Archive for category World News
BOJ to Provide 10 Trillion Yen in Emergency Credit
Posted by admin in Financial Market, World News on December 1st, 2009
By Mayumi Otsuma
Dec. 1 (Bloomberg) — The Bank of Japan said it’s ready to pump more money into the financial system after unveiling a 10 trillion yen ($115 billion) program to help an economy battered by falling prices and the yen’s surge to a 14-year high.
“If there is a shortage of liquidity we are prepared to provide more funds,” Governor Masaaki Shirakawa said after an emergency board meeting in Tokyo today that decided to offer three-month loans at 0.1 percent to commercial banks.
Bond yields fell the most in 13 months, lowering borrowing costs for companies whose profits are being threatened by deflation and the yen’s advance. Today’s action constitutes “quantitative easing in the broad sense” said Shirakawa, who earlier today faced demands from government ministers to complement a stimulus package that Prime Minister Yukio Hatoyama will release this week.
“The BOJ was facing a lot of pressure from the markets and the government, so it wanted to show that it was being proactive,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “The BOJ’s understanding is that deflation risks have increased.”
The yen pared losses after earlier falling the most in more than a month on speculation the bank would take action that would limit the currency’s appreciation. It traded at 86.83 per dollar at 11:39 a.m. in London from 87.53 before the announcement. Last week the yen reached 84.83, the highest since 1995, threatening earnings at exporters including Toyota Motor Corp.
Bond Yields
The yield on Japan’s five-year bond dropped 7.5 basis points, the most since October 2008, to a four-year low of 0.455 percent. The Nikkei 225 Stock Average closed 2.4 percent higher before the decision was published.
The policy board kept the key overnight lending rate at 0.1 percent, a level that Shirakawa said is already effectively zero, indicating he is unlikely to lower the rate.
The bank also maintained its monthly purchases of Japanese government bonds at 1.8 trillion yen. Analysts expect the central bank to expand the bond transactions eventually.
“Today’s move is only the first tentative step by the Bank of Japan to a much more substantive quantitative easing policy,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “Ultimately, JGB purchases will form the bulk of that policy — and to have any meaningful effect, those purchases will have to be in excess of 2.2 to 2.5 trillion yen per month.”
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China’s overdue credit-card debt reported rising sharply
Posted by admin in Financial Market, Mixed Economy, World News on November 30th, 2009
By John Letzing – Nov. 30, 2009 07:27 PM est
MarketWatch.com
SAN FRANCISCO (MarketWatch) — While China has the reputation in the West as a nation of frugal savers, a state-media report Tuesday cited another sharp rise in overdue credit-card accounts, highlighting a downside to the country’s rapidly expanding economy.
Credit-card debt at least six months overdue rose 126.5% for the first three quarters of 2009 compared to the same period last year, Xinhua news agency reported, citing People’s Bank of China data.
By the end of September, China’s banks had issued 175 million credit cards, a 33.3% increase from last year, according to the report — which said that the central bank has warned of potential risks of mounting overdue credit-card debt.
Accounts overdue by six months or more made up 3.4% of China’s total credit-card debt outstanding at the end of the third quarter, a 0.3% increase over the prior period, the report said.
Credit-card debt at least six months overdue had risen 131.3% in the second quarter of this year compared to the same period last year, according to the report, following a 133.1% increase in the quarter before that.
U.A.E. Will Support Banks in Dubai Credit Crisis
Posted by admin in Financial Market, World News on November 29th, 2009
by Vikas Bajaj & Graham Bowley – Nov. 29, 2009
The New York Times
MUMBAI — The United Arab Emirates central bank on Sunday said that it stood behind domestic and foreign banks operating in Dubai after last week’s announcement that Dubai World needed more time to pay back some of its $60 billion in debt.
Dubai surprised the financial world on Wednesday when it said it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, to agree to a six-month standstill on the debt. Global markets sank on the news.
On Sunday, the central bank said it set up a “liquidity facility” for the Dubai banks, and tried to reassure investors that the banking system there was more sound and liquid than a year ago.
Whether these moves will restore investor confidence remains to be seen as soon as Monday, when most U.S. traders return from a long holiday weekend.
In recent days, investors have begun worrying that Dubai’s debt troubles might be the first in a series of panics in developing countries that borrowed too much money in the past few years — much as in 1997, when Bangkok became the first capital to crumple in the Asian financial crisis.
Many analysts said their biggest worries were not about whether Dubai would fully repay its lenders, or how much assistance it would receive from its neighbor Abu Dhabi. Rather, these people said, their main concern was what Dubai’s problems said about the rest of the world.
These analysts fear that while Dubai may have spent its borrowed money more extravagantly than most, it is far from alone in having taken on too much debt for dubious real estate projects. Investors have already raised alarms about debts in Ireland, Greece and East European countries.
During the shortened U.S. trading day Friday, the first since the Wednesday announcement by Dubai that it was seeking more time to repay billions in loans, investors sold bonds of other emerging markets and drove up the price of insuring against a default by those same countries.
If investors’ fears about a crisis in emerging markets were realized, it would be a severe setback to a fragile global economy that has yet to fully recover from the credit crisis last year.
RBS Led Dubai World Lenders; HSBC Most at Risk in UAE
Posted by admin in Financial Market, World News on November 28th, 2009
By Vivian Salama and Gavin Finch
Nov. 27 (Bloomberg) — Royal Bank of Scotland Group Plc was the biggest underwriter of loans to Dubai World, the state company seeking to reschedule debt, while HSBC Holdings Plc has the most at risk in the United Arab Emirates, according to JPMorgan Chase & Co.
RBS, the largest U.K. government-controlled bank, arranged $2.3 billion, or 17 percent, of Dubai World loans since January 2007, JPMorgan said in a report today, citing Dealogic data. HSBC, Europe’s biggest bank, has the “largest absolute exposure” in the U.A.E. with $17 billion of loans in 2008, JPMorgan said, citing the Emirates Banks Association. Abu Dhabi Commercial Bank PJSC may be owed $1.9 billion by Dubai World, making it the largest creditor outside the emirate, said two people familiar with the companies.
“The market is very nervous about exposure to Dubai and RBS’s name has been associated with it as both a lender and a book runner,” said David Williams, a banks analyst at Fox-Pitt Kelton Ltd. in London. “People are concerned it’s going to produce a new wave of losses. Dubai is driving everything in the market at the moment.”
Stocks around the world have slumped for two days on concern a debt restructuring by Dubai World, with $59 billion of liabilities, will add to the $1.72 trillion of losses and writedowns from the global credit freeze. British banks have the most to lose among international lenders from a crisis in the United Arab Emirates, with a combined $49.5 billion of loans outstanding, according to a report from RBS that cites Bank for International Settlements data published in June.
‘Disruption and Uncertainty’
U.K. Prime Minister Gordon Brown’s government is monitoring the situation in Dubai, his spokeswoman said today.
“Clearly the restructuring announcement has caused disruption and uncertainty in world markets,” Brown’s spokeswoman Vickie Sheriff told reporters in London. Brown’s “view is that U.K. banks are well capitalized having undergone rigorous stress testing,” she said.
Dubai World, controlled by the emirate’s ruler, Sheikh Mohammed Bin Rashid Al-Maktoum, borrowed from more than 70 lenders to buy assets ranging from stakes in Las Vegas casino company MGM Mirage to London-based Standard Chartered Plc through Istithmar PJSC. The government said this week it will seek a “standstill” agreement to delay repayment of its debt, including $3.52 billion of bonds due Dec. 14 from property unit Nakheel PJSC.
In Contact
“We are in touch with Dubai World, and we have been in discussions more than once today and yesterday,” Ala’a Eraiqat, the chief executive officer of Abu Dhabi Commercial, the third- largest lender in the United Arab Emirates, said in a telephone interview yesterday. He declined to comment on specifics. “We have a lot of assurances which is a good thing.”
RBS spokesman Piers Townsend in London declined to comment. The bank had 4.98 billion pounds ($8.15 billion) of loans and advances outstanding to the UAE at the end of the first half, according to company filings. That included 2.7 billion pounds of corporate loans, 1.65 billion pounds to banks and financial institutions and 596 million pounds to consumers.
Hitler’s favorite car makes comeback?
Posted by admin in Mix Up News, World News on November 28th, 2009
by Dave Graham – Nov. 25, 2009 09:49 AM est
Reuters.com
BERLIN (Reuters) – A car expert says he has tracked down Hitler’s favorite Mercedes to a garage near the town that helped the Austrian-born Fuehrer become a German citizen.
Classic cars specialist Michael Froehlich said he found the bullet-proof touring car after charting its postwar travels from Austria to Las Vegas and back to Munich, where Hitler burst onto the political scene with a failed putsch in 1923.
“It was the best car in the world at the time. Better than the Bugatti, Bentley, Rolls Royce or whatever,” Froehlich told Reuters from his office in Duesseldorf. “It was his favorite car: the one he used most often, which he used for parades.”
After being commissioned by a Cypriot buyer to find the vehicle, Froehlich discovered it had been bought by a farmer near Braunschweig, where in 1932 local Nazi officials got Hitler a civil servant’s job so he could claim citizenship.
“I thought it was an interesting job, but on the other hand I wasn’t too thrilled, because my parents and grandparents suffered greatly under his regime,” Froehlich said of the commission.
The dark blue car, which Froehlich said had spent decades in the basement of the Imperial Palace Casino in Las Vegas, was recently sold by the heirs of a Munich brewing tycoon before he traced it “in under two months” to northern Germany.
Froehlich said reports the buyer was Russian were mistaken, and rejected the notion that past owners of the vehicle with the number plate “1A 148 461″ were admirers of the dictator.
“They weren’t Nazis from what I can see, I think it’s something they saw as a business investment,” he said. “I can well imagine that an old Hitler banger has a certain value.”
Froehlich declined to name the car’s price tag, or give details about the buyer, but said the 1935 edition custom-made vehicle could fetch “more than 10 million euros ($14.91 million).”
Though he had not yet had outside confirmation of the car’s authenticity, the owner’s paperwork left no doubt, he added.
“The Mercedes sales register shows this 770 K model was ordered for the Fuehrer and Chancellor of the Reich in 1935,” he said.
Only 88 of the series were ever made and the Braunschweig car showed all the special modifications made for Hitler, who had to be driven because he had no “Fuehrerschein” — a German word made up from “driver” and “license” — Froehlich said.
“He was a Fuehrer without Fuehrerschein,” he said.
China Could Flood The World With Goods, Damage Global Economy
Posted by admin in Mixed Economy, World News on November 28th, 2009
by Douglas A. McIntyre – Nov. 26, 2009
247wallst.com
China’s stimulus package
may work too well. The world’s most populous nation is still building many factories even though its exports remain low. Building the facilities creates jobs and offers the country the chance to be ready to send out a huge amount of goods when the world’s economy recovers without straining its manufacturing capacity
China may have erected so many new manufacturing facilities that it could flood the world with goods as it keeps millions of its workers employed creating products for which that are not enough buyers in the West.
A new study from The European Union Chamber of Commerce in China describes the problems of overbuilding. European Chamber President Joerg Wuttke wrote, “Our study shows that the impact of overcapacity is subtle but far-reaching, affecting dozens of industries and damaging economic growth not only in China but worldwide. Domestically, excess capacity squeezes profit margins, hampers innovation and prevents the emergence of true local champions, while on the global stage its influence is clearly seen in the rise in trade tensions between China and its major trading partners.”
The dangers from the overbuilding could be grave. As America and Europe begin to re-industrialize, providing millions of new jobs, a huge supply of goods, manufactured at below market prices in China could undermine the foundations on which a Western recovery needs to be built. China will have created a means for employing it massive middle class work force, but that middle class will not be large enough to consume what China builds, at least not on its own.
China is almost certain to create the unprecedented problem of revitalizing its own economy by increasing its manufacturing capacity so greatly that its output will reach levels well beyond those that existed when the global economy was expanding rapidly. No other industrial nation will countenance having its own manufacturing base destroyed by a massive influx of Chinese goods.
It is the stuff that trade wars are made of.
Dubai’s Shock May Not Be Last
Posted by admin in World News on November 26th, 2009
by Richard Barley - Nov. 26, 2009
The Wall Street Journal
Dubai has delivered investors a wake-up call. The Gulf State’s decision to seek a six-month standstill on debt of conglomerate Dubai World isn’t only a reminder of the deep problems in Dubai itself but highlights the biggest risk for markets in 2010: less-predictable actions by governments. With sovereign finances stretched, investors need to remember that governments can and will change the rules when necessary. Asset prices, buoyed by a faith in policy support, may need to adjust to that.
Dubai World, whose activities span real estate, ports and leisure, has $60 billion of debt. The immediate casualty is a $3.5 billion bond due to be repaid in December from real-estate developer Nakheel, the builder of the emirate’s palm-tree-shaped island. It isn’t yet clear which other parts of Dubai World’s empire will be affected. Port operator DP World said Thursday that its debt, which includes $3.25 billion of bonds, won’t be included in the restructuring.
The Dubai World decision has raised doubts about other Dubai government-related debt. Moody’s has estimated the emirate may need to restructure up to $25 billion of debt, particularly in real estate. Credit Suisse estimates European banks could have $40 billion of exposure to Dubai. But it is difficult to assess the full impact as Dubai doesn’t publish consolidated data on public-sector debt. The uncertainty is reflected in Dubai’s credit-default swaps, which have soared to 5.7 percentage points from 3.18 percentage points in just two days.
Until now, corporate-credit and stock markets have remained fairly sanguine in the face of global jitters over sovereign credit quality in countries such as Japan, Greece, Ukraine and Dubai itself. But the Dubai World announcement, which came the same day as Dubai said it had raised $5 billion in bonds from Abu Dhabi banks, has shaken investors out of their complacency. Some Western European stock indexes fell about 3% Thursday, Eastern European currencies declined and the Markit iTraxx Crossover index widened by some 0.30 percentage points.
Dubai’s decision may mark a watershed. Throughout the crisis, governments have looked to prop up some assets: After the global-banking bailout, support was extended to some auto makers in the U.S. and Europe. At a sovereign level, countries have banded together to provide support to peers in trouble, such as Latvia. Dubai itself set up a Financial Support Fund for its government-related companies.
But this support carries a cost. Governments are under pressure to rein in borrowing, particularly as central banks start to withdraw stimulus measures, thereby removing some of the support for government-bond markets. As a result, they may no longer be able to provide such wide-ranging support. The result could be more nasty surprises as governments cast other nonviable investments adrift.
