Daily Archives: May 17, 2010

Latin American stocks and currencies were battered on Monday by continuing worries over European debt, concerns over China’s move to curb real-estate speculation and a disappointing manufacturing report from the US.

Amid volatile trading in global markets, the euro touched a fresh four-year low of $1.2235 before recovering to gain 0.3 per cent by the end of trading, and commodities prices were pressured by the stronger dollar and fears over weaker growth.

“With the situation in Europe, a lot of stuff just does not convince. The way they will implement the austerity programs is not clear and if they do manage to adjust deficits, there will be lower growth,” Alejandro Martinez, a debt and currency strategist at HSBC, told Reuters.

The first phase of Argentina’s swap – designed to put its 2001 default behind it – closed last week and though official results won’t be out until Friday, it looks as though $10.5bn of the just over $18bn eligible total has been tendered.

Argentina as such looks on course to reach its goal of 60 per cent acceptance, though persuading Italian retail bondholders to take the offer may yet prove a hard sell – which is why the economy minister and his team are on the seduction trail again in Italy. As one fund manager says, the swap looks to be a success judged by the 60 per cent benchmark, but it won’t be a “blowout”.

Another sign of the confidence that multinationals have in the strength of the Indian economy comes today with a $1bn planned investment by ABB, the engineering company. The Swiss-Swedish group is bidding to raise its stake in its Indian subsidiary from 52 per cent to 75 per cent as it eyes growing Indian spending on energy and transport infrastructure projects.

It is a logical move that ABB executives have eyed in the past but rejected, partly on cost grounds. Now the company is offering minority shareholders Rs900, a hefty 34 per cent premium to Friday’s closing price.

A quiet revolution is underway at Latin America’s stock and derivatives exchanges as they gear up to attract liquidity outside the region.

The Santiago bourse said today it had signed a deal with Fidessa, a UK-listed trading technology company, that allows traders outside Chile to connect directly and electronically to the exchange.

And this revolution isn’t just happening in Latin America. Exchanges in other regions, notably Asia, are also looking to algorithmic traders to give them better global exposure.

Not so long ago, you might have expected Life Healthcare, the South African private hospital operator whose R7bn initial public offer will be the biggest ever seen on the Johannesburg Stock Exchange, to be orienting its expansion towards the UK or even Australia.

But it is a sign of both the new orthodoxy in South African business circles and fashions in international markets that the group is focusing its growth plans exclusively on emerging markets.

Brazil has come in for some tough criticism of its “friends with everyone” foreign policy, including the FT, which recently had a go under the headline “Brazil’s cuddly ways are barrier to seat at the top table.”

But the weekend’s news of a deal to swap Iranian nuclear fuel in Turkey could vindicate Brazilian diplomacy. The idea that Iran would abandon its alleged nuclear weapons programme in favour of a peaceful nuclear energy programme in response to amicable talks rather than under the threat of UN-backed sanctions seemed unrealistic, even naïve. But it may well have paid off. Even a US official conceded today that the latest news was “potentially a good development.”

With its $23bn offer to build three oil refineries and a petrochemical plant in Nigeria, China has added fresh impetus to its tireless courtship of Africa’s most prodigious energy producer.

At first glance, one might conclude that Beijing, shopping for crude to fire the economic engine at home, has planted its flag at the wrong end of the oil supply chain.

That would be a mistake.

… unless it introduces more reforms and completes the $25bn restructuring of troubled government-owned holding company Dubai World quickly.

That’s according to a report published by the Institute for International Finance’s Gulf Cooperation Council, issued in Dubai today. The report presents a forecast of 0.5 per cent economic contraction this year after 3 per cent decline in GDP last year.

Some you win, and some you lose. Three weeks ago, Najib Razak was riding high, just back from a chat with Barack Obama in Washington, and celebrating the recapture of Hulu Selangor, one of the parliamentary seats his National Front coalition lost to the opposition in the 2008 general election.

Today it’s the opposition People’s Alliance that is celebrating, after narrowly winning a government-held seat in a by-election in Sibu, Sarawak, one of the two Malaysian states on the island of Borneo.

With up to three years to go before the next general election, neither result makes any difference to the NF’s control of parliament. But both offer insights into the state of the voters’ minds as the prime minister struggles to regain the political initiative and prepares a key economic reform programme.

European benchmark equity indices strengthened on Monday, but central and eastern Europe’s stocks continued to be weighed down by concerns over the eurozone deficit crisis. The euro dropped to a four-year low, but the currencies of many of the CEE nations were comparably weaker.

By David Gardner in London

The apparent breakthrough Turkey and Brazil have negotiated with Iran to export the majority of its stock of low enriched uranium to Turkey in exchange for the western powers supplying medical isotopes for Tehran’s experimental reactor could dissolve into yet another false diplomatic dawn in the nuclear stand-off between Iran’s theocrats and the West. Yet, it might just be a triumph that prevents an armed conflict with Iran.

The crisis in Bangkok has spread from Bangkok to the provinces outside the capital, worsening the country’s already precarious political crisis and sending reverberations through the Thai markets. The Thai baht has dropped to a seven-week low, the main stock index fell 2 per cent at a two-week low, and credit default swaps on government debt jumped the most in a year, according to data compiled by Bloomberg.

Meanwhile, the FT reports a renegade army general who was shot in the head by a sniper on Friday has died and the death toll from fighting between the Thai military and anti-government protesters has reached 64. It is unclear how or when the fighting will stop as protesters ratchet up the tensions, pledging to stand their ground.

When China Telecom said on Monday that it’s launching sales of the BlackBerry, it was not the most spectacular announcement. The BlackBerry has been available in China for a while, and China Telecom is the smallest of the country’s three state-owned mobile operators.

However, the move is another indicator of China Telecom’s speed and focus on profitability compared with its two far larger rivals.

  • Chinese markets tumble as retail investors run for cover
  • Thai markets hit as violence escalates
  • Wen Jiabao: tough times ahead
  • Samsung bets big in chipmaker arms race
  • Weak euro prompts Chinese currency delay
  • Kazakhstan may freeze corporate deposits to keep cash, S&P says
  • Medvedev: Gazprom-Naftogaz merger is possible
  • Turkey, Brazil agree tentative Iran deal
  • Glaxo set to double India and China revenue
  • Goldwind says China regulator approves HK listing
  • Islamic 2010 bond sales set to reach $5bn
  • Markets: Asian stocks fall as Euro tumbles

Samsung Electronics’s record spending plans for this year are sending mixed signals to the global semiconductor market, which is staging a robust recovery after a three-year slump.

But how long before the spending sprees across the industry causes a supply glut?

Global equities macromap

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54.46 Rupees to the dollar on Wednesday, an all-time low for India's currency.

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