Daily Archives: Nov 22, 2011

Albert Einstein once defined insanity as doing the same thing over and over again expecting different results.

Whether or not that is the case, the Venezuelan government’s dogged persistence with its policy of price controls certainly seems to demonstrate admirable faith that they might one day succeed, after a new law came into force today applying the controls to an even broader range of products. 

Bad timing. Just as Spain was announcing at a seminar in Santiago that it wanted to begin a “second wave of investments” in Chile, Banco Santander, one of the country’s biggest banks, said it was selling a 7.8 per cent stake in its Chilean operations for an estimated $1bn. 

If anyone thought Mexico’s surprisingly strong economic performance between July and September changed the longer-term outlook, they might be in for a disappointment.

Mexico’s economy grew significantly more during the third quarter than economists expected, notching up a 1.3 percentage point increase over the previous quarter’s pace and brining annual growth over the last 12 months to September to 4.5 per cent. 

Investors were cheered on Tuesday by news that the IMF is to open a credit line for strong economies facing short-term liquidity problems.

But the move was dismissed by some analysts as a palliative measure that would do nothing to address the roots of the eurozone crisis. And if you think this brings Hungary any closer to the IMF deal it has suddenly decided it does want, after all – forget it. 

Latvia cancelled an auction of ten-year bonds on Tuesday after regulators suspended operations at Latvijas Krajbanka, a small bank owned by the troubled Snoras Bank of Lithuania, taken over by authorities last week.

So that’s two failed banks and a bond strike, soon after yields on Slovenia’s ten year bonds hit new highs. The smaller countries of peripheral Europe are beginning to look like canaries in coal mines. 

Fred Hu, chairman of Primavera Capital and former chairman for Greater China at Goldman Sachs, tells the FT’s Jamil Anderlini why China’s economy is struggling to cope with imbalances in the supply of credit between state-owned enterprises and the private sector and an overheated real estate sector that has similar characteristics to the pre-bubble property markets in the US and the UK.

Video after the break: 

The Nigerian naira was holding steady at lunchtime on Tuesday,  trading at N159.2 per dollar after opening at N158.9, as the central bank’s move to devalue its currency, announced on Monday, hit home.

The central bank also announced its decision to keep its monetary policy rate unchanged at 12 per cent on Monday as inflationary pressures eased off – not an enormous surprise considering its last rate decision involved a 275 basis points rate rise on October 10, its sixth hike this year. 

By András Bíró Nagy

There should be nothing special about a vulnerable country turning to the International Monetary Fund at a time of economic crisis. Indeed, Hungary’s decision to do so might not have raised many eyebrows had the otherwise rational decision not been preceded by the IMF’s theatrical send-off in the summer of 2010 and by a year and a half of demonising the Fund.

Despite the farcical circumstances surrounding the decision, markets have responded positively. But that should not disguise the fact that this was a political failure of the first order that calls into question the ability of Viktor Orbán and his government to steer Hungary through the present crisis. 

* MF Global shortfall doubles to $1.2bn

* Indian rupee hits record low against dollar

* US, UK and Canada impose new Iran sanctions

* Cairo crisis grows as cabinet quits 

Poland premier Donald’s Tusk’s blood sweat and tears speech to parliament last week promising spending cuts and tax increases may have been music to the ears of investors and rating agencies, but his determination to squeeze out more revenues has spooked the shareholders of KGHM, the government-controlled copper miner.

Tusk’s call for a new royalty levy on minerals, particularly for copper, silver, and shale gas, has gone down like a lead balloon with KGHM investors who have seen more than 20 per cent wiped off the company’s value. 

Egypt’s markets tumbled again on Tuesday morning following another day of protest which culminated in the Egyptian cabinet offering its resignation to the ruling military council. Egypt’s headline EGX index fell 1.3 per cent in early morning trading, dropping to its lowest point since March 2009, when it hit 3389 points. It is currently trading at 3749.5.

Monday had already seen big losses on Egyptian markets – the EGX fell 3.6 per cent – as protests against the military-led government erupted in Tahrir Square over the weekend, fueling investor fears that election scheduled for November 28 would not bring calm or certainty to the country. 

Tuesday’s top picks from the beyondbrics team: why the Berezovsky v Abramovich trial is more a 15th-century dispute than a modern English court case; a, controversial, call for a global “Tahrir Square tax”; why South Africa’s rand is running scared; and why the Kremlin is living in a fantasy world. 

The rupee slid to an all-time low on Tuesday, hitting 52.72 against the dollar, and despite the Reserve Bank of India’s aggressive moves to contain inflation, analysts predict that the Indian currency is likely to depreciate even further.

So how can India save its faltering currency and bring it back to sub-50 levels against the dollar? 

Can mainland China’s love affair with luxury goods withstand a downturn in the global economy? Yes, say retailers – naturally.

For Graff, the diamond retailer, and Chow Tai Fook, the Hong Kong gold and jewellery store, both planning IPOs in Hong Kong, the belief is rock-solid. Graff’s chief executive Laurence Graff projected to the South China Morning Post on Monday that if 10 per cent of China’s population bought diamonds, the world would run out of diamonds. True, but unlikely. 

Pity the Chinese steelmaker. Having enjoyed years of unprecedented boom, 2011 has been a bit tough. First came the sudden pullback in railway investment, then more recently evidence of a slowdown in construction demand.

And it looks like just the opening phase of a troubled patch for the industry.