Daily Archives: February 8, 2010

Japanese equities become popular

February 8, 2010 7:53 pm by Emma Saunders

Capital flows are unpredictable. Overseas investors bought up Japanese equities at the fastest pace in three years in January as global asset managers rebalanced portfolios towards the country’s equity market from underweight positions.

Foreign investors bought a net Y1,543bn ($17.3bn) of Japanese equities last month, the most since February 2007, according to Ministry of Finance data published yesterday. Separate data from Nomura show that Japan has seen net inflows from mutual funds so far this year, while markets including the US, China and Hong Kong have experienced net outflows. (more from Lindsay Whipp).

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Traders in biggest ever euro short

February 8, 2010 6:51 pm by FT writers

By Peter Garnham

Traders and hedge funds have bet nearly $8bn against the euro, amassing the biggest short position in the single currency since its launch on fears of a eurozone debt crisis.

Investors increased their bets against the euro to record levels in the week to February 2, according to the latest figures from the Chicago Mercantile Exchange, which are often used as a proxy of hedge fund activity.

The build-up in net short positions represents more than 40,000 contracts traded against the single currency, equivalent to bets worth $7.6bn. It suggests that investors are losing confidence in the euro’s ability to withstand any contagion from Greece’s fiscal problems to other European countries. Read more.

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Hungary nurtures forint mortgage market

February 8, 2010 3:50 pm by Emma Saunders

Hungarians will be borrowing more forints and less euros under one of several new initiatives planned by the country’s central bank.

Interest rates are typically higher on forint-denominated mortgages than, for instance, their euro counterparts. But spreads have been narrowing and the central bank plans to reduce them further. The Magyar Nemzeti Bank will buy forint-denominated mortgage notes up to a maximum face value of 100bn forint ($500m).

The purchases, which will be made until at least December 31, are intended to reduce the liquidity premium on the forint notes (ie. they become cheaper as there is less risk the holder won’t be able to sell them on). The purchase may also increase the supply. Initial purchases will be made in the secondary market, before moving into the primary market. Ewald Nowotny will be pleased.

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Ralph Atkins A European monetary fund?

February 8, 2010 3:00 pm by Ralph Atkins

If nothing else, a positive aspect of Greece’s plight has been the wave of ideas on how the eurozone could operate more effectively in the future.

A big shortcoming identified by many has been the lack of proper “crisis management” procedures, which have arguably exacerbated Greece’s difficulties. Now – just in time for the EU leaders’ summit in Brussels this week – comes an ingenious solution for a European Monetary Fund, put forward by Daniel Gros, director of the Brussels-based Centre for European Policy Studies, and Thomas Mayer, chief economist at Deutsche Bank.

Their idea is for a sort of eurozone version of the International Monetary Fund, which could provide emergency loans to struggling countries or ensure a default was orderly, with minimum effect for other eurozone countries. It would be funded by contributions from countries in the weakest financial position, calculated according to how grievous was their abuse of the EU’s fiscal rules as set out in its ”stability and growth pact”.

Continue reading: “A European monetary fund?”

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Posted in European Central Bank, European Union (EU), International Monetary Fund |

Economic news headlines

February 8, 2010 1:25 pm by Emma Saunders
  • Chinese wage inflation: provincial min wage raised 13% – FT
  • Australia: mortgage rates set to diverge further from base – SMH
  • Forget lawyers – risk controllers cash in in post-crisis world – FT
  • Russian central bank says credit and bubbles are main threats – Biz Week
  • Russian president tells central bank: lending rates must decline – Laos News
  • G7 warms to idea of bank levy – FT
  • Zimbabwe: “The police robbed the central bank” – Money Supply
  • Kuwait cuts rates 50bp to 2.5 per cent – Money Supply
  • UK: Pension funds pile into commercial property funds, dwarfing 2006 levels – FT
  • US unemployment: how both unemployment and employment are falling – Calc Risk
  • “The best stimulus puts money directly in pockets” – FT
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Greece: bail-out, if needed, should come from IMF

February 8, 2010 11:54 am by Emma Saunders

If Greece needs a bail-out, it would be far better for it to seek one from the International Monetary Fund than from other euro-zone countries, Otmar Issing told the NYT.

Mr Issing is a former top official of the German and European central banks. “I don’t think that the EU can impose the kind of sanctions that would be needed, and it would make Brussels too unpopular,” said Mr. Issing. “A better way is for Greece to approach the IMF. It is the only institution that can impose strict enough conditions.” Bailing out Greece would involve “a more or less disguised transfer of taxpayer money,” he added, “and I don’t see any support for that from the people in Germany or elsewhere.”

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Posted in European Central Bank, International Monetary Fund |

Zimbabwe: “The police robbed the central bank”

February 8, 2010 11:22 am by Emma Saunders

Three strongboxes of diamonds, weighing 29kg, have been taken from the central bank by police, violating orders from the country’s Supreme Court.

The removal is the latest in a long-running dispute between mines minister Obert Mpofu and British-registered mining company, African Consolidated Resources, over ownership of Chiadzwa claims. Chiadzwa is considered the world’s biggest diamond discovery in a century and could yield more than $1bn annually. In 2006, ACR was forced from its property at gunpoint; the courts later ruled this illegal.

Two weeks ago, chief justice Godfrey Chidyausiku ordered the three strongboxes be deposited in the central bank for safekeeping until a case concerning them was finalised. Mr Mpofu apparently attempted to remove the diamonds before they reached the bank, but was prevented by the deputy sheriff. Once the diamonds arrived, however, Mr Mpofu tried again and was successful. “We don’t know where the diamonds are,” said ACR’s lawyer, Jonathan Samkange. “The police robbed the central bank.”

Ironically, the mines minister recently announced Zimbabwe was unable to pay its debt to (other types of) mining company.

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Kuwait cuts rate to 2.5 per cent

February 8, 2010 11:05 am by Emma Saunders

The central bank of Kuwait has cut the discount rate by 50 basis points to 2.5 per cent and its repo rate 25bp to 1.5 per cent. Yesterday’s reduction, the sixth since October 2008, was aimed at stimulating non-oil sectors. Kuwait has been diversifying its activities from oil towards financial services. Bank governor Sheikh Salem Abdulaziz Al-Sabah said indicators showed inflation pressure has continued to ease.

Kuwait is one of five Gulf states planning a single currency, so diverging interest rates between the states could have spelt difficulties ahead. However, the other four states have similarly low and stable rates (NB. all Gulf states except Kuwait peg to the dollar). Saudi Arabia recently stated there was ‘no chance of a rate increase’; Bahrain’s repo rate is steady at 2.25 per cent; Qatar’s is stable at 5.55 per cent; the repo rate of Oman – not joining in the first phase – has been steady at 2 per cent.

Monetary union – originally planned for 2010 – is a few years off yet. The first step for members of the Gulf co-operation council is to create a regional central bank, to which end the four participating central banks have been asked to stop public sector loans.

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Chris Giles Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS

Ralph Atkins, Frankfurt bureau chief, has been writing about European economics and politics for the Financial Times for more than 20 years following an economics degree from Cambridge. He has been watching the European Central Bank and eurozone economies since 2004. He has previously worked in London, Bonn, Berlin, Jerusalem and Brussels. RSS

Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS

Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS

James Politi is US economics and trade correspondent for the Financial Times, based in Washington DC. He joined the Washington bureau in January 2008 following four and a half years as US deals correspondent covering M&A and private equity. James Politi joined the FT in London in 2000 with an MSc at the London School of Economics, and undergraduate degrees from Georgetown University and the University of Florence. RSS

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