to Morgan Stanley’s $499.5 billion.

‘LAND-GRAB’

Emerging markets deals hit a record $378 billion, while developed markets lagged. Global M&A increased 19 percent, while U.S. M&A rose 11 percent and activity in Europe climbed 5 percent.

Colin Banfield, Citigroup’s head of M&A for Asia-Pacific, said currency rates were aiding the region’s companies, which were growing “more ambitious” and contemplating bigger deals.

But aside from several major telecommunications tie-ups in the developing markets, and the odd banner deal such as Chinese carmaker Geely’s purchase of Volvo from Ford, many deals from newer markets were aimed at securing resources or technologies.

“We’re still in the early days of emerging markets M&A,” said Matlock at Morgan Stanley.

“When it gets really hot is when people decide they want to buy and build truly global multinational corporations, and we’re not there yet. It’s more focused on acquiring natural resources or on opportunistic deals.”

Energy and power was the year’s busiest sector, with a near-40 percent rise in announced deals to $482 billion, followed by the financial and basic materials sectors.

Asian companies including China’s Sinopec Corp and Thailand’s PTT Exploration and Production struck deals that ranged from buying stakes in oil fields to Korea National Oil Corp’s hostile takeover of Britain’s Dana Petroleum.

“Asian players, led by China, are making a land-grab for resources to fuel their economies for many years into the future,” said Jeremy Wilson, co-head of natural resources at JPMorgan .

December 22, 2010

Moody’s Sees No Europe Defaults

 

MOODY’s SEES NO EUROPE DEFAULTS

LONDON –The euro zone “retains significant financial strength” and has the “resources, incentives, and political cohesion” needed to contain the sovereign debt crisis, Moody’s Investors Service Inc. said Tuesday.

“We believe that policymakers have sufficient resources and will use them as necessary to restore financial stability,” the ratings agency said in a report.

Moody’s said that all its euro-zone sovereign ratings with the exception of Greece are investment grade, reflecting its view that “the risk of a euro-zone sovereign default is very small.”

Beginning late October, euro zone sovereign bond markets have experienced a second wave of volatility this year, on worries about the health of sovereign borrowers and about proposals for a post-2013 crisis resolution mechanism that could penalize private lenders.

This prompted the European Central Bank to step up purchases of bonds issued by peripheral euro-zone members under its Securities Market Program.

Germany has resisted some ideas floated to deal with the crisis, such as increasing the size of European Financial Stability Facility, or issuing common euro-zone bonds.

Moody’s Investors Service said it doesn’t foresee defaults or maturity extensions on euro-area debt because the region will likely backstop weaker members, and reiterated that Portugal will likely stay investment-grade.

“Moody’s base-case scenario remains that over the medium term, no euro-zone country will suffer a payment default or otherwise impose losses on private-sector lenders through maturity extensions or other forms of distressed exchange,” the company said in a report today. “The collective willingness of the euro zone to support weaker members through the provision of liquidity will remain an important element of investor protection.”

 Its euro-zone sovereign ratings “reflect a range of factors including high intrinsic economic and financial strength and ready access to financial resources,” including those made available by other euro-zone members, Moody’s said.

FED EXTENDS DOLLAR LOAN PROGRAM WITH FOREIGN BANKS

WASHINGTON — The Federal Reserve on Tuesday extended a program set up during the European debt crisis to make it easier for foreign central banks to get access to U.S. currency to distribute to commercial lenders.

The Federal Open Market Committee said it’s extending, through Aug. 1, its U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan and the Swiss National Bank.

The swap arrangements, established in May, had been authorized through January.

Back in May, money markets were rattled by the strains in Greece, which subsequently received 110 billion euros of assistance through the International Monetary Fund and euro-zone nations. Since then, a similar package was arranged for Ireland, and there are worries that Spain and Portugal could need them as well.

The swap lines with the European Central Bank, the Bank of England, the Swiss National Bank and the the Bank of Japan will enable the central banks to conduct tenders of U.S. dollars in their local markets at fixed local rates for full allotment, similar to arrangements that had been in place previously, according to the Fed.

As the world’s reserve currency, the dollar is highly sought after outside the United States to settle trades — in commodity markets, for example.

 They are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets, the Fed said.

“It is a bond-bullish recognition that back-up liquidity facilities are still warranted in the current environment,” said analysts at CRT Capital.

December 21, 2010

TPG, GIC invests $331 million at Indonesia’s coal firm-sources in PT Delta Dunia Makmur

 

TPG, GIC invests $331 million at Indonesia’s coal firm-sources in PT Delta Dunia Makmur

Sunday, Dec 19 04:38 AM EST

JAKARTA (Reuters) – U.S. private equity firm Texas Pacific Capital TPG.UL and Singapore sovereign wealth fund GIC GIC.ULinvested 2.99 trillion rupiah ($331 million) for a stake in an Indonesia coal contractor, two sources with knowledge of the deal said on Sunday.

TPG and GIC have bought non-voting shares in Northstar Tambang Persada Ltd, a special purpose vehicle which owns 40 percent in PT Delta Dunia Makmur (DOID.JK), according to a statement to Indonesia’s stock exchange, following a report in the Financial Times on Dec 18 about the deal.

Delta Dunia is owned PT Bukit Makmur Mandiri Utama, Indonesia’s second largest coal contractor.

The transaction was conducted early this month when they bought 2.72 million shares of Delta Dunia for 1,100 rupiah a share, one source told Reuters.

TPG and GIC bought the shares from the Widjaya family, which controls conglomerate Sinar Mas Group, and the Bakrie Group, the source added.

“The investment in Delta is appealing as it has returned up to 25 percent annually,” another source, who declined to be identified because the details were not public, told Reuters.

Delta Dunia provides various services to Indonesia’s coal mine operators such as Bumi Resources (BUMI.JK), Indonesia’s largest mining group, controlled by the politically connected Bakrie family. It transports coal to customers in China, India and other markets.

Delta Dunia shares have fallen 24 percent so far this year, underforming a broader Jakarta market (.JKSE) up 41 percent.

December 20, 2010

China Business News: Shanghai’s foreign trade hits record US$34.51 bln in Nov

Filed under: Uncategorized — bigcapital @ 10:03 am
Tags: , , , , , , , , ,

China Business News: Shanghai’s foreign trade hits record US$34.51 bln in Nov

Dec. 20, 2010 (China Knowledge) – Shanghai’s import and export value grew 31.5% year on year to a record US$34.51billion in November this year, according to the latest statistics released by the Shanghai Statistics Bureau.

The city’s exports were US$17.11 billion last month, up 27.2% year on year, while its imports rose 36.1% from a year earlier to US$17.4 billion.

The export value of mechanical and electronic products increased 23.4% year on year to US$12.56 billion in November, while the import value of such products was US$9.93 billion, up 31% from the same month of last year.

The city’s exports and imports of high-tech products were US$8.17 billion and US$6 billion in the month, up 19.6% and 23.4% year on year, respectively.

Last month, Shanghai’s exports to its top three trade partners, the E.U., the U.S. and Japan, were US$3.85 billion, US$4 billion and US$1.95 billion, up 14.8%, 30.6% and 39% year on year, respectively, while imports from the three partners were US$3.29 billion, US$1.87 billion and US$2.86 billion, growing 30.1%, 22.4% and 37.1% year on year, respectively.

Source: http://marketpin.blogspot.com/

December 17, 2010

China Credit – S&P Raises China’s Long-Term Sovereign Rating – CNBC

China Credit – S&P Raises China’s Long-Term Sovereign Rating – CNBC

S&P Upgrades China’s Credit Rating

BEIJING—Standard & Poor’s Ratings Services upgraded China’s sovereign-debt rating, citing its large foreign reserves, strong fiscal position and positive growth outlook.

S&P raised its rating on China’s sovereign debt to double-A-minus from A-plus, reflecting “the government’s modest indebtedness, a strong external asset position, and our view of the economy’s exceptional growth prospects,” the agency said Thursday.

The announcement from S&P follows a similar move by Moody’s Investors Service, which raised its rating for China’s sovereign debt last month.

S&P said the government may face “contingent liabilities in the banking system that could materialize if an extended economic slowdown unfolds,” but that China’s many strengths outweigh that potential pitfall.

The upgrade amounts to a vote of approval for China’s response to the financial crisis. “We believe the Chinese authorities would respond to future threats to financial stability with timely measures, based on our observation over the past two years,” S&P analyst Kim Eng Tan said.

Implementing structural reform during the global slowdown improves the likelihood of macroeconomic stability, S&P said in a statement.

“We may raise the ratings again if structural reforms lead to sustained economic growth that significantly lifts the average income level,” Tan said.

Next Page »

Create a free website or blog at WordPress.com.