China's narrow focus on oil in South Sudan won't work: U.S. envoy

China needs to move beyond a narrow focus on oil issues in South Sudan and help tackle that country's larger political disputes with Sudan, the outgoing U.S. special envoy to the two African states said on Wednesday.

Ambassador Princeton Lyman said he had worked closely with Chinese officials more than two years, during which time South Sudan seceded from Sudan in 2011 to become the world's newest nation.

 

 

China is Sudan's biggest ally and is the largest investor in the oil industry there and in South Sudan - a position that Western diplomats say gives Beijing the best chance of defusing tensions between Khartoum and Juba over sharing oil wealth and ending violence on both sides of their shared boundary.

But Lyman said the disputes, which have shut down landlocked South Sudan's oil output, underscore the limits of staying aloof from political problems.

"They have weighed in very significantly on the oil issue. But what China doesn't like to do is to get involved in some of the underlying political problems that are keeping the oil from flowing," he told reporters in Washington.

"Without that stability and (with) the danger of conflict on the border, the chances of having a long-term productive oil sector is threatened, so they can't just concentrate on the oil and just pretend that the other things aren't bearing on it," he said.

China has long held up as its foreign policy mantra non-interference in countries' internal affairs, a principle it first enunciated in 1954 - long before it was an economic power with interests around the globe. (Reuters)

Malaysia News: RM500m worth of properties to be up for sale at Mapex

Some RM500 million worth of properties from both local and foreign developers will be up for sale at the Malaysia Property Expo (Mapex) in October.

Mapex committee chairman Datuk Ng Seing Liong said over 50 developers have registered to take up 145 exhibition booths at the event where a total of 227 booths are expected to be set up.

"Though we have not finalised the total number of foreign participants attending this year's Mapex, we expect properties on sale to be around RM500 million," he told reporters on Thursday.

Mapex, a property exhibition event, is hosted by the Real Estate and Housing Developers' Association (Rehda).

This year's three-day Mapex will be held at the Mid Valley Convention Centre here from Oct 19.

Ng said Rehda is expecting at least 50,000 visitors to the exposition, which will also feature several talks by experts in the property investment and legal fields.

"Mapex is an ideal platform gathering of property developers, financiers, legal experts and also property consultants all under one roof to assist the home buying public in making informed decision in their property investment," he said.

He said over the years, Mapex has grown to become the signature property event of the country, receiving an average participation of about 80 developers in each exposition.

"Firmly established as the leading property exhibition in Malaysia since its inception in 2000, the latest edition of Mapex brings together property developers from all over Malaysia to offer a wide range of properties to prospective buyers and investors," he said.

Among the developers who have confirmed their participation are S P Setia Bhd, Sime Darby Properties Sdn Bhd, Perbadanan Kemajuan Negeri Selangor (PKNS), IJM Properties Sdn Bhd, Berjaya Land Bhd, I & P Group Sdn Bhd, Lebar Daun Sdn Bhd and Sunway Integrated Properties. (Bernama)

Hong Kong’s Largest Bullion Vault Signals Rising Asia Wealth

Hong Kong’s largest gold-storage facility, which can hold about 22 percent of the bullion now in Fort Knox, will open in September to meet rising demand from banks and the wealthy, according to owner Malca-Amit Global Ltd. (3271)

The facility, located on the ground floor of a building within the international airport compound, has capacity for 1,000 metric tons, said Joshua Rotbart, general manager for the Hong Kong-based company’s Malca-Amit Precious Metals unit.

11-Year Rally

Immediate-delivery gold rallied from 2001 to 2011 as investors sought protection from weaker currencies and the risk of inflation, and central banks boosted holdings. The metal traded at $1,605.93 an ounce at 3:04 p.m. in Hong Kong today, 2.7 percent higher this year. It rose 10 percent in 2011. Gold held in exchange-traded funds reached a record 2,413.61 tons on July 5, according to data tracked by Bloomberg.

The U.S. Bullion Depository Fort Knox in Kentucky, held as an asset of the nation at book value of $42.22 an ounce, holds 147.3 million ounces (4,582 tons) at present, according to data on the U.S. Mint website. In total, U.S. holdings of gold amount to 8,133.5 tons, according to World Gold Council data.

China’s gross domestic product expanded 7.6 percent in the second quarter, the least in three years, a report showed on July 13. Gold demand in the country may increase 13 percent to 870 tons this year, according to a revised forecast this month from the WGC, which abandoned a target for usage to gain as much as 30 percent to 1,000 tons. Last year, demand in the world’s second-largest economy grew 20 percent to 769.8 tons.

Increasing Wealth

Asia-Pacific millionaires outnumbered those in North America for the first time last year, according to Capgemini SA and Royal Bank of Canada’s wealth-management unit. The number of individuals in the region with at least $1 million in investable assets rose 1.6 percent to 3.37 million, helped by increases in China and Indonesia, according to the firms’ World Wealth Report, released last month. So-called high-net-worth individuals in North America dropped 1.1 percent to 3.35 million.

Singapore’s Push

Singapore is also among economies in Asia vying for a greater share of the bullion trade. In February, the government announced a plan to exempt investment-grade gold, silver and platinum from a goods and services tax, starting from October. The aim is to raise the city-state’s share of the global gold trade to as much as 15 percent in five to 10 years from about 2 percent, according to IE Singapore, the external trade agency.
(Bloomberg)

Commodities: Gold , Oil end up on US jobs data

Oil ended up for a third straight day on Friday despite a strong dollar as positive U.S. jobs data inspired hopes for more energy demand, and soybeans hit 5-1/2 month highs on lower-than-expected crop forecasts before easing on profit-taking.

Solid growth in American employment for a third month in a row indicated less need for monetary stimulus from the Federal Reserve, helping the dollar notch its biggest gain against the euro since January. U.S. stocks also rallied, to near 4-year highs. A strong dollar is usually a negative for commodities as it eases upward pressure on prices.

But Friday's session in oil, grains and metals were influenced more by optimism that the U.S. economy could pull away from other struggling regions of the world.

That could boost demand for raw materials, given the relative size of U.S. consumption versus other nations, analysts say.  Even gold, which traded in opposite direction to the dollar at one time, rose with oil and other commodities. U.S. gold futures benchmark April contract settled up $12.80 at $1,711.50 an ounce. Gold is showing a lot of resiliency, precious metals  attributing it partly to "firm oil prices". Crude oil was headed for a weekly gain after a three-day rally made up for Tuesday's price tumble caused by worries over Greece debt and shaky European economic data.

U.S. crude rose 82 cents for the session and 70 cents for the week, finishing at $107.40 a barrel. London's Brent rose 54 cents on the day and $2.33 on the week, closing at $125.98 In copper, aside from the growing confidence over the U.S. economy, investors were heartened by data indicating that China may soon be resorting to monetary easing that could work up demand for the base metal. China is the world's top consumer for copper, accounting for as much as 40 percent of total demand.

China's annual consumer inflation slowed sharply to a 20-month low at 3.2 percent in February, and factory output and retail sales also cooled more than forecast, giving policymakers ample room to further loosen monetary policy to support flagging growth.

 Benchmark copper on the London Metal Exchange (LME) closed at $8,490, up almost 2 percent from a close of $8,330 on Thursday. For the week, however, it was down nearly 1 percent, after accounting for Tuesday's tumble of 2.5 percent.

Soybean prices rose to their highest level in 5-1/2 months on lower-than-expected South American crop estimates, before turning lower on profit-taking. Dry weather reduced the soy crop in Brazil, the world's No. 1 exporter, by 9 percent in three months and the crop in Argentina by 11 percent, the U.S. Department of Agriculture said on Friday.

The cuts in crop estimates by the USDA were much larger than traders had expected. May soybeans on the Chicago Board of Trade settled three quarters of a cent down for the session at $13.37-3/4 a bushel. For the week, it rose 4.25 cents. Its peak for Friday was $13.54 -- a high since Sept. 21.

Aside from profit-taking, soy was also pressured down by "spreading activity" in grains, which meant traders selling soybeans to buy corn and wheat. May corn ended at $6.45 a bushel, up 9-1/2 cents on the day and down 10 cents on the week.

 May wheat finished at $6.43, up 8-1/4 cents for the session and off 31.5 cents on the week. (Reuters)

Gold price expect to increase next week

Gold Prices touched $1600 per ounce Friday lunchtime in London – a 2.3% rally from this week's lows – while stocks and commodities were broadly flat on the day.

Demand for gold market continue to improve since a huge demand seen from thailand and indonesia.

Silver Prices rose to $29.96 per ounce – still 7.0% down on last week's close – while on the currency markets the Euro rallied against the Dollar despite fears that Eurozone government downgrades may be imminent.

Heading into the weekend, Dollar Gold Prices were down 6.9% for the week. Based on Gold Prices at the afternoon London Fix, the last time gold fell further in one week was the first week of December 2008.

Today's London Fix would have to come in below $1488.75 per ounce to surpass the 12.9% weekly drop in Gold Prices seen in the week ended 17 October 2008.

Nevertheless, net outflows saw the volume of Gold Bullion held to back shares in the SPDR Gold Trust (ticker: GLD) – the world's largest Gold ETF – fall yesterday by nearly 15 tonnes to just under 1280 tonnes, the biggest one day outflow by volume since August this year. (Bullion Vault)

Crude Oil Heads for Biggest Weekly Drop

Futures dropped to the lowest level in more than six weeks after Fitch Ratings lowered France’s outlook and put nations including Spain and Italy on review for downgrade. Exports from the euro area dropped in October, led by declines in Germany and Spain.

Oil for January delivery fell 34 cents, or 0.4 percent, to $93.53 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 2. The contract tumbled 5.9 percent since Dec. 9, the biggest weekly decline since Sept. 23. Prices are up 2.4 percent this year after climbing 15 percent in 2010.

Brent oil for February settlement slipped 25 cents to $103.35 a barrel on the London-based ICE Futures Europe exchange.

Crude may fall next week on speculation that Europe’s economy will shrink as the region’s debt crisis spreads. (Bloomberg)

UK banks' eurozone 'zombie' fears

British banks slashed their exposure to France, Italy and Spain in the three months to the end of September, highlighting fears over the spread of the eurozone sovereign debt crisis to some of the currency bloc's largest members. 

French exposures were cut by £19bn in the third quarter to £178bn, while holdings of Italian and Spanish assets were cut by £8bn and £5bn respectively, according to figures released yesterday by the Bank of England.

The decision of UK banks to reduce their exposures to the troubled countries came as they upped their holdings in Northern European and US assets. German exposures increased by £26bn, while Dutch were up £13.6bn. US exposures increased by £6.2bn.

Funding market conditions for eurozone banks continued to deteriorate this week despite the introduction by the European Central Bank of two long-term refinancing operations (LTRO) providing three-year funding.

Eurozone banks' shortage of collateral to borrow against has led the central bank to widen the pool of assets it will accept, however analysts warned the move could be a "fast-track to 'zombieville'".

" 'Excess' bank usage of the three-year LTRO runs the risk of creating more banks who are 'addicted' to ECB money – ie. the classic model of 'zombie' banks," said analysts at Barclays Capital. A 'zombie' bank is one which relies on central bank funding to survive.(The Telegraph)

 

Oil Heads for First Weekly Drop Since September on European Debt Concern

Oil headed for the first weekly decline since September in New York as signs Europe’s debt crisis is spreading countered speculation economic recovery in the U.S. will boost demand in the biggest crude consumer.

Futures were little changed, after slipping as much as 0.8 percent, and headed for the first weekly drop in seven weeks. Prices fell below $100 a barrel yesterday as European bond yields rose, signaling leaders are struggling to stem the crisis that threatens economic growth and demand for commodities. Claims for U.S. unemployment benefits decreased to the lowest level in seven months, the Labor Department said.

“Europe is clearly where eyes are focused for all markets at the moment,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty. in Sydney. “The potential for it to knock global growth prospects significantly is still there. We could see a pullback from these levels before heading higher again.”
Crude for December delivery declined as much as 81 cents to $98.01 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.91 at 1:35 p.m. Sydney time. The contract yesterday dropped $3.77, or 3.7 percent, to $98.82, the lowest settlement since Nov. 14. Prices are down 8 cents this week. The December contract expires today. The more-active January contract slid 5 cents to $98.88.

Brent oil for January settlement was at $108.17 a barrel, down 5 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to U.S. futures was at $9.26, compared with a record $27.88 on Oct. 14.

Debt Crisis

“Oil benchmarks plunged on fears of contagion from Europe’s debt crisis,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “Bearish sentiment in Europe outweighed solid U.S. data.”

New York crude may fall next week on heightened concern that Europe’s debt crisis is spreading and will hurt demand, according to a Bloomberg News survey. Eighteen of 36 analysts forecast oil will fall through Nov. 25. Eleven predicted a gain, and seven said there will be little change. Last week, 58 percent of those surveyed projected a drop.

Applications for jobless benefits decreased 5,000 in the week ended Nov. 12 to 388,000, Labor Department figures showed yesterday. Housing starts decreased 0.3 percent to a 628,000 annual rate in October, according to the Commerce Department. The median estimate of economists surveyed by Bloomberg News called for a drop to 610,000. Building permits, a proxy for future construction, jumped 10.9 percent. (Bloomberg)

Malaysia Fund: RHB Islamic Bond Fund Steps Out of Recommended Fund

Key Points:

• RHB Islamic Bond Fund (the Fund) invested RM8 million nominal value in Ample Zone Class C Sukuk, and constituted 13.65% of the fund size.
• The credit rating of this Class C Sukuk has been downgraded by Malaysian Rating Corporation Bhd (MARC) from B+IS to B-IS.
• This reflects that there is a heightened risk that the Class C Sukuk may fail to honour repayment when it matures on 27 January 2012.
• We remain unclear on whether RHB Islamic Bond Fund will do any impairment or write-down if Ample Zone fails to repay its repayment in January 2012.
• We advise potential new investors not to buy into this Fund.
• We will also remove the Fund as our Recommended Fund under the category of Malaysia Bond Islamic.
• Our advice for existing unit holders, after considering the potential default of Ample Zone is to switch to another Islamic bond fund. Fund to consider is AmBon Islam. 
   
   
  What is Our Concern?
  As at 30 September 2011, RHB Islamic Bond Fund (the Fund) has an investment in Ample Zone Class C sukuk of RM5 million and RM3 million holdings in nominal value which were purchased on 13 May 2005 and 18 May 2005 respectively. Ample Zone Class C Sukuk is the largest holdings of the Fund and constituted 13.65% of the fund size. 
  
  
  The credit rating of this Class C Sukuk has been downgraded by Malaysian Rating Corporation Bhd (MARC) from B+IS to B-IS to reflect that there is a heightened risk that the Class C Sukuk may fail to honour repayment when it matures on 27 January 2012. 
  
  
  Who is Ample Zone?
  According to MARC, Ample Zone is a special purpose vehicle established in 2005 for the sole purpose of raising fund via issuance of RM150 million Sukuk (refer to Table 1). 
  
  
  Table 1: Breakdown of Ample Zone Sukuk 

          Class A                        RM50 million
          Class B                        RM25 million
          Class C                        RM75 million
          Class D                        RM150 million
Source: MARC, iFAST compilations

The proceeds from the Sukuk were used to acquire four properties, namely,

1. Menara Maxisegar
2. Wisma Talam
3. Midpoint Shopping Complex
4. Pandan Kapital Shopping Complex

The properties were subsequently leased back to the respective sellers, which includes three subsidiaries of Trinity Corporate Bhd (Trinity - formerly known as Talam Corporation Bhd) and one private company.

As Wisma Talam was disposed in January 2008, the RM50 million Class A Sukuk and part of Class B Sukuk were redeemed at the same time. The remaining properties supporting the Sukuk are Menara Maxisegar, Midpoint Shopping Complex and Pandan Kapital Shopping Complex, which are now leased to Trinity. 

How is The Sukuk Structured?

Based on MARC, Ample Zone Class C Sukuk was structured based on expected cash surplus from the rental payments, after profit payments to the Class A and B Sukuk and all relevant expenses of Ample Zone.

An Option Agreement is given by Trinity to the Sukuk Trustee, where the Sukuk Trustee can require Trinity to purchase the properties if the sellers fail to honour their payment obligation. 

If Trinity are unable to honour its obligations on exercise of the Option Agreement, property agents will be appointed by Sukuk Trustee or Ample Zone to dispose off the properties in order to raise proceeds to meet the payment obligations for the Sukuk.

Why Ample Zone May Miss The Repayment?

Due to the continued non-payment of rentals from Trinity, the Sukuk Trustee has exercised the option given by Trinity to require Trinity to purchase the properties. However, due to its strained financial position, Trinity will only be able to honour its obligation by disposing the properties to external parties. 

Referring to the announcement from MARC, the Sukuk Trustee has initiated the disposal of the remaining three properties since 1Q 2010 but has not been successful in concluding a sale of any of the three properties. Ample Zone, the issuer of the Sukuk, is dependent on the disposal of properties to meet its repayment obligations that are due on 27 January 2012. As such, failure to dispose the properties before the payment date may trigger Ample Zone to default on its repayment. Total repayment for Class B and Class C Sukuk amounted to RM88.5 million, of which RM84.6 million relates to principal repayment.

What Are The Impacts to RHB Islamic Bond Fund?

As there is insufficient information on occupancy rates, rental rates and tenant diversification, current market value of these three properties cannot be estimated. Based on MARC’s valuation in 2006, the market value and the forced-sale value of the three properties are RM176.0 million and RM139.2 million respectively. This is more than enough to cover the RM88.5 million of repayment.

Table 2 shows the possible treatments of RHB Islamic Bond Fund in recoginising the Sukuk Value under different assumed situations.

Table 2: Impacts to RHB Islamic Bond Fund under different assumed situation
              Situations                                               Possible Treatment
1. Manage to dispose the properties before            No impairment and write-down
    payment date and the proceed is enough 
    to repay RM88.5 million. No default on 
    Ample Zone Sukuk    

2. Manage to dispose the properties before           Possible impairment or no action taken
   payment date but the proceed is only 
   enough to repay part of RM88.5 million.
   Partial default on Ample Zone Sukuk 

3. Not manage to dispose the properties               Possible impairment or write-down or no action
    before payment date.                                        taken
    Default on Ample Zone Sukuk  

Source: iFAST assumptions

We believe that situation 2 and 3 are likely to happen going forward. The adverse impacts to RHB Islamic Bond Fund are much depended on the treatment of the Fund in recognising the Sukuk value after the default. The Fund may impair or write-down the Sukuk value after the default or may have no action taken due to the reason that the Sukuk is pledged by properties, which could be disposed later and subsequently repay the Sukuk holders. 

Having said that, we remain unclear on whether RHB Islamic Bond Fund will do any impairment or write-down if Ample Zone fails to repay its repayment in January 2012. Any impairment or write-down will trigger a sharp decline on the Net Asset Value (NAV) of the Fund.

Remove RHB Islamic Bond Fund as Recommended Fund

Going forward, the outlook for RHB Islamic Bond Fund remains uncertain and the Fund faces the risk with regards to impairment or write-down of the Ample Zone Class C Sukuk. As such, we advise potential new investors not to buy into this Fund. Meanwhile, we will also remove the Fund as our Recommended Fund under the category of Malaysia Bond Islamic.

In our previous article, Dissecting The Recent Drop in RHB Islamic Bond Fund, we advised existing unit holders of RHB Islamic Bond Fund to hold on the Fund. Our advice for existing unit holders, after considering the potential default of Ample Zone is to switch to another Islamic bond fund. Fund to consider is AmBon Islam. (Source: fundsupermart.com)

METALS OUTLOOK: Gold Expected To Continue To Rise Next Week

 Gold prices could continue to find buying interest next week as investors are likely to stay nervous regarding the European sovereign debt situation and start to turn their attention to the U.S. “super committee” charged with federal spending cuts.

On the week, December gold futures prices on the Comex division of the New York Mercantile Exchange settled at $1,788.10 an ounce, up 1.88% on the week. December silver settled at $34.682 an ounce, up 1.75% on the week.

In the Kitco News Gold Survey, out of 34 participants, 22 responded this week. Of those 22 participants, 18 see prices up, while two see prices down and two see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

Market participants are keeping an eye on Europe after the Greek prime minister stepped down and Italy’s prime minister is planning to leave. Analysts at Brown Brothers Harriman said the political uncertainty appears to be easing gradually, with a technocratic government – that is a government run by people based upon how knowledgeable and skillful they are in their chosen field – slated to take over in Greece. Italy could see the same type of government in place next week following votes on austerity packages.

The easing of the political worries helped yields on Italian 10-year bonds pull back to under 7%, which many analysts said is key as that level is where Greece and Portugal need to reach out for help.

Tensions over Europe’s situation may have eased for the moment, but it doesn’t mean all is well. Analysts at Commerzbank said “it is still unclear whether a new government in Italy will be able to successfully consolidate its budget without external help. Gold should therefore continue to profit from the persisting high uncertainty.”

Rich DeFalco, president, West Cooper Asset Management, concurred, adding that gold prices should continue to move higher because of the turmoil in Europe is so entrenched.

If the European Central Bank has to expand its balance sheet to shore up ailing European economies, gold is likely to hit new records into 2012, said TD Securities. “We would undoubtedly have markets worrying that inflation will be used to address Europe’s fiscal problems. It is also likely that governments may want to create above trend inflation in order to reduce the real value of the debt issued by Greece, Italy, Spain, etc. We would also expect that real yields move lower and short-term rates remain at near-record lows for years,” they said.

Gold prices rallied sharply on Friday, supported by the dollar weakening and the stock market rallying. Charles Nedoss, senior market strategist at Olympus Futures, said that with no fresh headlines out of Europe there was less need for investors to seek safety in the dollar.

Gold fell earlier in the week, but DeFalco and some other market watchers said that may have been related more to the problems regarding customer funds at now-bankrupt firm MF Global than to the near-term desirability of gold. Customer accounts have been moved to other clearing firms, but not all positions or monies have accompanied the move and that might have caused accounts that do not have sufficient margin to sell other assets to top off the accounts. Market watchers said that seems to be the case in other markets besides precious metals, too, as prices for some commodities seem to be lower than fundamentally justified in the short-term.

Market watchers said by the end of next week, many more investors will keep an eye on the back and forth between the selected members of the Joint Select Committee on Deficit Reduction, known as the super committee. The group is charged with the task of cutting $1.2 trillion from the budget over the next decade. If they cannot come to an agreement, automatic cuts of that size kick in. The uncertainty that might surround what this group is doing could support gold, especially if it comes down to the last-minute, which could happen given past history of other Congressional decisions.

Economic news for next week includes retail sales and inflation data. Official inflation data remains subdued, with consumer price index estimates for October suggesting to be flat versus a rise of 0.3% in September. (Kitco News)

Euro debt worry hurts riskier assets; dollar firms

TOKYO (Nov 1):  Renewed worries about the slow progress in resolving the euro zone's debt crisis dampened investor appetite for risk, sending Asian shares and commodities lower on Tuesday while keeping pressure on the euro.

The switch to safety helped the dollar firm against six major currencies, although it slipped from Monday's three-month peak against the yen after Japan's record one-day intervention estimated by local media at as much as 10 trillion yen ($128 billion).

The euro came under renewed pressure amid growing doubts about the effective implementation of a plan agreed just last week to contain Europe's debt crisis, having lost all of the gains made in a run to as high as $1.4247 last Thursday after the debt deal was announced.

Greek Prime Minister George Papandreou has called an unexpected referendum on a new EU bailout deal for his debt-ridden country, while Italian bonds faced persistent selling pressure.

"The depth and breadth of unanswered questions from Thursday's EU deal, the spectacle of euro-peripheral bonds yields/yield spreads mostly higher on Monday and general support afforded the USD from the BOJ's intervention, ensured EURUSD traded down in fits and starts throughout Monday," BNP Paribas analysts wrote in a note.

Traders said Asian stocks were generally ripe for profit-taking after a sharp rally last week on relief that European leaders had at least come to an agreement on a basic framework to help reduce Greece's huge debts, boost the region's bailout fund and strengthen banks.

A slightly weaker-than-expected pickup in China's factory activity as shown by official purchasing managers' index (PMI), which fell to 50.4 in October from September's 51.2, provided another excuse for selling, sending Hong Kong's benchmark Hang Seng index down 2 percent on Tuesday.

China's factory activity in October was its slowest since February 2009, reminding investors of the risks to the world's No. 2 economy from a sagging global backdrop.

The data sent risk-sensitive Australian dollar and the euro lower as well, but gold, perceived as a safe haven asset, was underpinned as other riskier assets slid.

"The China data was disappointing, but it shows growth is continuing," although at a lower rate than previously expected, said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.

The pessimism in global markets that was prevalent 1-2 months ago was overdone and it is unlikely that the U.S. economy would fall into a double-dip recession, while a lack of specifics from last week's European meeting is a reminder that there was no once-and-for-all solution to Europe's problems, which will linger for 1-2 years, he added.

"We may see a bit of underpinning in the fourth quarter. But caution will stay with us, and we expect quite sharp daily moves," Foster said, adding that the markets may fall 3-4 percent for a few days, but rather than continuing the downtrend, they may reverse course and rise.

MSCI's broadest index of Asia Pacific shares outside Japan fell 1 percent on Tuesday, after ending October up more than 12 percent for its best monthly gain since May, helped by last week's huge rally on a long-awaited plan to resolve the European debt crisis.

The Nikkei average fell 0.8 percent.

MF GLOBAL REMINDS

The MSCI world equity index dropped 2.4 percent on Monday, pulling back from its highest levels in nearly three months hit last week, but gained 10 percent in October for its biggest one-month rise since April 2009.

U.S. stocks fell as the spike in the U.S. dollar weighed on commodity prices, sending the Standard & Poor's 500 Index down 2.47 percent on Monday. Despite the losses, it posted its biggest monthly percentage rise since December 1991.

U.S. futures broker MF Global Holdings Ltd filed for bankruptcy protection on Monday after bad bets on euro zone debt, highlighting the risk from exposure to the region as long as its sovereign debt crisis remained unresolved.

The collapse of MF Global forced a scramble to untangle trading positions, putting a brake on trading activity in U.S. gold, crude oil and grain futures on Monday.
Some analysts said such unwinding of trading positions could intensify selling pressures and weigh on broad markets.

Gold rose 0.5 percent on Tuesday after losing nearly 1 percent the day before on a firmer dollar, while oil slipped.

Asian credit markets weakened on Tuesday, as renewed worries about the European debt woes and rising Italian bond yields led to a sharp widening of the spreads on the iTraxx Asia ex-Japan investment grade index , a gauge for whether investor risk appetite is returning. The spread widened by 14 basis points from Monday.

Italian 10-year government bond yields rose back above 6 percent on Monday to levels last seen in August, before the European Central Bank stepped in to buy Spanish and Italian debt in the secondary market.

U.S. Treasuries soared on Monday, with 30-year bonds posting their best day since the Federal Reserve announced its first massive stimulus programme in March 2009, while the yield on benchmark 10-year notes fell to 2.12 percent from 2.32 percent late Friday. (Reuters)

Emerging Stock Funds Post Second Week of Inflows, Led by Asia, Citi Says

Emerging-market equity funds reported a second week of inflows, as investors became more optimistic about a solution to the European debt crisis, according to Citigroup Inc.

Funds investing in developing-nation stocks took in $1 billion in the week ended Oct. 26, Citigroup analyst Markus Rosgen wrote in a report today, citing data compiled by EPFR Global. Asia excluding Japan had the biggest inflows, while Latin America and Central & Eastern Europe, Middle East and Africa had outflows, according to the report.

The MSCI Emerging Markets Index has dropped 13 percent this year, driving down estimated price earnings to 10.7 times. That’s less than the four-year average multiple of 11.5 times, according to data compiled by Bloomberg. The index rose 1.4 percent to 1,007.47 at 11:43 a.m. Shanghai time, extending a 21 percent surge since Oct. 4 as European leaders this week agreed to expand a bailout fund and the Chinese government signaled an end to a two-year tightening campaign.

“We are now calling for emerging markets to outperform the developed markets,” Adrian Mowat, JPMorgan Chase & Co.’s Hong Kong-based chief Asian and emerging-market strategist, said in a Bloomberg Television interview today. “Everything in emerging markets got considerably cheaper in the last year.”

Bond funds dedicated to developing nations took in $135 million in the week ended Oct. 26, according to a report from Barclays Capital, citing data from EPFR Global. Flows returned to local-currency bonds, receiving $89 million in the latest week after redemptions of $21 million in the prior week.

Easing European Crisis

European leaders said yesterday they had persuaded bondholders to take 50 percent losses on Greek debt and resolved to increase the size of the rescue fund, responding to global pressure to step up the fight against the financial crisis.

“The meeting in Europe boosts investors’ expectations” of a resolution to the debt crisis, Yue Hin Pong, a Citigroup analyst, said today in a phone interview.
The deal to boost Europe’s bailout fund and write down Greek debt was hailed by U.S. President Barack Obama as an “important first step” in resolving the crisis. French President Nicolas Sarkozy said China will “cooperate closely” to ensure the Group of 20 will contribute to the enlarged fund, while a person familiar said Japan plans to support the increase.

Chinese officials will make adjustments at a “suitable time and by an appropriate degree” and will maintain “reasonable” growth in money supply, Premier Wen said during a visit to Tianjin, according to a statement published on Oct. 25 on the government’s website. The government will continue to make tackling inflation a top priority, Wen said.

China’s policy “fine-tuning” has supported a rebound in stocks and may spark a year-end rally, Shen Minggao, the Hong Kong-based head of China research at Citigroup, said in a separate report today.(Bloomberg)

Aussie Declines From Two-Month High on Speculation Gains Were Too Rapid

The Australian dollar fell from its highest level in almost two months against the greenback as traders speculated that the currency’s biggest advance in more than a year yesterday had been too rapid.

Demand for the so-called Aussie was also dented before the nation’s central bank meets Nov. 1 amid bets Governor Glenn Stevens will cut interest rates to 4.5 percent. The New Zealand dollar, known as the kiwi, retreated from near a five-week high. Both South Pacific nations’ currencies were still headed for a five-day gain as easing concern about Europe’s debt crisis and signs of U.S. growth supported demand for high-yielding assets.

“In the short term, you will get a bit of a pullback as a standard correction following strong rallies,” said Richard Grace, the Sydney-based chief foreign-exchange strategist and head of international economics at Commonwealth Bank of Australia. “We have a forecast of $1.04 for the Aussie by year- end and we feel very comfortable with that.”

The Australian dollar fell 0.5 percent to $1.0672 as of 2:05 p.m. in Sydney from $1.0730 yesterday in New York when it touched $1.0753, its highest level since Sept. 1. The currency weakened 0.7 percent to 80.93 yen from yesterday, when it rose 2.9 percent. The Australian dollar’s 3.2 percent gain against the U.S. dollar yesterday was the biggest since May 2010.

New Zealand’s dollar weakened 0.3 percent to 82 U.S. cents after earlier touching 82.43, the most since Sept. 21. The kiwi fell 0.5 percent to 62.19 yen.
The Aussie’s 14-day relative strength index versus the dollar reached 69 yesterday, near the 70 level that signals to some traders that an asset’s price has risen too quickly and may be set to reverse direction.(Bloomberg)

Indonesia Bonds Head for Weekly Gain on Inflows; Rupiah Steady

Indonesia’s bonds headed for a third weekly gain and the rupiah snapped a five-week decline as foreign funds boosted holdings of the nation’s assets.

Government debt rallied as the central bank lowered its benchmark interest rate by 25 basis points to 6.50 percent on Oct. 11 and purchased sovereign bonds this month. Overseas investors bought $237 million more Indonesian shares than they sold in the first four days of this week, according to exchange data.

“We saw funds coming into Indonesian markets,” said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. “The confidence has returned as Bank Indonesia has managed the situation well. Certainly, the investor sentiment has turned positive.”

The yield on the 10-year bond fell 43 basis points, or 0.43 percentage point, to 6.44 percent this week as of yesterday, prices compiled by Bloomberg showed. The rupiah traded at 8,880 per dollar from 8,900 at the end of last week as of 9:13 a.m. in Jakarta, according to prices from local banks complied by Bloomberg. The currency declined more than 4 percent in the previous five weeks.

Foreign ownership of the nation’s debt rose 0.7 percent to 214 trillion rupiah ($24 billion) in the first two days of this week, according to data from the finance ministry’s website.

Bank Indonesia is selling dollars when needed to ease volatility in the currency, Deputy Governor Hartadi Sarwono said Oct. 7.(Bloomberg)

Palm futures dip on profit taking avtivities

CPO FUTURES

CRUDE palm oil futures on Bursa Malaysia Derivatives ended lower on profit-taking activities yesterday, dealers said.

October 2011 and November 2011 decreased RM33 each to RM2,842 and RM2,830 a tonne respectively, December 2011 lost RM20 to RM2,844 a tonne and January 2012 shed RM32 to RM2,846.

Volume rose to 15,240 lots from Wednesday's 28,080 lots while open interest went up to 143,285 contracts, from 142,442 recorded on Wednesday .

On the physical market, October South fell RM15 to RM2,860 a tonne.

OIL

NEW YORK: Brent and US crude futures extended losses yesterday in choppy trading after data showed initial jobless claims fell last week in the US, but only from a level in the previous week that was revised higher.

Weak economic data from China had already weighed on prices ahead of the jobless claims report.

ICE Brent November crude was down US$1.61 (US$1.00 = RM3.20) to US$109.75 a barrel by 1240 GMT, having fallen to US$109.37 after the data. The day’s high trade was US$111.87.

On the New York Mercantile Exchange, November crude fell US$1.17 to US$84.40 a barrel, trading from US$83.94 to US$85.39.

RUBBER

THE Malaysian rubber market closed mixed yesterday amid supply shortage in Thailand, dealers said.

“Traders are worried over the floods in the largest rubber-producing country which may disrupt supply of the commodity used to make tyres and gloves,” a dealer said.

The Malaysian Rubber Board’s official physical price for tyre-grade SMR20 slid 3 sen to 1,314 sen a kg while latex-in-bulk gained ½ sen to 832.5 sen.

The unofficial closing price for the tyre-grade SMR 20 fell 7.5 sen to 1,310 sen while latex-in-bulk shed 3.5 sen to 829 sen.

TIN

TIN price on the Kuala Lumpur Tin Market (KLTM) remained unchanged at US$22,400 a tonne as the market remained cautious, dealers said yesterday.

"Buyers remained sidelined awaiting leads from the London Metal Exchange (LME) today. They may enter the market tomorrow," a dealer said.

The tin price on LME rose US$650 to US$23,050 per tonne in overnight trading.

On the local front, turnover slipped one tonne to 40 tonnes with Japanese, European and Malaysian traders accounting for the yesterday's transaction.
At the opening bell, bids amounted to 43 tonnes while offers stood at 40 tonnes.
The price differential between the KLTM and the LME was at a discount of US$310 per tonne against a premium of US$340 per tonne yesterday.(Business Times)

Weakening Ringgit Lifted Global Funds in September 2011

The Fundsupermart Indices - All Equity dropped 5.5% month-to-date as at 30 September 2011. The top 5 funds were mostly global funds; bottom 5 funds were mostly Malaysia funds.(Author : iFAST Content Team)

Key Points:

• FSMI lost 5.5% month-to-date
• Top 5 funds were mostly global funds
• Bottom 5 funds were mostly Malaysia funds

During the month of September, the MSCI AC World Index shed 2.9% (in RM terms) as the markets remained focused on the Eurozone debt crisis and on fresh fears of a global downturn and possible recession. In US, the Fed announced that it would embark on “Operation Twist” in a bid to lower longer-term interest rates which have more bearing on mortgage rates and longer-term funding costs for corporations. Elsewhere in Europe, the payout of EUR8 billion to Greece under the initial bailout plan is still pending approval from Eurozone finance ministers, while the European Commission expects Eurozone GDP growth at 0.2% and 0.1% in 3Q and 4Q 2011 respectively after recording a 0.2% growth in 2Q 2011 (growth numbers in q-o-q terms).

Only Japan and Tech (US and Asia Pacific) were in the black for the month of September, as the Nikkei 225, Nasdaq 100 and Bloomberg Asia Pacific Technology indices gained 3.5%, 2.6% and 4.3% respectively (all in RM terms). These gains were mainly attributed to the weakening of the RM against most major currencies. During the month, the FSMI - All Equity index lost 5.5%, bringing its year-to-date returns to -11.6%.

Weakening Ringgit Boosted The Performance of Global Funds

The top performing fund in September, the RHB - GS US Equity Fund, was among the worst performing funds in August. That being said, the fund outperformed its benchmark the S&P 500, which lost 0.3% in September (in RM terms). This outperformance is attributed to its larger holdings in the Tech sector and lesser holdings in underperforming sectors such as energy and materials vis-à-vis its benchmark (based on end August data).

Top performing global funds also managed to outperform their respective benchmarks, with each fund using different strategies. AmOasis Global Islamic Equity and Prudential Global Leaders Fund focused on high-quality large cap stocks in traditionally defensive sectors such as consumer staples and healthcare, while the RHB Global Fortune Fund systematically shorted the markets.

On the currency exchange front, the RM strengthened against the Aussie dollar (for the second consecutive month) by 2.1%, while at the same time weakening against the US dollar, renminbi and yen by 7.1%, 6.9% and 6.7% respectively. Since the start of 2011, the RM had weakened against the yen, renminbi, euro and US dollar by 9.4%, 7.4%, 5.0% and 4.2% respectively (as of 30 September 2011).(Source:iFast Compilation, as at 30 September 2011)

Foreign suitors for Kurnia Insurans?

Liberty International and Chartis Malaysia Insurance are believed to be vying for the stake owned by Kurnia Asia

Kuala Lumpur: At least four foreign insurers, including two from the US, are among several parties believed to be close to making a bid for Kurnia Insurans (Malaysia) Bhd, according to industry sources.

US-based Liberty International Holdings Inc and Chartis Malaysia Insurance Bhd, whose parent AIG Inc was rescued by the US government in 2008, are believed to be vying for the stake owned by investment holding company, Kurnia Asia Bhd.

Another potential suitor for the stake in the largest general insurer in the country is Insurance Australia Group Ltd (IAG), which holds a 49 per cent stake in AmBank Group's general insurance arm, AmG Insurance.

AmG Insurance is on the lookout for a sizeable insurer having failed to buy MAA Holdings Bhd's general insurance business arm after protracted negotiations.

IAG sees a lot of potential in Malaysia and has intention to up its stake to 70 per cent from 49 per cent currently in AmG Insurance, the third largest motor insurer in the country.

Another party that had tried but failed to buy an insurance company here was Liberty International.

In June, it attempted to buy a 52.21 per cent stake in Malayan United Industries Bhd's insurance arm, MUI Continental Insurance Bhd.

The Boston-based insurer is part of Liberty Mutual Holding Company Inc, a diversified global insurer and third largest property and casualty insurer in the US.

Liberty Mutual is on an acqui-sition trail in the Asean region and has put Malaysia, a country where it has no operations at the moment, high on its radar.

Chief executive officer of Liberty International Holdings Inc, Luis Bonell Goytisolo, said recently that the insurer would like to expand into Malaysia, Indonesia and Thailand within two years.

Malaysia has been seen as more attractive now since the government announced liberalisation measures in 2009 by raising the foreign equity limit to 70 per cent from 49 per cent. The move is aimed at wooing more established international players to set up operations here.

Meanwhile, for Chartis, capturing a stake in Kurnia would quicken its target to double its business here in the next four years.

It would also propel the group to be the largest motor insurer in the country. Currently, it is widely known in the property and casualty business.

According to Bank Negara Malaysia's 2010 Annual Report, Chartis Malaysia's gross motor insurance direct premium was RM158.8 million while Kurnia's stood at RM384.1 million.

Another name bandied about is German insurer Allianz Group, which has a large motor portfolio and is the second largest general insurer in Malaysia when it completed the acquisition of Commerce Assurance Bhd in 2007.

It is not known if Allianz would be interested to buy another large motor insurance portfolio after it paid RM990 million to purchase Commerce Life Assurance.(Business Times)

Gold Declines for Second Day as European Debt Concern Sends Dollar Higher

Gold fell for a second day as concern about a potential Greek default drove the dollar higher and some investors sold the metal to cover losses in other markets on speculation the European debt contagion is worsening.

Gold for immediate delivery declined as much as 0.7 percent to $1,842.25 an ounce, and traded at $1,852.85 at 10:54 a.m. in Singapore, erasing an earlier gain of 0.4 percent. It reached a record $1,921.15 an ounce on Sept. 6. Bullion priced in euros and Swiss francs advanced to all-time highs today.

The dollar climbed for a third day against a six-currency basket to its strongest level in more than six months as investors sought safe assets. December-delivery bullion in New York, which sometimes moves inversely to the dollar, shed as much as 0.8 percent to $1,844.60 an ounce before trading at $1,855.50.

“A spike in the U.S. dollar prompted investors to close off bullish bets in bullion,” Phillip Futures analysts including Ong Yi Ling wrote in a note today. “After weeks of extreme volatility, confidence in gold’s bull was tempered.”
Gold’s 30-day historical volatility, a measure of how much the metal fluctuates, climbed above 33 last week. This is the highest level since December 2008 and compares with this year’s low of 8.7 in June.

Exchange-traded product holdings rose for the first time in eight days on Sept. 9 to 2,149.763 metric tons after reaching a record 2,216.756 tons on Aug. 8, Bloomberg data show. Hedge funds and other money managers added to their net-long gold positions by 4 percent to 184,371 contracts in the week to Sept. 6, data from the U.S. Commodity Futures Trading Commission showed. Twenty-two of 26 traders, investors and analysts surveyed by Bloomberg said bullion will rise this week.

Dollar Strength

The Dollar Index, which tracks the greenback against six U.S. trading partners, had its biggest weekly gain since October 2008 last week after President Barack Obama detailed his $447 billion plan to boost jobs in a Sept. 8 address to Congress. The index is still 2 percent lower this year on concern the economic recovery is faltering as unemployment persists.

“The U.S. dollar has been sold off so significantly but I can’t see any reason for it to rally as the U.S. has got significant problems that it needs to address,” said Gavin Wendt, founder and director of Mine Life Pty. “As people look for haven assets, it’s very possible for both the dollar and gold to go up together.”

Officials in Chancellor Angela Merkel’s government are debating how to shore up German banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three coalition officials said Sept. 9.

BNP Paribas SA, Societe Generale SA and Credit Agricole SA, France’s top banks, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of Greek holdings, two people with knowledge of the matter said on Sept. 10.

“Nothing changes from week to week, there’s always a lot of uncertainty and we’re definitely going to see a continued interest in gold,” Wendt said.
Cash silver slid as much as 1.1 percent to $41.0225 an ounce before trading at $41.2625. Spot platinum was little changed at $1,833 an ounce, while palladium fell 0.4 percent to $733.50 an ounce.(Bloomberg)

Crude Trades Near Two-Day Low on U.S. Demand Outlook; Price Forecasts Cut

Oil traded near a two-day low in New York as investors looked beyond a report showing a weekly decline in U.S. stockpiles and bet that faltering economic growth in the U.S. will temper demand for crude.

Futures fluctuated before a speech tomorrow by Federal Reserve Chairman Ben S. Bernanke, who is scheduled to outline what steps the central bank will take to stimulate the world’s largest economy. Standard Chartered Plc lowered its third- quarter oil price forecasts before a report that may show U.S. growth slowed in the second quarter. Crude supplies unexpectedly fell last week, U.S. government data showed yesterday.

“Everyone’s sitting back and waiting to see what Bernanke has to say,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts crude will average $100 a barrel this year. “A 2 million drop in crude stockpiles is neither here nor there.”

Crude for October delivery was at $85.12 a barrel, down 4 cents, in electronic trading on the New York Mercantile Exchange at 11:36 a.m. Singapore time. Yesterday, the contract dropped 28 cents to $85.16, the lowest since Aug. 22. Prices are 17 percent higher the past year.

Brent oil for October settlement was at $110.17 a barrel, up 2 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $25.06 to U.S. futures, down from a record $26.21 on Aug. 19.

Crude Stockpiles

U.S. crude inventories dropped 2.2 million barrels to 351.8 million last week, the Energy Department report showed. Supplies were forecast to increase 1.75 million barrels, according to the Bloomberg News survey.

Gasoline inventories climbed 1.36 million barrels to 211.4 million, as imports increased and refineries raised output, according to the report.

Standard Chartered lowered its third-quarter price forecasts for New York and London-traded crude on “weaker-than- expected” demand in the U.S. and speculation output disruptions in the North Sea and West Africa will end.

The bank cut its Brent forecast to $112 a barrel from $115, Helen Henton, a London-based analyst at the bank, said in a report dated yesterday. New York’s West Texas Intermediate futures may average $90, compared with an earlier estimate of $98, according to the report.


U.S. Growth
Commerce Department data tomorrow will show U.S. gross domestic product grew at a 1.1 percent annual pace in the second quarter, down from the 1.3 percent that the government estimated last month, according a Bloomberg News survey of economists. Bernanke will give a speech to central bankers tomorrow at a meeting in Jackson Hole, Wyoming.

Hurricane Irene remained a Category 3 storm in the Atlantic and is forecast to approach North Carolina this weekend. It packed maximum winds of 120 miles (193 kilometers) per hour and may be upgraded today to Category 4, the second-strongest on the five-step Saffir-Simpson scale, the U.S. National Hurricane Center said in an advisory at 11 p.m. Miami time yesterday.

The U.S. East Coast, known as the Padd 1 region, has 10 operating refineries with a capacity of 1.21 million barrels a day, based on Energy Department data. The area accounts for 7.1 percent of total U.S. operating capacity.(Bloomberg)

Growth of Asia-Pacific Stock Market Followed by U.S. Debt Crisis

As a financial writer & advisor I am writing articles on debt management, debt consolidation. debt advice etc. And also I am a regular writer for various finance related Communities including www.ovlg.com and CDFA.(Blog Guest: Myrina Stein)

The recent America’s debt default has touched the ceiling, and has left many investors to rethink about their personal investment. For past 35 years, during the presidency of Ronald Reagan, U.S. national debt has always been a serious issue. During the presidency of George W. Bush, the national debt of the United States has increased for more than 70 percent. According to the recent survey, the total number of debt stands at over $14 trillion. With the increasing debt ceiling, the market is worried about the U.S. debt default crisis will eventually waive off the 82 days before the deadline. However, this positive impact of the elimination of 81 days has been encouraged by global market sentiment. Industry experts believe that as a consequence, the uncertainty of the global capital market has been ended.

81 days, has fallen in Tokyo stock market for three consecutive days last week. 225 stock average index has opened the rebound, and rose to 10,000 points or even more. On the other hand, the Nikkei ending closing rose 131.98 points to close at 9965.01 points, or 1.3%. Seoul stock market index climbed to 1.8%, to close at 2172.31points.Sydney, Australia stock market have also gained a hit of 2percent, closing up 1.7 percent, to close at 4497.8 points.

Aside from Japan Australia and South Korea, other Asia Pacific market has gained a hit of rise. China and Hong Kong’s Hang Seng index closed rose 223 points to 22,663 points, an increase of 1%. Chinese Taipei’s weighted index rose 57.2 points to close at 8701.38 points, an increase of 0.66%.

Though U.S. debt default has uplifted the stock market of the Asia Pacific countries but yet there is a bit of uncertainty about the outlook. The industry believes that although the U.S. debt farce has ended with the allocation of funds but there is still more to be reallocated. It may flock back to U.S once more or may flock to some other countries also.

State Securities Zhang Youngfeng, vice president of wealth management has pointed out in the “International Finance News” that debt default crisis has lifted up, after the configuration of dollar as hedge funds, and gold may therefore fell. He has also said that the farce of the U.S. debt has been sounding high but people realized that it is not absolutely safe though there is no credit rating cut. But the U.S. debt has weakened the confidence of the market investors. 

However, Zhang Youngfeng believes that U.S. debt will be waived off very soon, and there will be some return to attract back into the United States. In the recent market correction, a reallocation of funds may take place in the U.S. itself, which will lead to a reduction of credit, and will bring in some sensitive investment.