News Update

UPDATE---------------------FEBRUARY 20, 2010 SATURDAY


BANGLEDESH


WEEKLY PRICE SITUATION

Spice, chicken prices mark
fresh rise, rice stable

Price of spices and chicken increased further in the past week and rice prices remained unchanged amid a declining trend on the wholesale market.
Vegetables prices continued declining as supply of winter varieties was still abundant.
Turmeric and ginger prices increased further in the week by at least Tk 10 a kilogram.
Fine grade turmeric of the Patna variety sold for prices between Tk 200 and Tk 210 on Friday at the New Market Banalata Complex market and ginger sold for prices between Tk 100 and Tk 110.
Retail price of the spices have increased by more than 30 per cent in a couple of months as, market sources said, supply remained tight
‘Ginger and turmeric prices are on the rise again in China and India, which is pushing up the prices,’ said Sarder Barkat, an importer at Shayambazar, a major wholesale hub for spices.
For ginger, local market is dependent on import from China and Indonesia and major sources of turmeric are India and Myanmar as the local production, according to an estimation of wholesalers, can meet only a half of the domestic demand.
Live broiler sold between Tk 140 and Tk 145 a kilogram on Friday on the retail market on Friday. Price of the farm chicken has increased by Tk 10 a kilogram in a week and Tk 40 in a month or so.
‘Increased price of day-old chicks and poultry feeds have mainly caused the latest round of increase in broiler prices,’ argued Sayed Abu Siddique, adviser to the Bangladesh Poultry Industries Association.
He said increased demand for chicken because of picnics and wedding ceremonies towards the close of the winter had also added to the increase in prices.
Coarse rice of different grades, the prices of which remained unchanged in the week, was retailed between Tk 28 and Tk 32 a kilogram on Friday and parboiled rice of fine varieties sold for prices between Tk 38 and Tk 46.
Rice prices, however, was on a downward trend on the wholesale market in the past week as supply from millers increased.
‘Poor sales, increased supply and open market sales of rice have kept the market somewhat stable,’ Hafez Belal Ahmed, a wholesaler in Bogra, said.
Belal told New Age prices of rice of all varieties declined by about Tk 50 a mound (37.3kg) in the past week. In the past month, prices of coarse rice increased by about Tk 100 a mound and fine rice by about Tk 150.
Beans sold for prices between Tk 20 and Tk 28 a kilogram at the Mohakhali kitchen market on Friday, potato for Tk 10, round aborigine for Tk 20 and medium-sized cauliflower or cabbage for Tk 12 each.
Local variety of red lentil sold for prices between Tk 116 and Tk 120 a kilogram, sugar between Tk 56 and Tk 60, and bottled soya bean oil between Tk 84 and Tk 88 a litre.
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BANKING NEWS

Rupali Bank’s board gets all
management powers

The board of directors of Rupali Bank has amended its Memorandum and Articles of Association to gain the authority to hire and fire officials and employees of all levels, said sources.
The amendment, which was also approved by the state-owned bank’s shareholders, was made in its sixth Extraordinary General Meeting held on February 17.
The boards of the other three state-owned commercial banks — Sonali, Janata and Agrani — gained the same authority earlier.
Under the amended Memorandum and Articles of Association, the Rupali Bank’s board will henceforth have the authority to appoint consultants and legal advisers on contractual basis. Besides, it will also enjoy the power to prepare the service rules for its own staff.
The board is now free to determine the pay structure and remuneration of Rupali Bank’s staff. The Ministry of Finance’s approval will no longer be necessary to do so, sources said.
The government, which owns 94.5 per cent of the ailing Rupali Bank, now wants it to be run by professionals who should get attractive compensation packages and enjoy adequate autonomy, a senior official of the bank told New Age.
According to the new Memorandum, the board of directors, not the finance ministry, will appoint or remove the chairman.
However, the finance ministry will appoint directors to the board as usual as the bank is mostly state-owned, said sources.
Rupali Bank, according to the previous Memorandum, cannot give loans to the small and medium enterprises, but the revised Articles of Association have empowered the bank to do so, said an official.
An official of the bank also said that the managing director of Rupali Bank will be its chief executive officer.
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IN FOCUS


Bangladesh among top 10 markets
for Canadian grains


Bangladesh has become one of the top ten fastest growing markets for the Canadian growers of food grains, said an agro-commodity promotion official of the North Atlantic country.
President of Saskatchewan Trade and Export Partnership (STEP) Lionel Labelle said Canadian shipment of food grains to Bangladesh tremendously increased last year and is expected to rise more this year.
‘Bangladesh has become one of the top 10 fastest growing markets for the Canadian growers of lentils, peas and wheat,’ Labelle said in an exclusive interview with New Age on Monday.
Labelle pointed out that Canada exporter shipped $370 million worth of lentils, peas, wheat oilseeds to Bangladesh in 2009 with more than 130 per cent growth in shipment.
A STEP delegation comprising Canadian growers and traders, led by Labelle, is now on a weeklong visit to Bangladesh to further expand their agro-commodity market in the country.
Some 47 per cent of all Canadian arable lands are located in the province of Saskatchewan which is regarded as the granary by food grains importers from across the world.
STEP, the board of directors of which includes three senior Canadian federal ministers, is a government-industry corporation body that works with Saskatchewan provincial government to facilitate farm output and exports.
The delegation of STEP met importers in Dhaka and Chittagong and on Monday night it delivered special awards to 14 top Bangladeshi agro-commodity importers.
At a ceremony held in Hotel Sonargaon, Commerce Minister Faruk Khan handed over the awards.
‘Bangladesh’s food industry has advanced incredibly in recent times with businessmen putting in huge investments in large-scale processing units and in the supply chain,’ said Labelle.
He weighs high the courage and capacity of local food industry investors, who, he said, have been keeping the market and the supply chain vibrant and active for 150 million plus local consumers.
Labelle said Canadian grain industry has special focus on the requirements of Bangladesh market.
‘Researchers in Saskatchewan University are working to develop varieties of lentils
which are should be popular in Bangladesh and South Asian markets,’ he added.
Canadian yellow lentils and red lentils dominate the market in Bangladesh as local traders said prices and quality of the Canadian shipments are much competitive and dependable.
Asked on price forecast, Labelle said despite plantations had been intensified this year the importers have to wait up to next harvesting in May for seeing the actual prices.
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SOUTH ASIA


India growth returning to
boom level

India’s economy should grow 8.2 per cent next year and return to previous boom levels of nine per cent the following year, an influential government panel forecast Friday.
The forecast, released in an economic survey ahead of the annual budget due at the end of the month, said that the growth estimate for the year 2010-11 could be revised upward.
The government says it needs a growth rate of 9.0-10.0 per cent per year to make a meaningful impact on India’s poverty levels, with a fast-expanding economy required to generate jobs.
The Prime Minister’s Economic Council, which made the forecast, said it expects global conditions ‘to be somewhat better’ in coming years, helping lift export demand after a sharp downturn during the global financial crisis.
But it cautioned that the pace of global recovery would be ‘subdued’.
The council stuck by
an estimate that the economy would grow 7.2 per cent in the current
fiscal year to March — reiterated by finance minister Pranab Mukherjee this week — up from 6.7 per cent last year.
But it said the figure for the current year could be revised higher due to stronger-than-expected industrial output.
Analysts have said India’s strong economic performance has given the government reason to start slowly unwinding stimulus aimed at shielding the economy from the global slump.
Before the financial crisis, India’s economy was posting growth of nine per cent plus levels.
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BANGLADESH: EVENT UPDATE

Chittagong International Trade
Fair 2010 inaugurated

The month-long Chittagong International Trade Fair-2010, organised by the Chittagong Chamber of Commerce and Industry, was inaugurated at polo-ground in the city on Friday.
The jute and textile minister, Abdul Latif Siddiqui, was the chief guest at the inaugural session of the fair, which will be opened for visitors on Sunday.
The CCCI president MA Latif chaired the session, which was attended by chairmen of parliamentary standing committee on jute and textile ministry, Akteruzzaman Chowdhury and members of parliament, Mainuddin Khan Badal and Mahajabin Morshed.
A total of 263 stalls and 36 pavilions of different companies from home and abroad have been set up at the fair. Thailand, Pakistan, Iran and China were given special zones at the venue.
The fair will remain open for the visitors from 10:00am to 10:00 pm till March 21, for the 6th time as partner country.
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Seminar on investment in
Bangladesh in Singapore Feb 23

A seminar on Investment Climate and Business Opportunities in Bangladesh will begin in Singapore on February 23 with an objective to showcase high value and high return projects and investments before the Singaporean entrepreneurs.
The Bangladesh High Commission, Singapore, Business Federation- South Asian Business Group and International Enterprise, Singapore have organised the seminar at Little Red Dot Seminar Room.
SA Samad, executive chairman of Bangladesh Investment Board will present key-note speech in the seminar while Bangladesh High Commissioner to Singapore Kamrul Ahsam will give address of welcome.
The key-note papers would be presented in the seminar Regulatory Framework Governing Investment in Bangladesh by Syed Yusuf Hossain, chairman Bangladesh Energy Regulatory Commission, Key Sectors and Projects for Investment in Private-Public Partnership Basis by M Anis Ud Dowla, president Metropolitan Chamber of Commerce and Industry and Overview of Financial Incentives and Options available for Foreign Investors by Atiur Rahman, Governor of Bangladesh Bank.
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SOUTH ASIA

India top gold consumer again

India has retained its position as world’s largest gold consumer after a weak first quarter owing to around 49 per cent recovery in demand in peak wedding and festival season, the World Gold Council has said.
China was the only gold jewellery market to grow 6 per cent in 2009, according to the figures compiled by the organization formed and funded by world’s leading gold mining companies.
‘In 2009, dollar demand for gold remained above the $100 billion mark for the second year in succession against the backdrop of continued turbulence in financial and commodity markets,’ it said.
China was the only non-western country to record growth of 22 per cent in investment demand in 2009. In contrast, ETF demand in 2009, at 594.7 tonnes, was 85 per cent higher than in 2008, equivalent to an inflow of $17.7 billion, due primarily to an exceptional first quarter.
According to the WGC Gold Demand Trends published Thursday, the resilience in demand was achieved as average gold prices went 12 per cent higher than in 2008, at $972.35/oz. Total identifiable gold demand fell 11 per cent to 3385.8 tonnes during
2009 when compared to the levels in 2008, masking a progressive recovery in jewellery and industrial demand. The final quarter of 2009 showed a decline in total identifiable demand of 24 per cent in terms of tonne, against the extraordinary fourth quarter demand in 2008, it said.
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BANGLADESH: UPDATE


BGMEA to install UD software
at member organizations


Bangladesh Garments Manufacturers and Exporters Association have decided to install UD software at the offices of its member organizations to bring dynamism and transparency and to reduce costs.
The decision was taken at a meeting of the BGMEA member garment industry owners at BGMEA auditorium on Thursday.
UD, a high-performance computing (HPC) system management and data centre automation software that simplifies the complex nature of deploying and operating HPC and data centre environments, saving customers’ time and resources while giving them confidence that their solution will perform as expected.
The BGMEA president Abdus Salam Murshedy chaired the meeting.
Vice president Shafiul Islam, director Shahidullah Azim and chairman of UD Automation Committee Minhajul Islam spoke at the meeting. Through installation of UD software, it would be possible to create an archive at BGMEA office for UD information.
If needed, the BGMEA will organize trainings for member organizations on using of the software.
It was also discussed that the BGMEA has introduced B2B web portal for readymade garments industries. This would perform as virtual global market place for suppliers of garments goods, buyers and backward linkage companies.
Besides readymade garments entrepreneurs and buyers of garment products, banks, insurance companies, hotels, shipping agencies would be benefited from this portal.
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WORLD ECONOMY


Nestle eyes stronger growth after
annual profit retreats

Company Nestle on Friday posted a 42 per cent drop in its 2009 net profit to 10.4 billion Swiss francs and set its sights on stronger growth in the coming year.
The net profit, equivalent to 7.1 billion euros or $9.6 billion, marked a retreat to the Swiss group’s business performance in 2007, but it was largely in line with analyst estimates compiled by business news agency AWP.
‘For 2010, I expect our Food and Beverages business to achieve higher organic growth than in 2009,’ said chief executive Paul Bulcke, although the company also highlighted overall economic uncertainty for the year ahead.
‘This confidence is also reflected in our increased dividend proposal as well as our share buyback plans for the year,’ he added in a statement.
In 2008, Nestle’s net profit was boosted by a one-off 9.2 billion Swiss franc earnings on the sale of part of its stake in eye care specialist Alcon, affecting the comparison with last year.
Sales in 2009 declined slightly from the 109.9 billion Swiss francs reported in 2008, a boom year, to 107.6 billion Swiss francs in 2009.
Nestle estimated that the strong Swiss franc wiped 5.5 per cent off its 2009 sales figure.
The food giant said its business had delivered strong and broad-based organic growth — a measure of performance minus the impact of sell-offs and acquisitions.
‘With organic growth of 4.1 per cent achieved in last year’s challenging environment, we were able to grow substantially faster than our industry,’ said Bulcke.
The group proposed a 14.3 per cent increase in its dividend payment to shareholders.
Nestle’s profits for 2010 are likely to be boosted significantly following Swiss pharmaceutical company Novartis’s decision last month to buy the outstanding stake in Alcon.
The group reported sales growth in its core food and beverage business across most regions, led by a 7.4 per cent increase in demand in Asia and the Pacific, and nearly all products types.
However, the weak link was again its bottled water division, with a decline of 1.4 per cent.
Nestle said sales in the bottled water industry as a whole were weaker last year but that demand had picked up in Europe and North America during the fourth quarter.
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Thai export growth hits
18-month high: minister

Thai exports grew at their fastest rate for 18 months in January because of a recovery in the kingdom’s main markets, the commerce minister said Friday.
Exports climbed 30.8 per cent year-on-year to a total of $13.7 billion, Porntiva Nakasai said, as Thailand’s economic recovery continued.
The figure was also the third straight month of growth in every sector, while shipments expanded 26.1 per cent from the previous month.
Agricultural and farm products such as rice and rubber grew at 46.2 per cent while the industrial sector, including electronic appliances and the auto sector, surged 27.8 per cent.
Porntiva said exports to the United States, Japan and the European Union, all grew at an average of 28.4 per cent as Thailand’s main markets emerge from the global economic crisis.
Growth was bigger closer to home, with exports to the five main members of the Association of Southeast Asian Nations, of which Thailand is a member, leaping 66.6 per cent.
New markets were even larger, with shipments to India soaring 141.7 per cent and Taiwan 96 per cent.
‘We are still confident that this year exports will grow by 14 per cent from last year and the export value will top $170 billion,’ Porntiva said.
But Thailand’s political turmoil continued to be a risk, with a major court judgment on frozen assets of ousted former premier Thaksin Shinawatra due next week, said commerce ministry permanent secretary Yanyong Puangrach.
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Economists back British govt’s
delay to spending cut

More than 60 leading economists on Friday backed the British government’s plans to delay spending cuts, in a boost to the ruling Labour party ahead of a general election it is tipped to lose.
In two letters to the Financial Times newspaper, they warned it would be ‘reckless’ to begin slashing public spending too soon as the country struggles to recover from its worst recession since World War II.
Finance minister Alistair Darling announced in a budget statement in December, a precursor to the main budget next month, that cuts would be put off until after general elections due by June.
The move drew criticism from the press that the government was resorting to populist measures in a bid to win votes, but the economists on Friday rallied behind his strategy.
‘History is littered with examples of premature withdrawal of the government stimulus, from the US in 1937 to Japan in 1997,’ said one of the letters.
‘With people’s livelihoods at stake, a responsible government should avoid reckless actions.’
Signatories of the letters included two Nobel laureates — Joseph Stieglitz, a professor at Columbia University; and Robert Solow, an academic at the Massachusetts Institute of Technology.
The appeal came a day after official data showed Britain suffered its first ever January deficit, and after figures last month showed the country crawled out of recession in the final quarter of 2009 with growth of just 0.1 per cent.
It was also a rebuff to a letter to the Sunday Times newspaper at the weekend, in which a group of economists urged whoever wins the coming election to cut the deficit faster than Darling plans.
That letter, although bipartisan, appeared to support proposals by the main opposition Conservatives to cut spending faster than Labour.
The economists on Friday warned the letter by their colleagues at the weekend failed to stress that ‘the current deficit reflects the deepest and longest global recession since the war.’
And referring to the letter sent to The Sunday Times, it asked: ‘How do the letter’s signatories imagine foreign creditors will react if implementing fierce spending cuts tips the economy back into recession?’
Darling is set to announce his latest annual budget in March, just weeks before the election which must be held by early June and is widely expected to take place on May 6.
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SOUTH ASIA

Carrefour to enter India, in
talks with partners

French retailer Carrefour, which has been looking to crack the restrictive India market for seven years, plans to kick off its operations in the country this year by setting up a wholesale business.
The company also said that it was in talks with local firms as potential partners, but declined to name them.
Global retail chains have long been frustrated in their efforts to set up shop in the world’s second-fastest growing major economy, where organised retail accounts for just 6 per cent of industry sales and incomes are rising quickly.
Carrefour, the world’s second-largest retailer, will join mega retailers such as top-ranked Wal-Mart and Germany’s Metro AG in operating so-called cash-and-carry ventures in India.
Foreign firms are prohibited from owning multi-brand retail chains in India, a rule that is not expected to be relaxed in the near term.
‘Carrefour will develop its activities in India with the start of cash & carry activities in 2010,’ the company said in an email statement to Reuters.
Indian regulations allow foreign multi-brand retailers only through franchise agreements with local players, and Carrefour has held talks over the years with various Indian firms to enter the retail market.
‘Carrefour and some Indian companies have been discussing partnerships,’ the company said, but would not to comment on which firms it had spoken with.
India’s Future Group, the country’s largest retail operator with brands such as Pantaloon Retail and Big Bazaar, has been the subject of media speculation as a possible partner for Carrefour.
Earlier this week, Future Group CEO Kishore Biyani told Reuters that he was in talks with several overseas retailers but did not specify which.
Foreign retailers may own up to 51 per cent in single-brand retail and 100 per cent in cash-and-carry ventures.
The restrictions are intended to protect the small single-shop operators that dominate retail in India.
‘Starting off with a cash-and-carry business gives them the opportunity to get a first-hand feel of the Indian market and allows them to build a brand name,’ said Hemant Kalbag, partner with consultancy firm AT Kearney.
India’s robust economic growth — at more than 7 per cent it trails only China among major economies — and a burgeoning middle-class with rising spending power are magnets for foreign retailers facing declining demand in their home markets.
On Friday, Carrefour said profit for 2009 fell nearly 70 per cent as sales languished in Europe.
The Indian retail market is estimated to be currently worth about $450 billion, of which organised retail with a share of 6 per cent is growing at more than 20 per cent a year.
Carrefour said it has been meeting local vendors and suppliers to finalize sourcing arrangements for food and non-food items.
The company already sources supplies worth about $2 billion from India, according to industry estimates.
Carrefour has set up two entities in India — Carrefour WC&C India Pvt. Ltd to run cash-and-carry business and Carrefour Master Franchise Company Pvt. Ltd for its retail business, but neither firm has any outlets.
‘Companies such as Wal-Mart and Carrefour would rather be in retail...but with the regulations being what it is I guess they have no choice but to be in the wholesale business,’ Kalbag said.
Overseas retailers want to control their retail operations, which has prevented them from entering India in this category.
Wal-Mart, which has a joint venture with Bharti Enterprise, the parent of top telecom firm Bharti Airtel, for a cash-and-carry venture under the brand Best Price Modern Wholesale, has said it would get into retail only when the rules were relaxed for investment in the segment.
Metro operates five cash-and-carry stores under its own brand.
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IN FOUCS


GM to invest $500m in fuel
efficient engines

General Motors announced plans to invest $494 million in fuel efficient engines Thursday amid a broader expansion of its US operations following years of painful cuts.
The investment will create 550 new jobs at three US plants that are involved in the production of its four-cylinder Ecotec engine, the automaker said.
‘GM is transforming its product portfolio to reduce fuel consumption and emissions, and the next generation Ecotec engine is an integral part of that transformation,’ said Denise Johnson, GM vice-president of labour relations.
GM shuttered scores of plants and slashed its US workforce by more than half in the past five years, as it restructured its operations in the face of a steady market share loss to Asian rivals.
But the largest US automaker emerged from bankruptcy protection last year with a leaner operation and substantially improved product offerings.
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Mobile phone technology unveils its
future direction in Barcelona

The Fifth World Mobile Congress in Barcelona has shed some light on the future direction in which mobile phone technology is moving.
The conference has brought almost 200 million euros ($272 million) of earnings to Barcelona and attracted 1,300 exhibitors and 50,000 visitors, who booked 95 per cent of the city’s hotel rooms.
Functioning to facilitate new networking possibilities, deal- makings and contract- signings, the meeting also served as a platform for brand-new technologies and ideas.
The tone of the meeting was set on Monday when chief technology and strategy officer of the GSMA Alex Sinclair announced the creation of the Wholesale Applications Community, which will unite at least 24 leading mobile operators in one open platform.
Sinclair said the community was still in its early stages, yet stressing its potential market would be around 3 billion customers.
The GSMA’s press release described the community as an attempt to unite a fragmented marketplace and create a wholesale applications ecosystem that will establish a simple route to market for developers to deliver the latest innovative applications and services to the widest possible base of customers worldwide.
The GSMA, which represents the interests of the worldwide mobile communications industry, also announced China Telecom, KDDI and Verizon Wireless have joined the organization after committing to deploy services based on Long-Term Evolution.
The rapid advance in LTE development will provide the next generation of wireless technology for mobile broadband with peak rate speeds of up to 100mbs downlink and 50mbs uplink.
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German producer prices gain
0.8pc in January

German producer prices, the cost of goods at the factory gate, rose 0.8 per cent in January from December official figures showed Friday, suggesting inflation is starting to pick up again in Europe’s biggest economy.
Analysts polled by Dow Jones Newswires had forecast a rise of just 0.2 per cent after producer prices dipped 0.1 per cent in December.
On an annual basis, producer prices fell 3.4 per cent in January, the Destatis office said.
That compared with analyst forecasts for a 4.0 per cent drop and followed declines of 5.2 per cent in December and 5.9 per cent in November, an indication that the trend lower is coming to an end.
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Fed rate hike hurt world stocks

Asian stock markets slumped on Friday and there were also losses for European equities after the US Federal Reserve unexpectedly hiked the interest rate it charges banks for emergency loans.
Tokyo closed down 2.05 per cent and Hong Kong dived 2.59 per cent as investors viewed the Fed’s move to raise its discount rate as a sign that there will be a faster-than-expected unwinding of stimulus measures.
In European morning trade on Friday, London slipped 0.23 per cent, pulling back from initial sharp losses, while Frankfurt lost 0.37 per cent and Paris fell 0.52 per cent.
‘The Federal Reserve certainly managed to spice things up a little after the US close last night with that surprise move to raise the discount rate, which looks likely to erode the bulk of (Thursday’s) gains on Wall Street’ when it reopens Friday, said IG Markets analyst Ben Potter.
‘This will doubtless stimulate the debate as to which central bank will move next, although it’s worth stressing that this change affects the discount as opposed to the (Fed) Funds rate.’
After two consecutive quarters of positive US economic growth, the Federal Reserve Board on Thursday said it was hiking the discount rate, or the primary credit rate, to 0.75 per cent from 0.5 per cent.
Primary credit is provided by the central bank as a backup source of funds to commercial banks.
In a statement, the Fed said its action was part of changes to the terms of its discount window lending programs ‘in light of continued improvement in financial market conditions.’
The Fed made clear the changes ‘do not signal any change in the outlook for the economy or for monetary policy.’
But markets read the news differently, with the euro striking a fresh nine-month low of 1.3443 dollars.
‘The most important takeaway is that the Fed is beginning to implement an exit strategy, which is more than what many of the other central banks are doing, and therefore this action will be extremely positive for the dollar,’ said Kathy Lien, director of currency research at Global Forex Trading.
‘Although the Fed went out of (its) way to say that this does not equate to a change in their monetary policy outlook, action speaks louder than words,’ she said, adding that the move ‘indicates how hawkish they must be and how serious they are about tightening monetary policy.’
Investors saw the action as possibly signaling ‘the Fed is closer to eventually raising the Fed Funds rate,’ the benchmark interest rate, said Samarjit Shankar, an analyst with The Bank of New York Mellon.
At the last meeting of its policy-making body on January 26-27, the Fed left unchanged its target range for the key Federal Funds rate — the rate which the banks charge each other for overnight loans — at zero to 0.25 per cent.
‘Some investors are worried that the Fed’s discount rate hike may lead to tighter financial conditions for businesses,’ said Shinichiro Matsushita, market analyst at Daiwa Securities.
But Matsushita said a decline in the value of the yen against the dollar in response to the Fed move provided some support for Tokyo stocks because a weaker currency is good for exporters.
In Asia earlier Friday, the Tokyo Stock Exchange’s benchmark Nikkei-225 index lost 2.05 per cent, Hong Kong tumbled 2.59 per cent and Sydney dropped 0.43 per cent.
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Euro plumbs fresh nine-month dollar low

The euro, already weakened because of Greece’s debt crisis, hit fresh nine-month lows against the dollar on Friday after a surprise change to the US Federal Reserve’s monetary policy, analysts said.
The European single currency fell as low as 1.3443 dollars overnight, striking the lowest level since May 18.
In morning London trade it stood at 1.3504 dollars, down from 1.3535 dollars in New York on Thursday.
Against the Japanese currency, the dollar eased to 91.73 yen from 91.75 yen on Thursday.
The dollar jumped sharply after the Fed said it was raising the interest rate it charges on emergency loans to banks, a surprise move seen as the start of an exit strategy from its massive stimulus programme.
The hike sparked speculation that a rise in the main Fed funds rate might be closer than previously thought, boosting the dollar on hopes of an increase in yields on US financial assets.
‘Last night’s Fed decision has seen the euro hit its lowest levels since last May as it broke below the key 1.3485 level in Asia trading,’ said analyst Michael Hewson at financial betting firm CMC Markets.
‘The market’s reaction would suggest that this could be the signal for further tightening and that the Fed Funds rate could well be next,’ he said.
‘It also signifies an important point in the recovery with respect to the long awaited beginning of the withdrawal of stimulus measures to support the economy.’
The Fed has taken a step closer to exiting its emergency measures taken during the financial crisis, Hiroshi Maeba, director of Forex at Nomura Securities, told Dow Jones Newswires.
‘That definitely does not help the yen because it highlights how the Bank of Japan will trail behind the Fed’ in tightening monetary policy, Maeba added.
But dealers said the dollar might not rise much further in the near term because market participants are likely to take profits on the gains so far.
‘The upside effect from the Fed’s move will soon die down,’ said Masatsugu Miyata, Forex dealer at Hachijuni Bank.
The euro, however, is seen as likely to remain pressured by worries that eurozone countries such as Portugal, Ireland, Italy, and Spain could suffer similar fiscal problems as eurozone member Greece.
In London on Friday, the euro was changing hands at 1.3504 dollars against 1.3535 dollars on Thursday, at 123.87 yen (124.17), 0.8778 pounds (0.8710) and 1.4650 Swiss francs (1.4652).
The dollar stood at 91.73 yen (91.75) and 1.0848 Swiss francs (1.0821).
The pound was at 1.5383 dollars (1.5537).
On the London Bullion Market, the price of gold fell to 1,108.55 dollars an ounce from 1,118 dollars an ounce on Thursday.
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Oil prices drop as dollar
strengthens

Oil prices fell on Friday, although New York crude managed to hold above $78, as the US currency strengthened at the end of a volatile week for markets.
New York’s main futures contract, light sweet crude for delivery in March, fell 99 cents to $78.07 a barrel.
Brent North Sea crude for April delivery dropped $1.08 to $76.70.
The dollar rose to fresh nine-month highs against the euro on Friday after a surprise change to the US Federal Reserve’s monetary policy, traders said.
The European single currency fell to $1.3443 overnight — striking the lowest level since May 18.
A stronger dollar makes dollar-priced oil more expensive for buyers using weaker currencies, hitting demand.
The Fed’s move sparked speculation that a rise in the main Fed funds rate might be closer than previously thought, boosting the dollar on hopes of an increase in yields on US financial assets.
‘At the same time, hopes of a rebound in oil demand were dampened, but oil price losses seem contained, the more so as the inventory data published by the US Department of Energy yesterday did not provide much cause for optimism,’ said Commerzbank analyst Carsten Fritsch.
US crude oil stockpiles rose by nearly 3.1 million barrels to 334.5 million barrels for the week ended February 12, compared with average forecasts for a 1.8-million increase.
Gasoline (petrol) stocks rose by 1.6 million barrels to 232.1 million barrels, while analysts polled by Dow Jones Newswires had forecast a 1.5-million increase.
Distillate stocks including heating oil and diesel fuel dropped by 2.9 million barrels to 153.3 million barrels.
Northern parts of the United States experienced extremely cold weather conditions last week which pushed up demand for heating fuel.
The DoE weekly data is closely followed since the United States is the world’s biggest energy consuming nation.
Traders have this week also been keeping watch on oil-rich Iran, where renewed tensions over Tehran’s nuclear ambitions helped to support crude prices.
Iran recently began enriching uranium to 20 per cent purity, which the United States and several other powers said added to evidence that the Islamic republic is seeking to build a nuclear weapon.
Tehran counters that its only goal is peaceful nuclear energy and research.
US Secretary of State Hillary Clinton said her country had no plan for military action against Iran, while Admiral Mike Mullen, the chairman of the US Joint Chiefs of Staff, said Washington has not ruled out military action.
During a roller-coaster week’s trading, oil prices shot up $3.0 on Tuesday as the euro rallied against the dollar that day.
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Global cyber attacks hit
firms
Hackers have created a ‘dangerous new’ network of virus-infected computers in 2,500 businesses and government agencies around the world, a US Internet security firm warned Thursday.
Net Witness dubbed the army of 75,000 zombie machines the ‘Kneber botnet’ and said it was made using malicious ZeuS software that lets its masters steal information ranging from passwords to corporate or government secrets.
ZeuS malware has been increasingly used to siphon cash from financial institutions, with kits for customizing the larcenous programs hawked in the cyber underworld.
The code is usually slipped onto machines by tricking people into opening booby-trapped email attachments or clicking on tainted Internet links.
‘These large-scale compromises of enterprise networks have reached epidemic levels,’ said Net Witness chief executive Amit Yoran, a former national cyber security division director at the US Department of Homeland Security.
‘Cyber criminal elements like the Kneber crew quietly and diligently target and compromise thousands of government and commercial organizations across the globe.’
Computers compromised by the botnet let attackers take remote control of systems as well as mine them for valuable information about people’s identities, financial transactions, and company activities.
Net Witness said it discovered the Kneber botnet in January while deploying an online monitoring system.
Investigation revealed that business and government computers had been plundered of information including log-in credentials for banking, email and social networking services, according to Net Witness.
Yoran said the scale of the attacks dwarfs the recent ‘Operation Aurora’ cyberassault on Google and dozens of other firms.
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Dell profit dips as revenues climb

Dell Thursday reported that its fourth-quarter profits slipped five per cent despite revenues climbing to $14.9 billion.
The US computer giant’s net income for the fiscal quarter ending January 29 was $334 million, or 17 cents per share, as compared to $351 million, or 18 cents per share, during the same period a year earlier.
Revenues were pushed up by sales of economical notebook computers, but the business market where Dell makes about half its sales is only beginning to revive from the recent global fiscal drubbing.
‘We achieved solid revenue growth in every part of our business,’ said Dell chief financial officer Brian Gladden.
‘Our commercial units are well poised for profitable growth as demand continues to return.’
Dell executives said they are ‘cautiously optimistic’ about businesses ramping up purchases of computers this year.
Dell’s outlook echoes one expressed a day earlier by technology giant Hewlett-Packard, which reported its first-quarter profit surged to $2.3 billion fuelled by sales of personal computers.
California-based HP’s best performers were personal computers, unit sales of which surged 26 per cent.
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Boeing hopes to be No. 1 again

Boeing will be the world’s largest civil aircraft maker once again, a top executive from the US Company vowed in Friday’s edition of the Financial Times.
The company would take the top spot from European rivals Airbus within four years, predicted Jim Albaugh, who has served as the head of the company’s commercial aircraft business since September. The latest version of its 747 jumbo jet had taken to the skies for the first time.
The 747-8 is Boeing’s answer to the A380, the super-jumbo aircraft made by European rival Airbus.
Boeing also produces the 747, 767, 777 and the new 787 Dreamliner aircraft, which shares the same advanced technologies as the new 747-8.
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Microsoft-Yahoo! deal gets green
light from regulators

Microsoft and Yahoo! said Thursday that US and European regulators have cleared the way for them to blaze on with a planned tie-up aimed at taking on Internet search king Google.
‘Although we are just at the beginning of this process, we have reached an exciting milestone,’ said Microsoft chief executive Steve Ballmer.
‘I believe that together, Microsoft and Yahoo! will promote more choice, better value and greater innovation to our customers as well as to advertisers and publishers.’
The companies said they had ‘received clearance for their search agreement, without restrictions, from both the US Department of Justice and the European Commission, and will now turn their attention to beginning the process of implementing the deal.’
The European Commission earlier announced it had approved software giant Microsoft’s plan to acquire Yahoo!’s Internet search and advertising business.
The partners said they expected to begin implementing the deal ‘in the coming days.’
Under terms of the agreement announced in late July 2009, Microsoft’s new Bing search engine will handle online queries at Yahoo! properties, with the California Internet pioneer customizing presentation of results and ads.
The transition will involve moving Yahoo!’s search platforms to Microsoft, with Yahoo! running sales relations with both companies’ premium search advertisers globally.
‘This breakthrough search alliance means Yahoo! can focus even more on our own innovative search experience,’ said Yahoo! chief executive Carol Bartz, who took command of the firm after a failed takeover bid by Microsoft.
‘Yahoo! gets to do what we do best: combine our science and technology with compelling content to build personally relevant online experiences for our users and customers.’
All global customers and partners are expected to be transitioned by early 2012, they said.
‘Once the transition is completed, the companies’ unified search marketplace will deliver improved innovation for consumers, better volume and efficiency for advertisers and better monetization opportunities for web publishers through a platform that contains a larger pool of search queries,’ the companies said in a joint statement.
Yahoo! and Microsoft announced in December that they had finalised the details of an Internet search and advertising partnership — a year after Microsoft offered $47.5 billion in a takeover bid for Yahoo!.
Google opposed a Microsoft takeover of Yahoo! and had proposed its own alliance with the struggling Internet firm, but backed off from such a plan after it was frowned on by US regulators.
Predictably, Microsoft had weighed in against a Google partnership with Yahoo! at the time.
Analysts are divided on how much closer the Microsoft-Yahoo! tie-up will take either company to Google, the overwhelming leader in a web search and advertising market, which research firm Forrester estimates will be worth more than $30 billion (22 billion euros) in 2014 in the United States alone.
Microsoft and Yahoo! said Thursday that they continue to work with regulators in South Korea, Taiwan and Japan to provide all relevant information necessary for them to evaluate the transaction before the deal is launched in those countries.
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JAL shares end last trading
day at one yen

Shares in bankrupt Japan Airlines finished their last trading day at just one yen (one US cent) on the Tokyo Stock Exchange on Friday, marking another ignominious milestone in the carrier’s decline.
Asia’s biggest airline, which went bankrupt a month ago with $6 billion of debt in one of the country’s biggest ever corporate failures, is being delisted from the exchange under a government-backed turnaround plan.
Shareholders are to lose their investment but the airline aims to continue operating after receiving a financial lifeline of $10 billion in public funds.
The stock exchange said 27.6 million JAL shares changed hands Friday, but the stock finished unchanged from the previous day’s close.
Investors will no longer be able to trade JAL stocks on the Tokyo Stock Exchange although the stock may still be traded on the grey market, a spokesman for the bourse said.
‘If you ask securities companies, they might buy at one yen or so. But we don’t know if they would really buy the shares,’ he said.
JAL’s stock has plunged 99 per cent over the past three months. Its highest share price since it began merging operations with small domestic carrier Japan Air Systems was 366 yen, seen in 2003.
JAL, a once-proud flag carrier that carries more than 50 million passengers every year, plans to slash more than 15,600 job cuts under a three-year turnaround plan.
The airline was established in 1951 and two years later the government took a 50-per cent stake. It made its international debut in 1954, connecting Tokyo, Honolulu and San Francisco.
JAL’s woes are seen as the result of years of bad management, high costs stretching back to its days as a state-owned flag carrier as well as government pressure to service unprofitable routes to small domestic airports.
It was also hit particularly hard by the global economic downturn because of its extensive overseas flight network.
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ECB, Fed to march to different
monetary rhythms

The European Central Bank has already begun to undo exceptional measures taken amidst the global financial crisis but will go more slowly than the US Federal Reserve owing to the eurozone’s fragile state, analysts say.
The Fed raised on Thursday the rate it charges for emergency loans to banks, a surprise move seen as the start of an exit strategy from radical measures begun in mid 2007 that sought to jolt the US economy from recession.
The ECB began in December to unwind what it calls ‘enhanced credit support,’ mainly unlimited loans to commercial banks, and does not need to take specific steps but can just let measures run out according to an established timetable.
The last 12-month loans of central bank cash took place in December and the last six-month operation has been set for late March.
‘The ECB can simply go back to normal three month refinancing operations, this already takes a lot of liquidity out of the markets,’ ING senior economist Carsten Brzeski told AFP.
The 16-nation eurozone economy is much weaker than that of the United States, which might allow the Fed to move more quickly than the ECB.
‘We have the impression that if there is a bias on the US side, it will be towards an accelerated unwinding of the support measures,’ Deutsche Bank economist Gilles Moec told AFP.
Global Economics chief international economist Julian Jessop stressed however that ‘the normalization of some monetary policy tools (whether the restoration of usual interest rate spreads or the withdrawal of emergency facilities) does not mean that key policy rates are going up any time soon.’
The Fed announced its decision after leading US economic indicators rose for the 10th consecutive month in January.
On Friday however, a closely-watched survey of eurozone private business activity showed a ‘worrying slowdown’ in the all-important services sector, reinforcing worries over what is expected to be a hesitant recovery.
The eurozone is also struggling with deficit and debt crises in several member states that have raised the question of its ultimate credibility and cohesion.
That has forced governments to announce strict fiscal belt-tightening moves which will influence ECB policymakers when they meet in two weeks to mull changes to the bloc’s monetary policy.
Moec resumed their position as ‘I don’t have a very good economic climate, I probably also have budget tightening, I therefore don’t really want to accelerate the pace’ of normalizing money supply and interest rates.
Brzeski did not believe the ECB would change its exit strategy just because of the fiscal crisis in Greece.
But he acknowledged a question mark remained over whether Greek banks now depended on the ECB’s generous allocations of cash loans.
‘If the ECB now withdraws the liquidity, could this mean that Greek banks could get into trouble,’ he asked.
At the same time, the ECB has made it clear since December that ‘the times of free refills are over,’ the ING economist noted.
‘Like the Fed the ECB will withdraw now and test the interbank market a little bit,’ but Brzeski stressed that within the eurozone, ‘it has to be very gentle.’
Moec felt the Fed’s move ‘confirmed it wants to withdraw exceptional measures at a relatively rapid pace.’
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US asked to tighten laws to fight
copyright violation

A top US business lobby urged lawmakers Thursday to tighten laws to crack down on nations that infringed intellectual property rights.
The US Chamber of Commerce, which claims to represent over three million businesses, said it wanted Congress to enact legislation that would strengthen an annual government review of countries linked to copyright piracy.
The US Trade Representative office places such countries on a blacklist, known as a ‘Priority Watch List,’ as part of its annual ‘Special 301 Report’ that scrutinizes global intellectual property rights protection and enforcement.
‘Congress should enact legislation to improve the US Trade Representative’s ‘Special 301’ process by enhancing the tools available to the administration to engage more effectively with countries that fail to respect and enforce the rights of American innovators and/or live up to their international IP obligations,’ the chamber said in a report.
The study, the ‘2010 Intellectual Property Agenda,’ contains other suggestions to beef up the fight against copyright piracy and was sent to Congress and President Barack Obama.
‘This legislation should require an action plan for Priority Watch List countries that includes clear benchmarks to measure performance, and meaningful consequences for nations that fail to perform,’ the report suggested.
It urged the Obama administration to ‘engage key trading partners such as India and China in strengthening their protection and enforcement of IP rights, whether it is improving India’s patent law or working with Beijing to crack down on Internet piracy.’
In a letter to Obama, the chief of the chamber’s Global Intellectual Property Center said intellectual property issues in a few countries were ‘harming America’s competitiveness and economic growth.’
‘For example, India’s patent laws prevent many critical medicines from being patented, thereby discouraging the development of important new treatments and cures,’ the center’s president, David Hirschmann, said in the letter.
‘Internet piracy in and from China is also doing great harm to America’s creative industries.’
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Singapore eyes 6.5pc growth

Singapore said Friday its economy is expected to expand up to 6.5 per cent this year as countries that buy most of its exports emerge from recession and world financial markets stabilize.
The government upgraded its growth forecast from 3.0-5.0 per cent to 4.5-6.5 per cent after the economy contracted by a slower-than-predicted 2.0 per cent in 2009 due to a faster turnaround from recession.
Gross domestic product rose 4.0 per cent year-on-year in the fourth quarter to December, faster than the 0.6 per cent expansion in the third quarter, the Ministry of Trade and Industry said.
‘Major economies around the world have emerged from recession. Financial markets have stabilized and trade flows and industrial production have also picked up strongly,’ the ministry said in a statement.
Singapore, one of Asia’s wealthiest countries, relies on trade, finance and tourism to drive economic growth.
Trade promotion body International Enterprise Singapore said the nation’s main exports, among them pharmaceuticals and computer chips should expand 10-12 per cent this year after declining 10.6 per cent in 2009.
After shrinking 19 per cent to 747 billion Singapore dollars ($529 billion) in 2009, total trade is also forecast to jump 9-11 per cent this year, driven by a rise in global demand, IE Singapore said.
The trade ministry however said there are uncertainties in the economic outlook, especially in the second half of the year with the recovery in the United States, Europe and Japan expected to be sluggish.
‘In addition, several downside risks remain, including sovereign debt risks (especially in Europe) and asset price inflation in Asia,’ it said.
‘These factors could weigh on the pace of growth in major economies, especially in the later part of 2010.’
David Cohen, a regional economist with consultancy Action Economics, acknowledged there are potential minefields but said growth will continue.
‘There are still risks surrounding another possible financial crisis of some sort,’ he told AFP, citing fears the debt crisis in Greece could spread to the rest of the countries using the euro single currency.
‘But I still think the most likely scenario would be continued growth. The data out of the United States indicate that recovery is continuing there. The Asian region, in particular China, should continue to pace global growth’.
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Obama unveils plan to help
housing bubble victims

President Barack Obama will Friday unveil a package of measures aimed at helping those worst affected by the US housing crisis as he visits Nevada, where the collapse hit particularly hard.
In Las Vegas, Obama will announce ‘funding for innovative measures to help families in the states that have been hardest hit by the aftermath of the housing bubble,’ the White House said in a statement.
‘In each of these states, the average price for all homeowners in the state has fallen more than 20 per cent from the peak,’ the statement added.
The White House noted that while home prices have begun to stabilize, many people still found themselves owing more on their mortgage than the value of their home — so-called ‘underwater’ mortgages.
Obama will announce the allocation of $1.5 billion to be disbursed in coordination with State Housing Agencies.
The money will fund programs that will help unemployed homeowners, assist borrowers with underwater mortgages, address the problem of second mortgages or encourage ‘sustainable and affordable homeownership,’ the White House said.
The administration has already spent hundreds of billions of dollars trying to stabilize the housing market and reduce the foreclosures that have multiplied across the country since the peak of the financial crisis in September 2008.
Nevada, Florida and California, all once states with booming housing markets, have been worst hit by the sector’s collapse.
Obama is in Las Vegas Friday for a second day of stumping for Democratic candidates.
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Toyota chief to face US Congress
over safety crisis

The head of embattled Toyota has bowed to calls to testify in US Congress as lawmakers demand a whistleblower lawyer hand over potentially damning internal company documents on alleged safety defects.
A key congressional committee has subpoenaed former Toyota lawyer Dimitrios Biller, who has accused the world’s biggest car maker of hiding and destroying evidence of safety problems and of ‘a culture of hypocrisy and deception’.
Toyota is recalling more than eight million cars worldwide for defects linked to more than 30 deaths in the United States that have sparked a host of US lawsuits which could cost the company billions of dollars in damages.
Akio Toyoda, the usually publicity-shy grandson of the company’s founder, was initially reluctant to appear before the US Congress but relented following an invitation by Representative Edolphus Towns to testify next Wednesday.
‘Since I received an official letter, I decided that I’m pleased to go. I want to speak there with all sincerity,’ Toyoda told reporters.
‘What I want to stress most is our cooperation in determining the causes (of the problems) and our firm stance on safety,’ he added.
His announcement came as the committee asked Biller, a top US lawyer for the Japanese carmarker from 2003 to 2007, to bring all documents he has relating to Toyota’s ‘handling of alleged motor vehicle defects and related litigation’.
Biller says the internal company documents show the beleaguered firm was hiding evidence of safety defects from consumers and regulators.
The lawyer, speaking to ABC News, has accused Toyota of hiding and destroying evidence and of ‘a culture of hypocrisy and deception’.
Toyota has denied Biller’s claims, describing him as a disgruntled former employee, and both sides are locked in a legal battle.
The iconic company, whose global expansion pushed it past General Motors in 2008 as world number one, is facing a litany of complaints ranging from unintended acceleration to break failure in its Prius hybrid cars.
US safety officials are probing whether Toyota dragged its feet on tackling the problems, and President Barack Obama’s Transportation Secretary Ray LaHood has vowed ‘to hold Toyota’s feet to the fire’ to make sure its cars are safe.
The auto giant’s president has faced mounting criticism about his handling of the crisis, the worst in the company’s history.
‘President Toyoda should have announced his attendance much earlier as he has no choice but to appear before Congress under the current circumstances,’ said Mamoru Kato, an analyst at Tokai Tokyo Research Centre.
‘Toyota Motor hopes to calm the issue with his appearance, but it’s unlikely,’ he said. ‘There is no sign of this blowing over as distrust in Toyota is quite serious, particularly in the United States.’
Japan’s transport minister on Friday criticized Toyoda for not being more decisive on whether to face the US Congress.
‘It’s regrettable that there were flip-flops and talk that he would not attend,’ Seiji Maehara told reporters.
Toyoda, 53, was long groomed for the top job and became the first member of the founding family in 14 years to take the reins last June.
The avid motor racing fan was criticized for being slow to appear in public after the mass recalls went global, but has now appeared before the media four times in about two weeks.
Toyoda is the grandson of Kiichiro Toyoda — who founded the automaker in 1937 — and the son of former president Shoichiro Toyoda.
When he was named last year to take the helm of the automaker, Toyoda said he was ‘sobered by the heavy responsibility’.
The family scion has put the brakes on Toyota’s rapid expansion, which left it vulnerable to the global economic crisis and — critics say — led to a weakening in its once-legendary quality control.
With its sales slumping following a string of safety issues, Toyota said this week that it was suspending output at two US plants for up to two weeks.
And according to media in Britain, Toyota will also idle its plant there next month for two weeks.
Toyota shares fell 1.78 per cent to end Friday at 3,300 yen. The stock has plunged more than 20 per cent since January 21 in response to the mass recalls, which have triggered fears for the brand image of the whole of corporate Japan.
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US January consumer prices inch up

US consumer prices inched up in January but core inflation — excluding food and energy — unexpectedly fell for the first time in 27 years amid a sluggish recovery, official data showed Friday.
The consumer price index rose 0.2 per cent, led by gasoline prices, the Labour Department reported in seasonally adjusted data.
The CPI increase was a tick below the analyst consensus forecast of 0.3 per cent.
On an unadjusted annual basis, consumer prices were up 2.6 per cent from January 2009, a low base for comparison because consumer prices had fallen for five consecutive months in late 2008 as the global financial and economic crisis accelerated.
Core CPI ,excluding food and energy prices, unexpectedly fell 0.1 per cent last month, the first decline since December 1982.
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British PM hopes for G20 deal
on world finance rules

British Prime Minister Gordon Brown said Friday he was hopeful of agreement on a ‘world constitution for the global financial system’ at G20 meetings in Canada and South Korea later this year.
Speaking at a meeting of European centre-left parties in London, Brown again voiced his support for measures including common global rules on bankers’ bonuses, plus bank capital reserves and liquidity.
‘I hope that all these things can be agreed in the coming months in the meetings in Canada and Korea,’ Brown said.
‘One thing is clear — either government cooperates internationally, or the invisible hand of the unfettered market will fail us again.’
The G20 is meeting on June 26 and 27 in Toronto and November 11 and 12 in Seoul this year.
Brown, whose country chaired the G20 last year, said unless the world learns lessons from the credit crunch, ‘we will relapse into the old ways of business as usual and bring crisis upon ourselves anew’.



BANGLADESH: STOCK MARKET
IPO floatation guidelines set to be revised next week

The Ministry of Finance (MoF) is set to revise the guidelines it issued about three and a half months back on minimum paid-up capital requirement -- 40 per cent of total paid-up capital -- for an intending company to qualify for making initial public offerings (IPOs), officials in the ministry said.

The restriction, made effective from November 5, 2009, drew criticism from capital market analysts and investors, which virtually discouraged many potential companies to raise their needed capital from the booming share market.

The finance ministry at a meeting early last November decided that a company would have to go for offloading minimum 40 per cent of its paid-up capital through IPO.

According to the revised guidelines, which are likely to be issued early next week, the percentage of IPO of an intending company has been tagged with the amount of paid-up capital under three categories, sources said.

A company having paid-up capital worth above Tk 1.5 billion has to go for IPO to offload a minimum of 15 per cent of its paid-up capital. However, the value of such a company's IPO has to be minimum Tk 400 million, according to category-one of the revised guidelines.

Under the new guidelines for the second category, a company having paid-up capital between Tk 750 million and Tk 1.5 billion has to go for IPO with the minimum of shares equivalent to 25 per cent of its paid-up capital. The amount of such company for IPO has to be minimum of Tk 300 million, sources said.

Under the last category a company having the paid-up capital worth less than Tk 750 million must raise at least 40 per cent of its paid up capital through IPOs.

Officials in the MoF said they have finalised the revised regulations for IPOs in consultations with the Securities and Exchange Commission (SEC) as the latter, being asked by the ministry, has recently submitted the new guidelines in this respect to replace the earlier one.

"We would issue the revised regulations of IPOs early next week to ensure the entry of new securities to the capital market," a top MoF official told the FE last Thursday.

He said the new guidelines on IPOs would help flow of shares from good companies.

Officials in the SEC said the regulations have been made in line with the recommendations made by the Commission.

At least three companies have been awaiting nods from the SEC for long for floating their IPOs without meeting the 40 per cent criteria and these companies will now be given permission for IPOs after the new IPO regulations are issued, the officials in the SEC said.

The companies are: RAK Ceramics, Beacon Pharmaceuticals and IIDFC, it is learnt.

The amounts of share offloading by the three companies are below the government's existing requirement for floating an IPO.

RAK Ceramics IPO size is Tk 300 million, which is more than 16 per cent of its existing paid up capital of Tk 1.85 billion, while Beacon Pharmaceuticals' Tk 300 million is around 16 per cent of its Tk 1.9 billion paid-up capital.

As of June 2009, IIDFC's paid up capital was Tk 140 million, and with the IPO floatation, another Tk 50 million will be added to the existing paid up capital. The company is offering Tk 70.5 million worth of shares, which include premium amounting to Tk 50 million, sources in the SEC said.




COMMENTARY
Stock Market: A ticking bomb

The bulls in the Dhaka Stock Exchange (DSE) are surging ahead with the DSE all share price index crossing 5,800-mark last week. Generally strong stock market performance is associated with strong economic fundamentals, and one should be pleased with the outcome. However, the surge in the price index and the associated increased market volatility, somehow reminds us about the boom and bust of 1996. A sudden influx of funds and a surge in retail investors are pushing the DSE index forward without regard to economic fundamentals; the unfolding scenario is virtually a reenactment of the first part (constituting/representing the bull run) of the 1996 stock market episode. We are drawing on the 1996 episode, since lessons of 1996 is very much relevant today.

During the second half of 1996, the DSE all share index increased by 139 per cent, a robust growth by any measure, fueled by the herd mentality of the non-professional retail investors and a huge influx of funds. Participants in the overheated market were aggressively chasing a few available stocks. The hike in market capitalization and market turnover were also aberrant as the number of listed companies and available shares of good companies remained almost unchanged during this period. During June to November 1996, the DSE all share price index increased more than three folds from 959 to 3065 or by 220%!

The newly elected government of that time initially misinterpreted this formation of the stock market bubble as fundamental strength of the economy and a manifestation of people's confidence in the new government. However, policymakers' enthusiasm was short-lived and was soon replaced by concerns about the demise of the bubble and the impending market crash. When the market index more than doubled in one month to 3000 in October 1996, efforts were made to stabilize the market, but it was too little and too late. As the bubble busted in November 1996, the DSE general index collapsed to its post-peak lowest level of 957 in April 1997, stabilizing at about the same level where it was some 10 months back (See Fig 1). By the end of April 1997, the stock market price index plunged by almost 70% from its peak of November 1996.

During this bubble period only few traders and market manipulators who had knowledge and inside information gained, while general investors paid heavily. The bear market that started with the busting of the bubble lasted for seven years, the DSE general index rarely crossing the 1000-point mark during this period. The market started a recovery from April 2004, when it was fairly underpriced with the average price-earnings ratio at about 10, and thereafter the DSE index steadily gained through July 2009.

No two bubble episodes are exactly the same across countries or across time. A sharp rise in stock prices does not necessarily mean formation of a bubble. Stock prices may also rise across the board when something change fundamentally in the economy or in the economic outlook, such as the developments in the Spanish and Irish stock markets on the eve of their joining the European Union (EU). Such price surges cannot be characterized as bubbles since the indices may stabilize at their new high levels with earning potentials realized over time. However, generally most stock market bubble episodes have some common characteristics. Some of these characteristics include: exuberant demand manifested through weak correlation between price and economic value; high price volatility; acceleration in money and margin lending; narrow market leadership; structural weaknesses like lack of institutional investors and weak regulatory regime.

Assessing the existence and size of exuberant demand is a difficult task. However, as we notice record levels of market turnover and new records for the DSE general index week after week, we really wonder whether "irrational exuberance" is also dominating Bangladesh stock market. The index, which was at 2941 in August 2009, has crossed 5800 points in February 2010 (see figure 1), growing by 98 % since August. The index has increased by 28.5% since the beginning of the year. This surge is certainly not normal and cannot be explained by economic fundamentals.

Similar movements have been recorded in market capitalization, price-earnings ratio, market volatility and in other indicators during this period. Market capitalization (total number of shares times the average market price of shares) in August 2009 was TK 1307 billion (US$18.9 billion) and on February 17 it has risen to TK 2366 billion (US$ 34.2 billion) (See figure 2), exhibiting a rise of 81% within five months! Just to put it in proper perspective, the market capitalization was only Tk 97 billion (US$ 1.7 billion) in Dec 2003 before the beginning of the current bull-run. The daily average turnover showed a similar trend, increasing from Tk. 0.14 billion in Dec 2003 to Tk. 12 billion in January 2010 and further to Tk. 14 billion in the first half of February. In 2009, daily turnover did not fall below Tk. 10 billion which was a miniscule 0.26 billion in 2004.

As the supply of stocks is almost unchanged, except for the launching of Grameen Phone IPO in November 2009, pressures in stock prices are obviously coming from the demand side. Among many factors, huge number of new investors with fresh funds is primarily responsible for this price pressure. In January 2009, some 0.115 million (1.15 lakh) new Beneficiary Owners' (BOs) accounts have been opened while the number was 58,000 in December 2009. The increase in the number of BO account holders has accelerated further to 0.123 million (1.23 lakh) in the first 10 days of February. This means 12,000 new investors are joining the market every day. Huge amounts of fresh money are being channeled into the stock market through these accounts, undoubtedly pumping the stock market balloon to grow bigger almost every day. If the average account size is Taka 0.1 million (1.0 lakh), everyday Tk. 1.2 billion is being poured into the market, mostly by the first time retail investors while foreign portfolio investors are withdrawing from the market realizing their profits.

This excess demand is causing price earnings (P/E) ratio to rise and making stocks riskier to purchase/hold. The P/E ratio can be defined as:

That is, the P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio. The P/E ratio can be interpreted as "number of years of earnings to pay back purchase price", ignoring the time value of money. In other words, P/E ratio shows current investor demand for a company share.

A high P/E ratio also implies that the share has high growth potentials. That's why its market price is expected to be higher than other equivalent shares. Market P/E ratio at the DSE has been rising gradually, meaning many shares have become overvalued. In August 2009 the market (weighted average) P/E ratio was 17.5 and by February 2010 it has risen to 30 (see figure 3), meaning a share on average takes 30 years to give back (through dividends) its purchase price to the investor. It is also reported that, a few companies which are not even properly managed, their securities are being actively traded in the market at P/E ratios well above 75!! Isn't it insane to invest in such shares?

Moreover, what we are observing at the DSE is that companies like banks with higher growth potentials, stable income base and established track records have lower P/E ratios compared with shares of many other companies without proven track records! These findings clearly indicate that some shares of questionable quality are extremely overvalued in recent times.

The Security and Exchange Commission (SEC), the regulatory authority for overseeing the stock market, has been taking some steps to contain the market instability. To limit investor funds flowing into these already overvalued shares and help the market to calm down, the SEC has undertaken several initiatives, including tightening of the conditions for margin loans. Initially, the SEC set the limit of equity to loan ratio at 1:1.5 and restricted such lending only for stocks with P/E ratio not more than 75.

More recently, the SEC further tightened the criteria by setting the loan limit at 1:1 in shares which have P/E ratios lower than 50. This means with margin loan facilities 50% of the share price should be borne by the investors and other shares which have P/E ratio over 50 can be purchased only with cash. These are good moves. But the market is in a defying mood and simply shrugged off the message.

Now the question is why this is happening and what else the government can do to prevent a repeat of 1996 stock market debacle. Obviously when there is a lot of liquidity in the system, and money being fungible, there is no way to prevent people from borrowing on one account (for the officially stated purpose of trading, housing, agriculture and other uses) and investing in the stock market. As surging flood water cannot be contained by a putting a small/weak dam downstream and water simply bypasses or overwhelms/washes away the barrier, money keeps pouring into the stock market ignoring the SEC signals lured by quick capital gains.

With broad money (M2) expanding by more than 20% last fiscal year and once again this year, fueled by inflow of workers' remittances, certainly there is more than enough liquidity (like surging flood water) to shrug off the limited efforts by the SEC. The budgetary provision to allow whitening of undisclosed money into the stock market is also playing an important role in flooding the market with liquidity.

People of all walks of life are moving toward the market but the market is not for everyone. Professionals and market manipulators are expected to gain, while others must lose at the end. The market is already overheated, and in the midst of the stock market frenzy market manipulators are very active. This is clearly visible in the performance of the index of "bottom 20 small cap companies". Since May 2008 the price index of these companies has increased several times more than the DSE general index and the P/E ratio for these companies is now 100 or more, compared with DSE market P/E of about 30.

All these uncomfortable indicators send one clear message that the stock market is currently not a good time for new and uninformed investors. It is imperative on the part of policy makers to send clear warning signals and highlight the heightened risks in order to protect ordinary investors. Measures also need to be taken to minimize the exposure of banks to the stock market in order to safeguard depositors' interest. Ordinary investors should be reminded what Warren Buffet said: "The market, like the Lord, helps those who help themselves. But unlike the Lord, the market does not forgive them who do not know what they do."

Currently the market is entirely being driven by mob frenzy, and how long this will continue is to be seen. However, if this frenzy continues for a few more months, the bubble would become much bigger and it would be too late to defuse this ticking bomb. The bubble will explode like it did in 1996. Should we allow the market to give investors such a hideous solution? Should not the government come forward to give people a better solution?

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