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News SummaryThe most significant news article from the weekend came from Chinese Premier Li Keqiang. On Saturday, Li revealed that China has never said the economy absolutely must grow 7% this year, adding that he had faith in the country's ability to overcome its economic difficulties (see page 6).

PBOC Vice-Governor Yi Gang said on Saturday that China will be able to keep economic growth at around 6-7% annually over the next three to five years. Comments appeared to be aimed at reassuring investors this level of growth, China's slowest pace in two decades but still faster than other major economies, is the Chinese economy's "new normal". Speaking at a conference in Beijing, Yi said China will lower the reserve requirement ratio - the amount of cash that major banks need to keep on hand - in the future at a "normal" pace (page 6).

Are you surprised by the rate cut? PBOC has been steadily reducing interest rates since November last year, cutting them roughly every two months. The last cut came 59 days ago, on August 25 and the previous cut came 59 days before that. See AFR article on page 4.

The Chinese central bank also announced it will eliminate the cap on bank deposit interest rates, allowing banks in principle to set rates freely. The move is part of efforts to liberalize financial markets in hopes of having the Yuan included in the basket of elite currencies underlying SDR (page 4).

FT said the PBOC move highlight a wider nervousness in official circles over the health of the global economy. Eswar Prasad, former China head of IMF said, “It heightens concerns that the economy may be losing growth momentum somewhat faster than suggested by the headline official GDP growth rate.” Analysts say the latest rate cut is aimed at industrial borrowers, who are struggling to service debt that is fixed in nominal terms, even as falling prices decrease their revenue. Yet economists caution that benchmark rate cuts will not benefit all borrowers equally. The WSJ wrote, Days after reporting its worst economic performance since the global financial crisis, China unleashed a one-two punch to prop up growth.” There were signs of investor skepticism. Offshore trading in China’s currency, whose value is controlled by China’s central bank on the mainland, indicated that investors were betting on a further devaluation of Yuan. Abolishing the ceiling on deposit rates would also help lift the income that ordinary households earn on their savings—seen as critical to China’s efforts to transition to an economy driven by consumption. But it also brings considerable risk: A scramble for deposits could destabilize the banking sector (see pages 2-3).

The 18th Communist Party Central Committee kicks off its fifth plenary session on Monday Oct 26. Investors will be focused on the government's new annual growth target.

An article in The Sunday Times said Chinese President Xi Jinping has returned home to face bitter infighting at the top of the Communist party and resistance to his authority over the People’s Liberation Army. The paper wrote evidence is accumulating that Xi may be in political trouble. There has even been talk of an abortive conspiracy last March to stage a coup d’état against him, leading to the postponement of a visit to Pakistan. The coup talk came after Xi purged two top generals, Xu Caihou and Guo Boxiong, for corruption. Xu died of cancer before he could face trial. Xi’s problem is that 134 of China’s generals were promoted by his two predecessors, Jiang Zemin and Hu Jintao. Both men are still Xi’s rivals and lead factions opposed to his group of “princelings” (page 5).

No Chinese data till Nov 1. But we have RBNZ rates decision on Wednesday and BOJ on Oct 30. Market is not expecting changes on Nov 28 but it will be a tricky on come Friday. Last Friday Japan Finance Minister Taro Aso’s remarks brushed aside an immediate need for additional monetary easing by BOJ. This has created mixed views among financial market players over whether it will take action at its next policy-setting meeting.

UK will publish the preliminary Q3 GDP growth on Tuesday. The Sunday Telegraph said UK growth slowed in the third quarter as construction output shrank and manufacturing stagnated, official figures will show this week. Experts believe the economy expanded by 0.6% following growth of 0.7% in Q2. The newspaper highlighted official figures show monthly construction output fell by 1% in July and 4.3% in August, while industrial production fell 0.4% in July before rising 1% the following month. This suggests the sectors, which account for just over 20% of GDP, added little or nothing to growth in Q3 (page 8). However, Kathryn Cooper in The Sunday Times said the acceleration in retail sales growth suggests domestic demand held up in the third quarter despite growing international risks (page 9).

I don’t know why but probably he loves ready The Daily Mail. BOE Governor Mark Carney gave an exclusive interview with The Mail on Sunday. Carney said there was no certainty that rates would rise, but it was the central expectation. He also insisted any interest rates rise would be 'gentle' and not steep (see page 12).

Liam Halligan in The Sunday Telegraph wrote it would appear that a Eurozone QE programme running to €1trln isn’t enough. Having churned out €60bn of virtually printed money a month since March, Preseident Mario Draghi has now signalled there’s likely to be even more. Draghi delivered his coup de grâce, declaring that the ECB is now “vigilant”. That was it, the magic V-word, the sign that has previously pointed to definite policy action to come. In his view, the Fed won’t put up rates. What we’ll see instead, on some pretext of another, is yet another large dollop of US money printing, which will become known as QE4 (page 11).

Barron’s Online said how the Fed Res can swim against the global current of increased monetary

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness. Copyright © 2013 The Poon Report by Vincent Poon. All rights reserved.

accommodation is puzzlement. The federal-funds futures market says the odds are about 2-to-1 against the lift-off in rates commencing in December. What’s clear to the equity markets is that the central-bank tide has turned decisively toward more easing. And so yet again, the timing for the first Fed boost is being pushed further into the future (page 15).

Polish elections kick off on Sunday, seems like the Eurosceptic PiS is the frontrunner – with more than 30%. PiS opposes joining the 'euro zone' in the near future, promises more welfare spending on the poor and wants banks subject to new taxation (see page 12).

Finally, market data on Sunday showed South Korea’s top three shipbuilders, Samsung Heavy Industries Co., Hyundai Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. are expected to post an operating loss of 3trln won in the second half of 2015 (page 19).

News China

China joins nervous global easingTaken from the FT Saturday, 24 October 2015China’s central bank cut benchmark interest rates for the sixth time in 12 months in a bid to support an economy which is forecast to grow at its slowest annual rate in 25 years.The move comes a day after the European Central Bank indicated it would extend its quantitative easing programme and cut its deposit rate in a bid to boost the eurozone’s sluggish recovery.The People’s Bank of China’s actions, combined with Thursday’s ECB announcement and market doubts over the US Federal Reserve’s commitment to raise interest rates this year, highlight a wider nervousness in official circles over the health of the global economy.Expectations for global growth have already been revised down to 3.1 per cent in 2015, the lowest International Monetary Fund forecast since 2009, and analysts are concerned that prospects for next year are also dimming.The PBoC said on its website that it was lowering the one-year benchmark bank lending rate by 25 basis points to 4.35 per cent and the one-year benchmark deposit rate to 1.5 per cent — its lowest on record — from 1.75 per cent.The central bank also cut the share of customer deposits banks must hold in reserve, injecting Rmb560bn ($90bn) of cash into the banking system to counteract the cash drain from capital outflows in recent months. The required reserve ratio was lowered by 0.5 percentage points to 17.5 per cent.“The PBoC’s two-pronged monetary policy action signals an intensification of policy measures intended to combat the economic slowdown in China,” said Eswar Prasad, Cornell University professor and former China head of the International Monetary Fund.“It heightens concerns that the economy may be losing growth momentum somewhat faster than suggested by the headline official GDP growth rate.”The PBoC’s actions are the latest in a string of domestic interest rate reductions and injections of credit into the Chinese economy, designed to raise lending and spending by reducing financing costs for home mortgages and loans to big companies.Official figures released earlier this week showed China’s economy expanded at its slowest pace since 2009 in the third quarter. The data showed the challenges facing China’s leaders in achieving their growth target of around 7 per cent for the year.China has long been an engine of growth for the global economy, and its slowdown has had far-reaching consequences, depressing commodity prices, triggering big swings in emerging market currencies and provoking doubts about the wisdom of raising interest rates in the US.Fears about China were further stoked by a plunge in the country’s stock market during the summer and a surprise devaluation of the renminbi.Analysts say the latest rate cut is aimed at industrial borrowers, who are struggling to service debt that is fixed in nominal terms, even as falling prices decrease their revenue.


Yet economists caution that benchmark rate cuts will not benefit all borrowers equally. Since 2013, Chinese banks have been free to set lending rates as they choose. The benchmark lending rate is only a guideline. In practice, home mortgages and loans to big state-owned companies are correlated most closely with PBoC benchmarks.The central bank has drawn down its foreign exchange reserves in recent months to prop up the renminbi exchange rate following the surprise move on August 11 to let the currency depreciate.This intervention, which involves selling dollars and buying renminbi, sucks money out of China’s banking system because the renminbi that the PBoC buys is taken out of circulation. The cut in banks’ required reserve ration on Friday aims to offset the tightening impact of the PBoC’s currency moves by pumping funds back into the system.

“We see rising [downward] pressures on [renminbi] and [offshore renminbi] exchange rates as PBoC will find it difficult to strike a balance between monetary policy easing and a stable exchange rate,” Zhou Hao, China economist at Commerzbank, wrote on Friday.In addition to the easing moves, the PBoC also took its final step towards deregulating China’s domestic interest rates by removing the ceiling on all bank deposit rates. Alongside its previous rate cut in August, the PBoC removed the ceiling for deposits above one year. Friday’s move eliminates the cap for deposits for all maturities.Analysts say liberalising interest rates is a key prerequisite for China to win the IMF’s endorsement of the renminbi as a global reserve currency. The fund is expected to decide late this year whether to include the renminbi in its Special Drawing Rights.(Full article click - FT)---China’s Central Bank Moves to Spur Economic GrowthTaken from the WSJ Saturday, 24 October 2015PBOC cuts benchmark one-year lending, deposit rates by 0.25 percentage pointDays after reporting its worst economic performance since the global financial crisis, China unleashed a

one-two punch to prop up growth while also sweeping away a major control on how banks set deposit rates.The country’s central bank combined a quarter-point cut in benchmark interest rates with a half-percentage reduction in banks’ reserve-requirement ratios, moves aimed at lowering corporate financing costs and pumping liquidity into the economy.Friday’s moves marked the sixth time since November that the Chinese central bank has cut interest rates and the fourth across-the-board reduction of the amount of deposits banks are required to hold in reserve. China is the latest of the world’s big economies to turn to its central bank to stimulate flagging growth. The Federal Reserve, with rates already near zero, expanded its holdings of government and mortgage bonds through last year to push down long-term interest rates. Now it is grappling with the timing to raise short-term rates.China’s announcement came one day after European Central Bank chief Mario Draghi signaled the ECB could do more to stoke growth and inflation in the eurozone as early as December.The actions helped extend a global rally in stocks for a second day. The Dow Jones Industrial Average climbed 158 points to a three-month high of 17646.70, erasing a long losing streak that began with China’s surprise devaluation of its currency Aug. 11. The S&P 500 swung into positive territory for the year for the first time since August.In a statement posted on the central bank’s website late Friday, the People’s Bank of China attributed the measures to what it said was downward pressure on the country’s economy. Beijing is fighting a host of economic ills that have put at risk its goal of achieving growth of about 7% for the year.Investors cheered the prospect of expanded easy-money policies by the world’s central banks, snapping up risky assets such as stocks while paring back on safer Treasurys. The yield on the 10-year note rose to 2.081% from 2.025% on Thursday.China’s latest action “reduces the probability of some of the more dire predictions” about a slowdown in the world’s second-largest economy, said Aaron Kohli, interest-rate strategist at BMO Capital Markets.But there were also signs of investor skepticism. Offshore trading in China’s currency, whose value is controlled by China’s central bank on the mainland, indicated that investors were betting on a further devaluation of yuan. The yuan in Hong Kong slumped to a nearly one-month low against the dollar.Along with the moves easing rates, China took a crucial step toward overhauling its creaky banking system by removing caps on deposit rates, illustrating a persistent dilemma for the country’s economic stewards.Broad credit-easing risks funneling money into unproductive parts of the economy, such as heavily indebted state-owned companies and inefficient sectors. To help solve that problem, the PBOC will now allow banks to set deposit rates more freely. The central bank thus intends to create greater competition among lenders, which could in turn steer money toward areas that need it most, such as small and private businesses.Abolishing the ceiling on deposit rates would also help lift the income that ordinary households earn on their savings—seen as critical to China’s efforts to


http://www.ft.com/intl/cms/s/0/59ff3dea-797d-11e5-a95a-27d368e1ddf7.html#axzz3pRjK3Mfe

transition to an economy driven by consumption. But it also brings considerable risk: A scramble for deposits could destabilize the banking sector.As a result, China’s central bank said in its statement that it will continue to manage rates, as officials seek to control lending risks and put a lid on borrowing costs.Other central banks, including the Fed, the ECB and Bank of Japan, pushed rates down and started their own bond-purchase programs, known as quantitative easing, in response to their domestic economic troubles. The ECB is now contemplating expanding its bond program.Despite these efforts, growth and inflation have lagged, pointing to the limits of monetary policy to jump-start economies with problems that can’t be resolved by easy credit alone.For all the Chinese central bank’s maneuvering over the past year, the country’s economy has shown few signs of regaining its previous strength. On Monday, China said third-quarter growth was 6.9%, compared with a year ago. The pace was 7.0% in the second quarter.While third-quarter growth was at the high end of estimates, raising eyebrows among economists as other data had indicated a sharper deceleration, it marked the slowest rate of expansion since the beginning of 2009, at the height of the global financial crisis. The performance adds pressure on Beijing to pile on further pro-growth measures to meet its full-year growth target.Until this summer, it had been rare for the PBOC simultaneously to lower interest rates and banks’ reserve requirements. The central bank made such a combination move also in late August, amid a severe selloff of Chinese stocks and growing worries over China’s economy following a surprise currency devaluation.“Taking such a rare action again means the real economy is performing poorly,” said a senior official at the PBOC. “A lot of companies have seen their profitability falling sharply and that’s a key reason why we took the action again today.”Profits at Chinese industrial companies plunged 8.8% in August from a year earlier, latest data show, the biggest monthly fall since 2011. Coal-mining companies, as well as oil and metal producers—industries notorious for having excess capacity—were among those that suffered the worst declines.Economists say liberalizing interest rates and getting more capital to private companies that employ large numbers of workers are crucial to securing future growth. Beijing eased controls over lending rates in July 2013, though that move has made little difference to companies’ borrowing costs.By loosening controls on deposit rates now, the government is attempting to inject market competition into a politically powerful state-run banking sector that has favored big state companies over a more dynamic private sector.The measure likely will further hurt the profitability of Chinese banks already grappling with rising bad-debt levels. Still, the central bank was able to overcome considerable opposition from the banking industry to push through the reform, according to people with knowledge of the matter, as it convinced the leadership that China needed to take the step to get the International Monetary Fund to include the

Chinese yuan in its elite basket of reserve currencies when the IMF board votes on the issue next month.Senior leaders including President Xi Jinping are eager to see the yuan enjoy the same reserve-currency status as the dollar, the euro, the British pound and the Japanese yen. They see that as elevating China’s role in the global financial system even though it might not benefit the Chinese economy in any meaningful way in the short run.In recent weeks, Beijing has been stepping up efforts to win reserve-currency status for the yuan. It has allowed foreign central banks to invest in China’s bond and currency markets and is planning to extend trading hours for the Chinese currency within China.Eliminating the deposit-rate ceiling “removes one of the last remaining hurdles to satisfying the technical criteria set by the IMF” for designation of the yuan as a reserve currency, said Eswar Prasad, a Cornell University professor and former IMF China head.However, China still has a way to go before declaring full interest-rate liberalization, as the central bank will continue to guide banks over how much they charge borrowers and pay depositors. A completely market-based interest-rate system, central-bank officials fear, could lead to risky lending behavior and higher funding costs at a time many businesses already are having a hard time getting loans.“It’s a big test to commercial banks now that they can decide on what rates to charge and to pay on their own,” the PBOC senior official said. “Of course we’ll continue to provide window guidance to them.”After the latest rate cuts, China’s benchmark one-year lending rate will be 4.35% and its one-year deposit rate will be 1.5%, effective Saturday. The reduction in banks’ reserve requirements—made to offset continued capital outflows—will pump about 680 billion yuan ($108 billion) worth of funds into China’s banking system, estimates Zhu Chaoping, China economist at UOB Kay Hian Holdings Ltd., a Singapore-based brokerage.The barrage of easing measures since late last year has had some success in getting more credit flowing in the economy. Chinese banks issued 1.05 trillion yuan of new loans last month, the highest on record. However, as credit continues to expand while growth slows, China risks a further buildup in debt. An analysis by consultancy McKinsey & Co. shows that China’s debt load increased to 282% of GDP last year from 158% in 2007.Still, companies’ borrowing costs remain elevated, and bankers say they have had no choice but to charge more, given the heightened risks in a slowing economy. “Banks’ funding costs are rising fast, and they have to pass them on to their customers,” said a senior executive at Shanghai Rural Commercial Bank.(Full article click - WSJ)---Ceiling on deposit rates scrapped Taken from the Nikkei Saturday, 24 October 2015China's central bank said Friday that it will eliminate the cap on bank deposit interest rates, allowing banks in principle to set rates freely.The People's Bank of China will remove the ceiling on Saturday. Banks had been allowed to set rates only within a certain range based on a benchmark determined by the central bank. The bottom limit on lending rates was removed in July 2013, while the deposit rate ceiling had been gradually relaxed, with


http://www.wsj.com/articles/chinas-central-bank-cuts-rates-1445601495

the central bank saying it planned to scrap the limit entirely this year.The move is part of efforts to liberalize financial markets in hopes of having the yuan included in the basket of elite currencies underlying Special Drawing Rights, the International Monetary Fund's global reserve asset.The deposit rate had been held down to protect bank profits. The controls resulted in a massive shift of money from bank deposits to high-yield wealth management products, endangering the health of the market. The elimination of the cap, along with the floor on lending rates, will improve market transparency and prevent distortions in fund allocation.But creating an environment in which the central bank deploys monetary policy to guide market-based interest rates will take time. Even after rates are liberalized, the PBOC will maintain the benchmark rate, which it said will continue to function as a policy guide to some extent.(Full article click - WSJ)---China interest rates cut explainedTaken from the AFR Saturday, 24 October 2015China's central bank has cut benchmark interest rates for the sixth time since November last year and removed its remaining controls on deposit rates, in a bid to prop up the economy by lowering corporate financing costs and boosting household income.The People's Bank of China announced the move on its web site late Friday, cutting the one-year benchmark bank lending and deposit rates by 25 basis points to 4.35 per cent and 1.5 per cent, respectively.It also removed the ceiling on deposit rates, an important reform that will allow banks to compete freely for customers.And it reduced the banks' required reserve ratio by 50 basis points to 17.5 per cent, which is expected to inject an estimated 700 billion yuan ($153 billion) into the banking system. The cash injection is aimed at countering the capital outflows in recent months. This is what you need to know:❑ The latest easing move comes ahead of a key meeting by the country's political elite next week, at which they will set the next five-year plan for 2016 to 2020, including economic growth and development targets.❑ While the latest interest rate cut follows China's announcement this week the economy grew at 6.9 per cent in the third quarter – it's slowest pace since the global financial crisis – it is not necessarily a knee-jerk reaction. As Capital Economics points out the PBOC has been steadily reducing interest rates since November last year, cutting them roughly every two months. The last cut came 59 days ago, on August 25 and the previous cut came 59 days before that.❑ China now has a fully liberalised interest rate regime. While it will probably take some time for interest rates to be determined by the market, the reform fulfills one of the International Monetary Fund's requirements for the yuan to be designated a global reserve currency. The IMF is expected to make its decision as early as next month.❑ This easing cycle is not over. Most economists expect one more interest rate cut this year, probably

in December, followed by another in early 2016. Even though the central bank had cut rates five times before Friday's move, real interest rates are still higher than a year ago, leaving companies struggling to service their debt. ❑ The easing is both good and bad news for the global economy. On the one hand, it shows China is continuing to reform and open up its economy. However, it also suggests Chinese policymakers are concerned. Economic activity is subdued and there is downward pressure on prices. This clearly has implications for China's major trading partners and the stability of the global economy.(Full article click - AFR)---What will it mean for the yuan to get IMF reserve-currency nod?Taken from the Business Times Saturday, 24 October 2015International Monetary Fund (IMF) representatives have given China strong signals that the yuan is likely to soon join the fund's basket of reserve currencies, known as Special Drawing Rights, Chinese officials with knowledge of the matter told Bloomberg News this week.Here's a primer on what that means.What is a Special Drawing Right?The fund created the SDR in 1969 to boost global liquidity as the Bretton Woods system of fixed exchange rates unraveled. While the SDR is not technically a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket - currently the dollar, euro, yen and pound - to meet balance-of-payments needs. So the ability to convert SDRs into yuan on demand is crucial. Its value is currently based on weighted rates for the four currencies. How much of these SDRs are out there?The equivalent of about US$280 billion in SDRs were created and allocated to IMF members as of September, compared with about US$11.3 trillion in global reserve assets. The US reported about US$50 billion in SDR holdings as of August.Why does China want this status so badly?In a 2009 speech, People's Bank of China Governor Zhou Xiaochuan said the global financial crisis underscored the risks of a global monetary system that relies on national reserve currencies. While not mentioning the yuan by name, Zhou argued that the SDR should take on the role of a "super-sovereign reserve currency," with its basket expanded to include currencies of all major economies.Chinese officials have since been more explicit. After meeting President Barack Obama last month at the White House, President Xi Jinping thanked the US for its conditional support for the yuan joining the SDR. Winning the IMF's endorsement would allow reformers within the Chinese government to argue that the country's shift toward a more market-based economy is bearing fruit.Why is the IMF likely to approve this?Global use of the yuan has surged since the IMF rejected SDR inclusion in the last review in 2010. By one measure, the currency became the fourth most-used in global payments with a 2.79 per cent share in August, surpassing the yen, according to the Society for Worldwide Interbank Financial Telecommunication, known as Swift.


http://www.afr.com/news/world/asia/chinas-interest-rate-cuts-explained-20151024-gkhil5

http://asia.nikkei.com/Politics-Economy/Economy/Ceiling-on-deposit-rates-scrapped

The IMF uses several indicators to determine if a currency is "freely usable," the benchmark for inclusion in the SDR basket. IMF staff members said in a report in August that the yuan trails its global counterparts in major benchmarks, such as its use in official reserves, debt holdings and currency trading. But staffers have also stressed that the fund's 24 executive directors, who will make the final call, will need to use their judgment.Many major economies, including the US, Germany and UK, say they're prepared to back the yuan's inclusion if it meets the IMF criteria. Supporting the yuan may boost relations between China and countries such as the UK, which has sought to make London a major yuan trading hub.Adding the yuan to the basket may also help the IMF improve its standing with the Chinese. China and other emerging markets were supposed to gain greater representation at the fund under reforms agreed to in 2010, but the U.S. Congress has yet to ratify the changes.What's likely to happen to yuan assets in the longer term?At least US$1 trillion of global reserves will migrate to Chinese assets if the yuan joins the IMF's reserve basket, according to Standard Chartered Plc and AXA Investment Managers.Foreign companies' issuance of yuan-denominated securities in China, known as panda bonds, could exceed US$50 billion in the next five years, according to the World Bank's International Finance Corp."Once the Chinese yuan becomes part of the SDR, central- bank reserve managers and institutional investors will automatically want to accumulate yuan-denominated assets," Hua Jingdong, vice president and treasurer at IFC, said in an interview in Lima earlier this month during the IMF and World Bank annual meetings. "It will be strategically important for China to welcome all kinds of issuers to become regular issuers in China's onshore market."(Full article click - BT)---Coup whispers sour Xi’s returnTaken from the Sunday Times 25 October 2015WREATHED in the glow of royal pomp and ceremony, the Chinese president, Xi Jinping, has returned home from Britain to face bitter infighting at the top of the Communist party and resistance to his authority over the People’s Liberation Army (PLA).The British government placed a huge bet on Xi, 62, by honouring him last week with a state visit while talking of a “golden era” of trade and friendship. Chinese newspaper readers and television viewers were shown images of their leader riding with the Queen in her gilded carriage.But evidence is accumulating that Xi — who heads the state, the party and the army — may be in political trouble. There has even been talk of an abortive conspiracy last March to stage a coup d’état against him, leading to the postponement of a visit to Pakistan.The information comes from insiders connected to the party elite, amplified by leaks to the Chinese-language media in Hong Kong.Threats to Xi’s prestige multiplied after China’s stock market crashed in the summer, its economy slowed and thousands of officials and army officers fell to his campaign against corruption.

Earlier this month the official PLA Daily newspaper acknowledged dissent in the ranks by denouncing “resistance blocking the reforms of military command appointments”. The coup talk came after Xi purged two top generals, Xu Caihou and Guo Boxiong, for corruption. Xu died of cancer before he could face trial.A retired general, in an interview with the Hong Kong political magazine Qianshao, said Xi could not sleep soundly at night in the leadership compound at Zhongnanhai, in the old centre of Beijing. “What does he worry about? First, about the military power on which his life depends,” the unidentified general was quoted as saying.A group of 14 generals, including the chiefs of all of China’s seven military regions, earlier made an unprecedented public vow of loyalty to Xi.“This demonstration that the PLA had his back was a sign of weakness as much as strength,” said Roderick MacFarquhar of Harvard, an expert on Chinese politics.Xi’s problem is that 134 of China’s generals were promoted by his two predecessors, Jiang Zemin and Hu Jintao. Both men are still Xi’s rivals and lead factions opposed to his group of “princelings”, the privileged sons and daughters of the leaders of the 1949 revolution. The anti-corruption campaign, led by a dour enforcer named Wang Qishan, met fierce resistance.“The risk for Xi is that he is confronting dozens and dozens of families who feel they contributed to the building of China and who face losing their wealth, their positions and their place in history,” said MacFarquhar.Government business has slowed or come to a stop as mid-ranking officials start to worry about making decisions and resent the fact they cannot take bribes. Some analysts believe that if the campaign goes on as it is, the party’s morale could crumble, along with its organisational strength. Mingjing, a Hong Kong magazine, said in its latest report on the issue: “The biggest risk is that Xi Jinping and Wang Qishan will be killed.”Xi, who arrived back yesterday, faces a difficult party meeting tomorrow at which a barely concealed split over the economy with his prime minister, Li Keqiang, will be on the table. The fifth plenum of the 18th party congress is meant to set out the next five-year plan. In reality, a venomous dispute has broken out among the leadership about the stockmarket crash and its aftermath. The meeting was delayed because of the tensions.During the crisis Xi is said to have banged the table and shouted at the premier to fix the market or come back with his head on a plate. He then ordered state intervention to prop up stock prices to protect millions of small investors from losing money. Officials threatened financial firms with punishment. Chinese journalists say the premier’s faction retaliated with leaks to the Hong Kong media that “economic reform has reached a dead end”.The Chinese public has read none of this in the state- controlled press, which has been full of Xi’s triumphant progress through Britain. There was no mention of the fact that the Queen, in her speech at a state banquet, avoided using the words “golden era”.MacFarquhar, who is close to the White House, says the US government reacted to Britain’s embrace of


http://www.businesstimes.com.sg/government-economy/what-will-it-mean-for-the-yuan-to-get-imf-reserve-currency-nod

the Chinese leader with disbelief. “They will be rethinking their whole vision of Britain,” he said.(Full article click - Times)---

China central bank sees 'very normal' growth of 6-7 percent in next few years Taken from the Nikkei Sunday, 25 October 2015China will be able to keep economic growth at around 6-7 percent annually over the next three to five years, a top People's Bank of China policymaker said on Saturday, a day after the bank cut interest rates for the sixth time in less than a year.The comments from Yi Gang, vice governor of the People's Bank of China, appeared to be aimed at reassuring investors this level of growth - the slowest pace in two decades but still faster than other major economies - is the Chinese economy's "new normal"."China's future economic growth will still be relatively quick. Around seven, six-point-something - these will all be very normal," he told a conference in Beijing.As well as cutting interest rates on Friday, the PBOC lowered the amount of cash that banks must hold as reserves.Both moves were bids to jumpstart growth in China's slowing economy, a drag on global growth that has been of major concern in emerging markets and other leading economies.Monetary policy easing in the world's second-largest economy is at its most aggressive since the 2008/09 financial crisis, as growth looks set to slip to a 25-year-low this year of under 7 percent.China will lower the reserve requirement ratio - the amount of cash that major banks need to keep on hand - in the future at a "normal" pace, Yi said.The vice governor said the PBOC planned to keep interest rates at a reasonable level to reduce the corporate debt burden, and noted that interest rate liberalization does not mean that the central bank would reduce regulation of rates.China will also continue to set benchmark lending and deposit rates for some time, he said, but these rates would not restrict market pricing.Yi also noted that China's stock market, which has fallen sharply since June, had completed most of its adjustments and that the yuan, which was buffetted in the wake of a surprise devaluation in early August, has stabilised. The PBOC was looking into leverage levels in the debt market, he noted.Yi also commented on China's debt levels. He said that China did not have exceptionally high debt levels, and while the bank is not overly anxious about cutting the level of leverage in the economy, the overall strategy is to stabilize leverage levels.(Full article click - Nikkei)---China premier says 7 percent growth goal never set in stoneTaken from the Nikkei Sunday, 25 October 2015China has never said the economy absolutely must grow seven percent this year, Premier Li Keqiang said in comments reported by the government late on Saturday, adding that he had faith in the country's ability to overcome its economic difficulties.China's economy in the July-to-September quarter grew 6.9 percent from a year earlier, data showed last week, dipping below 7 percent for the first time since the global financial crisis.Speaking at the Central Party School, which trains rising officials, Li said that China's economic


http://asia.nikkei.com/Politics-Economy/Economy/China-central-bank-sees-very-normal-growth-of-6-7-percent-in-next-few-years

http://www.thesundaytimes.co.uk/sto/news/world_news/Asia/article1623705.ece

achievements had been not easy to come by and that the difficulties ahead should not be underestimated.(Full article click - Reuters)

European News

Portugal faces months of political upheavalTaken from the FT Saturday, 24 October 2015A divided Portugal, torn between keeping to a narrow path of fiscal rigour or “turning the page on austerity”, faces months of political upheaval after the appointment of a minority centre-right government that is vehemently rejected by a left-of-centre majority in parliament.President Aníbal Cavaco Silva on Thursday night reappointed Pedro Passos Coelho as prime minister three weeks after his centre-right alliance (PAF) emerged from a general election as the largest political force but lost its outright majority.The opposition Socialists (PS) denounced the president’s decision as “a waste of time”, saying they would bring down the new government and replace it with an anti-austerity administration backed by the radical Left Bloc (BE) and hardline Communists (PCP).“I give this government a week, a week and a half at the most,” said Pedro Filipe Soares, a senior BE official.The fallout from Portugal’s election has raised concerns among fiscally-conservative eurozone leaders that moderate centre-left parties could also ally themselves to anti-austerity groups in upcoming elections in Spain and Ireland.Comparing the BE to Spain’s Podemos movement, Mariano Rajoy, the Spanish prime minister whose conservative Popular party faces a tough general election in December, condemned “parties that oppose the euro and EU rules” at a Madrid meeting of the centre-right European People’s Party (PPP) on Thursday.After four years of majority rule under Mr Passos Coelho, whose government steered the country through a punishing international bailout, Portugal has been brought to a political crossroads by a “historic compromise” between moderate pro-European Socialists and the hard anti-euro left.The main protagonist of this change has been António Costa, the PS leader, who rejected pressure to strike a deal with the centre-right after losing the election to Mr Passos Coelho’s Forward Portugal alliance.Instead, Mr Costa, the former mayor of Lisbon, turned to the BE and the PCP, parties that support unilateral debt restructuring, oppose the EU’s fiscal pact on cutting budget deficits and had previously spurned the PS as a political enemy subservient to the conservative right.The pact with the BE and PCP was “like tearing down the last remains of a Berlin Wall”, Mr Costa said last week. The hard left parties had agreed to put aside any demands that conflicted with eurozone rules in support of a PS government determined to “break the cycle of impoverishment”.But Mr Cavaco Silva said in a televised address that Portuguese governments had never before depended on “anti-European forces” who defended “leaving the euro and dissolving Nato”, suggesting he would make every effort to exclude the BE and PCP from government.His comments were interpreted as an appeal for moderate PS deputies to defy party discipline and not


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support a planned parliamentary motion rejecting Mr Passos Coelho’s new government programme.There are signs of disagreement inside the PS. Francisco Assis, a potential challenger to Mr Costa’s leadership, said he was “absolutely opposed to any government based on a hypothetical leftwing majority”.But at least nine PS deputies would have to break ranks to see the government programme through parliament, a possibility that party officials described as “unlikely”.The president, a former leader of Mr Passos Coelho’s centre-right Social Democrats, warned that a stable government that complied with eurozone rules and maintained the confidence of international lenders, investors and financial markers was “absolutely crucial to the financing of our economy, economic growth and job creation”.In an editorial on Friday, Público newspaper described Mr Cavaco Silva’s address as “deeply ideological and at times alarmist”, questioning how he could legitimately prevent a PS-led government taking office if it was supported by a parliamentary majority.After a bailout that triggered a deep recession, record unemployment and a wave of emigration, Mr Costa argues that 62 per cent of the electorate — the combined votes of the PS, BE and PCP — voted to roll back austerity. The drop in the centre-right’s share of the vote to 38.6 per cent, down from 50.4 per cent, amounted to a rejection of “rightwing policies”.However, Mr Passos Coelho denounced a potential leftist front government as politically illegitimate, saying many people would not have voted for the PS if Mr Costa had raised the possibility of such an alliance before the election.More than 70 per cent of the electorate, the prime minister argues, voted for mainstream parties — the PS and the centre-right coalition — who are firmly in favour of staying in the euro.Yields on Portugal’s 10-year debt rose by up to 20 basis points following the election, but have since fallen back to about the same level as before the vote.(Full article click - FT)---Ambrose Evans-Pritchard: Eurozone crosses Rubicon as Portugal's anti-euro Left banned from powerTaken from the Telegraph Saturday, 24 October 2015Constitutional crisis looms after anti-austerity Left is denied parliamentary prerogative to form a majority governmentPortugal has entered dangerous political waters. For the first time since the creation of Europe’s monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest.Anibal Cavaco Silva, Portugal’s constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order

to satisfy Brussels and appease foreign financial markets.Democracy must take second place to the higher imperative of euro rules and membership.“In 40 years of democracy, no government in Portugal has ever depended on the support of anti-European forces, that is to say forces that campaigned to abrogate the Lisbon Treaty, the Fiscal Compact, the Growth and Stability Pact, as well as to dismantle monetary union and take Portugal out of the euro, in addition to wanting the dissolution of NATO,” said Mr Cavaco Silva.“This is the worst moment for a radical change to the foundations of our democracy."After we carried out an onerous programme of financial assistance, entailing heavy sacrifices, it is my duty, within my constitutional powers, to do everything possible to prevent false signals being sent to financial institutions, investors and markets,” he said.Mr Cavaco Silva argued that the great majority of the Portuguese people did not vote for parties that want a return to the escudo or that advocate a traumatic showdown with Brussels.This is true, but he skipped over the other core message from the elections held three weeks ago: that they also voted for an end to wage cuts and Troika austerity. The combined parties of the Left won 50.7pc of the vote. Led by the Socialists, they control the Assembleia.The conservative premier, Pedro Passos Coelho, came first and therefore gets first shot at forming a government, but his Right-wing coalition as a whole secured just 38.5pc of the vote. It lost 28 seats.The Socialist leader, Antonio Costa, has reacted with fury, damning the president’s action as a “grave mistake” that threatens to engulf the country in a political firestorm.“It is unacceptable to usurp the exclusive powers of parliament. The Socialists will not take lessons from professor Cavaco Silva on the defence of our democracy,” he said.Mr Costa vowed to press ahead with his plans to form a triple-Left coalition, and warned that the Right-wing rump government will face an immediate vote of no confidence.There can be no fresh elections until the second half of next year under Portugal’s constitution, risking almost a year of paralysis that puts the country on a collision course with Brussels and ultimately threatens to reignite the country’s debt crisis.The bond market has reacted calmly to events in Lisbon but it is no longer a sensitive gauge now that the European Central Bank is mopping up Portuguese debt under quantitative easing.Portugal is no longer under a Troika regime and does not face an immediate funding crunch, holding cash reserves above €8bn. Yet the IMF says the country remains “highly vulnerable” if there is any shock or the country fails to deliver on reforms, currently deemed to have “stalled”.Public debt is 127pc of GDP and total debt is 370pc, worse than in Greece. Net external liabilities are more than 220pc of GDP.The IMF warned that Portugal's “export miracle” remains narrowly based, the headline gains flattered by re-exports with little value added. “A durable


http://www.ft.com/intl/cms/s/0/d41a28ac-7972-11e5-933d-efcdc3c11c89.html#axzz3pRjK3Mfe

rebalancing of the economy has not taken place,” it said.“The president has created a constitutional crisis,” said Rui Tavares, a radical green MEP. “He is saying that he will never allow the formation of a government containing Leftists and Communists. People are amazed by what has happened.”Mr Tavares said the president has invoked the spectre of the Communists and the Left Bloc as a “straw man” to prevent the Left taking power at all, knowing full well that the two parties agreed to drop their demands for euro-exit, a withdrawal from Nato and nationalisation of the commanding heights of the economy under a compromise deal to the forge the coalition.President Cavaco Silva may be correct is calculating that a Socialist government in league with the Communists would precipitate a major clash with the EU austerity mandarins. Mr Costa’s grand plan for Keynesian reflation – led by spending on education and health – is entirely incompatible with the EU’s Fiscal Compact.This foolish treaty law obliges Portugal to cut its debt to 60pc of GDP over the next 20 years in a permanent austerity trap, and to do it just as the rest of southern Europe is trying to do the same thing, and all against a backdrop of powerful deflationary forces worldwide.The strategy of chipping away at the country’s massive debt burden by permanent belt-tightening is largely self-defeating, since the denominator effect of stagnant nominal GDP aggravates debt dynamics.It is also pointless. Portugal will require a debt write-off when the next global downturn hits in earnest. There is no chance whatsoever that Germany will agree to EMU fiscal union in time to prevent this.The chief consequence of drawing out the agony is deep hysteresis in the labour markets and chronically low levels of investment that blight the future.Mr Cavaco Silva is effectively using his office to impose a reactionary ideological agenda, in the interests of creditors and the EMU establishment, and dressing it up with remarkable Chutzpah as a defence of democracy.The Portuguese Socialists and Communists have buried the hatchet on their bitter divisions for the first time since the Carnation Revolution and the overthrow of the Salazar dictatorship in the 1970s, yet they are being denied their parliamentary prerogative to form a majority government.This is a dangerous demarche. The Portuguese conservatives and their media allies behave as if the Left has no legitimate right to take power, and must be held in check by any means.These reflexes are familiar – and chilling – to anybody familiar with 20th century Iberian history, or indeed Latin America. That it is being done in the name of the euro is entirely to be expected.Greece’s Syriza movement, Europe’s first radical-Left government in Europe since the Second World War, was crushed into submission for daring to confront eurozone ideology. Now the Portuguese Left is running into a variant of the same meat-grinder.Europe’s socialists face a dilemma. They are at last waking up to the unpleasant truth that monetary union is an authoritarian Right-wing enterprise that has slipped its democratic leash, yet if they act on this insight in any way they risk being prevented from taking power.

Brussels really has created a monster.(Full article click - Telegraph)---Steel bosses in Treasury crisis talksTaken from the Sunday Telegraph 25 October 2015Industry expected to demand more help from Chancellor in first meeting since trouble eruptedThe steel industry is preparing for crunch talks with the Chancellor as fears grow more jobs could be lost unless ministers deliver on pledges to help hard-pressed companies.Pressure is building on George Osborne to provide financial relief on high energy prices, with him scheduled to meet a representative from the industry next week.Terry Scuoler, chief executive of industry body UK Steel’s parent EEF, is understood to be ready to meet Mr Osborne next week. The talks – the first between the Chancellor and the industry since the steel crisis erupted – will lay out the huge pressures Britain’s steel-makers are under.Last week Tata Steel announced 1,200 redundancies at its plants in Scunthorpe and Scotland, taking the number of positions it has cut this year to almost 2,200. Earlier this month SSI’s Redcar plant closed with the loss of 2,200 jobs after the company went into administration, and there are doubts over the future of 1,700 roles at Caparo Industries after it also collapsed.Co-ordinated by EEF and UK Steel, the industry has been campaigning for a reduction in green levies which make power bills for the energy-intensive industries (EEIs) such as steel-makers some of the highest in Europe.The calls form part of EEF’s regular submission to the Chancellor ahead of the Autumn Statement, but next week’s meeting will give the industry its first opportunity to set out its position to the Treasury. With the crisis currently ravaging the steel industry, the meeting is expected to be dominated by demands for further support.The 2014 Budget introduced measures that helped remove some costs for EEIs, but the final part of the scheme is not due to come into effect until April 2016 and has yet to win European approval under state aid rules.At last week’s Steel Summit in Rotherham, Sajid Javid, the Business Secretary, pledged to fight for European approval for the full relief. He is due to meet European commissioners this week to plead the industry’s case.However, industry chiefs are worried that unless support comes soon, more steel businesses could fail.“The current situation is unsustainable and I believe we could see more collapses and jobs lost if approval takes months, rather than weeks,” said UK Steel director Gareth Stace.The industry body believes that implementing the full relief for steel-makers from the green levy would cost the Government £3.8m a month in taxes the industry would not pay.British steel-makers are buckling under a combination of high energy bills, more onerous business rates than many foreign competitors and the dumping of Chinese steel. Tata Steel - which yesterday revealed a £9m package jointly funded by it and the Government to help retrain Scunthorpe staff being made redundant - has cited “cripplingly high”


http://www.telegraph.co.uk/finance/economics/11949701/AEP-Eurozone-crosses-Rubicon-as-Portugals-anti-euro-Left-banned-from-power.html

energy costs as a factor in it cutting jobs. Senior industry sources calculate that since 2013 Tata has paid £150m in energy taxes in the UK, with about 20pc of that being returned in rebates. Last year the company posted a pre-tax loss of £768m, more than doubling the £354m it was in the red last year.Steel bosses demanding action include Sheffield Forgemasters chairman Tony Pedder, who called for an industry advisory board.“An advisory board would give a voice to underpin the Department for Business, Innovation and Skills (BIS) and give it more clout in Westminster,” he said. “Otherwise they get outgunned by Treasury or the Department for Energy and Climate Change as witnessed by how long our energy strategy has been unhelpful to the manufacturing sector.”John Beeley, managing director of Finnish-owned Outokumpu Stainless in Sheffield, said: “The green levy is excessive and unfair when we are up against Chinese steel makers who are not facing these pressures. We have been promised relief for years and I think the wider industry has a future if it comes, otherwise it could be driven into the ground.”Pressure for action will be ratcheted up on Tuesday when MPs on the BIS Committee take evidence from ministers, industry bosses and union chiefs.Committee chairman Iain Wright said: “The UK’s steel industry has been dealt a series of major blows in recent weeks and months. It is facing terminal decline… and we will be pressing the Government to explain what action it is taking now to help the steel industry through this crisis.”(Full article click - Telegraph)---UK recovery slows amid 'bumpy' growth patchTaken from the Sunday Telegraph 25 October 2015Britain's recovery slows in the third quarter as faltering manufacturing and construction means UK relies on single engine of services to drive growthUK growth slowed in the third quarter as construction output shrank and manufacturing stagnated, official figures will show this week.Experts believe the economy expanded by 0.6pc between July and September, following growth of 0.7pc in the second quarter.Global weakness has weighed on the recovery in recent months as jitters in China and weakness in the eurozone have raised concerns about the impact of a sharp slowdown on the UK.Official figures show monthly construction output fell by 1pc in July and 4.3pc in August, while industrial production fell 0.4pc in July before rising 1pc the following month.This suggests the sectors, which account for just over 20pc of gross domestic product (GDP), added little or nothing to growth in the third quarter.Economists said growth would be entirely reliant on Britain’s dominant services sector, where output rose by 0.2pc in July.A closely-watched survey showed that the sector expanded at the weakest pace in nearly two-and-a-half years in September. Many economists believe there is a risk that the third quarter expansion slowed to 0.5pc.However, this would still represent the 11th consecutive quarter of positive growth.

Ross Walker, chief UK economist at RBS, said tighter fiscal policy and “significant difficulties” facing Britain’s manufacturing sector were likely to drag on growth for some time.“Given that fiscal consolidation implies only negligible growth in public services, which represents around one-fifth of GDP, and that manufacturing is facing significant difficulties, this means that around one-third of the UK economy is likely to remain mired in a state of broad stagnation over the next quarter or two,” he said.Recent data have shown pay growth is strengthening, while bumper retail sales in September also suggest consumer confidence remains robust. Capital Economics believes growth will be “bumpy” in the coming months, but expects a stronger recovery as “productivity rebounds, the drag from the pound eases and the eurozone recovers”.Mark Carney, the governor of the Bank of England, said this summer that eliminating remaining “slack” in the economy would require growth above its past average of around 0.6pc per quarter for a “sustained” period.Mr Walker said slower growth would keep interest rates lower for longer. “GDP growth of 0.5pc quarter-on-quarter in Q3 would see the annual rate inch down to 2.3pc,” he noted.“Although these outturns would be only a little below trend, global and domestic headwinds are more apparent than tailwinds at present and this warrants some caution in withdrawing monetary policy stimulus.”Markets do not believe the Bank will raise rates until 2017.(Full article click - Telegraph)---Kathryn Cooper: Shopping spree keeps economy on trackTaken from the Sunday Times 25 October 2015BRITAIN’S shoppers lifted the economy out of a late-summer soft patch, official figures are likely to reveal this week.The economy is expected to have grown 0.6% in the third quarter, down only slightly from 0.7% in the previous three months, after consumers went on a spending spree in September.Economists had been braced for a slowdown to 0.5% or 0.4%, but the strength of retail sales has convinced many that Britain has been able to shrug off the global downturn.“The acceleration in retail sales growth suggests domestic demand held up in the third quarter despite growing international risks,” said Kallum Pickering, senior UK economist at Berenberg, the investment bank.“This gives an early hint that while the pace of economic growth may have slowed a little in the third quarter as a result of financial market turbulence . . . the economy grew by 0.6% quarter on quarter.”The Office for National Statistics said retail sales rose 1.9% in September and 6.5% over the year. The boom was led by a 2.3% monthly rise in food and drink sales, boosted by the rugby World cup.Households have been lifted by record levels of employment, wage growth of about 3% a year and “good” deflation. Prices for goods and services fell


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http://www.telegraph.co.uk/finance/newsbysector/industry/11952883/Steel-bosses-in-Treasury-crisis-talks.html

0.1% in September and inflation has been hovering around zero for much of the year.(Full article click - Times)---

Jeremy WarnerSorry, but Britain has little reason to thank the EU for superior growthTaken from the Sunday Telegraph 25 October 2015Thatcher's structural reforms were a much bigger boost to the UK than EuropeThere are some things which Mark Carney, Governor of the Bank of England, is not allowed to say. Never the less, he came as close as he dared in a speech at St Peter’s College, Oxford, last week on British membership of the European Union, and he’s been getting stick for it from both sides of the debate ever since.There were some caveats, but Mr Carney left little doubt where he stands. Britain has benefited quite a bit from being part of the European Union, he argued.Mr Carney didn’t actually say it, but he might well have done, and it is certainly what he believes - like David Cameron and George Osborne, it is to Mr Carney unconscionable that Britain would leave a supranational organisation such as the EU - worse, in the signals it sends to the rest of the world, than quitting the United Nations, the World Trade Organisation, or the International Monetary Fund.This is scarcely the first time a Governor of the Bank of England has waded into the political debate. They used to do it all the time. More recently, Eddie George pre-judged the government’s own assessment of whether it made sense to join the euro by warning in terms of the dangers of Europe’s “one size fits all” monetary policy. Thank goodness for such interventions.And Mr Carney himself made a possibly decisive intervention in the Scottish referendum vote by telling Scots that they could not have both full independence and the pound.In both these cases, however, there were profound implications for monetary policy; beyond the basically unknowable effect on the economy, there are no such ramifications if Britain were to leave the European Union.Even so, I can’t agree with the former Chancellor and now head of the Conservative out campaign, Lord Lawson, that the Governor has strayed beyond his mandate. As one of Britain’s two mainstay economic institutions (the other being the Treasury) the Bank plainly does have some sort of a duty to assess the economic pros and cons. Nobody is obliged to agree with the Bank’s conclusions, and in particular, I would challenge the Governor’s assertion that Britain has been perhaps the prime beneficiary of the EU’s four freedoms – capital, goods, labour and services. As evidence, he points to superior rates of growth in GDP and productivity since Britain joined. These gains, however, almost certainly have much more to do with Thatcher’s capital and labour market reforms than membership of the EU, whose regulatory demands often seem to push Britain in the other direction.All the same, the Governor has in a round about way managed to highlight what promise to be the key drivers of the Brexit debate, at least from an economic perspective. I’m not sure the EU was ever quite the benign globalising force it pretends to be, but if the degree of seemingly perpetual crisis management and further integration thought


http://www.thesundaytimes.co.uk/sto/business/Economy/article1623627.ece

necessary to salvage the euro is making it into something else – defensive, inward looking and protectionist – is that really in Britain’s interests as one of the most open and outward looking economies in the world? If it isn’t, might not these interests be best pursued by going it alone? And finally are these potential rewards worth the massive business uncertainty and disruption that would come with the act of leaving?(Full article click - Telegraph)---

Shoppers put life back into the eurozoneTaken from the Sunday Times 25 October 2015Consumer confidence in Europe has soared but slower emerging markets have hit exportersCHISTOPHER NIEPER is doing so well selling quality British clothes to the French that he is sponsoring a prime-time French TV programme for the first time.David Nieper, the company set up by his father in 1961 in Alfreton, Derbyshire, has been sponsoring Des Chiffres et des Lettres (Numbers and Letters) — the forerunner to Channel 4’s Countdown — for two months. The company is also running TV ads in France and Germany to boost brand recognition.“We are a British manufacturer reaching continental consumers in their own homes. I don’t know any other British manufacturer doing that,” said Nieper, 51, the managing director.“Confidence has returned remarkably well in Europe. In August, which is normally a quiet month, our French sales were up 12% and in Germany they were up 21%, prompting us to increase our marketing budget to try to boost our market share further.”European consumers, in the doldrums for so long, have roared back to life over the past 12 months. In Germany and France, but also in Spain, Italy and Ireland, households are feeling confident again and have been spending their cash.Household spending has been boosted by “good” deflation — prices are falling just enough to make consumers feel richer but not enough to discourage them from making big purchases.Domestic demand, rather than trade, looks set to drive GDP growth in the eurozone this year, reversing a trend that has been in place since the single currency’s debt crisis in 2011, according to Barclays.Yet while falling prices may be good news for consumers, they are a headache for Mario Draghi, president of the European Central Bank (ECB). At a meeting of eurozone policymakers in Malta last week, he made it clear the bank stands ready to pump more money into the economy to rid it of the spectre of long-term deflation. Five-year inflation expectations have fallen to 1.6%, well below the ECB’s 2% target and close to a record low.Draghi signalled that he is primed to extend the €1.1 trillion (£790bn) bond-buying programme launched in March, under which the bank has pledged to purchase €60bn a month of assets until next September.He also left the door open for the bank to cut deposit rates deeper into negative territory — meaning it would in effect charge more to hold cash. The deposit rate already stands at -0.2%. This would weaken the euro and give a much-needed boost to the region’s exporters, which have been hit hard by the slowdown in emerging markets.After Draghi’s announcement the euro dropped nearly 2% against the dollar on the promise of further stimulus, while yields on two-year government bonds fell to record lows. They are now below zero for almost every eurozone state.“The ECB is still deeply concerned about the threats to the eurozone’s patchy recovery,” said David Lamb, head of dealing at the foreign exchange specialist Fexco. “Such a strong signal that the money presses will soon be set rolling again sent the euro slumping.”


http://www.telegraph.co.uk/finance/comment/11952026/Sorry-but-Britain-has-little-reason-to-thank-the-EU-for-superior-growth.html

Despite tentative signs that the first wave of quantitative easing has succeeded in getting credit moving to businesses, the slowdown in emerging markets has come at just the wrong time for the euro area — and in particular Germany, the bloc’s largest economy.German consumers may be spending again, but growth in the country’s trade has more than halved over the past six months as the downturn in China has taken its toll. Germany exports about 6% of its goods to China. With cars accounting for about a sixth of industrial production, the emissions scandal at Volkswagen is also expected to weigh heavily in the coming months.“The slowdown in China and the deterioration in other emerging economies, combined with the Volkswagen scandal, are key risks to the euro area,” said Tomas Holinka, economist at Moody’s Analytics.The troubles in Germany come just as the economies of Europe’s embattled periphery seemed to be coming back to life. Figures last week showed that Spain’s unemployment rate, while still worryingly high, fell to a four-year low of 21.2% in the third quarter. Consumer confidence in the country is at its highest for 10 years, house prices are rising strongly again and Spain is expected to be the fastest-growing of the largest eurozone economies this year with a GDP rise of more than 3%.Spain’s rebound has provided rich pickings for British companies that were brave enough to venture into the country during the depths of the crisis.Will Butler-Adams, managing director of Brompton Bicycle, said sales of the London company’s folding bikes have doubled over the past five years in Spain and the number of stockists there has soared from 20 to nearly 100.“Spain went through a brutal five years but our customers are young, cool people who were encouraged by the downturn to ride a bike rather than drive, showing you can still get growth, even when the wider economic picture doesn’t look good,” he said.Ireland, too, has been one of the eurozone’s star performers with predicted growth of nearly 5% this year. With the era of harsh austerity largely over, employment has picked up, the housing market has stabilised and consumers are spending again.Even in Germany, British exporters are making inroads into a market that is notoriously difficult for overseas companies to crack, and they have seen little sign of a slowdown following the Volkswagen scandal — yet.Rowan Crozier, chief executive of Brandauer, a precision-metal components manufacturer in Birmingham, is taking his sales team to the Productronica electronics trade fair in Munich next month for the first time in 30 years.He said orders from Germany’s car industry have flooded in since the summer, in defiance of the global slowdown, and Crozier wants to show his German counterparts that he can undercut them.“Last month we had a huge volume of orders from the automotive sector in Germany,” he said. “Our customers may manufacture [car parts] in Germany and eastern Europe but they have a global customer base that isn’t just Volkswagen. It’s about being selective over who you sell to.”

Yet Draghi is worried about the impact of a stronger euro on the bloc’s exporters. The currency has risen nearly 10% since April as the impact of the ECB’s last stimulus has started to fade, and as America’s Federal Reserve has delayed interest-rate rises. This had been one of the key factors supporting the dollar against the euro.Economists also question whether European consumers can continue to drive growth, particularly when the boost from lower fuel prices starts to fade towards the end of the year.When this drops out of the numbers, underlying inflation will still remain persistently weak, suggesting there is little underlying demand to drive growth.“For now at least the eurozone seems to be experiencing good short-term deflation, which is helping to boost consumer spending, but that temporary boost from the lower oil price can’t be relied on in future and we expect consumer spending to slow,” said Jennifer McKeown, senior European economist at the consultancy Capital Economics.That is why Draghi cheered markets, and sent the euro tumbling, with his promise of further stimulus last week. “Overall, [it] was a vintage Draghi performance,” said Marchel Alexandrovich, European financial economist at the investment bank Jefferies International.“The euro was down more than 1.5 cents against the dollar, the markets were left expecting ‘something’ in December and all the while the euro area economy continues to quietly, but steadily, recover.”(Full article click - Times)---Liam HalliganMario Draghi gives the V-sign but a dangerous QE day loomsTaken from the Sunday Telegraph 25 October 2015QE-to-infinity is pumping up equity and bond markets, blowing an even bigger bubble than that which led to the Lehman collapseIt’s all about the V-word, apparently. That’s a nod not to Sir Winston Churchill, but a rather different character – namely Mario Draghi, president of the European Central Bank.It would appear that a eurozone quantitative easing programme running to €1,100bn (£795bn) isn’t enough. Having churned out €60bn of virtually printed money a month since March, and committed to maintaining that pace until September 2016, Draghi has now signalled there’s likely to be even more.“The degree of monetary policy accommodation will need to be re-examined at our December meeting,” he said last week, following the latest gathering of the central bank’s Governing Council.The “size, composition and duration” of eurozone QE could be adjusted, Draghi continued, with the monthly amounts getting bigger or the schedule extending into 2017 and beyond.Alternatively, or in addition, the ECB could use credits created ex nihilo to extend its bond-buying to some of the more ropy corporate bonds otherwise burning holes in the balance sheets of various eurozone banks.



“We’re open to a whole menu of monetary policy instruments,” Draghi continued, indicating that further interest rate cuts were also now on the table.No matter that the benchmark rate is 0.05pc, with the deposit rate at minus 0.2pc – both record lows. No matter that the ECB has only recently said such rates were already at “their lower bound”.Then, as traders held their collective breath, Draghi delivered his coup de grâce, declaring that the ECB is now “vigilant”. That was it, the magic V-word, the sign that has previously pointed to definite policy action to come.And, on that utterance, across the entire continent – with absolutely no regard to actual macroeconomic or company news, or any other kind of information that would, under normal circumstances, influence financial markets – stocks and bonds dutifully rallied.The Europe-wide Stoxx60 share index surged after Draghi’s oral intervention, closing 2pc up. Italian and Spanish benchmark 10-year yields dropped to their lowest levels since April, with the shorter two-year German sovereign bond hitting an all-time low of minus 0.32pc.The euro itself, on the prospect of even greater money-printing, shed a whopping 1.7pc against the dollar – a big win for the ECB given the implied boost to eurozone exports.As a result, Draghi is now being hailed, once again, as a rhetorical wizard, a veritable horse-whisperer among central bankers. Back in mid-2012, when the single currency was imploding, the smooth-talking Italian proclaimed that the ECB would do “whatever it takes” to save the euro.Bond vigilantes retreated, the markets were calmed and the euro crisis was “solved”. Since then, at regular intervals, Draghi has committed the ECB to fulfilling, if needs be, the pledged Outright Market Transactions programme, a more sustained form of central bank sovereign bond-buying, never yet formally used.So the ECB supremo has not only glued the single currency together again, putting the great European project back on track by dint of artificial balance sheet expansion.He’s also delivered to Europe’s political and financial classes an asset price rally that’s kept various grossly mismanaged banks afloat and allowed governments to continue with heavy borrowing, despite having nothing to do – at all – with the eurozone’s economic facts on the ground. And now, with another rhetorical flourish, ahead of yet another round of stock-and-bond pumping, Draghi has “re-loaded his big bazooka”.How should a rational person respond to all this? What are we to make of the fact that, across the Western world, financial asset prices now appear to be driven largely, in the absence of big shocks, by the promises of central bankers further to extend, sooner or later, what have become known as “extraordinary monetary measures”?The first thing is to understand what is actually happening – and why. The ECB, like the Federal Reserve and the Bank of England before it, goes to great lengths to maintain the myth that it is only rolling out ever more QE in an attempt to “meet our inflation mandate”.Yes, annual inflation across the eurozone was negative in September, at minus 0.1pc, down from

0.1pc the month before – and a long way from the 2pc target. But that’s mainly because oil prices are some 50pc lower than they were a year ago, and the United Nation’s FAO food price index is 20pc down on September 2014. Strip out those entirely cyclical commodity components and eurozone inflation was positive last month – at close to 1pc.The threat of “deflation” is often wielded, not just in the eurozone but across the Western world, as an alibi for politicians and central bankers to keep “extending and pretending” with ever more QE.As the commodity cycle shifts back, and the price drop falls out of the inflation numbers, other reasons to keep on printing will no doubt be cited – be it “turmoil in emerging markets” (already being lined up) or yet another destabilising row between Congress and the White House over America’s federal borrowing limit (also coming into view).A major motivation for ever more QE, apart from keeping the asset price rally going, and pushing further into the future the inevitable market tantrum when the sugar-rush (and the prospect of future sugar rushes) finally ends, is to bear down on domestic currencies.The leading central banks involved (be they based in Frankfurt or Washington, London, Tokyo or Beijing) are trying to protect themselves in an largely unspoken, yet ongoing currency war. Growth in the emerging markets has slowed, of course, not least in China – in part due to the beginnings of a necessary and natural shift from investment - to consumer-focused economics.Sales of goods and services to such countries now account for 25pc of eurozone exports, and almost 35pc in Germany. Faced with a still-fragile banking sector, the eurozone authorities have sprayed around a great deal of QE money – and that will continue. Given moribund domestic growth, also, the ECB wants to gain competitive ground against the dollar – which means, for now at least, doing more QE than the Fed.In the end, the Fed will decide. If America’s central bank does finally raise rates for the first time since 2006 in early December, as expected, the dollar will get firmer, with the euro falling. That would make it less likely we’ll see additional eurozone QE, beyond the remaining €680bn of the announced programme still to come.In my view, though, the Fed won’t put up rates. What we’ll see instead, on some pretext of another, is yet another large dollop of US money-printing, which will become known as QE4.As the euro rises, the ECB will then have to respond, exploiting Draghi’s latest V-word preparatory work to extend Frankfurt’s QE programme to 2018 or even beyond. Given the UK’s woeful export performance, and our massive trade deficit, where will that then leave the Bank of England – which has never ruled out more QE?People talk about currency wars between the West and the emerging markets. Far more serious to my mind, and potentially explosive, are the related intra-Western struggles.QE-to-infinity is pumping up equity and bond markets, blowing an even bigger bubble than that which led to the Lehman collapse – and there’s little sign of a convincing exit strategy. With the best will


in the world, it’s hard to imagine this seemingly endless monetary expansion will end well.“Never run away from anything,” said Churchill. “Never!” Western policy-makers, though, and much of the commentariat, those lauding “Mario’s big bazooka”, are running away – from the screaming dangers of yet more QE.(Full article click - Telegraph)---Government faces mountain of work as cash runs lowTaken from the Kathimerini Sunday, 25 October 2015After a first round of talks with creditors failed to establish virtually any common ground, the government must next week push efforts to honor bailout commitments as concerns about state coffers return.With so many of the prior actions pledged to creditors pending, it appeared unclear whether the government would make enough progress next week to secure the release of a first tranche of 2 billion euros in loans.But officials are already under pressure to compile a second bill featuring tough measures including increases to taxes on farmers and an overhaul of the pension system; the second bill is linked to another slice of 1 billion euros in loans.The two sides have differing opinions on several issues, however, including on whether and how to impose a value-added tax on private education, on a law allowing debtors to honor their dues in a larger number of installments and on foreclosures involving primary residences.Another sticking point is the budget for next year: the creditors are not convinced that the measures Greece is proposing will meet fiscal targets.During his visit to Athens, French President Francois Hollande suggested that there should be more discussion about the threshold for foreclosures.Berlin might not welcome any attempt to seek concessions, however. Also, there are fears that delays could revive the risk of a haircut on bank deposits.If Greece’s banks are not recapitalized before the end of the year, new European rules on bank bailouts, coming into effect on January 1, mean deposits of over 100,000 euros can be tapped.Before Greek banks can be recapitalized, however, Greece must undergo a review by creditors and that can only be done once both sets of prior actions have been legislated.Meanwhile, state coffers are running low. This comes as the draft budget for 2016 indicates that authorities are hardly cutting spending, relying almost entirely on tax increases to achieve budget targets.The draft points to only 214 million euros in cuts to primary expenditure while aiming to raise more than 2 billion euros from value-added tax increases alone.(Full article click - Kathimerini)---BOE Governor Mark Carney interview: Interest rate rise will be gentle not steepTaken from the Daily Mail Sunday, 25 October 2015Almost one in 25 mortgage borrowers could be vulnerable when interest rates start to rise, the

Governor of the Bank of England warned this weekend.In an exclusive interview with The Mail on Sunday, Mark Carney said about four per cent of mortgage-holders were at risk of being unable to pay their debts if, as expected, the Bank of England lifts rates in the next year. But he insisted any rise would be gentle and the Bank would keep a close eye on whether it was causing problems.The Governor’s warning applies to borrowers for whom the cost of paying their debts amounts to 40 per cent or more of their income.He said: ‘If you are spending more than 40 per cent of your income on debt service you are vulnerable. 'If you are off sick from work or you get not as many hours of work or interest rates go up, those type of factors make it more likely that you would not be able to pay those debts.‘Today we have about two per cent of households who are in that position. For mortgage-holders, it’s about four per cent of households.’With almost seven million mortgage holders in Britain, the vulnerable group amounts to roughly 280,000. Carney said there was no certainty that rates would rise, but it was the central expectation of the Bank’s rate-setting Monetary Policy Committee.‘There has been significant progress in the last seven years. The economy has grown, a lot of jobs have been created and we are now seeing wages pick up. 'Wage growth is about three per cent, though that’s not evenly distributed. So a lot of things are happening which are consistent with the idea of interest rates beginning to increase. 'We’ve talked on the MPC and the view is that the next move in rates is likely to be up. That is still a decision to be taken. 'We have underscored that the path of rate rises will be a modest, gentle pace because there are headwinds against the economy.’Most City economists expect interest rates – which have been at a historically low 0.5 per cent since the financial crisis – will start to rise next year. But uncertainty in the global economy means there is still huge debate about when.(Full article click - Daily Mail)---Poland votes, conservative eurosceptic party looks set to winTaken from the Reuters News Sunday, 25 October 2015Poles vote in an election on Sunday that could end nearly a decade of economic and political stability in the country of 38 million, bringing to power a conservative, eurosceptic party whose policies diverge from many of Poland's European allies.If opinion polls are correct, the ruling Civic Platform (PO), a pro-market, centrist grouping in power for the past eight years, will lose to the conservative Law and Justice opposition party (PiS), run by the twin brother of late president Lech Kaczynski, Jaroslaw.Most polls show PiS as the frontrunner on more than 30 percent, while PO is second with just over 20 percent. Several small parties are also running, spanning the political spectrum from ultra-right to liberal and extreme left.


http://www.dailymail.co.uk/news/article-3288095/Bank-Governor-s-rate-rise-fears-homeowners-one-25-mortgage-borrowers-vulnerable.html

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http://www.telegraph.co.uk/finance/comment/11952876/Mario-Draghi-gives-the-V-sign-but-a-dangerous-QE-day-looms.html

Distrustful of the European Union and an advocate of a strong NATO hand in dealing with Moscow, PiS opposes joining the 'euro zone' in the near future, promises more welfare spending on the poor and wants banks subject to new taxation.It also opposes the relocation of migrants from the Middle East to Poland, arguing they could threaten Poland's Catholic way of life - raising the prospect of tensions with the EU on the issue.On the campaign trail, Kaczynski and other PiS leaders have sought to tap into anger that the economic success is not more evenly shared out and into nationalist sentiment fanned by immigration fears, particularly among young voters."If (PO) maintains power, if we don't manage to take it from them, things will be much worse than before. You may say things cannot get worse. Things can always get worse," Kaczynski told supporters during a rally in Lublin, some 80 km (50 miles) from the Ukraine border.Poland has seen its economy expand by nearly 50 percent in the last decade and is the only EU member not to experience recession after the 2008 financial crisis. But pockets of poverty and stagnation remain, particularly in the east."There is a broader phenomenon of a return to national, religious, community values being seen all across Europe," said political analyst Aleksander Smolar."PiS uses clear ... language in this respect."FANNING RACISMKaczynski was accused by some Polish media this month of fanning racism when he said migrants fleeing war in the Middle East and Africa may bring new diseases and parasites to Poland.PO Prime Minister Ewa Kopacz later quipped Kaczynski, a known cat lover, wasn't too worried to own cats even though they can carry diseases dangerous to people."There are many diseases that come from animals, but at the same time that doesn't stop (Kaczynski) from having a cat," she said.PiS's advocacy of a robust Western approach towards Russia following Moscow's 2014 annexation of the Crimean peninsula in Ukraine might also complicate any future bridge-building between the EU and Russia.Several new parties are running on anti-establishment platforms, supported largely by young voters.Among them, Kukiz'15, a grouping run by former Polish rock star Pawel Kukiz, which wants to tax "bank gangsters" and says Poland is a "colony of foreign governments". Kukiz ran in a presidential election in May, winning a shock 21 percent."I hope we enter parliament in such numbers that it will allow us to make a crack in the system, allowing the citizens, the nation to win back control over the state, which has been taken away from them," Kukiz told a campaign rally.The smattering of fringe parties in the election means PiS, even if it wins, will likely have to seek coalition partners to rule, raising the possibility of extended talks in the weeks after the vote.It also leaves room for PO to retain its hold on power, if PiS fails to form a functioning majority in parliament and the centrists secure the support of

leftist groupings such as United Left (ZL) or liberal Nowoczesna.Polls open at 7 a.m. local time (0600 British time) and close at 9 p.m., (2000 British time). Exit polls will be available immediately after voting ends. (Full article click - Reuters)---VW pressed to sell Porsche after debacleTaken from the Sunday Times 25 October 2015VOLKSWAGEN could face pressure to spin off or float its Porsche luxury sports car maker as the emissions cheating scandal continues to engulf the car giant.VW’s third-quarter profits on Wednesday will be overshadowed by the biggest crisis in the German company’s 78-year history, with new chief executive Matthias Müller expected to face a barrage of questions about how it will pay for and recover from the scandal.It emerged a month ago that the car maker, which competes with Japan’s Toyota for the world No 1 title, used “defeat devices” to trick American emissions tests into thinking its diesel cars are far less polluting than they are.VW has said about 11m cars are affected globally — 1.2m of them in Britain. It has so far set aside €6.5bn (£4.7bn) to cover the costs of the scandal. However, many believe more impairments will follow as it is hit by fines, lawsuits and recall costs. The ratings agency Moody’s last week warned it could cost VW up to $31bn (£20bn).Fiat Chrysler’s successful float of Ferrari last week raises questions about whether VW should carve out divisions such as Porsche or commercial vehicles to raise funds, said George Galliers, automotive analyst at the investment bank Evercore.“They could list 40% of Porsche and maintain control, and that would unlock a lot of value for shareholders. It’s a question they will get from the investment community,” Galliers said. “With Ferrari, we now have a brilliant case study of arguably how easily it can be achieved.”A more difficult option would be to combine and spin off its two luxury brands, Porsche and Audi, he added.VW is 52%-owned by the Porsche family, who tried to buy the group in 2007.VW declined to comment.(Full article click - Times)---Renault pact with Japanese in perilTaken from the Sunday Times 25 October 2015RENAULT and Nissan bosses are set for crisis talks this week as French government activism threatens to unravel the car makers’ 16-year alliance.Executives will discuss how to water down Renault’s influence over Nissan to reduce the impact of a power grab by François Hollande’s socialist government last April.The talks at the Tokyo motor show will centre on how to shrink Renault’s stake in Nissan below 40% from the current 43.4%. This would hand voting rights to Nissan, which has a 15% interest in its French partner but no formal say at the moment.The Renault-Nissan alliance, formed in 1999, is widely seen as one of the industry’s most successful unions, sharing development, purchasing, parts, manufacturing and basic car skeletons. It is held


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together by a mesh of cross shareholdings and run by one chief executive, Carlos Ghosn.However, the alliance has been shaken to its core since France’s economy minister Emmanuel Macron increased the country’s stake in Renault from 15% to 19.7% to force a doubling of its voting rights in the French company. When the double voting rights come into force in April, industry insiders fear Paris will use its greater clout to preserve French jobs at the expense of Nissan plants.They warned that this could lead to Nissan’s Sunderland factory, which makes more than half a million cars a year, losing work to France. Industry sources said Renault factories were only 40% utilised, while Sunderland was the most productive plant in the alliance.France had been due cut its stake to 15% soon after buying it, but has yet to do so after a fall in Renault’s share price. It is believed to be sitting on a €100m (£72m) paper loss.A recent decision on where to build Nissan’s new version of its Juke small SUV was delayed by the Franco-Japanese power struggle, but a source said “sanity prevailed” when Sunderland was reselected.France’s activism has strained relations, with a Japanese minister last week insisting Tokyo would not accept the power grab passively.Measures that could reduce French influence over the alliance include a share buyback, sources said. They added that both companies were keen on giving Nissan a greater say.(Full article click - Times)---

Formula One owner eyes RACTaken from the Sunday Times 25 October 2015THE owner of Formula One racing has made a £1bn approach for a large stake in roadside services company RAC. The buyout firm CVC has opened talks with Carlyle, one of RAC’s owners, about buying its stake, senior City sources said this weekend.The discussions were described as “very early stage” and may not lead to a formal offer. It is understood that investment bankers have not yet been appointed to work on the deal.CVC is understood to have asked for access to the accounts of RAC, which traces its roots to 1897 and has more than 8m members. It provides car insurance as well as breakdown cover, and was part of the insurance giant Aviva until Carlyle’s £1bn takeover in 2011.A sale to CVC would all but rule out a stock market float for RAC, sources suggested. The private equity house would make its investment through a “long-term” fund and probably hold on to the business for several years, sources said.RAC was primed as a stock market candidate last year until Carlyle struck a deal to sell a large chunk of its stake to GIC, the Singapore sovereign wealth fund. The deal valued the breakdown service at £2bn.Insiders said Carlyle had received several approaches for its stake in the past year. Carlyle and GIC could still decide to float the business, but the sources said they had been put off by the lacklustre stock market performance of its larger rival, the AA.CVC, Carlyle and RAC declined to comment.(Full article click - Times)---Anglo boss tees up £1bn sell-offTaken from the Sunday Times 25 October 2015ANGLO AMERICAN boss Mark Cutifani hopes to revive his stuttering turnaround plan by selling another piece of the struggling mining empire.The Australian executive, 57, is understood to have started sounding out advisers about selling Anglo’s £1bn niobium and phosphates arm, which is based in Brazil. A sale is not expected to kick off for a couple of months. It would follow a flurry of disposals by Cutifani, who has been frantically cutting debt to stop credit agencies slashing the company’s rating.Anglo plunged to a $3bn loss in the first six months of the year because of writedowns and a steep drop in the price of some of its key products, including iron ore and coal.In a recent round of shareholder meetings, Cutifani said that he may slash the dividend for the first time since 2009 to protect the balance sheet.The share price has halved in a year. It closed at just under 610p on Friday, valuing the company at £8.5bnCutifani was hired two years ago to rehabilitate the flagging FTSE 100 miner but his efforts have been undermined by the slump in commodity prices. His most pressing problem is the $12bn debt pile. The chief executive has pledged to raise at least $3bn to cut the burden. So far he has brought in $2bn by selling South African platinum operations, Chilean copper mines and the Tarmac building materials business.If Cutifani approves the disposal of the niobium and phosphates arm, Goldman Sachs and Morgan Stanley


http://www.thesundaytimes.co.uk/sto/business/Companies/article1623617.ece


could get the job. They handled the recent copper sale.Anglo declined to comment.(Full article click - Times)---

Shell and BP prepare for further cost-cutting as oil prices stay lowTaken from the Sunday Telegraph 25 October 2015Results this week could give more detail on savings to protect dividend paymentsBritain’s oil giants are preparing to make further cuts to their investment plans in the face of plummeting crude prices.Shell, like many oil explorers, has already slashed spending and jobs to counteract the effects of a 40pc slump in oil prices in the past year, with the price sliding as low as $43 a barrel from highs of more than $110 in 2014.However, Shell is this week expected to unveil a new round of cuts alongside its third quarter results, which are set to show a 38pc slump in sales to $67bn (£43.7bn) and a 54pc drop in adjusted earnings.The budget cuts will come on top of the £10bn reduction in investment that was announced in January. The company also halted drilling in the Arctic in September after disappointing tests.Many oil firms are expected to burn through their cash flows this year, leaving spending cuts and asset sales as tools to avoid sacrificing their dividends. Shell’s position is complicated by a pending cash-and-shares takeover of BG Group, which at current prices is worth more than £40bn.Analysts are nevertheless optimistic about Shell maintaining its dividend, which at $11.8bn last year represented one of the biggest shareholder payments in the FTSE 100.“On our numbers, at $50-a-barrel oil and a further 10pc reduction to capex, Shell will add 3pc to its [debt] gearing each year, and with gearing at the deal close around 22pc, we see ample room to weather the storm,” said analysts at RBC Capital Markets.Meanwhile, BP is forecast to report a 47pc slump in its third-quarter revenues to $49bn and adjusted earnings 60pc lower on Tuesday.The company, which last week formalised a $10bn gas supply deal with the Chinese state-owned power firm Huadian, is already set to save about $1.8bn from its yearly costs by 2018.BP has rebuilt its dividend track record after cutting payments in the wake of the Gulf of Mexico spill five years ago, and recently agreed a deal to end US charges relating to the disaster, bringing total related charges to $53.5bn.However, RBC analysts said BP was at greater risk of a dividend cut than Shell, estimating that the group has one or two years with oil at $50 “before it will have to address its dividend”.(Full article click - Telegraph)


http://www.telegraph.co.uk/finance/newsbysector/energy/11952001/Shell-and-BP-prepare-for-further-cost-cutting-as-oil-prices-stay-low.html


News Americas

Global Realities May Stay Fed’s Hand on Rate HikeTaken from the Barron’s Online Saturday 24 October 2015Central banks once again get the credit for the sharp advance at the end of last week. European Central Bank head Mario Draghi Thursday strongly suggested that further accommodative measures—in addition to the ECB’s current quantitative easing and negative interest rates—would be forthcoming in December. Then, on Friday, the People’s Bank of China announced its sixth round of interest-rate cuts since last November, along with further reductions in bank-reserve requirements.In other words, it was the same story of central banks’ largess flowing to the equity markets. Moreover, the Bank of Japan this week may expand its asset purchases, which include exchange-traded funds, in addition to the mundane government bonds that have been central banks’ traditional asset.Among the exclusive club of central bankers, Federal Reserve Chair Janet Yellen would appear to be the odd woman out. The majority of economists continue to predict that, by December, the U.S. central bank will begin raising short-term rates from the near-zero floor where they’ve been stuck since late 2008.For its part, however, the federal-funds futures market says the odds are about 2-to-1 against the liftoff in rates commencing in December (a 36% probability, according to Bloomberg calculations). As for this week’s meeting of the Federal Open Market Committee, the probability of a rate hike is a mere 6%. The fed-funds futures market reckons that the first increase will come in March, with a 60.6% probability.What’s clear to the equity markets is that the central-bank tide has turned decisively toward more easing. And so yet again, the timing for the first Fed boost is being pushed further into the future. And other central banks are dealing with weakening growth.In China, there is further monetary ease, even though official third-quarter numbers show the economy grew 6.9% from its level a year ago. The divergence of government data from reality has increased, according to Barclays’ estimates, with the bank calculating that actual growth is one to 1.7 percentage points below the official numbers. President Xi will announce a new five-year plan this week. The emphasis will be on continued reforms, but growth will remain a focus.How the Fed can swim against the global current of increased monetary accommodation is puzzlement. With interest rates near zero almost everywhere, the effects of monetary policy are seen most clearly in the foreign-exchange market. Expectations of ECB easing sent the euro down sharply against the greenback, from above $1.13 at midweek to around $1.10 at week’s end.Currency effects have been a major depressant for third-quarter earnings now rolling in; no surprise to the stock market, which has largely been willing to look past them. While the U.S. economy is less export-dependent than others, the strong dollar restrains prices of goods. Preventing these prices from falling leads to central-bank accommodation and, in turn, higher asset prices.

(Full article click - Barron's)---


http://www.barrons.com/articles/global-realities-may-stay-feds-hand-on-rate-hike-1445660813

John Boehner Races Time on Debt LimitTaken from the WSJ Saturday, 24 October 2015If speaker wants to leave his likely successor, Paul Ryan, without a standoff, he must act early in weekDeparting House Speaker John Boehner doesn’t want to leave increasing the debt ceiling to Rep. Paul Ryan, the Wisconsin Republican expected to win an election to succeed him this coming week.But Mr. Boehner (R., Ohio) has little time and few options to dispatch one of the most politically repellent issues for Republicans. That is likely to leave him with no other choice than to bring to the House floor early in the week legislation raising the federal government’s borrowing limit with no policy strings attached, known as a “clean” increase.“It would be great if they could come up with some big deal that makes us all feel great about ourselves, but if past is precedent, then we’re going to end up doing a clean debt limit vote” soon, said Rep. Tom Rooney (R., Fla.), who said he would vote against it.The Treasury Department has said that in order for it to continue paying bills on time, Congress must act by Nov. 3 to increase the federal government’s current $18.1 trillion borrowing limit. Republicans have said that they will raise the debt limit only if other measures are passed to reduce federal spending.But President Barack Obama has vowed that he won’t negotiate over the debt limit, which Congress has increased before without extracting any policy concessions. Raising the debt limit doesn’t authorize spending on new government programs. It allows the government to pay debts on items for which Congress already approved spending.Mr. Boehner, who plans to leave Congress by Oct. 30, has little time to act if he wants to ensure the debt ceiling doesn’t land on Mr. Ryan in his first week on the job. House Republicans are expected to select Mr. Ryan as their nominee for speaker on Wednesday, with his election on the House floor scheduled for Thursday.“If the conference cares about Paul Ryan’s ability to succeed, we do need to do that,” Rep. Frank Lucas (R., Okla.) said of resolving the debt-limit standoff.House GOP leaders have struggled to find the roughly 30 Republican votes needed to pass a debt-ceiling increase. They shelved a proposal this past week from the Republican Study Committee, a large group of House conservatives, that would have tied an increase to large spending cuts and a freeze on new federal regulations.A House debt-limit increase tied to other conservative policies would probably not come back from the Senate, shorn of those measures, until after Mr. Boehner’s departure.Many Republicans say that they aren’t willing to vote for any debt-limit increase without assurances that Mr. Obama will compromise elsewhere.“I’m not going to raise the debt ceiling if I don’t have any guarantees of spending cuts,” said Rep. Richard Hudson (R., N.C.) Mr. Hudson said Republicans wouldn’t cause an economic catastrophe if they hold out beyond the Nov. 3 deadline. “It’s not like all the lights go out on the 3rd or 4th of November,” he said. “Markets go up and down all the time.”

Financial markets have showed rising unease over the debt-limit standoff this past week. Investors shied away from short-term debt that matures after next month’s deadline, sending yields to levels last seen during a similar standoff two years ago. Yields on securities that mature later this year saw no such uptick. The Treasury pre-emptively postponed an auction of two-year notes that had been scheduled for next Tuesday amid concerns it wouldn’t be able to settle as planned on Nov. 2, the day before the Treasury says its cash balance could drop to extremely low levels. Treasury Secretary Jacob Lew, shown earlier this month, has urged Congress to raise the debt limit before damage is done. The debt-limit impasse is “adversely affecting the operation of government financing, increasing federal government borrowing costs, reducing the Treasury bill supply and increasing the operational risk associated with holding a lower cash balance,” the department said in a statement Thursday.House and Senate leaders have made clear they don't want the GOP-controlled Congress to miss the Nov. 3 deadline. That means GOP leaders will likely have to pass debt limit increases with predominantly Democratic votes, as they have in the past.On Friday, Rep. Peter Welch (D., Vt.) sent Mr. Boehner a letter saying he would support a clean debt-limit increase, signed by nearly the entire Democratic caucus.Lawmakers from both sides of the aisle are hoping Mr. Boehner can wrap up the debt ceiling before Mr. Ryan takes his gavel.“John Boehner’s made it clear that he wants us to pay our bills,” Mr. Welch said. “It is definitely better for the country, it’s better for the Republicans and better for the Democrats if we get this done under John Boehner’s watch.”Even if Mr. Boehner can’t pass a debt-limit increase before his departure, conservatives said they wouldn’t blame Mr. Ryan for cleaning up the mess left him. “Holding him responsible for something he’s got at the very last hour—I don’t think most folks are going to say that’s his fault,” said Rep. Matt Salmon (R., Ariz.).(Full article click - WSJ)---Irwin StelzerAmerican Account: Britain may pay high price for jilting America for ChinaTaken from the Sunday Times 25 October 2015JILTED. That’s how policymakers here in America feel now that David Cameron has dubbed Britain’s bond with the People’s Republic of China as “a very special relationship”, trumping the merely “special relationship” used by Winston Churchill in 1946 to describe our close security and cultural ties. Britain also trumped the state dinner accorded to President Xi Jinping in Washington by providing China’s iron-fisted leader with bed and board at Buckingham Palace, as a guest of the more benign head of state of the United Kingdom. So we enter what the chancellor dubs a new “golden era” in relations between China and Britain — not a silver era, but a golden one, as in the stuff of which the Midas legend is made.


http://www.wsj.com/articles/john-boehner-races-time-on-debt-limit-1445634628

For some reason, Britain, the world’s fifth-largest economy, feels a need to woo Xi so that he will pour capital into the country’s needy infrastructure, finance the nuclear plants the government believes are necessary to keep the lights on, and do China the favour of using the deep, liquid capital markets of London — for Beijing has none such — to help the People’s Republic trade its yuan and flog its financial paper.The US administration has been leaking to the press its unhappiness at what one unnamed official called Britain’s “constant accommodation” of China. That is understandable, but comes with ill grace. For one thing, President Barack Obama has put European allies on notice that America is “pivoting” to Asia and away from Europe. One nation’s pivot is another nation’s abandonment. And the 21st-century circumstances that justify the US pivot surely equally justify Britain’s pivot from an America that is shrinking its international footprint to a China that is expanding its global reach.For another, America’s reputation as a reliable ally has been tarnished by Obama’s refusal to provide Jordan with drones, Ukraine and the Kurds with weapons, and Israel with unambiguous support. So Britain certainly has reason to reduce the value of the special relationship to second rank by adding “very” to its description of its special relationship with China.But that does not mean America has no justification for its concerns. As part of its seeking an accommodation with China, Britain was the first western country to join the Asian Infrastructure Investment Bank (AIIB), the regime’s competitor to the Washington-based World Bank, despite the Obama administration’s objections. Of course, if the British government thought joining the AIIB was in its economic interest, it quite properly treated US objections as irrelevant. But it might worry about the long-term consequences of transferring power from a democratic, market-based economy to an authoritarian, centrally managed one.Then there is the deal Rolls-Royce has signed with China’s SNPTC to develop civilian nuclear products. State-owned SNPTC has been accused by America of cybertheft and cyberespionage of nuclear power technology, which the company denies. Expanding SNPTC’s reach into an important British manufacturing company is a reason for concern for the US, and perhaps should be for Britain. As should turning over an important future part of the nation’s energy infrastructure to China by involving it in financing and eventually designing and constructing nuclear power plants. If those plants were economically viable, markets would make capital available to finance their construction. If China has leapt into the breach, it must be expecting a non-financial quid pro quo.Most important from the American point of view is concern about the loss of support from the UK should one of the world’s flash points spark and ignite a conflagration. China demonstrated a few years ago that if Britain makes it cross, it will retaliate. When the prime minister made it cross in May 2012 by meeting the Dalai Lama, Beijing imposed an 18-month diplomatic freeze. Imagine how cranky Xi would be if Britain sided with America in the event of a serious confrontation with China.

Some 30% of maritime trade goes through the South China Sea, and it has been the historic responsibility of the US to keep the route open to all. Now China has created military bases out of bits of land known as the Spratly Islands, and announced that it has developed missiles capable of sinking an aircraft carrier. The ideological Xi seems less likely to favour unimpeded movement of goods, regardless of their source and destination, than America has been. Bad news, and not only for the US.Then there is the problem of China’s theft of intellectual property, both by cybertheft and by coercing foreign companies to turn over IP in return for access to the Chinese market. These companies, hoist with their own greed, may not merit our sympathy, but nothing can justify plain old-fashioned theft. And if Obama does lay on the sanctions he has threatened, British support risks bringing the just-dawned “golden era” to a premature close. As it will if Britain joins America’s complaints about China’s manipulation of its currency.Then there is the not small matter of the role of the dollar as the world’s reserve currency. China has long pressed for its replacement by a basket of currencies including the yuan. British backing for that position would be a significant triumph for Xi’s war to reduce the role of America in the world economy and increase that of China.Finally, American policymakers have raised the issue of human rights publicly when the opportunity presents itself. In his department’s latest report on human rights practices, John Kerry, the secretary of state, cited China as a country that “continued to stifle free and open media and the development of civil society through the imprisonment of journalists, bloggers, and non-violent critics”. Cameron promises to continue pressing China to adopt human rights policies consistent with British values, but henceforth will do so in private, eschewing what the Chinese and George Osborne call “megaphone diplomacy”.There is no reason to doubt the prime minister’s word, or believe he will abandon his advocacy merely to extend the new golden era Britain so values. Whether private criticism will be as effective as a public roasting remains to be seen.(Full article click - Times)---Nasdaq may see record with Apple earningsTaken from the Reuters News Sunday, 25 October 2015The Nasdaq 100 index, dominated by U.S. technology stocks, may set a record high next week, helped by good earnings from Apple Inc expected on Tuesday.Technology shares led the U.S. stock market's recovery this week from its worst correction in four years in August, thanks to gains in Alphabet, Amazon and Microsoft, after the three companies reported better-than-expected earnings results.The Dow Jones industrial average rose 0.9 percent to 17,646.70, the S&P 500 index recovered another 1.1 percent to 2,075.15, and the Nasdaq Composite closed the week up 2.27 percent at 5,031.86.Shares across Asia, Europe and the Americas all climbed, boosted by Thursday's message from European Central Bank chief Mario Draghi that he was ready to increase the ECB's bond buying



program, and by an interest rate cut by China's central bank.Factors this coming week that may provide further support for U.S. stocks include a Federal Reserve policy meeting, which is not expected to raise interest rates yet, a report on U.S. third-quarter economic growth, and earnings from Apple.The Nasdaq 100 index, including Apple, is just 1.5 percent below its year high and 4.0 percent from its record high back in March 2000.Intel and Microsoft have seen their stocks recover more than 30 percent each since Aug. 25, while Amazon and Facebook rose 28 percent and 23 percent, respectively.But the 'underperformer' among these companies has been Apple, up only 14.8 percent from its Aug. 25 close, less than the Nasdaq 100's 15.1 percent gain in that time.In contrast to Microsoft, Facebook, Alphabet and Amazon, Apple shares did not post record or multi-year highs this week, even though it rose 7.2 percent, the largest weekly gain in a year.On Tuesday, though, Apple is expected to report $51.1 billion in revenue, a 21.3 percent increase compared to the same quarter of last year. Earnings are seen at $1.879 per share."The bar has been raised a bit on its earnings report from where it was a week ago. The price action is telling you there's more optimism built into it," said Michael James, managing director of equities trading at Wedbush Securities in Los Angeles.Options market action shows traders expect Apple shares to move roughly 5.0 percent by the end of next week. The average move for the stock the day after its report in the last eight quarters was 4.4 percent, up or down."Will an above-estimates from Apple and raised guidance help? Sure it will. But we could still get there without that happening," said James of the possibility of the Nasdaq 100 hitting a record."The power of the moves in some of these large cap tech stocks has been breathtaking," he said.Chip makers were also among the top five percentage gainers in the Nasdaq 100 since the index closed at its 2015 low on Aug. 25, with SanDisk topping the list with a 70 percent jump on the back of a takeover bid from Western Digital.The overwhelming leadership from established technology companies is a positive for this market move higher, according to Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh."The last time the Nasdaq 100 was the market leader a lot of it was speculative investments, but these (tech) companies actually return money to shareholders," she said."Tech deserves the leadership; the stock market is rewarding growth."BIOTECH THE FLIP SIDE TO TECH STOCK LEADERSHIPWhile technology stocks have led the market recovery, biotech stocks have been a drag on performance.The Nasdaq Biotech Index is down 3.5 percent from its Aug. 25 close, and more than 20 percent below its year high. The three index components with the largest declines in market capitalization in the last eight weeks are Mylan, Illumina and Biogen.

"There has been a major rotation out of healthcare and into tech and it has continued after the recent earnings reports," said Wedbush's James, referring to strong results from Amazon, Microsoft and Alphabet.Biotech stocks were shaken in September when U.S. presidential candidate Hillary Clinton first tweeted concerns about drug prices and the selling spread to other areas of the healthcare sector. Investors have been dumping shares of everything from hospitals to traditional pharmaceutical companies and insurers in recent weeks.Since peaking in July, the Nasdaq Biotech Index has fallen 23 percent, the broad S&P Health Care Index has lost 12 percent and the S&P 500 Health Care Facilities index is down 31 percent.Fund managers now say they expect regulatory threats on drug prices, disappointing earnings, higher interest rates that could hurt heavily indebted hospitals, and the loss of the initial Obamacare boost to business to all weigh on health sector stocks this year.(Full article click - Reuters)---Alberta Regulator Lifts Suspension Order on Cnooc Oil-Sands PlantTaken from the WSJ Sunday, 25 October 2015Alberta Energy Regulator rescinded suspension of 24 pipelines at Cnooc subsidiary Nexen’s Long Lake oil-sands facilityThe chief energy regulator in oil-dependent Alberta province lifted a suspension order impacting a plant operated by the Canadian unit of Chinese state-controlled energy giant Cnooc Ltd., but said late Friday that a related investigation into a pipeline breach is ongoing.The Alberta Energy Regulator rescinded its suspension targeting 24 pipelines at Cnooc subsidiary Nexen Energy ULC’s Long Lake oil-sands facility, but kept a shut-down order for several other pipes, including one that ruptured this summer and connects to smaller oil-sands plant nearby, according to a spokesman.Nexen said in a statement on Thursday that the remaining pipelines under suspension “are discontinued and not required for operations” at its troubled 50,000 barrel-a-day Long Lake operation, which was forced to curb production after authorities imposed the order after a pipeline spill was detected in July.The provincial energy regulator initially imposed the ban for what Nexen itself termed its “non-compliance” with rules on documenting pipeline maintenance, effectively rendering Long Lake inoperable. The AER scaled back its suspension last month after receiving assurances the facility could be operated safely.The regulatory action was the latest setback for the Long Lake plant, which started up in 2008 but has never reached its capacity of 72,000 barrels a day. That has proved a challenge for parent company Cnooc, which bought Nexen for $15 billion in 2013 and installed its own management team to run it last year.In July, Nexen cut its production by 9,000 barrels a day after the pipeline incident that spilled 31,500 barrels of crude oil, wastewater and sand from its


http://www.reuters.com/article/2015/10/25/us-markets-stocks-usa-weekahead-idUSKCN0SH2O220151025

Kinosis oil-sands project adjacent to Long Lake in northern Alberta’s boreal forests.Representatives for Nexen weren’t available for comment on the current status of Kinosis or the cause of the pipeline spill.The industry-funded AER has launched a probe into that spill and its response has been watched closely by both the Canadian energy industry, whose reputation for pipeline safety has suffered a black eye from the leak, and critics of Alberta’s track record enforcing environmental regulations.(Full article click - WSJ)

News Asia

Former Rabobank Trader Accused of Libor Rigging Arrested in AustraliaTaken from the WSJ Sunday, 25 October 2015Paul Thompson was detained in Perth following an extradition request by the U.S.A former Rabobank trader wanted by U.S. prosecutors for his alleged role in manipulating a key benchmark interest rate has been arrested, Australian authorities said Saturday.Paul Thompson, an Australian citizen and former derivatives trader for Dutch bank Rabobank Groep NV in Singapore, was detained Thursday in the Western Australian capital of Perth following an extradition request by the U.S., a spokesperson from the Australian Attorney-General’s Department said. Mr. Thompson is one of seven former Rabobank employees charged in connection with the world-wide Libor manipulation scandal that has ensnared at least 18 financial institutions and 35 individuals. The interest rate underpins bank lending products worth trillions of dollars—from mortgages to student loans.“Mr. Thompson is wanted to face prosecution in the United States for wire and bank fraud offenses,” the spokesperson said.In a statement, Mr. Thompson’s wife, Robyn, said: “There is no reason for Paul to be charged by the U.S. For this reason we were hoping that Paul could defend himself against any allegations in either Australia or the U.K., so he could have access to the necessary evidence, financial and emotional support to do this properly.” Ms. Thompson also said his family would be seeking bail for the trader. A spokeswoman at Rabobank’s base in Utrecht declined to comment on the arrest and court case, saying Rabobank wasn’t a party in the current U.S. trial.Two other former Rabobank traders, Anthony Allen and Anthony Conti, are currently facing court in New York on charges of conspiring to rig Libor for their own benefit between May 2006 and early 2011. If convicted, they could spend years in prison. Both men deny the allegations. Meanwhile, three former Rabobank colleagues have pleaded guilty to criminal charges of manipulating Libor. Another former Rabobank yen Libor derivatives trader, Tetsuya Motomura, hasn’t yet entered a plea. He was charged, alongside Mr. Thompson, with conspiracy to commit wire and bank fraud, according to the Justice Department. The Rabobank trial parallels similar court cases under way in the U.K. So far, 13 individuals have been charged in the U.S. in connection with the Libor investigation. Some of the world’s largest banks have admitted to manipulating the rate, including Rabobank.In 2013, when Rabobank agreed to pay $1.07 billion in a settlement with U.S., British, Dutch and Japanese authorities, a member of its executive board said: “It’s shameful what has happened.” This summer, a British judge sentenced Tom Hayes, a former UBS and Citigroup trader, to 14 years in prison for manipulating Libor. He became to first individual to be criminally convicted in the world-wide probe.(Full article click - WSJ)---


http://www.wsj.com/articles/former-rabobank-trader-accused-of-libor-rigging-arrested-in-australia-1445680649

http://www.wsj.com/articles/alberta-regulator-lifts-suspension-order-on-cnooc-oil-sands-plant-1445715605?mod=wsj_nview_latest

Korea's top 3 shipbuilders to lose over 7 tln won in 2015Taken from the Korea Herald Sunday, 25 October 2015South Korea's top three shipbuilders are expected to post a combined operating loss of more than 7 trillion won ($6.2 billion) in 2015 amid an industry-wide slump, data showed Sunday.Market data showed the country's top three shipbuilders -- Samsung Heavy Industries Co., Hyundai Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. -- are expected to post an operating loss of 3 trillion won in the second half of 2015.The three players already posted an operating loss of 4.7 trillion won in the first half, due mainly to the slowing global economy leading to falling demand.Daewoo Shipbuilding, which posted an operating profit of 471 billion won in 2014, suffered an operating loss of more than 3 trillion won in the first half of 2015 alone, largely due to increased costs stemming from a delay in the construction of low-priced ships and offshore facilities.The shipbuilder is pushing to restructure, including selling assets and reducing the number of its executives.Its creditors, led by the state-run Korea Development Bank, is currently devising a rescue plan for the shipbuilder that will likely include an injection of additional funds from its creditors, as well as a $5 billion refund guarantee on advance payments made to Daewoo Shipbuilding.Samsung Heavy Industries said it is expected to post an operating loss of 1.37 trillion won in its guidance report, but industry watchers said the amount could reach 1.5 trillion won.Hyundai Heavy Industries, which lost 3.2 trillion won last year, is also expected to post an operating loss of 729.9 billion won in 2015, posting shortfalls for the second consecutive year.Industry watchers added the three players are expected to face further challenges down the road amid their tensions with labor unions and the rise of Chinese rivals.(Full article click - KH)---Deal to give Japan company 50% of Brazil's gas distribution marketTaken from the Nikkei Sunday, 25 October 2015Mitsui & Co. plans to acquire a 49% stake in a subsidiary of Brazilian state-owned oil company Petrobras for some 60 billion yen (about $500 million). Through the purchase, Mitsui & Co. will control 50% of Brazil's natural gas distribution market, up from roughly 22% now.Demand for natural gas in Brazil is expected to increase about 30% by 2020, mainly from industry and owners of natural gas-powered vehicles. The Japanese trading company aims to secure a stable profit source by enhancing its gas distribution business in the country.Mitsui & Co., through subsidiary Mitsui Gas e Energia do Brasil, will acquire shares of Gaspetro, a wholly owned subsidiary of Petrobras, as well as the gas distribution network of 11 utilities under Gaspetro. Along with supplies from its current network of eight Brazilian partners, the new deal will

allow Mitsui & Co. to furnish Brazil with 30 million cu. meters of natural gas a day.Petrobus has been weakened by accusations that it and the administration of Brazilian President Dilma Rousseff were involved in bribery as well as by the falling prices of natural resources. Hoping to improve its finances, Petrobras has decided to sell the stake in Gaspetro to the trading house.Petrobras can expect more production from deepwater oil fields it is currently developing.By expanding its gas distribution network in the country, Mitsui will benefit from growing demand as Brazil's economy expands.(Full article click - Nikkei)---Myanmar Vote 2015: What the vote means for ThailandTaken from the Bangkok Post Sunday, 25 October 2015Policies force migrant workers and border security into spotlightIrrespective of who wins the Myanmar election in two weeks' time, the result is expected to have a significant impact on Thailand in the areas of border security, labour and economic cooperation.The ruling Union Solidarity and Development Party has vowed to reform the charter and move toward a federal state to address conflict among ethnic groups, many near the Thai-Myanmar border.A major policy platform of Aung San Suu Kyi’s opposition National League for Democracy is job creation. The NLD says a lack of employment opportunities has been a failure of the current government, forcing Myanmar workers across the border to look for employment.“The fact that Thailand currently accommodates millions of Myanmar workers fits the context of the NLD political message,” said Wirat Niyomtam, director of the Myanmar Language Learning Development Centre at Naresuan University.According to Thanit Sorat, founder and former secretary-general of the Thai Myanmar Business Forum, about 1.6 million documented Myanmar migrants now work in Thailand, while a further 1.6 million are unregistered.“Many workers don’t have a passport or even an ID. Thailand and the new government of Myanmar will have to work together to oversee these migrants,” he said.The economic role Thailand will play within Myanmar under a new government may not prove to be as significant. Once the number one foreign investor, largely because of PTT's 26-year involvement in the energy sector, Thailand's clout has slipped as Myanmar's economy opened up after 50 years of isolation.Myanmar's Directorate of Investment and Company Administration says Thailand accounted for 6.69% of foreign investment as of last month. This consisted of 51 enterprises with US$3.16 billion (112 billion baht) worth of approved investment.“Thailand’s ranking is not significant," Mr Thanit said. "In fact, it shows Myanmar has increasingly gained confidence from many foreign investors in terms of trade and investment.”He said Thai investment in Myanmar has diversified from the energy sector, citing the recently-signed


http://asia.nikkei.com/Business/Deals/Deal-to-give-Japan-company-50-of-Brazil-s-gas-distribution-market

http://www.koreaherald.com/view.php?ud=20151025000075

Memorandum of Intent between Japan, Myanmar and Thailand to build the Dawei Special Economic Zone.Bumrungrad Hospital recently received a business permit from the Myanmar Investment Commission to operate a private clinic and diagnostic services there.George McLeod, a manager at PricewaterhouseCoopers, said Thailand has been very successful in Myanmar and better at mitigating political risks than the West.“There is a general trend of outbound investment in Thailand, changing from becoming an investment destination to a foreign investor in its own right,” he said.“That trend is going to continue regardless of the result of the election.”Myanmar has an investment promotion body, but foreign investors face skyrocketing land prices and complicated money transfers that take more than 10 days.“The new government is likely to further amend the regulations to promote foreign investment, such as laws to liberalise the financial sector to enable the easier transfer of currency,” Mr Thanit said.The USDP's push for a federal system and peace with all ethnic groups is crucial to investor confidence. “When we do business in the country, we have to get the buy-in not only from the government but also representatives from different ethnic groups such as the Karen,” Mr Thanit said.“For instance, there are about 30 checkpoints in Mae Sot and each is controlled by a different ethnic group. There are around 20 piers in Mae Sot and they are controlled by different ethnic groups as well. It is complicated."Thai ambassador to Myanmar Pisanu Suvanajata said during a recent seminar that true democracy would not be possible unless longstanding problems relating to ethnic minorities are resolved peacefully.The next government has to work with the rebel groups which have not yet signed an agreement as a way forward to democracy, according to Mr Pisanu.“It is welcoming that Myanmar unity is one of the themes that we have heard during the campaign,” Mr Thanit said.Foreign ministry spokesman Sek Wannamethee said longstanding ties between Thailand and Myanmar would not be changed by the election result.Mr Wirat said although the election has been billed as free and fair, he does not expect to see drastic change.“I doubt whether the political structure will change under a 'controlled democracy' as the constitution reserves a quarter of the parliamentary seats for the military,” he said.“The junta is likely to continue to influence the government anyway.”Incumbent Thein Sein is the frontrunner for the position of president should the USDP win.Prajak Kongkirati, chair of Thammasat University’s Centre for Southeast Asian Studies, said if there is a free and fair election, pressure will increase on Thailand to return to democracy. If the NLD wins, Thailand will be the only country in Southeast Asia under military rule.“No one has ever really thought that Thailand would go backwards and be in the same position that Myanmar was in the past,” Mr Prajak said.(Full article click - BP)


http://www.bangkokpost.com/news/politics/741900/what-the-vote-means-for-thailand

Other News

Saudi Arabia: Eight of the 12 surviving sons of country's monarch support move to oust King SalmanTaken from the Independent Saturday, 24 October 2015Eight of the 12 surviving sons of Saudi Arabia’s founding monarch are supporting a move to oust King Salman, 79, the country’s ailing ruler, and replace him with his 73-year-old brother, according to a dissident prince.The prince also claims that a clear majority of the country’s powerful Islamic clerics, known as the Ulama, would back a palace coup to oust the current King and install Prince Ahmed bin Abdulaziz, a former Interior Minister, in his place. “The Ulama and religious people prefer Prince Ahmed – not all of them, but 75 per cent,” said the prince, himself a grandson of King Ibn Saud, who founded the ruling dynasty in 1932.Support from the clerics would be vital for any change of monarch, since in the Saudi system only they have the power to confer religious and therefore political legitimacy on the leadership.The revelation suggests there is increasing pressure within the normally secretive Saudi royal family to bring to a head the internal power struggle that has erupted since King Salman inherited the throne at the beginning of this year. The prince, who cannot be named for security reasons, is the author of two recently published letters calling for the royal family to replace the current Saudi leadership. In 1964 King Saud was finally deposed after a long power struggle, when the majority of senior royal family members and the Kingdom’s religious establishment spoke with one voice and withdrew their support. The prince says something similar is going to happen again soon.“Either the King will leave Saudi Arabia, like King Saud, and he will be very respected inside and outside the country,” he told The Independent. “Alternatively Prince Ahmed will become Crown Prince, but with control of and responsibility for the whole country – the economy, oil, armed forces, national guard, interior ministry, secret service, in fact everything from A to Z.”Unhappiness at King Salman’s own diminishing faculties – he is reported to be suffering from Alzheimer’s disease – has been compounded by his controversial appointments, the continuing and costly war in Yemen and the recent Hajj disaster. Earlier this week the International Monetary Fund warned that Saudi Arabia may run out of financial assets within five years unless the government sharply curbs its spending, because of a combination of low oil prices and the economic impact of regional wars.The King’s appointment of his favourite son, Mohammed bin Salman, 30, to the novel post of Deputy Crown Prince in April, and the decision to make him Defence Minister – enabling him to launch a proxy war in Yemen against the Iranian-backed Houthi rebels who forced the pro-Saudi former President to flee – have heightened tensions. He is said to have assumed too much power and wealth since being elevated to this position. “Any paper or phone call to his father goes through him,” said the prince. The current Crown Prince, Mohammed bin

Nayef, 56, a nephew of King Salman, is also unpopular.Prince Ahmed, the man most family members support to take over the throne, is the youngest son of the Kingdom’s founder by his favourite wife, Hassa bint Ahmed Al Sudairi. He was deputy interior minister for 37 years and spent four years responsible for the religious sites in Mecca before being appointed Interior Minister in 2012. He left the post five months later, officially at his own request, and was replaced by Prince Mohammed bin Nayef, now the Crown Prince. The dissident prince claims Prince Ahmed left after a disagreement about the treatment of political detainees.“Prince Ahmed wants to introduce reforms like freedom of thought, cleaning up the justice system and freeing political prisoners who don’t have anything to do with terrorism,” he said. “Many political prisoners have been in prison since before 2001 because of their wise opinion and their moderate Islamic views. If Prince Ahmed has the authority he will allow such people out.”Prince Ahmed, who has a Master’s degree in political science, is favoured by clerics and by others within the royal family because of his professional experience and moderate lifestyle, according to the prince. “The eldest brothers want him because he is healthy and wise, and he has been clean all his life. He is not in trouble with gambling, women, drink or drugs.“Prince Ahmed likes the desert, hunting and sitting by the Red Sea or in Taif, by the mountains. He is religious but open-minded, he knows English and follows the world news.”The current King’s third wife, Fahda Al Hithlain, is said by the prince to be another key figure. “She is Mohammed bin Salman’s mother and has influence on his father,” he said. “The King is in love with her and so he is in love with Mohammed bin Salman.” However, because of ill health she has reportedly spent little time in Saudi Arabia recently.The struggle to remove King Saud took several years and led to tension between Saudi Arabia’s main armed organisations – the army, interior ministry and national guard – before finally he left without bloodshed. The prince expects the same will happen this time. “It is a kind of internal revolution. We want financial and political reform, freedom of thought and cleaning the justice system, freeing the political prisoners and proper Islamic sharia,” he said.The Saudi embassy in London did not respond to a request for comment.(Full article click - Independent)


http://www.independent.co.uk/news/world/middle-east/saudi-arabia-power-struggle-between-king-salman-and-mohammed-bin-salman-could-bring-down-the-a6706801.html

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