Brazil is the new focus of Automobile industry

Brazil s auto market – the fourth-largest in the world – is a top prospect for foreign carmakers seeking new buyers, with strong growth expected in the coming years, industry experts say.

Last week, China s JAC Motors (Jianghuai Automobile Co) announced it would invest $900 million to build a factory in Brazil, while German luxury carmaker BMW said there was a “high probability” it would also set up an assembly plant.

“The Brazilian market is one of the biggest in the world,” finishing fourth last year behind China, the United States and Japan, the director of Brazil s auto industry group Anfavea, Ademar Cantero, told a foreign news agency.

“This year, it should be fifth or sixth. But beyond its ranking, it s a promising market that will show positive growth over the next few years.”

Five years ago, Brazil was just the 10th largest auto market worldwide.

But as Cantero explained, while US and European markets are nearly saturated, the South American country only has one car for roughly every 6.5 people — a ratio that is music to the ears of foreign firms.

The emerging power s “economic stability” and rising household spending translates into what he called a “social migration, towards a category of consumers who are only now buying their first car.”

For Cantero, that means the market still has “enormous growth potential. This outlook attracts exporters, and those wanting to invest.”

Over the first seven months of 2011, car production in Brazil s 38 auto factories — most of them in the country s southeastern industrial heartland — reached 2.02 million units, a 4.3 percent jump as compared with last year.

Anfavea is looking for five percent growth in domestic car sales in 2011, which would mean 3.69 million units sold, and production of 3.42 million units, which would represent a 1.1 percent increase over 2010.

“The trend over the next few years will be to maintain this pace of growth,” said Anfavea president Cledorvino Bellini.

He noted that the industry group s projections were “prudent” given an “international situation that is not favorable, and about which we cannot predict the consequences.”

Last week, the administration of President Dilma Rousseff included the auto sector in a sweeping government plan of tax breaks and incentives aimed at helping national industry cope with competitiveness lost from the surging real. The Brazilian currency has been hovering at its highest level in the 12 years since it adopted a free exchange system in January 1999. The strength of the real has undercut exports while fueling imports.

Brazil remains one of the fastest-growing economies in the world, with 7.5 percent growth in 2010, but some sectors are ailing. Industrial production fell 1.6 percent in June.

“This is a first step so that we can once again become competitive in the country,” said Bellini, who sharply criticized a massive increase in car imports of more than 650 percent over the past five years.

There are more than 30 million cars in Brazil, a country of more than 190 million people. Italian auto giant Fiat leads with 22.9 percent of sales, followed by Germany s Volkswagen with 22.22 percent and US carmaker General Motors at nearly 20 percent, according to industry data.

Pound hits 15-month high vs dollar

LONDON: Sterling hit a 15-month high against a weak dollar on Friday, but fell versus the euro as investors braced for a quicker pace of tightening by the European Central Bank than by the Bank of England.

Sterling hit a high of $1.6430 after data showed producer prices rose faster than expected in March. By mid-afternoon it was up 0.4 percent on the day at $1.6387.

The pound has risen more than 5 percent against the struggling greenback this year, and Friday’s peak was the highest since January 2010.

With the greenback under strong downward pressure — the dollar index .DXY is at its lowest since December 2009 — analysts said a 16-month high of $1.6459 was a possible target for sterling.

Producer output prices rose 5.4 percent in March, confounding forecasts for a slowdown to an annual increase of 5.

The data may add to pressure on the Bank to hike rates sooner rather than later, after it left them at a record-low 0.5 percent on Thursday.

“We had a higher-than-expected number. That’s a bit of a hawkish signal for the Bank and would possibly make a May rate hike next month slightly more likely,” said Tom Levinson, currency strategist at ING.

“If we can secure a close above $1.6400 the outlook is pretty bullish for sterling going forward.”

Investors are now fully pricing in a 25 basis point hike in August with a better than a 50 percent chance being priced in for May.

The dollar was under broad pressure on the back of a potential U.S. government shutdown.

The euro rose to a 15-month high against the dollar, staying well-supported in the wake of a euro zone rate hike.

Traders also said rumoured option barriers for sterling at $1.6400 were hit earlier in the session with Asian central banks and Middle-East buyers lining up bids at $1.63. A UK clearer was also seen buying sterling and selling the yen.

Sterling pared some of its losses against the euro after the inflation numbers, but eased back again and was last down 0.6 percent on the day at 88.10 pence.

Markets are close to pricing in a further rate hike in the ECB’s main refinancing rate in June and it is more than fully priced by July. The ECB raised rates on Thursday by 25 basis points to 1.25 percent and signalled there was more tightening to come. AGENCIES

Indian Media Stars Caught up in Corruption Scandal

NEW DELHI: India’s feisty media claim to be guardians of national democracy, but a scandal involving high-profile journalists and telephone taps has given the country its own WikiLeaks-style controversy.

At the centre of the storm is India’s best-known television journalist, Barkha Dutt, who is accused of acting as a power broker in negotiations involving big business and the government over allocation of cabinet seats.

Tapes recorded by the police have emerged as part of a major row over the cut-rate sale of mobile phone licences in 2007-2008 which is estimated to have cost the treasury as much as 40 billion dollars in lost revenues.

Transcripts of the 104 tapes, many of which have been printed by two news magazines, have brought question marks over the reputations of Dutt, veteran newspaper columnist Vir Sanghvi and other big media names.

The tapes are a treasure trove for close followers of New Delhi’s interwoven media, business and political scenes.

A number of them, which record the conversations of about 30 journalists, date back to 2009 when the re-elected Congress party was patching together its current coalition government.

Dutt and Sanghvi are heard in separate conversations discussing who should be in the cabinet with influential lobbyist Niira Radia, who was pushing for A. Raja, a south Indian regional politician, to be reinstated as a minister.

As telecom minister before the election, Raja had supervised the sale of the lucrative 2G phone licences at knock-down prices — which is now emerging as potentially one of the biggest corruption cases in Indian history.

Radia worked as a lobbyist for two of India’s biggest industrialists: Mukesh Ambani, head of Reliance Industries, and Ratan Tata, whose conglomerate’s interests include phone operator Tata Teleservices.

Since the leaks, Tata has gone to court to try to stop any further dissemination of the tapes, saying disclosure of Radia’s “purely personal” telephone conversations with him violated his right to privacy.

Critics have accused Dutt and Sanghvi of acting like deal-makers rather than journalists in their chummy conversations with Radia about the cabinet’s makeup.

Raja was reappointed as telecom minister despite controversy over the 2G telecoms sale. He has since resigned, but denies any wrongdoing.

“What they seem to have done is fall into the trap that beguiles well-known journalists, of thinking that they are important players rather than observers on behalf of their readers and viewers,” commented Indian publisher T.N. Ninan.

Both Dutt and Sanghvi have denied any improper dealings with Radia or that they acted as go-betweens for her and the Congress party.

Dutt, who is famous for her combative interviewing style on the NDTV news channel, has for once found herself on the defensive.

On Tuesday night, she appeared on the channel for a special programme, and was quick to apologise for “an error of judgement,” but she argued that the criticism amounted to a personal smear campaign against her.

Sanghvi, normally an outgoing character, this week announced he was taking a break from his influential column for the Hindustan Times newspaper “to do some thinking.”

The tapes draw in some of India’s most famous people.

One relates to a bitter feud between Mukesh Ambani and his younger brother Anil over the carve-up of the corporate empire left to them by their father who died without a will. Sanhgvi is heard on tape apparently offering Mukesh Ambani a “rehearsed” TV interview.

The tapes, which cover thousands of hours of conversation, were recorded during a police income tax investigation in which Radia’s lines were tapped for 300 days.

The magazines, Open and Outlook, which printed the tapes admit the recordings were “selectively leaked” and say they have no clue about their source or the motivation behind their release.

Radia, who heads Mumbai-based Vaishnavi Corporate Communications, has made no comment directly on the licence sale but has accused the media of “spreading stories of misinformation and malice” about her and her company.

The telecoms scandal has led to paralysis in parliament as the opposition has blocked all business for weeks demanding a cross-party investigation.

Prime Minister Manmohan Singh, who normally manages to stand aloof from India’s political fray, was also drawn into the controversy after he was asked to explain his “alleged inaction” over the licence sales by the Supreme Court.

Asian stocks rise on US data, eyes on earnings

HONG KONG: Asian stocks pulled back slightly from two-and-a-half month highs hit earlier on Tuesday after upbeat U.S. housing data, while the euro neared 2-month peaks on relief over stress tests on European banks.

Financial markets are awaiting a slew of data from the United States, including consumer confidence later in the day and second-quarter Q2 gross domestic product, as well as a host of quarterly corporate earnings.

European markets are seen opening largely steady after Deutsche Bank”s in-line earnings and UBS”s street-beating performance in the second quarter.

The euro was just above a key resistance of 1.30 with sentiment buoyed after the stress tests. Analysts are now eyeing a 2-month high of $1.3029 hit last week as the next test.

High-yielding currencies like the Australian and New Zealand dollars held near recent highs and the dollar stabilised after retreating against the yen on Monday. The pound rose to a 5-month high of $1.5530 as risk appetite improved.

The MSCI index of Asia Pacific ex-Japan stocks was up 0.5 percent, led by gains in the technology and consumer durables sectors.

The index, which hit its highest level since mid-May earlier in the session, is down just 2 percent in the year to date, and could return to the black this week although earnings from Asian corporate heavyweights hold the key to further gains.

“What we are going to get is good earnings numbers and negative forward looking statements for Q3 and especially Q4. Things are not looking so good,” said Erwin Sanft, head of China and Hong Kong Research at BNP Paribas Asia.

Japan”s benchmark Nikkei ended down 0.1 percent after failing to break above a key resistance level, with support from robust earnings in Japan countered by persistent worries about a strong yen.

The yen was steady around 86.95 yen to a dollar, after rising from Monday”s 87.71.

Overnight, Wall Street finished higher after new home sales in June logged a surprising jump and package delivery and business services company FedEx Corp”s, an economic bellwether, upgraded its quarterly and full-year earnings forecasts.

Asian corporate reporting season enters its busy phase this week amid expectations of robust results for the April-June reporting period, though the picture in the months ahead is uncertain.

Japanese camera and office equipment maker Canon Inc and South Korea”s Samsung SDI Co Ltd, the world”s No.2 rechargeable battery maker, both posted strong earnings but the outlook is less than upbeat.

Bucking the overall trend, Shanghai”s composite, already the worst performer in Asia this year, edged down 0.4 percent after a report the city”s banks are facing rising default risks on loans to real estate developers.

The mood was already jittery after a report the previous day that almost a quarter of China”s local government debt is at risk of defaulting.

Shanghai”s index is down more than 21 percent in the year to date despite a six-session rising streak which has taken it to month highs.

The Aussie was trading at $0.9015 close to an 11-week peak and the kiwi hovered at $0.7339, not far from a six-month high.

Krishna believes Aman ki Asha vital for peace

NEW DELHI: External Affairs Minister SM Krishna said Jang Group-launched Aman ki Asha would go a long way in taking down the tension between the two countries, Geo News reported Thursday.

Talking to Pakistani journalists here, he lauded Pakistan for having taken up good practical steps to abolish the hideouts of extremists.

Mumbai Attacks aggravated the ties between the two countries; however, the Jang Group-sponsored project ‘Aman ki Asha’ will help scale down the tension between the two nations.

Responding a query regarding his Pakistan visit, Krishna said the headway to resolve the issues, would be achieved through meeting with his Pakistani counterpart Shah Mehmood Qureshi, adding it would enhance the outlook for peace in the region.

The five points are indispensable in restoring relations with Pakistan; these include elimination of safe havens for terrorisms and putting back in place the atmosphere of trust and trade.

Oil tumbles for 4th straight day

SINGAPORE: Oil fell for a fourth straight day on Thursday, shedding as much as 1.3 percent, on signs China”s economic growth was slowing, while the dollar strengthened as Europe”s debt woes kept simmering across financial markets.

China”s official purchasing managers” index (PMI) fell to a weaker-than-expected 52.1 in June from 53.9 in May, still above the 50 threshold that indicates an expansion, the National Bureau of Statistics said on Thursday, saying the outlook for Chinese exports was grim because of the euro zone debt crisis.

Japan”s Nikkei dropped 1.5 percent to a seven-month low on Thursday, after rating agency Moody”s decision on Wednesday to put Spain”s credit ratings under revision rekindled aversion to riskier assets, including commodities.

“Market confidence remains very fragile and people are concerned about the risks to the international economic recovery,” said David Moore, an analyst at the Commonwealth Bank of Australia.

“Most of the equity markets seem to be opening lower so that is probably not helping oil.”

U.S. crude for August delivery CLc1 fell as much as $1 to $74.63 a barrel and was down 82 cents at $74.81 by 0254 GMT, having slid almost 10 percent in the second quarter, the first quarterly drop since 2008. ICE Brent LCOc1 fell 74 cents on Thursday to $74.27.

United States fuel stockpiles posted surprise gains last week, government statistics showed on Wednesday, raising doubts about the speed of demand recovery in the world”s top consumer.

Traders were also looking to the nation”s weekly jobless claims later on Thursday and for June”s employment report on Friday for further indications about the direction of the economy.

“The data in the next two days is particularly important and has the potential to move oil prices,” Moore said. “The macroeconomic picture is key. I wouldn”t necessarily think that $75 would be a floor, but over time, we will see prices recover from current levels.”

Nonfarm payrolls probably fell in June for the first time this year, by 110,000, as many of the 411,000 temporary workers hired in May to complete the census were laid off, a survey showed.

U.S. gasoline stockpiles unexpectedly rose by 537,000 barrels last week, the Energy Information Administration said on Wednesday, trumping forecasts for a drop of roughly the same size. The increase came even as demand climbed 4.5 percent in the past four weeks from a year earlier.

Inventories of distillates rose by 2.5 million barrels, more than three times the expected gain, even as consumption jumped 9 percent in the past four weeks from a year earlier.

The nation”s crude stockpiles fell 2 million barrels in the week to June 25, compared to expectations for a decline of 900,000 barrels. Cushing, Oklahoma, crude supplies shed 795,000 barrels to 36 million barrels.

The recent slip from record high storage at the Cushing hub has helped narrow the price spread between the front-month and near-month U.S. crude contracts. The spread narrowed to 53 cents CL-1=R on Wednesday from $1.21 on Tuesday.

Alex strengthened into a Category 2 hurricane in the Gulf of Mexico on Wednesday and was due to hit the Mexican coast in a few hours, but it stayed clear of oil fields, to the relief of crude markets.

The U.S. House of Representatives on Wednesday approved a landmark overhaul of financial regulations but the Senate put off action until mid-July, delaying a final victory for President Barack Obama.

bank of canada

Loonie and markets down as Bank raises rates
OTTAWA—The Bank of Canada Tuesday became the first Group of Seven monetary authority to raise interest rates since the credit crisis, but said any further increases would have to be weighed carefully against domestic and global economic developments.

The bank raised its benchmark overnight rate by 0.25 percentage point to 0.50%. The rate had been at a record low 0.25% since April 2009.

The highly anticipated decision underscores the bank’s dilemma as it weighs a strong domestic economy against concerns about the impact of the euro-zone debt crisis on a global economic recovery that it acknowledged to be “increasingly uneven” across countries.

The bank said “considerable” monetary stimulus is still in place.

“Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments,” the bank said in its interest-rate statement.

The widely expected rate hike is the bank’s first since July 2007 and the first under the watch of Governor Mark Carney, who took over the top job in February 2008. The bank also re-established normal functioning of the overnight market, including reverting to a 0.50 percentage point operating band for the rate.
The debt crisis in Greece and some other euro zone countries has so far had only a limited impact on Canada through lower commodity prices. But the bank said some countries will now be forced to tighten their budgets quickly and that, combined with debt reduction by banks and households, could slow the pace of global growth.
Canadian government securities gained. The two-year note’s yield slumped 11 basis points, or 0.11 percentage point, to 1.71 percent. The price of the 1.5 percent security maturing in June 2012 advanced 21 cents to C$99.60.

Canada’s government bonds have made investors 3 percent this year, according to a Bank of America Merrill Lynch index.
More than half of the quarterly profit — a record $584 million — was generated by the Canadian banking operations, which saw growth in residential mortgages, lines of credit and business accounts.

Last week, the Bank of Montreal launched the earnings period with the strongest results, including a quarterly profit of $745-million that was 18 cents per share ahead of analyst estimates.

National Bank also beat predictions with a $261 million profit.

In the latest quarter, Royal Bank posted a $1.3-billion profit .

CIBC posted a $660 million profit that turned around a $51-million loss from a year earlier.

TD Bank more than doubled its second-quarter profit to nearly $1.2 billion.

2010 hurricane season may be worst on record

WASHINGTON: The 2010 Atlantic hurricane season may be one of the worst on record, US officials warned Thursday, amid fears it could deepen an oil crisis in the Gulf of Mexico and bring new misery to Haiti.

An “active to extremely active” hurricane season which starts on June 1 is expected for the Atlantic Basin this year, US officials said.

The National Oceanic and Atmospheric Agency (NOAA) said it was predicting three to seven major hurricanes, with eight to 14 smaller hurricanes, and 14 to 23 named storms would hit the region over the next six months.

This compares to an average of two major hurricanes, six smaller hurricanes and 11 storms per season.

“If this outlook holds true, this season could be one of the more active on record,” said NOAA administrator Jane Lubchenco.

Dollar rises in Asia after China GDP, ahead of US data

TOKYO: The dollar rose in Asian trade Thursday on the back of robust economic data from the United States, while China”s surging economy in the first quarter raised expectations of yuan revaluation.

The dollar firmed to 93.40 yen in Tokyo morning trade from 93.24 in New York late Wednesday. The euro dipped to 1.3649 dollars from 1.3656 but edged up to 127.48 yen from 127.33.

Stronger-than-expected US March retail sales data released overnight lifted the dollar, supporting views that consumer spending will boost growth in the first quarter of the year, Credit Agricole CIB analysts said in a client note.

March retail sales rose for the third straight month, by a greater-than-anticipated 1.6 percent.

The greenback will be supported by a positive tone in markets with the release of March factory data later Thursday, expected to show a 0.6 percent gain and strengthen the outlook for a sustainable recovery in the US economy.

China said Wednesday that first-quarter growth expanded 11.9 percent year-on-year, the fastest pace since the global financial crisis. Its consumer price index jumped 2.4 percent in March, in line with market expectations.

Dealers said the data underlined evidence of an overheating economy and highlighted the need for fast action to curb inflation threats.

The data fuelled “greater expectations of an imminent yuan revaluation as well as monetary tightening” in order to take the froth out of the economy, Credit Agricole CIB analysts said.

Asian currencies are likely to bounce from a yuan revaluation as well as from anticipation that other Asian central banks are moving to tighten their monetary policies, unlike their counterparts in advanced economies.

Singapore on Wednesday revalued its currency—the city-state”s principal monetary tool—prompting speculation that China and South Korea may be next in line.

“Given this expectation, firm risk appetite, and more follow-through from Singapore foreign exchange move, the outlook for other Asian currencies remains bullish,” Credit Agricole analysts said.

Australia, Malaysia, India, and Vietnam all hiked interest rates in recent months.

ADB forecasts ”robust recovery” for developing Asia

HONG KONG: The Asian Development Bank (ADB) said Tuesday Asia”s developing economies this year would grow 7.5 percent, with the region on track for a “robust recovery.”

Growth was expected to outpace a 5.2 percent rise in 2009, marking a healthy rebound from last year”s global economic slowdown, the bank said. For 2011, growth is forecast to slow slightly to 7.3 percent.

The bank”s forecast remained below the region”s record 9.6 percent expansion in 2007.

“Developing Asia”s recovery has taken firm hold and a return to stronger and sustainable growth is now in sight if the region can meet the challenge of strengthening domestic demand,” said ADB Chief Economist Jong-Wha Lee.

The region”s prospects improved after better-than-expected growth in the second half of 2009, a boost driven by the “strong performances” of the Chinese and Indian economies, the bank said.

“(The region) can look ahead to a robust recovery in the next two years,” the bank said.

Fiscal stimulus measures designed to counter the global financial meltdown will likely continue to lure foreign investment, the bank said, while rising incomes and lower unemployment should get consumers spending more, it said.

That spending will likely boost inflation to about four percent this year and again in 2011, up from 1.5 percent in 2009, the bank said.

The Manila-based bank”s annual report looks at 44 jurisdictions stretching from the former Soviet states of Central Asia to some Pacific islands, but excludes developed countries such as Japan, Australia and New Zealand.

The region, however, remained at risk if the global economy”s recovery slows or the removal of fiscal stimulus measures is not timed properly, the bank said. A spike in international commodity prices could also curtail the region”s recovery, it added.

“The region faces several risks, including a slower global recovery, with the outlook for the industrialised economies still somewhat uncertain,” it said.

“There is concern that as stimulus measures are unwound, particularly in the major economies, the strength of private demand is not healthy enough to take over.”

The region”s early recovery is “already attracting potentially volatile capital flows, complicating macroeconomic management,” the bank said.

“Asset price trends must be watched and preventative action taken before disruptive asset bubbles materialise,” it said.

Rising food prices, which disproportionately affect the poor, also pose a risk, it said.

The report warned that government policy makers must steer their countries through an uncertain environment with a “timely return to sound and responsible fiscal and monetary policies.”

“These served the region well when the crisis broke, and authorities need to adapt them appropriately as recovery takes hold and the crisis recedes,” it said.

Loosening exchange rate policies may help boost intra-regional trade while authorities across the region must coordinate fiscal, monetary and exchange rate policies to avoid a homegrown financial crisis, the bank said.

“Such adjustments… will enable the region to better adapt to the post-crisis world,” it added.

East Asia — including Hong Kong, China, Korea, and Taiwan — is forecast to lead the region with an 8.3 percent rise in Gross Domestic Product in 2010, up from 5.9 percent in 2009, the report said.

Southeast Asian economies will grow by 5.1 percent in 2010, up from 1.2 percent in 2009, as countries including Thailand, Cambodia, and Malaysia see an upswing in their exports, the bank said.

India will lead South Asia”s 7.4 percent GDP increase this year, the bank said, up from a 6.5 percent rise in 2009.

Central Asia, including Kazakhstan and Georgia, will see 4.7 percent economic growth compared with 2.7 percent last year, the bank said.

Pacific island nations, including Fiji and Papua New Guinea, are expected to see their economies expand 3.7 percent in 2010, outpacing a 2.3 percent rise last year, the report said.

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