Emerging-market currencies from South Africa’s rand to Turkey’s lira and Indonesia’s rupiah are benefiting from the crisis in Ukraine as investors move funds out of Russia and into other high-yielding markets.]]> |||
New York - Emerging-market currencies from South Africa’s rand to Turkey’s lira and Indonesia’s rupiah are benefiting from the crisis in Ukraine as investors move funds out of Russia and into other high-yielding markets.
The rupiah and rand were the biggest gainers among 24 developing-nation peers over the last five days, strengthening about 1.6 percent versus the dollar, while Russia’s ruble and currencies across eastern Europe were among the main losers.
Since the July 17 downing of Malaysian Airlines flight MH17, an index of 20 emerging currencies has jumped 0.8 percent from its lowest level in a month.
While global investors have withdrawn $199 million from Russian bond and equity funds this month, they bought the most Indonesian stocks since March and added holdings of South African bonds, according to data compiled by EPFR Global and stock exchanges.
Benchmark borrowing costs in countries such as Turkey and South Africa are at least 6 percentage points above those of the US, ranking the highest among developing countries along with Russia.
“Flows to emerging-market funds seem to be continuing, and they have to invest somewhere,” Simon Quijano-Evans, the head of developing-nation research at Commerzbank AG in London, said by phone on July 21.
“Russia has come under pressure, while the rand and lira have benefited from capital outflows from there.”
Improvements in many developing nations’ trade balances have made investors more willing to keep money in emerging markets than in past crises, according to Barclays.
This month’s outflow from Russian funds pushed withdrawals to $348 million since the end of February, just before the former Soviet Union country annexed Ukraine’s Crimea region, according to data compiled by EPFR Global, a Cambridge, Massachusetts-based company that tracks asset flows.
Investors added a combined net $12.9 billion across emerging markets in the same period.
“The inflows to emerging markets reflect a combination of factors: the reach for higher yield” and “improved” fundamentals, Koon Chow, the head of emerging-market strategy at Barclays in London, said in a July 17 note to clients.
“Russian developments are likely to divert money into other EM markets rather than scare investors away from EM.”
Sentiment toward Russian assets has soured further since the shooting down of the passenger jet over rebel-held eastern Ukraine.
The US says the missile used was probably supplied by the Russian military.
European Union foreign ministers are debating whether to expand its sanctions against President Vladimir Putin.
The standoff is complicated by Russia’s status as the world’s largest energy exporter, supplying about 30 percent of the EU’s natural gas.
The rally in developing-nation currencies will end if the conflict deepens and drives up volatility, according to Lars Christensen, the chief emerging-markets analyst at Danske Bank A/S in Copenhagen.
“We are quite negative in our outlook for Russian markets, but that doesn’t mean there is a benefit for others,” Christensen said in a phone interview on July 22.
“An escalation of the crisis in Ukraine is harmful for all emerging markets.”
JPMorgan Chase & Co.’s gauge of price swings in emerging-market currencies fell to a record 5.81 percent today, making it more attractive for investors to buy higher-yielding assets.
Countries from Turkey to South Africa have taken measures to cut their trade deficits while raising interest rates since the last crisis to hit emerging markets.
Developing-nation currencies tumbled in January when deadly protests in Ukraine and Thailand shook investor confidence that was already hurt by an economic slowdown in China and the reduction of the Federal Reserve’s monetary stimulus.
At 11 percent, the three-month deposit rate in Turkey is the second-highest in developing countries after Argentina, Bloomberg data show.
That compares with 9 percent in Russia, 8 percent in Indonesia and 6.5 percent in South Africa.
Global funds have bought a net $515 million of South African bonds this month, extending inflows this year to $1.8 billion, according to Johannesburg Stock Exchange data.
The rand has strengthened 2.4 percent since July 17 when the central bank raised its policy rate by a quarter point to 5.75 percent.
In Indonesia, foreign investors bought $1.03 billion more local stocks than they sold this month, set for the biggest monthly net inflow since March.
The rupiah extended its gain for the month to 3.1 percent as Joko Widodo won the nation’s presidential election.
Suharto-era General Prabowo Subianto rejected the vote count and said he’ll challenge it in the constitutional court.
Societe Generale SA recommended on July 18 that its clients buy the rand against the ruble to hedge an “escalation of geopolitical risks” as investors look for high-yielding assets in less volatile regions.
Standard Chartered, which gets more than half of its revenue from emerging markets, said the same day that traders will flee Russia for other developing-country assets, including the rupiah, as they did in the first quarter following Putin’s incursion into Ukraine.
“The yield play is still there,” Saktiandi Supaat, the head of foreign-exchange research at Malayan Banking, said in a July 22 phone interview from Singapore.
“The low-volatility environment and the easier global monetary conditions support riskier assets.” - Bloomberg News]]>
Microsoft said profits took a hit from its newly acquired Nokia phone division but that revenues got a strong lift from cloud services.]]> |||
New York - Microsoft said Tuesday profits took a hit from its newly acquired Nokia phone division but that revenues got a strong lift from cloud services.
The US tech giant's new chief executive Satya Nadella said the results suggested that Microsoft's shift to services amid declining personal computer sales was starting to pay off.
Net profit for the three months ending June 30 dipped seven percent from a year earlier to $4.6 billion, below market expectations.
But revenues grew a strong 17.5 percent, lifted by the cloud services.
“We are galvanised around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation, and focused execution,” said Nadella.
“I'm proud that our aggressive move to the cloud is paying off - our commercial cloud revenue doubled again this year to a $4.4
billion annual run rate.”
The earnings came just days after Microsoft announced its biggest job cuts ever with Nadella calling for a new focus at the US tech giant while integrating the Nokia phone division acquired this year.
The company said it would slash 18,000 jobs from its global workforce over the next year, the majority from the Nokia handset unit.
The cuts represent about 14 percent of Microsoft's global payroll of some 127,000.
The company will take a charge of between $1.1 billion and $1.6 billion for costs related to the layoffs.
In the latest earnings, Microsoft said revenues from its Windows division rose three percent from a year ago, in a sign of some stabilisation in the PC market and upgrades to devices with the newer operating systems.
The company saw a 40 percent jump in advertising revenues from its Bing search engine and gains from subscribers to its online Office 365.
The new Nokia phone division acquired this year added some $2 billion to revenues but dragged on profits, the company said.
The Nokia unit subtracted some $692 million from the Microsoft's bottom line, the company said.
Paul Ausick at 24/7 Wall Street said Microsoft remains dependent on Windows despite claims to the contrary.
“Microsoft's results continue to depend on Windows which in itself is no surprise. What is surprising is how hard it is for Microsoft to make any significant change in its dependence on Windows,” he said in a blog post.
Despite the weaker profit, investors appeared encouraged by the increase in revenues. Shares in Microsoft gained 0.2 percent to $44.93 in electronic trading after the results.
Raimo Lenschow, analyst at Barclays, said Microsoft's enterprise strategy “is gaining significant traction”
The company “had another solid quarter in the enterprise, as execution remains solid with customers buying into Microsoft's portfolio of enterprise solutions,” he said in a note to clients.
Microsoft completed its takeover of Nokia's phone unit in April in a move that strengthened its position in mobile devices.
The cost was around $7.5 billion.
Nadella, who became chief executive earlier this year, is seeking to reinvigorate a company that had been the world's largest but which has lagged in recent years as Google and Apple have taken leadership of the tech sector. - Sapa-AFP]]>
The International Monetary Fund said it expects the US economy to grow even more slowly this year.]]> |||
Washington - The International Monetary Fund on Wednesday said it expects the US economy to grow even more slowly this year than it predicted a month ago due to weakness in the first quarter.
The IMF said the world's largest economy should grow 1.7 percent in 2014, below its June prediction of 2 percent growth.
US GDP contracted at a 2.9 percent annual pace in the first three months of the year, dragged down by a weak housing market, a slower pace of restocking by businesses and lower exports.
It was the sharpest decline in five years.
The IMF said US activity should pick up to a rate of 3 percent to 3.5 percent for the rest of the year, and stay at 3 percent next year and in 2016.
“Still, the drag on growth from the first quarter contraction will not be offset,” IMF staff said in their yearly analysis of the US economy.
The lower expectations for growth should contribute to continued slack in the labour market for the next three to four years, with the United States remaining below full employment until 2018, it added.
As long as inflation and financial stability concerns remain subdued, the IMF said the US Federal Reserve could keep its benchmark interest rates at zero beyond the middle of 2015.
The IMF said views among policymakers at the US central bank appeared centred around mid-2015 for a rate hike.
The IMF also warned that as the US population ages, the economy would not be able to grow above 2 percent in the longer-term without significant reforms, including tax and immigration changes, more investment in infrastructure and job training, and the provision of childcare assistance, which could help lure more Americans into the workforce.
For the first time in several years, it also focused on the deep pockets of poverty within the United States, which afflicts a quarter of American children.
It urged the United States to expand the earned income tax credit to all poorer workers and boost the minimum wage, which together should help poor people without a huge dent to the government's budget.
“We do think (poverty) is macro-relevant, we do think it's important for growth, and both economic and social sustainability in the United States,” Nigel Chalk, deputy director of the IMF's Western Hemisphere Department, told reporters. - Reuters]]>
South Africa's rand rallied to a two-month high against the US dollar, caught up in an emerging markets rally and extending gains after local inflation data.]]> |||
Johannesburg - South Africa's rand rallied to a two-month high against the dollar on Wednesday, caught up in an emerging markets rally and extending gains after local inflation data.
The rand was looking to notch up a fifth day of daily gains against the dollar as global risk aversion - linked to geopolitical concerns around Russia and Ukraine - abates.
Emerging markets were also buoyed by benign inflation numbers out of the United States on Tuesday, igniting a relief rally in risky assets as the data signalled the that the Federal Reserve would stick to its monetary policy.
By 17:33 SA time, the rand traded at 10.4975 to the dollar, up 0.75 percent on its close in New York on Tuesday.
It last traded at these levels on May 30.
Domestic inflation data earlier signalled the South African Reserve Bank (SARB) would continue on its monetary tightening path, with CPI printing steady in June but with the core measure of consumer prices ticking up.
“Today's data does nothing to change the view that the SARB is in the midst of gradual tightening cycle,” said Shilan Shah, an analyst at Capital Economics.
“Following last week's rate increase of 25 basis points to 5.75 percent, further rate hikes are more likely than not over the coming months,” Shah said.
The rand hit a string of 5-year lows at the start of the year, and the central bank raised interest rates by a total of 75 basis points.
Yields on government bonds fell five basis points to 8.115 percent on the benchmark 2026 issue and dropped 6.5 basis points to 6.64 percent on the 2015 note. - Reuters]]>
Lithuania was expected to get the final stamp of approval on its plans to join the eurozone on January 1.]]> |||
Brussels - Lithuania was expected Wednesday to get the final stamp of approval on its plans to join the eurozone on January 1, setting it up to become the 19th member of the currency bloc.
EU leaders, finance ministers, its central bank, executive body and the European Parliament have all given their blessings to the accession.
The bloc's European affairs ministers on Wednesday will consider giving the final green light and setting the conversion rate that will be used to replace Lithuania's currency, the lita.
“I believe we deserve to have this decision,” Lithuanian Foreign Minister Linas Linkevicius said as he arrived for the ministers' talks in Brussels.
“We will be a reliable member of the eurozone,” he said.
“The euro is not just a coin or piece of metal; for us, it's belonging to the right club.”
Lithuania will be the last Baltic country to adopt the European currency after Estonia did so in 2011 and Latvia followed suit this year.
Lithuania first sought to adopt the euro in 2006 but failed to achieve the required price stability at the time.
All EU countries except Britain and Denmark are mandated to join the eurozone once they fulfil its economic criteria, but the prospect proved less attractive during the financial crisis that has plagued the currency bloc over the past few years.
The eurozone finally managed to pull out of recession last year but is still struggling with sluggish growth and high unemployment.
“Lithuania's accession means that yet it moves and yet it works,” Italian Secretary of State Sandro Gozi said as he arrived for Wednesday's meeting.
He was to chair the meeting because his country currently holds the EU's rotating presidency.
The countries still in line to adopt the euro are Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden. - Sapa-dpa]]>
South Africa plans a radical shake-up of its land policy to limit foreign ownership and could submit legislation to parliament by December, a government minister said.]]> |||
Cape Town - South Africa plans a radical shake-up of its land policy to limit foreign ownership and could submit legislation to parliament by December, a government minister said on Wednesday.
The proposal is part of a reform package sponsored by the ruling African National Congress (ANC) that includes the expropriation of land deemed to have been illegally acquired, a suggestion that could spook foreign investors.
“The principle is that foreign nationals should not own land in the country but should have a long lease at a minimum of 30 years,” land and rural development Minister Gugile Nkwinti told reporters.
Nkwinti said the government was wary of applying the proposals retroactively, however, on concerns that the constitutionality of the bill could be challenged in court.
Real estate industry representatives spoke out against the proposal, saying overall foreign investment in South African property was small.
“This is completely ill-conceived,” said Andrew Golding, chief executive of Pam Golding Properties. “Particularly when there is a misconception that foreigners are pouring into South Africa and pushing prices up.”
Land reform remains a sensitive issue in South Africa, where 20 years after the end of apartheid the white minority still holds around 87 percent of commercial farm land.
A government-appointed panel in 2007 said foreign nationals owned 3 percent of land used for residential housing, farms and sectional titles, with a significantly higher percentage in coastal and game farming areas.
The exact size and value of land owned by foreigners was unclear. Nkwinti said on Wednesday that foreigners are thought to own between 5 to 7 percent of South African land.
Under its existing land reform programme, the ANC had aimed to transfer a third of all farmland to blacks by 2014.
The government has said it would not meet the deadline because it did not have the tens of billions of dollars needed to transfer large swathes of land to the black majority.
The state also plans to change the “willing-buyer willing-seller” scheme it has used to purchase land, citing the difficulty in price negotiations.
Nkwinti said the government also wanted an expropriation act to confiscate land without compensation if the land was acquired illegally or used for illegal purposes. - Reuters]]>
Kenya’s stock exchange will be valued at 1.84 billion shillings (R221 million) after listing its shares in an initial public offering.]]> |||
Nairobi - Kenya’s stock exchange will be valued at 1.84 billion shillings (R221 million) after listing its shares in an initial public offering, chief executive Peter Mwangi said.
The Nairobi Securities Exchange plans to offer 66 million shares at 9.50 shillings each for the IPO and list a total of 194 million on the bourse, he told reporters in the capital today.
Listing will improve corporate governance, transparency and attract investors, Treasury Secretary Henry Rotich said at the function.
The NSE, which first announced plans for an IPO in 2009, will become the second publicly traded market on the continent after South Africa’s Johannesburg Stock Exchange started trading shares in June 2006.
The NSE has been seeking ways to deepen trading and attract listings from companies in East Africa’s largest economy.
The 62-member all-share gauge has a value of $24 billion, according to data compiled by Bloomberg.
The FTSE NSE Kenya 25 index has gained 15 percent this year. - Bloomberg News]]>
The S&P 500 hit a record high, lifted by bullish earnings from companies like Apple and Microsoft.]]> |||
New York - The S&P 500 hit a record high on Wednesday, lifted by bullish earnings from companies like Apple and Microsoft, though technical resistance and conflicts in Ukraine and the Gaza Strip kept gains in check.
The S&P touched a record above 1,989 but the 1,985-1,990 area was developing into technical resistance, analysts said.
News of two Ukrainian fighter jets being downed Wednesday, near the area where a passenger jet was shot down last week, added to caution on markets.
“What we have today is a testing of the (resistance level) on the S&P,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.
“With the addition of the fighter jets being downed in Ukraine, people are looking at the market and can't seem to find a way to break through.”
Hogan said higher-than-average revenue beats by companies that have reported so far this quarter pointed to a stronger economy.
About 64.3 percent of S&P 500 components have reported revenue exceeding analyst expectations, above the 61 percent beat rate since 2002 and 55 percent over the past four quarters.
The Dow Jones industrial average fell 7.32 points, or 0.04 percent, to 17,106.22, the S&P 500 gained 5.1 points or 0.26 percent, to 1,988.63 and the Nasdaq Composite added 21.89 points or 0.49 percent, to 4,477.90.
Apple shares jumped 2.8 percent to $97.37 even as it reported a smaller-than-expected 6 percent rise in quarterly revenue Tuesday.
Sales surged 28 percent in greater China despite stiff competition in its third-largest market.
Microsoft shares rose 1 percent to $45.26 a day after it said it aimed to get its loss-making Nokia phone unit to break even within two years.
Boeing reversed a premarket gain and fell 2.2 percent to $126.86 even as it reported a 52 percent jump in quarterly profit on higher commercial aircraft deliveries. Boeing was the heaviest drag on the Dow industrials.
PepsiCo rose 3.3 percent to $92.07 after it reported a higher-than-expected quarterly profit and raised its full-year adjusted earnings forecast.
Biogen Idec reported sharply higher-than-expected quarterly revenue on surging sales of its new treatment for multiple sclerosis and raised its full-year profit forecast. Shares were up 10.9 percent at $336.93.
Intuitive Surgical rose 13.4 percent to $444.75 a day after reporting second-quarter earnings that were better than its dismal first quarter, though it was still its fifth straight quarterly decline.
Puma Biotechnology shares soared 264 percent to $214.95 a day after it said its experimental breast cancer drug met its main goal in a late-stage trial.
In a blow to Israel's economy, US and European air carriers halted flights to Tel Aviv, citing concern over a militant rocket from Gaza that hit a house near the city's airport. Israel urged reconsideration of the decision, saying its air space was safe.
In Ukraine, pro-Russian rebels have shot down two Ukrainian fighter jets not far from where a Malaysian passenger jet was brought down in eastern Ukraine, a spokesman for Ukraine's military operations said Wednesday.
The first bodies of victims from the downed Malaysian airliner arrived in Eindhoven. Many of the 298 deceased were Dutch. - Reuters]]>
PepsiCo raised its forecast slightly for the year as it continued to slash costs while selling more of its snacks and drinks.]]> |||
Purchase - PepsiCo raised its forecast slightly for the year on Wednesday as it continued to slash costs while selling more of its snacks and drinks.
The company, which owns Frito-Lay, Gatorade and Quaker, said global volume for its snacks and drinks each rose 1 percent in the second quarter.
While the gains were relatively modest, PepsiCo has been boosting its financial results with a cost-cutting plan expected to generate $1 billion in savings this year.
In its Frito-Lay North America division, PepsiCo said revenue was up 2 percent, as lower prices helped lift sales volume.
Although the performance was muted, Chief Financial Officer Hugh Johnston noted in a phone interview that the unit is expected to benefit in the current quarter from the Lay's “Do Us a Flavor” contest, which lets customers suggest new flavours.
The finalists were recently announced - Cappuccino, Mango Salsa, Wasabi Ginger and Bacon Mac & Cheese.
Johnston said such special flavours are more profitable for the company, even if the prices are the same as regular flavours.
That's because PepsiCo puts fewer chips in those bags.
“There might be an ounce or two less,” Johnston said.
In its closely watched North American beverage business, soda volume fell 2 percent while non-carbonated drinks rose 1 percent.
On Monday, Coca-Cola also said non-carbonated drinks rose 1 percent, while soda volume was flat.
The two companies have been struggling to boost beverage volumes in the region, given the growing competition from smaller players and the shift away from soda that has been underway for years.
PepsiCo now expects core earnings per share to rise 8 percent from 2013, instead of the 7 percent increase it previously forecast.
For the quarter, the Purchase, New York-based company said net income fell to $1.98 billion, or $1.29 per share.
That was down 2 percent from a year ago, as restructuring and impairment charges took their toll.
Adjusted for one-time charges, earnings were $1.32 per share, topping the $1.23 analysts expected, according to Zacks Investment Research.
Revenue edged up to $16.89 billion, matching Wall Street forecasts.
PepsiCo shares have increased $6.23, or 7.5 percent, to $89.17 since the beginning of the year, while the Standard & Poor's 500 index has climbed 7.3 percent.
The stock has climbed $2.97, or 3.4 percent, in the last 12 months. - Sapa-AP]]>
The consumer price index (CPI) figure for June is confirmation of the SA Reserve Bank's motivation for the recent interest rate hike, Seifsa said.]]> |||
Johannesburg - The consumer price index (CPI) figure for June is confirmation of the SA Reserve Bank's motivation for the recent interest rate hike, Seifsa said on Wednesday.
“The June figure of 6.6 percent is high, and may fuel expectations of more to come,” Steel and Engineering Industries Federation of SA (Seifsa) chief economist Henk Langenhoven said in a statement.
Seifsa is the national employer federation in the metal and engineering industry.
“This is the key problem facing the governor of the Reserve Bank - managing inflationary expectations with interest rate increases without stunting domestic growth, all the while keeping an eye on what other central banks are doing.”
CPI for all urban areas remained unchanged in June.
The CPI was 6.6 percent, the same as in May, Statistics SA said.
On average, prices increased by 0.3 percent between May and June this year.
Langenhoven said the next producer price inflation numbers would indicate whether the cost pressures were sustained.
The two biggest risks contributing to upward pressure on costs were the exchange rate weakening and the continued oil price increase.
“We all hope that, on balance, these factors will contribute to a positive outcome of the already precarious choices the country needs to make, and not worsen it,” he said. - Sapa]]>