LONDON (Reuters) - To embellish Benjamin Franklin's quote: "In this world, nothing is certain but death and bank taxes."
Sure enough, European and U.S. banks could pay over $35 billion a year under twin taxes proposed by the International Monetary Fund (IMF) to recoup some of the rescue costs of the financial crisis -- and help prevent a repeat.
Support for a global bank levy has built since the United States in January proposed a 0.15 percent charge that could raise $90 billion to $117 billion over a decade.
A tax on banks is seen as inevitable following a wave of government proposals to claw back billions of dollars and euros of taxpayer cash used to bail out the industry. How to structure a levy and smooth it across borders will be a key challenge for world leaders in the next two months.
"We estimate that a U.S.-style tax on the Europeans could raise up to 19 billion euros ($25.5 billion) ... and potentially knock 6-10 percent off normalised profits," Keefe, Bruyette & Woods analyst Andrew Stimpson estimated.
The impact could range from 1 percent of profits to 21 percent, he said, with Dexia worst placed and RBS and Credit Agricole also ranking poorly.
Other banks with big balance sheets would be negatively affected, such as Deutsche Bank and BNP Paribas, while the least impacted should be deposit-rich banks, such as those in Spain and Italy, analysts said.
FAT'S IN THE FIRE?
The IMF suggests a two-pronged approach: a levy on the liabilities of financial firms to cover the cost of any future bailouts and an extra tax on profits and pay.
It is the extra levy -- dubbed a "financial activities tax", or FAT -- that surprised bankers and added heat to a row that has raged since most of the industry rebounded from a two-year financial crisis with bumper profits and bonuses for staff.
"It is potentially more onerous and potentially more wide-ranging but it would be premature to take away a radically negative conclusion," said Ian Gordon, analyst at Exane BNP Paribas in London. "A two-pronged approach wasn't expected, but we don't yet have any better idea on quantum."
The FAT proposal was unwelcome for the sector, and may penalise successful banks rather that risky behaviour, but was not a surprise given lawmakers' mood to curb excessive profits and payouts in the industry, analysts said.
The FAT would be levied on the sum of the profits and remuneration of banks. How countries define each would determine its impact, but a 2-percent FAT in Britain could raise 0.1-0.2 percent of gross domestic product (GDP).
The IMF suggests the first levy -- or financial stability contribution -- could raise 2-4 percent of GDP. A flat initial charge would be refined over time to reflect where risk lay.
A levy similar to a U.S. proposal, with national refinements to adjust for derivatives, capital, deposits and other factors, appears most likely, analysts said. They put the cost for Europe's banks at between 13 billion and 50 billion euros.
"We would not be buying into the sector until it becomes clear where the regulatory goal posts are going to be moved to," noted Bruce Packard, analyst at Seymour Pierce.
The IMF's move helped assuage government fears they risked a "first mover disadvantage" by addressing a tax ahead of peers, said Jan Putnis, a partner at UK law firm Slaughter and May.
But he said there was little in the proposals to discourage banks from taking many of the risks that led to the crisis, and some lawyers warned that as returns are dented, banks may chase riskier opportunities knowing there might be a fund, stuffed with bank taxes, to bail them out.
The IMF said directly supporting banks had cost an average of 2.7 percent of GDP across G20 countries. It was as high as 5.4 percent in Britain, 4.8 percent in Germany and 3.6 percent in the United States.
News that Goldman Sachs has earmarked an average of $166,000 for each employee for the first three months of this year stoked criticism that bankers reap the profits while taxpayers bear the cost of failure.
Britain, which was first to propose a global levy, welcomed the IMF move and is hopeful of clinching agreement. But others, such as Japan and Canada, whose banks avoided problems in the financial crisis, oppose it.
A senior Canadian official doubted there would be wide support across G20 countries as priority should be on toughening capital standards -- which could be at risk of getting crowded out by ideas such as a bank levy.
Wednesday, April 21, 2010
Iron ore prices reach $190/mt
Week 16 opened with a bang with the Indian spot prices making a quantum jump of almost USD 10 per tonne since 16th April. The unprecedented escalation seems unstoppable leaving veterans exasperated. It is noteworthy that the gradient has become steeper with each passing days from 1% in mid February to 11% during the course of last one week.
The following factors needs to be mentioned
1. After the banishing import of iron ore below Fe 60% by Chinese traders India could play only second fiddle as the composition of Indian iron ore is skewed towards low grade. As a result, spot prices of high grade iron ore from India have sky rocketed. Although the CNF prices seem to be prevailing at USD 190 per tonne, freakish cases of USD 195 have also been heard on week opening.
2. Prevailing mining mess in India has further fanned the fire with curtailed supply especially on East Coast.
3. The three mining behemoths viz., Vale , Rio Tinto and BHP Billiton have been playing truant to the roost by withholding supplies to leverage negotiating power in contractual discussions creating a situation of "take it or leave it " for Chinese buyers.
4. Against the backdrop of limited ore supply, traders are postponing selling in anticipation of better realization thereby supporting the hike.
However all the fun and frolic is not devoid of an element of scepticism as the tenants of this surge seems artificial rather than market driven.
1. In all likelihood Chinese buyers will bulk under the burgeoning costly ore prices as the finished demand is not increasing proportionately . Domestic prices have already showed signs of waning towards the weekend when the prices of long and flat product dipped slightly.
2. Shanghai equities slumped the most in 6 weeks due to the suspension of lending from banks to third home buyers in some areas.
3. Once the Chinese buyers acquiesce to the demands of the biggies naturally the spot prices will be doused.
The iron ore prices seems all set for a turbulent phase in the coming weeks in view of the above paradoxical reasons however clarity will dawn after the shaping of price trend in the domestic market during the coming week.
The following factors needs to be mentioned
1. After the banishing import of iron ore below Fe 60% by Chinese traders India could play only second fiddle as the composition of Indian iron ore is skewed towards low grade. As a result, spot prices of high grade iron ore from India have sky rocketed. Although the CNF prices seem to be prevailing at USD 190 per tonne, freakish cases of USD 195 have also been heard on week opening.
2. Prevailing mining mess in India has further fanned the fire with curtailed supply especially on East Coast.
3. The three mining behemoths viz., Vale , Rio Tinto and BHP Billiton have been playing truant to the roost by withholding supplies to leverage negotiating power in contractual discussions creating a situation of "take it or leave it " for Chinese buyers.
4. Against the backdrop of limited ore supply, traders are postponing selling in anticipation of better realization thereby supporting the hike.
However all the fun and frolic is not devoid of an element of scepticism as the tenants of this surge seems artificial rather than market driven.
1. In all likelihood Chinese buyers will bulk under the burgeoning costly ore prices as the finished demand is not increasing proportionately . Domestic prices have already showed signs of waning towards the weekend when the prices of long and flat product dipped slightly.
2. Shanghai equities slumped the most in 6 weeks due to the suspension of lending from banks to third home buyers in some areas.
3. Once the Chinese buyers acquiesce to the demands of the biggies naturally the spot prices will be doused.
The iron ore prices seems all set for a turbulent phase in the coming weeks in view of the above paradoxical reasons however clarity will dawn after the shaping of price trend in the domestic market during the coming week.
Tuesday, April 20, 2010
Goldman Sachs Says It Didn’t Mislead Investors; Profit Jumps
Goldman Sachs Group Inc., facing a fraud lawsuit from U.S. regulators, reported net income almost doubled in the first quarter and said it didn’t mislead investors.
“This all seems to be at root about whether someone intentionally misled someone, and that’s not something we would approve of or sanction,” Goldman Sachs Co-General Counsel Greg Palm told analysts on a conference call today. He spoke after the firm said earnings jumped 91 percent to $3.46 billion, or $5.59 a share, surpassing analysts’ estimates.
Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, finds itself fending off regulatory claims while cementing its position as the most profitable investment bank in Wall Street history. The Securities and Exchange Commission accused the firm of failing to tell investors in a 2007 collateralized debt obligation that hedge fund Paulson & Co., which planned to bet against the CDO, helped select the underlying assets.
Goldman Sachs had “no incentive” for the deal to fail, and lost more than $100 million on the transaction, Palm said. The firm was “somewhat surprised” when the SEC filed its suit on April 16, as “no one had told us in advance,” he said.
Fallout Eyed
Blankfein, 55, didn’t refer specifically to the suit today, saying in a statement, “In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people.”
Shareholders said concern about potential fallout from the accusations would supersede the earnings report. The stock, which fell 13 percent on April 16 after the SEC filed its case, fell $1.17 to $162.15 at 9:38 a.m. in New York Stock Exchange composite trading.
Ralph Cole, a senior vice president in research at Ferguson Wellman Inc., is among investors who said they are concerned the case could hurt Goldman Sachs’s reputation and cause clients to switch their business to other firms. Another worry is that the case could lead to additional lawsuits against the bank and add impetus to financial-reform efforts that would erode Goldman Sachs’s earnings potential.
Reputational Risk
“I don’t think the cost of this one suit’s the big deal, not certainly compared to what they make,” said Cole, whose firm manages $2.6 billion including Goldman Sachs stock. “It’s what does this do to their reputation and what does this do to the industry because of the current legislation going through?”
In the U.K., meantime, Britain’s financial regulator said Goldman Sachs’s London units will be formally investigated for fraud. “The Financial Services Authority has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations,” the FSA said in an e-mailed statement.
Goldman Sachs said revenue from fixed-income, currencies and commodities trading, which contributed more than half of revenue last year, rose 13 percent in the first quarter to an all-time high of $7.39 billion from $6.56 billion. That beat estimates for $5.95 billion from Howard Chen at Credit Suisse Group AG and $6.09 billion from Roger Freeman at Barclays Capital.
Bank of America Corp. and JPMorgan Chase & Co., the two biggest U.S. banks by assets, both reported record fixed-income revenue last week of $5.52 billion and $5.46 billion respectively.
Investment-Banking Revenue
“We’re looking at a great year for capital markets firms,” Thomas Brown, CEO of Second Curve Capital LLC and founder of bankstocks.com, said yesterday.
Equities-trading revenue rose 18 percent to $2.35 billion from $2 billion a year earlier, Goldman Sachs said. Gains from principal investments, which includes the company’s stakes in Industrial & Commercial Bank of China Ltd. as well as real estate and other companies, were $510 million compared with a net loss of $1.41 billion in the first quarter of 2009.
Investment-banking revenue climbed 44 percent to $1.18 billion from $823 million last year. Within that, fees from financial advice fell 12 percent to $464 million from $527 million and equity-underwriting revenue surged to $371 million from $48 million. Debt underwriting generated $349 million compared with $248 million a year earlier.
Compensation and benefits, the firm’s biggest expense, increased 17 percent to $5.49 billion in the quarter, or 43 percent of the firm’s overall revenue. The cost compared with $4.71 billion in the first quarter of 2009, when the firm set aside 50 percent of revenue.
The bank said the percentage of quarterly revenue put aside for compensation expense was the lowest for any first quarter.
“This all seems to be at root about whether someone intentionally misled someone, and that’s not something we would approve of or sanction,” Goldman Sachs Co-General Counsel Greg Palm told analysts on a conference call today. He spoke after the firm said earnings jumped 91 percent to $3.46 billion, or $5.59 a share, surpassing analysts’ estimates.
Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, finds itself fending off regulatory claims while cementing its position as the most profitable investment bank in Wall Street history. The Securities and Exchange Commission accused the firm of failing to tell investors in a 2007 collateralized debt obligation that hedge fund Paulson & Co., which planned to bet against the CDO, helped select the underlying assets.
Goldman Sachs had “no incentive” for the deal to fail, and lost more than $100 million on the transaction, Palm said. The firm was “somewhat surprised” when the SEC filed its suit on April 16, as “no one had told us in advance,” he said.
Fallout Eyed
Blankfein, 55, didn’t refer specifically to the suit today, saying in a statement, “In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people.”
Shareholders said concern about potential fallout from the accusations would supersede the earnings report. The stock, which fell 13 percent on April 16 after the SEC filed its case, fell $1.17 to $162.15 at 9:38 a.m. in New York Stock Exchange composite trading.
Ralph Cole, a senior vice president in research at Ferguson Wellman Inc., is among investors who said they are concerned the case could hurt Goldman Sachs’s reputation and cause clients to switch their business to other firms. Another worry is that the case could lead to additional lawsuits against the bank and add impetus to financial-reform efforts that would erode Goldman Sachs’s earnings potential.
Reputational Risk
“I don’t think the cost of this one suit’s the big deal, not certainly compared to what they make,” said Cole, whose firm manages $2.6 billion including Goldman Sachs stock. “It’s what does this do to their reputation and what does this do to the industry because of the current legislation going through?”
In the U.K., meantime, Britain’s financial regulator said Goldman Sachs’s London units will be formally investigated for fraud. “The Financial Services Authority has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations,” the FSA said in an e-mailed statement.
Goldman Sachs said revenue from fixed-income, currencies and commodities trading, which contributed more than half of revenue last year, rose 13 percent in the first quarter to an all-time high of $7.39 billion from $6.56 billion. That beat estimates for $5.95 billion from Howard Chen at Credit Suisse Group AG and $6.09 billion from Roger Freeman at Barclays Capital.
Bank of America Corp. and JPMorgan Chase & Co., the two biggest U.S. banks by assets, both reported record fixed-income revenue last week of $5.52 billion and $5.46 billion respectively.
Investment-Banking Revenue
“We’re looking at a great year for capital markets firms,” Thomas Brown, CEO of Second Curve Capital LLC and founder of bankstocks.com, said yesterday.
Equities-trading revenue rose 18 percent to $2.35 billion from $2 billion a year earlier, Goldman Sachs said. Gains from principal investments, which includes the company’s stakes in Industrial & Commercial Bank of China Ltd. as well as real estate and other companies, were $510 million compared with a net loss of $1.41 billion in the first quarter of 2009.
Investment-banking revenue climbed 44 percent to $1.18 billion from $823 million last year. Within that, fees from financial advice fell 12 percent to $464 million from $527 million and equity-underwriting revenue surged to $371 million from $48 million. Debt underwriting generated $349 million compared with $248 million a year earlier.
Compensation and benefits, the firm’s biggest expense, increased 17 percent to $5.49 billion in the quarter, or 43 percent of the firm’s overall revenue. The cost compared with $4.71 billion in the first quarter of 2009, when the firm set aside 50 percent of revenue.
The bank said the percentage of quarterly revenue put aside for compensation expense was the lowest for any first quarter.
Asian Stocks Rise on Divided Goldman Sachs Vote, Citigroup, Yen
Asian stocks rose, led by finance companies, as people familiar with the matter said regulators were split on suing Goldman Sachs Group Inc., easing concern over the impact increased scrutiny on banks will have on profits.
Sumitomo Mitsui Financial Group Inc. rose 1.4 percent in Tokyo as Morgan Stanley upgraded the nation’s banks and Citigroup Inc.’s profit beat estimates. National Australia Bank Ltd., the nation’s third-biggest lender, climbed 2.8 percent in Sydney. Honda Motor Co., which gets 44 percent of its sales in North America, gained 1.7 percent in Tokyo after the yen weakened against the dollar.
The MSCI Asia Pacific Index gained 0.6 percent to 126.30 as of 9:44 a.m. in Tokyo. The gauge slumped the most since Feb. 19 yesterday after regulators sued Goldman Sachs for fraud related to collateralized debt obligations. Securities and Exchange Commission officials voted 3-2 to pursue the case, two people familiar with the matter said.
“The divided vote on Goldman suggests excessive regulation that would reduce bank earnings will be avoided,” said Fumiyuki Nakanishi, a senior strategist at SMBC Friend Securities Co. in Tokyo.
Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. The gauge rose 0.5 percent yesterday as the index of U.S. leading indicators rose in March by the most in 10 months.
Sumitomo Mitsui Financial Group Inc. rose 1.4 percent in Tokyo as Morgan Stanley upgraded the nation’s banks and Citigroup Inc.’s profit beat estimates. National Australia Bank Ltd., the nation’s third-biggest lender, climbed 2.8 percent in Sydney. Honda Motor Co., which gets 44 percent of its sales in North America, gained 1.7 percent in Tokyo after the yen weakened against the dollar.
The MSCI Asia Pacific Index gained 0.6 percent to 126.30 as of 9:44 a.m. in Tokyo. The gauge slumped the most since Feb. 19 yesterday after regulators sued Goldman Sachs for fraud related to collateralized debt obligations. Securities and Exchange Commission officials voted 3-2 to pursue the case, two people familiar with the matter said.
“The divided vote on Goldman suggests excessive regulation that would reduce bank earnings will be avoided,” said Fumiyuki Nakanishi, a senior strategist at SMBC Friend Securities Co. in Tokyo.
Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. The gauge rose 0.5 percent yesterday as the index of U.S. leading indicators rose in March by the most in 10 months.
Monday, April 19, 2010
Sesa Goa Profit Increases on Higher Iron-Ore Demand From China
April 19 (Bloomberg) -- Sesa Goa Ltd., India’s biggest iron-ore exporter, said fourth-quarter profit more than doubled on higher demand for the steelmaking raw material from China.
Group net income climbed to 12.2 billion rupees ($273 million) in the three months ended March 31 from 5.5 billion rupees a year earlier, the Panaji, Goa-based company said today in an e-mailed statement. Net sales rose to 28.1 billion rupees from 15.8 billion rupees.
Sesa Goa, a unit of Vedanta Resources Plc, exports most of its production to steelmakers in China and Japan. China is the world’s largest buyer of iron ore and last year increased imports by 42 percent to a record 628 million metric tons. Chinese imports of the iron ore by sea could rise 47 percent this year from 2008 levels, Johannesburg-based Kumba Iron Ore Ltd. said on April 15.
Average cash prices of 62 percent iron-content ore delivered to Tianjin port in China jumped 87.5 percent to $131.6 a metric ton in the three months ended March 31, compared with $70.2 a ton a year ago, according to the Steel Index.
Group net income climbed to 12.2 billion rupees ($273 million) in the three months ended March 31 from 5.5 billion rupees a year earlier, the Panaji, Goa-based company said today in an e-mailed statement. Net sales rose to 28.1 billion rupees from 15.8 billion rupees.
Sesa Goa, a unit of Vedanta Resources Plc, exports most of its production to steelmakers in China and Japan. China is the world’s largest buyer of iron ore and last year increased imports by 42 percent to a record 628 million metric tons. Chinese imports of the iron ore by sea could rise 47 percent this year from 2008 levels, Johannesburg-based Kumba Iron Ore Ltd. said on April 15.
Average cash prices of 62 percent iron-content ore delivered to Tianjin port in China jumped 87.5 percent to $131.6 a metric ton in the three months ended March 31, compared with $70.2 a ton a year ago, according to the Steel Index.
Citigroup Net More Than Doubles as Loan Costs Decline
April 19 (Bloomberg) -- Citigroup Inc. said profit more than doubled as the global economic rebound trimmed costs for bad loans, trading revenue surpassed analysts’ estimates and the value of subprime mortgage bonds increased.
First-quarter net income of $4.43 billion followed a loss of $7.58 billion in the fourth quarter and a profit of $1.59 billion in the first three months of 2009, New York-based Citigroup said today in a statement. Adjusted per-share earnings were 14 cents. Analysts in a Bloomberg survey estimated the company would break even.
Chief Executive Officer Vikram Pandit, who is taking a $1 annual salary until the company turns consistently profitable, said in February that 2010 may show the “earnings potential of the new Citi” after two straight annual losses totaling $29 billion. Profit was the highest since the second quarter of 2007 as bad-loan costs fell 16 percent to $8.37 billion.
“They are now feeling themselves to be sufficiently reserved and they’re beginning to reduce credit expenses,” said Gary Townsend, president of Hill-Townsend Capital LLC, a Chevy Chase, Maryland-based investment firm, in an interview on Bloomberg Television. “That falls directly to the bottom line.”
Citigroup, which climbed 38 percent on the New York Stock Exchange this year before today, advanced 19 cents, or 4.2 percent, to $4.75 in composite trading at 9:46 a.m.
Assets Increase
The bank’s assets increased 8 percent to $2 trillion, after accounting rule makers closed a loophole that had allowed banks to keep credit-card loans and other debt instruments off their balance sheets.
Revenue from continuing operations shrank 5.8 percent to $25.4 billion, while consumer-banking revenue rose 3.1 percent to $8.08 billion, Citigroup said.
Chief Financial Officer John Gerspach said on a conference call with reporters that the company took $800 million of write- ups on subprime mortgage bonds. Writedowns on subprime bonds were among the biggest causes of Citigroup’s losses over the past two years.
“Our performance was aided by stability in the capital markets and improvement in the global business climate,” Pandit said in the statement.
Under bank accounting rules, bad-loan costs include charge- offs during the quarter as well as any increases or decreases of loss reserves for future defaults.
Charge-Offs
Charge-offs in the first quarter climbed to $8.38 billion from $7.28 billion. Overall, the bad-loan costs fell because the bank released $18 million from its reserves, compared with an increase a year earlier of $2.63 billion.
Revenue from trading and investment banking fell 34 percent to $8 billion. Citigroup had $6.59 billion of trading revenue, exceeding Credit Suisse Group AG analyst Moshe Orenbuch’s estimate of $5 billion.
The bank had $1.06 billion of mergers-advisory and underwriting revenue. Orenbuch forecast $1.1 billion.
Citigroup Vice Chairman Edward “Ned” Kelly will become chairman of the investment-banking division, according to an internal memo obtained by Bloomberg News and confirmed by spokeswoman Danielle Romero-Apsilos.
Revenue in Citigroup’s global transaction services division, which manages bank accounts for corporations and acts as securities custodian for fund managers, was $2.44 billion, up from $2.37 billion.
The Citi Holdings division, which includes businesses that Pandit has said he wants to exit, had revenue of $6.55 billion, compared with $4.06 billion a year earlier.
Government’s Stake
Citigroup, which had to get a $45 billion bailout in 2008, repaid $20 billion of the funds in December. The remaining $25 billion was converted by the Treasury Department into 7.7 billion Citigroup shares, which have a market value of about $35 billion.
“All of us at Citi recognize that we would not be where we are without the assistance of American taxpayers,” Pandit said in the statement. He said the company was “gratified” to be able to repay the government “with a substantial return, as well as create a significant increase in the value of their equity in Citi.”
JPMorgan Chase & Co.’s first-quarter profit climbed 55 percent from a year earlier, and Bank of America Corp.’s fell 25 percent. Goldman Sachs Group Inc. reports earnings tomorrow and Morgan Stanley is scheduled for April 21.
First-quarter net income of $4.43 billion followed a loss of $7.58 billion in the fourth quarter and a profit of $1.59 billion in the first three months of 2009, New York-based Citigroup said today in a statement. Adjusted per-share earnings were 14 cents. Analysts in a Bloomberg survey estimated the company would break even.
Chief Executive Officer Vikram Pandit, who is taking a $1 annual salary until the company turns consistently profitable, said in February that 2010 may show the “earnings potential of the new Citi” after two straight annual losses totaling $29 billion. Profit was the highest since the second quarter of 2007 as bad-loan costs fell 16 percent to $8.37 billion.
“They are now feeling themselves to be sufficiently reserved and they’re beginning to reduce credit expenses,” said Gary Townsend, president of Hill-Townsend Capital LLC, a Chevy Chase, Maryland-based investment firm, in an interview on Bloomberg Television. “That falls directly to the bottom line.”
Citigroup, which climbed 38 percent on the New York Stock Exchange this year before today, advanced 19 cents, or 4.2 percent, to $4.75 in composite trading at 9:46 a.m.
Assets Increase
The bank’s assets increased 8 percent to $2 trillion, after accounting rule makers closed a loophole that had allowed banks to keep credit-card loans and other debt instruments off their balance sheets.
Revenue from continuing operations shrank 5.8 percent to $25.4 billion, while consumer-banking revenue rose 3.1 percent to $8.08 billion, Citigroup said.
Chief Financial Officer John Gerspach said on a conference call with reporters that the company took $800 million of write- ups on subprime mortgage bonds. Writedowns on subprime bonds were among the biggest causes of Citigroup’s losses over the past two years.
“Our performance was aided by stability in the capital markets and improvement in the global business climate,” Pandit said in the statement.
Under bank accounting rules, bad-loan costs include charge- offs during the quarter as well as any increases or decreases of loss reserves for future defaults.
Charge-Offs
Charge-offs in the first quarter climbed to $8.38 billion from $7.28 billion. Overall, the bad-loan costs fell because the bank released $18 million from its reserves, compared with an increase a year earlier of $2.63 billion.
Revenue from trading and investment banking fell 34 percent to $8 billion. Citigroup had $6.59 billion of trading revenue, exceeding Credit Suisse Group AG analyst Moshe Orenbuch’s estimate of $5 billion.
The bank had $1.06 billion of mergers-advisory and underwriting revenue. Orenbuch forecast $1.1 billion.
Citigroup Vice Chairman Edward “Ned” Kelly will become chairman of the investment-banking division, according to an internal memo obtained by Bloomberg News and confirmed by spokeswoman Danielle Romero-Apsilos.
Revenue in Citigroup’s global transaction services division, which manages bank accounts for corporations and acts as securities custodian for fund managers, was $2.44 billion, up from $2.37 billion.
The Citi Holdings division, which includes businesses that Pandit has said he wants to exit, had revenue of $6.55 billion, compared with $4.06 billion a year earlier.
Government’s Stake
Citigroup, which had to get a $45 billion bailout in 2008, repaid $20 billion of the funds in December. The remaining $25 billion was converted by the Treasury Department into 7.7 billion Citigroup shares, which have a market value of about $35 billion.
“All of us at Citi recognize that we would not be where we are without the assistance of American taxpayers,” Pandit said in the statement. He said the company was “gratified” to be able to repay the government “with a substantial return, as well as create a significant increase in the value of their equity in Citi.”
JPMorgan Chase & Co.’s first-quarter profit climbed 55 percent from a year earlier, and Bank of America Corp.’s fell 25 percent. Goldman Sachs Group Inc. reports earnings tomorrow and Morgan Stanley is scheduled for April 21.
Sunday, April 18, 2010
C.K. Prahalad, Management Guru, Dies
Coimbatore Krishnarao Prahalad, one of India's best-known management exports and a distinguished professor at the Ross School of Business at the University of Michigan, died Friday in San Diego after a brief illness. He was 68 years old.
Mr. Prahalad, a world authority on management thinking, was most famous for his unconventional thinking on the "bottom-of-the-pyramid" approach. He followed this up with a book of the same name in 2004. In his book, "The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits," Mr. Prahalad proposes that businesses should start looking at the billions of poor all over the world as value-demanding consumers and not just as those on the fringes of society who can ill afford to buy products. The book went on to become a New York Times bestseller.
Born in Chennai in the Indian state of Tamil Nadu in 1941, Mr. Prahalad was one of nine children of a Sanskrit scholar and judge. He joined Union Carbide in 1960 soon after completing his bachelors in Physics from Loyola College in Madras. He then did his post graduation at the Indian Institute of Management in Ahmedabad, completing his studies there in 1966, and went on to do a PhD on multinational management at the Harvard Business School in 1972.
Mr. Prahlad's theory is believed to have affected many Indian and developing world retail outlets, for instance driving consumer-goods companies like Godrej and Hindustan Lever to come up with small-sized sachets of products like shampoo that could be sold as individual portions.
In 2009, the government of India conferred upon him the Padma Bhushan, one of India's highest civilian awards.
Mr. Prahalad's repertoire includes consulting for some of the world's leading companies, such as AT&T, Citigroup, Kodak, Oracle, Philips and Unilever. Besides "The Fortune at the Bottom of the Pyramid," his other books include "Competing for the Future" with Gary Hamel, "The Future of Competition" with Venkat Ramaswamy and "The New Age of Innovation" with M.S. Krishnan
Mr. Prahalad, a world authority on management thinking, was most famous for his unconventional thinking on the "bottom-of-the-pyramid" approach. He followed this up with a book of the same name in 2004. In his book, "The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits," Mr. Prahalad proposes that businesses should start looking at the billions of poor all over the world as value-demanding consumers and not just as those on the fringes of society who can ill afford to buy products. The book went on to become a New York Times bestseller.
Born in Chennai in the Indian state of Tamil Nadu in 1941, Mr. Prahalad was one of nine children of a Sanskrit scholar and judge. He joined Union Carbide in 1960 soon after completing his bachelors in Physics from Loyola College in Madras. He then did his post graduation at the Indian Institute of Management in Ahmedabad, completing his studies there in 1966, and went on to do a PhD on multinational management at the Harvard Business School in 1972.
Mr. Prahlad's theory is believed to have affected many Indian and developing world retail outlets, for instance driving consumer-goods companies like Godrej and Hindustan Lever to come up with small-sized sachets of products like shampoo that could be sold as individual portions.
In 2009, the government of India conferred upon him the Padma Bhushan, one of India's highest civilian awards.
Mr. Prahalad's repertoire includes consulting for some of the world's leading companies, such as AT&T, Citigroup, Kodak, Oracle, Philips and Unilever. Besides "The Fortune at the Bottom of the Pyramid," his other books include "Competing for the Future" with Gary Hamel, "The Future of Competition" with Venkat Ramaswamy and "The New Age of Innovation" with M.S. Krishnan
Friday, April 16, 2010
Goldman Sachs Sued by SEC for Fraud Tied to CDOs
April 16 (Bloomberg) -- Goldman Sachs Group Inc. was sued by U.S. regulators for fraud tied to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. The firm’s shares tumbled as much as 16 percent and financial stocks slumped.
Goldman Sachs misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter, the Securities and Exchange Commission said in a statement today. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president.
“The product was new and complex but the deception and conflicts are old and simple,” SEC Enforcement Director Robert Khuzami said in the statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”
The SEC alleged that Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, 55, structured and marketed CDOs that hinged on the performance of subprime mortgage-backed securities. The New York-based firm failed to disclose to investors that hedge fund Paulson & Co. was betting against the CDO, known as Abacus, and influenced the selection of securities for the portfolio, the SEC said. Paulson wasn’t accused of wrongdoing.
Financial Stocks Slump
A gauge of banks and brokerages in the Standard & Poor’s 500 Index sank 3.9 percent for the top loss among 24 groups after the SEC announced its action. Bank of America Corp. and JPMorgan Chase & Co. lost at least 3.5 percent as all 27 companies in the S&P 500 Diversified Financial Index declined.
“This gave the politicians everything they need to push for stronger financial reform and it’s going to further shake investor confidence in Wall Street,” said Matthew McCormick, a banking-industry analyst and portfolio manager at Bahl & Gaynor Inc. in Cincinnati, which oversees $2.8 billion.
Shares of Goldman Sachs fell $23.64, or 13 percent, to $160.63 as of 11:37 a.m. in New York Stock Exchange trading. It was the biggest one-day drop since Jan. 20, 2009.
Goldman Sachs spokesman Lucas Van Praag didn’t return a call and an e-mail seeking comment. A call to Richard Klapper, an attorney for Goldman Sachs at Sullivan & Cromwell LLP, wasn’t returned. Tourre, reached by phone in London today, declined to comment. A call to Pamela Chepiga, a lawyer for Tourre at Allen & Overy LLP, wasn’t returned.
Stefan Prelog, a spokesman for New York-based Paulson & Co., said he couldn’t comment. The company oversees $32 billion.
Goldman Sachs misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter, the Securities and Exchange Commission said in a statement today. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president.
“The product was new and complex but the deception and conflicts are old and simple,” SEC Enforcement Director Robert Khuzami said in the statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”
The SEC alleged that Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, 55, structured and marketed CDOs that hinged on the performance of subprime mortgage-backed securities. The New York-based firm failed to disclose to investors that hedge fund Paulson & Co. was betting against the CDO, known as Abacus, and influenced the selection of securities for the portfolio, the SEC said. Paulson wasn’t accused of wrongdoing.
Financial Stocks Slump
A gauge of banks and brokerages in the Standard & Poor’s 500 Index sank 3.9 percent for the top loss among 24 groups after the SEC announced its action. Bank of America Corp. and JPMorgan Chase & Co. lost at least 3.5 percent as all 27 companies in the S&P 500 Diversified Financial Index declined.
“This gave the politicians everything they need to push for stronger financial reform and it’s going to further shake investor confidence in Wall Street,” said Matthew McCormick, a banking-industry analyst and portfolio manager at Bahl & Gaynor Inc. in Cincinnati, which oversees $2.8 billion.
Shares of Goldman Sachs fell $23.64, or 13 percent, to $160.63 as of 11:37 a.m. in New York Stock Exchange trading. It was the biggest one-day drop since Jan. 20, 2009.
Goldman Sachs spokesman Lucas Van Praag didn’t return a call and an e-mail seeking comment. A call to Richard Klapper, an attorney for Goldman Sachs at Sullivan & Cromwell LLP, wasn’t returned. Tourre, reached by phone in London today, declined to comment. A call to Pamela Chepiga, a lawyer for Tourre at Allen & Overy LLP, wasn’t returned.
Stefan Prelog, a spokesman for New York-based Paulson & Co., said he couldn’t comment. The company oversees $32 billion.
Financial Shares Tumble After Goldman Sachs Charged With Fraud
April 16 (Bloomberg) -- Financial shares tumbled after the Securities and Exchange Commission charged Goldman Sachs Group Inc. with fraud related to packaging and selling collateralized debt obligations linked to subprime mortgages.
Goldman Sachs, the most profitable firm in Wall Street history, tumbled 10 percent to $165.02 in New York Stock Exchange composite trading at 11:12 a.m. in New York for the biggest intraday decline in a year.
A gauge of banks and brokerages in the Standard & Poor’s 500 Index sank 4.3 percent for its biggest decline since February 4 and the top loss among 24 groups. Bank of America Corp., Morgan Stanley and JPMorgan Chase & Co. lost at least 4.3 percent as all 27 companies in the S&P 500 Diversified Financial Index declined at least 1.7 percent after the SEC announced its action. Berkshire Hathaway Inc. Class A shares tumbled 5.1 percent.
Goldman Sachs misstated and omitted key facts about a CDO as the U.S. housing market was beginning to falter, the Securities and Exchange Commission said in a statement today. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president.
“I wouldn’t want to own Goldman stock right now,” said Keith Goddard, president of Capital Advisors, which oversees $810 million in Tulsa, Oklahoma. “If this turns out to be remotely true, do you want to be doing business with someone who doesn’t have your best interests in mind? That’s the accusation here.”
Goldman Sachs, the most profitable firm in Wall Street history, tumbled 10 percent to $165.02 in New York Stock Exchange composite trading at 11:12 a.m. in New York for the biggest intraday decline in a year.
A gauge of banks and brokerages in the Standard & Poor’s 500 Index sank 4.3 percent for its biggest decline since February 4 and the top loss among 24 groups. Bank of America Corp., Morgan Stanley and JPMorgan Chase & Co. lost at least 4.3 percent as all 27 companies in the S&P 500 Diversified Financial Index declined at least 1.7 percent after the SEC announced its action. Berkshire Hathaway Inc. Class A shares tumbled 5.1 percent.
Goldman Sachs misstated and omitted key facts about a CDO as the U.S. housing market was beginning to falter, the Securities and Exchange Commission said in a statement today. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president.
“I wouldn’t want to own Goldman stock right now,” said Keith Goddard, president of Capital Advisors, which oversees $810 million in Tulsa, Oklahoma. “If this turns out to be remotely true, do you want to be doing business with someone who doesn’t have your best interests in mind? That’s the accusation here.”
Thursday, April 15, 2010
Govt imposes duty on cotton exports to check rising prices
NEW DELHI: The government has imposed a duty of Rs 2,500 per tonne on raw cotton exports in order to moderate prices of the commodity in the domestic market and help the local textiles industry.
The Central Board of Excise and Customs has notified the export duty on the natural fibre, which has seen a sharp rise in prices in the recent few months.
The measure follows the decision by a high-level meeting chaired by Finance Minister Pranab Mukherjee last week.
The export duty has been levied for six months, an official in the textiles ministry said.
The domestic textile industry has been pitching for cotton export restrictions in the wake of steep rise in prices of the natural fibre.
The price of Shankar-6 variety, the premium quality of cotton, has risen to around Rs 28,500 per candy from around Rs 25,000 per candy (356 kg) in November 2009.
India, the world's second largest cotton producer, exported 2.36 million bales (of 170 kg each) of cotton last season (from October 2008 to September 2009).
Besides, the government is taking steps to ensure that there is adequate availability of cotton in the country.
"It was decided that there should be a carry-forward stock of about 50 lakh bales of raw cotton at the beginning of the next cotton season (starting October 2010)," the textiles ministry official said.
Besides, a three per cent duty on export of cotton waste has also been imposed.
Last week, the government also imposed restrictions on export of cotton yarn, making it mandatory for exporters to register their shipments with the textiles commissioner.
As per a notification by the Directorate General of Foreign Trade, export consignments of cotton yarn would now have to be registered with the textiles commissioner before they can leave the country.
The Central Board of Excise and Customs has notified the export duty on the natural fibre, which has seen a sharp rise in prices in the recent few months.
The measure follows the decision by a high-level meeting chaired by Finance Minister Pranab Mukherjee last week.
The export duty has been levied for six months, an official in the textiles ministry said.
The domestic textile industry has been pitching for cotton export restrictions in the wake of steep rise in prices of the natural fibre.
The price of Shankar-6 variety, the premium quality of cotton, has risen to around Rs 28,500 per candy from around Rs 25,000 per candy (356 kg) in November 2009.
India, the world's second largest cotton producer, exported 2.36 million bales (of 170 kg each) of cotton last season (from October 2008 to September 2009).
Besides, the government is taking steps to ensure that there is adequate availability of cotton in the country.
"It was decided that there should be a carry-forward stock of about 50 lakh bales of raw cotton at the beginning of the next cotton season (starting October 2010)," the textiles ministry official said.
Besides, a three per cent duty on export of cotton waste has also been imposed.
Last week, the government also imposed restrictions on export of cotton yarn, making it mandatory for exporters to register their shipments with the textiles commissioner.
As per a notification by the Directorate General of Foreign Trade, export consignments of cotton yarn would now have to be registered with the textiles commissioner before they can leave the country.
One year on, challenges remain at Mahindra Satyam
A year after taking over the former Satyam Computers, the Mahindra Satyam officials say that a lot has changed for good in the internal systems of Satyam, reports CNBC-TV18's Appaji Reddem.
Exactly a year after taking over Satyam, a visibly confident management of Mahindra Satyam says the fundamentals of the company have been changed to ensure better transparency.
CP Gurnani, CEO, Mahindra Satyam, said, "The fundamental change that happened in the organization was that 14 layers of management were reduced to seven layers. That means between CEO to my youngest engineer trainee, there are seven layers. Fundamentally, the structural changes that have happened around a better transparency, more availability of data, better collaboration between teams and essentially what you see is that customer centricity."
Despite legal issues, the firm also ensures that the much awaited re-statement of Satyam accounts will happen in the coming June as scheduled.
Vineet Nayyar, Chairman, Mahindra Satyam, said, "As the schedule goes, we believe, we will be able to meet the timelines."
The Corporate Affairs Minister Salman Khurshid, who had inaugurated Mahindra Satyam's 26 acre SEZ today, said one needs to take law into account before thinking of meeting timelines, especially with regard to the re-statement of Satyam accounts.
Khurshid stated, "There are technical matters that obviously have to be taken into account. Not everything that we wish and desire is possible immediately because we have to take the law into account. There are many other aspects related to recovery and revival of Mahindra Satyam."
Anand Mahindra tells Mahindra Satyam employees that war is over and it's time to dance. But it's definitely a tough road ahead for Mahindra Satyam as several of documents required to re-state the accounts are still locked up with the Central Bureau of Investigation. And the lawsuits by the US Securities and Exchange Commission are expected to be one of the major troubles for the company.
Exactly a year after taking over Satyam, a visibly confident management of Mahindra Satyam says the fundamentals of the company have been changed to ensure better transparency.
CP Gurnani, CEO, Mahindra Satyam, said, "The fundamental change that happened in the organization was that 14 layers of management were reduced to seven layers. That means between CEO to my youngest engineer trainee, there are seven layers. Fundamentally, the structural changes that have happened around a better transparency, more availability of data, better collaboration between teams and essentially what you see is that customer centricity."
Despite legal issues, the firm also ensures that the much awaited re-statement of Satyam accounts will happen in the coming June as scheduled.
Vineet Nayyar, Chairman, Mahindra Satyam, said, "As the schedule goes, we believe, we will be able to meet the timelines."
The Corporate Affairs Minister Salman Khurshid, who had inaugurated Mahindra Satyam's 26 acre SEZ today, said one needs to take law into account before thinking of meeting timelines, especially with regard to the re-statement of Satyam accounts.
Khurshid stated, "There are technical matters that obviously have to be taken into account. Not everything that we wish and desire is possible immediately because we have to take the law into account. There are many other aspects related to recovery and revival of Mahindra Satyam."
Anand Mahindra tells Mahindra Satyam employees that war is over and it's time to dance. But it's definitely a tough road ahead for Mahindra Satyam as several of documents required to re-state the accounts are still locked up with the Central Bureau of Investigation. And the lawsuits by the US Securities and Exchange Commission are expected to be one of the major troubles for the company.
Monday, April 12, 2010
Government to discuss allowing FDI in retail
The government of India is planning to allow multi-brand retail to the foreign direct investment (FDI) showing its resolve to open up the sector to international chains.
The department of industrial policy and promotion (DIPP) was written a letter to the finance ministry and is also carrying out discussions with the agriculture ministry about the allowing FDI into the sector.
DIPP is responsible for framing the foreign investment policy for the central government. The department is under the commerce and industry ministry and is proposing to allow 100% FDI in defence production.
"The move to open up retail is part of the government's strategy to plug gaps in the food supply chain and more importantly, help bring down the difference between farm-gate prices and retail prices," said a DIPP official.
Presently, the government allows 51% foreign investment in single-brand retail only and it has been reluctant in opening up the sector to the FDI fearing blackish from the political parties.
The government will put forward the argument that the control of the units will remain in the Indian hands. The official indicated that government will put a cap of 49%.
International chains like US-based Wal-Mart and Germany's Metro AG who have set up shops in the country have been asking the government to open up the sector for FDI.
The department of industrial policy and promotion (DIPP) was written a letter to the finance ministry and is also carrying out discussions with the agriculture ministry about the allowing FDI into the sector.
DIPP is responsible for framing the foreign investment policy for the central government. The department is under the commerce and industry ministry and is proposing to allow 100% FDI in defence production.
"The move to open up retail is part of the government's strategy to plug gaps in the food supply chain and more importantly, help bring down the difference between farm-gate prices and retail prices," said a DIPP official.
Presently, the government allows 51% foreign investment in single-brand retail only and it has been reluctant in opening up the sector to the FDI fearing blackish from the political parties.
The government will put forward the argument that the control of the units will remain in the Indian hands. The official indicated that government will put a cap of 49%.
International chains like US-based Wal-Mart and Germany's Metro AG who have set up shops in the country have been asking the government to open up the sector for FDI.
All-India 3G bid at Rs 4,324 cr; Delhi, Guj see highest prices
NEW DELHI: The third day of spectrum auction for 3G telephony saw the all-India licence bid touching Rs 4,324 crore at the end of 16 rounds, ensuring that the government would get a minimum of Rs 17,636 crore.
With today's closing, the bid has gone up nearly 24 per cent more than the base price of Rs 3,500 crore and 5.85 per cent higher than Rs 4,085 crore in the last round on Saturday.
The government has set a target of garnering up to Rs 35,000 crore from sale of spectrum for 3G and broadband wireless access (BWA) services.
The Rs 416.43-crore bid for Delhi was the highest among all metros. The bid for Gujarat at Rs 416.42 crore almost matched the one for Delhi, according to details available with the Department of Telecom (DoT).
The bid for Gujarat also saw the highest increase of Rs 20.82 crore from the last round of auction on Saturday.
Andhra Pradesh, Tamil Nadu and Maharashtra saw bids rising to Rs 404.54 crore, while that for Karnataka was Rs 396.58 crore ahead of Mumbai at Rs 392.66 crore.
The bid for Rajasthan was Rs 159.47 crore, UP (E) Rs 157.66 crore, Kolkata, Kerala Rs 150.16 crore each, Madhya Pradesh Rs 149.02 crore, Haryana Rs 140.09 crore and Punjab Rs 123.63 crore.
There were negative demands in nine circles -- West Bengal, HP, Bihar, Orissa, Assam, North East, J&K and Haryana. Excess demands were seen for eight circles with the maximum being for UP (E). These circles did not see any increase in their bid price since Friday.
The government is auctioning three slots of 3G airwaves in 17 telecom service areas. Only two slots are up for sale across the country for broadband airwaves, which will begin after the conclusion of the 3G auctions.
On Friday, the first day of the 3G spectrum sale process, the government had received bids worth a total of Rs 3,919 crore for a pan India licence- this was 12% higher than the base price of Rs 3,500 crore.
With today's closing, the bid has gone up nearly 24 per cent more than the base price of Rs 3,500 crore and 5.85 per cent higher than Rs 4,085 crore in the last round on Saturday.
The government has set a target of garnering up to Rs 35,000 crore from sale of spectrum for 3G and broadband wireless access (BWA) services.
The Rs 416.43-crore bid for Delhi was the highest among all metros. The bid for Gujarat at Rs 416.42 crore almost matched the one for Delhi, according to details available with the Department of Telecom (DoT).
The bid for Gujarat also saw the highest increase of Rs 20.82 crore from the last round of auction on Saturday.
Andhra Pradesh, Tamil Nadu and Maharashtra saw bids rising to Rs 404.54 crore, while that for Karnataka was Rs 396.58 crore ahead of Mumbai at Rs 392.66 crore.
The bid for Rajasthan was Rs 159.47 crore, UP (E) Rs 157.66 crore, Kolkata, Kerala Rs 150.16 crore each, Madhya Pradesh Rs 149.02 crore, Haryana Rs 140.09 crore and Punjab Rs 123.63 crore.
There were negative demands in nine circles -- West Bengal, HP, Bihar, Orissa, Assam, North East, J&K and Haryana. Excess demands were seen for eight circles with the maximum being for UP (E). These circles did not see any increase in their bid price since Friday.
The government is auctioning three slots of 3G airwaves in 17 telecom service areas. Only two slots are up for sale across the country for broadband airwaves, which will begin after the conclusion of the 3G auctions.
On Friday, the first day of the 3G spectrum sale process, the government had received bids worth a total of Rs 3,919 crore for a pan India licence- this was 12% higher than the base price of Rs 3,500 crore.
Feb industrial output rises at slower-than-expected 15.1%
The Index of Industrial Production (IIP) for the month of February rose at a slower-than-expected 15.1% as against 16.7% on a month-on-month basis, helped by stimulus measures that boosted domestic demand. The output is expected to ease further following moves to withdraw an economic stimulus, including a interest rate hike in March. A CNBC-TV18 poll indicates a figure of 16.5% for the month.
While the manufacturing sector for grew at 16% in February as compared to 17.9% in January 2010, the mining sector posted a growth at 12.2% versus 14.6% (MoM). The electricity sector too grew at 8.4% in February versus 10.7% in January.
Basic goods for the month grew at 6.7% as compared to 5.6% growth posted in January. The capital goods sector, which showed a growth of 56.2% in January, grew 44.4% in February and the intermediate goods posted 15.6% growth versus 21.3% in January. The consumer goods for the same month grew at 8.9% as against 4.2%.
A pick up in the economy has seen a rise in inflation with the headline number poised to breach 10% in March, above February's 9.89%.
Headline inflation, which was initially driven by high food prices, is now getting a push from other segments. Inflation in manufacturing accelerated to 7.4% in February from 6.5% in January, a sign that inflation is fast becoming a demand-driven problem.
The Reserve Bank of India, citing inflationary pressures and an improving economy, hiked key rates by 25 basis points last month and is expected to raise the rates again by at least the same amount at its policy review on April 20.
Commenting on the figures Atsi Sheth, Chief Economist at Macro-Sutra said, this was still an excellent number. “We stick by our view that the RBI will increase the repo and reverse repo rates by a modest 25 basis points at its policy review on April 20.”
"The number to watch now is inflation, and if it stays in the 10-percent range, especially with non-food inflation not accelerating, this bodes well for our forecast that the RBI's post-April 20 tightening will be measured and moderated," she added.
The numbers are certainly lower than the consensus expectation but some of this was possibly given the core index numbers because there was some slackness on steel, cement and so on, said Abheek Baruah of HDFC Bank. “That has probably got reflected in manufacturing and I think there has been some moderation in both durables and capital goods production, which was again expected because the surge in both December and January have been quite spectacular. So it is just moderation, I wouldn’t be too disappointed but certainly lower than expectations.”
Preferring to use a month-on-month seasonally adjusted numbers rather than year-on-year number, Samiran Chakrabarty, Chief Economist at Standard Chartered Bank says, from that perspective, it’s about 1% MoM drop seasonally adjusted. “However, I am not too surprised because typically we have seen that if in a particular month, the MoM number is very high as happened in January where it was almost a 5% MoM growth, then the next month is somewhat down. So that kind of an adjustment has happen and that’s why this number has come out lower than what the market would have been anticipating. I am not too worried about any reversal of trend in industrial production. I think the momentum is still on.
The yield on the benchmark 10-year bond fell two basis points to 8.03% after the news, but climbed back to 8.04%.
Commenting on the movement, Arun Kaul Executive Director at Central Bank of India, said, “The bond market has seen some worries, the last week auction the yield went up at 7.96 and there on the secondary market the yields have moved upto 8.06% right now. The worry in the market is two-fold; one, inflation has started moving up, we thought inflation was only in primary articles but it looks like non-primary articles it is spilling over too, particularly, the commodity prices are moving up so that is a cause of concern. Particularly oil, oil has moved to USD 86-87 per barrel that is very worrisome. Second, is in terms of the RBI possible action. There is a feeling in the market that the RBI could increase CRR and it could even increase the repo rate to contain inflationary expectations. So that worry is leading to expectation whereby players are not willing to initiate large positions and yields have moved up.”
Finance Minister Pranab Mukherjee has said the government could consider to further roll back stimulus, after hiking factory gate duties in the February budget.
The March purchasing managers' index for India showed the pace of manufacturing activity slowed down, dropping from a 20-month-record in February, as mounting cost pressures took a toll on expansion in output.
India, the world's second fastest growing economy after China, is expected to grow 8.5% in the current fiscal year and 9% in the next.
While the manufacturing sector for grew at 16% in February as compared to 17.9% in January 2010, the mining sector posted a growth at 12.2% versus 14.6% (MoM). The electricity sector too grew at 8.4% in February versus 10.7% in January.
Basic goods for the month grew at 6.7% as compared to 5.6% growth posted in January. The capital goods sector, which showed a growth of 56.2% in January, grew 44.4% in February and the intermediate goods posted 15.6% growth versus 21.3% in January. The consumer goods for the same month grew at 8.9% as against 4.2%.
A pick up in the economy has seen a rise in inflation with the headline number poised to breach 10% in March, above February's 9.89%.
Headline inflation, which was initially driven by high food prices, is now getting a push from other segments. Inflation in manufacturing accelerated to 7.4% in February from 6.5% in January, a sign that inflation is fast becoming a demand-driven problem.
The Reserve Bank of India, citing inflationary pressures and an improving economy, hiked key rates by 25 basis points last month and is expected to raise the rates again by at least the same amount at its policy review on April 20.
Commenting on the figures Atsi Sheth, Chief Economist at Macro-Sutra said, this was still an excellent number. “We stick by our view that the RBI will increase the repo and reverse repo rates by a modest 25 basis points at its policy review on April 20.”
"The number to watch now is inflation, and if it stays in the 10-percent range, especially with non-food inflation not accelerating, this bodes well for our forecast that the RBI's post-April 20 tightening will be measured and moderated," she added.
The numbers are certainly lower than the consensus expectation but some of this was possibly given the core index numbers because there was some slackness on steel, cement and so on, said Abheek Baruah of HDFC Bank. “That has probably got reflected in manufacturing and I think there has been some moderation in both durables and capital goods production, which was again expected because the surge in both December and January have been quite spectacular. So it is just moderation, I wouldn’t be too disappointed but certainly lower than expectations.”
Preferring to use a month-on-month seasonally adjusted numbers rather than year-on-year number, Samiran Chakrabarty, Chief Economist at Standard Chartered Bank says, from that perspective, it’s about 1% MoM drop seasonally adjusted. “However, I am not too surprised because typically we have seen that if in a particular month, the MoM number is very high as happened in January where it was almost a 5% MoM growth, then the next month is somewhat down. So that kind of an adjustment has happen and that’s why this number has come out lower than what the market would have been anticipating. I am not too worried about any reversal of trend in industrial production. I think the momentum is still on.
The yield on the benchmark 10-year bond fell two basis points to 8.03% after the news, but climbed back to 8.04%.
Commenting on the movement, Arun Kaul Executive Director at Central Bank of India, said, “The bond market has seen some worries, the last week auction the yield went up at 7.96 and there on the secondary market the yields have moved upto 8.06% right now. The worry in the market is two-fold; one, inflation has started moving up, we thought inflation was only in primary articles but it looks like non-primary articles it is spilling over too, particularly, the commodity prices are moving up so that is a cause of concern. Particularly oil, oil has moved to USD 86-87 per barrel that is very worrisome. Second, is in terms of the RBI possible action. There is a feeling in the market that the RBI could increase CRR and it could even increase the repo rate to contain inflationary expectations. So that worry is leading to expectation whereby players are not willing to initiate large positions and yields have moved up.”
Finance Minister Pranab Mukherjee has said the government could consider to further roll back stimulus, after hiking factory gate duties in the February budget.
The March purchasing managers' index for India showed the pace of manufacturing activity slowed down, dropping from a 20-month-record in February, as mounting cost pressures took a toll on expansion in output.
India, the world's second fastest growing economy after China, is expected to grow 8.5% in the current fiscal year and 9% in the next.
Greek Stocks, Bonds Rally on $61 Billion EU Aid Plan
April 12 (Bloomberg) -- Greek stocks and bonds rallied and the euro gained after European governments offered the debt- plagued nation a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates.
Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said yesterday they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. Its three-year bond yields plunged 90 basis points to 6.18 percent. As much as 15 billion euros would also come from the International Monetary Fund.
“This is a huge amount,” said Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run, the market is short Greek assets so we’ll get a rally in those.”
With the euro facing the stiffest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates.
Bonds Surge
The yield premium investors demand to hold Greek 10-year debt instead of benchmark German bunds dropped 67 basis points to 331 basis points as of 9:58 a.m. in London. Greece’s benchmark ASE Index climbed 4.8 percent, led by National Bank of Greece SA. That would be its biggest one-day gain since Feb. 9.
The yield on Greece’s 2-year note fell 149 basis points to 5.67 percent, the biggest one-day decline since at least 1998 when Bloomberg began collecting the data. Credit-default swaps on Greek sovereign debt tumbled 69 basis points to 357, the largest single-day drop ever, according to CMA DataVision prices.
The euro rose as much as 1.4 percent to $1.3629. The single currency has dropped 4.9 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management.
Bond investors’ response will determine whether Greece needs to tap the aid, a Greek Finance Ministry official said in Athens yesterday. Finance Minister George Papaconstantinou said the government plans to go ahead with debt sales, including a dollar-denominated bond, without taking up the offer for aid.
Beyond 2010
The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime Minister George Papandreou told reporters in Larnaca, Cyprus.
Yesterday’s teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet, left open just how much Greece might need in 2011 and 2012, the final years covered by the package.
“It shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday after chairing the conference call. “The initiative for activating the mechanism rests with the Greek government.”
Europe’s contribution would represent about two-thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said.
“We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet today to start working on details.
IMF ‘Ready’
The IMF was “ready to join the effort,” Managing Director Dominique Strauss-Kahn said an in e-mailed statement, without giving more details on the IMF contribution.
European rhetorical support in February and March failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Papandreou’s government will be swamped by its bills.
The jump in Greek yields to the highest since December 1998 helped overcome resistance to an aid package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share.
Germany “has lost the competition,” said Carsten Brzeski, an economist at ING Group in Brussels who used to work at the European Commission. “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.”
In the compromise hammered out yesterday, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to subsidizing a country that lived beyond its means. The EU will offer a mix of fixed- rate and floating-rate loans.
Record Deficit
The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB.
Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit.
While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits.
While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement.
No Request
The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9.
A combination of higher taxes, lower spending and salary cuts for public workers has prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages.
The EU showed no sign of demanding further Greek austerity measures. Rehn hailed the Greek government for implementing “a very bold and ambitious program.”
Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit.
The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence.
The amount provided by European governments was larger than expected, said Erik Nielsen, London-based chief European economist at Goldman Sachs Group Inc., though approving money transfers through national parliaments and disbursing the funds on time remains an issue. He expressed concern about Greece’s solvency in the longer term.
“I remain a tad worried about the process of making the money available in time as well as (very) concerned about the issue of longer term sustainability,” Nielsen wrote in a note to investors.
Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said yesterday they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. Its three-year bond yields plunged 90 basis points to 6.18 percent. As much as 15 billion euros would also come from the International Monetary Fund.
“This is a huge amount,” said Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run, the market is short Greek assets so we’ll get a rally in those.”
With the euro facing the stiffest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates.
Bonds Surge
The yield premium investors demand to hold Greek 10-year debt instead of benchmark German bunds dropped 67 basis points to 331 basis points as of 9:58 a.m. in London. Greece’s benchmark ASE Index climbed 4.8 percent, led by National Bank of Greece SA. That would be its biggest one-day gain since Feb. 9.
The yield on Greece’s 2-year note fell 149 basis points to 5.67 percent, the biggest one-day decline since at least 1998 when Bloomberg began collecting the data. Credit-default swaps on Greek sovereign debt tumbled 69 basis points to 357, the largest single-day drop ever, according to CMA DataVision prices.
The euro rose as much as 1.4 percent to $1.3629. The single currency has dropped 4.9 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management.
Bond investors’ response will determine whether Greece needs to tap the aid, a Greek Finance Ministry official said in Athens yesterday. Finance Minister George Papaconstantinou said the government plans to go ahead with debt sales, including a dollar-denominated bond, without taking up the offer for aid.
Beyond 2010
The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime Minister George Papandreou told reporters in Larnaca, Cyprus.
Yesterday’s teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet, left open just how much Greece might need in 2011 and 2012, the final years covered by the package.
“It shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday after chairing the conference call. “The initiative for activating the mechanism rests with the Greek government.”
Europe’s contribution would represent about two-thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said.
“We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet today to start working on details.
IMF ‘Ready’
The IMF was “ready to join the effort,” Managing Director Dominique Strauss-Kahn said an in e-mailed statement, without giving more details on the IMF contribution.
European rhetorical support in February and March failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Papandreou’s government will be swamped by its bills.
The jump in Greek yields to the highest since December 1998 helped overcome resistance to an aid package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share.
Germany “has lost the competition,” said Carsten Brzeski, an economist at ING Group in Brussels who used to work at the European Commission. “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.”
In the compromise hammered out yesterday, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to subsidizing a country that lived beyond its means. The EU will offer a mix of fixed- rate and floating-rate loans.
Record Deficit
The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB.
Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit.
While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits.
While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement.
No Request
The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9.
A combination of higher taxes, lower spending and salary cuts for public workers has prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages.
The EU showed no sign of demanding further Greek austerity measures. Rehn hailed the Greek government for implementing “a very bold and ambitious program.”
Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit.
The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence.
The amount provided by European governments was larger than expected, said Erik Nielsen, London-based chief European economist at Goldman Sachs Group Inc., though approving money transfers through national parliaments and disbursing the funds on time remains an issue. He expressed concern about Greece’s solvency in the longer term.
“I remain a tad worried about the process of making the money available in time as well as (very) concerned about the issue of longer term sustainability,” Nielsen wrote in a note to investors.
Tuesday, April 06, 2010
Temasek in Talks to Invest in GMR, Indian Utilities
April 6 (Bloomberg) -- Temasek Holdings Pte Ltd., the Singapore state investment company, is seeking stakes in Indian power producers including GMR Group as they double capacity to meet demand in the world’s second-fastest growing major economy.
“We are in advanced discussions with GMR,” Wong Kim Yin, managing director for energy investments at Temasek, told reporters at a power conference in Singapore today. “We are trying to get exposure to the domestic India markets.”
Temasek, manager of about S$172 billion ($123 billion) of assets, is betting utilities will ramp up generation in the next seven years to overcome power shortages that India’s government says are constraining economic growth. The 17-member Bombay Stock Exchange Power Index has climbed 62 percent in a year, lagging behind the 70 percent gain in the main Sensitive Index.
“Temasek is probably entering at the right time as the sector and the company have a lot to offer in the short term,” said Abhineet Anand, a Mumbai-based analyst with Antique Stock Broking Ltd. He recommends investors buy shares of GMR Infrastructure Ltd., a unit of GMR Group, with a one-year price target of 82 rupees.
GMR Infrastructure fell 0.2 percent to 63 rupees at 1:22 p.m. in Mumbai trading compared with a 0.1 percent gain in the Sensitive Index. The stock has climbed 24 percent in a year.
A. Subba Rao, chief financial officer of GMR Group, denied on Dec. 15 an Economic Times report that the group was in talks with Temasek and ICICI Bank Ltd. to raise funds to build power plants. He couldn’t be immediately reached at his office today for comment.
Sources of Funding
“Typically we look more at investing in power companies than in power projects,” Wong said, in reply to a question on whether Temasek was investing in new generators in India.
Temasek, which has invested in resources companies and financial institutions including ICICI, India’s second-biggest lender, is in talks with “a number of players,” Wong said.
Finance Minister Pranab Mukherjee said last month that inadequate supply of coal, gas and power is “worrying” as it constrains economic growth. Prime Minister Manmohan Singh called for a partnership between the government and companies to increase power generation.
“In places like India and China, sources of funding remain domestic,” Temasek’s Wong said at the conference. “It is unclear if funding will continue without government stimulus.”
Equity markets offer sources of funding and Singapore is relatively untapped by the power industry, he said.
Indian utilities plan to increase generation capacity to 313,572 megawatts by March 2017 from 156,092 megawatts as of Dec. 31 to curb peak-hour shortages. One megawatt is enough to power about 200 middle-class Indian homes.
Growth in the $1.2 trillion economy may accelerate to as much as 8.75 percent in the year ending March 2011 from an estimated 7.2 percent in the previous financial year, Mukherjee said on April 2.
“We are in advanced discussions with GMR,” Wong Kim Yin, managing director for energy investments at Temasek, told reporters at a power conference in Singapore today. “We are trying to get exposure to the domestic India markets.”
Temasek, manager of about S$172 billion ($123 billion) of assets, is betting utilities will ramp up generation in the next seven years to overcome power shortages that India’s government says are constraining economic growth. The 17-member Bombay Stock Exchange Power Index has climbed 62 percent in a year, lagging behind the 70 percent gain in the main Sensitive Index.
“Temasek is probably entering at the right time as the sector and the company have a lot to offer in the short term,” said Abhineet Anand, a Mumbai-based analyst with Antique Stock Broking Ltd. He recommends investors buy shares of GMR Infrastructure Ltd., a unit of GMR Group, with a one-year price target of 82 rupees.
GMR Infrastructure fell 0.2 percent to 63 rupees at 1:22 p.m. in Mumbai trading compared with a 0.1 percent gain in the Sensitive Index. The stock has climbed 24 percent in a year.
A. Subba Rao, chief financial officer of GMR Group, denied on Dec. 15 an Economic Times report that the group was in talks with Temasek and ICICI Bank Ltd. to raise funds to build power plants. He couldn’t be immediately reached at his office today for comment.
Sources of Funding
“Typically we look more at investing in power companies than in power projects,” Wong said, in reply to a question on whether Temasek was investing in new generators in India.
Temasek, which has invested in resources companies and financial institutions including ICICI, India’s second-biggest lender, is in talks with “a number of players,” Wong said.
Finance Minister Pranab Mukherjee said last month that inadequate supply of coal, gas and power is “worrying” as it constrains economic growth. Prime Minister Manmohan Singh called for a partnership between the government and companies to increase power generation.
“In places like India and China, sources of funding remain domestic,” Temasek’s Wong said at the conference. “It is unclear if funding will continue without government stimulus.”
Equity markets offer sources of funding and Singapore is relatively untapped by the power industry, he said.
Indian utilities plan to increase generation capacity to 313,572 megawatts by March 2017 from 156,092 megawatts as of Dec. 31 to curb peak-hour shortages. One megawatt is enough to power about 200 middle-class Indian homes.
Growth in the $1.2 trillion economy may accelerate to as much as 8.75 percent in the year ending March 2011 from an estimated 7.2 percent in the previous financial year, Mukherjee said on April 2.
Monday, April 05, 2010
Apple Sells 300,000 iPads on First Day
Apple Inc. said it sold more than 300,000 iPads in the U.S., including preorders, on the first day the device was available, hitting all but the highest estimates for the product.
Media attention and early crowds across the country at Apple retail stores had some expecting a bigger figure, with one analyst predicting as many as 700,000 iPad sales the first day. Compared with other Apple product launches, however, analysts said the results were still impressive.
"It looks like initial sales are starting solid," ThinkEquity analyst Vijay Rakesh said.
Apple also said users downloaded more than one million applications and 250,000 e-books from its iBookstore during the first day.
Apple hadn't offered iPad sales forecasts, but over the weekend, swarms of buyers flocked to stores after weeks of publicity about the tablet-style computer. Despite long early lines, crowds thinned throughout the day, and few stores sold out of the device.
With the iPad, Apple is attempting to turn a niche product category—tablet-style computers—into a mainstream device used to watch movies, read books and newspapers, and do some simple computing. Its success will depend on whether less-technology-savvy consumers embrace the device even as Apple fans clamor for it.
Sales estimates varied widely. Piper Jaffray analyst Gene Munster more than doubled his initial first-day sales estimate to between 600,000 and 700,000 units, including preorders, based on longer-than-expected lines at stores and high expectations for online preorders. He had also lifted his 2010 forecast to 5.5 million units from 2.8 million.
Meanwhile, Kaufman Bros. analyst Shaw Wu predicted sales between 250,000 and 300,000 units for the opening weekend.
Preorders made guessing sales based on turnout tricky.
IPads on sale Saturday started at $499. They connect to the Internet using Wi-Fi, with a third-generation wireless iPad available in the next few weeks.
When Apple launched its first iPhone in June 2007, the company sold roughly 270,000 in the first weekend, Mr. Munster estimated. Apple sold one million 3G versions of the iPhone in the first weekend when that device launched in 2008, though the tally included sales abroad.
Overall, analysts expect iPad sales to reach into the millions this year. On Friday, research firm iSuppli Corp. predicted that 7.1 million iPads will sell world-wide this year, with sales nearly tripling to 20.1 million by 2012. But others were less bullish. Forrester Research, for example, predicted first-year sales of three million.
Media attention and early crowds across the country at Apple retail stores had some expecting a bigger figure, with one analyst predicting as many as 700,000 iPad sales the first day. Compared with other Apple product launches, however, analysts said the results were still impressive.
"It looks like initial sales are starting solid," ThinkEquity analyst Vijay Rakesh said.
Apple also said users downloaded more than one million applications and 250,000 e-books from its iBookstore during the first day.
Apple hadn't offered iPad sales forecasts, but over the weekend, swarms of buyers flocked to stores after weeks of publicity about the tablet-style computer. Despite long early lines, crowds thinned throughout the day, and few stores sold out of the device.
With the iPad, Apple is attempting to turn a niche product category—tablet-style computers—into a mainstream device used to watch movies, read books and newspapers, and do some simple computing. Its success will depend on whether less-technology-savvy consumers embrace the device even as Apple fans clamor for it.
Sales estimates varied widely. Piper Jaffray analyst Gene Munster more than doubled his initial first-day sales estimate to between 600,000 and 700,000 units, including preorders, based on longer-than-expected lines at stores and high expectations for online preorders. He had also lifted his 2010 forecast to 5.5 million units from 2.8 million.
Meanwhile, Kaufman Bros. analyst Shaw Wu predicted sales between 250,000 and 300,000 units for the opening weekend.
Preorders made guessing sales based on turnout tricky.
IPads on sale Saturday started at $499. They connect to the Internet using Wi-Fi, with a third-generation wireless iPad available in the next few weeks.
When Apple launched its first iPhone in June 2007, the company sold roughly 270,000 in the first weekend, Mr. Munster estimated. Apple sold one million 3G versions of the iPhone in the first weekend when that device launched in 2008, though the tally included sales abroad.
Overall, analysts expect iPad sales to reach into the millions this year. On Friday, research firm iSuppli Corp. predicted that 7.1 million iPads will sell world-wide this year, with sales nearly tripling to 20.1 million by 2012. But others were less bullish. Forrester Research, for example, predicted first-year sales of three million.
Salary accounts to get up to 25% more interest
NEW DELHI: Salary account holders could see their interest income rise by up to 25 per cent on the back of a new RBI rule from this month, under which banks will compute 3.5 per cent savings interest on daily basis instead of taking the lowest deposit during a month, Crisil Ratings said today.
Crisil said the new method of interest computation will increase the effective interest rate on savings balances, particularly for salary account holders.
"It is estimated that for a salary account holder with a minimum savings balance between 1-2 times of the monthly salary, the increase in interest income will be between 10 and 25 per cent," it said.
The new computation method has taken effect from April 1, 2010. Earlier, banks gave interest of 3.5 per cent on savings accounts on the basis of the least deposit in an account between the 10th and the last day of each month.
The interest is credited in the account twice a year, in March and September.
As for impact on banks, Crisil said the cost of deposit for them will increase by 10-20 basis points (100 bps = 1 per cent), depending on the share and pattern of the current and savings accounts (CASA).
"This will not materially impact their profitability or lead to any significant change in the share of low-cost deposits, that is CASA in the banking system," it added.
Crisil said, however, that the impact is expected to be higher for banks that have a dominant share of salary accounts with highly fluctuating balances.
At the end of February, all the commercial banks had a total deposit of over Rs 44 lakh crore, including savings, current and fixed deposits. The country's largest lender State Bank of India has over 1.56 crore savings bank account holders.
Crisil said the average CASA levels in the domestic banking system stood at 33 per cent, with savings deposits accounting for 22 per cent as of March 2009.
But it added, "The share of savings deposits is estimated to have increased to 25 per cent as on December 2009, which would translate into an increase of 2-4 per cent in CASA levels by March 31, 2020."
While announcing the annual monetary policy for 2009-10 unveiled last April, the Reserve Bank had said, "payment of interest on savings accounts by scheduled commercial banks would be calculated on a daily product basis with effect from April 1, 2010."
Crisil said the new method of interest computation will increase the effective interest rate on savings balances, particularly for salary account holders.
"It is estimated that for a salary account holder with a minimum savings balance between 1-2 times of the monthly salary, the increase in interest income will be between 10 and 25 per cent," it said.
The new computation method has taken effect from April 1, 2010. Earlier, banks gave interest of 3.5 per cent on savings accounts on the basis of the least deposit in an account between the 10th and the last day of each month.
The interest is credited in the account twice a year, in March and September.
As for impact on banks, Crisil said the cost of deposit for them will increase by 10-20 basis points (100 bps = 1 per cent), depending on the share and pattern of the current and savings accounts (CASA).
"This will not materially impact their profitability or lead to any significant change in the share of low-cost deposits, that is CASA in the banking system," it added.
Crisil said, however, that the impact is expected to be higher for banks that have a dominant share of salary accounts with highly fluctuating balances.
At the end of February, all the commercial banks had a total deposit of over Rs 44 lakh crore, including savings, current and fixed deposits. The country's largest lender State Bank of India has over 1.56 crore savings bank account holders.
Crisil said the average CASA levels in the domestic banking system stood at 33 per cent, with savings deposits accounting for 22 per cent as of March 2009.
But it added, "The share of savings deposits is estimated to have increased to 25 per cent as on December 2009, which would translate into an increase of 2-4 per cent in CASA levels by March 31, 2020."
While announcing the annual monetary policy for 2009-10 unveiled last April, the Reserve Bank had said, "payment of interest on savings accounts by scheduled commercial banks would be calculated on a daily product basis with effect from April 1, 2010."
Stocks, Commodities Rise as U.S. Jobs Data Boost Recovery View
April 5 (Bloomberg) -- U.S. and Asian stocks rose and commodities advanced as growth in American jobs boosted investor optimism that demand in the world’s largest economy is recovering. Treasury yields were at the highest since June.
The Standard & Poor’s 500 Index climbed 0.5 percent to 1,183.75 at 10:04 a.m. in New York, above its highest close since September 2008. The MSCI Asia Pacific Index rose to the highest level in more than 19 months, driven by gains in Japan. Markets in Europe, Australia, Hong Kong, China, Taiwan and New Zealand were shut for holidays. Oil advanced and copper rose to a 20-month high. The dollar fell against 15 of 16 major counterparts and the yield on the benchmark 10-year Treasury note increased 3 basis points to 3.97 percent.
U.S. payrolls gained last month by the most in three years, a “solid report” indicating “the economy is now creating jobs,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview. Industry reports today showed that pending home sales unexpected increased and the Institute for Supply Management’s index of service industries topped economists’ estimates.
“Overall, we are seeing positive signs about the global economy,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co., which manages $111 billion. “While developing nations are leading global growth, they are waiting for the U.S. to rebound. Recent reports are suggesting that the U.S. labor market and consumer spending are improving.”
Exxon Mobil Corp. and Schlumberger Ltd. paced gains in 39 of 40 energy stocks in the S&P 500 as crude oil climbed 1 percent to $85.73 a barrel in New York.
Apple’s iPad
Apple Inc. rose 0.8 percent to $237.80 after saying it sold more than 300,000 iPads on the device’s first day of availability over the weekend.
Canon Inc., which gets 28 percent of its revenue in the Americas, climbed 2.5 percent. Toyota Motor Corp., which derives 31 percent of its revenue in North America, increased 1.1 percent.
Former Federal Reserve chairman Alan Greenspan said yesterday on ABC’s “This Week” that the chances the U.S. economy will retrench after recovering from the worst recession since the 1930s “have fallen very significantly in the last two months.”
“There is increasing growth optimism now given that the job situation in the U.S. is getting a little more relaxed,” said Roger Groebli, Singapore-based head of financial-market analysis at LG Capital Management, part of the group that oversees $84 billion. “Exporters will benefit from that.”
Samsung, Hynix Climb
Samsung Electronics Co. rose 1.5 percent after Maeil Business Newspaper said the company will add a new semiconductor chip line. Asia’s biggest chipmaker also rose after the price of the benchmark DDR2 dynamic random access memory, or DRAM, chip rose on April 2, ending a four-day decline, according to Dramexchange Technology Inc. Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, advanced 3.4 percent.
Malaysia’s ringgit climbed to its strongest level since July 2008 after the government said exports increased 18.4 percent in February from a year earlier.
“The economic recovery theme is attracting foreigners to ringgit assets,” said Tan Voon Ching, a foreign-exchange trader at OSK Investment Bank Bhd. in Kuala Lumpur. “There’s a lot of confidence in the economic outlook for this year.”
Ringgit Gains
The ringgit strengthened 0.6 percent to 3.2301 per dollar. The won added 0.3 percent to 1,123.05 per dollar in Seoul, according to data compiled by Bloomberg. It reached 1,122.15 on April 2, the strongest level since Jan. 19.
Malaysia’s FTSE Bursa Malaysia KLCI Index rose 0.4 percent, advancing for a 10th day, the longest winning streak in 16 years. CIMB Group Holdings Bhd., Malaysia’s second-biggest bank, climbed 1.1 percent to a record. The company said the size of its initial share sale for its dual listing on the Thai exchange has been raised to as much as 50 million shares from 35 million.
Indonesia’s benchmark stock index, Asia’s best-performing major market this year, climbed to a record on expectations the central bank will keep interest rates at a record low tomorrow, helping to boost the economy.
PT Astra International, the nation’s largest auto retailer, surged 4.9 percent. PT Bank Central Asia advanced 5.5 percent, the most in more than two weeks, leading gains among banks. The central bank will keep its key interest rate at 6.5 percent tomorrow after inflation slowed to 3.43 percent in March, according to 16 out of 17 economists in a Bloomberg News survey.
The Jakarta Composite index jumped 2 percent to 2,887.246, above its previous record close of 2,830.26 on Jan. 9, 2008. The measure has climbed 14 percent this year as the central bank raised its economic growth forecast and Standard & Poor’s upgraded the nation’s sovereign debt ratings.
Yen, Pound
The yen snapped four days of losses against the dollar, on speculation Japanese exporters bought the nation’s currency after it touched a seven-month low. The pound gained versus all major counterparts after polls eased concerns that political turmoil will derail the nation’s economic recovery.
The pound rallied after a YouGov Plc poll for the Sunday Times showed that the opposition Conservative Party holds a 10 percent lead over Prime Minister Gordon Brown’s Labour party, before elections that are likely to be held next month. The Conservatives have 39 percent of the vote, while Labour had 29 percent and the Liberal Democrats 20 percent, the survey showed, reducing the likelihood that they will fail to win the parliamentary majority that some think is necessary to tackle the U.K.’s budget deficit, the largest in the Group of 20 nations. The pound strengthened 0.5 percent to $1.5290.
‘Heading Toward Stabilization’
A survey for the Sunday Express newspaper by Canadian pollsters Angus Reid put the Conservatives at 38 percent, 11 points ahead of Labour’s 27 percent, with the Liberal Democrats at 20 percent.
“The polls seem to suggest that the U.K. political situation is gradually heading toward stabilization,” said Toshiya Yamauchi, senior currency analyst in Tokyo at online currency trading company Ueda Harlow Ltd. “Signs of political stabilization, combined by waning expectations for additional quantitative monetary measures amid the plethora of positive data, will support the currency.”
Crude oil for May delivery rose to a 17-month high.
Oil prices have established a floor of $75 a barrel and there is no need for OPEC to increase production, Venezuelan Oil Minister Rafael Ramirez said April 2. The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and slashed output in January 2009 to prevent a glut. The group left its production targets unchanged when ministers met in Vienna on March 17.
Venezuela, the group’s sixth-largest producer, is seeking a price band between $80 and $100 a barrel, Ramirez told reporters in Caracas on April 2.
Copper for May delivery advanced as much as 1.2 percent to $3.6265 a pound in New York, the highest level since Aug. 1, 2008.
The Standard & Poor’s 500 Index climbed 0.5 percent to 1,183.75 at 10:04 a.m. in New York, above its highest close since September 2008. The MSCI Asia Pacific Index rose to the highest level in more than 19 months, driven by gains in Japan. Markets in Europe, Australia, Hong Kong, China, Taiwan and New Zealand were shut for holidays. Oil advanced and copper rose to a 20-month high. The dollar fell against 15 of 16 major counterparts and the yield on the benchmark 10-year Treasury note increased 3 basis points to 3.97 percent.
U.S. payrolls gained last month by the most in three years, a “solid report” indicating “the economy is now creating jobs,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview. Industry reports today showed that pending home sales unexpected increased and the Institute for Supply Management’s index of service industries topped economists’ estimates.
“Overall, we are seeing positive signs about the global economy,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co., which manages $111 billion. “While developing nations are leading global growth, they are waiting for the U.S. to rebound. Recent reports are suggesting that the U.S. labor market and consumer spending are improving.”
Exxon Mobil Corp. and Schlumberger Ltd. paced gains in 39 of 40 energy stocks in the S&P 500 as crude oil climbed 1 percent to $85.73 a barrel in New York.
Apple’s iPad
Apple Inc. rose 0.8 percent to $237.80 after saying it sold more than 300,000 iPads on the device’s first day of availability over the weekend.
Canon Inc., which gets 28 percent of its revenue in the Americas, climbed 2.5 percent. Toyota Motor Corp., which derives 31 percent of its revenue in North America, increased 1.1 percent.
Former Federal Reserve chairman Alan Greenspan said yesterday on ABC’s “This Week” that the chances the U.S. economy will retrench after recovering from the worst recession since the 1930s “have fallen very significantly in the last two months.”
“There is increasing growth optimism now given that the job situation in the U.S. is getting a little more relaxed,” said Roger Groebli, Singapore-based head of financial-market analysis at LG Capital Management, part of the group that oversees $84 billion. “Exporters will benefit from that.”
Samsung, Hynix Climb
Samsung Electronics Co. rose 1.5 percent after Maeil Business Newspaper said the company will add a new semiconductor chip line. Asia’s biggest chipmaker also rose after the price of the benchmark DDR2 dynamic random access memory, or DRAM, chip rose on April 2, ending a four-day decline, according to Dramexchange Technology Inc. Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, advanced 3.4 percent.
Malaysia’s ringgit climbed to its strongest level since July 2008 after the government said exports increased 18.4 percent in February from a year earlier.
“The economic recovery theme is attracting foreigners to ringgit assets,” said Tan Voon Ching, a foreign-exchange trader at OSK Investment Bank Bhd. in Kuala Lumpur. “There’s a lot of confidence in the economic outlook for this year.”
Ringgit Gains
The ringgit strengthened 0.6 percent to 3.2301 per dollar. The won added 0.3 percent to 1,123.05 per dollar in Seoul, according to data compiled by Bloomberg. It reached 1,122.15 on April 2, the strongest level since Jan. 19.
Malaysia’s FTSE Bursa Malaysia KLCI Index rose 0.4 percent, advancing for a 10th day, the longest winning streak in 16 years. CIMB Group Holdings Bhd., Malaysia’s second-biggest bank, climbed 1.1 percent to a record. The company said the size of its initial share sale for its dual listing on the Thai exchange has been raised to as much as 50 million shares from 35 million.
Indonesia’s benchmark stock index, Asia’s best-performing major market this year, climbed to a record on expectations the central bank will keep interest rates at a record low tomorrow, helping to boost the economy.
PT Astra International, the nation’s largest auto retailer, surged 4.9 percent. PT Bank Central Asia advanced 5.5 percent, the most in more than two weeks, leading gains among banks. The central bank will keep its key interest rate at 6.5 percent tomorrow after inflation slowed to 3.43 percent in March, according to 16 out of 17 economists in a Bloomberg News survey.
The Jakarta Composite index jumped 2 percent to 2,887.246, above its previous record close of 2,830.26 on Jan. 9, 2008. The measure has climbed 14 percent this year as the central bank raised its economic growth forecast and Standard & Poor’s upgraded the nation’s sovereign debt ratings.
Yen, Pound
The yen snapped four days of losses against the dollar, on speculation Japanese exporters bought the nation’s currency after it touched a seven-month low. The pound gained versus all major counterparts after polls eased concerns that political turmoil will derail the nation’s economic recovery.
The pound rallied after a YouGov Plc poll for the Sunday Times showed that the opposition Conservative Party holds a 10 percent lead over Prime Minister Gordon Brown’s Labour party, before elections that are likely to be held next month. The Conservatives have 39 percent of the vote, while Labour had 29 percent and the Liberal Democrats 20 percent, the survey showed, reducing the likelihood that they will fail to win the parliamentary majority that some think is necessary to tackle the U.K.’s budget deficit, the largest in the Group of 20 nations. The pound strengthened 0.5 percent to $1.5290.
‘Heading Toward Stabilization’
A survey for the Sunday Express newspaper by Canadian pollsters Angus Reid put the Conservatives at 38 percent, 11 points ahead of Labour’s 27 percent, with the Liberal Democrats at 20 percent.
“The polls seem to suggest that the U.K. political situation is gradually heading toward stabilization,” said Toshiya Yamauchi, senior currency analyst in Tokyo at online currency trading company Ueda Harlow Ltd. “Signs of political stabilization, combined by waning expectations for additional quantitative monetary measures amid the plethora of positive data, will support the currency.”
Crude oil for May delivery rose to a 17-month high.
Oil prices have established a floor of $75 a barrel and there is no need for OPEC to increase production, Venezuelan Oil Minister Rafael Ramirez said April 2. The Organization of Petroleum Exporting Countries pumps about 40 percent of the world’s oil and slashed output in January 2009 to prevent a glut. The group left its production targets unchanged when ministers met in Vienna on March 17.
Venezuela, the group’s sixth-largest producer, is seeking a price band between $80 and $100 a barrel, Ramirez told reporters in Caracas on April 2.
Copper for May delivery advanced as much as 1.2 percent to $3.6265 a pound in New York, the highest level since Aug. 1, 2008.
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