Americas markets wrap: Financial reform and commodities gains boost Latam equities
Latin American markets gained on Friday as global risk appetite picked up after US lawmakers finalised a sweeping financial reform bill. Commodities prices rebounded, lifting miners and steelmakers across the region.
“The markets see that this reform curbs future risks,” Gerardo Copca, an analyst at MetAnalisis in Mexico City, told Reuters. “It will restrict banks, but this will remove risks that we face something similar to last year.”
Add another item to the agenda at this weekend’s G20 summit: African resource nationalism and the twin issue of security of mining contracts. That’s thanks to a burgeoning dispute between Canadian miners and the authorities in the Democratic Republic of Congo.
Canadian prime minister Stephen Harper, who is hosting the meeting, plans to raise concerns about the case, which Canada views as particularly egregious. Canadian authorities think they should play a part in a decision by the IMF and World Bank due next week on whether to conclude the write-off of $9bn of Congo’s historic foreign debt.
CEE market wrap: Romanian court ruling hits sentiment
Equity markets and currencies in central and eastern Europe mostly fell on Friday, after a bad surprise from Romania and lower oil prices hurt sentiment.
Romania’s constitutional court rejected parts of a key austerity package required by the IMF. The court ruled out the government’s proposal to cut pensions by 15 per cent, saying such move would be illegal, though the court accepted the rest of the plan, including 25 per cent cuts in public wages.
The ruling was bad news for the Romanian leu, which slipped 0.9 per cent to 4.273 lei, as well as for stocks – the Bucharest Composite sank 4.5 per cent to 2,881.61, its biggest loss in a month.
Bhopal: a new India tries to right old wrongs
In one sense, the unexpected upsurge in public anger in India over the 1984 Bhopal disaster, when up to 15,000 died, is all about the past. But in another it is all about today’s India – a country that no longer hides its face from the world, but is increasingly confident in asserting itself. And in this terrible case, rightly so.
The world’s worst industrial accident has come back into the news after an Indian court decision to sentence to two years’ jail seven Indian directors of Union Carbide, the US-owned company that ran Bhopal.
Far from satisfying the public, the verdicts revived anger at the government’s handling of the tragedy – and its failure to bring to justice the American parent group and its bosses. Indians are struck by the glaring gap between the $470m Union Carbide paid in compensation with the billions of dollars that BP is being required to pay following the Gulf of Mexico oil spill.
New Delhi is addressing the issue by suddenly increasing the compensation to the families of those killed and injured, seeking the extradition of Warren Anderson, the octogenarian ex-chairman of Union Carbide, and pursue an acknowledgement of liability from Dow Chemical (which bought Union Carbide’s in 2001).
India may not get far with its new claims. But the Indian public has served notice that it will never again alow the Indian government to let a company off as easily Union Carbide. Today’s investors should take note.
Poland: the building boom goes on
There has not been a lot of good economic news out of Europe in recent months – but there is an unexpected bright spot: Poland’s awful roads.
After 20 years of foot-dragging in trying to build modern highway and rail networks, Warsaw may be finally close to a breakthrough – thanks in large part to billions of euros in funding from the European Union and the spur of co-hosting the 2012 European football championships. The beneficiaries are travellers, recession-hit construction companies – and the government of Donald Tusk who stands to reap the political rewards, though only if the projects are finished in time and on budget.
Citi on Russia: at a fork in the road
Russia, it appears, is at a crossroads. Or so says Citi in its new macro report on Russia for the first half of 2010.
A financial disaster in the fall of 2008 and the equities star of 2009, Russia is now in a Goldilocks state where stocks are priced low but not cheap; growth is better but not robust; and outlook is good but not great.
Deal of the day: MTS and Comstar agree to merger
By Rob Hartley of mergermarket
The long-awaited merger of Russian mobile operator MTS and its fixed-line unit Comstar paves the way for development of the company both at home and abroad. The full integration of these two businesses will provide the merged entity with access to a new customer base, allowing cross selling in television and broadband services.
The renminbi’s new flexibility buys Beijing more time
You say appreciation. I say flexibility.
Last weekend’s widely-praised announcement by China’s central bank that it would no longer peg the renminbi to the US dollar is already attracting a backlash. Paul Krugman, a longtime critic of China’s currency policy, labelled the change “the renminbi runaround.”
Krugman has a point – the clearest evidence of the Rmb’s undervaluation is Beijing’s $2,400bn pile of foreign reserves, the product of systematic intervention in foreign exchange markets over the past decade.
Deal could mark the beginning of China-Taiwan tie-up spree
Long-time political rivals China and Taiwan are set next week to sign a broad trade deal that would bring about the closest economic ties the two have ever enjoyed.
The main focus of the deal, called the Economic Cooperation Framework Agreement, is on tariff reduction. China will cut import tariffs on $13.84bn worth of items including petrochemicals and vehicle parts, and Taiwan will cut tariffs on $3bn worth of goods including parts for baby strollers and bicycles, and raw materials for textiles.
[snap] Romania stalls on taking its bitter medicine, IMF aid stalled
The Romanian’s government’s hopes of forcing through an unpopular austerity package came unstuck in spectacular fashion on Friday when the constitutional court ruled that some of the measures were unconstitutional.
Although the nine justices appeared to give the thumbs up to a 25 per cent wage cut for Romania’ s 1.4m public sector workers, they took issue with a proposed 15 per cent cut to pensions.
This means that much-awaited IMF aid could remain in limbo. Markets did not like what they heard.
Discouraging data from the US helped to keep equities down and sentiment cautious in the region this week. Asian exporters saw selling on concerns on Friday that weak US consumer spending could dent their earnings as US corporations forecast lower-than-expected profits.
In Shanghai, the world’s worst performing major market this year, managed to pull off its best week of trading this month, despite losses on Friday. Positive sentiment about the Chinese government’s decision to relax restrictions on the renminbi continued to linger as China’s vice commerce minister told a forum today that an appreciating yuan would benefit exports.
On the currency front, the renminbi capped its biggest weekly advance for two years during midday trading as the People’s Bank of China set its central parity rate 0.3 per cent higher than yesterday. At BST 1100 the currency was up 0.1 per cent against the dollar at 6.79. It was been unofficially pegged to the US dollar at 6.83 for two years.
New York headlines
*India decides to raise petrol, diesel prices
*China’s exporters need not fear freer yuan: Mofcom
*Czech prime minister Jan Fischer resigns
*Alibaba makes first US acquisition
*SAIC Plans to raise up to Rmb10bn in share placement
*Date set for historic deal with Taiwan
*Ecuador suffers `growth problem,’ won’t meet GDP forecast, Borja says
*China Unicom in talks over iPad and iPhone 4
*Guinea election may draw mining investors as civilian rule is restored
*Obama, Medvedev reach deal on US poultry exports
*ING sells Indian stake as foreign banks review position
*Turkey hits at Google for ‘picking fight’
*Ford puts wheels in motion for $450m Thailand car factory
*India-led M&As touch $40bn in January-June 2010
*CCB wins investor approval for rights issue
*Markets lower
Chinese property: Another popping sound?
China Vanke – the country’s biggest property developer is slashing prices for its new properties by 20 per cent, according to reports in China Business News and the Shanghai Morning Post.
The reports, brought to our attention by Capital Vue, refer to a number of different developments, both in the company’s base in Shenzhen, and Shanghai – including the Vanke Sunshine Park project, which launched on June 19. Prices were reportedly cut to $2,350-$2,500 per square metre from a previous $2,650-$2,940.
Further reading
From the FT,
From elsewhere,
Banks tap into Turkey’s gold-buying habits
Even the start of the wedding season, where brides are traditionally showered with gold coins and jewellery, is failing to cheer up Turkey’s legion of small gold dealers.
Tales of dealers closing up shop highlight the impact of soaring prices in the world’s second largest market for the precious metal. Turkey imported 166 tonnes of gold in 2008, but this year the figure could be as low as 2 tonnes, according to a Reuters report. Jewellers have no need to import: they have a plentiful supply of scrap metal as people sell carefully hoarded coins and bracelets
But while sales of the physical metal decline, banks are aggressively marketing gold-based mutual funds, giving retail investors the option to invest in small amounts and cash in on day-to-day price movements.
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