Analysis: Lenders seen swallowing Greece's 80 bln euro demand
Ben Harding
ATHENS |
ATHENS (Reuters) - Greece needs 10 times more aid in January than the 8 billion euros it is scrambling to secure by next month. International lenders are likely to grit their teeth and pay both bills to prevent a messy default that could take down Italy as well.Greece says lenders will need to frontload their proposed 130 billion euro bailout for Athens with an initial 80 billion euros because of the vast sums needed to cut private sector debt without destroying Greek banks in the process.
European leaders say Greece has consistently failed to sell state assets, chase tax evaders and slash the public sector as promised, prompting the exasperated leaders of France and Germany to openly suggest last month Athens might quit the euro.
"While they may well want to threaten Greece, when push comes to shove, euro zone governments may opt to put off disorderly default ... and the Greek government is aware of that," said Ben May at Capital Economics.
Finance Minister Evangelos Venizelos is frank about Greece's urgent need for a big slice of the second bailout -- even before its lenders from the European Union, International Monetary Fund and European Central Bank have signed off on the release of the prior loan, needed by mid-December.
"The next loan tranche ... is not like the sixth tranche of 8 billion euros but more than 80 billion euros in total," he told parliament on Tuesday, adding Greece would need it by early February at the latest.
GREECE HOLDS THE CARDS
New prime minister Lucas Papademos, a respected former European Central Bank vice-president, has made the bailout, agreed in Brussels last month, his coalition's top priority.
But while euro zone lenders appear to have the whip hand as the clock runs down, the trauma of a Greek default would still be too painful for the rest of the common currency area.
Though Greece, with 360 billion euros of debt, is a far smaller systemic risk than Italy, any withholding of financial aid would shatter an assumption that the euro zone will support any member in trouble.
Italian bond yields have burst through the psychologically key 7 percent barrier as political turmoil has stoked fears it lacks the means or will to fund its 1.8 trillion euro debt pile.
"Maybe the effect of Greece leaving the euro zone is priced in ... but the likelihood that Italy would then default has increased, so it becomes even more expensive to save Italy," said Christian Schulz, Senior Economist at Berenberg Bank in London.
Diego Iscaro, at IHS Global Insight in London, said he expected Paris and Berlin to grumble but ultimately to agree to the large tranche since Europe's EFSF bailout fund lacks the firepower to save Italy, making a Greek firewall more important.
"I think Athens' position is stronger than many on the outside realize."
THE 80 BILLION EURO QUESTION
One risk is that Greece's feuding parties use Papademos to secure the massive first installment of a new bailout program, then once his three-month mandate expires, revert to politics as usual. Since they will have had most of the money in one dollop, some may feel the remainder is not worth all the political pain.
Still, Athens can ill afford to slacken the pace of austerity as it will see little of the 80 billion euros before it flies out the door again.
Thirty billion will go to recapitalize Greek banks in order to absorb losses on a key pillar of the deal -- an agreement between banks, the EU and Greece to halve Athens' 200 billion euro debt to private sector bondholders.
To secure this private sector involvement (PSI), a further 30 billion euros will go to bondholders to sweeten the haircut, with one suggestion that they receive 30 percent of the discounted bonds in cash.
Greece said earlier on Thursday it had begun negotiations with banks to thrash out the swap of existing bonds for longer maturing, discounted paper.
Charles Dallara, head of the Institute of International Finance (IIF), which represents the banks, said before meeting Papademos in Athens on Wednesday that there was limited flexibility on the plan's terms to ensure it remained voluntary.
Adding urgency to the PSI negotiations is a tentative target for fresh parliamentary elections on February 19.
Only 20 billion euros of the 80 billion estimated by Venizelos will flow into state coffers and what it will be used for is unclear, reflecting the embryonic state of the PSI talks.
Five billion euros will go toward clearing debts to suppliers who have kept the country running, leaving the remaining 15 billion euros to pay for bond redemptions.
That war chest could be swallowed whole by a 14.5 billion euro bond which matures on March 20, according to Reuters data.
Creditors on the three-year issue are unlikely to accept any significant haircut or extension of its maturity this close to redemption, analysts said, particularly since the hit to net present value would be all the greater.
Neither Greece's finance ministry nor the country's debt agency would comment on what debt it would target with the 'spare' 15 billion euros.
In all, Greece has still to repay 8.7 billion euros up to the end of this year and 22.4 billion euros from January to end-March, Reuters data shows.
Athens estimates the PSI deal will save it 4.5 billion euros a year in interest repayments, but analysts say even that will not prevent a further default down the line, since Greek debt would still be at an "unsustainable" 120 percent of GDP by 2020.
"We would not be surprised to see further debt restructurings down the line," says Capital Economics' May.
"Greece could continue to play ball if it feels that the costs of defaulting are greater than the benefits, but in our view, at some point, Greece will feel it needs to restructure its debt again because it's simply too costly."
____________________
My Thots...
The greatest uncertainty in Greece is that of political risks.
Lucas Papademos will deliver but can he stay after Feb?
Will Antonis Samara honour the agreements that Greece under Papademos made with the Troika, should he be elected?
Thursday, November 17, 2011
Mario Monti
Italy's PM unveils anti-crisis plan
Posted: 17 November 2011 2230 hrs
ROME: New Italian Prime Minister Mario Monti said on Thursday that the future of the euro also depended on Italy, during his first speech in parliament in which he unveiled a plan to tackle the crisis.
"The future of the euro also depends on what Italy will do in the next few weeks," he said, adding that his new technocratic cabinet would implement "austerity measures" which would be balanced by "growth and equity".
The former European commissioner said Europe was living through "the most difficult years since the second world war" and warned that the European project "could not survive the collapse of the monetary union".
He said Italy must stop being considered Europe's "weak link", otherwise "we risk becoming partner to a model we have not helped build", and which could instead be built by countries "who do not want a strong Italy".
However, he added: "We don't consider the European obligations to have been imposed by external forces. It's not a case of them on one side and us on the other. We are Europe."
"We need measures to make the economy less fossilised, help new industries to grow, improve public services and favour youth and female employment."
Monti, whose economic programme had been hotly awaited by global leaders, said he intends to overhaul the labour market and pensions system, which has "unjustified privileges for certain sectors".
Both are measures the European Union has called for and their inclusion in the announced reforms is expected to reassure markets.
Monti also said he hoped to reduce labour tax and look into re-weighting estate tax, adding that the absence of property tax on main households since it was abolished under the former Silvio Berlusconi government was an Italian "anomaly".
"If we fail, if we don't carry out the necessary reforms, we will also be subjected to much harsher conditions," he warned.
The premier, who took over from the ousted billionaire Berlusconi on Wednesday, said the "absence of growth cancelled out sacrifices" and promised to respect Italy's timetable to balance its budget by 2013 and reduce its debt.
Monti's speech was well received, and the Senate speaker had to intervene and call on members of parliament to listen rather than applaud wildly.
- AFP/al
"The future of the euro also depends on what Italy will do in the next few weeks," he said, adding that his new technocratic cabinet would implement "austerity measures" which would be balanced by "growth and equity".
The former European commissioner said Europe was living through "the most difficult years since the second world war" and warned that the European project "could not survive the collapse of the monetary union".
He said Italy must stop being considered Europe's "weak link", otherwise "we risk becoming partner to a model we have not helped build", and which could instead be built by countries "who do not want a strong Italy".
However, he added: "We don't consider the European obligations to have been imposed by external forces. It's not a case of them on one side and us on the other. We are Europe."
"We need measures to make the economy less fossilised, help new industries to grow, improve public services and favour youth and female employment."
Monti, whose economic programme had been hotly awaited by global leaders, said he intends to overhaul the labour market and pensions system, which has "unjustified privileges for certain sectors".
Both are measures the European Union has called for and their inclusion in the announced reforms is expected to reassure markets.
Monti also said he hoped to reduce labour tax and look into re-weighting estate tax, adding that the absence of property tax on main households since it was abolished under the former Silvio Berlusconi government was an Italian "anomaly".
"If we fail, if we don't carry out the necessary reforms, we will also be subjected to much harsher conditions," he warned.
The premier, who took over from the ousted billionaire Berlusconi on Wednesday, said the "absence of growth cancelled out sacrifices" and promised to respect Italy's timetable to balance its budget by 2013 and reduce its debt.
Monti's speech was well received, and the Senate speaker had to intervene and call on members of parliament to listen rather than applaud wildly.
- AFP/al
_____________
My Thots....
Not yet the full Monty.
So far so good, for Italy under Monti.
Iron Ore Swaps
Published November 17, 2011 | |
BOC unit plans iron ore swaps business (SHANGHAI) A unit of the Bank of China (BOC), one of the country's top four banks, is planning to kick off an iron ore swaps business next year in a bid to tap growing demand for hedging from steel mills and traders, two sources familiar with the matter said. |
The entry of a major bank from the world's top iron ore buyer could bolster liquidity of the nascent swaps market, and signal a further warming to derivatives in China's state- dominated steel sector as prices of the main raw material become more volatile.
BOC International (BOCI), the investment banking arm of the state-owned bank, aims to provide brokerage services, proprietary trading of iron ore swaps as well as physical trading.
'The bank plans to start an iron ore swaps business in the first half of next year, with the aim of providing hedging services for domestic players first,' said one of the sources. 'It also plans to apply for clearing membership in the Singapore Exchange (SGX) next year.'
BOCI was approved as a clearing member of CME Group in March. The CME and SGX both offer clearing of iron ore swaps, with the bulk of globally traded volumes cleared on the SGX.
The source said that BOCI has also applied for category two membership on the London Metal Exchange (LME), which would give it access to all types of LME business except ring trading.
A spokeswoman for BOCI said that she could not immediately comment.
Demand for iron ore derivatives has swelled in recent years given a shift away from annual contracts for the commodity, with a growing number of investment banks and traders venturing into the sector.
The move by BOC is the latest sign that Beijing is moving onto the global stage as it looks to play a greater role in setting world prices for the raw materials that power its fast-growing economy.
Earlier this year, Chinese regulators allowed three of the country's futures brokerage firms to prepare to participate on overseas commodity exchanges.
The overseas foray by BOC and other brokerage firms will help overcome the advantage that foreign banks currently have in helping Chinese firms hedge overseas.
But growing demand from Chinese firms for hedging could also see Beijing accelerate the pace of opening domestic commodity exchanges, the world's largest by traded volume, to foreign players.
'The market certainly needs the big liquidity boost coming from China to make this a market where you can genuinely hedge physical risk,' said an iron ore swaps broker in Singapore.
'If it happens, it shows a bit of softening in China's stance on derivatives,' he said.
Last year's breakdown of a 40-year-old system of pricing iron ore annually in favour of a more flexible quarterly scheme encouraged some Chinese mills to consider hedging risks via swaps, although many remained wary.
Baosteel Group, China's second-biggest steelmaker, in September warned Chinese mills to exercise caution in trading swaps, saying that global miners were able to influence index reference prices used in swaps.
Launched in May 2008, iron ore swaps are cash- settled contracts that allow steelmakers and traders to hedge price risks.
The volume of globally traded swaps soared to an all-time high above nine million tonnes in October, with SGX clearing a record 7.5 million tonnes, as prices gyrated wildly.
Iron ore gained 25 per cent in the past 12 trading days, after sliding nearly 31 per cent in October when Chinese mills cut purchases of iron ore as lower steel prices reflected weaker demand.
Iron ore rose nearly 6 per cent to US$146.30 a tonne on Tuesday, according to the Steel Index. -- Reuters
_______________
My Thots....
Potential game changer.
Wednesday, November 16, 2011
Reits
Published November 15, 2011 |
Don't let Reits be the next wave of governance lapses By WONG WEI KONG SINGAPORE boasts of a thriving real estate investment trust or Reit sector, but recent events have served another reminder that beneath the glowing surface, there are some key fundamental concerns. K-Reit Asia, last week, pushed through its plan to buy 87.5 per cent of Ocean Financial Centre (OFC), and raise some $976 million through a rights issue to fund part of the cost. It had earlier announced that it would pay some $1.57 billion to buy parent company Keppel Land's entire stake in the OFC office building. Keppel Land will see a net gain of about $492.7 million from the sale. Put before shareholders for their approval at an extraordinary general meeting (EGM), the proposal ran into howls of protest. Shareholders questioned the stiff price and timing of the deal, at a time when the economy is facing a slowdown. Shareholders noted that while the prime Grade A office building in Raffles Place has a tenure of 999 years with 850 years remaining on the lease, KepLand is selling its stake with only a 99-year lease. Others questioned why K-Reit is paying its manager (which is owned by KepLand) an acquisition fee - even though it is buying the asset from its parent company.There were also rumblings about the independence of the manager. In a nutshell, the EGM brought to the fore two key issues relating to Reits here that corporate governance advocates have been highlighting for some time: This isn't the first time - and probably it won't be the last - that issues like these arise at a Reit. For some time now, there has been growing disquiet among corporate watchers about weaknesses in the corporate governance structures in Singapore Reits. Earlier this year, a review of Asia-Pacific Reit markets by the CFA Institute produced less-than-assuring results. Looking at the governance of Reits in Singapore, Australia, Hong Kong and Japan, the institute in its report called strongly for Reit managers to be independent. In the current most common scenario, the Reit sponsor wholly owns the Reit manager, and also holds a large stake in the Reit. And even before the latest K-Reit development, cases of sponsors selling properties to Reits have triggered concerns about conflict of interest, and unitholders have often questioned the purchase of these assets and how they were priced. The CFA Institute said that to better protect ordinary unitholders, most directors on the boards of Reit managers should be independent of management, sponsors and substantial unitholders. This should be made law, rather than just a best-practice guide. There is also the need to have more transparent structures to pay Reit managers and to tie these more closely to performance, and indeed to require all Reits to hold annual meetings for unitholders. Reits are often presented as defensive plays, and given their yield structures, there is some truth in this. But it would be unfortunate if investors buy into Reits for their relative safety just to have their interests as minorities undermined by weak corporate governance structures. If nothing is done, the Reit sector could be where the next wave of governance lapses emerge, and that would be a pity for a sector that has done quite well so far. |
BT
__________________
My Thots......
A stitch in time saves nine!!
Corporate Governance
Corporate Governance is an evolving process which need the participation of all------- manager of the Reit, the Board of the Reit, majority shareholders (aka Sponsors), retail/minority Reit investors, not forgetting SGX and MAS; which encouraged and fostered the ecosystem for the growth of this important asset class.
In the Sg context, Reits can and must evolve into a class of shares in which conservative investors can look forward to regular recurrent dividends payouts (DPUs, DCFs) with relatively low risks and be de-risked from untimely "wants" for cash calls.
Note: I call it a "want" and not a "need", as it is often the sponsor/majority shareholder whom is the chief beneficiary and decides on the timing for the call. A well concieved Reit with good Reit-able tenants have the luxury of choosing the timing for acquisitions; it is the sponsor who needs to cash out at opportune situations.
Why Reits ?
The raison det're for Reits for the Sponsor/majority shareholders is that it allows monetisation of their assets and serve as a vehicle for recyling the monies; in short, as athe last and most important component of the asset recycling model.
The raison det're for Reits for the minority/retail shareholders is that it serves as a defensive investment choice for regular DPUs, given that the Reits tenants are supposedly chosen to give safe recurrent incomes with locked in leases.
For the Asset recycling model to work, the Sponsors must not forget the investors at the end of the food-chain.
Hence, the Reit must acquire properties with good location, which have a stabilised portfolio of proven tenants (in terms of ability to pay), with a stabilised mix of tenants able to provide that mix of regular recurrent income net of operating expenses and interest charges which can then translate into accretive DPUs.
That said, it implies a period of incubation at the sponsor level, so that the rental profiles in terms of tenant mix, WALE, cost of borrowing and operating expenses are all quite stablilised.
As OFC is only 80% rented out at passing rentals of SGD 9psf with the remaining 20% subject to the uncertainty of the current Office rental mkts (buffeted by the woes of the Eurozone crisis), rental support is an artificiality ------- it is certainly not real as the tenants are not captured yet and is an attempt to substitute for (get around) the uncertainties with an explicit guarantee by the majority shareholders (aka Sponsors). One may ask, what if the returns that sponsor was seeking did not materialise, so that the sponsor herself falters and fails, and will be unable to cough out the guaranteed rental supports ?
Regulators may want to look at the validity and the use of such "Rental supports". How do they know that the sponsor will remain viable to keep their promissory "Rental supports"? What if the weaker sponsored Reits, also want a piece of this kind of "Rental supports" options/actions?
The issue is that the Sponsors themselves may have hidden agenda and entirely different motivations for unloading the property assets at such a time, completely unaligned to the Reit biz model.
Kepland, as the prime beneficiary could be trying to lock in the price of OFC before the downturn and eyeing the cash from the monetisation of OFC for certain "prizes" that they want to capture in a mkt downturn---- in other words, Kepland is trading and timing the buy and sell of property assets which IMHO, is fair as it is in the biz of developing and trading of such properties.
But, for the KReit management and KReit Board, which is in the biz of finding a good tenant mix and locking in good rents and rental periods so as to get positive recurrent incomes with positive reversionary outcomes, buying or selling property assets should not be happening in such uncertain periods.
Yes, KReit can cite need for growth, but growth must be from acquisitions of properties that are accretive DPU-wise and whose incomes have truly stabilised.
In this case, KReit is getting itself involved in trading of property assets risks ; as well as risks in the volatilities associated with rentals rates, borrowing costs, as well as risks of a possible rise in gearing (falling property values or NAVs may risk downgrades in debt ratings due to increased gearing; causing a rise in borrowing costs).
Growth should be according to the schedule guided, well in advance-----OFC was not due to be offloaded by Kepland until end 2012 or early 2013------ so that investors do not get nasty surprises for cash calls; cash which they can use for buying juicy assets at low low prices in these crisis driven environment.
For KReit minority shareholders (as distint from the sponsors who have a stake in OFC, the choice is between an meagre accretive 2% increase in Proforma DPU vs having to cough out 17/20 of cash for the rights issue.
3 cash calls in 3-4 yrs is an awful record for KReit, and the pliant Board is not taking good care of minority shareholder interests. The worry is in MBFC Tower 3. Will there be another cash call?
Does that mean that minority shareholders should just sell their shares and park the money in others?
To answer this Q, we come full circle, back to the issue of evolving Corporate Governance---- reporters, shareholders, corporate governance watchdogs------ by speaking up , helps to influence and shape opinions and policies in the Reit investment ecosystem.
The number of available safe haven defensive plays in the Sg mkt are few and far between.
Reits can be and should be such an asset class.
Minority Shareholders must speak up, so that the Sponsors (whether TAL for Ascott Reit or Kepland for KReit etc) realise that such practises are contrary to the practise of good corporate governance; and in doing so, help effect a change.
Make the Reits you own rise to better standards of Corporate Governance.
I used to subscribe to the thinking of sell and buy another asset/share, if you disagree with management.
But lately, I have another view------Don't just take the easy route of selling, which will in the end limit the number of types of shares of the different assets classes available for investments on the SGX----Speak up and stand up for better Corporate Governance.
Inherently, Kreit and most of the Temasek linked Reits vehicles have very good sponsors (Keppel Corp, FNN, Capitaland etc) and a robust biz model. But, as with every situation when the majority shareholders have complete dominance, minority rights can get overlooked and if undefended, trampled.
Complacency creeps in and the laxity can fester into a downward loop.
This BT article has done good by creating awareness of the Corporate Governance issues and make the regulating bodies be mindful of the possibilities of the next wave of potential problems.
Bigger Issue
Hence, the issue here, is not really the quality of Kreit, as one may argue that Kepcorp and even Temasek will come in to help even if Kepland should inexplicably fail (which is unthinkable to many given Kepland's pristine record).
The issue is about fostering an environment, an ecosystem, that is conducive to the evolving Reit class in Sg.
Yes, in terms of size, with 23 listed Reits and mkt cap of SGD 34b, SgX listed Reits has got the heft, but Corporate Governance is a process, more correctly an evolving process and as minority shareholders, we must support, speak up and stand up --- for it is only when we do so, that the media, NGO watchdogs and regulatory bodies will sit up, listen and act!!
Buffet Watch
Warren Buffet Watch
________________________________
My Thots.....
1st taboo on Utilities/Infrastructure stocks with high Capex broken; with BNSF buy.
2nd taboo, on Tech stocks broken with IBM buy.
Foreign Property Buyers
The Straits Times
Nov 16, 2011
The case for curbs on foreign property buyers
Entry of foreigners into mass-market homes bears careful watching
By Esther Teo
SOME Singaporeans are clearly worried that the growing numbers of foreigners buying private homes are driving prices ever higher - and out of the reach of some local buyers.
This concern has been heightened by a fairly new trend for foreigners to buy mass-market homes, a segment in which they had previously taken little interest.
These, of course, are the same homes that many upgraders aspire to buy.
Are restrictions on foreigners' purchase of private homes, proposed by some, warranted?
First, consider the figures. In the first eight months of this year, one in three buyers of non-landed private residential properties was a non-Singaporean.
Among buyers of private homes - excluding landed property which is more regulated - the proportion of foreigners, including permanent residents (PRs), is creeping up. Last year, it was 28 per cent.
Foreigners are also increasingly turning to new developments. A recent Business Times report showed that foreigners, excluding PRs, bought 843 uncompleted private homes from developers in the third quarter, up nearly 20 per cent from 703 homes in the previous quarter. Their share of the total number of uncompleted private homes sold by developers rose from 16.3 per cent in the second quarter to 20.1 per cent in the third quarter.
Foreigners, excluding PRs, accounted for 16 per cent of all private home purchases in the first half of the year, up from 12 per cent last year.
Perhaps the biggest worry for many Singaporeans is the fact that foreigners are now encroaching on the mass-market segment.
Foreigners' share of homes sold at price tags of under $1 million - taken as a proxy definition of a mass-market home - rose to 28 per cent in the first nine months of this year. It was 19 per cent in 2009 and 22 per cent last year, according to caveats lodged with the Urban Redevelopment Authority.
At recent launches of mass-market developments such as Parc Vera in Hougang, foreigners and PRs made up about 20 per cent of sales, compared to below 10 per cent a few years ago.
In the past, foreigners largely went for expensive homes in districts nine, 10 and 11, and this had minimal impact on the average Singaporean, said Dennis Wee Group director Chris Koh. However, they are now making a splash in the suburban leasehold mass market, he noted.
Faced with such statistics, it is little wonder that some attribute the surge in private home prices to record highs - up 18 per cent last year and a further 6 per cent in the first nine months of this year - to purchases by foreigners.
Amid this concern, some experts like Chesterton Suntec International research head Colin Tan have suggested that curbs on foreigners buying private residential properties could temper the rapid rises in prices.
To a certain extent, foreigners already face curbs on property purchases. Foreigners can buy landed homes only in Sentosa Cove. If they are PRs, they may buy some types of landed housing elsewhere, but only with approval.
The sale of resale Housing Board flats is also restricted to Singaporeans and PRs who meet certain criteria.
But the market for private condominiums is largely open to foreigners, who invest in this market on a level playing field with citizens.
Those who call for curbs point out that Singapore's real estate sector is vulnerable to speculative capital flows.
With interest rates set to stay low for the next couple of years, the plentiful funds washing around the market seeking better returns could well cause price volatility if there are no curbs, they argue.
Last month, MP Christopher de Souza (Holland-Bukit Timah GRC) suggested restrictions on foreigners buying homes. He cited Australia, which has rules that limit foreigners to buying only new properties, which they can subsequently sell only to Australians.
Singapore, like other open economies such as Hong Kong and Britain, does not restrict foreigners from purchasing private condos and apartments.
Others have suggested less onerous financing-related measures such as caps on the number of mortgages foreigners can take out or reducing further for them alone the proportion of a property's value they may borrow.
Dennis Wee's Mr Koh suggested one way would be to introduce a capital gains tax for foreigners who make gains from selling private property here. Or simply keep or impose an additional sellers' stamp duty on foreigners who sell within a stipulated period, he said.
Another suggestion from Knight Frank group managing director Danny Yeo is to differentiate between those who have a stake here and those who do not.
Long-term residents, such as PRs and foreigners working here, should not be subject to restrictions as they also need a home in Singapore. But the purchases of foreigners who do not live or work here could be subject to curbs, he said.
But as National Development Minister Khaw Boon Wan noted last month, it is important to ensure that housing policy shifts do not unwittingly harm the economy and society. Rising prices also cannot be attributed solely to foreign purchases. There are many factors at play, such as low interest rates and Singapore's strong economic fundamentals, he emphasised.
In any case, foreigners are already subject to the same anti-speculation measures as locals - including a sellers' stamp duty of up to 16 per cent. This has creamed off some speculative froth, with prices moderating for the past eight consecutive quarters - inching up just 1.3 per cent in the three months to Sept 30.
Taken together, the case for more curbs on foreign purchases is mixed. A further surge in demand from foreigners can raise prices beyond the reach of locals.
At the same time, any measure that curbs demand in one segment risks cooling down the entire market, especially with a slowing economy.
There may be a case for more calibrated measures: for example, to dampen demand for mass-market homes from foreigners who do not live or work in Singapore.
But the timing and extent of any such move are critical. For now, the trend of foreigners buying into mass-market homes is certainly one that bears careful watching.
Nov 16, 2011
The case for curbs on foreign property buyers
Entry of foreigners into mass-market homes bears careful watching
By Esther Teo
SOME Singaporeans are clearly worried that the growing numbers of foreigners buying private homes are driving prices ever higher - and out of the reach of some local buyers.
This concern has been heightened by a fairly new trend for foreigners to buy mass-market homes, a segment in which they had previously taken little interest.
These, of course, are the same homes that many upgraders aspire to buy.
Are restrictions on foreigners' purchase of private homes, proposed by some, warranted?
First, consider the figures. In the first eight months of this year, one in three buyers of non-landed private residential properties was a non-Singaporean.
Among buyers of private homes - excluding landed property which is more regulated - the proportion of foreigners, including permanent residents (PRs), is creeping up. Last year, it was 28 per cent.
Foreigners are also increasingly turning to new developments. A recent Business Times report showed that foreigners, excluding PRs, bought 843 uncompleted private homes from developers in the third quarter, up nearly 20 per cent from 703 homes in the previous quarter. Their share of the total number of uncompleted private homes sold by developers rose from 16.3 per cent in the second quarter to 20.1 per cent in the third quarter.
Foreigners, excluding PRs, accounted for 16 per cent of all private home purchases in the first half of the year, up from 12 per cent last year.
Perhaps the biggest worry for many Singaporeans is the fact that foreigners are now encroaching on the mass-market segment.
Foreigners' share of homes sold at price tags of under $1 million - taken as a proxy definition of a mass-market home - rose to 28 per cent in the first nine months of this year. It was 19 per cent in 2009 and 22 per cent last year, according to caveats lodged with the Urban Redevelopment Authority.
At recent launches of mass-market developments such as Parc Vera in Hougang, foreigners and PRs made up about 20 per cent of sales, compared to below 10 per cent a few years ago.
In the past, foreigners largely went for expensive homes in districts nine, 10 and 11, and this had minimal impact on the average Singaporean, said Dennis Wee Group director Chris Koh. However, they are now making a splash in the suburban leasehold mass market, he noted.
Faced with such statistics, it is little wonder that some attribute the surge in private home prices to record highs - up 18 per cent last year and a further 6 per cent in the first nine months of this year - to purchases by foreigners.
Amid this concern, some experts like Chesterton Suntec International research head Colin Tan have suggested that curbs on foreigners buying private residential properties could temper the rapid rises in prices.
To a certain extent, foreigners already face curbs on property purchases. Foreigners can buy landed homes only in Sentosa Cove. If they are PRs, they may buy some types of landed housing elsewhere, but only with approval.
The sale of resale Housing Board flats is also restricted to Singaporeans and PRs who meet certain criteria.
But the market for private condominiums is largely open to foreigners, who invest in this market on a level playing field with citizens.
Those who call for curbs point out that Singapore's real estate sector is vulnerable to speculative capital flows.
With interest rates set to stay low for the next couple of years, the plentiful funds washing around the market seeking better returns could well cause price volatility if there are no curbs, they argue.
Last month, MP Christopher de Souza (Holland-Bukit Timah GRC) suggested restrictions on foreigners buying homes. He cited Australia, which has rules that limit foreigners to buying only new properties, which they can subsequently sell only to Australians.
Singapore, like other open economies such as Hong Kong and Britain, does not restrict foreigners from purchasing private condos and apartments.
Others have suggested less onerous financing-related measures such as caps on the number of mortgages foreigners can take out or reducing further for them alone the proportion of a property's value they may borrow.
Dennis Wee's Mr Koh suggested one way would be to introduce a capital gains tax for foreigners who make gains from selling private property here. Or simply keep or impose an additional sellers' stamp duty on foreigners who sell within a stipulated period, he said.
Another suggestion from Knight Frank group managing director Danny Yeo is to differentiate between those who have a stake here and those who do not.
Long-term residents, such as PRs and foreigners working here, should not be subject to restrictions as they also need a home in Singapore. But the purchases of foreigners who do not live or work here could be subject to curbs, he said.
But as National Development Minister Khaw Boon Wan noted last month, it is important to ensure that housing policy shifts do not unwittingly harm the economy and society. Rising prices also cannot be attributed solely to foreign purchases. There are many factors at play, such as low interest rates and Singapore's strong economic fundamentals, he emphasised.
In any case, foreigners are already subject to the same anti-speculation measures as locals - including a sellers' stamp duty of up to 16 per cent. This has creamed off some speculative froth, with prices moderating for the past eight consecutive quarters - inching up just 1.3 per cent in the three months to Sept 30.
Taken together, the case for more curbs on foreign purchases is mixed. A further surge in demand from foreigners can raise prices beyond the reach of locals.
At the same time, any measure that curbs demand in one segment risks cooling down the entire market, especially with a slowing economy.
There may be a case for more calibrated measures: for example, to dampen demand for mass-market homes from foreigners who do not live or work in Singapore.
But the timing and extent of any such move are critical. For now, the trend of foreigners buying into mass-market homes is certainly one that bears careful watching.
_____________________
My Thots....
Delicate balancing act needed.
IMHO, given the open nature of our economy and society, we are unlikely to go the Aussie way.
U cannot have employment and immigration policies that promote openness and yet, have housing policies that run counter to those.
But, upgraders aspirations will put political pressures on the policymakers.
Monday, November 14, 2011
Bkt Sembawang, Midas
Bkt Sembawang
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_D3840A935FC24D414825794800339D5B/$file/BSEL2Q2012.pdf?openelement
Midas
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_47CEABEA148F49BE482579480039C99C/$file/Midas-3Q2011ResultsAnnouncement.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_47CEABEA148F49BE482579480039C99C/$file/Midas-3QResultsNR.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_D3840A935FC24D414825794800339D5B/$file/BSEL2Q2012.pdf?openelement
Midas
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_47CEABEA148F49BE482579480039C99C/$file/Midas-3Q2011ResultsAnnouncement.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_47CEABEA148F49BE482579480039C99C/$file/Midas-3QResultsNR.pdf?openelement
Saturday, November 12, 2011
Noble Group
Published November 12, 2011 | |
Noble Group founder buys shares, calms investors NOBLE Group's founder Richard Elman stepped in yesterday to calm Noble Group investors, who suffered a US$2 billion hit on Thursday as the stock fell sharply on news of a quarterly loss and the resignation of its CEO. |
Besides buying Noble shares on Thursday, Mr Elman told Reuters yesterday that the resignation of the CEO was not due to the quarterly loss.
The Singapore-listed commodities trader saw its share price plunge by more than a quarter on Thursday, hit by the surprise resignation of Ricardo Leiman and its first quarterly loss in more than a decade.
The shares recouped some of the losses in early trade yesterday, rising as much as 4 per cent, but ended unchanged at $1.18. Noble said late on Thursday that a vehicle linked to Mr Elman's family bought 10 million shares, raising its interest in the firm to 21.53 per cent from 21.37 per cent.
Mr Elman, who is now acting CEO and chairman, told Reuters in a phone interview yesterday that the company thought that it would be better to announce the departure of Mr Leiman before the planned listing of its agricultural unit.
'It was planned for some time, and we thought it would be better to get this out of the way since he will not be on the board of the new company (Noble Agri),' Mr Elman said, adding that 'it was coincidence of timing' that the announcement came a few hours after Noble reported its poor quarterly results.
Mr Elman, who is already in his 70s and has been cutting back on his role at the company over the past two years, did not elaborate on why the former CEO wanted to leave.
The company said late on Wednesday that Mr Leiman was leaving for personal reasons. Mr Leiman had been in the job for less than two years.
Mak Yuen Teen, a professor at the National University of Singapore's business school who specialises in corporate governance, said: 'If this was long planned and not connected to the results, the company should have disclosed the succession plan earlier rather than two hours after a negative results announcement. It would be difficult to convince the market that they are unconnected.'
Noble is the latest casualty among commodity traders caught up in the defaults in the cotton business.
It blamed part of its US$17.5 million quarterly loss on cotton as farmers defaulted on their contracts following a gyration in cotton prices, which forced it to cover physical deliveries to its customers by purchasing cotton in the spot market at elevated prices.
Investors are now turning their attention to another Singapore-listed rival, Olam International, which reports earnings on Monday.
Olam is among the world's top cotton traders, with a network of more than 100,000 farmers, ginners and suppliers, according to the company's website, said Reuters.
'Olam's industrial segment, which constitutes 23 per cent of 2011 financial year gross contribution, is largely driven by its cotton business,' Goldman said in a research note.
'We believe investors may have concerns regarding these (cotton counterparty) risks, and the stock price may see short-term weakness until there is more clarity provided by the company.'
Mr Elman tried to calm investor jitters over the volatile commodities market, which has forced global commodities giants from Cargill to Bunge to report steep decline in profits.
'Honestly, it was a minor loss, it's mark-to-market, and probably some of it or all of it can come back in the next quarter or at some point in the future,' Mr Elman said, referring to the possibility that the company can claw back the losses if commodity prices improved. 'It is not a major issue - markets made it a major issue. But that's fine, let the markets do what they want,' he added.
According to Reuters, Noble said that its processing margins in agriculture remained under pressure, while below-average crop yields in the sugar business in Brazil and continuing counterparty defaults in the cotton industry had undermined the operating environment.
Bloomberg said in a report yesterday that Mr Elman, a former scrap yard worker who created Asia's largest commodity supplier by sales, is looking for a successor for at least the second time in as many years.
As Noble transforms from a trader to a producer of food, metals and energy commodities, Mr Elman has to look for an executive skilled not only in trading, but also in industrial operations, said Bloomberg.
____________________
My Thots....
The big word used is SCM, Supply Chain Management, supplying the commodities, all the way from the farms gates to the factories floor.
Most have trading as their main activity, the risks associated, of which, they are supposedly able to hedge away due to their deep expert/intimate knowledge of the entire supply chain.
But, as an investor as opposed to trader, I have always wondered if the volatilities and uncertainties can truly be hedged away. Or to put it bluntly, if commodities is really a one way upward bet as some like Mr Bowtie (Jim Rogers) wants us to believe.
Of late, the greater danger is that these SCM purveyors are buying up & owning the 2 extreme ends of the supply chain, either the farms/mines or the factories, in an effort to realise better & better margins.
The risks rises and the biz model switches from managing supply chains to owning & managing farms and factories with accompanying skillsets and asset ownership (high capex involved) risks.
I was particularly worried when Temasek got Goodyear as the CEO, in an effort to allocate more for commodities exposure. I hope with Goodyear gone, Big T's exposure has lessened.
Two commodities, sugar and cotton comes to mind, in recent months.
The cotton mkts volatilities in recent mths has certainly exposed the flaw in the so called SCM model.
US cotton farmers faced with escalating cotton prices reneged and did not deliver on their forward contracts preferring to resell on the spot mkts where prices have doubled. With the doubling of prices within a few short mths, the factories were priced out and their demand plunged, so the SCM guys got squeezed from both ends, stuck with high priced cotton inventories when cotton prices plunged.
Apparently, all the SCMs; Cargill, Glencore, Noble and Olam? are all hit......
Anyway, I have always never been smart enuff to figure out Noble's founder Richard Elman's financial statements, and find his SGX announcements too expressive and colorful and lacking in detail for my understanding.
Genting Singapore
Published November 12, 2011 | |
Genting S'pore slides on market-share losses Its move to raise bad debt provisions in Q3 raises concerns about debt collections from VIP players in China By GRACE LEONG SHARES of Genting Singapore slid yesterday on its market-share losses and after its move to raise bad debt provisions sparked concerns over whether debt collections from VIP players in China - one of its biggest markets - may become more challenging as credit conditions there tighten. |
Genting Singapore shares fell as much as 8.3 per cent in volatile trading yesterday, before closing at $1.595, down 5.34 per cent or nine cents.
In what Genting Singapore called a prudent move in the face of a slowing global economy and tightening credit conditions in China, the company raised its bad debt provisions to $56.9 million for the third quarter, up from $23.5 million a year ago.
That equates to 8.5 per cent of its gaming revenue, higher than the average of 3 per cent over the past six quarters, Citigroup said yesterday.
'However, this is in contrast to Marina Bay Sands, which has not shown higher provisioning, so we wonder if Genting Singapore's decision was driven by its aggressive credit extension that was seen in the first half of the year,' Macquarie Equities Research analysts Gary Pinge, Elaine Lai and Somesh Kumar Agarwal said in a report yesterday.
Also pressuring Genting Singapore's stock are concerns that its flagship casino, Resorts World Sentosa (RWS), continued to cede market share in both VIP and mass gaming segments to rival MBS.
'Genting Singapore lost significant gaming market share in 3Q11 and also did not see any ramp-up in non-gaming,' the Macquarie report said. 'We believe the VIP market share loss is more driven by lack of a competitive product relative to MBS.'
'We find it interesting that notwithstanding Genting Singapore adding more table game capacity, slots and electronic table games (ETGs) (quarter-on-quarter), mass market failed to ramp and showed 2 per cent QoQ growth. This essentially means that table, slot and ETG yields all declined QoQ - at a time when there was available hotel room capacity,' the Macquarie report said.
The scheduled opening of Bayfront MRT at MBS may also shift some mass-market players away from RWS, it said.
But it isn't all doom and gloom.
Some analysts say downside was capped by Genting Singapore's top management's renewed optimism on hopes that some of the junket licensing applications it endorsed may be approved in the next few months.
Also helping is the planned opening of the 200-luxury room Equarius hotel and 20-plus Beach Villas by year-end, which would triple RWS's VIP hotel offering to nearly 330 and help the casino claw back some VIP market share.
Morgan Stanley said RWS could see growth in its VIP roll as it ramps up the number of slot machines to 1,744 by year-end from its current 1,315.
With the resort's completion next year, RWS is expected to see a boost in operational performance in 2013.
'We believe Genting Singapore remains well-positioned to secure new gaming opportunities when they arise. Globally, governments are facing fiscal pressure and casinos remain an efficient policy tool for raising taxation revenues. We see Korea and Japan as key potential markets,' said HSBC analyst Sean Monaghan.
Aaron Fischer of CLSA Asia-Pacific Markets noted that Genting Singapore was 'especially optimistic on Japan and believes it could legalise gaming within the next 12 months'.
'This would be another major catalyst to the shares as we believe Genting Singapore, Las Vegas Sands and Wynn are the three front-runners for one of the two licences (which would probably be operated under a joint venture with a Japanese company,' he said.
___________________
My Thots....
Both GS and LVS, in Sg, operates under the same regime i.e. w/o junkets to insure against the receivables risk and quite the same in terms of patronage profiles.
LVS in Macau & elsewhere do operate with the junket scheme.
Take note, the analysts from MacQ are arguing that LVS is taking away VIP market share.
Now who do the junkets serve ------ VIPs, right?
So if LVS has a higher share of the VIP mkt and w/o junkets to insure against bad debt collections of receivables, then why are their provisioning lower?
So is LVS more aggressive or is GS more conservative?
Take Ur pick.
U can read it as GS is conservative by making a larger provisioning
or
Do U say LVS is conservative and GS is aggressive in over providing credit, as MacQ is implying ?
A "spin" has been put on the conservative stance for provisioning, to make GS look aggressive!!
THG, HLA, GP, GV
The Hour Glass
HLA
Good Pack
GV
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_DCF1FE0F2233A0804825794500349E59/$file/GV_3Q2011.pdf?openelement
http://www.remisiers.org/cms_images/research/Research-14Nov-18Nov_2011/galv_by_DBSV_141111-result_Buy.pdf
http://www.remisiers.org/cms_images/research/Research-14Nov-18Nov_2011/Sunnysideup141111.pdf
http://www.remisiers.org/cms_images/research/Research-14Nov-18Nov_2011/galv_by_DBSV_141111-result_Buy.pdf
http://www.remisiers.org/cms_images/research/Research-14Nov-18Nov_2011/Sunnysideup141111.pdf
Thursday, November 10, 2011
Tat Hong
Published November 10, 2011 | |
Tat Hong's Q2 profit soars 78% to $12.6m Revenue rises 26%; overall gross profit margin was 37.1% By VEN SREENIVASAN ROBUST margins and a steady pick-up in business enabled crane specialist Tat Hong Holdings to boost its second-quarter bottom line by 78 per cent to $12.6 million, from $7.1 million a year earlier. This came on the back of a 26 per cent rise in July-September 2011 revenue to $183.3 million. The results translated into first-half earnings of $18.1 million, an improvement of 4 per cent over the previous interim earnings of $17.5 million at end-September 2010. The company declared an interim dividend of one cent per ordinary share and convertible redeemable share. Nevertheless, the quarterly results mark a steady sequential improvement in the bottom line of the company, from $3.8 million profit during the final quarter of last year, then $5.5 million during the April-June first quarter of the current year and now $12.6 million. CEO Roland Ng attributed this to steady margin recovery since late last year. 'We have seen an upward trend in business, especially in our crawler crane division and distribution business,' he said. 'We have a sustainable business model which is firing on all cylinders. In fact, we expect things to get even better during the year ahead as our Australian tower crane business starts delivering results.' Indeed, the company enjoyed growth across all its business divisions, while operating cost increase was kept modest. Overall gross profit margin was 37.1 per cent. The distribution business saw a revenue growth of 38 per cent to $89.1 million due to higher sales of excavators to the Indonesian logging industry and the Australian resources sector. Margin for this business was about 20 per cent. The crane rental business brought in revenues of $53.5 million, but chalked up a gross margin of 58 per cent. The general equipment business had a 77 per cent revenue growth to $26 million, and a strong 56 per cent gross margin. Mr Ng said that although the tower crane business only contributed some $14.8 million to revenue (a mere 7 per cent year-on-year rise), this was a business with a lot of potential. 'We are well positioned in Australia, where we see strong demand for our tower cranes next year and beyond,' he said. BT |
______________________
My Thots...
Roland Ng expressing much more optimistic outlooks for GPM (Gross Margins) and the Tower Crane Biz, in this interview with the reporter than in the SGX announcement.
Wednesday, November 9, 2011
Starhub, HLF, Tat Hong, RE, Venture Corp, Yanlord
Starhub
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_31FA908137EC74DB482579430030DE77/$file/PS3Q2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_31FA908137EC74DB482579430030DE77/$file/PR3Q2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_31FA908137EC74DB482579430030DE77/$file/3Q2011.pdf?openelement
HLF
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A46C6D53885E6B2E482579430037C16A/$file/Results_3Q2011.pdf?openelement
Tat Hong
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/Q2FY2012Presentation091111.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/TatHongSGXNETSEPTEMBER2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/2QFY2012PressRelease091111.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/2QFY2012Factsheet091111.pdf?openelement
RE
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_43F13AEBF012065D4825794300353933/$file/REC-EarningsReleaseQ1FY2012-08112011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_43F13AEBF012065D4825794300353933/$file/REC-Anncemt_Q1FY2012results.pdf?openelement
Venture Corp
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_917F7238F9FB0C00482579430028A9BB/$file/3Q2011Results9Nov2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_917F7238F9FB0C00482579430028A9BB/$file/3Q2011PressRelease.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_917F7238F9FB0C00482579430028A9BB/$file/3Q2011Financials.pdf?openelement
Yanlord
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_254632BDBE85B29748257943003C5088/$file/9-11-11-9M2011PresentationSlides.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_254632BDBE85B29748257943003C5088/$file/9-11-11-9M2011Results.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_254632BDBE85B29748257943003C5088/$file/9-11-11-9M2011PressRelease.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_31FA908137EC74DB482579430030DE77/$file/PS3Q2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_31FA908137EC74DB482579430030DE77/$file/PR3Q2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_31FA908137EC74DB482579430030DE77/$file/3Q2011.pdf?openelement
HLF
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A46C6D53885E6B2E482579430037C16A/$file/Results_3Q2011.pdf?openelement
Tat Hong
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/Q2FY2012Presentation091111.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/TatHongSGXNETSEPTEMBER2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/2QFY2012PressRelease091111.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_BA49D22C81AFBBCD48257943002D280C/$file/2QFY2012Factsheet091111.pdf?openelement
RE
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_43F13AEBF012065D4825794300353933/$file/REC-EarningsReleaseQ1FY2012-08112011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_43F13AEBF012065D4825794300353933/$file/REC-Anncemt_Q1FY2012results.pdf?openelement
Venture Corp
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_917F7238F9FB0C00482579430028A9BB/$file/3Q2011Results9Nov2011.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_917F7238F9FB0C00482579430028A9BB/$file/3Q2011PressRelease.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_917F7238F9FB0C00482579430028A9BB/$file/3Q2011Financials.pdf?openelement
Yanlord
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_254632BDBE85B29748257943003C5088/$file/9-11-11-9M2011PresentationSlides.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_254632BDBE85B29748257943003C5088/$file/9-11-11-9M2011Results.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_254632BDBE85B29748257943003C5088/$file/9-11-11-9M2011PressRelease.pdf?openelement
China's CPI Release
China's Consumer Price Indices in October
Albeit, still high, the CPI is trending down for the past 3 mths.
At 5.5%, and with the Eurozone in crisis, the policymakers will likely take their foot off the brakes on Monetary policies tightening.
China's Producer Price Indices in October
PPI is a strong predictor of CPI trends and the sharply falling growth trend in the PPI augurs a soft landing for the Chinese inflation picture.
_________________________
My Thots.....
Many of the SMEs, especially local S-chips who are suffering from the recent credit squeeze caused by higher interest rates and higher RRRs, as well as a rising RMB, will be able to breathe better going forwards, as the Chinese policy makers adjust to a more pro-growth stance and ease the tighthening measures.
Tuesday, November 8, 2011
Asia Square Tower 1
Published November 9, 2011 | |
Two-thirds of Asia Square Tower 1 taken up By UMA SHANKARI TOWER 1 of Asia Square, the newest office building in the Marina Bay financial district, is about 68 per cent leased at rents between $12-16 per square foot per month, the project's head of leasing, Luke Moffat, said in an update. |
Mr Moffat, who was speaking to reporters after the tower's grand opening last night, added that he expects Tower 1 to be fully let by the middle of 2012.
He also does not see rents being reduced in order to secure tenants. 'We don't see it as a period where we will have to drop rents, but things will be a bit slow.'
The 43-storey Asia Square Tower 1 has some 1.26 million square feet of office space. Around 32 per cent of the space has yet to be leased, though Mr Moffat's team is negotiating with a few tenants, he said.
One potential tenant in the financial sector could possibly take up a few high-rise floors, BT understands.
Companies that have already signed leases include Citibank (which will take up nine floors), Google (three-and-a-half floors) Bank Sarasin and White & Case.
The guest-of-honour at the opening ceremony, Emeritus Senior Minister Goh Chok Tong, said that Asia Square introduces the latest innovation in design, building technology and efficiency, which will advance Singapore's goal of building a world-class business district.
'Looking ahead, we must continue to upgrade Singapore's business infrastructure in order to meet the changing needs of global business and finance and to serve the financing and investment needs of a growing Asia.
'Our business spaces should be innovative and flexible, and our downtown should provide attractive lifestyle options for those who work, live and play here.'
Asia Square's Tower 2 will be ready in 2013. The building will be the first development in Singapore's new downtown to integrate a 305-room five-star Westin Hotel.
Asia Square is owned by MGPA, a private equity real estate investment advisory company which counts Australia's Macquarie group among its shareholders.
BT
____________________
My Thots...
Prime Office still looks good, if this BT article is correct.
CFG/PARD
New Acquisitions in Peru
Assets of the two Peruvian fishing companies include two fishing vessels and one fishmeal processing plant.
______________________
My Thots....
The key word here is ITQ, Individual Transferable Quotas.
Ownership of the ITQs provide exclusive rights to a portion of the TAC ( Total Allowable Catch) in the respective fishery, every year.
As prices of fish rise each year due to inflation and increasing demand from West Africa and aquaculture needs, the ITQs are expected to rise in value.
For more on ITQs,
see
http://www.rff.org/RFF/Documents/RFF-Rpt-KroetzSanchirico.pdf
https://ioes.hi.is/.../Arnason%20-Building%20on%20ITQs.pptx
Technocrats to run national unity govts
Berlusconi humiliated in parliamentary vote
Opposition leader Pier Luigi Bersani immediately called on Berlusconi to resign, saying Italy ran a real risk of losing access to financial markets after yields on government bonds had approached the red line of 7 percent.
"I ask you, Mr Prime Minister, with all my strength, to finally take account of the situation ... and resign," Bersani said immediately after the vote.
Berlusconi has been on the ropes for weeks but Tuesday's events seem to be pushing him toward inevitable resignation.
Earlier Berlusconi's key coalition ally, Umberto Bossi, head of the devolutionist Northern League, told him to step down as the 75-year-old media magnate suffered a series of what could be mortal blows.
Bossi said Berlusconi should be replaced by Angelino Alfano, secretary of the premier's PDL party.
"We asked the prime minister to stand down," Bossi told reporters outside parliament.
Berlusconi had remained defiant ahead of Tuesday afternoon's vote on a public finance measure, rejecting calls from all sides to step down and desperately trying to win back a large group of rebels in the PDL. The vote showed that he had not been able to stem a major rebellion.
Bossi's action and the parliamentary vote could finally tip the balance against him as red lights flash on bond markets about Italy's instability.
The League, together with many members of the PDL, are believed to want Berlusconi to make way for a new center-right government capable of tackling a huge economic crisis and restoring the confidence of markets without handing power to a transitional administration.
Earlier five PDL rebels said they would not take part in the vote on public financing, sapping Berlusconi's support.
The center-left opposition said they abstained to lay bare the weakness of Berlusconi's support while allowing the passage of a bill that is vital for government funding.
"LONG AGONY"
While Berlusconi's demise has turned into what commentators are calling a "long agony," interest rates on Italy's debt have soared to levels that are causing deep concern about the survival of the euro zone if its third largest economy cannot service its debts.
Yields on Italy's 10-year benchmark bonds rose to 6.74 percent on Tuesday before dropping back. Analysts said Italy was reaching the point where Portugal, Greece and Ireland had been forced to seek a bailout.
Finnish Prime Minister Jyrki Katainen said Italy was just too big to bail out. "It is difficult to see that we in Europe would have resources to take a country of the size of Italy into the bailout program," he told parliament in Helsinki.
As the spread between Italian and German bonds -- a reflection of the extra risk of holding Italian bonds -- approached 5 percentage points, Italian employers' association leader Emma Marcegaglia said: "We can't go on like this for long."
Analysts say current interest rates, if maintained for long, would cancel out the budget savings planned as part of a painful austerity program.
_____________
My Thots....
Papandreou gone, Berlusconi going...
Likely, Greece & Italy will be run by technocrats (NOT politicians), who are pushed forward by neccessity to lead the national unity governments and who can have the credibility to negotiate with the troika and the capability to implement the measures agreed upon.
ROME |
ROME (Reuters) - Italian Prime Minister Silvio Berlusconi suffered a huge humiliation in parliament on Tuesday in a vote that indicated he no longer had a majority and ratcheted up pressure for him to resign.Berlusconi's government won a key budget vote after the opposition abstained but obtained only 308 votes compared with an absolute majority in the lower house of 316 votes.Opposition leader Pier Luigi Bersani immediately called on Berlusconi to resign, saying Italy ran a real risk of losing access to financial markets after yields on government bonds had approached the red line of 7 percent.
"I ask you, Mr Prime Minister, with all my strength, to finally take account of the situation ... and resign," Bersani said immediately after the vote.
Berlusconi has been on the ropes for weeks but Tuesday's events seem to be pushing him toward inevitable resignation.
Earlier Berlusconi's key coalition ally, Umberto Bossi, head of the devolutionist Northern League, told him to step down as the 75-year-old media magnate suffered a series of what could be mortal blows.
Bossi said Berlusconi should be replaced by Angelino Alfano, secretary of the premier's PDL party.
"We asked the prime minister to stand down," Bossi told reporters outside parliament.
Berlusconi had remained defiant ahead of Tuesday afternoon's vote on a public finance measure, rejecting calls from all sides to step down and desperately trying to win back a large group of rebels in the PDL. The vote showed that he had not been able to stem a major rebellion.
Bossi's action and the parliamentary vote could finally tip the balance against him as red lights flash on bond markets about Italy's instability.
The League, together with many members of the PDL, are believed to want Berlusconi to make way for a new center-right government capable of tackling a huge economic crisis and restoring the confidence of markets without handing power to a transitional administration.
Earlier five PDL rebels said they would not take part in the vote on public financing, sapping Berlusconi's support.
The center-left opposition said they abstained to lay bare the weakness of Berlusconi's support while allowing the passage of a bill that is vital for government funding.
"LONG AGONY"
While Berlusconi's demise has turned into what commentators are calling a "long agony," interest rates on Italy's debt have soared to levels that are causing deep concern about the survival of the euro zone if its third largest economy cannot service its debts.
Yields on Italy's 10-year benchmark bonds rose to 6.74 percent on Tuesday before dropping back. Analysts said Italy was reaching the point where Portugal, Greece and Ireland had been forced to seek a bailout.
Finnish Prime Minister Jyrki Katainen said Italy was just too big to bail out. "It is difficult to see that we in Europe would have resources to take a country of the size of Italy into the bailout program," he told parliament in Helsinki.
As the spread between Italian and German bonds -- a reflection of the extra risk of holding Italian bonds -- approached 5 percentage points, Italian employers' association leader Emma Marcegaglia said: "We can't go on like this for long."
Analysts say current interest rates, if maintained for long, would cancel out the budget savings planned as part of a painful austerity program.
_____________
My Thots....
Papandreou gone, Berlusconi going...
Likely, Greece & Italy will be run by technocrats (NOT politicians), who are pushed forward by neccessity to lead the national unity governments and who can have the credibility to negotiate with the troika and the capability to implement the measures agreed upon.
Soros on the Greek and Eurozone crisis
http://www.reuters.com/video/2011/11/04/soros-european-governments-have-the-bazo?videoId=224273274&videoChannel=4301
http://www.reuters.com/video/2011/11/04/soros-angela-merkel-was-the-creator-of-t?videoId=224281604&videoChannel=4301
http://www.reuters.com/video/2011/11/04/soros-greeks-would-be-ill-advised-to-lea?videoId=224287405&videoChannel=4301
______________________
My Thots....
Chyrstia Freeland asks Soros how the Eurozone crisis can be solved,
why Greece will be ill-advised to leave the Eurozone and why he is sitting on the fence, for the moment......
http://www.reuters.com/video/2011/11/04/soros-angela-merkel-was-the-creator-of-t?videoId=224281604&videoChannel=4301
http://www.reuters.com/video/2011/11/04/soros-greeks-would-be-ill-advised-to-lea?videoId=224287405&videoChannel=4301
______________________
My Thots....
Chyrstia Freeland asks Soros how the Eurozone crisis can be solved,
why Greece will be ill-advised to leave the Eurozone and why he is sitting on the fence, for the moment......
Monday, November 7, 2011
Here comes the Sun
Op-Ed Columnist NYT
Here Comes the Sun
By PAUL KRUGMAN
Published: November 6, 2011
For decades the story of technology has been dominated, in the popular mind and to a large extent in reality, by computing and the things you can do with it. Moore’s Law — in which the price of computing power falls roughly 50 percent every 18 months — has powered an ever-expanding range of applications, from faxes to Facebook.
Our mastery of the material world, on the other hand, has advanced much more slowly. The sources of energy, the way we move stuff around, are much the same as they were a generation ago.
But that may be about to change. We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.
If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives.
Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.
Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.
Economics 101 tells us that an industry imposing large costs on third parties should be required to “internalize” those costs — that is, to pay for the damage it inflicts, treating that damage as a cost of production. Fracking might still be worth doing given those costs. But no industry should be held harmless from its impacts on the environment and the nation’s infrastructure.
Yet what the industry and its defenders demand is, of course, precisely that it be let off the hook
for the damage it causes. Why? Because we need that energy! For example, the industry-backed organization energyfromshale.org declares that “there are only two sides in the debate: those who want our oil and natural resources developed in a safe and responsible way; and those who don’t want our oil and natural gas resources developed at all.”
So it’s worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government “pick winners,” yet they demand special treatment for this industry precisely because they claim it will be a winner.
And now for something completely different: the success story you haven’t heard about.
These days, mention solar power and you’ll probably hear cries of “Solyndra!” Republicans have tried to make the failed solar panel company both a symbol of government waste — although claims of a major scandal are nonsense — and a stick with which to beat renewable energy.
But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.
This has already led to rapid growth in solar installations, but even more change may be just around the corner. If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal.
And if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.
But will our political system delay the energy transformation now within reach?
Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.
So what you need to know is that nothing you hear from these people is true. Fracking is not a dream come true; solar is now cost-effective. Here comes the sun, if we’re willing to let it in.
NYT
___________________
My Thots...
China's entry into the solar energy industry will quicken the lowering of the costs and hasten "Moore's law" in the industry.
This is an Op Ed, but I would like to see more facts N figures subtantiating Krugman's claim that price of sloar energy has gone below that of coal (plus environmental costs).
Here Comes the Sun
By PAUL KRUGMAN
Published: November 6, 2011
For decades the story of technology has been dominated, in the popular mind and to a large extent in reality, by computing and the things you can do with it. Moore’s Law — in which the price of computing power falls roughly 50 percent every 18 months — has powered an ever-expanding range of applications, from faxes to Facebook.
Our mastery of the material world, on the other hand, has advanced much more slowly. The sources of energy, the way we move stuff around, are much the same as they were a generation ago.
But that may be about to change. We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. That’s right, solar power.
If that surprises you, if you still think of solar power as some kind of hippie fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives.
Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.
Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.
Economics 101 tells us that an industry imposing large costs on third parties should be required to “internalize” those costs — that is, to pay for the damage it inflicts, treating that damage as a cost of production. Fracking might still be worth doing given those costs. But no industry should be held harmless from its impacts on the environment and the nation’s infrastructure.
Yet what the industry and its defenders demand is, of course, precisely that it be let off the hook
for the damage it causes. Why? Because we need that energy! For example, the industry-backed organization energyfromshale.org declares that “there are only two sides in the debate: those who want our oil and natural resources developed in a safe and responsible way; and those who don’t want our oil and natural gas resources developed at all.”
So it’s worth pointing out that special treatment for fracking makes a mockery of free-market principles. Pro-fracking politicians claim to be against subsidies, yet letting an industry impose costs without paying compensation is in effect a huge subsidy. They say they oppose having the government “pick winners,” yet they demand special treatment for this industry precisely because they claim it will be a winner.
And now for something completely different: the success story you haven’t heard about.
These days, mention solar power and you’ll probably hear cries of “Solyndra!” Republicans have tried to make the failed solar panel company both a symbol of government waste — although claims of a major scandal are nonsense — and a stick with which to beat renewable energy.
But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.
This has already led to rapid growth in solar installations, but even more change may be just around the corner. If the downward trend continues — and if anything it seems to be accelerating — we’re just a few years from the point at which electricity from solar panels becomes cheaper than electricity generated by burning coal.
And if we priced coal-fired power right, taking into account the huge health and other costs it imposes, it’s likely that we would already have passed that tipping point.
But will our political system delay the energy transformation now within reach?
Let’s face it: a large part of our political class, including essentially the entire G.O.P., is deeply invested in an energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers’ money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar.
So what you need to know is that nothing you hear from these people is true. Fracking is not a dream come true; solar is now cost-effective. Here comes the sun, if we’re willing to let it in.
NYT
___________________
My Thots...
China's entry into the solar energy industry will quicken the lowering of the costs and hasten "Moore's law" in the industry.
This is an Op Ed, but I would like to see more facts N figures subtantiating Krugman's claim that price of sloar energy has gone below that of coal (plus environmental costs).
Friday, November 4, 2011
BLS EMPLOYMENT SITUATION – OCTOBER 2011
http://www.bls.gov/news.release/pdf/empsit.pdf
* Nonfarm payroll employment trended up in October (+80,000)
* Unemployment rate was little changed at 9.0 %
MoM change in K
* Nonfarm payroll employment trended up in October (+80,000)
* Unemployment rate was little changed at 9.0 %
MoM change in K
Category....................................Oct...........Aug...........Sept.................Oct.
.................................................2010.......2011........2011p...........2011p
Total nonfarm.............................171.........104............158....................80
Total private..............................143...........72............191..................104
Goods-producing........................1............-13.............29...................-10
Private service-providing1........142............85............162.................114
Government................................28............32.............-33.................-24
Thots & Observations....
1) The change in TNFP (total nonfarm payroll) employment for August was revised from +57K to +104K and the change for September was revised from +103K to +158K.
IMHO, it shows that the BLS preliminary estimates data tend to be adjusted upwards in future mths as more data streamed in; only to follow the ADP Private Payrolls data.
2) So jobs add in the previous 2 mths had been underestimated.
3) As with the ADP data, Goods-producing industries remain weak, whilst the Service Providing Industries power on.
4) Govt Sector continues to be weak, with the State govt losing 20K jobs.
ECB rate cut was pre-emptive, bond buys temporary -Stark
* Says Draghi made clear bond-buy programme is temporary* Puts onus on governments to tackle crisis via reforms
* Suggests Thursday's rate cut should have been expected
* Sees "strong cooling" of economy
By Sakari Suoninen and Eva Kuehnen
FRANKFURT, Nov 4 (Reuters) - The European Central Bank's interest rate cut on Thursday was a pre-emptive strike, policymaker Juergen Stark said on Friday, and urged the bank to call an early halt to its sovereign bond-buying programme.
The comments by Stark, who will step down from the bank's six-strong Executive Board at the end of the year, signal the ECB is not preparing to cut its key policy rate again this year.
He also stressed that the bank's programme of buying sovereign debt was temporary and dismissed suggestions it should be made permanent even as the ECB faces pressure to ramp up purchases to tackle the euro zone debt crisis.
The controversial programme has increasingly come into focus as the debt crisis has deepened due to uncertainty about Greece's future in the euro zone. Many analysts see ECB bond buying, and the firepower it could unleash, as the only way to steady markets.
Stark is quitting the ECB early this year in what sources have said is a protest against the bond-buying programme.
The ECB's new president, Mario Draghi, said on Thursday the programme was "temporary" and "limited", reiterating the stance of his predecessor Jean-Claude Trichet and suggesting Draghi wants to keep up pressure on euro zone governments engulfed by the debt crisis to reform.
"Mario Draghi made clear that this is a temporary measure and it's no secret that I have never been a particular fan (of the programme)," Stark told a conference in Frankfurt.
"I expect that we should end this programme as soon as possible, because it sets false incentives for member states, for governments to bring their budgets in order."
After the event, Stark expanded on his comments, ruling out making the programme permanent, as was suggested during the Cannes G20 meeting.
"This is not an option," he told reporters.
Stark suggested markets were wrong to have been surprised by Thursday's ECB decision to cut rates to 1.25 percent at its first policy meeting under Draghi.
"Yesterday's decision has nothing to do with pragmatism," Stark said, adding that he made the proposal to cut rates.
"We are witnessing a strong cooling of the global economy and in the euro zone."
But, he also flagged that the ECB plans to keep rates on hold until at least the end of the year.
"We anticipated the deterioration of the economic situation over the next couple of weeks, so this was a pre-emptive decision," the German said. "We never pre-commit, but I would like to stress this was a pre-emptive decision."
Stark's fellow Executive Board member, Jose Manuel Gonzalez-Paramo said on Friday that inflation should remain the central bank's priority.
"Monetary policy must remain focused on its key objective of delivering price stability," he said in Madrid.
SELF-HELP PROGRAMME
Stark's opposition to the ECB's bond buying is based on a belief, shared by many at the central bank, that the onus should be on the crisis-hit countries to make economic reforms and fears that ECB market intervention, which can reduce government borrowing costs, could reduce their incentive to reform.
Stark said euro zone countries receiving aid from their wealthier peers must use that help to put themselves on a stable footing.
"Solidarity is not a one-way street," he said. "It calls for input from both sides, from those who give as well as those who take. The financial support of the donor countries helps the crisis states to buy time to carry out reforms."
ECB bond buying has helped keep surging Italian bond yields in check as Italy's high debt has become a focus of market attention. Italy agreed late on Thursday to allow the IMF to monitor its progress in carrying through economic reforms whose delay has sapped market confidence in the country and ravaged its government bonds.
Draghi, himself an Italian, gave no hint on Thursday that the ECB's bond-buy programme would be accelerated despite the chaos in Greece threatening to engulf the much larger economies of Italy and Spain.
"At this juncture they want to stress that they don't see it as their remit to be the lender of last resort to governments," RBS economist Nick Matthews said of the ECB, adding that the central bank still wanted markets to function in an orderly way to allow the transmission of its monetary policy.
"If the governments are trying to put the Italian politicians under pressure to put in place the necessary reforms, you don't want to let them off the hook by all of a sudden buying huge amounts of their bonds," he added. "So it's a balancing act we've got here."
Matthews expected the euro zone's rescue fund, the European Financial Stability Facility, would have insufficient firepower to restore order to markets, even if it is leveraged to 1 trillion euros, and that the ECB would ultimately have to increase its bond purchases.
"We think that ultimately they will be forced to step up massively their bond purchases in order to prevent a new escalation of contagion risks across the system," said Matthews, who was among a minority of economists who forecast the ECB's rate cut on Thursday.
Posted: 04 November 2011 1832 hrs
____________
My Thots....
The 2 articles represent the dilemma facing Draghi.
A danger that the contagion effects due to Eurozone sovereign debt and banking crisis spreading to, and affecting the economies in the Eurozone, leading to stagnation or even recession.
versus
The danger that countries like Italy may see any aid as a license to be profligate.
* Suggests Thursday's rate cut should have been expected
* Sees "strong cooling" of economy
By Sakari Suoninen and Eva Kuehnen
FRANKFURT, Nov 4 (Reuters) - The European Central Bank's interest rate cut on Thursday was a pre-emptive strike, policymaker Juergen Stark said on Friday, and urged the bank to call an early halt to its sovereign bond-buying programme.
The comments by Stark, who will step down from the bank's six-strong Executive Board at the end of the year, signal the ECB is not preparing to cut its key policy rate again this year.
He also stressed that the bank's programme of buying sovereign debt was temporary and dismissed suggestions it should be made permanent even as the ECB faces pressure to ramp up purchases to tackle the euro zone debt crisis.
The controversial programme has increasingly come into focus as the debt crisis has deepened due to uncertainty about Greece's future in the euro zone. Many analysts see ECB bond buying, and the firepower it could unleash, as the only way to steady markets.
Stark is quitting the ECB early this year in what sources have said is a protest against the bond-buying programme.
The ECB's new president, Mario Draghi, said on Thursday the programme was "temporary" and "limited", reiterating the stance of his predecessor Jean-Claude Trichet and suggesting Draghi wants to keep up pressure on euro zone governments engulfed by the debt crisis to reform.
"Mario Draghi made clear that this is a temporary measure and it's no secret that I have never been a particular fan (of the programme)," Stark told a conference in Frankfurt.
"I expect that we should end this programme as soon as possible, because it sets false incentives for member states, for governments to bring their budgets in order."
After the event, Stark expanded on his comments, ruling out making the programme permanent, as was suggested during the Cannes G20 meeting.
"This is not an option," he told reporters.
Stark suggested markets were wrong to have been surprised by Thursday's ECB decision to cut rates to 1.25 percent at its first policy meeting under Draghi.
"Yesterday's decision has nothing to do with pragmatism," Stark said, adding that he made the proposal to cut rates.
"We are witnessing a strong cooling of the global economy and in the euro zone."
But, he also flagged that the ECB plans to keep rates on hold until at least the end of the year.
"We anticipated the deterioration of the economic situation over the next couple of weeks, so this was a pre-emptive decision," the German said. "We never pre-commit, but I would like to stress this was a pre-emptive decision."
Stark's fellow Executive Board member, Jose Manuel Gonzalez-Paramo said on Friday that inflation should remain the central bank's priority.
"Monetary policy must remain focused on its key objective of delivering price stability," he said in Madrid.
SELF-HELP PROGRAMME
Stark's opposition to the ECB's bond buying is based on a belief, shared by many at the central bank, that the onus should be on the crisis-hit countries to make economic reforms and fears that ECB market intervention, which can reduce government borrowing costs, could reduce their incentive to reform.
Stark said euro zone countries receiving aid from their wealthier peers must use that help to put themselves on a stable footing.
"Solidarity is not a one-way street," he said. "It calls for input from both sides, from those who give as well as those who take. The financial support of the donor countries helps the crisis states to buy time to carry out reforms."
ECB bond buying has helped keep surging Italian bond yields in check as Italy's high debt has become a focus of market attention. Italy agreed late on Thursday to allow the IMF to monitor its progress in carrying through economic reforms whose delay has sapped market confidence in the country and ravaged its government bonds.
Draghi, himself an Italian, gave no hint on Thursday that the ECB's bond-buy programme would be accelerated despite the chaos in Greece threatening to engulf the much larger economies of Italy and Spain.
"At this juncture they want to stress that they don't see it as their remit to be the lender of last resort to governments," RBS economist Nick Matthews said of the ECB, adding that the central bank still wanted markets to function in an orderly way to allow the transmission of its monetary policy.
"If the governments are trying to put the Italian politicians under pressure to put in place the necessary reforms, you don't want to let them off the hook by all of a sudden buying huge amounts of their bonds," he added. "So it's a balancing act we've got here."
Matthews expected the euro zone's rescue fund, the European Financial Stability Facility, would have insufficient firepower to restore order to markets, even if it is leveraged to 1 trillion euros, and that the ECB would ultimately have to increase its bond purchases.
"We think that ultimately they will be forced to step up massively their bond purchases in order to prevent a new escalation of contagion risks across the system," said Matthews, who was among a minority of economists who forecast the ECB's rate cut on Thursday.
Italy put under strict IMF and EU surveillance: officials
Posted: 04 November 2011 1832 hrs
CANNES, France - The International Monetary Fund and European Commission will strictly monitor Italy to reassure markets that it is meeting targets to reduce its budget deficit, European officials said on Friday.
But an Italian government source quickly denied that the agreement implied a formal "surveillance" mechanism, and said instead that Rome would seek "advice" from the IMF on the issue.
While it had been agreed earlier the EU's executive would step up monitoring of Rome, European leaders meeting on the margins of a G20 summit had decided to bring in the IMF to increase the credibility of the surveillance and reassure the markets, the senior officials said.
The IMF's advice is expected to play a complementary role to the European Commission's monitoring, added the Italian source.
Investors forced up the Italian government's 10-year borrowing cost to a euro-era record 6.402 percent on Thursday.
The European Central Bank (ECB) was forced to step in and prop up the Italian bond market in August when the rates soared above six percent, a level widely considered by experts to be unsustainable.
It was reported then that the ECB had sent the Italian government a list of policy changes to be made.
After the European Union decided to force investors to take losses on Greek bonds, attention turned to Italy, where the anaemic growth rate makes it increasingly difficult for Rome to manage its debt equal to 120 percent of output.
Italy's government adopted two austerity packages during the summer, but markets have remained sceptical that the measures will eliminate the deficit and boost growth.
At the G20 summit on Thursday, Prime Minister Silvio Berlusconi vowed to stick to Italy's target of balancing the budget by 2013 and that new austerity measures would be fully enacted by the end of the month.
An emergency Cabinet meeting on Wednesday adopted reforms including state asset sales, tax incentives for recruiting workers, measures to boost market competition and the unblocking of billions in aid for southern Italy.
The measures, which still have to go before parliament for final approval, stopped short of major changes such as higher taxes for the wealthy, a one-off levy on current accounts and a housing tax that had been mooted in recent days.
- AFP/ir
But an Italian government source quickly denied that the agreement implied a formal "surveillance" mechanism, and said instead that Rome would seek "advice" from the IMF on the issue.
While it had been agreed earlier the EU's executive would step up monitoring of Rome, European leaders meeting on the margins of a G20 summit had decided to bring in the IMF to increase the credibility of the surveillance and reassure the markets, the senior officials said.
The IMF's advice is expected to play a complementary role to the European Commission's monitoring, added the Italian source.
Investors forced up the Italian government's 10-year borrowing cost to a euro-era record 6.402 percent on Thursday.
The European Central Bank (ECB) was forced to step in and prop up the Italian bond market in August when the rates soared above six percent, a level widely considered by experts to be unsustainable.
It was reported then that the ECB had sent the Italian government a list of policy changes to be made.
After the European Union decided to force investors to take losses on Greek bonds, attention turned to Italy, where the anaemic growth rate makes it increasingly difficult for Rome to manage its debt equal to 120 percent of output.
Italy's government adopted two austerity packages during the summer, but markets have remained sceptical that the measures will eliminate the deficit and boost growth.
At the G20 summit on Thursday, Prime Minister Silvio Berlusconi vowed to stick to Italy's target of balancing the budget by 2013 and that new austerity measures would be fully enacted by the end of the month.
An emergency Cabinet meeting on Wednesday adopted reforms including state asset sales, tax incentives for recruiting workers, measures to boost market competition and the unblocking of billions in aid for southern Italy.
The measures, which still have to go before parliament for final approval, stopped short of major changes such as higher taxes for the wealthy, a one-off levy on current accounts and a housing tax that had been mooted in recent days.
- AFP/ir
____________
My Thots....
The 2 articles represent the dilemma facing Draghi.
A danger that the contagion effects due to Eurozone sovereign debt and banking crisis spreading to, and affecting the economies in the Eurozone, leading to stagnation or even recession.
versus
The danger that countries like Italy may see any aid as a license to be profligate.
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