NIFTY TIPS

Tuesday, January 19, 2010

End of economic stimulus risk for oil demand: IEA

The end of huge economic stimulus packages around the globe threatens a modest recovery in global oil demand this year, an official from the International Energy Agency said on Monday.

"That is something we are watching closely," said IEA Deputy Executive Director Richard Jones in an interview with Reuters. "We think these are downward risks to demand."

The oil market was 'pretty well supplied' so OPEC was unlikely to change output at its March meeting, he said.

"We see similar action in March as we saw in the last few meetings, which is to leave things as they are," Jones said.

Source: Reuters
Courtesy moneycontrol.com

Also check

Swiss Re gets $1.27 bn in Berkshire life deal

Insurer Swiss Re is to transfer the liabilities of a lossmaking US life reinsurance contract to investor Warren Buffett for 1.3 billion Swiss francs (USD 1.27 billion) to free up cash and bolster its finances.

The deal with the US investor's Berkshire Hathaway makes Berkshire Hathaway Life Insurance Company of Nebraska liable for up to USD 1.5 billion in reinsurance claims. Berkshire Hathaway will also be the recipient of premiums from the block.

For Swiss Re, the deal will also free up about 300 million Swiss francs in capital, allowing it to be invested more profitably elsewhere, Swiss Re, the world's second-biggest reinsurer, said on Monday.

Shares in the company were up 0.15% at 50.25 Swiss francs by 0845 GMT.

"The transaction is marginally positive for Swiss Re. This block of business was slightly loss-making in 2009," said Helvea analyst Tim Dawson.

"It does give Swiss Re more capital flexibility and strengthen the balance sheet."

The claims Berkshire Hathaway is taking responsibility for stem from a block of US life insurance policies written before 2004.

Swiss Re said the business no longer met its investment thresholds, and that passing it to Berkshire Hathaway would have boosted operating profit at its life unit by 40 million Swiss francs in the first nine months of 2009.

Getting rid of the contract will also reduce its financial exposure to lethal pandemics such as the swine flu outbreak by about 10%, the company added.

The deal is effective as of Oct. 1, 2009, and will be reported by Swiss Re in the first quarter 2010.

(USD 1=1.023 Swiss Franc)

Source: Reuters
Courtesy moneycontrol.com

Also check

Friday, January 15, 2010

China needs tightening policies to avert overheating: ADB

China should consider policies to tighten its monetary policy to prevent the world's third-largest economy from overheating as growth is likely surge this year, the Asian Development Bank said on Friday.

With monetary conditions looking unduly loose, there is a need for tightening with focus on reining in lending and raising actual cost of funds.

China took an unexpected step towards tightening on Tuesday by increasing banks' reserve requirements, although market players say it would only marginally succeed in curbing inflows of speculative capital.

"No country has responded as effectively and as resolutely to the crisis as China has. With the global economy recovering and with China's growth now surging, there may be a need for change in policy settings," according to a study commissioned by the Manila-based ADB and completed before the reserve hike.

The ADB estimates developing Asia will grow 6.6% this year after expanding 4.5% in 2009, with China charging ahead with forecast growth of 8.9%.

"The fact that the (Chinese) authorities have already begun a range of tightening measures reflects their growing concerns over possible asset bubbles and other distortions," the study said. It cited efforts by China to require big banks to raise their capital adequacy ratio to cut the risk of a rise in bad loans.

The study, titled "Impact and Policy Responses - People's Republic of China", also said the yuan is probably undervalued and should be allowed to appreciate gradually.

"A shift to a gradual appreciation of the exchange rate anchored in a new exchange rate regime such as the 'basket-band-crawl' regime adopted by countries such as Singapore might be more appropriate."

Source: Reuters
Courtesy moneycontrol.com

Also check

ADB says too early to end stimulus; no China bubble

The head of the Asian Development Bank warned it was too early for Asian countries to end stimulus policies started during the financial crisis and said he saw no big risk of price bubbles in China.

Haruhiko Kuroda said on Thursday that policymakers still needed to restore demand and stabilise financial systems to support the economic recovery.

China's surprise move on Tuesday to raise bank reserve requirements was "quite appropriate" even if there were no big asset price risk in the world's third-biggest economy.

"While we believe developing Asia is leading the global economic recovery, it is still too early to relax vigorous efforts to restore demand and stabilise financial systems," Kuroda told a forum on the crisis.

He said the rebound in the world economy was fragile.

Asia is leading the recovery but growth is unlikely to lead to runaway inflation, Kuroda said.

"The timing of exit from policy stimulus needs to be tailored to countries' individual situations, taking into account inflation risks where output gaps are turning positive, as well as debt levels," Kuroda later told reporters.

Asian countries must boost internal demand to return to high growth rates and reduce poverty, with external demand likely to remain sluggish as advanced economies tread carefully back to pre-crisis growth levels, he said.

The ADB estimates developing Asia will grow 6.6% this year after a 4.5% expansion in 2009, with China charging ahead with 8.9% growth this year.

China rocked world financial markets with an increase in the amount that banks must set aside as reserves that was earlier than markets had expected. The move was likely prompted by concerns over a surge in inflation surge.

"Inflationary pressures have not been so much prominent in the Chinese economy at this moment. But in some cities, the real estate prices have risen sharply over the last several months and so the move by the Chinese central bank appeared to be quite appropriate," Kuroda said, adding the move was not expected to undermine the V-shaped recovery.

"The monetary authorities have already adjusted slightly to a less expansionary monetary stance quite appropriately, and also the bank credit has been well supervised."

Source: Reuters
Courtesy moneycontrol.com

Also check

IMF chief urges reform financial regulation

The head of the International Monetary Fund on Thursday urged a global focus in 2010 on reforming financial regulation in order to help prevent a repeat of the failures that caused the financial crisis.

IMF Managing Director Dominique Strauss-Kahn, in his first news conference of the year, said financial sector regulations and oversight need to be stronger and smarter. Without necessary changes, he said, the financial sector could go back to business as usual and lessons from the crisis would be cast aside.

"It means we should complete the global project to address the failings in regulation, economic policy and governance that lay behind this crisis," Strauss-Kahn said.

"The question is not to add layers of regulation one over the other one, but to have regulations that really help avoid crisis of this kind," he said, noting that the changes would require political support.

He applauded plans by the Obama administration to apply a levy against major U.S. financial institutions to cover the cost of the government's bailout for banks.

"I really celebrate this proposal by the U.S. government because it shows the political momentum to move in this direction is still there," he said.

Turning to the world economy, Strauss-Kahn suggested the IMF would announce more upbeat economic forecasts in its World Economic Outlook later this month, including for Europe, although he warned that the recovery worldwide remains very fragile and mainly driven by government support.

The world is in the midst of a jobs crisis, with the worst was yet to come, he said, as he urged governments to take the jobs situation seriously and shift stimulus toward supporting employment.

The world, and the IMF, could not declare the crisis over until the employment crisis was under control, he said.

Source: Reuters
Courtesy moneycontrol.com

Also check

Wednesday, January 13, 2010

China raises banks' reserve requirements

China's central bank on Tuesday said it was raising banks' reserve requirements by 0.5% points, effective January 18, in the clearest sign yet that it has begun to tighten monetary policy.

It was the first time that the People's Bank of China adjusted the amount of deposits that commercial banks must keep on reserve since it lowered the ratio in December 2008 as part of its loosening cycle at the time.

The hike in the reserve requirement ratio was sooner than many economists had anticipated and was interpreted as a pre-emptive move against inflation.

This first increase since June 2008 was meant to stabilise loan growth but keep overall policy pro-growth, a Chinese central bank official told Reuters. "Our monetary policy stance is still appropriately loose and the move is intended to use quantitative tools for flexible fine-tuning," an official at the People's Bank of China said.

So, what do experts make of this policy move?

Donald Straszheim, Senior Managing Director & Head of China Research, ISI Group, says, "I wouldn't really be negative about it, it is the right thing to do. China provided so much monetary stimulus in 2009, excessive by anyone's measure, that they need to start pulling it back. The economy is roaring ahead, it is time to start to do this, this is the first step in a transition to tighter policy."

David Gordon, Head of Research, Eurasia Group, too echoes Straszheim's view. "On the one hand, they are very worried about a slow global economic recovery. They are still committed to fully laying out a stimulus plan. But at the same time, they are also quite worried about asset bubbles building up and the potential for inflation. I think they are trying to balance continued stimulus with fine tuning and slowing down access to capital, making it harder to lend."

This, experts say, is a clear signal of what direction the RBI is likely to take in it's monetary policy this month end.

(With agency inputs)

Source: CNBC-TV18
Courtesy moneycontrol.com

Also check