Month: November 2013

India’s GDP on Friday – here’s what to expect

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s economy appears to be stuck in neutral, with gross domestic product (GDP) growth forecast to remain below 5 percent for the fourth consecutive quarter in the July-September period.

GDP data, due out on November 29, is expected to show that Asia’s third largest economy grew 4.6 percent on year, according to a Reuters poll, following 4.4 percent growth in the previous three months.

“The appointment of a new central bank governor in September has helped to stabilize the currency and financial markets, although this is unlikely to have had much of an impact on real economic activity,” wrote economists at Moody’s Analytics – who forecast growth of 4.5 percent.

“The weight on confidence created by persistent inflation, the weak central government, a volatile rupee, and an uncertain policy environment continues to drag heavily on demand, particularly business investment. Little appears to have changed in the third quarter,” they added.

(Read more: India tops China as most attractive investment venue)

While the government set up the Cabinet Committee on Investment (CCI) to fast track clearances for large projects in January this year, approvals have yet to translate into actual activity on the ground.

On top of a subdued investment environment, a revival in inflationary pressures looks to have weighed on private consumption, said Radhika Rao, India economist at DBS.

“This along with the hurt to employment and income prospects on (the) weak industrial sector likely slowed consumption spending,” Rao, who also forecasts a 4.5 percent GDP print, said.

(Read more: Onion crisis leaves trail of tears across India)

Economists say the small pickup in growth was likely driven by better agricultural output on above-normal rainfall in the September quarter, sustained government spending, and buoyant exports.

Exports have been a bright spot for the economy in the recent months, jumping by 13.5 percent to USD 27.27 billion in October, for example, on the back of a recovery in global demand and depreciation of the rupee which boosts price competitiveness.

 Taimur Baig, chief Asia economist at Deutsche Bank, however, believes the positive drivers of the economy provided a greater boost to the growth than most anticipate.

“The growth figure could well be a pleasant surprise to the markets,” he said, forecasting GDP rose at a rate of 5.5 percent during the quarter – the best performance in a year.

“There has been a modest revival in the industrial and construction sectors, finance and trade look buoyant, and public spending has been robust lately. Add to this the impact from a good monsoon and high prices to agriculture sector activity and income,” he noted.

(Read more: India’s woes deepen as GDP misses expectations)

India’s economic performance has proved to be a major disappointment in recent times, with growth decelerating from above 9 percent in 2010 to as low as 4.4 percent in the April-June quarter – lagging far behind economic rival China, which has managed to maintain growth rates above 7 percent this year.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Greece’s emerging market status: Good news really?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Greece formally lost its developed market status on Wednesday, with Greek equities moving into the MSCI Emerging Markets Index instead.

The move came after MSCI, a leading provider of equity indexes, said in June that the Greek index failed to meet criteria regarding securities borrowing and lending facilities, short selling and transferability.

It prompted fears that such a downgrade might drive away investors, but many analysts argue that the outlook for Greek stocks is now in fact a lot rosier.

Read more: Emerging Market Switch Could Boost Greek Stocks

“For the index-aware Developed Market investors, Greece has certainly been off the radar; it’s been a small part of a large universe. There will certainly be more attention on this market now as a bigger part of what is however a smaller universe,” Matthew Beesley, head of global equities at Henderson Global Investors told CNBC.

“Furthermore, for Emerging Markets managers, given some of the budget-deficit induced macro problems across their universe, Greece at least presents a different set of challenges”, he said.

The MSCI Greece included just two companies: telecoms giant Hellenic Telecommunications (OTE), and OPAP, the recently privatized Greek gambling company, the biggest one in Europe.

With the move to emerging markets, more companies have gained access to the index. It will now comprise of ten stocks: Alpha Bank, Follie Follie, Hellenic Petroleum, Jumbo, National Bank of Greece (NBG), OPAP, OTE, Piraeus Bank,PPC & Titan Cement. The weighting of the index thus changed from 0.02 in the developed markets pool to 0.4 in the emerging market index.

This is the first time that the MSCI has downgraded a country from developed to emerging. In its annual market reclassification review, the MSCI checks criteria like economic development, size and liquidity, and market accessibility.

Greek stocks have been hit hard by the euro zone’s debt crisis. The benchmark ASE lost fell 51.8 percent in 2011, and although it picked up in 2012, foreign investment inflows remained negative. In 2013 – with positive inflows – the ASE index is up 31.9 percent to date.

Read more: From Developed Back to Emerging: Greece’s Full Circle

This year marks the return of net capital inflows from foreign investors; they had reached 1.9 billion euros (USD 2.57 billion) by the end of October.

“Investor confidence in Greece has grown. In October 71.69 percent of buys in terms of transaction value came from foreign investors. The average daily trading value reached 147 million euros during the current quarter (as of beginning of October). And 40 percent of the activity comes from banking stocks, which shows how interest in Greek banks has returned after the successful recapitalization program,” Socrates Lazaridis, Chairman of the Athens Exchange and CEO of the Hellenic Exchanges Group said.

“The move to the emerging markets index has also increased foreign investors’ interest and that is evident from the increase in visits to Greece from different funds to find out more about certain companies”, he said.

Greece is in its sixth year of recession and is burdened with 240 billion euros in loans from the so-called Troika; the European Commission, the European Central Bank and the International Monetary Fund.

Unemployment in Greece has reached a record high of 25 percent, but other economic data has improved and an exit from the euro remains “unthinkable” for now, writes Michael Harris, an equity strategist at BofA Merrill Lynch, in a report.

Read more: Greece’s Recovery Coming – But at a Cost

He says these improvements have been embodied by the recent Greek stock rally. “The index move has helped at the margin as plenty of GEM (Global Emerging Markets) investors are revisiting Greece, but as Greece is very small in GEM they would unlikely be doing so, were it not for a sense of Europe is improving and hope the worst is near over for Greece”, he told CNBC.

The government last week submitted its 2014 budget and is hoping to achieve 0.6 growth in 2014 and a primary surplus of 1.6 percent of GDP, even though unemployment is expected to remain at all-time highs at 24.5 percent.

“The fiscal correction is progressing and a primary surplus is possible in 2013,” wrote Deutsche Bank analysts in a report.

But “a gap in funding over the next few years needs to be addressed,” they wrote. The Greek government has still not come to an agreement with its foreign lenders of how to plug this gap. A funding shortfall that has emerged for the second half of 2014 and disagreement over how much this will be had the Troika leave Greece last week to return to Athens in early December for further negotiations.

Read more: Greek government prepares for another storm

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is the Fed trying to ‘fool’ the bond market?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A sharp rise in US Treasury yields should act as a reminder to the Federal Reserve not to ignore developments in the bond market as it deliberates when to pull back its hefty monetary stimulus, one market analyst told CNBC.

The yield on the benchmark 10-year Treasury is trading around 2.71 percent, up about 20 basis points from where it was a month ago.

Read more: Where are Treasurys going? Just watch gold

“Putting aside what the Fed wants to do, the bond markets have tightened for them [policymakers],” said Peter Boockvar, chief market analyst at The Lindsey Group, a Washington-based economic advisory firm.

“Interest rates are up dramatically in the US, off the early summer lows, and that’s something that the Fed shouldn’t ignore. It fooled the bond market once in early September when it did not taper,” Boockvar told CNBC Asia’s “Squawk Box.”

“It will be very interesting to see how they treat the bond market in the next couple of meetings since we are at 2.70 percent in the 10-year [Treasury],” he said.

Many economists expect the Fed to start unwinding its USD 85 billion-a-month bond buying program in the first quarter of next year in response to signs of strength in the US economy.

Read more: Fickle Fed: Taper could arrive in ‘coming months’

Bond yields have been rising since early May in anticipation of the Fed tapering. The concern about yields rising too quickly is that they could derail a recovery in the housing market, and in turn the economy, since yields on Treasurys affect the interest rates on fixed-rate mortgages, analysts say.

“What we have is still a fragile economy where consumption and investment are still not seen as strong enough to drive growth, so there is a feeling that the Fed has to continue to support growth,” said Timothy Riddell, head of global markets research for Asia at ANZ Bank in Singapore.

Indeed, the move in the Treasury markets in recent months has raised some concerns about bond yields rising too fast, too soon.

CNBC host and former hedge fund manager Jim Cramer said in June that the sharp rise in Treasury yields was a sign that the Fed had “lost control” of the bond market.

Read more: Cramer: Bernanke`s Fed has lost control of the bond market

“We saw 2.80 percent [on 10-year yields] just last week, so we could easily see that in a matter of days if we get a good number on the jobs data, so next week is a really important week,” Boockvar said, referring to the release of the key monthly U.S. jobs report next Friday.

Riddell at ANZ Bank said the rise in Treasury yields was contained and reflected a move back from low levels when markets were braced for a period of weak growth and no inflation. The yield on 10-year bonds fell to a record low around 1.38 percent in July 2012.

“We’re looking at yields pushing up towards the 3-3.5 percent level over the course of the year, which I would say is a controlled rise in long-term yields,” he said.

“It`s a natural response that once the healing process [of the economy] becomes embedded, yields rise, markets have to expect that,” Riddell added.

-By CNBC.Com`s Dhara Ranasinghe; Follow her on Twitter @DharaCNBC

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Shoppers beware – the 12 scams of Christmas

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

China’s reform drive threatens to derail yuan

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gold below $1,200 needed for ‘new equilibrium’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A drop in gold prices below USD 1,200 an ounce may precipitate a fresh round of production cuts in the mining sector aimed at re-balancing the market, strategists told CNBC.

Although the short-term view on gold remains overwhelmingly negative – with nearly three quarters of respondents in this week’s CNBC gold sentiment survey forecasting further weakness for bullion – many say prices may start stabilizing below USD 1,200 – levels where a supply response from the mining sector may kick in.

“Gold production may fall at prices below USD 1,200 as it becomes uneconomical for many mines to operate profitably,” said Mark O’Byrne, Founder and Executive Director of Dublin-based bullion dealer GoldCore.

An estimated 36 percent of the South African gold industry is loss-making even at today’s spot prices, O’Byrne said, adding that 28 percent of the country’s gold miners failed to turn a profit in the third-quarter, based on a gold price of USD 1,330.

Curbs on mine supply, according to UBS strategists Giovanni Staunovo and Dominic Schnider, “should come with the gold price decline toward the marginal cost of production.”

UBS estimates that 10 percent of supply “on a cash cost basis would be loss-making at a price between USD 1,050 and USD 1,150/oz. At this level, the gold market should be adequately balanced and find a new equilibrium,” they said.

Edmund Moy, Chief Strategist at Morgan Gold and a former director of the U.S. Mint, said major gold miners such as Toronto-based Barrick Gold are already starting to scale back production.

The world’s largest producer by sales, Barrick sold three Australian mines this year and Chief Executive Officer Jamie Sokalsky said the company is in talks to sell more assets.

“Many miners have been reducing their capacity like Barrick,” Moy said but warned that “if demand for physical gold picks up in the US, it will take miners quite a while to re-open their shuttered mines and produce gold.”

CNBC’s latest survey of market sentiment showed 74 percent of respondents (20 out of 27) expect prices to fall this week, 15 percent (4 out of 27) say prices will trade around current levels while 11 percent (3 out of 27) say prices will rise.

Spot gold staged a modest recovery on Monday, climbing 0.5 percent to just under USD 1,250 after falling earlier to USD 1,227.34, its lowest level since July 8 after Iran and major western powers struck an initial agreement on Sunday aimed at limiting Tehran’s nuclear program in return for sanctions relief. Gold slipped on the perception that the deal lessens the risk of tensions in the Middle East, reducing gold’s appeal as a safe-haven.

ETF outflows

Bullion has fallen about 25 percent so far this year, reflecting concerns that the U.S. Federal Reserve will start winding down its stimulus program as the economy improves. Accommodative monetary policy tends to cheapen the U.S. dollar, making gold more affordable for buyers paying in other currencies.

“With Fed tapering imminent – and likely to be pulled forward to December if anything – the path of least resistance remains lower and honestly I’m surprised we’re not sitting at USD 1,200 already,” said Tom Essaye, a former NYSE floor trader, now President of Florida-based Kinsale Trading LLC, publisher of The 7:00’s Report. “The next major catalyst in gold is inflation, but we’re still months or quarters from that appearing in the stats.”

Investors continue to liquidate holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF) and a key measure of investor sentiment, as gold grinds lower.

Holdings fell 4.50 tons to 852.21 tons last Friday, the sharpest drop since Nov. 1 and stood at their lowest since February 2009.

UBS expects more selling. “Once the schedule of the upcoming Fed taper becomes clear – we expect this to start in March 2014 – ETF outflows should intensify.” The Swiss bank expects fund outflows of more than 300 tons over the next 12 months.

While futures and options flows combined with Asian demand have been strong enough to offset “modest” ETF outflows in recent months, “we advise investors not to count on these factors once ETF outflows intensifies,” UBS said.

A stronger U.S. stock market performance – reflecting a propensity amongst investors to take on more risk – has also undermined the case for gold and the correlation will likely remain a drag on prices, survey respondents said.

Dow industrials eked out a slim gain on Monday to end at another record high, after the Nasdaq topped 4,000 for the first time in 13 years and then slipped to close below that level, Reuters reported. The S&P 500 is up 26.4 percent for the year and the Dow has risen seven weeks in a row.

“Gold continues to be an innocent victim of the frenzy on Wall Street,” said Jeff Nichols, managing director at American Precious Metals Advisors. Gold’s appeal may return, however, once investors realize that “super-stimulative” monetary policies pursued by major central banks are creating over-priced stock valuations out of kilter with fundamentals.

“Sooner or later, when the bubble bursts, equity investors will really lose their heads and gold stands to benefit, if not at first, certainly as the dust settles on Wall Street,” he said.

Scott Carter, the chief executive officer of Los Angeles-based Lear Capital and a long-term gold bull, questioned whether the “wild gains” in the stock market – exemplified by the Dow over 16,000 – are sustainable.

“Let’s pause for a moment and think about how outrageous that really is,” Carter said. “We are living in a simulated reality. Investors are acquiring and holding gold because they know that the market bubble will burst.”

Carter added: “Gold remains a hedge, a protection strategy, a diversification tool, and a long-term savings shelter. It has historically always done its job.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Say goodbye to the world’s longest flight

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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This weekend, Singapore Airlines will terminate its iconic, non-stop all-business-class service to New York – also the world`s longest flight – as the aviation sector grapples with high fuel prices and subdued demand for premium travel.

The cancellation of the direct route, which shuttles passengers between Changi and Newark within 18.5 hours and costs around USD 8,800, has come as a disappointment to business travelers who now face an additional six hours or so in travel time.

Read more: How you`re being nickel and dimed by airlines

“It`s disappointing that a direct flight to the US is no longer available. I feel that it was decently full every time we were on it. The timing of the direct flight works best for business travelers,” said Singapore-based Sheena Mahtani, who travels to New York for work multiple times a year.

“The SQ flight via Frankfurt would probably be the only other Singapore-New York option that would work,” she added, referring to the flight with duration of over 24 hours.

Operating exclusive, non-stop flights to the US has brought about intangible benefits for Singapore`s flag carrier, including helping it to win and maintain key corporate accounts, according to Centre for Asia Pacific Aviation (CAPA).

“There was also the glamour and prestige associated with operating the world`s longest non-stop routes. But ultimately the incredible cost of operating an ultra-long-range service could not be ignored,” CAPA said in a recent report on long-range travel.

According to industry experts, despite opting for an all-business configuration and charging a premium over its one-stop services in the same market, the yields were not high enough to offset the high operating costs.

Read more: Singapore Airlines hit by cutbacks in premium class

In 2008, the airline re-configured its A340-500 aircraft used on the non-stop route to 100 business class seats from 117 premium economy and 64 business class seats. During that year, premium accounted for over 9.5 percent of total passengers, compared with 8 percent currently, according to data from International Air Transport Association (IATA).

“At the current high price of fuel, making a profit off such long flights became nearly an impossible mission even when filling the plane with premium passengers,” CAPA said.

Timothy Ross, analyst at Credit Suisse says while the non-stop flight was a “differentiator” for the airline, the natural inclination for passengers will be to switch to the airline`s one-stop service.

“There`s a high level of loyalty to Singapore airlines. I don`t think the impact is going to be anything other than marginal,” Ross said. “People attracted by a lower price point are already flying competitors, such as Emirates,” he added.

Read more: Airlines cash in on every inch, even the jammed bins overhead

Meantime, Singapore Airlines, which also ended its non-stop service to Los Angeles at the end of October, says that it remains “very committed” to the US market.

“Over the past 2-3 years we have increased capacity to both Los Angeles and New York by deploying A380 superjumbos on flights via Tokyo and Frankfurt,” a spokesperson for the airline for CNBC via email.

-By CNBC`s Ansuya Harjani; Follow her on Twitter:@Ansuya_H

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

From McDonald’s to Michelin: Rise of polish cuisine

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Two decades ago, the biggest gastronomic event in Poland was the opening of the country`s first McDonald`s. Now, Michelin-starred dishes like pike with baby duck`s blood have arrived, as the country undergoes a culinary renaissance.

Photos from the Golden Arches` arrival in Warsaw in 1992 show Poland`s then political and cultural figures queuing for Big Macs with thousands of ordinary Poles. At that time, the arrival of the US fast food giant was a key moment as the country opened up to Western cultural influences.

Now, Polish cuisine is branching out from its traditional sausage, potato and cabbage image as a new generation of chefs embraces and redefines it.

“It was like Polish cuisine has joined the family of great cuisines around the world,” Wojciech Modest Amaro, the chef behind Atelier Amaro, the recipient of Poland`s first Michelin star, told CNBC.

Amaro, whose restaurant charges a hefty 320 zloty (USD102) per head for an eight-course menu, with another 199 zloty for matching Polish spirits, aims to establish Polish cooking alongside the great cuisines of the world. It is planning to open another restaurant in a more prominent city like New York, London or Berlin in the next three years.

As well as being trained at El Bulli, which was regularly voted the best restaurant in the world before it closed its doors in 2012, Amaro has also worked at another world-beating restaurant, Noma, famous for its use of foraging for ingredients.

Part of the reason for Amaro`s success is the quality of produce available. Poland`s small farms saw a flood of urban emigres return during the transition from communism to capitalism. While this has created some problems – farmers are notoriously low earners because the average farm size is still very small – one positive aspect is that there are high-quality cheeses, meats and vegetables available.

The farmers markets springing up around the country give these smaller producers the chance to display their wares.

“Poland is a green field,” Amaro said. “It`s a very natural country… We have all these small producers here and they are trendy around the globe right now.”

With prices at the very top end of the spectrum, Atelier Amaro`s clientele is around 60 percent foreign tourists and business travellers, who he hopes will help spread the word about the improvement in Polish food.

The international reputation of Poland`s food could also be helped by the publication of From a Polish Country Kitchen, a cookery book by Pulitzer award-winning journalist (and wife of Polish politician Radek Sikorski) Anne Applebaum.

Walking around Warsaw, it is still international cuisines like Italian and American which dominate the landscape.

A number of more affordable Polish restaurants are springing up to cater to the country`s growing middle class. And the celebrity chef trend is on the rise, according to Marta Glinka, a Warsaw food blogger.

“There are more and more signature places appearing where the chef is the creator and element attracting guests to restaurants. This is standard abroad, but a very fresh trend in Poland,” she said.

“The quality of the food is very good, and ingredients like beef are no longer imported by good restaurants.”

– By CNBC`s Catherine Boyle. Twitter: @cboylecnbc.

Copyright 2011 cnbc.com

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow