Inflation control should top
govt agenda: ICCB
Bdnews24.com . Dhaka
Taking effective and long-term measures to contain inflation should top the government agenda, president of the International Chamber of Commerce-Bangladesh Mahbubur Rahman said Saturday.
Presenting a report of the executive board at the 13th ICC Bangladesh Annual Council 2007, at the MCCI Conference Hall, Rahman said a democratic government was a prerequisite for any sustained development of a nation.
The point-to-point inflation rate rose to 10.16 per cent in February of 2008 from 7.28 per cent in the same period a year ago.
The ICCB chief stressed a downward adjustment of earlier projections on growth in line with recent domestic and global developments including natural calamities, temporary disruptions in domestic production, and adverse price developments in international markets.
The ICCB report predicted some setbacks to the economy because of a considerable degree of volatility in the world economy.
Moreover, constraints in domestic revenue mobilisation with continuing dependence on international trade remain a major problem, it added.
The report said Bangladesh must draw up a ‘master plan’ that includes sufficient investment in agricultural research, provision of appropriate incentives to farmers to go for cereal production as well as ensuring proper management and modernisation of the sector.
Rahman underlined the need for concrete measures to cut red tape in improving the country’s image as a business and investor friendly environment.
‘In order to attract further investment, which we need desperately for growth and development, we should also be able to offer … incentives so that investors can make their long-term plan,’ the ICC president said.
He said the changeover of 1/11 had brought an immediate sense of relief to everyone, including big and small traders and owners of industrial units and financial institutions, who took the main brunt of the violence on the streets.
But despite positive gains and improvement in different areas of national importance, especially governance, the changeover has also taken some tolls on the business and economy of Bangladesh, Rahman added.
Dhaka, Bangkok to double bilateral trade
New Age Desk
Thailand has set its sights on doubling bilateral trade with Bangladesh to at least $1 billion within five years.
Deputy commerce minister Viroon Tejapaibul discussed the goal after meeting on Friday with trade representatives and authorities from Bangladesh, according to Bangkok Post.
He said the two governments also pledged to accelerate talks on a free trade agreement and promote joint investment.
Thailand has a large trade surplus with Bangladesh. Out of two-way trade worth $525.38 million last year, Thailand’s shipments accounted for $511.16 million.
Major export products included cement, fabric, yarn, plastic pellets, machinery, and chemicals. Thailand’s key imports from Bangladesh were fertiliser, pesticides, raw hides and leather, and scientific equipment.
According to Viroon, the relatively high trade deficit has led Bangladeshi authorities to urge the Thai government to purchase more products such as pharmaceuticals, seafood, spices and cosmetics.
Bangladesh has also called for more investment from Thailand, particularly in construction, automobiles, shrimp farming, black goat farming, sugar, leather finishing, and power plants.
Chalermpol Thanchitt, the Thai ambassador to Bangladesh, said Bangladesh offered attractive investment opportunities now that its government was allowing full foreign ownership in almost all businesses.
Bangladesh is rich in petroleum, natural gas and oil, and has relatively cheap labour.
More importantly, it has enjoyed Generalised System of Preferences tariff privileges as a least developed country from developed economies such as the European Union, the United States, Canada and the Organisation of the Islamic Conference.
‘The Bangladeshi government is now looking for joint investments from Thai investors in developing hotels in Dhaka and hospitals and Foy’s Lake in Chittagong,’ said the ambassador.
‘They are also interested in a skytrain development project and need Thai investors to forge such joint ventures.’
According to Mr Chalermpol, daily direct flights between the two countries have led many cash-rich Bangladeshis to visit Thailand not only for tourism but also for medical treatment.
Bangladeshi tourists spent about $2.6 billion in Thailand last year.
About 13 Thai private companies already have a business presence in Bangladesh. They include CP Animal Feed and Thai Classical Leathers.
However, Chana Kanaratanadilok, deputy director-general of the Trade Negotiations Department warned Thai investors to study the tariffs that Dhaka levies on almost all imports.
Bangladesh also has non-tariff barriers, substandard utilities and infrastructure, political instability, and frequent labour strikes.
India inflation jumps to 8pc
as analysts see more rises
Agence France-Presse . New Delhi
India’s inflation jumped to eight per cent in March for the first time in three-and-a-half years, revised data showed Friday, as an impending fuel cost rise stoked worries that prices would push higher.
Annual inflation remained steady at 7.82 per cent for the latest week ended May 10, after hitting 7.83 per cent the previous week, according to the Wholesale Price Index, India’s closest watched cost monitor.
But an upward revision to March’s inflation grabbed economists’ attention and analysts said surging global oil prices meant more inflationary pressure.
Inflation was 8.02 per cent for the week ended March 15, the highest since September 2004, compared with an earlier estimated 6.68 per cent .
Also, a statement by India’s petroleum ministry that a domestic fuel price hike was ‘inevitable’ to bail out state oil firms selling fuel at hugely discounted rates stoked expectations of further inflation rises.
The companies are reeling from a cash crunch stemming from surging global prices but analysts say any fuel price rise will feed inflation in the nation of over 1.1 billion people.
Inflation will ‘tread higher due to higher oil prices,’ said Goldman Sachs economist Tushar Poddar in a research note.
The investment bank said it had revised its near-term average wholesale price inflation forecast to 7.5 per cent year-on-year from an above market consensus 6.5 per cent year-on-year.
‘If the current inflation scenario continues we could definitely be looking at inflation of nine or 10 per cent ,’ said Yes Bank chief economist Shubhada Rao.
Fears of prices rising further are worrying the Congress-led government which is desperate to wrestle down inflation to avert a voter backlash in general elections due by next May.
India’s hundreds of millions of poor — whose electoral support is vital — have been hit hardest.
9 lakh workers to go abroad
Bangladesh Sangbad Sangstha . Dhaka
The country is expected to send nine lakh workers abroad this year and remittances would increase to Tk 70,000 crore.
A total of 3,52,249 workers have already received permission to go abroad till May 20, which is 56 per cent more than the same period of last year. In 2007, a total of 2,24,725 got permission, a spokesperson for the Ministry of Expatriates Welfare said.
This was possible after the present government undertook a seven-point long-term plan for exploring oversees jobs.
As part of the plan, the government initiated a programme to search for employment scope abroad and widening the present labour market. Recently, the country exported 60 workers to Russia.
A two-member delegation will visit Russia soon to explore Bangladesh’s manpower export market in the European countries, including Russia.
The delegation comprising joint secretary of the Expatriates Welfare Ministry Monsur Raja Chowdhury and BAIRA’s president-elect Golam Mustafa will visit Vadivstock this month to have ideas about labour market in Russia and employment scope there.
They will join a forum on manpower export on May 29-30, the spokesperson said.
At the forum, they will discuss the issue of employment of a large number of skilled and non-skilled labourers in hotel, restaurant and road infrastructure sectors till 2012.
Besides, they will gain ideas about the nature of Russia’s labour market, sector-wise demand for labourers and facilities for workers there, the spokesperson said quoting the Bangladesh mission in Moscow.
Foreign adviser Iftekhar Ahmed Chowdhury last year directed the Bangladesh missions abroad for preparing reports on possible labour markets in the respective countries.
After receiving the reports, the syllabus of 37 technical training centres under the Bureau of Manpower Export Training was updated. The principals of the TTCs have been invited to join a training in Dhaka on Sunday for giving them necessary guidelines about the syllabus.
Besides, necessary directives have been given to the technical institutes under the ministries of education, health and youth and sports to conduct training programmes under the updated syllabus.
The foreign adviser recently said the process of widening the job market would continue.
Angry protests as Indonesia
hikes fuel prices
Agence France-Presse . Jakarta
Angry students hurled molotov cocktails at police after Indonesia hiked the cost of fuel by nearly 30 per cent Saturday to rein in subsidies that are exploding along with world oil prices.
More than 100 protesters were arrested as students burned tyres in the streets and threw homemade fire-bombs outside the National University in Jakarta in response to the midnight price hike, police said.
Other rallies broke out in the second city of Surabaya, where students commandeered a fuel truck from state-owned oil and gas company Pertamina, and in Bandung where members of a hardline Muslim group took to the streets.
The major fuel price hike took effect at midnight in response to soaring global oil prices and a ballooning subsidy bill that is straining the budget and sucking state funds away from basic services and infrastructure.
Long queues formed at petrol stations ahead of the announcement Friday and 26 demonstrators were arrested at a protest at the presidential palace overnight.
Millions of Indonesians live on less than two dollars a day and protesters say higher fuel prices combined with the recent surge in the cost of food will put an intolerable strain on family budgets.
Indonesian motorists are now paying 33.33 per cent more to fill their tanks with premium gasoline at 6,000 rupiah (65 cents) a litre, while diesel fuel for transportation has leapt 27.9 per cent to 5,500 rupiah.
‘We will fight against this abuse of power by the government. It’s unacceptable,’ protest organiser Wardah Hafidz, of the Urban Poor Consortium, told AFP.
‘The fuel hike will be followed by rises in the price of basic food, education and transport fares, meaning more people won’t have money to educate or feed their children. This country will collapse.’
The price hike sparked protests across the sprawling archipelago of 234 million people when it was flagged earlier this month by President Susilo Bambang Yudhoyono, and police across the country are on alert for more unrest.
The president had promised not to raise fuel costs until after elections next year, but with oil prices smashing records above 130 dollars a barrel this week, the government felt it had no choice but slash subsidies.
Analysts welcomed the rises and said other Asian counties would have to follow suit or watch their budgets break under the weight of massive fuel subsidies.
‘I think this move is positive for Indonesia in terms of its fiscal position,’ Royal Bank of Scotland economist Euben Paracuelles said in Singapore on Friday.
‘It looks like that’s where most governments are heading right now.’
Taiwan’s new government has decided to end a freeze on domestic gasoline prices from June, while Malaysia is reportedly looking at making wealthy consumers pay more for fuel under a new two-tier subsidy system.
Even regional giant India is reeling from the oil price onslaught, with the petroleum secretary admitting Friday that a fuel price hike was ‘inevitable’ to bail out state oil firms selling at hugely discounted rates.
To soften the blow, Jakarta is offering direct cash transfers to the poor amounting to 14.1 trillion rupiah ($1.5b).
The government was at pains to point out that even with the price hike Indonesians still enjoyed some of the cheapest fuel in the world.
But vice president Jusuf Kalla said the government was not afraid to adjust prices even higher in Southeast Asia’s biggest economy if the oil markets continued to climb.
The last fuel price rise in Indonesia was a whopping 126 per cent in 2005, sparking mass demonstrations but no long-term unrest.
US already in recession, says
world’s richest man Buffet
Agence France-Presse . Berlin
While economists quibble, the world’s richest man has decided: the United States is already in recession. So Warren Buffet tells German magazine Der Spiegel in an interview to be published on Monday.
‘It is perhaps not a recession in the way that economists would understand it... but people are already feeling the effects and it will be deeper and longer than people think,’ Buffet said on a visit to Frankfurt.
Buffett, the 77-year-old chief of the Berkshire Hathaway holding company, blamed financial institutions for introducing instruments ‘they can no longer control’ and said the ‘genie can no longer be put back in the bottle.’
Buffett, who overtook Bill Gates this year as the world’s richest man, said he believed the financial markets should be more tightly regulated.
According to the Forbes annual billionaire’s list published in March, Buffet saw his wealth jump from 52 billion dollars last year to 62 billion, pushing Microsoft co-founder Gates into third position after 13 years at the top.
US economic growth has slowed dramatically in recent months and a growing number of economists believe the world’s largest economy will experience a recession during 2008 amid a housing slump and related credit crunch.
DCC workshop on marketing
research held
Business Desk
The DCCI Business Institute and the Centre for Promotion of Imports from Developing Countries, the Netherlands jointly concluded a two-day training workshop on ‘market research for export to Europe’ at the chamber’s auditorium in the Dhaka city on Friday.
Khandaker Shahidul Islam, vice-president of the Dhaka Chamber of Commerce and Industry, as chief guest handed over certificates.
Md Hossain Ali, executive director, of the DCCI Business Institute, and others were present at the workshop that started on Thursday, said a press release.
China to issue 3G licenses,
merge telecoms majors
Reuters/Bdnews24.com . Hong Kong/Shanghai
China will issue three licenses for high-speed third-generation mobile phone services and called for a merger of China Unicom and Netcom, two of its four big telecoms providers, in a long-awaited industry revamp.
The government said on Saturday it would also call on China Telecom, the country’s biggest fixed-line telecoms carrier, to purchase wireless telecoms company Unicom’s CDMA network, fleshing out details of the restructuring following an initial announcement on Friday.
ABN AMRO has valued the Unicom network at HK$40 billion ($5.13b).
The government’s statement (http://www.gov.cn) gave no time frame for implementation and did not specify whether the restructuring would involve the state-owned companies or their listed units, but analysts have said mergers were likely to involve the parent firms.
The 3G licenses and the industry revamp are also set to unleash billions of dollars in spending for network gearmakers such as Ericsson, Motorola, Nokia, Nortel and Siemens, as newly merged firms expand to compete.
The move is also expected to foster competition in China’s mobile sector, where the parent of China Mobile, the world’s largest mobile service provider by subscribers, has long overshadowed Unicom, the smaller of China’s mobile duopoly and hobbled by a split between two different networks: CDMA andGSM.
‘The move aims to address China Mobile’s dominance and Unicom can finally focus on developing a single network, which will boost efficiency, and GSM is traditionally a stronger network,’ said Sandy Shen, research director at Gartner IT, a consultancy.
‘Now all telecom players will be full-service carriers, fixed-line players get the chance to penetrate the lucrative mobile market, and mobile operators will also gain fixed-line and fixed-line broadband access, which can supplement their mobile network,’ Shen added.
China announced an initial series of moves on Friday, including leadership changes and a directive for China Mobile to take over a small fixed-line operator, China Railway Communication Co Ltd, which has assets of 42.4 billion yuan ($6.11b) and employs 72,000 staff across China.
‘Oil tariff cut won’t bring
down pump prices’
Agence France-Presse . Manila
A Philippines official admitted Friday that a government decision to waive import tariffs on crude oil will do little to cut record-high pump prices.
President Gloria Arroyo’s government came in for criticism from all sides a day after announcing it will scrap the remaining one per cent tariff on crude oil, which had been gradually cut from three per cent in February to help cushion the impact of record-high crude oil prices.
‘We would have had windfall revenues due to rising oil prices, but (the effect of the tariff removal) is revenue-neutral,’ Finance Secretary Margarito Teves told reporters.
He also said this will likely have no effect on pump prices since the rates charged by oil firms did not reflect the increased import costs as crude prices soared to more than 130 dollars a barrel.
‘Prices are rising, we cannot do anything about that,’ he added.
He said government officials are discussing a proposed subsidy to the public transport system, ‘but there have been no decisions made.’
Opposition Senator Manuel Roxas urged the government to go beyond ‘tokenism’ and waive a 12 per cent sales tax on petroleum products, a proposal that the government has previously resisted.
Meanwhile the Manila-based left-wing think-tank Ibon claimed removing the sales tax ‘will immediately bring down pump prices by as much as five pesos (11.63 US cents) per litre and directly relieve the consumers, unlike the oil tariff cut that only relieves oil companies from paying import duties.’
It said local pump prices rose by about 7.50 pesos a litre after the oil tariff was cut to two per cent in February and then to one per cent earlier this month.
Teves meanwhile said there will be ‘winners and losers’ in the depreciation of the peso to about 43 to the dollar from 40 to the greenback earlier this year.
Towhidur made EC chairman,
Halim VC Of SIB
Business Desk
The Shahjalai Islami Bank Limited in its 92nd meeting of the board of directors held recently elected Md Towhidur Rahman chairman and Abdul Halim vice-chairman of the bank executive committee.
Towhidur, industrialist and businessman, was born in Patuakhali. After obtaining a specialisation degree in engineering from Europe, he worked in various government organisations for five years. He is the chairman and managing director of the Libas Textiles Limited, Fresh Foods Limited, Sea Fresh Limited, and the MTS International.
Abdul Halim was born in Bangshal of the Old Town in Dhaka. He is the chairman of the Excellent Motors Ltd, Halim Mootors, Halim and Brothers, Kharnaphuli Motors, Motor Cycle Bitan, and the Rupsha Trading Corporation.
Halim is the president of the Motor Cycle Dealers Association, the press matter adds, said a press release.
France concerned over
currency ‘misalignments’
Agence France-Presse . Chicago
French economy minister Christine Lagarde Friday expressed concern about the ‘misalignments’ of global currencies but said the problem is broader than simply the a weak dollar.
‘It is not just the dollar,’ Lagarde told reporters following a speech in Chicago.
‘It’s the whole question of volatility and the whole question of misalignment between the currencies relative to the other and relative to the fundamentals of the economy.’
Lagarde said she ‘wished the dollar was stronger’ but declined to pick a target range.
‘I am not an appraiser of currencies,’ she said, but added that there ‘are imbalances at the moment.’
Lagarde said she was not particularly concerned that the strong euro will have a major impact on foreign direct investment in France.
‘It will encourage investment from the eurozone to the rest of the world,’ she added. ‘Frankly, given the balance between the euro and the dollar, it is likely that US companies will be interesting targets.’
Lagarde said the European economy had, so far, proven ‘more resilient than expected’ in the face of a credit crunch spurred by the subprime lending crisis.
She noted that financial institutions have another 50 days to report their exposure to the crisis and expressed frustration at reports that European banks have been slow to report.
‘All banking institutions and all financial institutions are doing their job at reporting,’ she said.
‘I don’t think there is any particular basis to allege that one side of the ocean is reporting more or less accurately than the other.’
Asked whether there should be more direct intervention by governments into financial markets, Lagarde said there are areas where intervention is appropriate.
‘The central banks have done a very good job of managing liquidity and in making available liquidity in sufficient volumes and with sufficient coordination.’
Lagarde declined to comment on the ongoing disputes over the awarding of a huge aerial refueling tanker contract to Northrop Grumman and Europe’s EADS.
‘I’m sure that the proper rules of competition and review of public procurement will apply,’ she said.
‘The United States is a country where the rule of law is highly respected and I trust this will apply to this matter as it does to others.’
Rice plugs nuclear power,
US oil exploration
Agence France-Presse . Washington
The United States needs to explore more for oil at home and tap nuclear power as part of a comprehensive energy policy, secretary of state Condoleezza Rice said in an interview aired Friday.
Speaking to CNBC television during a visit to California, Rice also dismissed fears that the US economy was losing its competitive edge to China and India.
‘It’s very important that we diversify (energy) supply,’ Rice said in the interview taped Thursday.
‘We say we want to be less addicted to foreign oil, but then we say to oil producers you have to increase supply rather than thinking about what we can do at home to increase supply.
‘The ability to use our domestic resources, our domestic sources of oil would be a very important part of that.’
It was also important for the United States to increase its oil refining capacity.
‘Nuclear energy is another clean technology that we should be using and exploring,’ she said.
‘We simply have put ourselves into a situation in which it’s hard to break our addiction to oil,’ Rice added.
Rice acknowledged the United States was experiencing hard times but sought to dispel any ideas that the US economy was losing its competitive edge to the booming Chinese and Indian economies.
‘I can count many, many times that people have said that America had lost its competitive edge,’ Rice said, recalling claims in the 1980s that the United States was losing out to Japan.
‘So there have been many premature sentences for America losing its competitive edge.’
Rice also called for ‘comprehensive immigration reform’ that will secure US borders while maintaining the US tradition of offering opportunities to immigrants who work hard and bring fresh ideas.
She regretted that the last session of Congress was unable to agree on reform.
Japan ‘favourably’ mulls Philippine
request for rice: US
Agence France-Presse . Washington
Japan will ‘favourably’ consider a request from the Philippines for the release of 200,000 tonnes of imported rice amid severe rice shortages on the global market, a US trade official said Friday.
US and Japanese officials met at the technical level Friday to discuss ways in which the two countries can take steps to address global hunger and bring stability to the global rice market, US Trade Representative spokeswoman Gretchen Hamel said in a statement.
The Japanese officials said their government has the ‘intention to favourably consider the request from the Philippines for the release of 200,000 tonnes of imported rice,’ according to Hamel.
The US is ‘supportive’ of Japan’s initiative, she added.
‘Both countries agreed on the need to act expeditiously’ and plan to continue talks in the coming weeks, she said.
Hamel said the United States used the discussionss to urge that the two countries coordinate their diplomatic efforts to persuade other food-exporting countries to lift their recent food export restrictions, and to coordinate their food aid efforts around the world.
The Japanese government previously indicated it is considering Manila’s request for 200,000 tonnes of its stockpiled foreign rice.
Food shortages have sparked protests and even deadly riots in some countries and export limits in others, hurting developing countries where food costs consume the lion’s share of household income.
Japan, Asia’s biggest economy, is sitting on stocks of 1.5 million tonnes of imported rice as it needs to import 770,000 tonnes every year to fulfill its obligations as a member of the World Trade Organisation.
USTR spokeswoman Hamel said the US officials also raised their ‘longstanding’ concerns with the Japanese about Japan’s restrictions on the sale of imported rice into the Japanese consumer market and ‘the importance of Japan fulfilling its WTO commitments.’
Last week a US trade official, speaking on condition of anonymity, told AFP that the US is considering allowing Japan to sell imported US rice on the global market, blocked by their bilateral agreement under the WTO, in an effort to curb soaring prices.
Under its WTO obligations, Japan must purchase imported rice annually, the official said. To sell these stocks outside its domestic market, Tokyo is required to obtain approval from the exporting countries.
Japan has pledged to put the global food crisis on the agenda when it hosts the annual summit of the Group of Eight industrialized nations in July.
Tech tops financials in S&P;
energy on the rise
Associated Press . New York
For the first time since the bubble burst earlier this decade, information technology stocks have overtaken financials as the largest sector by market value in the Standard & Poor’s 500 index. But that alignment might not last for long — soaring oil prices have helped lift the energy sector to a close third.
For the last 10 years, tech and financials have gone back and forth as the leading sector in the index. Tech grabbed about 32 per cent of the S&P by early 2000, but quickly gave up that lead as the sector lost its lustre amid the dot-com crash.
A little over a year later, financial stocks had become Wall Street’s favourites, and kept the top spot in the S&P until this past Tuesday. While they never reached the heights tech did during the boom years, financials did account for more than 22 per cent of the S&P by late 2006.
Now, both sectors hover just above 16 per cent, with tech ahead marginally. And energy companies, led by oil producers like Exxon Mobil Corp. and Chevron Corp., could be in position to soon take the lead.
Much of the switch can be attributed to the devastation of the financial sector in the last six months, as the credit crisis and housing recession took their toll. Melissa Roberts, senior vice president of quantitative research at Keefe, Bruyette & Woods, noted that 16 of the 92 financial stocks in the S&P have fallen 30 per cent or more since the index peaked in October, with diversified financial companies like Citigroup Inc and JPMorgan & Co among the hardest hit.
Some tech stalwarts like IBM Corp have gained in recent months. But Howard Silverblatt, S&P’s senior index analyst, noted that while IT performed slightly better than the S&P overall, most of the sector didn’t ‘earn’ its way to the top.
‘It’s not that tech did so much better, it’s that the financials did so bad,’ he said. ‘The financials gave it to them.’
That might reflect some lingering wounds from tech’s downfall.
‘There’s still a spectre of the bubble that is hovering over tech, even though the sector is much different from it was eight years ago, let alone four years ago,’ said Brian Belski, an analyst with Merrill Lynch. ‘People learned their lesson in tech because they got burned, and it’s taken them years to want to invest in them again.’
He suggests tech could gain more strength and more firmly establish itself as the leading sector again.
‘We haven’t seen the big shift in leadership, but fundamentally we think it can very much happen,’ Belski said. ‘Not because tech looks attractive on a valuation basis, but fundamentally it is a much different sector than it was four years ago.’
For instance, in 1999, players like Cisco Systems Inc. or Hewlett-Packard Co. would see their shares routinely rise or dive by 10 per cent . These companies now trade much more conservatively, while the financials are the ones with the big swings.
Still, the dark horse may turn out to be energy, which has leaped in the past year as oil prices have doubled. ‘You see a lot of what’s leaving the financials going into energy,’ Roberts said. ‘That’s the No 1 performer.’
And the sector is gaining momentum. Silverblatt said that when the S&P hit its all-time high in October, energy made up about 11.6 per cent of the index. It reached 14.9 per cent on Thursday, the highest per cent age the sector has occupied since the index’s current configuration was developed in 1989.
‘That’s an enormous gain in a short period of time,’ he said. ‘Their stocks during that time period were up 13.2 per cent .’
One factor that’s hard to gauge is whether politics will enter the picture. Big oil executives were called to testify this past week before both houses of Congress, and oil’s march past $135 a gallon may prompt politicians to try to apply new taxes that could limit energy company profits, or take other measures which could potentially hurt energy stocks.
Also, energy’s rise has hit other sectors of the S&P, like consumer discretionary stocks, as companies have tried to pass on higher costs to customers, Silverblatt noted. If oil reaches the $150 a barrel some predict, those additional costs will spread throughout the economy, he said, and could hurt both corporate spending for things like IT and consumer spending for both staples and discretionary items.
No stopping to oil price rise
Asia News Network . Manila
Energy secretary of the Philippines Angelo Reyes called on the public Thursday to brace themselves for still higher fuel prices as world oil leapfrogged to record highs above $135 on runaway fears about tight energy supplies, rising global demand and a slumping US dollar.
London Brent crude hit a historic high of $135.13 a barrel, while the benchmark New York light, sweet crude struck an all-time peak of $135.09.
‘This is the reality that we must face and act on,’ Reyes said, citing a forecast by investment bank Goldman Sachs that oil prices would average $141 a barrel in the second half of this year and could top $200 a barrel by 2010.
To mitigate the impact of the soaring oil prices particularly on the transport sector, Reyes said the government was scrapping the remaining 1 per cent import duty on crude oil and refined oil products effective June 1.
He said the zero tariff would reduce the price of diesel by at least 50 centavos per litre—a minimal impact on pump prices which oil companies have been jacking up by 1 peso per litre every week starting this month.
As a long-term measure, Reyes said he was pushing for a ‘drastic shift’ by the transport sector from crude-based fuel to alternative fuels like compressed natural gas and liquefied petroleum gas.
‘Up all the way’
With gas and oil prices setting new records nearly every day, many analysts are beginning to wonder what could stop prices from rising. There are technical signals in the futures market, including price differences between near-term and longer-term contracts, that crude may soon fall.
But with demand for oil growing in the developing world, and little end in sight to supply problems in producing countries such as Nigeria, few analysts are willing to call an end to crude’s rally.
‘Prices are going in one direction...They are up all the way,’ said Gerard Rigby of Fuel First Consulting in Sydney.
David Moore, commodity strategist with the Commonwealth Bank of Australia in Sydney, said the sentiment in the market ‘is very bullish at the moment’.
‘The US dollar was weaker last night, and also the US EIA (Energy Information Administration) report showed an unexpected decline in US commercial crude oil inventories, so there’s a combination of factors pushing the oil prices higher,’ Moore said.
Crude prices blew past $130 on Wednesday amid concerns about demand, supplies and a weaker dollar, and then prices just kept going up. The price rise accelerated when the US Energy Department’s Energy Information Administration said US crude inventories fell by more than five million barrels last week. Analysts had expected a modest increase.
Late Thursday afternoon in Singapore, light, sweet crude for July delivery was up $1.71 at $134.88 a barrel in electronic trade on the New York Mercantile Exchange.
The contract had earlier hit a trading record of $135.09 a barrel after rising $4.19 during Wednesday’s floor session to settle at $133.17. The settlement price marked crude’s largest one-day price advance since March 26.
Some analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power.
Also, the Wall Street Journal reported on Thursday that the Paris-based International Energy Agency is in the middle of its first attempt to comprehensively assess the condition of the world’s top 400 oil fields.
For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently.
Now, the IEA is worried that aging oil fields and diminished investment mean that ‘future crude oil supplies could be far tighter than previously thought.’
The agency feels that oil companies may have to struggle to surpass 100 million barrels a day in production over the next two decades, the newspaper reported.
That view has been echoed by many analysts watching the seeming unending string of oil price records.
‘The market is really structurally tight … oil demand is not growing that fast but supply is constrained,’ said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
In its weekly report, the US Energy Information Administration said gasoline inventories also fell, which took the market by surprise as well. Inventories of distillates, which include heating oil and diesel fuel, rose less than analysts had expected.
In Asia, the dollar has gained slightly from overnight levels, but the US currency is still showing a downward bias that wasn’t there last week.
CBC teams up with Southeast Bank
Business Desk
The Commercial Bank of Ceylon has recently signed a master repurchase agreement with the Southeast Bank Limited.
S Prabagar, chief operating officer of the Commercial Bank of Ceylon, and Syed Imtiaz Hasib, deputy managing director of the Southeast Bank Limited, inked the agreement at a function held in the Dhaka city, said a press release.
Karar Zubair, head of Treasury, Mahmood Rashid, assistant general manager, Kazi Mashqur, foreign exchange dealer, and Asaduzzaman, money market dealer of Commercial Bank of Ceylon, and from the Southeast Bank Limited, M Shamsul Islam, head of treasury, Arifa Akhter, assistant vice-president, and Md Jahangir Kabir were present on the occasion.
The deal will be used for the purpose of trading on the Repo or the Reverse Repo against the T-bills or bonds and other government securities.
WORLD COMMODITIES UPDATE
Oil tops 135 dollars as records smashed
Agence France-Presse . London
Oil prices stormed to record highs this week, spiking above 135 dollars as investors showed no let-up in their thirst for black gold amid tight supplies, high demand and a weak dollar.
Oil: Brent North Sea oil struck an all-time high of 135.14 dollars and New York light sweet crude reached a record 135.09 dollars on Thursday, driven by growing concerns that energy supplies will fail to keep up with demand.
They later slumped as investors banked profits but resumed their upwards march on Friday.
‘It seems there is no stopping soaring oil prices,’ said Andrey Kryuchenkov at the Sucden brokerage in London.
‘Investors doubt that the market will be able to meet ever growing demand in the long run, with booming emerging market economies underpinning robust demand for energy.’
Crude futures have risen by more than a third since the beginning of 2008 when they struck 100 dollars for the first time, lifted by unrest in oil-producing countries, falling energy inventories, OPEC’s unwillingness to hike output, high Asian demand for fuel and a weak dollar.
A struggling US currency makes dollar-commodities cheaper for foreign buyers.
Oil prices breached 130 dollars for the first time on Wednesday and continued higher on news that US energy inventories had unexpectedly fallen last week.
Abdalla Salem El-Badri, the secretary general of the Organisation of the Petroleum Exporting Countries, said this week that the cartel’s members were unhappy with surging prices which he blamed on speculators and a weak dollar.
OPEC, which produces 40 per cent of the world’s oil, is reluctant to bend to US-led demands for it to pump more crude to help cool rocketing prices.
The 13-nation cartel insists that the market is well supplied and that record prices reflect speculative investment activity rather than actual supply and demand conditions.
By Friday, New York’s main oil futures contract, light sweet crude for delivery in June, had soared to 133.17 dollars from 127.43 dollars a week earlier.
Brent North Sea crude for June was at 133.44 dollars, up from 126.07 dollars the previous week.
Precious Metals: Gold shone, reaching a near five-week high.
Soaring oil prices raised concerns about inflation, encouraging investors to buy gold, which is widely regarded as a good store of value.
Silver benefited from the rise of gold, while platinum was also boosted by lingering supply disruptions in key exporter South Africa.
On the London Bullion Market, gold gained to 927.50 dollars per ounce at Friday’s late fixing from 897 dollars a week earlier.
Silver advanced to 18.10 dollars per ounce from 16.83 dollars.
On the London Platinum and Palladium Market, platinum increased to 2,182 dollars per ounce at the late fixing on Friday from 2,136 dollars a week earlier.
Palladium jumped to 451 dollars per ounce from 443 dollars.
Base Metals: Base metals prices slumped, with nickel and zinc hitting two-year lows.
‘With (mining) strikes and disruptions taking a back seat, and with high oil prices threatening the global economy, it may well be that supply concerns will start to diminish and be overtaken by concerns over the prospects for falling demand,’ said William Adams of BaseMetals.com.
By Friday, copper for delivery in three months fell to 8,200 dollars per tonne on the London Metal Exchange from 8,296 dollars a week earlier.
Three-month aluminium dropped to 2,988 dollars per tonne from 3,010 dollars.
Three-month nickel slid to 23,510 dollars per tonne from 26,305 dollars.
Three-month lead dropped to 2,020 dollars per tonne from 2,276 dollars.
Three-month zinc declined to 2,143 dollars per tonne from 2,318 dollars.
Three-month tin slumped to 23,700 dollars per tonne from 25,300 dollars.
Cocoa prices extended losses, hitting a five-week low in London.
Major producer Ivory Coast said Thursday that considerably less of its home-grown cocoa beans were being smuggled and sold in nearby non-producing countries.
By Friday on LIFFE, London’s futures exchange, the price of cocoa for July delivery slid to 1,377 pounds per tonne from 1,458 pounds a week earlier.
On the New York Board of Trade (NYBOT), the July cocoa contract fell to 2,573 dollars per tonne from 2,665 dollars.
Coffee prices rose strongly at the start of the week but went off the boil towards the end as speculators took profits.
By Friday on LIFFE, Robusta for July delivery declined to 2,248 dollars per tonne from 2,265 dollars a week earlier.
On the NYBOT, Arabica for July delivery fell to 134.60 US cents per pound from 137.90 cents.
Sugar prices extended their downward spiral.
‘Sugar faltered to a three-week low ... as plentiful supplies weighed on the market,’ wrote analysts at Barclays Capital.
By Friday on LIFFE, the price per tonne of white sugar for August delivery fell to 326 pounds from 331.10 pounds the previous week.
On NYBOT, the price of unrefined sugar for July delivery declined to 10.24 US cents per pound from 11.10 cents.
Grains and soya prices were mixed as markets tracked the path taken by oil.
Maize and soya are used to produce ethanol, which is a cheaper alternative to gasoline (petrol). Brazil is a major producer and consumer of ethanol used to power vehicles.
By Friday on the Chicago Board of Trade, maize for July delivery climbed to 6.01 dollars per bushel from 5.91 dollars the previous week.
July-dated soyabean meal — used in animal feed — dropped to 13.61 dollars from 13.78 dollars.
Wheat for July delivery fell to 7.49 dollars per bushel from 7.75 dollars.
Rubber prices extended their rally, boosted by record-high oil prices and as heavy rain in Asian producing countries disrupted output.
‘Supply is expected to recover this month,’ said one dealer.
Owing to soaring oil prices, buyers are switching to natural rubber from synthetic.
On Friday, the Malaysian Rubber Board’s benchmark SMR20 rose to 302.70 US cents per kilo from 288.90 a week earlier.
European stocks dip
Agence France-Presse . London
Europe’s main stock markets fell on Friday as rebounding oil prices weighed on the auto and aviation sectors, while miners slid on profit-taking, traders said.
London’s FTSE 100 index of leading shares dropped 0.33 per cent to 6,160.90 points in late morning trade.
Frankfurt’s DAX 30 slid 0.29 per cent to 7,049.48 points and in Paris the CAC 40 index slumped 1.08 per cent to 4,974.62 nearing the half-way mark.
The European single currency stood at 1.5720 dollars.
Crude oil prices jumped higher on Friday to trade above 132 dollars a barrel, about three dollars away from record highs reached this week on concerns that supplies will not meet demand, traders said.
Wall Street had scored slender gains on Thursday as the stock market calmed after a two-day plunge amid record-breaking oil, which reached an all-time high of 135.14 dollars a barrel on Thursday.
Japanese shares closed narrowly mixed on Friday as investors turned cautious ahead of the weekend, amid ongoing jitters about the outlook for the US economy and world energy prices, dealers said.
‘Oil has been influencing the market all week,’ said a Paris-based trader who requested anonymity. French carmaker Renault saw its share price crash 2.44 per cent lower to 63.58 euros on Friday.
Plane-carriers also took a hit, as Deutsche Lufthansa dived 1.52 per cent to 15.60 euros in Frankfurt trading.
In London, miners dulled as investors banked their profits after recent strong gains won on the back of surging metals prices.
Rio Tinto shed 3.52 per cent to 6,434 pence and BHP Billiton lost 3.03 per cent to 2,046 pence, heading into midday trade.
German stock market operator Deutsche Boerse and Chinese market Shenzhen Stock Exchange meanwhile signed on Friday an outline deal to share product information.
Gas roars higher, pressuring
holiday travelers
Associated Press . New York
Associated Press . New York
As consumers began hitting the road Friday for the Memorial Day weekend, they faced the sobering reality that it now costs $87 to fill a Ford Explorer SUV, up $14 from last year, and $72 to fill a mid-sized Honda Accord, up $12.
That’s because gas prices, which took another jump higher overnight, are up nearly 20 per cent, or 65 cents a gallon, over the past year to average nearly $3.88 a gallon nationally. But unlike this time last year, when gas prices were at their peak for 2007, pump prices now show no signs of halting their daily assault on the record books.
‘Four dollars (a gallon) is a done deal now,’ said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. ‘We could go significantly above that.’
On average, drivers in Alaska, Connecticut, California, New York and Illinois are already paying more than $4 for gas, and an increasing number of stations around the country are posting prices higher than $4. In Alaska, where the average price of regular gas stood at a national high of $4.181 Friday, it now costs $94 to fill an Explorer, and $77 to fill an Accord.
Nationally, the price of a gallon of regular gas rose 4.4 cents overnight to a record average of $3.875, according to AAA and the Oil Price Information Service. Prices are headed even higher in coming days because of oil’s dramatic rally this week to a new record over $135 a barrel.
‘We’re going to see some more significant increases here in light of what we’ve seen in the last few days,’ said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, NJ.
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Google, Facebook
in stalemate over social data
Google Inc’s online communities have little traction in the United States, but the search leader continues to seek a spot in the social-networking hierarchy. First, it must contend with Facebook, the No 2 online hangout behind MySpace. Days after Google unveiled Friend Connect, which lets the sites of musicians, political campaigns and others incorporate profile data from several social networks, Facebook began to block the program. Although Google was taking advantage of the same tools that Facebook made available free to other outside developers, Facebook said Google was violating Facebook’s restrictions on data sharing. The two sides remain in a stalemate. Google, whose Orkut social network has tens of millions of users in Brazil, tried to reach further into social networking with the November unveiling of a consortium called OpenSocial, which lets developers write applications for use on multiple social networks. News Corp.’s MySpace has joined, but Facebook hasn’t. This month, Google unveiled Friend Connect, which promises to pool profile data from Facebook, Google Talk, Orkut, LinkedIn, Plaxo and hi5, though not MySpace. The profile information gets incorporated into other sites — a political campaign, for instance, can build communities of supporters by tapping existing networks — with Google serving as the intermediary. Facebook quickly objected, citing privacy concerns. Normally dealing with other companies one on one, Facebook can block a service it feels violates its rules. With Google as the intermediary, Facebook lost that leverage, so it decided to block Friend Connect entirely.
— AP
Microsoft to
shut down
book scanning operations
Microsoft Corp is abandoning its effort to scan whole libraries and make their contents searchable, a sign it may be getting choosier about the fights it will pick with Google Inc. The world’s largest software maker is under pressure to show it has a coherent strategy for turning around its unprofitable online business after its bid for Yahoo Inc., last valued at $47.5 billion, collapsed this month. Digitizing books and archiving academic journals no longer fits with the company’s plan for its search operation, wrote Satya Nadella, senior vice president of Microsoft’s search and advertising group, in a blog post Friday. Microsoft will take down two separate sites for searching the contents of books and academic journals next week, and Live Search will direct Web surfers looking for books to non-Microsoft sites, the company said. Nadella said Microsoft will focus on ‘verticals with high commercial intent.’ ‘We believe the next generation of search is about the development of an underlying, sustainable business model for the search engine, consumer and content partner,’ Nadella wrote. At an advertising confab at Microsoft’s Redmond, Wash., headquarters this week, he demonstrated a new system that rewards customers with cash rebates for using Live Search to find and buy items on advertisers’ sites.
— AP
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