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DHAKA TRIBUNE
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Sunday, December 7, 2014
Bill Gross warns global markets reaching ‘point of low return’ n Reuters, New York Bill Gross, the closely watched bond investor, on Thursday lambasted central banks around the world for unconventional monetary easing and advised investors to curb risk-taking going into 2015 as global markets are reaching “the point of low return” and diminishing liquidity. Gross, who oversees the Janus Global Unconstrained Bond Fund, said “investors may want to begin to take some chips off the table,” given the current environment. “Raise asset quality, reduce duration, and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, QE (Quantitative Easing) and the trickling down of faux wealth to the working class.” In his third investment outlook letter since joining Janus Capital Group Inc, Gross asked: “How could they? How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt?” The Janus Global Unconstrained portfolio, which Gross began managing in October, attracted an estimated $364m in client deposits in the first full month since his arrival, bringing assets to $442.9m through Oct 31, according to Morningstar data. Janus Capital posted a total of $1.1bn in net inflows in October, the largest net deposits this year, after hiring Gross. Last month, Soros Fund Management LLC, chaired by legendary investor George Soros, invested $500m in an account run by Gross, Denver-based Janus Capital said. The roughly $7tn pumped into the financial system since the financial cri-
sis by the world’s three biggest central banks has succeeded mostly in lifting prices of securities rather than the cost of goods and workers’ wages, Gross said. The US Federal Reserve, the Bank of Japan and the European Central Bank have all taken extraordinary policy measures since the 2008 crisis to stabilize their economies and try to create a moderate amount of inflation. Results have largely been disappointing, with none of the three central banks able to guide their preferred measures of inflation to their target levels of around 2%. Gross, whose letters to investors are as famous for their quirky asides and analogies as they are for their economic and market analysis, introduced his December investment outlook letter with a children’s nursery rhyme to convey the state of the world today: “Punch and Judy fought for a pie. Punch gave Judy a sock in the eye. Said Punch to Judy, ‘Would you like anymore?’ Said Judy to Punch, “No my eye is too sore.” Gross, who has absorbed quite a few blows lately himself after a run of mediocre returns and billions of outflows from various funds he previously managed, said: “Can a debt crisis be cured with more debt? It is difficult to envision a return to normalcy within my lifetime (shorter than it is for most of you).” Gross, long known and still considered the world’s “Bond King,” quit bond giant Pacific Investment Management Co (Pimco) on Sept 26 for distant rival Janus. Two sources had told Reuters he was expected to be fired the next day. Gross helped launch Pimco more than four decades ago and built into a $2tn investment powerhouse, only to see his reputation suffer after a run of lackluster returns, more than a yearand-a-half of outflows from Pimco’s flagship fund, and unflattering stories about his management style. l
US one-hundred dollar bills are seen in this photo illustration at a bank in Seoul
India to press G20 for deadline to cut remittance costs n Reuters, New Delhi India will press the Group of 20 economies to set a two-year deadline to reduce the cost of international money transfers, two government sources said, potentially saving more than $20bn for developing countries. The world’s largest recipient of remittances - of about $70bn a year - won the backing of G20 leaders last month in Brisbane to take “strong practical measures” to cut the average cost of sending money home to 5%. Despite that pledge, big banks are pulling out of handling remittances over rising compliance costs. In one case, 20 remittance firms sued Australia’s Westpac Banking Corp to stop it quitting the business. “We will demand a deadline of two years at the next G20 meeting,” one of the sources, with direct knowledge of the matter, told Reuters. The official is part of an Indian delegation that plans to attend a meeting of G20 deputy central bank governors in Istanbul on Dec. 11-12. Turkey has just taken over the annual presidency of the G20, an intergovernmental forum. In 2011, G20 members agreed to bring down the global average cost of remit-
REUTERS
tances to 5% by 2014, but that deadline has been missed. The cost of remittances from G20 countries has fallen to 8.3% from 9.1% in 2011, the World Bank estimates. That has saved nearly $30bn for migrant families since 2010, it said in a report to the G20. Prime Minister Narendra Modi, who attended last month’s G20 summit, is pushing for Indians to save about $3bn a year, partly helping bridge its current account deficit, the official said. “The money belongs to poor families of developing countries and cannot be taken away in the name of transaction fees,” said another official. Several Indian banks have brought down costs by up to 30% by offering services that allow Indian migrants in the United States and Britain to send money directly from their bank account or credit card to recipients in India. Saudi Arabia has reduced remittance costs to near 3%, and India is hopeful that other G20 countries would agree to set a deadline to reduce the costs. The government estimates that about 22 million Indians live abroad, with large communities in the Middle East, the United States and Britain. l
Shaybah oilfield complex is seen at night in the Rub' al-Khali desert, Saudi Arabia
REUTERS
Saudi slashes January oil prices for Asia, US n Reuters, London
Saudi Arabia slashed its oil prices for Asian and US buyers on Thursday, in a move some analysts said shows it is stepping up its battle for market share a week after refusing to support OPEC output cuts. Official Selling Prices (OSPs) for oil from the largest producer and exporter in the Organization of the Petroleum Exporting Countries have been seen as possible indications of the kingdom’s oil policies. Some analysts have said sharp drops in OSPs in recent months show the kingdom is fighting for market share with other producers, but others have
said the OSPs only reflect the market and are a backward-looking rather than a forward-looking indicator. The discounts on Saudi crude oil for Asian customers in January were the biggest since at least 2002, according to Reuters data, while prices were cut to the United States for the fifth month in a row. “(The) Saudis are making it clear they don’t want to lose market share,” Richard Mallinson, an analyst at consultancy Energy Aspects, told the Reuters Global Oil Forum. Saudi Arabia and other rich Gulf producers last week blocked proposals from poorer OPEC members, such as Venezuela and Algeria, to cut output to support oil prices, which have plum-
meted by over a third since June. OPEC sources have said Saudi Oil Minister Ali al-Naimi told the OPEC ministerial meeting behind closed doors that OPEC should defend its market share, because production cuts would only boost rival producers, including U.S. shale oil companies. According to the sources, Naimi did not give any indication how far prices would need to fall for Saudi Arabia to consider cutting production. Oil prices have been volatile since the OPEC meeting and are down around 40% since June. On Thursday, Brent crude fell, trading below $70 per barrel. Aramco cut the January price for its Arab Light grade for Asian custom-
ers by $1.90 a barrel from December to a discount of $2 a barrel to the Oman/ Dubai average. The Arab Light OSP to the United States was set at a premium of $0.90 a barrel to the Argus Sour Crude Index (ASCI) for January, down 70 cents from the previous month. Arab Light OSPs to Northwest Europe were raised by 20 cents for January from the previous month to a discount of $3.15 a barrel to the Brent Weighted Average (BWAVE). The tables below show the full FOB prices for January in US dollars. Saudi term crude supplies to the United States are priced as a differential to the Argus Sour Crude Index (ASCI). l
Vietnam’s 2014 exports seen up at a record $150bn
Uber now valued at $40bn n AFP, Washington
n Tribune Business Desk
Popular but controversial US ridesharing startup Uber is now valued at $40bn, it said Thursday, twice what it was worth six months ago, after raising a fresh $1.2bn in funding. Uber chief Travis Kalanick announced the latest funding in a blog post, saying the money will fuel expansion, especially in the Asia-Pacific region. “It was just a year ago that Uber was operating in 60 cities and 21 countries - today we are in over 250 cities in 50 countries,” he wrote. “We are six times bigger today than 12 months ago - and grew faster this year than last. This progress is remarkable, but it is in the coming years that Uber truly scales and the impact in cities becomes visible.” Kalanick added that “this kind of continued growth requires investment. To that end, we have just raised a financing round of $1.2bn ... This financing will allow Uber to make substantial investments, particularly in the AsiaPacific region.” Earlier this year Uber raised $1.2bn, giving it a value of $17bn, but a spokesman Thursday said the company was now valued at more than twice that at $40bn. The rapid expansion has caused deep tensions with traditional taxi drivers, especially in Europe. Founded in 2009 in California, Uber is best known for its smartphone app that lets people who need a ride connect with local drivers. The app uses GPS to put the user in contact with the nearest driver. Uber charges a commission for each ride. Uber has also faced scrutiny following negative comments about the news media from a top executive and revelations that it offered a “God view” of customers that could allow spying. The company hired experts to conduct a privacy review. l
Vietnam’s exports this year are expected to hit a record $150bn, up 13% from 2013, Prime Minister Nguyen Tan Dung said on Friday, beating a previous government projection. The value, above the $148bn previously estimated by the trade ministry, could keep Vietnam on track to register a trade surplus of $1.5bn in 2014, its third consecutive annual surplus, Dung told an international conference. The forecasts are based on the export figures during the first 11 months of the on-going year, according to Reuters. Vietnam’s last year’s garment and
textile export turnover has witnessed an increase of over 19% in the first 11 months in 2014 and the yearly export figure is expected to reach $24.5bn, the largest rise in three years. Vietnam National Textile and Garment Group (Vinatex), claims that the industry’s efforts in the strategic direction of production, and increased localization rate to more than 50%, have helped increase competitiveness. Vinatex GM Le Tien Truong said, “The upcoming Trade Agreement is an opportunity for Vietnam’s garment manufacturers to prove their capabilities, it will need to improve its productivity, quality, and competitiveness
PMI: Global economy to expand at solid pace in fourth-quarter n Reuters, London The global economy will expand at a solid pace in the final quarter, albeit less strongly than during the summer months after inflows of new business slowed in November, a survey showed on Wednesday. JPMorgan’s Global All-Industry Output Index, produced with Markit, fell to a seven-month low of 53.2 from October’s 53.5 but has now held above the 50 mark that divides growth from contraction for more than two years. “November saw global economic growth continue its gradual slowdown from the highs of the middle of the year,” said David Hensley, a director at JPMorgan. “The survey therefore implies that global GDP (gross domestic product) will expand at a solid pace over the final quarter as a whole, albeit cooler than during the summer months.” A global PMI covering the services industry dipped to its own sevenmonth low of 53.5 from 53.6. Global manufacturing activity expanded at its weakest pace in over a year in November, a sister survey showed on Monday. The index combines survey data
from countries including the United States, Japan, Germany, France, Britain, China and Russia.
Euro zone economy to contract in the new year
Heavy discounting failed to stop euro zone business activity growing less than thought last month, a survey showed on Wednesday, suggesting the bloc’s economy may contract again early next year. “The region is on course to see a mere 0.1% GDP growth in the final quarter of the year, with a strong likelihood of the near-stagnation turning to renewed contraction in the new year unless demand shows signs of reviving,” said Chris Williamson, survey compiler Markit’s chief economist. A Reuters poll last month predicted 0.2% economic growth this quarter and 0.3% next. Markit’s final November Composite Purchasing Managers’ Index (PMI), based on surveys of thousands of companies across the region and seen as a good indicator of growth, sank to 51.1 from October’s 52.1, missing an earlier flash reading of 51.4. l
with investment in new technologies, machinery and innovation, in order to compete effectively. We will have to convince customers that we are competitive and able to supply them with products and best service.” Seafood export contributed $5bn to a trade surplus of $8.2bn run by the agriculture sector in the first 11 months of 2014. During the period, seafood brought home $7.2bn and is to earn $7.8bn by the end of the year, Deputy Minister of Agriculture and Rural Development Vu Van Tam reported at the first meeting of the aquatic disease prevention and control steering committee in Hanoi on December 4. l
German industrial orders gain momentum n AFP, Frankfurt German industrial orders, a key measure of demand for German-made goods both at home and abroad, rose strongly in October, suggesting Germany’s period of economic weakness could be over, data showed Friday. Industrial orders rose by 2.5% in October compared with the previous month, the economy ministry said in a statement. In September, German factory orders had already risen by 1.1%. “This was a good start to the fourth quarter. Alongside a brightening of sentiment indicators, the signals are looking increasingly positive,” the ministry said. “Even if the economic risks continue to exist, this suggests that the German economy could be gradually beginning to recover from its period of weakness.” l
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