Etisalat will not exit foreign markets: CEO Page 23
Bond traders, exhausted new stars of markets Page 24
MONDAY, OCTOBER 15, 2012
New top model in the Cayenne model series
China central bank focused on inflation before growth Page 25
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ABU DHABI: Cars drive past the Etihad Airways headquarters in the Emirati capital Abu Dhabi yesterday. Air France-KLM and Etihad Airways announced a codesharing agreement in the first phase of what could become a broader strategic partnership, a statement said. — AFP
Easing may cause world asset bubbles: IMF TOKYO: Monetary easing in the developed world could cause overheating and asset bubbles in emerging economies, the International Monetary Fund’s managing director said in Tokyo yesterday. “Accommodative monetary policies... could strain the capacity of those economies to absorb the potentially large flows and could lead to overheating asset price bubbles,” Christine Lagarde told the close of the IMF and World Bank’s annual meeting. Critics in emerging nations have argued that easing measures, particularly in the United States, have driven down the value of the dollar and sparked huge capital flows to spill across their borders, raising the
risk of overheating and driving up national currencies. On Friday Brazilian Finance Minister Guido Mantega warned that his country would take “whatever measures it deems necessary” to fight the problem. “Emerging markets can’t passively endure large and volatile capital flows and currency fluctuations caused by rich countries’ policies,” Mantega said in Tokyo. “Advanced countries cannot count on exporting their way out of the crisis at the expense of emerging-market economies.” Mantega added: “Currency wars will only compound the world’s economic difficulties.” However US Federal Reserve chief Ben Bernanke yesterday
rejected claims that central bank easing in rich countries was to blame for the huge waves of capital flowing into emerging economies. “The linkage between advanced-economy monetary policies and international capital flows is looser than is sometimes asserted,” he said in a statement. The top US central banker added that the “beneficial effects” of the Fed’s policies in propping up the US economy-the world’s biggest and a key developingworld export market-should be given “appropriate weight”. The Fed has maintained an ultra-low interest rate policy for several years, pumping about $2.3 trillion into the US economy to stimulate growth. Last month, the
central bank decided to inject $40 billion a month to help an economy beset by stubbornly high unemployment. Lagarde yesterday appeared to be playing a balancing act on the effect of easing policies by central banks in Europe, Japan and the United States. “We have seen several bold initiatives by major central banks certainly that the IMF highly praises and values as major contributing factors to stability,” she said. “These are big policy actions in the right direction. Indeed central bankers must play a significant role in pulling the global economy out of the current malaise.” But Lagarde acknowledged “there are diverging views within and across countries about
important issues including the management of capital flows. “Disagreement might be unavoidable but we must not forget that we all have a stake in global financial stability,” Lagarde said yesterday. “Given the cross-border spillover effect of monetary policy decisions, central banks may need to step up their international dialogue and cooperation. “It is important for us to stay at the table and work through these issues.” During the Asian financial crisis in the late 1990s, Malaysia adopted capital controls designed to smooth volatility and prevent money flowing out of the economy as fast as it had arrived, sparking protest among many free-market critics. —AFP
IMF meeting heralds shift away from austerity TOKYO: The curtains came down yesterday on IMF and World Bank meetings that were dominated by a gathering row over whether austerity or growth should come centre stage as the world economy seeks a reboot. The International Monetary Fund-criticised in the past for its strict prescription of the bitter medicine of deficit cuts-used the week to articulate a moderated position emphasising growth. That brought its Managing Director Christine Lagarde into conflict with champions of austerity, in the person of German Finance Minister Wolfgang Schaeuble, who insisted there was “no alternative” to budgetslashing. The dispute was the centrepiece of events in Tokyo, as they jockeyed over how strict to be on countries with runaway deficits. Lagarde caused a stir on Thursday when she said she was happy for Greece-bleeding from the spending cuts demanded by international creditors-to have two more years to meet its deficit-reduction targets. The following day, Schaeuble said there was “no alternative” to slashing bloated national balance sheets, demands to which Athens and other troubled eurozone capitals have agreed in exchange for multi-billion euro bailouts. On Saturday both insisted they were on the same page. “We are in complete agreement with the IMF, and especially with Lagarde, that in a midterm view the reduction of too-high debt levels is completely unavoidable,” Schaeuble told reporters. As they sought to paper over the cracks, Lagarde told a separate news conference that talk of a split was over-done. “In reality, what has been presented as disagreement is more about perception than reality,” she said.
“We all recognise that credible, medium-term fiscal adjustments are necessary in all advanced economies... (but it must) be calibrated on a country-by-country basis... it cannot be one-size-fits-all.” Calls for moderation in the pace of fiscal tightening have grown over recent months, with sometimes-violent street protests in debt-laden European countries as joblessness grows and social welfare programs are trimmed. There are also escalating fears that cuts are a drag on the global economy. The IMF’s latest world economic growth forecast topsliced the rate of growth for the year to 3.3 percent, down from its July estimate of 3.5 percent. At a press conference at the start of the week, just after the growth estimates were announced, IMF chief economist Olivier Blanchard telegraphed the apparent shift in Fund thinking. “In most countries, fiscal consolidation is proceeding according to plan, and while consolidation is needed, there is no question that it is weighing on demand and, therefore, on output,” he told reporters. Blanchard said the IMF’s advice had always been that budget adjustments had to be made over time, to avoid shocks to the economic system. “This has the implication that if growth turns out to be worse than expected, the country does not have to take additional fiscal measures, which could make things worse. “I think that when the case is there, we have to be ready to readjust the targets,” he said. Less tightening, more easing, then? Yes and no, said Lagarde, who in a lecture Sunday insisted the easing that was good for the developed world could cause overheating and asset bubbles in emerging economies.—AFP
LIVERPOOL: British entrepreneur Sir Richard Branson leans out of the window of the driver’s cab on board a Virgin Pendolino train at Lime Street Station in Liverpool, north-west England, as he prepares to launch a Global Entrepreneurship Congress.— AFP
Abu Dhabi 2011 growth fastest in seven years ABU DHABI: Abu Dhabi’s economy grew 6.8 percent in inflation-adjusted terms in 2011, the fastest rate since 2004 and more than double the pace of the previous year, thanks to stronger activity in both oil and non-oil sectors, government data showed yesterday. “Growth in GDP at constant prices during 2011 surpassed all the forecasts and estimates made by local and international parties,” the Statistics Centre Abu Dhabi said. The real gross domestic product of Abu Dhabi, one of seven United Arab Emirates, rose 3.0 percent in 2010. Abu Dhabi, which accounts for most of the UAE’s crude oil output and about 65 percent of the GDP of the second largest Arab economy, released detailed inflationadjusted GDP data for the first time on Sunday. In the past, the statistics centre only published nominal GDP data. The hydrocarbon sector, which accounts for over
half of Abu Dhabi’s real GDP, soared 9.4 percent in 2011, the strongest expansion since 2004 and well up from 2.0 percent in 2010. Growth in non-oil activities was much more moderate at 4.1 percent last year, only slightly above the 3.9 percent clip in 2010 and roughly half of the average rate over the past decade, the data also showed. Analysts believe the UAE, the world’s No. 3 oil exporter, benefited last year when it boosted oil output to help cover a production shorfall in civil war-torn Libya, a factor which will not be repeated in 2012. Global economic weakness is also expected to take its toll this year. As a result, Abu Dhabi’s economic growth is likely to slow to 3.9 percent this year, but should pick up in the next few years, helped by diversification away from oil, its Department of Economic Development said in September. — Reuters
Results, global cues weigh on markets MIDEAST STOCK MARKET DUBAI: Saudi Arabia’s stock market declined for a second straight day yesterday as disappointment over third-quarter corporate earnings weighed. Having recorded its biggest one-day drop in over four months on Saturday, a slide of 1.8 percent, the Saudi bourse fell once more, by 0.3 percent, to a fresh 11-week low. Concerns which sent global bourses lower at the end of last week, including expectations for weak corporate earnings in the United States and Spain’s debt problems, are combining with weak results Saudi companies to hurt investor sentiment. “Clearly, the concerns over global growth prospects are weighing on the market,” said Julian Bruce, EFGHermes’ director of institutional equity sales. “But Saudi is looking for a couple of decent numbers from somewhere and investors are not finding them. We need someone to come up with something positive to provide support.” Yanbu National Petrochemical Co slumped 3.4 percent, the sixth successive daily fall and the largest oneday drop since June 2. This followed Saturday’s disclosure by the firm that its third-quarter profit almost halved from last year, thanks to reduced product prices and a unit shutdown. Saudi Arabian Fertilizer Co fell 0.4 percent and Saudi Kayan Petrochemical Co slipped 2.8 percent after reporting a dip in profits and a widening loss respectively. Markets in the United Arab Emirates were also buffeted by external factors, with global cues and the previous day’s performance in Saudi dragging both exchanges lower. In Dubai, the measure slipped 0.7 percent, erasing all of the previous session’s advance, while the Abu Dhabi bourse snapped a four-session winning streak, declining 0.5 percent. Bucking the trend was Etisalat, which rose 0.2 percent. Its CEO said on Sunday that it would not completely sell out of any of its foreign markets and that a long-awaited network-sharing deal with domestic rival du could be in place in the next three to four months. Dubai-listed du also ended up 0.2 percent. Egypt’s benchmark declined on the back of weekend clashes between supporters and opponents of Egyptian President Mohamed Morsi, ending the day down 0.3 percent. Liberal opponents of Morsi fought his Islamist supporters in Cairo on Friday in the first street violence between rival factions since he took office in June. The health ministry said 110 people were injured. “The first instant reaction was to sell at the open because investors feared that the market would go lower during the day,” said Mohamed Radwan at Pharos brokerage. Radwan added that institutional buying of real estate stocks helped provide some support during the middle of the session but lingering investor worries over the clashes would be the main driver. Kuwait’s measure rebounded from the previous session’s two-week low with a 0.2 percent increase. Qatar’s index also ended higher, gaining 0.1 percent. Industries Qatar supported, rising 1.1 percent, after the Gulf’s second-largest chemical producer by market value posted a 23.7 percent jump in third-quarter profit. In Oman, the measure extended its decline to a third session, ending the day down 0.1 percent, while Bahrain’s bourse climbed 0.4 percent. — Reuters