Month: November 2012

Will China’s new leaders walk their talk on reforms?

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

Listen to the Article (6 Minutes)

It has only been two weeks since China revealed its lineup of new leaders and Beijing has already started making the right noises about economic reforms. But the question China watchers are asking is whether the new team will actually walk its talk.

Last week China’s current vice premier and next premier Li Keqiang was quoted as saying China needs to accelerate an overhaul of its economy, improving state-owned firms and the taxation system.

Plus last Friday local media reported that the Chinese province of Wenzhou is pressing ahead with a closely-watched pilot project that aims to formalize private lending in order to reduce financial risks.

“The new leaders are making the right noises on the need for economic reforms, but I’m not sure if they fully realize the sense of urgency,” said Patrick Chovanec, associate professor at Tsinghua University in Beijing.

“The real issue is not the rhetoric but implementation and whether or not we will see action on the economy,” he added.

China unveiled the members of its top decision-making body at a congress of the ruling Communist Party earlier this month, appointing Xi Jinping and Li Keqiang to become China’s president and premier, respectively, as of next March. The new leaders will govern China for the next decade.

Country analysts said China, the world’s second-largest economy, needs to deliver both economic and financial reforms to keep growth on a sustainable path, although many expect the pace of reforms to be slow as the new leadership team takes its time to find its feet.

The World Bank and Chinese government researchers warned earlier this year that China could face an economic crisis within 20 years if it did not overhaul its development model and implement changes such as scaling back state-owned enterprises.

The Wenzhou Experiment

Still, analysts said there are signs to be hopeful about the scope for reform once the transition to a new generation of leaders is completed next March.

According to a report in the China Securities Journal last week, the Chinese city of Wenzhou will draw up details of a trial that will allow direct overseas investments in yuan.

Already approved by China’s State Council, this is a significant step by Beijing to open up China’s financial system, analysts said.

“The Wenzhou experiment is a very good one that will allow Chinese private money to enter into the financial system,” Liu Li-Gang, head of China Economic Research at ANZ told CNBC.

“At this moment, China’s financial sector is pretty much dominated by the state sector. If we were to see more private entry into this sector, then we would see more lending to China’s small-and-medium-sized enterprises and that would help the eventual rebalancing of the economy,” he added.

According to Chovanec, one of the obstacles to implementing reforms such as reducing the role of state-owned firms in the economy is an expectation of increased state spending to boost an economy that slowed for seven-straight quarters.

“Within China and at a local government level, there are still hopes and expectations that the government will deliver a big stimulus package,” he added. “This is something the new leadership needs to contend with.”

Economic conditions, however, appear to be turning in favor of the new leadership team, with a recent string of upbeat economic data from China easing fears that the economy is heading for a sharp slowdown in growth or a “hard landing.”

Data on Tuesday, for instance, showed profits earned by industrial companies in China jumped 20.5 percent in October from the previous year, accelerating from September’s 7.8 percent gain and the latest sign of a pick-up in Chinese economic activity.

Richard Jerram, chief economist at Bank of Singapore, said markets may not have to wait too long to see whether a change at the top of China’s leadership structure will translate into economic reforms, with a policy document due in December.

“We will get a policy document in December from Beijing and this should help set the agenda,” he said. “The problem with short-term comments from leaders is that it is difficult to read much into these, so we will wait to see what’s in that policy document.”

– By CNBC’s Dhara Ranasinghe.

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 has Wall Street gotten so bullish about next year?

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

Listen to the Article (6 Minutes)

Even the bears are bullish for 2013, a year in which virtually every Wall Street expert believes the market will overcome its many headwinds and post a positive year.

While retail investors have been preoccupied with worries over fiscal armageddon, an election that is now past and a global economy nearing stall speed, strategists have been busy with projections that see sizeable stock gains.

Their reasons: A US economy that is on the mend due to the nascent housing recovery and an expected surge in earnings, more cheap money from the Federal Reserve, and a general feeling that none of the various-worst scenarios out there will come to fruition.

“At first blush, it seemed like an inopportune time to commit to a year-ahead target and outlook, what with so many global uncertainties in our path,” said Sam Stovall, chief equity strategist at Standard & Poor’s/Capital IQ. “But most of these uncertainties have been with us for quite some time, and are now regarded by many as annoyances to resolve rather than obstacles to fear.”

RELATED LINKS

• Buffett’s Biggest Holdings
  
• Great Time for ‘Grave Dancers’
  
• Are Bonds Posing Trap?

The firm is near the high end of the pack, projecting a 1,550 close for the S&P 500 by the end of next year, a nearly 11 percent rise from current levels.

Obstacles such as the “fiscal cliff” of automatic spending cuts and tax increases that will take effect if Washington fails to reach deficit-reduction targets worry Stovall, but he believes that issue, as well as the debt crisis and recession in Europe, won’t stop stocks.

“We believe the manner in which these headwinds are resolved could result in an explosive rally rather than just a sigh of relief,” he said. “Yet, handled inappropriately, these could end up causing a low flying economy to crash.”

While not predicting an outright crash, Adam Parker, chief market strategist at Morgan Stanley, had through the year been predicting the market to swoon lower from a lackluster 2011.

But his projection of an 1,167 for the S&P 500 has virtually no chance of happening absent a colossal stock market event.

For 2013, Parker has changed his tune.

“We wish we didn’t have to set a year-end target. Having had a very accurate one in 2011 and a pretty bad one in 2012, we are living proof that there is a negative asymmetry,” he said in the firm’s 2013 outlook. “We felt little joy in 2011 and lots of pain in 2012 related to the target, and find few credible investors really care where we think the market is going to be on a particular day one year in the future.

“What they more often care about is the logic and thought process, and the empirical evidence that support it.”

Parker sees a modest 2013 rally driven by mega-cap dividend stocks and a rebound in China, as well as a broader picture of rising earnings.

His S&P 500 call is for “low- to mid-single-digit upside” with the S&P 500 closing at 1,434.

“We have been cautious on US equities for much of the last two years,” he wrote in his analysis. “Our concerns around US deficit/debt and the obvious borrowing from the future that occurs from unconventional policy, the European sovereign crisis, and slower growth in emerging markets generally remain, but the acuteness of these issues appears for now to be less sharp.”

While that’s not exactly wide-eyed bullishness, it is enough to make contrarians think that sentiment could be getting a little overheated on Wall Street.

“The reasons we’re skeptical of it being able to break to new highs is, first of all, everybody’s bullish,” said Walter Zimmerman, senior technical analyst at United-ICAP in Jersey City, N.J. “The readings are consistent with those at a major top.”

Still, even someone normally as bearish as Zimmerman thinks the near-term direction is higher, though he doesn’t see a sustained rally through next year.

That’s not the case at Canaccord Genuity, which has one of the most bullish calls yet at 1,650, with only Piper Jaffray’s 1,700 higher thus far.

“History, global monetary policy, and the fundamental sweet spot of US economic data argue strongly for better performance as we move…into next year,” Canaccord’s Tony Dwyer and Michael Welch said.

Deutsche Bank, meanwhile, remains bullish with a 1,500 call. The firm is “encouraged by the continued intention of central banks to maintain accommodative policy” and believes that “given current market pricing, equities continue to offer the best risk-adjusted return compared to other asset classes.”

And Bank of America Merrill Lynch, whose 1,450 for 2012 remains very much in play, believes the S&P 500 will close out the coming year at a 10 percent rise from its projected finish for the current year.

“We are cautious on the near-term outlook for US equities, but we remain constructive on the medium to longer term outlook,” Savita Subramanian, equity and quant strategist at BofA, said in a note. “Given the S&P 500’s attractive valuation and weak investor sentiment, we expect positive earnings growth to drive the market to 1,600 by the end of 2013.”

© 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

Middle East woes likely to underpin oil prices: Survey

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

Listen to the Article (6 Minutes)

US crude oil prices may test USD 90 a barrel this week as investors try to price in the risk of further flashpoints in the Middle East, while data from China suggests the world’s second-largest economy is improving, according to CNBC’s latest poll of oil market sentiment.

Ten out of eleven of this week’s CNBC survey respondents, or more than 90 percent, expect oil prices to climb, while just one believes oil will trade close to current levels around USD 88 a barrel.

Also Read: Buy MCX Crude Dec above Rs 4940; target Rs 4990: Geojit

Although the Gaza crisis is showing signs of de-escalating as a ceasefire between Israel and Hamas holds, oil markets are watching renewed domestic political tensions in Egypt and the implications for the continued flow of oil and petroleum products through the strategically-important Suez Canal and the Suez-Mediterranean Pipeline.

“You have to ask yourself, ‘are you comfortable shorting oil here?’ I wouldn’t be. What if an oil pipeline is blown up, or Israel attacks Iran? That would be a nightmare for shorts,” said Sean Hyman, a financial analyst who edits The Ultimate Wealth Report newsletter, referring to bets that oil prices will head lower.

“There’s so much Middle East turmoil right now that could ignite into something much larger and oil could spike very easily from here,” he added.

Egypt’s ruling Islamists tried to defuse a political crisis on Monday, with President Mohamed Mursi backing a compromise over his seizure of extended powers last week, while his Muslim Brotherhood called off a planned demonstration, Reuters reported.

“If a political crisis erupts in Egypt, it could destabilize the rest of the region – just as it did in last year’s revolution – and add to upside price risks,” ANZ analysts led by Mark Pervan said in a note on Tuesday.

Separately, Egyptian mediators began talks on Monday with Hamas and Israel to flesh out details of a ceasefire agreed last week that ended eight days of fighting in the Gaza Strip.

“The longer the lull in Gaza, the higher the risk of a more significant fall below USD 85 and then towards our end of year USD 80-target,” said Sydney-based Compass Global Markets in a report. “However, we maintain our neutral outlook in crude in the short term as there are various factors pulling the crude price in opposite directions.”

Justin Harper, Market Strategist at IG Markets, said of the firm’s clients currently trading oil, 87 per cent hold long positions, or bullish bets, an increase from 81 percent in the prior week. “They are very bullish right now,” Harper said. “We have hundreds of clients trading oil on a daily basis so this is a good reflection of global sentiment.”

China Recovers

Net-long positions in US crude futures held by money managers rose by 5,564 contracts on the week to 188,018 futures and options combined as of Nov. 20, according to data from the Commodity Futures Trading Commission’s Commitments of Traders report.

An improvement in the macro-economic picture from China is helping boost risk-taking in the oil markets, analysts said.

HSBC’s flash China manufacturing Purchasing Managers’ Index released last week hit a thirteen-month high at 50.4 for November. This “confirms that the economic recovery continues to gain momentum towards the year end,” said Qu Hongbin, HSBC’s China Chief Economist. “However, it is still the early stage of recovery and global economic growth remains fragile.”

Euro zone finance ministers and the International Monetary Fund meanwhile reached a deal late on Monday to lower Greece’s debt, paving the way for the release of key aid to Athens and removing one pillar of uncertainty hanging over global financial markets.

Still, concerns about whether the US can avoid looming tax hikes and spending cuts, referred to as the “fiscal cliff,” was expected to remain in focus as US lawmakers returned to Washington following last week’s Thanksgiving holiday.

“The time for platitudes is over in Washington,” said Kirk Howell, Partner at Spy Ridge Capital. He added that the week “will be crucial to see if real progress can be made on the fiscal cliff. It will undoubtedly be an interesting end to an interesting year.”

-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

Should markets be cheering the Greek debt deal?

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

Listen to the Article (6 Minutes)

Hours after euro zone finance ministers and the International Monetary Fund (IMF) arrived at a much-awaited deal to help Greece reduce its debt, sending risk assets higher, market experts began expressing doubt over whether this deal will be successful in resolving the nation’s long-term debt troubles.

“All you have got is a framework to pretend the numbers are going to add up in eight year’s time, when it seems to be fairly obvious that they are not. Greece has an overwhelming debt burden, and it’s hard to imagine the sort of growth that can deal with that, and get the (debt) numbers to anything acceptable within a reasonable space of time,” said Richard Jerram, chief economist of Bank of Singapore.

Related Links:

Greek Debt Deal Clinched
What Greece Needs
Greece’s ‘Monster’ Debt Problem Haunts Europe

Risk assets including the euro and emerging market stocks rose after the announcement, with the single currency spiking above the USD 1.30 level in early trade. While the euro has since pared back some of its gains, Asian markets are still trading broadly higher.

Greece’s international lenders agreed late Monday to reduce the country’s debt by 40 billion euros (USD 51.9 billion), cutting it to 124 percent of gross domestic product (GDP) by 2020 by lowering interest rates charged on loans made to Greece and to return profits made on Greek bonds by the European Central Bank back to Athens. The new deficit target is also less ambitious than IMF’s original goal of 120 percent.

The currency bloc’s finance ministers also gave the go ahead to release 43.7 billion euros in loans to Greece starting in December, with further payments during the first three months of 2013, on condition the government implements agreed reforms outlined under the bailout plan. This aid is expected to fill the country’s financing gap till the end of 2014, according to analysts.

Vasu Menon, vice president, Wealth Management Singapore at OCBC Bank, said while the “broad strokes” painted by European policymakers are very positive, the “devil is in the detail.”

“We’ve seen Greece run into a lot of problems in terms of implementation, it is one thing to provide broad numbers, but how they are going to achieve it eventually, is going to be a tough road ahead,” he said.

Menon said eventually there needs to be some form of debt forgiveness on the part of creditors, noting that even if debt-to-GDP falls to 124 percent, it is still extremely high.

Over 70 percent of Greece’s debts are now owed to official lenders such as the European Central Bank and International Monetary Fund. Private-sector bondholders, represented by the Institute of International Finance (IIF), agreed to write off some of Greece’s debt earlier in the year, but Germany has so far resisted calls for further debt relief for Greece.

“At the end of the day, the creditors will have to come to terms with the fact that this nation is a bankrupt nation, and you’ll have to forgive a substantial amount of debt to help it to recover. Austerity alone is not going to be a solution to the problem,” he said.

Why Are Markets Still Up?

Despite doubts surrounding the new debt deal, risk appetite remained in the markets. Stock indexes in the region, including South Korea’s KOSPI and Australia’s ASX-200 gained 0.7 and 1 percent, respectively.

“You might not resolve everything today for Greece, but certainly if the intent is there, that’s enough for the markets for now,” said Laura Fitzsimmons, vice president, Futures & Options, JPMorgan Investment Bank.

The key point, according to Mark Matthews, head of research Asia at Bank Julius Baer is that the IMF has breached its “red line” of 120 percent of GDP, suggesting it is a little more flexible, and reducing “the threat of brinkmanship” for markets.

Jerram of Bank of Singapore, however, remain unconvinced, adding, “The markets are pleased because the prospect of some immediate crisis has been postponed to next year, or the year after, or however long it is until they run out of money again. But I don’t think anything really has been solved.”

 – By CNBC’s Ansuya Harjani

© 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

Gold must cross $1,800 soon or face a steep fall: Chart

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

Listen to the Article (6 Minutes)

Trading channels are useful to traders and investors as they show us how price is likely to continue to develop. We are given a defined range of volatility in which price can rally and retreat while still moving in the direction of the trading channel. This presents traders in particular with multiple rebound and rally trading opportunities on both the long and the short side.

An additional advantage of the trading channel is that the price projection of a breakout continues to rise as price rises. Gold continues to develop using the upward sloping channel as the general definition of the secular trend. We can see price slide down Trend line C through both the top and bottom of trading channel B.

Related Links

The ‘Sneaky Bid’ in Gold and Silver
Pro: Look to Sell Gold on Rallies
The World’s Biggest Gold Reserves

If we measure the distance between the top and the bottom of the channel and project this downwards we can draw a parallel up-sloping trend line to create a second trading channel. Trading channel A is currently where price resides and we see the same trending behavior as we did in trading channel B.

The development of this second trading channel though sloping upwards is a warning sign of a potential slowdown of trending activity. We can see additional signs of this warning as price continues to fail to push above the USD 1,800 an ounce level having tested this level a total of three times.

Price has once again rallied to test this level and retreated back towards the bottom of trading band A. Looking forward we can expect price to rally once more to test this level giving traders short term long side investment opportunities.

Traders are able to trade the channel trending behavior with confidence as they are generally low risk investments.

If price is unable to break through the USD 1,800 resistance level by the time the lower edge of the trading channel reaches the resistance line we will get confirmation that the upward trend has ended. In this situation the price will most likely enter a sideways consolidation period as markets determine the new trend direction. Price may fall back towards a new resistance level around USD 1,575 before rallying once more to retest the USD 1,800 resistance area.

A new uptrend can only be confirmed by a sustainable breakout above the USD 1,800 level. Once a breakout is confirmed it is likely traders will see a pullback and consolidation around the then USD 1,800 support line before continuing upwards.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com. He is a regular guest on CNBC’s Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

© 2012 CNBC, Inc. All Rights Reserved

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

Consumers, housing getting stronger as Cong works on cliff

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

Listen to the Article (6 Minutes)

Higher home prices are making for slightly happier consumers, a trend that is helping holiday sales and other consumer-driven parts of the economy, while business sits on the sidelines, worrying about the “fiscal cliff.”

Higher home prices are making for slightly happier consumers, a trend that is helping holiday sales and other consumer-driven parts of the economy, while business sits on the sidelines, worrying about the “fiscal cliff.”

“I’ve been somewhat surprised at how healthy consumer confidence has been over the last few months because the fundamental indicators haven’t been fantastic,” said Stephen Stanley, chief economist at Pierpont Securities. “It’s not like the economy accelerated rapidly. I do think better housing is helping.”

Related Links

November Consumer Sentiment 82.7 
Warren Buffett’s $250K Difference of Opinion with Obama
Will Sandy Skew Econ Data? 
Mysterious Hedge Fund Gets Even More Mysterious

Economists expect confidence to rise to 73 from 72.2 but Stanley is more optimistic, expecting a jump to 78.

“The house price data has looked pretty good. If anything the pace of gains might taper off a little bit heading towards the latter part of the year but it definitely feels like we’ve turned the corner there,” Stanley said. “That’s a pretty big positive and at least one of the reasons consumer confidence has done better in the last couple months…history suggests that consumer confidence tends to go up in the November of election years.”

The economy is facing tricky cross-currents. The housing recovery and the improved state of the consumer are vulnerable and dependent on Congress and President Barack Obama coming to an agreement on the fiscal cliff.  The cliff is the expiration of dozens of tax breaks and the onset of automatic federal spending cuts that will occur starting January 1 if Congress does not take action.

“Home price is the biggest wealth effect out there. We’re finally seeing a reversal of what got us into this mess. But we still don’t have escape velocity, and there’s nothing normal about it,” said Diane Swonk, chief economist at Mesirow Financial. She said there are signs the trend is picking up and should continue, unless consumers are jolted by the fiscal cliff.

Swonk said consumers have gone a long way to clean up their personal balance sheets. At 3 p.m. Tuesday, the New York Fed releases the third quarter report on household debt and credit. “We’ve gotten back down to debt loads that are 2003 levels, which are not low relative to history but  they are relative to that run up in housing,” she said.

So far, the consumer has showed a willingness to spend and holiday sales over the four day Thanksgiving weekend were up 12.8 percent, according to the National Retail Federation. The White House Monday warned that the cliff could slow GDP by 1.4 percent and limit holiday spending. It also said consumer confidence is at risk if middle-class tax cuts are not extended with a “minimum of political drama.”

_PAGEBREAK_

“We really are at a critical turning point,” Swonk said. Business spending has slowed and some of the manufacturing slowdown should show up in a decline in Tuesday’s durable goods orders, reported at 8:30 a.m.  She expects to see fourth quarter GDP slow to about 1.9 percent from her forecast of a revised 3 percent  for the third quarter.

“Measures of uncertainty in general tend to impact business decisions affecting investment and hiring to a greater extent than consumers,” said Barclays economist Peter Newland.

The consumer is not a strong enough engine to turn the tide of the negative effects of the fiscal cliff, which Swonk and Newland both expect will result in about $200 billion fiscal drag next year. If Congress does not act, the drag would be $500 billion or greater.

“I think next year could be pretty good if we get past the cliff,” said Swonk, adding that China’s economy shows signs of turning and Europe is starting to get it debt problems under control. Late Monday, a deal was reached by euro zone officials on Greece’s aid disbursement, and that should help calm market concerns.

Economists also say the impact of Super Storm Sandy has also added to the uncertainty. While ultimately Sandy might become a slight positive for the economy, it has slowed growth in the fourth quarter.

“You have a slow start to repairs and rebuilds,” said Swonk, adding ultimately USD 100 billion to more than USD 200 billion could be spent in insurance money, federal FEMA funds and from homeowners’ savings to rebuild the damaged housing and businesses, mostly in New York and New Jersey.

The real toll of Sandy has yet to be seen, with business disruption also a factor, given the blackouts and flooding in Manhattan, disruptions in  transportation and damage to energy infrastructure. US Airways, for instance, said Tuesday that Sandy cost it USD 15 million in earnings.

Some of the spending to rebuild from Sandy should show up as a positive by the first quarter. Swonk now expects first quarter GDP of 1.4 percent.

“If we go off the cliff, we’re in a recession. It could be negative two or 2.3 percent,” she said.

The positive is if the cliff is avoided and Congress strikes a “grand bargain,” of revenue hikes and spending cuts, the economy could get a lift from confidence. “The fact households have gotten their balance sheets in shape, and businesses have been sitting on their hands for the better part of six months now and the longer that goes on the more pent up activity there is waiting to be unleashed,” Stanley said.

But economists also worry the hit from the reversal of the 2 percent payroll tax cut could be an immediate hit to the economy since it affects all taxpayers. That tax break is seen as one that neither political party supports retaining.

There is still a deep divide when it comes to raising taxes on the wealthy. Newland said that group is more able to smooth out the effects of a tax hike, and the least likely to change spending patterns.

Follow Patti Domm on Twitter: @pattidomm

Questions? Comments? Email us at marketinsider@cnbc.com

© 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

Trouble stirs in Thailand: Here’s why not to fret

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

Listen to the Article (6 Minutes)

Anti-government protests in Thailand over the weekend were a reminder of violent demonstrations in the recent past that have plunged the Southeast Asian state into instability. While the latest outrage was a cause of concern for investors, the risks appear to be contained, as of now, experts told CNBC.

Police fired tear gas in clashes with hundreds of protestors in the Thai capital Bangkok on Saturday ahead of a rally to overthrow the government of Prime Minister Yingluck Shinawatra in the biggest demonstration since her party came to power in elections in July last year.

In recent years, Thailand has witnessed bloody street protests that have led to a military crackdown and instability in local financial markets.

But country watchers said this time around there are some reassuring signs for investors. For one thing, Saturday’s protests were much smaller than expected, while last year’s sweeping election win for Yingluck’s Puea Thai party means the government is underpinned by legitimacy.

“These protests are a concern after some of the violence we have seen on the streets of Bangkok in recent years,” said Andrew Walker, associate professor at the Australian National University in Canberra.

“But the fact is that this was a pretty small protest, the royalist group that staged the protest was talking about getting half-a-million people on the streets and in fact they got about 20,000, so this was a very big disappointment for them,” he told CNBC Asia’s “The Call.“

Thai markets appeared to take the weekend unrest in their stride. Bangkok’s benchmark stock index was up 0.6 percent on Monday, outperforming most of its regional peers, and the Thai baht was steady around 30.65 to the US dollar.

Thailand’s equity market, with gains of about 25 percent this year, looks poised to end 2012 as one of Asia’s best performing stock markets. Its economy, meanwhile, has held up relatively well in the face of anemic growth globally, bolstered by strong domestic demand.

Mayuree Chowvikran, investment strategist at Maybank Kim Eng Securities in Bangkok, said she did not believe the signs of renewed unrest would derail foreign investment into Thailand, especially from Japan, Thailand’s biggest foreign investor.

“I think investors are still quite friendly towards Thailand and understand the situation,” she told CNBC. She said she expected Japanese automakers such as Toyota, Honda and Nissan to continue with plans to relocate some of their manufacturing activity to Thailand from China because recent anti-Japan protests in China meant they felt the need to diversify.

Sounder Political Footing

Country analysts said the Thai government, led by Yingluck, was on a strong political ground following a decisive win in last year’s election and that was important in reassuring foreign investors about political stability in Thailand.

“What makes Yingluck safe is that when the country went to the polls last year, she won that election handsomely. She’s only the second prime minister in Thai history to win an absolute majority in parliament. The first to achieve that was her brother, Thaksin Shinawatra,” said Walker.

Thaksin was overthrown in 2006 in a military-backed coup and left Thailand in 2008, shortly before being found guilty of abuse of power. Opposition groups accuse the government of being a puppet of Thaksin.

“He (Thaksin) is an influential figure on the government, but it is clear that Yingluck has emerged as a capable prime minister, who has bought stability to Thailand after some years of very intense political conflict,” Walker added. “It was only a week ago that Yingluck hosted a visit by Barack Obama and he very clearly endorsed her administration for a domestic and international audience.”

Julia Goh, regional economist at CIMB in Kuala Lumpur agreed: “This government has a stronger political base and we think it will be more difficult to topple, so that is positive for economic stability.”

“Political instability in the past has stifled key public investment and we really hope the government can implement some big ticket investments going forward,” she added.

–By CNBC’s Dhara Ranasinghe

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 booming Indian equities will rock in December

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

Listen to the Article (6 Minutes)

India’s stock market has brushed aside the country’s weak economic health this year and soared some 20 percent on the back of strong buying by foreign institutional investors. And investment strategists are betting on further gains for the benchmark Bombay Sensex, particularly in the month of December.

Since 1980, December has produced an average return of 4.6 percent, the best for any month in the year, according to Morgan Stanley.

“The December phenomenon is explained by the fall in institutional activity, associated with the holiday season. Consequently, local speculators tend to exert higher influence on shares and they rise in anticipation of fresh FII allocations in January,” the bank’s India managing director, Ridham Desai, wrote, referring to foreign institutional investor inflows.

Over the past 20 years, 1994, 2000, 2001 and 2011 are the only four occasions when December generated negative returns, he said, adding that there has not been a common cause for the poor returns in these cases.

This year, Desai said, one of the biggest risks for the market includes the parliament session, which could damage the policy environment.

The ruling Congress-led government is expected to legislate around 25 bills including the liberalization of the insurance and pension sectors during the month-long winter parliament session that began last week. However, the new parliament session got off to a rocky start with opposition parties questioning the government over recent economic policies, which could derail its reform agenda.

However, Desai added, “expectations are low, so an upside surprise is more likely.”

Top Pick for 2013

Despite the growth slowdown, investors began increasing their exposure to the country’s stocks in mid-2012 because of compelling valuations and falling oil prices, which helps reduce the country’s current account deficit, and ease inflation pressures.

JPMorgan’s chief Asian and emerging markets equity strategist, Adrian Mowat, said India was his top pick for 2013 of the BRIC countries, made up of Brazil, Russia, India and China.

“India, which has had a reasonably good year so far, remains the big market to stick with into 2013. You’re coming off the weakest economic growth since we’ve seen since 2003. We’ve got a very competitive currency,” Mowat told CNBC.

The weakening of the Indian rupee, which has depreciated 3.5 percent against the US dollar in the last month, has been beneficial for exporters as it makes their products more competitive on the global market.

While India’s economy has slowed sharply in 2012, with gross domestic product (GDP) averaging 5.4 percent gross in the first half, growth is expected to pick up pace next year, driven by the positive effects of policy reforms and an increase in agricultural output growth.

“The new Finance Minister, P Chidambaram is very keen to promote reforms, and Manmohan Singh’s term as prime minister will be over within the next 12 months, and I think he wants to go out with the reputation of generating some sort of reform. We would describe the Congress party as now managing the economy, rather than simply managing a coalition,” he said.

In addition, he said funding costs for Indian corporates is set to decline over the next twelve months, as demand for emerging market debt increases. “You’ve got a nice economic momentum and companies that have been delivering profits,” he said.

While the market has rallied this year, valuations continue to look attractive on a historical basis, Mowat said. The Sensex trades at 15.6 times estimated earnings, compared with 11.6 for Brazil’s Bovespa, 9.6 for China’s Shanghai Composite and 5.5 for Russia’s Micex, according to Reuters.

“What investors like to buy is domestic demand plays. If you buy domestic demand plays in China you are paying 19 times earnings, in India you’re paying 15 times,” Mowat added.

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

Here’s why you should care about the war in Congo

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

Listen to the Article (6 Minutes)

Global financial markets don’t pay much attention to the conflict in the Democratic Republic of Congo. They should. The central African country produces about half of the world’s tin, tungsten and cobalt output and about three percent of the world’s copper and gold, according to the US Geological Survey.

Consumer electronics makers would also be well-advised to watch developments in the war-torn nation, which is a key supplier of columbite-tantalite, or coltan for short-a mineral ore used to manufacture capacitors found in cellphones, tablet computers, laptops and practically every mobile device on the market today.

Like Sierra Leone with its notorious ‘blood diamonds’, DRC Congo has been blighted by the stigma of ‘conflict minerals” where the proceeds from resources extracted from mines controlled by government or rebel forces are used to fund war. ‘Conflict-free’ certification programs and legislation have sought to reduce market share of resources mined in war zones but convoluted supply-chain networks have allowed buyers to exploit loopholes in the system.

Legislators in the US. have sought to close those loopholes.

On August 22, the US Securities and Exchange Commission adopted a rule mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act to require companies to publicly disclose their use of conflict minerals that originated in the DRC or an adjoining country.

Under the rules, companies are required to disclose their use of conflict minerals that include tantalum, tin, gold, or tungsten if those minerals are ‘necessary to the functionality or production of a product’ manufactured by those companies, the SEC said.

Bu the industry has been slow to respond, according to market research firm IHS iSuppli.

The “vast majority” of US companies are not yet ready for the new rules that go into effect in less than two years, IHS isuppli pointed out in an exhaustive study released on October 25. “The industry appears to be unprepared, given that about 90 percent of firms so far have not produced the data, declarations, or documentation that will help fulfill regulatory requirements detailing the presence of such minerals in their supply chains,” the firm said.

As of August, the percentage of electronics component manufacturers with available conflict minerals information amounted to only 11.3 percent of the peer group, according to the IHS Parts Management Service, accounting for just 17.1 percent of active electronic components on the market.

IHS estimates that 15 cents’ worth of tantalum was contained in every smartphone shipped when Dodd-Frank was originally signed in 2010. In 2012, this would amount to USD 93 million worth of tantalum in smartphones alone. The firm has been gathering information on conflict minerals for more than two years from a database on more than 300 million electronic, electromechanical and fastener components used in commercial and military applications.

USD 24 Trillion Mineral Wealth

A striking endnote from IHS estimates the value of DRC Congo’s mineral wealth at as much as USD 24 trillion, which stands in stark contrast to almost three-quarters of the population who live below the poverty line – a clear case, some might argue, where a developing country’s resources wealth has morphed into a resources curse.

A question for the immediate term is to what degree the unrest will affect production from major asset run by listed global miners.

Though the most recent bout of unrest in Congo threatens the eastern minerals-rich Kivus region near the Rwandan border, any impact will likely be limited as M23 rebels, reportedly backed by Rwanda, may have achieved their “primary strategic and commercial aims” by capturing Goma, the capital of North Kivu province, said Philippe de Pontet, Africa Director at political risk advisor Eurasia Group, in a report on Nov. 22.

“This limits the immediate commercial impact to the Kivus region, the world’s largest source of coltan – also known as tantalite, a crucial input in many electronic devices,” de Pontet said. The region is also home to Toronto-listed gold miner Banro Corporation’s Twangiza gold mine which entered commercial production on September 1.

“Absent a major escalation, or a plausible but unlikely army mutiny (or assassination) that topples President Kabila, we do not envision direct impacts on copper/cobalt producers concentrated in (southern province of) Katanga,” de Pontet added.

However, AngloGold Ashanti’s Mongbwalu gold asset is a “bit more exposed should conditions worsen,” the risk consultancy said. “The threat of escalation beyond North Kivu, while not our base case, cannot be discounted.”

AngloGold has held the Mongbwalu concession – with proven reserves of 2.5 million ounces – since 1998 and has had a presence there since 2004, but insecurity has hampered work, meaning that construction is only now getting under way, Reuters reported in April.

The world’s third-biggest mining firm partnered with Congo’s government to build the industrial gold mine in a vast zone deep in the hills of Ituri, a district in the central African state still recovering from a bloody ethnic conflict that ended in 2003, Reuters said.

-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 it be third time lucky for Greece?

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

Listen to the Article (6 Minutes)

International lenders take a third stab on Monday at reaching an agreement on lowering Greece’s debt to sustainable levels. A positive outcome would pave the way for the release of key aid to Athens and should cement the risk appetite that has resurfaced in markets, well, at least for the short-term, analysts said.

Euro zone finance ministers, the International Monetary Fund (IMF) and European Central Bank (ECB) have failed twice to reach an agreement on Greece and hopes are rising that a deal will be made on Monday.

Related Links:

Analysts said Greece, together with a possible deal to avert a US “fiscal cliff” of looming tax hikes and spending cuts, hold the key to maintaining a resurgence in risk appetite that has boosted equity markets and help send the euro to three-week highs versus the dollar in the past week.

“If they (the international lenders) strike a deal on Greece, that would be positive in the short-term,” Marco Bardelli, CEO at UBI Capital Singapore told CNBC Asia’s “Squawk Box” on Monday.  “But medium-term, problems exist.”

Last week European Union leaders failed to reach an agreement on setting a budget for the next seven years, while early results from Sunday’s regional elections in Spain showed four separatist parties in Catalonia looked set to win a majority. These are two developments that highlight the problems that will continue to hang over the euro zone, according to Greg Gibbs, senior currency strategist at the Royal Bank of Scotland.

“Every piece of information that has come out of Europe over the past week has been disappointing. There have been delays in the Greek deal and over the weekend we’ve had an election result in Spain that does not appear to be too encouraging,” he told CNBC.

“There is a sense of stability now and that’s why money has flowed into (risk) assets,” he added. “In six months from now, where are we going to be? I still think we are going to be struggling terribly in Europe and these deals that are being done do not look credible.”

All About Greece

Athens says time is running out and that it needs the next tranche of aid, of up to 44 billion euros (USD 57 billion), from its international lenders, to recapitalize its banks and prop up an economy mired in recession. Greece’s next big repayment is due in mid-December.

But as it has teetered on the brink of bankruptcy and pushed through unpopular austerity measures, Greece’s lenders have disagreed over how to lower Greece’s massive debt burden.

A bailout deal between Greece and its international lenders aims to get debt down to 120 percent of gross domestic product (GDP) by 2020. Greek debt currently stands at about 170 percent of GDP.

Euro zone finance ministers favor allowing Greece two extra years to bring down its debt levels to 120 percent of GDP, but an extension to 2022 has been resisted by the IMF, which wants Greece’s creditors to forgive a portion of the country’s debt in what is referred to as a “haircut.”

“I think they will give Greece the money it needs today (Monday), but that won’t solve the Greek debt problem,” Uwe Parpart, managing director at Reorient Financial Markets told CNBC Asia’s “The Call.”

“I agree with the IMF that there should be a ‘haircut’ on Greek debt, but Germany and France would not be happy with that. They (the international lenders) want to cut Greek debt to 120 percent of GDP by 2020. That’s unlikely to happen and everybody knows that,” he added.

Concerns about the euro zone debt crisis have eased since July when ECB President Mario Draghi promised to do whatever it takes to keep the euro zone together, while subsequent policy announcements from the central bank and regional policymakers went further to underpin sentiment in markets.

Analysts said an image of in-fighting among policymakers threatens to undo the positive work done over the summer months.

“Recent developments and continuous fractions between different countries leave us in the fog. We don’t see a true leadership in Europe that is taking us forward,” said Bardelli at UBI Capital Singapore.

—By CNBC’s Dhara Ranasinghe

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