INTERNATIONAL

 

Aug 23 - 29, 2004

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF

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ASIA FEELS THE PAIN OF OIL PRICES

Asian governments have warned that rising oil prices have started to hurt their economies.
China has said that rising oil prices will affect growth and now India, the Philippines, Taiwan and Thailand have said they too may feel the pinch.
The continent boasts some of the most dynamic economies in the world and relies heavily on imported oil.
Governments are introducing energy-saving measures and cutting duties to try and ease the economic impact.

 

 

 

 

China is the world's third largest importer of oil and its demand for oil is rising in line with its own economic growth.

Rising oil prices could push Chinese inflation higher, discouraging consumers from spending and hitting company profits.

Already, it is expected to have to pay an extra $8.8bn (4.8bn) to import its usual 880 million barrels of oil this year.

Reports last week suggested that China was willing to pay Russian rail fees to ensure it continued to get the oil it needs from troubled oil company Yukos.

Thailand has so far insisted that the energy crisis will not hit the country's economic growth, forecast to be 7% this year.

Nonetheless, the government has decided to take action to cut the oil spending bill, following one estimate that the country will have to spend 40% more on importing oil than it did last year.

In India, fears have centred on the impact on inflation. The Indian government has cut customs and excise duties on many petroleum products, in a bid to curb rising inflation. Finance Minister Palaniappan Chidambaram said gasoline and diesel customs duties would be cut from 20% to 15%.

Exports from the Philippines are still rising, but rising oil prices contributed to the creation of a $142m trade deficit in June. The same month last year saw a trade surplus of $132m.

CHINA INVESTMENT SPENDING JUMPS

An unexpected jump in China's fixed-asset investment during July has raised question marks over government attempts to curb spending.

During the first seven months of 2004, the statistical office estimates that spending on assets such as factories and roads rose 31% from a year earlier.

The market had expected growth of closer to 20%.

The concern among some analysts is that the country's booming economy is still in danger of overheating.

"This figure will surely puzzle investors and even trigger questions on the effectiveness of the government's investment cooling measures," said Jun Ma, an economist at Deutsche Bank.

The government has implemented a number of measures aimed at cooling expansion and investment without bringing the economy to a juddering halt.

Banks have to hold more money in reserve and to provide fewer loans for projects, particularly in the property and automobile sectors.

There has also been a tightening of land-use rules to slow industrial developments.

Despite the jump in July's figures, many analysts are still optimistic about the outlook for the economy.

They point to the fact that investment figures are often unreliable, citing possible changes in accounting methods, as well as one-off factors such as the weather.

EUROPE JOINS CITIGROUP BOND PROBE

France and Germany's financial market watchdogs have begun to look into Citigroup bond trades already under scrutiny in the UK.

Both Germany's BaFin and France's AMF said they were gathering information on the trades, but had not yet launched formal investigations.

Last Wednesday, the UK's Financial Services Authority (FSA) announced a formal probe into the matter.

It centres on a large-scale sale of government bonds by Citigroup traders.

The sale, carried out on 2 August, is reported to have pushed down the price of the bonds, allowing Citigroup to buy them back at a profit soon afterwards.

City sources told the Reuters news agency that Citigroup, the world's biggest financial services company, may have made profits of up to 30 million euros ($36m; 20m) on the deal.

IRELAND RAISES GROWTH FORECASTS

Ireland is poised to benefit from the global economic recovery, the Department of Finance said last week as it raised its forecast for growth.

The country's public deficit would be smaller than expected thanks to better tax revenues than expected in 2004, the government said.

The projected borrowing requirement was revised to 1.8bn euros ($2.2bn; 1.2bn) from a budget forecast of 2.8bn euros.

And economic expansion was revised to 4.7%, from a previous forecast of 3.3%.

Gross domestic product grew by 3.7% in 2003.

In his 2004 Economic Review and Outlook, Finance Minister Charlie McCreevy forecast inflation at an average of 2.2% after 3.5% last year and 4.6% the year before.

Mr McCreevy put the expected deficit at 0.4% of GDP, compared to the previous estimate of 1.1%.

US TRADE DEFICIT SWELLS IN JUNE

The US trade deficit has unexpectedly swollen by 19% to a record $55.8bn (30.4bn) in June.

The country suffered the biggest drop in exports in nearly three years, just as imports hit record levels.

Wall Street economists had expected the gap to widen, but had predicted a gap of just $47bn.

Economists said the growing deficit was likely to force the government to revise downwards its forecast of 3% economic growth in the second quarter.

The deficit rise may increase the pressure on President Bush and his handling of the economy ahead of the Republican Party Convention later this month.

The figures are the latest in a series of worse than expected economic reports in recent weeks.

US exports fell by 4.3% to $92.8bn (50.4bn) in June, their largest monthly fall since September 2001.

Imports rose 3% to $148.6bn, partly reflecting the steady rise in crude oil prices.

EURO INDUSTRIAL PRODUCTION SLOWS

Industrial production in the eurozone fell by 0.4% in June from May, with Germany registering the biggest fall.

The eurozone's monthly fall was smaller than forecast and industrial production rose by 2.7% on an annual basis.

But the 2% decline in Germany renewed fears that its economic growth could slow in the second half of this year.

Separately, German investor confidence fell to its lowest level in 13 months in August, according to research institute ZEW's expectations indicator.

HUNGARIAN PRIME MINISTER RESIGNS

The Hungarian Prime Minister, Peter Medgyessy, has resigned following a row with his Socialist party's liberal coalition partner.

Tensions arose between the prime minister and the Free Democrats (SZDSZ) over a government reshuffle.

Mr Medgyessy sacked three ministers last week, including the Free Democrat Economy Minister Istvan Csillag.

SOUTH KOREA IN GROWTH SPURT

South Korea's economy grew faster than expected in the three months from April to June.

Second quarter gross domestic product (GDP) was up 5.5% on a year earlier and 0.6% from the previous three months.

Growth continues to be driven by strong exports to nearby China, but is still constrained by weak domestic spending.

It is unclear whether this growth will continue, given that exports are expected to fall and high oil prices make a domestic spending boom unlikely.

"The key for the second half is how fast private consumption will revive to offset an expected slowdown in exports," Lee Dong-Su, an economist at Tong Yang investment bank, said.

South Korea imports all of its crude oil and is the world's sixth largest oil consumer

PARMALAT SUES US INVESTMENT BANK

Italian food giant Parmalat has launched a lawsuit against its former auditors by taking CSFB to task over a bond deal back in 2002.

Parmalat said it is suing the US investment bank for about 250m euros (168m; $202m).

 

 

AMAZON MOVES INTO CHINESE MARKET

US internet giant Amazon.com is buying China's largest web retailer Joyo.com, in a deal worth $75m (41m).

Amazon is making its entry into the fast-growing Chinese market after several months spent searching for a suitable partner or acquisition target.

Joyo's principal activities are the sales of books, music, movies and toys on the internet at discount prices.

WAL-MART 'TARGETS JAPAN RETAILER'

US retail giant Wal-Mart is thinking of investing in Japanese supermarket chain Daiei, according to reports.

Shares in the heavily indebted Japanese retailer jumped on the news and were up 27% at 235 yen by close of trading.

Wal-Mart already owns a 37.8% stake in Japan's fourth-biggest supermarket chain Seiyu, but is thought to want a bigger share of the Japanese market.

BANGLADESH WINS $2BN INDIA DEAL

India's Tata group is to invest $2bn (1.1bn) in Bangladesh, the country's single largest foreign investment ever.

Tata is to build a power plant, steel unit and fertiliser factory after Bangladesh guaranteed a supply of gas.

The Bangladeshi government is wooing foreign investors in an attempt to reduce its reliance on foreign aid.

Bangladesh has 15.33 trillion cubic feet of proven gas reserves.

FRENCH OUTPUT STEPS UP THE PACE

France and Germany, the bastions of the shorter working week, are still Europe's most productive economies, a survey has found.

Growth in output per French worker came top of poll of 5,000 firms for consultancy Deloitte, and Germany was not far behind.

Meanwhile, the UK, where productivity is usually high, suffered a reverse.

British firms registered their slowest productivity growth in 14 months, and are now below the EU average.

SINGAPORE BAN AFTER BIRD FLU CASE

Singapore has suspended poultry imports from Malaysia after scientists there found a potentially deadly form of bird flu in chickens.

It is the first time the H5 strain of the virus has been found in Malaysia.

The outbreak was detected in the Malaysian state of Kelantan at a village near the Thai border.

Malaysian eggs have also been banned and the Singaporean authorities have warned of shortages until alternative supplies an be found.

STEEL BOOM BOOSTS ISCOR'S PROFITS

Shares in South African steel producer Iscor surged to a record high last Wednesday after the firm reported strong interim profits.

Revenue for the six months to June rose 13% to 10.54bn rand ($1.6bn, 884m). Operating profit, which strips out debt payments, was up 31% to 2.2bn rand.

UK MORTGAGE LENDING BREAKS RECORD

Mortgage lending rose sharply in July, figures from the Council of Mortgage Lenders (CML) have shown.

Lending rose by 29.2bn in July, up from 27.8bn in June, fuelled by a record 14.7bn worth of loans for house purchases.

RAND FALLS ON SHOCK SA RATE CUT

Markets in South Africa are digesting the surprise decision to cut interest rates, as the rand suffered extended losses last week following the move.

Some analysts see the SA central bank's cut in the key repo interest rate, by half a percentage point to 7.50%, as being forced by political pressure.

The rand touched 6.55 against the dollar, 13 cents weaker than August 19's close, and its lowest since 10 June.

Its depreciation against the US dollar was 5.4% in less than 24 hours.

BHP BILLITON POSTS RECORD PROFIT

Soaring demand for raw materials from China has helped to push Anglo-Australian mining giant BHP Billiton to record full-year profits.

Net profits after one-off payments rose to $3.38bn (2.03bn) in the year to June from $1.9bn last time.

HIGH OIL COSTS HIT MORE AIRLINES

BMI, Air France and KLM are raising ticket prices to pass on rising fuel costs to their customers.

The Portuguese airlines Tap-Air, Portugalia Airlines and Air Luxor said they will take similar steps.

British Airways, Virgin Atlantic and Lufthansa have all recently said they would raise passenger fuel surcharges in response to record high oil prices.

US PRICES IN SURPRISE JULY SLIDE

US consumer prices fell by 0.1% in July, the first monthly fall since November last year.

The slide accompanied falling gasoline prices, sparking speculation about whether the

US central bank would raise rates when it meets in September.

The Federal Reserve lifted interest rates by a quarter of a percentage point to 1.5% at its last meeting in July, its second tightening this year.

Core prices, which exclude food and energy prices, rose 0.1% in July.

IMF GIVES JAMAICA THUMBS UP

Jamaica has succeeded in stabilising its economy and its economic prospects are positive, the International Monetary Fund says.

In its annual review of the island's economy, the IMF praised the government for tackling its huge debt burden and improving investor confidence.

Future economic growth of up to 4% a year was possible, it said, given a recovery in tourism and mining sectors.