Superior Equity Group – US stocks gain on China data, Fed hopes
Goldisequity.com – US deficit is real and growing threat
Federal Reserve chairman Ben Bernanke on Monday called for quick and decisive steps to rein in the exploding US budget deficit, warning failure to act could result in a serious crisis.
Warning that surging annual deficits presented a “real and growing threat” to the US economy, Bernanke told an audience in Rhode Island that a day of reckoning would come if action is not taken.
“The only real question is whether these adjustments will take place through a careful and deliberative process… or whether the needed fiscal adjustments will be a rapid and painful response to a looming or actual fiscal crisis.”
The US saw a record 1.47 trillion dollar budget shortfall in the financial year that ended in September, as tax revenues dried up and the government splurged on economic bailouts and stimulus spending.
Bernanke suggested new fiscal rules from Congress could help put the US budget back into order, but only with sustained political support.
“Both current and future congresses and presidents will have to make some very tough decisions to put the budget back on a sustainable trajectory,” he said.
Bernanke said a reform of the fiendishly complex US tax code could also help.
“Most people agree that the US tax code is less efficient and less equitable than it might be; moreover, the code is excessively complex and imposes heavy administrative and compliance costs,” said Bernanke.
“Collecting revenues through a more efficient, better-designed tax system could improve economic growth and make achieving sustainable fiscal policies at least somewhat easier.”
Goldisequity.com – Consumer confidence drops to lowest level in seven months
Goldisequity.com – New EU finance watchdogs ratified
The European Parliament has ratified a law creating new financial oversight institutions, designed to help prevent future banking crises.
New watchdogs for the banking, financial markets, insurance and pensions sectors will be set up, in addition to a European board to oversee the health of Europe’s economy.
They will become active at the beginning of next year.
European Union member states had already backed the plan.
The new framework for financial supervision was drawn up by EU finance ministers and the European Parliament earlier this month.
Superior Equity Group – Investment of China rose 360% in US
China milked the opportunity offered by the slowdown in US economy by pushing up its investment in that country by 360% in 2009. This is one reason why it has managed to grab the 5th rank in foreign direct investment.
Experts say Beijing is now directing its attention towards low-cost European debt, which has been severely hit by the weakening economy. Year 2010 will see China hugely enhancing its investment in Europe, they said. Chinese investors also more than doubled their investment in European Union and ASEAN destinations. Fund pumping by Beijing happened in a year economic slowdown when the levels of global FDI actually fell by 40%.
Beijing hugely improved on its own record investing $90 billion in overseas destinations in 2009 as compared to its FDI of $56 billion the previous year. It expects to raise the level of $100 billion this year, Shen Danyang, vice-director of the commerce ministry said.
Besides higher levels of Chinese investments, the slowdown in FDI by several developed countries is what helpedBeijing make the pole jump from the 12th to the 5th position in 2009.
The official Chinese media Jinny Yan, Shanghai based economist of Standard Chartered Bank predicted that the EU would continue to be a hotspot for China’s outbound investment in the coming months because of the ongoing European debt woes.
Superior Equity Group – US set to decide on China currency dispute escalation
The US government is set to decide whether to escalate a dispute with China over its currency policy.
The Commerce Department was asked by US manufacturers in April to look into imports of aluminium-based goods for the car and construction industries.
The department must now decide whether to launch an investigation, which could lead to retaliatory trade sanctions.
The main point at issue is whether China unfairly subsidises its exports by manipulating its currency.
Many economists and politicians in the US allege that China holds the value of the yuan down, making its exports artificially cheap.
‘Currency manipulator’
A decision to open an investigation may signal a change in strategy by Barack Obama’s administration.
The US president is under pressure to come up with a new plan to turn the flagging economy around before Congressional mid-term elections in November.
If Washington does go ahead, analysts say this it is likely to reignite serious trade tensions with Beijing at a time when things had seemed to have been smoothed over.
In July, US Treasury Secretary Tim Geithner released a report into China’s currency policy which avoided labelling the country a “currency manipulator”.
That accusation would have provided a basis for efforts within the US Congress to pass punitive trade sanctions against China.
Shortly afterwards, China responded by allowing the yuan to strengthen gradually against the US dollar.
However, the Chinese currency has gained less than 0.5% in value since then.
Moreover, recent trade data has shown the US running enormous trade deficits again – and China running surpluses – despite the US economy remaining weak.
BBC News
Superior Equity Group – Warren Buffett eyes RBS insurance business
US billionaire Warren Buffett is interested in buying Royal Bank of Scotland’s insurance business Direct Line, a report said on Sunday.
Spiralling claims from car accidents have led to heavy losses at RBS’s insurance arm and the bank has brought in a team of advisors to help sell the business, according to the Sunday Times.
RBS — which is 83% state-owned after being bailed out by the British government — has been ordered by the European Commission to sell Direct Line to fall into line with competition rules.
Berkshire Hathaway, the investment vehicle owned by Buffett, is among a clutch of potential bidders interested in the business, the Sunday Times reported. US insurer Allstate has also expressed an interest, it was claimed.
RBS would not comment on speculation over potential buyers, but did confirm it had engaged a team of advisers to see through the sale.
AFP
Superior Equity Group – China to allow foreign investment in media
China is now ready to permit foreign companies to invest in local newspapers and magazines, provided they do not interfere with the editorial policy, Liu Binjie, minister for general administration of press & publication, said on Wednesday.
Chinese media groups will also be encouraged to extend their reach across the world, he said. “You can only invest in the financial operations of the newspapers. We have been encouraging the separation the news reporting and business operations. Foreign investors can only invest in the business operation functions,” Liu said at a press conference. “A US media group has already invested in a Chinese computer magazine, he added.
The minister disclosed plans to bring about mergers and acquisitions in the Chinese media industry with the purpose of producing some international giants with worldwide reach.
Xinhua news agency is set to become an international media player, he said. The state-run agency is being encouraged to establish bureaus across the world to improve original reporting of international affairs, instead of depending on foreign sources for news stories.
“The government is encouraging media companies to restructure their management and list in stock markets,” Liu said. He said that 41 Chinese media companies, including the Beijing Youth Daily, are listed in the stock market, having a total market value of 290 billion Yuan ($43 billion).
The minister tried to counter the general view that the entire media industry in China is directly or indirectly owned by the government. He said there were 100,000 privately owned media companies in the country.
Superior Equity Group – Analyst predicts another US market crash next month
Storm clouds are gathering over the US market with a renowned American analyst betting on a huge crash next month.
The crash prediction was made after ‘Hindenburg Omen’ — named after an ill-fated German plane that crashed in 1937– was sighted on the technical charts by Jin Miekka, who is credited with making several accurate market-linked forecasts before.
The ‘plane of bad omen’ is now a euphemism for a crash much bigger than just a bearish trend.
Based on a study of technical trends, Miekka predicts the meltdown could be in September.
Wall Street has been abuzz over whether the Omen, for which names like ‘Titanic’–after the luxury liner that sank on its maiden trip–was also in contention but discarded because it has already been used, would come true.
Amid an increasingly volatile US market, investors have been searching for any clues about stock’s direction, especially in the past week where major indices fell more than three per cent.
There were 92 companies that hit new 52-week highs on Thursday (August, 14), or 2.9 per cent on the New York Stock Exchange. There were also 81 new lows, or 2.6 per cent of the total. Each number must exceed 2.5 per cent for the Omen to occur.
Marketmen in India, meanwhile, say Hindenburg threat is far from its shores.
Bourses here are aflush with FII investment and, according to analysts, there has not been a single day since July when Foreign Institutional Investors (FIIs) have turned net sellers.
“When bears cannot control the markets, they have to come out with some theories — be it is charts, patterns, astrological fall or even theoretical envisaged corrections,” CNI Research Kishore P Ostwal said.
Other criteria for the Omen to occur include a rising 10-week moving average for New York Stock Exchange (NYSE) and negative Mc-Clellan Oscillator, a technical indicator measuring market volatility.
Many FIIs feel that even the Indian markets are expensive at the moment.
Analysts are not ruling out correction of eight to 10 per cent before the start of the next wave in the market.
“We believe that there is no case of reversal of market, though chances of correction always looms large. Every dip should be used as an opportunity to invest till the end of December 2014,” analysts feel.
There are no signs of Indian markets being in overbought zone, they said.
Investors may continue in their exercise of value picking. With the government on a sell-off spree till March 2011, its policies are likely to remain market friendly.
Superior Equity Group – Beijing sees green, lines up billions to develop e-vehicles
The Chinese government, determined to become a world leader in green technology, says it plans to invest billions of dollars over the next few years to develop electric and hybrid vehicles.
The government said a group of 16 big state-owned companies had already agreed to form an alliance to do research and development, and create standards for electric and hybrid vehicles. The plan aims to put more than a million electric and hybrid vehicles on the road over the next few years in what is already the world’s biggest and fastest growing auto market.
The announcement, analysts say, is another example of how China seeks to marshal resources and tackle industries and new markets. The plan also underlines what China describes as its growing commitment to combating pollution and reducing carbon emissions. According to some reports by state-run media, Beijing intends to invest nearly $15 billion in the venture, which if true would make it one of the world’s most ambitious attempts to develop more energy-efficient vehicles.
The bold plan was announced late on Wednesday by one of China’s most powerful bodies: the State-owned Assets Supervision and Administration Commission (SASAC). SASAC operates under China’s cabinet, or State Council. From Beijing, it oversees about 125 of China’s biggest state-owned companies.
State-owned companies “have an overall advantage in developing the electric vehicle industry,” Li Rongrong, SASAC’s chairman, said in a statement. Analysts say the government plan bears watching.
“This is the kind of plan the government would like to happen, and they certainly have the resources to put behind it,” said Oded Shenkar, a professor of management at Ohio State University and the author of ‘The Chinese Century’. “The government could easily underwrite or subsidise the development costs,” Shenkar said, “and do it at a time when the global car industry is still reeling.”
Few details of the plan were released. But Beijing said that over the next three years, 500,000 energy-efficient vehicles would reach the market each year and that more-efficient vehicles would soon account for 5 percent of passenger car sales in China. This year, analysts expect vehicle sales in China to reach about 17 million.
SASAC’s announcement said the alliance had been formed with about $200 million. But other reports said the investment was tied to the government’s plan to revamp the auto industry and promote energy-efficient vehicles with an investment of nearly $15 billion.
There is some opposition to the plan. The English edition of The Global Times, another state newspaper, said Thursday that some groups had criticised the alliance, saying it favoured big state-owned companies and had not made clear who would own the intellectual property.
“Such an association should include all firms strong in the area, rather than only SOE’s,” Zhong Shi, editor in chief of China Automotive Review, told The Global Times, referring to state-owned enterprises. “Though lots of foreign firms launched technology agreements, there is no precedent of successful technology exchange in China’s auto industry.”
