Month: September 2012

Chinese growth set for decade of slowdown: Barclays

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

Listen to the Article (6 Minutes)

Chinese growth is set to stabilize in the coming months and will slow to 6 percent in the next decade, according to new research from Barclays.

With Chinese policymakers seemingly reluctant to adopt a more aggressive policy response, the current growth downturn is “as much structural in nature as cyclical,” analysts at Barclays wrote in a research note.

China’s growth potential rate has moderated from 10.4 percent in 2000-2010, to an estimated 8 percent over 2010-2020, and will slow further to 6 percent over 2020-2030, according to the note.

“The main purpose of the current cautious policy expansion is to let growth gradually settle around the new potential growth rate,” the analysts argued.

China’s gradual economic slowdown has come as industrial activity is weakening, especially in the base metal and industrial machinery sectors. There is some good news from activity picking up in the railway and property sectors, and financing for central government-supported infrastructure projects has also improved, according to the report.

Chinese policymakers focus too much on unemployment and inflation indicators to assess the success of their approach, with too many job losses implying below-potential growth and high inflation indicating above-potential growth.

China’s economic growth forecast for 2012 was downgraded to 7.5 percent by rating agency Standard and Poor’s (SandP) on Monday as the Asian tiger feels the burden of the on-going euro zone crisis and a slower-than-expected recovery in the US The growth forecast for Hong Kong this year was also cut to 1.8 percent from the original 2.8 percent by SandP.

The lower forecast for Chinese growth reflects the lack of stimulus by the Chinese government, according to SandP. The International Monetary Fund in July lowered its 2012 growth forecast for China to 8 percent from 8.2 percent.

Signs that the Chinese dragon’s fire is cooling come at an already difficult time for the global economy as Europe’s economies have stalled, the U.S. economy is struggling with continuously high unemployment rates, and growth has started to falter in Brazil and India.

While in 2009 China was regarded to be the savior for the world economy after launching an aggressive stimulus program which allowed it to continue to move ahead, this time around hopes that the world’s second largest economy will provide much support for the world’s economic outlook have dampened.

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

Fed may need to boost QE ‘dramatically’ this year: Pros

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

Listen to the Article (6 Minutes)

The Federal Reserve`s latest easing move has been nicknamed everything from “QE3” to “QE Infinity” to “QEternal,” but some on Wall Street question whether the unprecedented move will be QEnough.

With unemployment remaining high and the effects of previous Fed-sponsored quantitative easing programs a matter of debate, the central bank is embarking on a round of mortgage-backed securities purchases that will last until the jobless rate comes down to acceptable levels.

From Morgan Stanley chief equity strategist Adam Parker`s point of view, the Fed soon will find its new program inadequate.

“QE3 will likely be insufficient to significantly boost equity markets and we wouldn`t be at all surprised to see the Fed dramatically augment this program (i.e., QE4) before year-end,” Parker said in a research note.

He said the probability that the Fed will need to juice up the program will increase “particularly if economic and corporate news continue to deteriorate as they have over the past few weeks.”

As it stands, the latest round of easing will see the Fed create money that will allow it to buy USD 40 billion of MBS each month.

Following the conclusion of its September meeting two weeks ago, the Fed said that rather than target a specific amount of purchases – the “quantitative” part of QE – it instead will keep buying until the unemployment rate hits an acceptable though unspecified level.

But Parker said that total will achieve only incremental help in the Fed`s quest to spike asset prices, particularly in the stock market, and help out the housing recovery, which it hopes will generate a “wealth effect” that will lead to more hiring.

“Although QE3 is open-ended, the currently announced pace and program of purchases is much smaller than previous QE programs,” he said.

Parker estimates based on the previous QE effects that the Standard and Poor`s 500 (INDEX: .SPX) will gain an average of .015 to 0.25 percentage points each week. That won`t be enough to offset typical market volatility of 2.3 percent per week, nor will it be enough to spark the economy, he said.

“QE3-related gains could cumulate to 3-4 percent return by year-end, but we see headwinds – negative earnings revisions, especially for 2013, and reappearance of tail risks – that could dominate and more than offset these potential gains,” he said.

Parker warns that “size matters” when it comes to QE, but said one thing the Fed got right this time was that MBS purchases, which were the focus of QE1, are more effective than purchases of Treasurys, which were the focus of QE2.

“So far, the announcement of size and composition of QE3 looks like a light version of the QE1 extension,” he said.

Parker isn`t the only one warning about QE effectiveness.

Capital Economics said there are too many other headwinds in the global economy for the Fed`s easing efforts to be a game-changer. Moreover, the firm said pushing down mortgage rates when they already are at all-time lows also probably won`t be much help the housing market.

“The Fed can commit to deliver whatever economic outcome it likes, but the problem is that the crisis in the euro-zone and/or a stand-off in negotiations to avert the fiscal cliff in the U.S. may well reveal it to be like the proverbial Emperor with no clothes,” Capital economists Paul Ashworth and Paul Dales said.

Stocks have continued to creep higher since the QE announcement, and Parker acknowledged that the Fed`s actions probably have accounted for two-thirds of all the market`s gains over the past six months.

Bob Janjuah, fixed income strategist at Nomura Securities, advises investors to watch 1,450 on the SandP 500 as a critical level. He forecasts that eventually the Fed money-printing effects will wear off and the index will tumble to the 800 level.

“The important message now is to accept that, in my view, risk assets are in a bubble which of course can extend, but which can reverse sharply and suddenly,” he said in a note Monday. “Up here, `valuation metrics` are not going to help much.”

Parker advises investors to focus on “growth stocks” – those that have underperformed – with a focus on lower quality. Discretionary sectors and telecom could underperform, while the health care stocks, in particular Stryker, would excel.

He believes the next phase of easing “will be announced by year-end.”

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

Why Asia should start worrying about inflation

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

Listen to the Article (6 Minutes)

Asian economies have stumbled in recent months. High inventories, the lagged effects of tightening in China, and lackluster growth in the West have all taken their toll. Inflation, as a result, has slowed.

But this is a mere cyclical dip in the structural ascent of price pressures across the region. Investors and policymakers alike shouldn’t rest too easy. With another stimulus being applied by the world’s major central banks, and Asia’s return to more vigorous growth in the coming quarters, inflation will again become a cause for worry.

It is easy to lose sight of the bigger picture. The world economy is stuck in a rut. China no longer has its usual swagger, the US dangles over the “fiscal cliff,” and Europe is lost in contemplation of its enduring problems. Japan, meanwhile, is greying fast, with the occasional stimulus merely painting over its structural cracks. Why, then, should anyone worry about inflation?

First, the cycle masks broader structural trends. Emerging markets, led by Asia, are on the rise. According to the International Monetary Fund, they will account for more than 50 percent of world gross domestic product (GDP) for the first time this year. Only 12 short years ago, their share was only 37 percent. Granted, this is measured on a purchasing power basis, but this is ultimately what matters for global inflation. The stagnation in the West is thus no longer enough to hold world prices at bay.

Consider a simple example. In 2000, a percentage point increase in US growth added 0.23 percent to world demand, while a percentage point increase in China’s economy contributed a mere 0.07 percent. Today, the numbers are converging rapidly. A one percentage point rise in US GDP now contributes about 0.19 percent to world GDP, while China adds 0.15 percent.

Assuming that the US economy will grow by 2 percent this year, and China, say, by 7.5 percent (Beijing’s official target), the contribution of the latter, despite being deemed a disappointment by financial markets, will eclipse that by the US by a factor of at least 3. Even in US dollar terms, the incremental increase in world demand accounted for by China is almost double that by the US

Second, the composition of growth in emerging markets has shifted. Exports are less important today than domestic demand. Asia, for instance, has seen a rapid decline in its once sturdy current surpluses. Local demand, led by services and construction, is much more inflationary than growth that is driven by manufacturing exports.

Third, and unsurprisingly, emerging economies are bumping against growth constraints. Labor markets are much tighter across emerging markets today than only a few years ago. In China, despite the recent deceleration, employment is holding up remarkably well, in contrast to the Global Financial Crisis, when job shedding by exporters led to wide-spread layoffs. And this is not just the case on the mainland, across Asia labor markets have remained highly resilient in the face of faltering growth.

Fourth, global central banks have once more turned on the spigot. The Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan just announced further easing. All that extra cash will ultimately flow to where returns are the most promising. We have seen it before, and it’s happening again: Emerging markets will see their demand pumped up once more as a result. Inflation will be the thing to worry about.

Frederic Neumann is co-head of Asian Economics at HSBC’s Global Research and has been covering regional economies for the past 7 years. He is a regular guest on CNBC TV.

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

India commits to big reforms, but will investors bite?

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

Listen to the Article (6 Minutes)

Despite the political firestorm, the Indian government seems committed to pushing through a series of bold reforms aimed at boosting foreign inflows, but do the changes go far enough to convince investors to take the plunge?

Braving nationwide protests, the government of Prime Minister Manmohan Singh on Thursday formally opened India’s supermarket sector to foreign chains and eased foreign investment rules in airlines and broadcasters, Reuters reported.

Business leaders inside and outside the country have applauded the move as a credible step towards fiscal consolidation, restoring growth and preventing a credit rating downgrade.

“The government has seen that they need to provide and continue to provide incentives for foreign investors to invest,” William Strong, co-CEO, Asia Pacific, at Morgan Stanley told CNBC’s “Squawk Box“ on Friday. “It is in the interest of the Indian citizens that the government do that. You need to have an open architecture, open capital market system and allow the free flow of capital in and out of the country.”

If the regulations go through, foreign investors “certainly want a piece of India,” said Stephen Roach, senior fellow at Yale University`s Jackson Institute of Global Affairs and former non-executive chairman of Morgan Stanley Asia. “They understand the potential for getting a toehold in this country but what we need from this Prime Minister is resolve.”

The popular backlash against Singh’s reform program will certainly test that resolve. Protests against India’s pro-business overhauls intensified Thursday with a nationwide strike, but the Congress party-led government appeared to gather sufficient political support to avoid being forced from office, the Wall Street Journal reported.

If Prime Minister Singh succeeds with his “Big Bang” reforms, the payoff could be huge for India and the private sector. The Indian retail market, which accounts for nearly 15 percent of its GDP, is estimated to be worth USD 450 billion and ranks as one of the top five retail markets in the world, according to an August report by consultancy Corporate Catalyst India.

Conditions Apply

But the reforms come with “strict” conditions attached to make them more politically palatable, “most likely in order to win over skeptics in the Cabinet,” wrote David Sloan, director Asia at political risk consultancy Eurasia Group, in a report on Thursday.

And that`s raising doubts as to whether investors like Wal-Mart Stores, the world`s largest retailer, Britain`s Tesco and French retailer Carrefour will ultimately participate in India`s expanding retail sector.

Under the reforms, “operations of foreign retailers are restricted to India`s 53 cities with populations of 1 million or more. Another key provision requiring foreign retailers to win state government approval will further restrict market access and increase the time it takes to open stores,” Sloan said.

Plus, only 10 Congress Party-ruled states and union territories – notably relatively wealthy Delhi, Maharashtra, and Andhra Pradesh – will initially welcome foreign retailers, “but much of the rest of India will likely keep its doors closed for some years to come,” Sloan added.

“Furthermore, foreign retailers will be required to source 30 percent of their inventory of manufactured and processed products from small and medium-sized Indian industries. This restrictive sourcing requirement promises to be a major stumbling block for retailers focused on branded goods and electronic devices predominantly manufactured outside of India.”

Retailers are therefore weighing up the risk-reward profile very carefully.
“We`re glad about the progress that has been made in India … but there are conditions,” Tesco board member Lucy Neville Rolfe told India`s Economic Times on the sidelines of the World Retail Congress in London. “We have to study the impact of the conditions.”

First Step Taken

Raj Jain, president of Walmart India and managing director and CEO of Bharti Walmart, which operates 17 wholesale cash-and-carry outlets through a joint venture with Bharti Enterprises, was more optimistic, calling the reforms allowing 51 percent foreign direct investment in multibrand retail “an important first step” towards further liberalization.

“We are grateful that the government has realized and appreciated the value that we will bring to strengthen the Indian economy,” Jain said in a statement. “This policy change will allow us to connect directly with the consumer and save them money.”

Jain added Walmart is “willing and able” to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation.

Siva Govindasamy, Asia managing editor at Flightglobal said the likely entrants into India`s liberalized aviation sector could be cash-rich Asian and Gulf carriers including Singapore Airlines (SIA), Emirates and Qatar Airways. New Delhi is allowing up to 49 percent investment by foreign airlines in Indian carriers.

“Indian airlines are still in lots of trouble, with plenty of debt and very poor prospects due to high costs and competition,” Govindasamy said. If reforms are finalized, it`s “logical for Gulf carriers as India is a big market but they won`t put their money in there yet. SIA is a possibility, but they are looking more closely at China again. But they could re-look the Indian market if it improves.”

An SIA spokesperson told CNBC, “We keep all investment options open, but at this point there are no discussions taking place on the purchase of a stake in an Indian airline.”

Also Asia’s largest low-cost carrier AirAsia “would love to” invest in the Indian market, “but the high cost base and stiff competition may put them off for a while,” Govindasamy added.

By CNBC`s Sri Jegarajah

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

High-frequency trading: It’s worse than you thought

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

Listen to the Article (6 Minutes)

High-frequency trading, which already has a sullied reputation, is even worse than the critics have charged, a new survey shows.

The Federal Reserve of Chicago recently asked 30 firms associated with the industry – traders, exchanges, vendors and others – to evaluate where HFT stands in the wake of a series of high-profile blowups.

While the central bank’s analysts knew there were issues, what they found exceeded their expectations.

Also Read

How Fed Hurts HFT

Investors ‘Always Late to the Party’

The Truth About IPOs

Industry pros reported a rash of out-of-control computer algorithms that power the HFT platforms. They admitted that speed is more important than safety. And they even went so far as to say that they actually wish the industry was more regulated but want the rules to be applied equally, something that may not be happening today.

“Market participants at every level of the trade life cycle reported they are looking to regulators to establish best practices in risk management and to monitor compliance with those practices,” Carol Clark, senior policy specialist at the Chicago Fed, wrote in a summary of the survey’s findings.

The report came about as the Fed sought to uncover what happened in a series of well-publicized gaffes: A snafu that delayed the opening of the much-ballyhooed Facebook initial public offering; price spikes in dozens of stocks that happened after a glitch at Knight Capital; and problems at the BATS trading platform that squelched the exchange’s own IPO.

What it found was an amalgam of firms desperately trying to stay ahead of each other even at the expense of their own businesses.

In theory, high-frequency trading, which is done through algorithms that process trades at lightning speeds in hopes of profiting by miniscule moves in prices, has a series of checkpoints that should prevent errors.

In practice, that’s frequently not how it works.

“With the chance of an order passing though controls at so many levels, how can things go wrong?” Clark asked in her analysis. “One possibility Chicago Fed researchers found is that most of the trading firms interviewed that build their own trading systems apply fewer pre-trade checks to some trading strategies than others. Trading firms explained that they do this in order to reduce latency.”

Latency is the time it takes to place an order to an exchange and have it confirmed. Making that process go as quickly as possible is at the heart of HFT.

The firms develop algorithms to speed the trades, but survey respondents reported the “algos,” as they are more commonly referred, can run amok.

To address malfunctions, some firms said they fix bad algos simply by “tweaking old code” and putting new algos back into production “in a matter of minutes.” One firm, though, said it had an out-of-control algo caused by a software bug inserted when it tried to fix an initial bad algo.

“Two-thirds of proprietary trading firms, and every exchange interviewed had experienced one or more errant algorithms. The frequency with which they occur varies by exchange,” Clark said. “One exchange said it could detect an out-of-control algorithm if it had a significant price impact, but not if an algorithm slowly added up positions over time, although exchange staff had heard of such occurrences.”

Clark proposes a variety of fixes for the system: Order and position limits, a “kill switch” that could halt bad trading immediately and at multiple levels; and profit-and-loss (P&L) limits that could restrict losses.

A broader question, though, could be why the nation’s central bank is so concerned about irregularities in the stock market.

Nicholas Colas, chief market strategist at ConvergEx in New York, suggests one answer: That the Fed’s quantitative easing programs hinge on an efficiently functioning market.

The Fed last week announced the third round of QE, an open-ended program to purchase USD 40 billion of mortgage-backed securities each month until the economy recovers enough to drive down the unemployment rate.

Central to the Fed’s easing policies is the “wealth effect” created by rising stock prices.

“The upshot is that the Federal Reserve is right to be concerned about market structure, in that a strategy of boosting stock prices is predicated on the notion that people believe them,” Colas said in a research note. “The Federal Reserve probably needs to rethink how stock prices ‘transmit’ information to consumers and businesses. The game is changing. Quickly.”

© 2012 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

Sugar, spared by drought, may get cheap

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

Listen to the Article (6 Minutes)

Sugar prices may soften over the course of this year, breaking ranks with the rest of the commodity market’s “Breakfast Club” of corn, wheat, soybeans and cocoa, which surged to multi-month and all-time highs as dry weather ravaged crops.

Standard Chartered cut quarterly price forecasts for benchmark sugar prices on Wednesday after concerns receded over supply from Brazil, but warned upside risks remained for 2013.

The bank lowered its average sugar price forecasts to 21 US cents a pound for the third quarter, from 23 cents previously and 22 cents a pound for the fourth quarter from 24 cents. It estimates the 2012 annual average at 22 cents from 23 cents earlier.

Raw sugar futures traded on the IntercontinentalExchange (ICE) made their biggest two-day tumble in three months on Wednesday, with dealers focused on a global surplus of the sweetener and on the progress of the harvest in Brazil, Reuters reported.

ICE October raw sugar futures fell 0.48 cents, or 2.5%, to end at 18.96 cents a pound, drifting towards a two-year low of 18.81 cents touched on September 6. The move lower extends the previous session`s losses, causing the contract to drop 5.3% in the past two days, the biggest two-day fall since June 22. “We recognize that sugar`s support near 18-20 cents a pound appears vulnerable, partly due to the depreciation of the Brazilian real,” wrote Abah Ofon, Senior Soft Commodity Analyst at Standard Chartered Bank in Singapore.

In May, analysts at the emerging market-focused bank believed the negative trend in the sugar market at the time would be short-lived due to supply problems reported from Brazil, the world`s top producer of the sweetener. Standard Chartered recommended long positions, or bullish bets, in October 2012 ICE sugar contract in anticipation of a rebound towards the 25-28 cents a pound level.

Initially, the market did move higher reflecting uncertainty over the outlook for Brazilian production in the second quarter. “Heavy rains adversely delayed crushing and dented the sucrose content of the cane,” Standard Chartered`s Ofon said. “This created bottlenecks in the supply chain at a time when output from that region is usually buoyant.”

But Brazil`s supply picture has changed for the better since then, offering the prospect of some relief in prices and prompting Standard Chartered to revise their price forecasts. “Since mid-July, the pace of cane crushing has been brisk, and in third quarter 2012, it exceeded the historic average. This, in addition to expectations of higher cane volume and a moderately larger sugar output in Brazil, has alleviated market fears of a supply squeeze,” the bank said.

Yet despite bearish developments, “the market still needs to price for risk as output remains uncertain in a number of key trading countries, including China, India and Thailand…our 2012 and 2013 forecasts are still 8 percent and 19 percent higher than the implied futures curve, respectively, underpinning our view that the market is still too bearish,” Ofon wrote.

– by CNBC`s Sri Jegarajah

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

Will China’s next move be a rate hike?

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

Listen to the Article (6 Minutes)

After bold stimulus measures by the world’s major central banks all eyes are now on China to come up with a monetary boost to bring momentum back into its economy, but one expert expects quite the contrary. He tells CNBC the next major policy move from China will likely be an interest rate hike.

According to Zhang Zhiwei, Chief China Economist at Nomura, the People’s Bank of China (PBOC) will leave rates unchanged for the rest of 2012, and raise borrowing costs twice in the second-half of 2013 due to rising inflationary pressures.

The PBOC last moved on rates in July when it cut the one-year lending rate by 31 basis points to 6%.

The third quarter will mark the “bottom for the economy,” which is already heating up, Zhang told CNBC Asia`s “Squawk Box” on Thursday. He added that the inflation rate was already on an upward trend which would drive the PBOC to increase interest rates.

China`s annual inflation rate moved up to 2% in August after hitting a 30-month low of 1.8% in July. And, Zhang sees inflation at over 4% in 2013, much higher than the consensus forecast of 3.4%.

“The surge in global food prices is also likely to push up pork and edible oil prices in China,” Zhang said.

In the PBOC`s latest monetary policy report, the central bank also warned that inflation will rebound gradually from August onwards as a result of monetary loosening earlier in the year.

Bullish on Growth

Zhang also said there would be a spurt in economic growth in the fourth quarter. He forecasts gross domestic product to expand 8.8% in the last three months of the year, one of the most bullish projections for China growth.

He expects infrastructure investment to support this growth. Earlier this month the government approved more than USD 150 billion in infrastructure spending.

“The economy started to show some positive signs from the leading indicators, particularly in the housing sector. Housing is 27% of China’s investment,” he said, pointing to a pickup in land sales, transaction volumes and housing starts in August.

New housing starts, for example, rose 14% year-on-year in August from a 27% decline in July.

The latest economic indicator out of China, HSBC`s Flash Purchasing Manager’s Index (PMI), which measures factory activity, edged up slightly to 47.8, from the final reading of 47.6 in August. A reading above 50 indicates expanding activity, and one below 50 signals contraction.

Zhang said China`s PMI data should show further improvement in October and November as the economy picks up momentum.

By CNBC`s Ansuya Harjani

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

Indonesia’s economy to surpass Germany, UK by 2030:McKinsey

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

Listen to the Article (6 Minutes)

Southeast Asia’s most populous nation is on track to become the world’s 7th largest economy by 2030, putting it ahead of the developed nations of Germany and the UK, a new report by McKinsey Global Institute showed Tuesday.

The report cites the country’s young population, new consumer class and the rapid urbanization of cities as reasons that will elevate Indonesia`s USD 850 billion economy up nine spots from its current place of 16th largest economy globally.

The findings do not reveal the projected rankings of other economies, and are based on a “proprietary modeling” method which McKinsey declined to elaborate on.

According to the report, Indonesia’s economy will be powered by an estimated 90 million additional consumers with considerable spending power by 2030, making its “consuming class stronger than in any economy of the world apart from China and India.”

Its relatively younger population will also keep the economy’s productivity edge. McKinsey estimates that 70% of the country’s population will remain of working age of between 15 and 64 in the next 18 years.

“Indonesia has a much younger, productive, and growing population. That is a different demographic outlook to the situation in many Western European economies, where the labor force will be either static or decline in size in the future,” said Raoul Oberman, Chairman of McKinsey and Company, Indonesia.

The country’s rapid pace of urbanization-especially in its smaller cities-as it moves up the value chain will contribute significantly to the country`s growth. McKinsey estimates that 86% of GDP in the country will come from urban areas by 2030.

“The greater areas around Jakarta and Surabaya are the economic powerhouses of Indonesia today, but we expect strong growth in cities like Pekanbaru, Pontianak, Karawang, Makassar, and Balikpapan which are all outside of Java,” Oberman said.

The report highlights the key challenges facing the economy, which involves low productivity, rising inequality and soaring consumer demand, and says the country is at a “critical juncture.”

“It (Indonesia) needs to build on its recent impressive performance to boost labor productivity to 4.6% – that`s 60% higher than in the past decade,” said Oberman. “It also needs to tackle concerns about rising inequality and manage soaring demand from its expanding consumer class to meet the government’s longer term GDP growth targets.”

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

Why the Bank of Japan is fighting a losing battle

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

Listen to the Article (6 Minutes)

Under pressure to ease monetary policy in the face of a strong yen, Japan’s central bank said Wednesday it would expand its asset-buying program, which resulted in the currency falling to its lowest level against the US dollar in a month. Analysts warned, however, that this could just be a temporary drop.

Given the aggressive easing from the US Federal Reserve and the new bond-buying plan by unveiled by the European Central Bank over the past two weeks, the Bank of Japan`s latest effort to weaken the yen may prove to be futile, say experts.

“The BOJ action is an insufficient step in the right direction. We’re talking about unlimited easing by the ECB, the Fed and then you have in Japan a limited approach,” Hans Redeker, head of global foreign-exchange strategy at Morgan Stanley, told CNBC.

The BOJ boosted its asset-buying and loan program by a more-than-expected 10 trillion yen (USD 126 billion) to 80 trillion. It also extended the deadline for asset purchases by six months to the end of 2013.

Economists argued, however, that this will not be enough given the Fed’s decision to engage in open-ended quantitative easing, and the ECB’s pledge to make unlimited purchases of euro zone government bonds in the secondary market should countries request for it.

Junko Nishioka, chief Japan economist at RBS Securities Japan, agrees that it`s getting harder for the BOJ to fight a surging yen.

“When we see further weaker than-expected indicators out of the US, the markets are going to price in further Fed action, and that will make the yen stronger … it’s a vicious cycle,” she said, adding that the downtrend in the yen will likely be short-lived.

Following the announcement of the Fed’s third round of quantitative easing last Thursday, for example, the yen hit a seven-month high against the dollar at 79.10.

For the BOJ to be more effective in stemming the yen`s rise, Nishioka suggests the central bank remove all deadline on its asset purchases. Other steps that could help weaken the yen in the long run could be extending the maturities of Japanese government bonds to over three years, say experts.

The yen, which has risen 6 percent against the dollar over the last six months, dents the competitiveness of Japan`s exporters, posing a threat to the country`s fragile economic recovery.

Masafumi Yamamoto, chief foreign-exchange strategist for Japan at Barclays, however, said the BOJ’s latest move will have a sustained impact on lowering the value of the yen.

“The market hasn’t fully priced in BOJ’s move today (Wednesday) … also the risk on globally (that comes with QE3) will be negative for the yen,” he said, adding that the dollar-yen will likely test 80 over the next month.

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

Luxury travel making slow rebound

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

Listen to the Article (6 Minutes)

Signs are pointing to a slow rebound in luxury travel, even for businesses.

Travel agencies are experiencing an uptick in high-end bookings for first-class airline tickets and premium hotel accommodations, USA Today reported Tuesday.

Wall Street and other elite business travelers served by high-end travel service Ovation Travel are buying 3% more first-class airline tickets this year than a year ago, USA Today reported.

Ovation Travel also said its bookings jumped 15% this year over last year, and clients are back to booking four- and five-star hotels for their corporate retreats and other gatherings, the article said.

The uptick in luxury travel comes as the sector tries to recover from a recession. Hotel and leisure companies, meanwhile, are rolling out new luxury properties in Asia.

Growth in Asia

Starwood Hotels and Resorts opens two new hotels this week aimed at the luxury segment.

The Luxury Collection, part of Starwood, opened The Royal Begonia on Tuesday located on China`s southern tropical island of Hainan. It boasts 142 guest rooms, 18 private villas and an ultra-luxe Spa overlooking the South China Sea.

The Luxury Collection brand is on an aggressive growth campaign with the debut of 10 hotels and resorts in the Asia-Pacific this year alone, including Shanghai, Jaipur and Chennai in India, the Blue Mountains, Australia as well as Koh Samui, Thailand and Jakarta, Indonesia.

“The debut of The Royal Begonia on China`s Hainan Island marks a true milestone for The Luxury Collection as we continue our journey to open a record number of hotels and resorts in Asia Pacific by the end of this year,” says Paul James, global brand leader St. Regis and The Luxury Collection Hotels and Resorts, in a release.

New Macau property

And on Thursday, the world`s largest Sheraton opens in Macau. The 4,000-room property is located on the Cotai Strip, also known as the “Las Vegas of Asia.”

The flagship hotel features three outdoor pools with poolside cafes, three restaurants, the largest Sheraton Club (executive lounge) in the world, and a Spa and holistic fitness center.

The resort also features a children`s program including kids-only menus, dedicated family suites, video games and other leisure amenities.

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