Daily Archives: May 21, 2010

Coming off one of the rockiest weeks in recent memory, investors can perhaps be excused for seeing little chance of a breakthrough in renminbi policy coming out of next week’s US-China summit.

“The market is very, very tight this week,” said Jens Nordvig, Nomura’s G10 currency strategist. Investors are “not very focused on [the currency] issue, because it’s been one of the most volatile weeks at least since 2008.”

“The consensus is pretty much that it’s going to be a non-event,” said Nicholas Consonery, an associate at the Eurasia Group. “You’re probably not going to see a move on the currency policy.”

Bovespa indexLatin American markets rallied on Friday as the global flight from risk seemed to ease and US stocks rallied following the passage of the financial reform bill in the Senate. But the gains were not enough to offset losses over the week of volatile trading.

“All we can say today is that it all depends on whether the US/Global recovery indeed survives this risk “on” risk “off” environment and the drag from Europe. Short term, [the Mexican peso] along with [the Brazilian real] are victims of the crowded [euro] crosses,” wrote Flavia Cattan-Naslauky of RBS Securities.

After nine years and a doubling in construction costs, the new terminal D at Moscow’s Sheremetyevo airport is finally open to travellers. There are none of the scuffed rubber floor mats, the dingy corners and endless queues that are so much a part of the travel experience at the older Sheremetyevo 2.

Instead, all is space and light, with a shiny TGI Fridays on almost every corner and fancy coffee shops with croissants instead of stale sandwiches. Even the traditionally dour passport officials have been replaced with people who smile and say they like their new workplace.

The $900m project is a big step in the Kremlin’s drive to improve its image and Russia’s worn-out infrastructure. But the story of terminal D, with its delays, in-fighting and budget over-runs, suggests that modernising the country will be even harder than getting through the Sheremetyevo-2 passport queues on a busy day.

The week came to a close on a calm note, with regional currencies up and equity markets mixed. Currencies recovered some of the losses sufferred earlier in the wee. Pressure on the euro eased when Germany’s parliament passed through the €750bn eurozone support package on Friday afternoon.

But analysts warned the respite could be temporary as eurozone contagion continues to affect the rest of Europe, with investors deleveraging and moving into dollar and yen safe havens. But despite everything emerging market equity funds secured net inflows of $4.9 million, according to EPFR.

Moscow’s new cash-for-clunkers scheme is doing what many people thought was impossible – reviving Russia’s crisis-hit auto market and persuading ordinary Russians to buy Russian cars.

Moscow began offering motorists discounts of up to $1,666 on new cars in early March on condition that they bought Russian-built autos and traded in their clunkers for scrap.

Deals, deals and more deals.

As Europe figures out how to save the euro and wrestles with its Mediterranean sovereign debt crisis, Indian companies have been extremely busy signing off multi-million – or in some case multi-billion – dollar deals. The week ended with two deals on Friday; Illinois-based pharmaceutical company, Abbott Laboratories, coughed up $3.7bn to buy India’s Piramal, and India’s Hinduja Group announced it paid $1.69bn to buy a private banking arm of Belgium’s KBC.

A month after winning power, Hungary’s incoming government is in little hurry to set out its economic agenda. Today, it announced that financial “skeletons” left behind by the previous administration would boost the deficit to at least 4.5 per cent versus the target of 3.8 per cent. And Mihaly Varga, finance minister, said it could run to 7-8 per cent.

While it is early days for Viktor Orban, the new prime minister and his centre-right Fidesz party, none of this bodes well for fiscal reform, relations with the European Union and the International Monetary Fund, or Hungary’s standing in financial markets.

Vodafone’s possible deal to sell its controlling stake in Vodafone Egypt, Egypt’s second largest mobile phone operator, would be an opportunistic move by the UK group.

And the timing seems makes sense for both parties.

Telecom Egypt, Egypt’s leading fixed line phone operator, approached Vodafone about buying its 55 per cent stake, which analysts value at about £3bn.

When outgoing Indonesian Finance Minister Sri Mulyani made her final appearance at the House of Representatives on Thursday, a familiar sight greeted her: empty seats.

The country’s lawmakers are notorious for missing sessions, and even when the do bother to show up, some are known to fall asleep in their seats. But their absenteeism this time was actually planned. Mulyani does not have a good relationship with the House, which in March rebuked her for a controversial, $730-million state bailout of an ailing private bank back in 2008.

Asian stocks fell again today in very volatile trading as global risk appetite continued to shrink. Yesterday’s fear of eurozone contagion in North America, with the S&P 500 index’s steepest decline since April 2009, continued today in Asia as Asian credit default swaps spiked. The Markit iTraxx Asia index – which tracks 50 investment-grade borrowers in Asia excluding Japan- climbed 16 basis point to 155.5 basis points in the afternoon in Singapore, highlighting growing risk aversion.  Meanwhile, bond yields in Indonesia, the Philippines were higher. When Asian markets closed the MSCI Asia Pacific finished at a nine-month low of  111.84 .

*Abbott buys India drugs unit for $3.7bn
*China fund invests $2.2bn in Agricultural Bank
*Hinduja to buy KBC’s private bank for $1.69bn
*PetroChina lines up $60bn to boost overseas output
*Vodafone in talks to sell Egypt mobile stake
*Fred Hu to float $10b PE fund
*China to double investment in Xinjiang
*Thai debt risk rises on Bangkok gunfights
*Indian rupee drops sharply as outflows rise
*Worst Brazil bond drought since August
*Markets down globally

The Thai government said today that it had restored order. But ministers admitted there were “huge challenges” ahead on the road to normalcy, with the finance minister warning that the economic growth numbers for the current quarter would be “less rosy” than the 10-per-cent-plus surge seen in the first quarter.

It will, in other words, take some time for Thailand to recover from the disruption of the anti-government protests and this week’s military crackdown in which 15 people died, scores were injured and fires damaged buildings in central Bangkok.

Despite holding the annual Arab Economic Summit in the fabled party town of Beirut this year, the mood was undeniably sombre, with Europe’s economic turmoil dominating the discussions.

Arab states, and most Gulf states in particular, have overall fared better than the developed world, but the global financial implosion after Lehman collaped shattered hopes that ample hydrocarbon reserves
would insulate the region. Local officials and bankers now fear a repeat should Europe’s woes worsen.

For an authoritarian state, China is remarkably bad at getting what it wants sometimes. Beijing has been vowing for years to crack down on illegal, inefficient, highly polluting small steel producers, for example – with very little discernible effect.

Now Beijing is stepping up the rhetoric against illegal producers of rare earth elements, of which China supplies 95 per cent of the global market, in a bid to tighten its grip on the valuable minerals used to produce everything from hybrid cars to iPod music players, to lasers and high-powered magnets for the US military.

From the FT:

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