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Saturday, December 3, 2016Rabia I 4, 1438 AH

BUSINESSGULF TIMES

Singapore fi nes Coutts,StanChart

1MDB SCAM | Page 3

NSE chief quits months before IPO

INDIA BOURSE | Page 9

US payrolls risesolidly; joblessrate at 9-yr low

FED RATE HIKE MOST LIKELY : Page 12

Banks to Britain: Stagger Brexit over years or we could leaveReutersLondon

Britain must negotiate a staggered departure from the European Union over several years or risk

banks leaving the country, the biggest banking lobby group will warn the gov-ernment in coming weeks, according to sources familiar with the matter.

The British Bankers’ Association will argue its case in a report to Prime Minister Theresa May’s government, outlining the risks for the country if she does not secure a “transition” phase beyond the two-year withdrawal pe-riod that will begin when she invokes Article 50 of the EU’s Lisbon Treaty.

The document also calls for a clear message from the government about its vision of Brexit, following perceived mixed messages from ministers about the importance they place on retaining

access to the EU single market. “We’re saying we need an adaptation period... to stop banks moving en masse,” said one person familiar with the report, speaking on condition of anonymity as the pro-posals have not been made public.

The BBA’s draft report is the fi rst blueprint about how a transition could work — and spelling out the risks if it is absent. The BBA declined to comment.

May has said she will invoke Article 50 by the end of March 2017, starting formal withdrawal negotiations with Brussels, meaning Britain would leave in early 2019.

Banks and business have long warned of the need to avoid a “cliff edge” or abrupt British exit from the bloc without advance knowledge about how trading terms might look.

If no deal has been agreed for Brit-ain to retain some access to the single market after the two years of talks, UK-based banks may be forced to withdraw

services to EU customers and vice versa unless they relocate to the continent.

Under the currently envisaged time-table, the BBA will warn, banks will not have enough time to prepare themselves for Brexit and their possible departure from London. It would take banks more than two years to relocate operations.

If no transition phase is allowed, they may be forced to leave the country be-fore Brexit.

In the document the industry argues that Britain must secure an agreement with Brussels, around the time of trig-gering Article 50, for a period of delay following the two-year exit process.

This would include a “bridging” pe-riod, as well as an “adaptation” period.

“We have two problems to solve. The bridge gets you to the new deal. You need an adaptation period as well.

So the two things together become a transition period,” said another person familiar with the document. The docu-

ment does not say exactly how long the transition period would need to be.

Britain’s prime minister will have to have the backing of EU countries in or-der to secure such an arrangement.

There’s a lot at stake.Financial services account for about

a tenth of British economic output.The sector generates more than

£60bn pounds ($80bn) a year in tax, with £15bn of that from foreign banks in London.

UK-based banks also lend more than £1.1tn to European companies and gov-ernments.

May pledged in November to address concerns that Britain could fall off a “cliff edge” — a sudden exit from the EU — in 2019, hinting at a transitional agreement. She may face opposition to such arrange-ments, however, from those who support a clean and quick split from the EU.

The government is now formulat-ing its position, balancing demands for

immigration curbs against the need for access to the single market, but a lack of clarity has led some bank executives to fear the worst. Those concerns are spelt out in the report.

So far, May has said she will give no “running commentary” on how a fu-ture deal will look, apart from saying she wants curbs on free movement of people into Britain from other EU states but also the best possible access to the European market.

Brexit minister David Davis said on Thursday that Britain would consider making payments to the European Union after it leaves to get access for businesses to the bloc’s markets. His comments came a day after Bank of England Governor Mark Carney said British businesses needed more clarity on Brexit. The government is appealing a court ruling that it needs parliament’s approval to trigger Article 50.

Meanwhile, a broadly stronger ster-

ling posted a fi fth consecutive week of gains against the euro yesterday, its best run in nine months, as investors’ fears over a “hard Brexit” that would see Britain lose access to the European Union’s single market eased.

The pound jumped to a three-month high against the single currency and a two-month high against the dollar on Thursday, staying close to those levels yesterday, after Davis’ statement.

Sterling was up 0.7% at around $1.26 by 1640 GMT, having climbed over 1.5% over the course of the week.

Having already recorded its strong-est month against the single currency in eight years in November, sterling climbed 0.6% to 84.185 pence per euro.

It has risen almost 9% against the euro since mid-October, as the euro has been weighted down by a slew of upcoming political risks, such as Sun-day’s Italian referendum on constitu-tional reform.

Oil unlikely to surpass $60 for next fi ve years, says IIFBy Santhosh V PerumalBusiness Reporter

A deal to cut production, the fi rst in eight years, notwithstand-ing; oil prices may not surpass

$60 a barrel for the next fi ve years as the Organisation of Petroleum Export-ing Countries (Opec) is “not a game changer”, according to the Institute of International Finance (IIF).

“Our fi rst price forecast for 2018 is $54 per barrel, and we maintain that prices are unlikely to break $60 per bar-rel during the next fi ve years,” Wash-ington-based IIF said in response to the Opec’s recent decision to cut produc-tion by 1.2mn barrels per day (bpd).

Expecting global inventories to de-cline in 2017 by 1mn bpd, IIF said it has adjusted its price forecast for 2017 up-wards to $52 from $49.

“The Opec agreement is not a game changer in the oil market, as US shale producers remain the marginal sup-pliers. However, downside risks to oil prices have been reduced as state oil producers have shown more willing-ness to adjust production if needed to protect revenues,” it said.

After weeks of hectic parleys, the Opec-countries had inked a pact on a cut in oil production to 32.5mn bpd in early 2017, from an estimated 33.6mn bpd in October 2016, following which oil prices rose more than 10% in the past two days to a spot price of over $54 for Brent crude.

The quick rise in prices is also refl ec-tive of the moves of Russia and a few other non-Opec countries to gradu-ally reduce production by a combined

0.6mn bpd, half of which comes from Russian oil companies.

This brings the total agreed supply reduction to 1.1mn bpd in 2017 (slightly

less than the expected global demand growth), it said, noting that Russian pro-duction spiked in October to 11.2mn bpd.

The announced reduction will thus

only take production back to the 2016 annual average, and “we expect Rus-sian production to stay at this level in 2017,” it said. IIF said it continues to

see global demand growth of 1.2mn bpd over the next couple of years, with upside risk from a more powerful US stimulus, and downside risk prima-rily from higher uncertainty in Latin America.

Global inventories are still very high, and US inventories have edged up-wards in recent weeks as production has increased after a decline since mid-year, it said, adding high inventories, US producers on standby and potential shifts in US energy policy act as “coun-terweights to whatever upwards price pressures the Opec agreement may create.”

Finding that while eff orts are made to oversee actual production, imple-mentation risks remain high, IIF said this is especially the case in Iraq, where the dire security and fi scal situation makes a large cut (5%) somewhat “sus-picious”.

Libya and Nigeria are exempt from the agreement as their production is recovering from security related issues. Libyan production rose to 0.53mn bpd in October, doubling since August, but still only a third of the pre-civil war level. Nigerian production increased to 1.63mn bpd, which is still lower than the 2014 level of 1.93mn bpd.

“We expect a maximum combined increase in production from these two countries over the next six months to be 0.6mn bpd,” it said, adding this lim-its the overall average cut to 0.5mn bpd in 2017.

The Opec will reassess the situation in the second quarter of 2017, which could lead to renewed volatility in pric-es if the agreement is not sustained, according to IIF.

Opec is trying to cement a preliminary September agreement in Algeria that would reduce its production to between 32.5mn and 33mn barrels per day, its first supply curb since 2008.

Libya sticks to plans to boost output by 50%

ReutersRome/London

Libya, which was exempt from

Opec production cuts this week, is

sticking with plans to raise output

in the near future by 50%, state-

owned National Oil Corp (NOC) said

yesterday.

“Currently our production is

600,000 barrels per day. We aim to

double that. We think we will get to

900,000 barrels” in the near future,

NOC chairman Mustafa Sanalla said

at a conference in Rome yesterday.

The increase depends on lifting a

blockade at pipelines serving the

western fields of El Feel and Sharara.

Libyan oil off icials told Reuters that

while talks with local tribes blocking

the pipelines were moving forward,

there was no clear indication yet

when the oil will flow again.

Libya was exempt from a deal the

Organisation of the Petroleum

Exporting Countries reached this

week to curtail its collective output

to 32.5mn bpd.

Under the deal, Opec used a con-

servative figure of 351,000 bpd as

a “reference production level” for

Libya, well below its October pro-

duction level of 528,000 bpd in the

most recent monthly Opec report.

Egypt accepts six bids for oil and gas exploration

ReutersCairo

Egypt has accepted six bids for oil

and gas exploration worth a total in-

vestment of up to $200mn, the Min-

istry of Petroleum said yesterday.

In May, the General Authority for

Petroleum announced an interna-

tional tender for 11 oil and natural

gas blocks in the Western Desert

and Gulf of Suez as Egypt looks to

boost oil and gas production to meet

growing energy demand.

Royal Dutch Shell, BP, Apache

Corp and Apex International Energy

are among the companies involved,

the ministry said in a statement.

It said BP would invest at least

$46mn, Apache at least $60.6mn

and Shell at least $35.5mn.

Apex said it had been awarded

two blocks covering 6,714 square km

in the Western Desert.

Apex is “committed to invest

$27.4mn during the first explora-

tion phase to acquire and process

3D seismic and drill six exploration

wells,” it said in a news release.

Opec cut ripples felt in top oil market as Saudis plan curbsBloombergSingapore

The eff ect of Opec’s deal to re-duce crude output starting next month is already being felt in the

world’s biggest oil market.Saudi Arabia, the group’s biggest

producer, is planning to curb the ad-ditional crude it offers to Asia cus-tomers on top of its regular scheduled supply under long-term contracts, people with knowledge of the matter said. The cut in such spot cargo offer-ings in January is part of a strategy to implement the output reduction deal reached in Vienna earlier this week,

they said, asking not to be identified because the information is confiden-tial.

The plan by the world’s biggest crude exporter shows one way through which producers will pass on Opec’s fi rst output cut in eight years to us-ers of their supply. It’s also a sign of the shift in policy from Saudi Arabia, which had previously led the Organi-sation of Petroleum Exporting Coun-tries in a strategy of keeping taps open to defend market share. The deal be-tween producers this week is an eff ort to shrink a global glut that’s dragged down benchmark prices more than 50% below their 2014 highs.

“This sends a signal to customers

in the Asia Pacifi c that you’re going to see tighter supplies, and this very likely will prompt customers to ex-pand or diversify their crude oil supply sources,” said John Driscoll, the chief strategist at JTD Energy Services, who has spent more than 30 years trading crude and petroleum in Singapore. The Opec “agreement is a signifi cant and strategic shift for the Saudis from their market-share driven policy for the last two years.”

Saudi Arabian Oil Co, or Saudi Aramco as the state-run company is known, sells the majority of its oil via long-term contracts to refi ners. Buy-ers can nominate to buy more or less supplies within a 10% contract toler-

ance each month, and purchase incre-mental spot supplies on top of regular volumes.

If the cut in spot supplies is not suf-ficient to bring overall output under Saudi Arabia’s new target level, Ara-mco can also supply less oil to term customers within the tolerance level of scheduled volume, the people said. That decision would also be based on how much supplies customers seek for January after official selling prices for the month are released, they said.

Nobody replied to an e-mail seeking comment sent to Aramco’s press offi ce.

In the last reported off er of additional spot cargoes, Saudi Arabian off ered its Arab Extra Light and Arab Light crude

grades to Asian customers for loading in August.

Opec said it will cut output by about 1.2mn barrels a day, fulfilling a plan sketched out in Algiers in Sep-tember to curb production to 32.5mn barrels. Saudi Arabia, which raised production to a record this year, will reduce output by 486,000 barrels a day to 10.058mn.

Front-month Brent crude futures were down 45¢, or 0.8% by 0951 GMT from their last settlement at $53.49 per barrel. The contract was up more than 13% this week, its biggest gain since March 2009.

US West Texas Intermediate (WTI) futures were at $50.68, down 38¢.

BUSINESS

Gulf Times Saturday, December 3, 20162

Protectionism complaints in China rising: GermanyReutersBeijing

Germany is getting an increasing number of complaints from its companies about a rise of pro-

tectionism in China, while Germany is keeping its door open to surging Chinese investment, the country’s ambassador in Beijing told Reuters.

Germany and China have been in-volved in an increasingly public dispute about access to each others’ markets, with China complaining about unfair scrutiny of its acquisition targets in Germany, and Germany wanting a more level playing-fi eld for its fi rms in the world’s second-largest economy.

German companies like Volkswagen AG and Siemens count China as among their most important overseas opera-tions.

Economy Minister Sigmar Gabriel visited China last month where he made plain his concern about Beijing’s trade policies.

“German companies here feel that there has been a considerable rise in pro-tectionism.

We are receiving more and more com-plaints, especially since the beginning of this year,” said Germany’s ambassador to China, Michael Clauss.

“When talking to them you get a sense that the overall mood has changed since last year, from being very optimistic to being more cautious.”

Asked about protectionism worries, Chinese Foreign Ministry spokesman Geng Shuang said China would continue to open up and would continuously im-prove the investment environment for foreign companies.

“Foreign companies in China will continue to have great potential and space to develop. China’s door is open and it won’t be closed,” Geng said.

Claus said Chinese investments in

Germany in the fi rst half of this year had risen by about 2,000% from a year earlier. “Most of this investment is go-ing into the high-tech sector. It seems there is a strategic connection to ‘Made in China 2025’, they’re trying to close the technological gap through acquisitions,” Clauss said.

“And we’re fi ne with China catching up and becoming a competitor in high-tech industries; it’s the fairness of the competition we’re concerned about.”

Gabriel’s trip came a week after his ministry withdrew approval for Fujian Grand Chip Investment Fund (FGC) to buy chip equipment maker Aixtron, cit-ing new security concerns.

Germany is also scrutinising the sale of Osram’s general lighting lamps busi-ness Ledvance to a consortium of Chi-nese buyers.

“EU companies have bought up to 14 companies in China so far this year, and that amounts to 5% of what has been

bought up by Chinese companies only in Germany this year,” Clauss said.

The ambassador said he was also con-cerned about restrictions on public de-bate about protectionism in China.

“We sense a growing unwillingness to allow concerns about protectionism within China to be voiced in the media. This might have to do with problems in the economy,” he said.

Germany has benefi ted from China’s rapid expansion – its automakers, in

particular, enjoy access to the world’s largest car market.

But they complain they are only al-lowed to manufacture cars domesti-cally in China through joint ventures with local partners. While Beijing has repeatedly pledged to increase market access for foreign firms, critics ac-cuse it of not following through on its reform agenda and introducing new regulations that are restricting market access even further.

From right: German Chancellor Angela Merkel, Economy Minister Sigmar Gabriel and Foreign Minister Frank-Walter Steinmeier attend a meeting in Berlin. Germany and China have been involved in an increasingly public dispute about access to each others’ markets, with Beijing complaining about unfair scrutiny of its acquisition targets in Germany, and Germany wanting a more level playing-field for its firms in the world’s second-largest economy.

ReutersSingapore/Hong Kong

Thousands of clients are being boot-ed out of bank accounts in Asia’s wealth management industry,

which is cleaning up after a money laun-dering scandal in Malaysia, the ‘Panama Papers’ expose, and a global push for tax transparency, bankers say.

“For some global wealth managers, up to 30% of private wealth clients in Asia are in the fi ring line,” said Benjamin Quinlan, CEO of Hong Kong consultancy Quinlan & Associates.

The clean-up is mainly focused on problematic clients in the Asian fi nancial hubs of Singapore and Hong Kong, which manage more than $1tn of managed as-sets combined.

Bankers expect a new round of consoli-dation among small wealth managers, as the costs of client due diligence and sur-veillance become unsustainable.

The scrutiny in Asia began in 2014 as banks moved to comply with tougher an-ti-money laundering rules, top bankers and compliance offi cers at nearly a dozen banks in Asia told Reuters.

But it has really gathered pace this year, they said.

The urgency increased with announce-ments that Switzerland and Singapore were conducting criminal investigations into billions of dollars allegedly misap-propriated by Malaysian state investment fund 1Malaysia Development Berhad.

Then came the leaked documents in April from Panama law fi rm Mossack Fonseca on 214,000 off shore companies.

They showed Hong Kong was the world’s most active centre for the crea-tion of shell fi rms, which can be used to avoid taxes.

Private banks in Asia have also felt the pressure of aggressive tax amnesty pro-grammes in Indonesia and India aimed at

bringing off shore wealth back home and fear regulators may impose big fi nes on banks who breach the rules.

Next year a global tax transparency campaign starts to bite: Singapore, Swit-zerland and Hong Kong will be among 101 jurisdictions to begin collecting tax in-formation that they will share to combat tax evasion.

All of this has “sparked a major re-view and fi ltering process,” Quinlan said, “with one global private bank we spoke to looking to off board roughly 3,000 wealth management clients in Asia in 2017”.

Compliance and regulatory costs af-fecting the banking industry have soared since the 2008 global fi nancial crisis.

Consultants LexisNexis Risk Solutions said anti-money laundering eff orts are costing banks $1.5bn annually in Asia Pa-cifi c and rising.

Banks globally are expected to spend $12bn on anti-money laundering compli-ance in 2016, says Quinlan & Associates.

Account and transaction surveillance is expensive, so it is often cheaper for banks to kick out tricky clients, bankers say.

For some, there is no warning: they know their accounts have been closed when they suddenly are unable to access them online or get an unexpected cheque in the post, six people working at law fi rms, funds and service providers said.

They said several funds incorporated in the Cayman and British Virgin Islands but operating in Hong Kong, were among those who found their bank accounts abruptly closed.

“We had one client whose account was just frozen, and they couldn’t get the money out,” said one Hong Kong fund administrator.

One corporate account at a global bank in Hong Kong was shut due to the client’s inability to provide detailed identities of investors in his company, a direct source told Reuters.

New standards adopted two years ago

in Asia require banks to clearly identify a client, the client’s business and – crucial-ly – the origin of the money deposited.

The banks also need to check the cli-ents have paid all due taxes back home.

In some cases, compliance staff at large older banks sit glued to old mainframe style computers tucked away in remote parts of the bank.

For hours on end, they click through and manually scan decades of transac-tions, people who conduct these searches told Reuters.

According to the head of a major cor-porate investigation fi rm, some banks in Hong Kong and Singapore have even used private eyes to perform due diligence on certain customers.

Nearly 40% of wealth fi rms in the Asia-Pacifi c region have cited compliance as their main strategic budget focus next year, EY said in its Global Wealth Report.

That compares with 11% and 9% for European and North American fi rms re-spectively.

“You need to make sure you’ve got the right controls in place – people, compli-ance, technology,” said Rahul Malhotra, who heads JPMorgan’s private banking business in Southeast Asia.

“Cost-to-income ratios are defi nitely going to be impacted in this business, which will result in further consolida-tion.”

Compliance staff also are gearing up for tax investigations.

Western governments led by the United States have already aggressively targeted European wealth management centres such as Switzerland to recoup undeclared tax money.

This led to whopping US fi nes against top wealth managers including UBS, Credit Suisse, HSBC and a host of Swiss banks.

Asia could be next in the line of fi re, with Singapore and Hong Kong as key targets, lawyers and banking sources say.

Asia’s wealth industry booting out clients in costly clean-up

China urges US to abide by WTO anti-dumping agreementReutersBeijing

China yesterday urged the Unit-ed States to abandon a surro-gate country approach it uses

to calculate anti-dumping measures against Chinese exports, as a related clause in China’s World Trade Organi-sation (WTO) deal is set to expire.

When China joined the WTO in 2001, it agreed to let WTO members treat it as a non-market economy when assessing dumping duties for 15 years. That gave trade partners the advantage of using a third country’s prices to gauge whether China was selling its goods below market value.

But that clause is due to expire on December 11, and China has demanded that countries abide by the agreement.

US Commerce Secretary Penny Pritzker said in November the time was “not ripe” for the United States to change the way it evaluates whether China has achieved market economy status, and there was no international trade rules requiring changes in the way US anti-dumping duties are cal-culated.

Chinese Commerce Ministry spokesman Shen Danyang said the

United States should stop using its own market economy evaluations to deny China’s “rights”.

“It’s a right that China must enjoy as a WTO member and an obligation that all WTO countries must fulfil,” Shen told reporters during a regular briefing.

“China advises the United States to stop mixing things and escaping its in-ternational obligations.

China calls for the United States to fully comply with the rule in a timely manner, and push for healthy devel-opment of China-US trade relations.”

The United States has repeatedly ar-gued that China’s market reforms have fallen short of expectations, especially in aluminium and steel where state in-tervention has led to oversupply and overcapacity, threatening industries around the world.

China must ‘walk the talk’ ontrade, says former WTO chief

AFPBeijing

Beijing’s pledges to pursue

trade liberalisation in the face of

a potentially more protectionist

US under Donald Trump meant

it was time for China to “walk

the talk” on the issue, former

WTO director-general Pascal

Lamy said yesterday.

Lamy, also a former EU

commissioner who negotiated

China’s entry into the World

Trade Organisation, said that

despite a rise in anti-globalisa-

tion rhetoric, he expected the

EU and China to remain key

players in keeping international

trade open.

But, speaking in the Chinese

capital, he added: “China has

had a lot of talk of trade-open-

ing and globalisation, and not

much walk.

“It is time for China to walk

the talk,” he told a conference at

Renmin University’s Chongyang

Institute for Financial Studies.

US President-elect Donald

Trump has vowed to ditch the

Trans-Pacific Partnership (TPP)

once taking off ice, and analysts

say the move could give Beijing

an opportunity to forge ahead

with its own trade deals and fill

a vacuum left by any American

withdrawal.

“Whether trade-opening is

done multilaterally, bilaterally,

regionally, east-west, north-

south, that doesn’t matter,” said

Lamy. What matters, he said,

was that “obstacles to trade are

reduced. You go the best option

you have”. A US withdrawal

from the TPP would have

limited impact on world trade,

he insisted.

As EU trade commissioner,

Lamy negotiated China’s 2001

entry into the WTO.

When it joined, it was

promised it would attain

Market Economy Status (MES)

by the end of 2016 – a status

that would mean that partners

would have to treat the Commu-

nist-ruled country as a free

market equal when it comes to

settling trade disputes.

The EU is opposed to grant-

ing it to China, not wanting to

let Beijing off the hook over a

long series of disputes ranging

from steel to solar panels.

Indian minister deniesplan to split Coal IndiaReutersBhubaneswar, India

India’s power and coal minister Piyush Goyal said yesterday there was no value in splitting up India’s biggest coal producer Coal India Ltd and denied any

plans to break it up.In a presentation seen by Reuters on Thursday, gov-

ernment offi cials recommend that Coal India – with a stock market valuation of $28bn – should be broken up into seven companies, which they say would make it more competitive and effi cient.

The proposal, dated November 30, is expected to be presented to Prime Minister Narendra Modi soon, three government offi cials with direct knowledge of the situ-ation said.

But Goyal said on the sidelines of an investment sum-mit held in the capital city of the eastern state of Odisha that the report was “unfounded” and “untrue”.

“I haven’t seen it. If somebody else has seen it then I don’t know,” Goyal said, referring to the proposal.

“I have made my view known in June 2014. Coal In-dia’s strength comes from it being one company,” Goyal said. Goyal also said he has asked the board of state-owned aluminium producer National Aluminium Co to “reconsider” a proposal to set up a smelter in Iran.

The company, majority owned by the government, had been scouting for an overseas location to set up a smelting plant.

“I believe that we should Make-In-India... Ideally it should be in Odisha where the material is mined,” Goyal said.

Coal miner boosts output as power plants restock

BloombergNew Delhi

The world’s largest coal miner boosted production for the

first time since July as Indian power plants began restock-

ing fuel inventories. Coal India Ltd output rose 5.3% to

50mn metric tonnes last month from a year earlier, while

shipments increased 6.2% to 48.2mn tonnes, the Kolkata-

based miner reported Thursday. While average monthly

coal inventory levels have declined over the last seven

months, stockpiles have risen 5.6% from a November low.

“Stockpiles at power plants have started inching up-

wards,” said Goutam Chakraborty, Mumbai-based analyst

at Emkay Global Financial Services. “That’s a reason Coal

India’s shipments and output have gone up in November.”

State-run Coal India aims to produce and sell 598.6mn

tonnes in the fiscal year ending March 31. Production in

the first eight months rose 0.7% from the prior year to

323.57mn tonnes, while dispatches dropped to 340.3mn,

according to stock exchange filings. The revival in power

plants demand for coal may be short-lived, as concerns rise

India’s move to recall high-value currency will weigh on

its economic growth and electricity demand, according to

Chakraborty. Prime Minister Narendra Modi’s move on No-

vember 8 to recall 500 and 1,000 rupee bills has resulted

in a cash crunch, which Fitch Ratings said in a report has

caused a short-term disruption to the economy.

Goyal: There is no value in splitting up India’s biggest coal producer Coal India.

BUSINESS3Gulf Times

Saturday, December 3, 2016

ReutersSingapore

Singapore’s central bank imposed penalties on the local units of UK-based Standard Chartered and private bank Coutts for

money laundering breaches related to Malay-sia’s scandal-tainted 1MDB fund and said it was nearing the end of its probes.

The penalties — of S$5.2mn ($3.65mn) and S$2.4mn, respectively — were the latest puni-tive measures taken by the central bank in its crackdown on money laundering, having or-dered the closure earlier this year of the local units of Swiss banks BSI and Falcon.

The Monetary Authority of Singapore (MAS) is also in the process of issuing a prohibition order against Tim Leissner, Goldman Sachs’ former Southeast Asia chairman.

“These actions send a strong signal that we will not tolerate the abuse of Singapore’s fi nan-cial system for illicit purposes,” said Ravi Me-non, the managing director of MAS.

“The supervisory investigations into the in-tricate web of international fund fl ows have been a learning experience for fi nancial institu-tions as well as for MAS,” he said.

The inspection at Standard Chartered “re-vealed signifi cant lapses in the bank’s customer due diligence measures and controls for ongoing monitoring,” MAS said.

While the 28 breaches were “serious”, the central bank did not fi nd “wilful misconduct.” Standard Chartered said in a statement it is tak-ing action to strengthen controls and surveil-lance systems.

“We regret that 1MDB-related transactions passed through Standard Chartered Bank Sin-gapore accounts from 2010 to early 2013,” it said.

“We reported the suspicious transactions, both before and at the time we exited the ac-counts in early 2013, and have been fully coop-erating with the authorities investigating this matter.” Malaysia’s 1MDB, once a pet project of Prime Minister Najib Razak who chaired its advisory board, is the subject of money-laun-dering investigations in at least six countries, including Switzerland, Singapore and the US. At Coutts, the investigation revealed 24 breaches of AML requirements in relation to customer due diligence measures for politically exposed

persons. This was the result of actions or omis-sions of offi cers who have since left the bank, including Yak Yew Chee and Yvonne Seah, who had left Coutts to join BSI Bank in late 2009.

Coutts International was sold by Royal Bank of Scotland to Union Bancaire Privee in March 2015 and is in the process of winding down its Singapore operations. “We regret any failings in our AML processes and the length of time it has taken to detect and resolve this issue,” RBS said in a statement. UBP said the acquisi-tion of Coutts International was an assets-only transaction and therefore UBP does not in-

herit Coutts’ “legal issues or liabilities.” Banker Leissner was responsible for managing the rela-tionship with 1MDB when Goldman Sachs was engaged by the fund to arrange three bond is-sues from 2012 to 2013.

MAS’s investigation found he had made false statements on behalf of his bank without its knowledge or consent.

“Today’s announcement refers to a matter we discovered in January of this year and identi-fi ed as a clear violation of the fi rm’s standards,” Goldman Sachs said in a statement.

“At that time we promptly took steps to sepa-

rate Leissner from the fi rm and reported the matter to regulatory authorities in several juris-dictions, including Singapore. We continue to cooperate with the MAS.”

The proposed order will prohibit Leissner for a period of 10 years from performing any regu-lated activity under the Securities and Futures Act or taking part, directly or indirectly, in the management of any capital market services fi rm in Singapore. Leissner’s lawyer Marc Harris from Scheper Kim & Harris LLP said in a state-ment that Leissner will accede to a request by MAS to response to the allegations.

Singapore slaps fi neson StanChart, Coutts

A Standard Chartered branch in Singapore. Singapore’s central bank imposed penalties on the local units of UK-based Standard Chartered and private bank Coutts for money laundering breaches related to Malaysia’s scandal-tainted 1MDB fund and said it was nearing the end of its probes.

ReutersShanghai

Bank of China, one of the coun-try’s “Big Four” state banks, has begun to sharply limit

corporate customers’ ability to pur-chase foreign currency in Shanghai, in what sources said yesterday was a bid to help stem capital outfl ows and ease depreciation pressure on the yuan.

Under the unwritten new policy, described by two sources familiar with the details, bankers at Chi-na’s fourth-biggest lender began this week to discourage companies wishing to change yuan into dollars.

Those fi rms which insisted on doing so were told they would be re-stricted to exchanging a maximum of $1mn.

Previously, there had been no re-strictions on companies’ forex pur-chases.

The policy comes as China’s gov-ernment adopts increasingly ag-gressive measures to control move-ments of yuan out of the country and snuff out expectations that the currency would continue to spi-ral lower. It has already lost nearly 6% against the resurgent dollar so far this year, taking it to more than eight-year lows.

“All preferential policies regard-ing forex purchases have been can-celed,” said one of the sources, who declined to be identifi ed by name because she was not authorised to speak publicly.

The source said the rules only ap-plied to Bank of China’s Shanghai operations, but that other locations were free to set their own corre-sponding policies.

Neither Bank of China nor the State Administration of Foreign Ex-change (SAFE), which oversees Chi-na’s forex policy, had an immediate comment.

Bank of China’s Shanghai op-erations were “starting to strictly control forex purchases... and have imposed restrictions on forex pur-chases worth $1mn or more”, the second source said.

One source described the policy as “voluntary”, while the other said

it had come from SAFE. Either way, the measures appeared to be an es-calation of the government’s war on outfl ows after SAFE earlier this week started vetting transfers abroad worth $5mn or more and increased scrutiny of major outbound deals. While limited in scope, the bank’s Shanghai foreign exchange restric-tions are more than just a symbolic step. Bank of China was once the only Chinese bank authorized to conduct foreign exchange transac-tions, and remains the country’s big-gest trader of foreign currency.

It has more overseas branches than any other Chinese bank.

At least one other bank was adopting similar measures to curb foreign exchange sales.

An offi cial at a mid-sized share-holding bank in Shanghai, who declined to be identifi ed, said the lender had suspended all forex pur-

chases. It was also preventing in-dividuals from transferring foreign currency to their relatives, taking aim at a common workaround to take money overseas.

Chinese regulations grant indi-viduals a foreign exchange quota of $50,000 a year.

Many have moved larger sums abroad by tapping relatives’ quotas.

Capital outfl ows have grown as a concern this year for the govern-ment as it attempts to put the econ-omy back on track and keep the cur-rency stable without exhausting its foreign exchange reserves.

Last week, a senior central bank researcher warned that the fall in the yuan’s exchange rate was shap-ing market expectations of further losses and triggering capital fl ight, and that it was necessary to “break this feedback loop”. Underscoring the risks, China’s foreign exchange

reserves fell $45.7bn – the most in nine months – in October and by far more than expected to the lowest since March 2011, indicating further capital outfl ows despite recent signs that the world’s second-largest economy was stabilising. The cen-tral bank is widely believed to have sold US dollars to cushion the yuan currency’s descent in October. On Friday, state banks sold dollars in the market for a fi fth straight day on Friday, helping keep the yuan steady at around 6.88 to the dollar.

November’s foreign exchange re-serves data is due out next Wednes-day. A Reuters poll of more than 50 foreign exchange analysts this week suggested that the yuan would likely slip to 6.90 per dollar by the end of this month, and then depreci-ate steadily to 7.14 in a year, which would mark its lowest level in nearly a decade.

Bank of China sharply limitsforex sales to Shanghai fi rms

Japan’s Q3 GDPseen revised up on increased capital spending

ReutersTokyo

Japan’s third quarter economic growth is forecast to be revised up slightly thanks to better-than-expected capital invest-

ment, a Reuters poll showed, though recov-ery is still seen likely to be slow given feeble domestic demand.

The Japanese economy, the world’s third-largest, was thought likely to expand an annualised 2.4% in July-September ver-sus 2.2% annualised growth seen in a pre-liminary reading, the poll of 16 economists found.

This increase would translate into 0.6% growth from the previous quarter, revised up from the initial 0.5% reported.

“There is some weakness in domestic demand but the economy is picking up moderately and has escaped from pro-longed economic stagnation,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

The poll showed that capital expendi-ture, a key component of gross domestic product, was expected to rise 0.6% for the quarter, revised up from the 0.5% growth seen in the preliminary reading.

Analysts expect public investment to be revised up for the quarter from the initially reported 0.7% decline – which would also contribute to an improved growth reading.

The government is to adopt a new base year for calculating gross domestic prod-uct which analysts said made forecasting revised third quarter GDP growth more dif-fi cult.

The new calculation method, which will include research and development for the fi rst time, will be applied to GDP data going back to 1994.

The revision raises the level of nominal GDP across time, but the impact on GDP growth rates will be small, government of-fi cials have said.

The Cabinet Offi ce will issue the revised GDP data on Thursday.

The poll also forecast a current account surplus of ¥1.5772tn ($13.84bn) for Octo-ber.

The current account data, which will be released at the same time as the GDP fi g-ures, is expected to show a 28th straight month of surplus, helped along by some recovery in exports and income gains from overseas investment.

Bank of China’s Shanghai operations were starting to strictly control forex purchases and have imposed restrictions on forex purchases worth $1mn or more, sources said yesterday.

China’s control on deal cash flows seen tangling solar industry

BloombergBeijing

The $1.5bn privatisations of two of China’s

biggest solar companies have been thrown

into doubt because of concerns they may run

afoul of a government eff ort to keep more of

the nation’s money supply at home.

Trina Solar and JA Solar Holdings, whose

chief executives have separately proposed

buying back the shares they listed in New

York, both may be aff ected by the rules on

sending money abroad being considered by

the government in China. Shares of the two

companies have declined since reports over

the last week about the curbs on companies’

overseas deal-making being planned.

“If the government tightens management

of the rules over the privatisation of overseas-

listed companies in more detail, the deals may

at the very least be delayed,” said Liu Xiaom-

ing, a Shenzhen-based analyst from Industrial

Securities Co. Those concerns help explain why

both companies have traded below the off ers

made from separate buyout groups to take

the manufacturers private. While China’s State

Council has yet to issue formal rules spelling

out how its restrictions will apply, people with

knowledge of that proposal have said it will tar-

get take-private deals and that special scrutiny

would be made of highly leveraged companies

with poor returns on assets.

Last month, people with knowledge of the

government’s plans said the State Council will

issue guidelines on the curbs, at which point

it will ask government agencies to draft more

detailed rules. The main target is overseas in-

vestments of at least $1bn in industries outside

a buyer’s core business and overseas property

deals by state-owned enterprises. Go- private

deals using onshore capital also at risk.

Trina is most at risk. Its shareholders vote

on December 16 on whether to accept a $1.1bn

off er from an investor group led by Gao Jifan,

the company’s chairman and founder. In a

letter dated December 12, 2015, the group

off ered $11.60 for each American depositary

receipt outstanding in New York, a price Trina

shares haven’t reached since before the off er.

The ADRs close on Thursday at $9.52, down

7.8% in the past week.

“The company’s finances are relatively

healthy, but the market isn’t rewarding its

performance,” said Wang Xiaoting, a Hong

Kong-based analyst from Bloomberg New

Energy Finance. “The entire solar industry

has experienced many ups and downs in the

past several years. Investors aren’t irrationally

positive.” Trina said it’s continuing to work on

the buyout. “As far as we can see, the parties

to the merger agreement continue to work

towards satisfaction of all closing conditions,”

Yvonne Young, Trina’s director of investor

relations, said by e-mail. “We will update the

market if there’s any significant progress. We

are not able to comment on any political/

regulatory news or speculation.”

JA Solar chief executive off icer Jin Baofang

sent his company a non-binding proposal in

June 2015 to buy its outstanding ADRs for

$9.69 apiece. The proposal hasn’t turned into

a binding agreement, and the company said

on November 17 there was no more informa-

tion about the deal. JA Solar shares in New

York have remained below that level since

January, trading above the off er price only for

a few weeks in December 2015.

JA Solar’s proposed group of buyers com-

prises Jin and closely held Jinglong Group

Co, of which Jin is the sole director. JA Solar

declined to comment, saying it’s restricted

from doing so while the company is involved

in such a transaction.

Alpine Associates Management Inc has

recently been buying Trina stock, anticipating

the rules China is working on won’t apply to

Trina. The Englewood Cliff s, New Jersey-based

investment advisory firm picked up 2.8mn

Trina shares during the third quarter, accord-

ing to a September 30 regulatory filing. That

makes it the seventh-largest holder, according

to data compiled by Bloomberg.

“People don’t understand the rules com-

pletely,’’ said Brad Cohen, an analyst at Alpine.

“We’ve had these Chinese ADRs before. You

have to ride through the noise.’’

The outlook for the solar industry has

darkened since the go-private off ers were first

made. PV production capacity has surged

faster than installations, which are expected

to finish at a record this year, according to

data compiled by Bloomberg. The cost of

solar panels has fallen 30% this year alone,

according to London-based BNEF.

China’s solar manufacturers, including

Trina and JA Solar, raised more than $5bn

from Wall Street investors starting in 2006

to expand factories. Those investments both

wrested control of the industry away from

German and US companies and sent the cost

of photovoltaics down more than 80%. That

gutted margins across the industry, bankrupt-

ing at least 30 companies and making most

companies unprofitable for years.

The ADR buyback would “help seek better

financing channels” for the companies, said

Wang Haisheng, former executive general

manager of the equity division at Ping An

Securities Co. “However, both the capital mar-

ket and fundamentals aren’t very bright. The

timing for Trina to say goodbye to Wall Street

isn’t very good.”

Donald Trump’s election victory in the US

also is weighing on sentiment. Trump has

suggested scrapping support for renewable

energy, saying solar is too expensive and

takes too long to pay off .

BUSINESS

Gulf Times Saturday, December 3, 20164

Japan regulators working on rules to prevent leaksReutersTokyo

Japanese authorities are set to rec-ommend new fair disclosure rules that aim to prevent company execu-

tives leaking insider information, part of Prime Minister Shinzo Abe’s push to improve corporate governance and en-courage foreign investment.

Marking the fi rst time that Japan will adopt statutory rules on corporate dis-closure, the move will likely broaden the scope of current requirements put in place by the Tokyo Stock Exchange and clarify what constitutes material and insider information.

While the extent of corporate leaks in Japan is hard to gauge, the government is keen to shake up a business culture that has often been criticised for pri-oritising the interests of executives over shareholders.

The measures are also a response to recent scandals involving Deutsche Bank’s and Credit Suisse Group AG’s local securities units leaking corporate earnings information to clients.

The Financial Services Agency cen-sured the brokers but invited criticism when the companies behind the original leaks weren’t named or punished.

Even so, in a nod to concerns of small fi rms worried about the burden of compliance, the FSA is expected to take a ‘soft’ approach and executives that break the rules will not face crimi-nal penalties such as fi nes – unlike the United States.

That approach has won the backing

of investors and companies alike.“There’s a concern about enforce-

ment. Many small and mid-sized firms wouldn’t be able to respond to those rules,” said Shota Watanabe,

fund manager at Rheos Capital Works which manages assets of around $1.8bn, adding that overall he sup-ported the rules.

“Rules that are too onerous could

turn into a policy that kills young en-trepreneurs and leaves only large fi rms standing.”

An FSA panel discussing the rules met for a fi nal time yesterday, and the

agency will likely submit legislation to parliament next year after details on what the rules will say are hammered out.

“For people who don’t know Japan but are looking to make investments, clearly defi ned rules will give them more faith in the system,” said Yuji Mano, a member of the FSA panel and general manager of investor relations at trading house Mitsui & Co Ltd.

Currently, Tokyo bourse rules for companies cover how they release in-formation such as share off erings, changes in capital or major sharehold-ers as well as earning results or revisions to performance estimates.

Areas that might be covered by the new FSA rules include unpublished in-formation on companies or fi nancial products that could infl uence share prices if made public.

The plans come amid a slew of other reforms to boost corporate governance under Abe’s administration.

In October, Japan’s securities indus-try body introduced guidelines on how analysts should gather information from listed companies in a bid to pre-vent leaks.

Last year, the Tokyo bourse also in-troduced a new governance code that while not legally binding, aims to secure equal treatment of shareholders, big and small, by companies.

Regulators are also planning new rules to improve standards in the audit-ing profession to avert scandals like last year’s $1.3bn overstatement of profi ts by Toshiba Corp, which was missed by Japan’s biggest auditor for years.

BloombergBeijing

China’s National Silicon Industry Group, a state-backed semiconductor

investment fund, is interested in acquiring a majority stake in German silicon-wafer maker Siltronic AG, the latest potential Chinese takeover that could face political opposition, according to people familiar with the matter.

The group, known as NSIG, has contacted Wacker Chemie AG about potentially acquir-ing the Munich-based chemical maker’s 58% stake in Siltronic, said the people, who asked not to be identifi ed because discus-sions are private. The deal faces several hurdles including the Chinese fund’s unwillingness to pay a premium to the current market value and growing re-sistance among German and US offi cials to allow Chinese pur-chases of semiconductor-relat-ed assets, the people said.

Wacker Chemie may be reluc-tant to sell, particularly at a low price, and discussions are at an early stage, the people said. Sil-tronic has also drawn interest from other Chinese bidders, the people said. If NSIG does agree to buy the 58% stake, it would normally be required to make an off er to remaining shareholders under German rules.

Siltronic shares jumped as much as 6.6% in Frankfurt after the takeover interest was report-ed. The stock gained 2.7% to €40 at 12:36pm local time, a record high. The shares have risen 77% this year, giving the company a market value of about €1.2bn ($1.3bn).

A representative for NSIG couldn’t be immediately reached for comment. Wacker Chemie is still seeking to reduce its stake in Siltronic “in the medium term,” Christof Bachmair, a company spokesman, said by phone yes-terday. He declined to comment further. A representative for Sil-tronic declined to comment.

NSIG, which was established in 2015 by China to invest in firms that make equipment and materials for semiconduc-tors, has made investments in Europe this year including Finnish silicon wafer producer Okmetic Oyj. Last year, Wack-er Chemie spun off Siltronic, the third-biggest maker of the hyper-pure silicon wafers used by chipmakers, to focus on its chemicals and poly-silicon di-visions.

Siltronic to attracttakeoverinterest from NSIG

ReutersTokyo

Japanese investors’ binge buying of US bonds has come to an abrupt halt as they contend with the huge loss-

es incurred when Donald Trump was elected president – triggering a wave of Treasury selling in the expectation of loose fi scal policies under the incoming administration.

Having bought some $290bn of US debt in the last two years, Japanese in-vestors face double blows: First from the sharp falls in Treasury prices, and second because they paid sky-high pre-miums for currency hedging.

The cost of hedging has risen partly because of higher short-term dollar interest rates and, ironically, because Japanese investors face higher currency

swap costs – caused by their huge de-mand for hedging.

In the near term the damaged port-folios are likely to limit risk appetite, with investors crystallising their losses potentially worsening already battered market sentiment, bond traders and in-vestors say.

“If you were in charge of foreign bonds portfolios at a Japanese bank, it would be kind of a hell,” said a deriva-tive trader at a Japanese brokerage, who has long experience of trading foreign bonds.

“We’ve gone through a market where your year’s worth of income gains are being wiped out in just three hours,” the derivatives trader said.

With Japanese bond yields falling be-low zero after the Bank of Japan adopted negative rates earlier this year, Japanese investors have been major investors

in US bonds in 2016. Bank of America Merrill Lynch’s US Treasury index fell 2.7% in November, its biggest fall since January’s market turmoil, when it fell 3.1%.

For many foreign investors, falling bond prices were mitigated or even off -set by the corresponding rise in the dol-lar. But for many Japanese investors the real return is worse because they have paid for currency hedging.

For instance, they typically paid around an annualised 1.6% to invest in 10-year US Treasuries yielding 1.8%, leaving them a meagre return of 0.2% – a strategy that is attractive only for in-vestors who have smaller bond returns at home.

“Our New York trading desk is very keen to know Japanese investors’ fl ows... If they pull out, that is going to have a consequence for the markets,”

said a director of fi xed income at a for-eign brokerage, who spoke on the con-dition of anonymity.

Japanese investors became net sell-ers of foreign bonds in the week of No-vember 14-18, selling ¥260.6bn worth in their fi rst net selling in seven weeks, Ministry of Finance data showed.

The following week, they bought ¥112.3bn net, less than average weekly net buying of more than ¥500bn so far this year.

The 10-year US Treasuries yield stood near 16-month high of 2.41% yesterday, and some investors think they could snare a bargain by buying bonds after the surge in yields.

“US bond yields have risen so much when we don’t even know the line-up of Trump’s cabinet.

So to me all the talk that rising in-fl ation justifi es the rise in yields seems

a bit phoney,” said Akira Takei, fund manager at Asset Management One.

“The market will be volatile for some time, but I think the yields have already hit a near-term peak.”

And those still interested in Treasur-ies say there has not been any change in the fundamental reasons behind the stampede into US bonds – the lack of decent returns on domestic bonds.

But with the end of 2016 approach-ing, a time when many institutions close their books, selling by Japanese investors trying to minimise their ex-posure could become a self-reinforcing avalanche of losses.

“If their selling continues in Decem-ber, we could see nasty spiral, because in December many fi nancial institu-tions limit their trading ahead of their book-closing at the end of year,” said a trader at a Japanese bank.

Japan investors’ stampede into US bonds ends

Japanese regulators are planning new rules to improve standards in the auditing profession to avert scandals like last year’s $1.3bn overstatement of profits by Toshiba, which was missed by Japan’s biggest auditor for years.

PBoC headache worsens as $50,000 conversion quota loomsBloombergBeijing

People’s Bank of China governor Zhou Xiaochuan already has one policy headache with the cur-

rency falling to near an eight-year low. He could have an even bigger one next month.

That’s when a $50,000 cap on how much foreign currency individuals are allowed to convert each year resets, potentially aggravating capital out-fl ow pressures that are already on the rise. If just 1% of China’s almost 1.4bn people max out those limits, that’s an outfl ow of about $700bn – more than the estimated $620bn that Bloomberg Intelligence estimates indicate has al-ready fl owed out in the fi rst 10 months of this year.

Middle class and wealthy Chinese have been converting money into other currencies to protect them-selves from devaluation, exacerbating downward pressure on the yuan. Out-fl ows could intensify if Federal Reserve interest-rate hikes fuel further dollar appreciation.

That leaves Zhou in a bind identi-fi ed by Nobel-prize winning econo-mist Robert Mundell as the “impossi-ble trinity” – a principle that dictates nations can’t sustain a fi xed exchange rate, independent monetary policy, and open capital borders all at the same time.

“At a moment like this, you have to compare two evils and pick the less-worse one,” said George Wu, who worked as a PBoC monetary policy offi cial for 12 years. “Capital free fl ow may have to be abandoned in order to maintain a relatively stable currency rate.”

China is moving further away from balance among trinity variables, at least temporarily, and “it may take a while before the situation stabilises” for the yuan and capital outfl ows, said Wu, who’s now chief economist at Huarong Securities Co in Beijing.

The global landscape complicates policy. Japan and Europe remain frag-ile, with negative policy rates. And in addition to a likely Fed hike in two weeks, US President-elect Donald Trump, who has criticised China’s trade and currency policy, takes offi ce on January 20.

“How the Chinese government re-sponds to this and how the new US ad-ministration responds to the Chinese government’s responding to this is the kind of stuff to watch,” Paul Gruen-wald, chief Asia-Pacifi c economist at S&P Global. “China’s authorities have to fi gure out what the best combina-tion is.”

Gruenwald identifi ed three options to counter the outfl ows: capital con-trols, burn their international reserves or let the currency weaken.

A mix of all three has already been occurring as policymakers opt to pre-serve monetary policy independence above all else. With economic growth stabilising – a report on Thursday showed the offi cial factory gauge matched a post-2012 high – the PBoC has kept its main policy benchmarks on hold for more than a year and has been using new open market liquidity tools to eff ectively tighten monetary conditions.

So rather than raise borrowing costs to try to make domestic returns more attractive – China has added new re-strictions on the fl ow of money across its borders. They include a pause on some foreign acquisitions and bigger

administrative hurdles to taking yuan overseas, people familiar with the steps have told Bloomberg News.

The off shore yuan headed for its biggest weekly advance in more than 10 months late Friday after money-market rates climbed, policymakers tightened curbs on capital outfl ows and the dollar’s three-week rally fal-tered.

China should cut intervention in foreign exchange markets while step-ping up capital control, Yu Yongding, a former academic member of the PBoC’s monetary policy commit-tee, said yesterday at a conference in Beijing. Yuan internationalisation shouldn’t be promoted too aggres-sively, said Yu, a senior research fellow at the Chinese Academy of Social Sci-ences.

PBoC deputy governor Yi Gang said on Sunday that foreign reserves are “very ample” and the yuan will remain stable, while Guan Tao, a former of-fi cial with the State Administration of Foreign Exchange, wrote in a com-mentary on Thursday that yuan bears were being stubborn.

SAFE, which executes currency policy, and PBoC didn’t reply to faxed requests for comment.

About $1.5tn has exited the country since the beginning of 2015, Bloomb-erg Intelligence estimates show. While China still has the world’s largest for-eign exchange stockpile, the hoard shrank in October to a fi ve-year low of $3.12tn, PBoC data show. That means there’s less in the armoury to battle depreciation if China’s famously frugal savers park more cash abroad.

The outfl ow pressure rose in January as individuals socked away a record amount in domestic bank accounts denominated in other currencies.

Household foreign deposits surged 8.1% to $97.4bn, according to the cen-tral bank, for the biggest jump since it began tracking the data in 2011. Those holdings stood at $113.1bn in October.

The start of next year is likely to bring an even bigger jump in such transactions because many Chinese expect the dollar to strengthen, ac-cording to Ding Shuang, head of China economic research at Standard Char-tered in Hong Kong.

That means policymakers are likely to draw more on reserves to protect the yuan because they prioritise keeping it stable, Ding said. Capital controls also are likely, especially those to curtail outbound foreign direct investment that’s being used solely as a vehicle to move capital out, he said. Ministry of Commerce data show January to Oc-tober ODI jumped 53.3% from a year earlier.

If the country stays committed to capital account liberalisation, it should strengthen the use of inter-est-rate instruments to infl uence the yuan exchange rate indirectly so as not to frighten away global investors, according to Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd in Hong Kong.

“Further delay in interest-rate re-form will make Chinese assets less attractive,” Yeung wrote in a recent note. “The free fl ow of capital is criti-cal to China’s fi nancial sector develop-ment, which will benefi t from higher involvement of foreign institutional investors.”

For now, the entry door is still open-ing, with new trading links and in-creased access to its capital markets. It’s the exit door that is going the other way as the impossible trinity bites.Xiaochuan: Facing tough times.

CURRENCIESDOLLAR QATAR RIYAL SAUDI RIYAL UAE DIRHAMS BAHRAINI

DINARKUWAITI

DINAR

Stocks slide as European political fears top agendaAFPLondon

European stocks fell yesterday in nervy trade before Italy’s crunch referendum and Austria’s elec-

tions, amid fears that both could send shockwaves reverberating across mar-kets.

London’s FTSE 100 was 0.3% down at 6,730.72 points, Frankfurt’s Dax 30 slipped 0.2% down at 10,513.35 points, Paris’ Cac 40 ended 0.7% down at 4,528.82 points and Milan’s FTSE MIB dipped 0.07% down at 17,087 points at close yesterday. The Euro Stoxx 50 ended 0.3% down at 3,020.93 points.

“European equities fi nished the week on a downbeat note, with most major indices ending both the day and the week lower,” said market analyst Jasper Lawler at CMC Markets.

“Rising political risk in Europe is seeing funds fl ow to the US where

companies potentially stand to benefi t from lower taxes and regulation under Donald Trump,” he added.

In New York, US stocks were most-ly higher after data showed the US unemployment rate dropped in No-vember to its lowest level since Au-gust 2007, all but guaranteeing an in-terest rate hike by the Federal Reserve later this month.

The jobless rate fell three-tenths of a percentage point to 4.6%, with a solid 178,000 net new positions created, in line with analysts’ expectations.

Despite an interest rate hike being positive for the dollar, it was down against the euro, yen and pound in late European trading, which analysts put down to the markets having already priced in a December move by the Fed.

But analyst Ipek Ozkardeskaya at London Capital Group warned that “the outcome of the (Italian) referen-dum could have a signifi cant impact on the short-term euro volatility”.

The expected rejection by voters

of the referendum “could lead to PM Renzi’s resignation and turbulence in the markets at the political upheaval,” said XTB analyst David Cheetham.

However, trader Markus Huber at City of London Markets told AFP that “even if the No vote in Italy wins and Austria will get a far right president, any jitters this might cause for the markets should be short lived”.

He pointed out the ECB has pledged to stand behind Italy if there were li-quidity problems and that an increase to US growth from the economic poli-cies of incoming US president Donald Trump was more important.

“A booming USA will help the en-tire global economy and the eurozone therefore (will be) much less prone to any crisis as investors won’t lose faith and keep investing,” said Huber.

Oil prices drifted higher yesterday, but were up considerably over the week due to Opec’s decision Wednesday to cut oil production.

Brent soared over 13% over the week.

Traders work at their desks in front of the DAX board inside the Frankfurt Stock Exchange yesterday. The Dax 30 index slipped 0.2% down at 10,513.35 points at close.

BUSINESS5Gulf Times

Saturday, December 3, 2016

Apple IncMicrosoft Corp

Exxon Mobil CorpJohnson & JohnsonGeneral Electric Co

Jpmorgan Chase & CoProcter & Gamble Co/The

Wal-Mart Stores IncVerizon Communications Inc

Pfizer IncVisa Inc-Class A Shares

Chevron CorpCoca-Cola Co/The

Intel CorpMerck & Co. Inc.

Cisco Systems IncHome Depot Inc

Intl Business Machines CorpWalt Disney Co/The

Unitedhealth Group Inc3M Co

Mcdonald’s CorpNike Inc -Cl B

United Technologies CorpBoeing Co/The

Goldman Sachs Group IncAmerican Express Co

Du Pont (E.I.) De NemoursCaterpillar Inc

Travelers Cos Inc/The

109.42

59.07

87.71

112.02

31.40

81.40

82.55

70.87

49.94

31.68

75.80

113.20

40.32

33.89

61.30

29.44

129.86

159.33

98.53

161.07

173.23

118.12

50.38

108.51

151.98

223.00

72.29

73.55

96.01

115.87

-0.06

-0.22

0.54

0.57

0.03

-0.48

0.84

0.28

0.15

0.70

0.49

-0.08

0.37

0.37

0.89

-0.03

0.30

-0.31

-0.41

0.08

0.35

-0.30

-0.53

0.96

-0.27

-1.60

-0.33

-0.10

-0.24

0.40

9,529,341

7,531,951

3,082,675

1,913,257

6,748,537

6,485,503

2,646,902

1,949,174

3,024,926

6,308,303

5,540,935

1,536,155

3,541,325

8,240,874

1,758,888

7,050,645

1,299,355

1,158,982

2,159,839

1,103,291

590,780

1,005,826

2,439,571

834,372

714,580

2,360,326

977,098

761,708

1,921,416

439,879

DJIA

Company Name Lt Price % Chg Volume

Wpp PlcWorldpay Group Plc

Wolseley PlcWm Morrison Supermarkets

Whitbread PlcVodafone Group Plc

United Utilities Group PlcUnilever Plc

Tui Ag-DiTravis Perkins Plc

Tesco PlcTaylor Wimpey Plc

Standard Life PlcStandard Chartered Plc

St James’s Place PlcSse Plc

Smith & Nephew PlcSky Plc

Shire PlcSevern Trent Plc

Schroders PlcSainsbury (J) Plc

Sage Group Plc/TheSabmiller Plc

Rsa Insurance Group PlcRoyal Mail Plc

Royal Dutch Shell Plc-B ShsRoyal Dutch Shell Plc-A Shs

Royal Bank Of Scotland GroupRolls-Royce Holdings Plc

Rio Tinto PlcRexam Plc

Relx PlcReckitt Benckiser Group Plc

Randgold Resources LtdPrudential Plc

Provident Financial PlcPersimmon Plc

Pearson PlcPaddy Power Betfair Plc

Old Mutual PlcNext Plc

National Grid PlcMondi Plc

Merlin EntertainmentMediclinic International Plc

Marks & Spencer Group PlcLondon Stock Exchange Group

Lloyds Banking Group PlcLegal & General Group PlcLand Securities Group Plc

Kingfisher PlcJohnson Matthey Plc

Itv PlcIntu Properties Plc

Intl Consolidated Airline-DiIntertek Group Plc

Intercontinental Hotels GrouInmarsat Plc

Informa PlcImperial Brands Plc

Hsbc Holdings PlcHargreaves Lansdown Plc

Hammerson PlcGlencore Plc

Glaxosmithkline PlcGkn Plc

Fresnillo PlcExperian Plc

Easyjet PlcDixons Carphone Plc

Direct Line Insurance GroupDiageo Plc

Dcc PlcCrh Plc

Compass Group PlcCoca-Cola Hbc Ag-Di

Centrica PlcCarnival Plc

Capita PlcBurberry Group Plc

Bunzl PlcBt Group Plc

British Land Co PlcBritish American Tobacco Plc

Bp PlcBhp Billiton Plc

Berkeley Group Holdings/TheBarratt Developments Plc

Barclays PlcBae Systems Plc

Babcock Intl Group PlcAviva Plc

Astrazeneca PlcAssociated British Foods Plc

Ashtead Group PlcArm Holdings Plc

Antofagasta PlcAnglo American Plc

Admiral Group Plc3I Group Plc

#N/A

1,660.00

260.20

4,670.00

217.70

3,403.00

191.60

881.00

3,111.00

1,037.00

1,364.00

206.80

150.60

345.60

649.00

938.50

1,474.00

1,116.00

771.00

4,609.50

2,124.00

2,789.00

229.10

640.00

0.00

530.00

464.70

2,156.00

2,051.00

193.80

659.50

3,014.00

0.00

1,338.00

6,580.00

5,835.00

1,561.50

2,854.00

1,697.00

784.00

8,340.00

184.50

4,860.00

905.80

1,585.00

432.10

683.00

327.30

2,682.00

57.54

242.40

958.50

350.10

3,084.00

167.60

262.60

416.60

3,245.00

3,218.00

705.50

640.50

3,408.50

629.50

1,181.00

535.00

279.15

1,468.00

304.20

1,203.00

1,510.00

972.50

345.10

347.90

1,955.00

5,935.00

2,586.00

1,333.00

1,630.00

208.20

3,885.00

543.00

1,416.00

2,039.00

358.20

588.00

4,344.50

467.20

1,309.00

2,753.00

474.80

212.65

594.50

949.00

444.20

4,061.00

2,566.00

1,540.00

0.00

694.00

1,210.50

1,843.00

681.50

0.00

0.00

-1.10

0.11

1.68

-0.38

0.31

0.97

0.45

-1.98

0.81

0.61

0.60

0.17

-0.15

-0.42

1.38

0.90

-0.32

1.21

0.52

0.14

0.17

-1.31

0.00

-0.47

2.09

-1.01

-1.06

-2.95

-3.30

-0.46

0.00

-0.74

-0.72

2.28

-1.05

-0.80

-0.41

0.19

-0.30

-0.59

-0.35

0.79

0.19

-0.37

-1.09

0.40

-0.07

-0.09

0.04

2.08

0.63

-0.64

-1.41

-0.15

-1.37

-0.37

-1.26

0.43

0.47

1.90

-0.13

0.43

0.47

-1.55

-0.03

-0.65

1.78

0.67

-2.41

0.20

1.25

-0.58

0.25

-1.49

0.30

-0.18

-0.53

-1.02

1.50

0.43

0.30

1.42

1.47

0.81

-0.61

-2.24

8.17

1.56

-2.92

-0.59

-0.16

-0.38

-0.47

0.98

-0.65

0.00

-1.63

0.25

-0.22

-0.29

0.00

1,743,703

2,513,488

498,144

4,735,798

235,376

59,743,526

1,278,243

1,101,028

365,632

554,568

8,927,396

11,581,574

2,760,298

7,514,074

540,590

1,850,086

2,034,139

2,599,945

1,526,128

480,984

106,899

5,153,437

1,850,434

-

1,239,385

3,426,101

2,217,910

3,143,345

9,810,944

2,638,732

1,908,399

-

2,508,886

1,197,590

485,004

4,388,015

120,159

744,932

1,341,764

41,063

5,618,700

181,590

5,319,276

1,086,959

1,078,205

1,140,353

2,366,815

276,182

69,518,910

11,613,585

2,158,190

4,889,023

191,387

9,041,056

2,174,281

3,313,031

170,918

203,711

1,068,973

592,367

1,072,025

17,112,066

349,991

3,169,062

25,240,795

4,309,727

1,617,521

656,397

1,509,536

1,358,967

2,140,063

1,516,448

3,008,783

107,076

1,343,177

2,681,662

274,810

7,940,602

493,043

2,572,076

758,570

428,123

8,808,456

1,466,959

1,611,043

17,992,090

4,874,274

1,859,317

3,222,678

36,952,376

4,206,103

943,036

2,915,255

1,900,882

377,643

1,233,417

-

2,718,965

5,782,139

400,618

1,237,106

-

FTSE 100

Company Name Lt Price % Chg Volume

East Japan Railway CoItochu Corp

Fujifilm Holdings CorpYamato Holdings Co Ltd

Chubu Electric Power Co IncMitsubishi Estate Co Ltd

Mitsubishi Heavy IndustriesToshiba Corp

Shiseido Co LtdShionogi & Co Ltd

Tokyo Gas Co LtdTokyo Electron Ltd

Panasonic CorpFujitsu Ltd

Central Japan Railway CoT&D Holdings Inc

Toyota Motor CorpKddi Corp

Nitto Denko Corp

9,618.00

1,593.00

4,243.00

2,307.00

1,599.00

2,319.00

523.90

427.50

2,896.50

5,320.00

496.30

10,025.00

1,204.50

680.70

18,230.00

1,491.00

6,686.00

2,953.50

8,180.00

-1.12

0.41

-0.54

0.74

-0.40

-0.77

0.58

0.00

-0.70

-1.06

-1.10

-4.39

1.18

-2.14

-1.94

0.40

-0.31

-1.37

-0.33

1,196,400

7,990,300

1,385,500

1,490,500

1,549,400

5,194,000

19,400,000

38,316,000

2,825,900

1,224,700

10,659,000

1,506,400

16,593,700

15,881,000

550,900

3,861,200

9,195,100

7,836,200

1,002,700

TOKYO

Company Name Lt Price % Chg Volume

Rakuten IncKyocera Corp

Nissan Motor Co LtdHitachi Ltd

Takeda Pharmaceutical Co LtdJfe Holdings Inc

Ana Holdings IncMitsubishi Electric Corp

Sumitomo Mitsui Financial GrHonda Motor Co Ltd

Fast Retailing Co LtdMs&Ad Insurance Group Holdin

Kubota CorpSeven & I Holdings Co Ltd

Inpex CorpResona Holdings Inc

Asahi Kasei CorpKirin Holdings Co Ltd

Marubeni CorpMitsubishi Ufj Financial Gro

Mitsubishi Chemical HoldingsFanuc Corp

Daito Trust Construct Co LtdOtsuka Holdings Co Ltd

Oriental Land Co LtdSekisui House Ltd

Secom Co LtdTokio Marine Holdings Inc

Aeon Co LtdMitsui & Co Ltd

Kao CorpDai-Ichi Life Holdings Inc

Mazda Motor CorpKomatsu Ltd

West Japan Railway CoMurata Manufacturing Co Ltd

Kansai Electric Power Co IncDenso Corp

Sompo Holdings IncDaiwa House Industry Co Ltd

Jx Holdings IncNippon Steel & Sumitomo Meta

Suzuki Motor CorpNippon Telegraph & Telephone

Ajinomoto Co IncMitsui Fudosan Co Ltd

Ono Pharmaceutical Co LtdDaikin Industries Ltd

Bank Of Yokohama Ltd/TheToray Industries IncAstellas Pharma Inc

Bridgestone CorpSony CorpHoya Corp

Sumitomo Mitsui Trust HoldinJapan Tobacco Inc

Osaka Gas Co LtdSumitomo Electric Industries

Daiwa Securities Group IncSoftbank Group Corp

Mizuho Financial Group IncNomura Holdings Inc

Daiichi Sankyo Co LtdFuji Heavy Industries Ltd

Ntt Docomo IncSumitomo Realty & Developmen

Sumitomo Metal Mining Co LtdOrix Corp

Asahi Group Holdings LtdKeyence Corp

Nidec CorpIsuzu Motors Ltd

Unicharm CorpShin-Etsu Chemical Co Ltd

Smc CorpMitsubishi CorpNintendo Co Ltd

Eisai Co LtdSumitomo Corp

Canon IncJapan Airlines Co Ltd

1,143.00

5,468.00

1,074.00

621.50

4,678.00

1,748.00

310.00

1,575.00

4,483.00

3,367.00

40,660.00

3,672.00

1,747.00

4,311.00

1,193.50

591.40

1,007.50

1,807.50

645.10

726.10

729.00

19,450.00

17,650.00

4,518.00

6,396.00

1,848.50

8,266.00

5,065.00

1,574.50

1,596.50

5,166.00

1,931.00

1,882.50

2,666.00

6,812.00

15,100.00

1,161.00

4,913.00

3,814.00

3,250.00

471.00

2,535.50

3,790.00

4,529.00

2,252.50

2,748.00

2,505.50

10,620.00

0.00

921.60

1,554.00

4,220.00

3,168.00

4,465.00

4,355.00

3,844.00

435.90

1,620.50

710.80

6,880.00

211.60

682.00

2,412.00

4,682.00

2,597.00

3,230.00

1,574.00

1,761.50

3,627.00

76,030.00

10,200.00

1,370.00

2,408.00

8,611.00

29,980.00

2,526.00

27,045.00

6,584.00

1,392.00

3,301.00

3,315.00

0.00

0.37

-0.19

0.44

0.17

2.10

0.16

-0.19

2.89

-0.85

0.49

0.22

-0.99

-3.06

0.04

5.14

1.54

-2.95

0.22

5.68

-0.90

-0.33

-1.31

-1.22

-1.31

-1.52

-0.80

1.40

-0.44

0.63

-1.71

2.17

-0.42

-1.15

-1.40

-3.30

0.56

-2.01

-0.24

-0.67

0.45

1.36

-0.86

-1.99

-0.40

0.15

-0.58

-0.75

0.00

-0.88

-0.51

-1.56

-2.49

-1.52

2.71

-2.44

-0.80

0.25

1.56

0.09

3.07

4.84

-0.74

-0.43

-1.40

0.31

2.04

-0.06

-1.97

-2.89

-2.58

-1.01

-0.82

-0.32

-7.01

0.40

-3.20

0.18

0.87

0.52

0.45

TOKYO

Company Name Lt Price % Chg

Aluminum Corp Of China Ltd-HBank Of East Asia Ltd

Bank Of China Ltd-HBank Of Communications Co-H

Belle International HoldingsBoc Hong Kong Holdings Ltd

Cathay Pacific AirwaysCk Hutchison Holdings Ltd

China Coal Energy Co-HChina Construction Bank-H

China Life Insurance Co-HChina Merchants Port Holding

China Mobile LtdChina Overseas Land & Invest

China Petroleum & Chemical-HChina Resources Beer Holdin

China Resources Land LtdChina Resources Power Holdin

China Shenhua Energy Co-HChina Unicom Hong Kong Ltd

Citic LtdClp Holdings Ltd

Cnooc LtdCosco Shipping Ports Ltd

Esprit Holdings LtdFih Mobile Ltd

Hang Lung Properties LtdHang Seng Bank Ltd

Henderson Land Development

3.54

31.80

3.54

5.84

4.43

28.65

10.38

93.80

3.85

5.80

21.70

19.30

84.30

22.35

5.46

16.02

18.92

12.80

16.00

9.50

11.78

73.60

10.34

7.82

6.50

2.52

17.02

145.80

42.30

-0.84

-0.93

-0.56

-1.52

-1.99

-1.38

-0.95

-0.95

0.00

-0.85

-2.69

-0.41

-1.92

-1.32

-1.62

-3.38

-1.46

-0.62

0.00

-3.36

-1.67

-2.26

-0.39

0.13

1.72

-0.79

-1.85

-0.27

-1.51

18,717,846

957,508

252,382,308

51,137,929

13,252,293

14,898,397

4,456,423

3,617,300

20,058,528

665,432,328

61,592,120

3,520,924

13,882,718

19,089,474

141,152,561

5,129,617

10,687,071

3,662,016

29,708,166

74,054,180

8,254,747

5,371,984

101,157,379

1,577,803

1,353,872

3,662,922

2,805,628

1,591,587

1,858,484

HONG KONG

Company Name Lt Price % Chg Volume

Hong Kong & China GasHong Kong Exchanges & Clear

Hsbc Holdings PlcHutchison Whampoa Ltd

Ind & Comm Bk Of China-HLi & Fung Ltd

Mtr CorpNew World Development

Petrochina Co Ltd-HPing An Insurance Group Co-H

Power Assets Holdings LtdSino Land Co

Sun Hung Kai PropertiesSwire Pacific Ltd - Cl ATencent Holdings Ltd

Wharf Holdings Ltd

14.12

202.80

61.15

0.00

4.75

3.35

37.85

8.62

5.49

41.90

71.70

11.64

101.00

76.50

191.00

55.65

-1.26

-0.69

0.00

0.00

-0.84

-1.47

-0.79

-0.92

-0.54

-1.87

-1.78

-0.85

-0.49

-0.65

-1.80

-1.94

27,761,413

4,548,475

51,498,578

-

444,445,752

27,258,764

7,303,552

11,458,146

219,334,782

31,710,659

3,874,340

5,077,432

3,916,040

1,119,790

31,654,894

8,961,118

HONG KONG

Company Name Lt Price % Chg Volume

Zee Entertainment EnterpriseYes Bank Ltd

Wipro LtdVedanta Ltd

Ultratech Cement LtdTech Mahindra Ltd

Tata Steel LtdTata Power Co Ltd

Tata Motors LtdTata Consultancy Svcs Ltd

Sun Pharmaceutical IndusState Bank Of India

Reliance Industries LtdPunjab National Bank

Power Grid Corp Of India LtdOil & Natural Gas Corp Ltd

Ntpc LtdMaruti Suzuki India Ltd

Mahindra & Mahindra LtdLupin Ltd

Larsen & Toubro LtdKotak Mahindra Bank Ltd

Itc LtdInfosys Ltd

Indusind Bank LtdIdea Cellular Ltd

Icici Bank LtdHousing Development Finance

Hindustan Unilever LtdHindalco Industries Ltd

Hero Motocorp LtdHdfc Bank Limited

Hcl Technologies LtdGrasim Industries Ltd

Gail India LtdDr. Reddy’s Laboratories

Coal India LtdCipla Ltd

Cairn India LtdBosch Ltd

Bharti Airtel LtdBharat Petroleum Corp Ltd

Bharat Heavy ElectricalsBank Of Baroda

Bajaj Auto LtdAxis Bank Ltd

Asian Paints LtdAmbuja Cements Ltd

Adani Ports And Special EconAcc Ltd

443.10

1,150.15

460.40

223.05

3,585.65

473.40

406.40

73.45

432.90

2,221.85

720.35

254.10

994.75

134.00

183.80

291.25

161.65

5,068.10

1,145.55

1,489.10

1,361.85

723.55

228.50

964.50

1,056.50

73.45

259.50

1,236.80

831.45

168.75

3,183.65

1,189.10

793.60

872.80

432.90

3,180.50

305.85

571.20

245.90

20,361.65

318.60

608.15

126.90

161.10

2,701.35

459.95

904.85

205.05

265.90

1,325.70

-3.17

-0.93

-1.69

-1.70

0.42

-0.35

-0.78

0.82

-3.41

-1.84

-0.16

-0.61

-0.30

-1.72

-0.27

-0.31

-0.15

-3.50

-1.25

-1.56

-1.91

-2.87

-2.14

-1.14

-2.24

0.89

0.14

-2.61

-1.96

-1.52

-0.21

-0.68

-1.18

-0.02

-1.54

-1.80

-0.15

0.53

-1.58

-0.10

0.13

-3.30

-1.44

-0.31

0.24

-1.31

-3.65

-0.89

-3.34

-0.92

SENSEX

Company Name Lt Price % Chg

WORLD INDICESIndices Lt Price Change

GCC INDICESIndices Lt Price Change

Dow Jones Indus. AvgS&P 500 Index

Nasdaq Composite IndexS&P/Tsx Composite Index

Mexico Bolsa IndexBrazil Bovespa Stock Idx

Ftse 100 IndexCac 40 Index

Dax IndexIbex 35 Tr

Nikkei 225Japan Topix

Hang Seng IndexAll Ordinaries Indx

Nzx All IndexBse Sensex 30 Index

Nse S&P Cnx Nifty IndexStraits Times Index

Karachi All Share IndexJakarta Composite Index

19,192.41

2,195.90

5,271.87

15,082.95

44,828.91

59,913.44

6,737.14

4,533.63

10,511.51

8,620.70

18,426.08

1,477.98

22,564.82

5,502.63

1,287.25

26,230.66

8,086.80

2,919.37

29,944.55

5,245.96

+0.48

+4.82

+20.77

+55.42

-55.95

+406.90

-15.79

-26.98

-22.54

-48.50

-87.04

-5.29

-313.41

-57.73

-4.80

-329.26

-106.10

-9.21

+167.79

+47.20

Doha Securities MarketSaudi Tadawul

Kuwait Stocks ExchangeBahrain Stock Exchage

Oman Stock MarketAbudhabi Stock MarketDubai Financial Market

9,913.75

7,093.66

5,569.00

1,177.72

5,590.16

4,308.77

3,360.91

+119.92

+93.48

+14.54

+3.61

+102.48

+47.54

+27.18

“Information contained herein is believed to be reliable and had been obtained from sources believed to be reliable. The accuracy and completeness cannot be guaranteed. This publication is for providing information only and is not intended as an off er or solicitation for a purchase or sale of any of the financial instruments mentioned. Gulf Times and Doha Bank or any of their employees shall not be held accountable and will not accept any losses or liabilities for actions based on this data.”

5,988,300

1,320,600

14,059,900

22,235,000

2,482,300

5,775,100

17,290,000

8,169,100

20,689,100

4,686,400

573,000

1,771,000

2,977,800

5,036,900

9,768,700

34,880,500

8,096,000

4,740,800

9,965,700

297,846,300

7,085,400

820,800

460,200

1,701,200

909,100

3,637,700

716,300

4,422,100

2,057,100

10,732,500

2,864,500

9,458,100

6,230,300

5,793,000

1,020,800

1,519,100

2,677,300

2,563,900

2,336,600

2,123,600

17,746,600

3,920,300

2,674,700

4,917,700

3,779,700

6,688,000

2,728,900

948,700

-

8,459,000

7,799,000

3,784,000

11,228,000

1,423,300

2,395,600

6,295,100

6,685,000

3,301,700

15,097,000

5,436,900

450,876,200

80,844,100

2,684,200

3,891,400

4,961,600

3,277,000

3,218,000

7,045,900

1,659,600

260,700

1,062,400

3,431,700

2,121,000

1,729,900

864,000

5,364,900

2,340,400

943,200

4,817,300

4,806,100

2,510,300

2,141,683

2,819,957

818,146

9,440,107

273,520

2,833,811

4,159,969

6,815,673

11,699,249

1,039,628

3,428,888

23,268,358

3,043,278

13,300,008

6,282,755

5,592,926

3,061,063

829,106

1,182,095

655,665

913,328

3,366,849

8,981,521

2,316,150

1,681,412

14,556,065

12,245,577

2,893,284

686,150

12,107,599

330,336

1,215,362

1,106,468

1,344,121

1,919,603

369,412

3,636,979

1,072,417

2,050,901

12,751

1,769,815

5,418,141

3,722,975

11,058,758

238,716

7,015,767

2,271,537

2,454,603

3,004,039

204,066

ACROSS7. Revolt (5)8. Amaze (7)9. Go on (7)10. Incited (5)12. Brave (10)15. Presided (10)18. Rascal (5)19. Overdue (7)21. Equilibrium (7)22. Pretend (5)

DOWN1. Suitable (10)2. Detest (5)3. Hint (4)4. Indulge (6)5. Wrestle (8)6. Cell (7)11. Inharmonious (10)13. Tenant (8)14. Cordial (7)16. Strolled (6)17. Sober (5)20. Raise (4)

ACROSS7. Being unsophisticated could be almost venial (5)8. Tell a fanciful tale from Cremona (7)9. Purple dye changes the look of a name-tag (7)10. Annoyed by one charge (5)12. Produces paper money and keeps a brief account (5,5)15. Key operated by the right hand (6,4)18. Recover from a number of strokes (5)19. One doesn’t care to show this (7)21. No agent will modify the weight (7)22. Money needed for animal shelter (5)

DOWN1. Wind instrument (10)2. Use a bit of paint in getting a particular shade (5)3. Sea-bird to change course, we hear (4)4. Mysterious start to the contest in the arena, maybe (6)5. Nice beam will transform the environment (8)6. A little child preceding a Spanish princess (7)11. The trade see it as an occasion for increasing egg sales (10)13. Raise a shout in a road - a very narrow one (8)14. Refuse to show signs of age (7)16. Put in tins and drunk! (6)17. Species of ruminants round the East (5)20. Substitutes stop in front of these (4)

Quick CluesCryptic Clues

QUICKAcross: 1 Descended; 8 Ice; 9 Subtraction; 11 Stetson; 12 Dross; 13 Radish; 15 Retina; 17 Alibi; 18 Timothy; 20 Nightingale; 22 Rue; 23 Reservoir.Down: 2 Emu; 3 Earns; 4 Decent; 5 Dwindle; 6 Sinfonietta; 7 Necessary; 10 Breadwinner; 11 Streamers; 14 Snigger; 16 Status; 19 Minor; 21 Lei.

CRYPTICAcross: 1 Canisters; 8 Net; 9 Shop steward; 11 Repulse; 12 Issue; 13 Peruse; 15 Sherpa; 17 Scuba; 18 Parable; 20 Immediately; 22 Set; 23 Resisting.Down: 2 Ash; 3 Sisal; 4 Eleven; 5 Spanish; 6 Undesirable; 7 Stalemate; 10 Opportunity; 11 Repossess; 14 Slammer; 16 Spades; 19 Reaps; 21 Len.

Weekly’s Solutions

Adam

Pooch Cafe

Garfi eld

Bound And Gagged

Sudoku is a puzzle

based on a 9x9 grid.

The grid is also

divided into nine

(3x3) boxes. You are

given a selection of

values and to com-

plete the puzzle,

you must fill the

grid so that every

column, every row

and every 3x3 box

contains the digits

1 to 9 and none is

repeated.

Sudoku

Weekly’s Solutions

BUSINESS/LEISURE

Gulf Times Saturday, December 3, 20166

Mall Cinema (1): Katapana (Malayalam) 2pm; Katapana (Malayalam) 4:30pm; The Unmarried Wife (2D) 7pm; The Unmarried Wife (2D) 9:15pm;Saithan (Tamil) 11:30pm. Mall Cinema (2): Trolls (2D) 2:15pm; Al Bab Yewfet Amel (Arabic) 4pm; Lion (2D) 5:45pm; Underworld: Blood Wars (2D) 8pm; Underworld: Blood Wars (2D) 9:45pm; Underworld: Blood Wars(2D) 11:30pm. Mall Cinema (3): Manyan Puli (Telugu) 2:30pm; The Edge Of Seventeen (2D) 5:30pm; Man Down (2D) 7:30pm; Lion (2D) 9:15pm;Kahaani 2 (Hindi) 11:30pm. Landmark Cinema (1): The Unmarried Wife (2D) 2:30pm; Al Bab Yewfet Amel (Arabic) 5pm; Lion (2D) 6:45pm; Katapana (Malayalam)

9pm; Saithan (Tamil) 11:30pm. Landmark Cinema (2): Trolls (2D) 3pm; Underworld: Blood Wars (2D) 5pm; The Edge Of Seventeen (2D) 7pm; Underworld: Blood Wars (2D) 9pm; Underworld: Blood Wars (2D)11pm. Landmark Cinema (3): Manyan Puli (Telugu) 2:15pm; Kahaani 2 (Hindi) 5:15pm; The Unmarried Wife (2D) 7:30pm; Man Down (2D)9:45pm; Lion (2D) 11:30pm.

Royal Plaza Cinema Palace (1): Trolls (2D) 2:15pm; Underworld: Blood Wars (2D) 4pm; The Edge Of Seventeen (2D) 5:45pm; Underworld: Blood Wars (2D) 7:45pm; Underworld: Blood Wars

(2D) 9:30pm; Katapana (Malayalam)11:15pm.

Royal Plaza Cinema Palace (2): Katapana (Malayalam) 2:30pm; Man Down (2D) 5:15pm; The Unmarried Wife (2D) 7pm; Kahaani 2 (Hindi) 9:15pm; Underworld: Blood Wars(2D) 11:30pm.

Royal Plaza Cinema Palace (3): Kahaani 2 (Hindi) 2:30pm; The Unmarried Wife (2D) 5pm; Al Bab Yewfet Amel (Arabic) 7:15pm; Lion(2D) 9pm; Saithan (Tamil) 11:15pm. Asian Town Cinema: Saithan (Tamil) 12:30, 8:45, 11:15pm & 1:30am; Katapana (Malayalam) 12:30, 3:15, 6, 8:45, 11:30pm, 1:30 & 2am; Thoppil Joppan (Malayalam) 12:30, 5:45 & 11pm; Manyam Puli (Telugu) 2:45pm; Dear Zindagi (Hindi) 3pm; Kahaani 2 (Hindi) 12:45 & 6pm; Puli Murugan(Malayalam) 5:45pm.

Apple said to fl y dronesto improve Maps dataBloombergSan Francisco

Apple plans to use drones and new indoor navigation fea-tures to improve its Maps

service and catch longtime leader Google, according to people familiar with the matter.

The Cupertino, California-based company is assembling a team of robotics and data-collection experts that will use drones to capture and update map information faster than its existing fl eet of camera-and-sensor ladened minivans, one of the people said.

Apple wants to fl y drones around to do things like examine street signs, track changes to roads and monitor if areas are under construc-tion, the person said. The data col-lected would be sent to Apple teams that rapidly update the Maps app to provide fresh information to users, the person added.

Apple is also developing new features for Maps, including views inside buildings and improvements to car navigation, another person familiar with the eff orts said. The people asked not to be identifi ed talking about private projects. An Apple spokeswoman declined to comment.

Five years after Google Maps launched on the iPhone, Apple’s mapping app was introduced in 2012 with glaring errors like a gro-cery store marked as a hospital and an incorrect airport address. Ap-ple lacked the technology needed to quickly suck in data from many diff erent sources to evaluate and change the digital maps.

“There’s a huge data-quality issue

there, and I don’t think we initially appreciated all the kinds of technol-ogy we would need to do that on an ongoing basis,” Craig Federighi, Ap-ple’s senior vice-president of soft-ware engineering, told Fast Com-pany earlier this year.

Digital maps are crucial tools for Apple and Google to attract de-velopers that build popular travel, ride-sharing, and retail apps and services that integrate with the companies’ mobile operating sys-tems. Collecting accurate data is the most important part of digital map building and Apple’s latest moves could help it match the pro-digious capabilities of Google in this field.

Since Apple Maps launched, the company has improved the app by more quickly updating data, adding a mode for navigating public transit systems, improving search results, and opening the platform to outside services such as Uber ride-hailing and OpenTable restaurant reserva-tions. The drone initiative is a con-tinuation of this eff ort and is un-likely to be related to a commercial Apple drone product.

Apple fi led for an exemption on September 21, 2015, from the Fed-eral Aviation Administration to fl y drones for commercial purposes, according to documents obtained by Bloomberg News. At that time, exemptions were required to com-mercially operate drones. In a re-sponse dated March 22, 2016, the FAA granted Apple approval to “op-erate an unmanned aircraft system to conduct data collection, photog-raphy, and videography,” according to one of the documents.

Apple’s application told the FAA that it would use a range of drones

sold by companies such as SZ DJI Technology Co and Aibotix to col-lect the data.

Offi cial guidelines for commer-cial drone operation were instated in August, restricting fl ying to mostly daytime hours and requiring li-censed pilots to operate the equip-ment while keeping the drones in their line of sight. Apple committed to these guidelines, according to the FAA documents.

The current rules restrict com-mercial drones from fl ying over people and buildings, potentially limiting Apple’s initiative for the time being. Apple could meanwhile fl y the drones in the US within FAA guidelines and fl y without restric-tion in countries without commer-cial drone regulations.

Apple has hired at least one per-son from Amazon.com’s Prime Air division to help run the drone team, one of the people said. Prime Air is Amazon’s initiative to quickly de-liver packages via drones. The Apple team is being assembled in Seattle, the same city as Amazon’s head-quarters, the person said.

Beyond better data collection, Apple is developing an indoor map-ping view that would allow users to navigate airports, and other high-traffi c buildings like museums us-ing iPhones, according to another person.

Apple acquired startup Indoor.io last year to help bring its indoor mapping project to market, accord-ing to another person familiar with the matter. Apple confi rmed the purchase, but declined to say why it did the deal. The company also bought WiFiSlam in 2013, another startup with indoor navigation ex-pertise.

BUSINESS

Gulf Times Saturday, December 3, 20168

GM’s ready to lose $9,000 a popand chase the electric car boomBloombergSouthfield

General Motors Co stands to lose as much as $9,000 on every Chevrolet Bolt that leaves a

showroom once the all-electric sub-compact starts rolling out. Sounds crazy, but the damage makes perfect business sense under the no pain, no gain policy driving the electric-vehicle boom in the US.

California crafted the doctrine, with tough clean-air rules and a mandate that automakers sell some non-pollut-ing vehicles if they want to do business in the Golden State. Nine others have adopted it, New York and New Jersey among them, and all told they make up close to 30% of the US market. That goes a long way to explaining why zero-emissions models from more than 10 brands are on the roads, with more on the way. Most are destined to be loaded with red ink for their makers, but they’ll be great deals for consumers as compa-nies unload them to meet their targets.

While the Trump administration may dilute federal programmes that take aim at carbon-dioxide spewing cars, California won’t be backing down, certainly not during Governor Jerry Brown’s term. The most populous state is such a powerhouse – roughly one in eight new vehicles was registered there in the fi rst half of the year – that com-panies will keep spitting out electrics for the privilege of selling everything else in their lineups.

“California will continue to act as the ballast, as the centre of gravity, for clean air and climate policies in the US,” said Levi Tillemann, author of

The Great Race, a book on the future of automobile technology. “Trump will thrust the state back into the role of clean-air crusader, and that’s a banner a lot of people in California don’t mind carrying.”

Where it’ll get interesting is over the next decade or so. The states’ rules are set to tighten so that zero-emission ve-hicles, or ZEVs, will have to rise to an estimated 15.4% of sales by 2025, some fi ve times the current level.

The hurdles may go higher: Brown, a Democrat with two years left in his term, signed a law ordering green-house-gas emissions be 40% below 1990 levels by 2030. To get there, ZEVs, plug-in hybrids or fuel-cell cars like Honda Motor Co’s Clarity may have to comprise 40% of sales, up from about 3% now, according to California Air Re-sources Board staff projections.

Can that really happen? “The idea that automakers will sell 40% of their vehicles at a loss in California is ludicrous,” said Eric Noble, president of the CarLab, a consulting company in Orange, Califor-nia, who reckons most electric cars lose at least $10,000 per sale.

The industry’s willing to take the hit on a small scale now. Fiat Chrysler Au-tomobiles’ battery-powered Fiat 500e is made for California alone, and chief executive offi cer Sergio Marchionne said in 2014 that it was losing $14,000 per sale. The company’s pretty much giving it away, at a monthly lease-rate of as little as $69. Nissan Motor Co has advertised lease deals for the Leaf at as low as $149.

Of course, the industry might fi g-ure out how to make ZEVs into money makers, once the charging-station in-frastructure is built out and as battery

costs fall. Global demand seems sure to rise, with major economies, includ-ing China, having recognised climate change as a threat and tailpipe-emis-sions from gas- powered autos as a chief contributor.

The US has a ZEV incentive of its own, off ering a $7,500 tax credit to buyers, and also gives credits to manu-facturers to reward them for cars that meet greenhouse-gas reduction targets set by the Obama administration.

There’s no indication President-elect Donald Trump has a view on these enticements. While he has dismissed global warming as “nonsense,” he told the New York Times he has an “open mind” on scientists’ overwhelm-ing consensus that human activity is warming the planet. Key members of his transition team have rejected that notion or contend the dangers are ex-aggerated.

The Alliance of Automobile Manu-facturers, the industry’s main trade group, has asked Trump to consider their state ZEV costs when evaluating the feasibility of rules set under Presi-dent Barack Obama to boost average fuel economy standards by 2025.

Over the next eight years, the elec-tric-vehicle demands will impose costs of up to $40bn on companies that they’ll pass on to customers, accord-ing to the group. The miles-per-gallon standard, which is 35.3 for 2016, will under the rules go to 50.8 – a number the industry contends could make cars prohibitively expensive.

Whatever happens in the national capital, California, a largely left-lean-ing state, will be where the power is for years to come. The bill that estab-lished its greenhouse-gas targets was

championed by then-Governor Ar-nold Schwarzenegger, a Republican. Two California cities, Los Angeles and Bakersfi eld, are the most smog- and particulate-laden in the US Brown has called climate change “the existential threat of our time.”

And California is where ZEVs are being dumped. More than half of all electrics were sold there in the fi rst six months of 2016, according to IHS Markit Ltd.

Under the rules, GM needs to sell enough Bolts that it can go to town on other vehicles, including pickups and SUVs, which is where the big money is. The Bolt’s anticipated per-sale loss of roughly $8,000 to $9,000 is an esti-mate based on a sticker price of $37,500, according to a person familiar with the matter. A GM spokesman declined to comment on the expected profi tability.

But GM has reasons beyond compli-ance to promote the Bolt, according to Tim Mahoney, Chevy’s chief marketing offi cer. For one thing, it lures young-er, technologically savvy buyers who probably wouldn’t have considered Chevrolet, he said. “It’s a statement about what we can do for the Chevy brand.”

The Bolt has a 238-mile range, which gives it an edge over mass-market electrics that have been around for a while; the Leaf can go 107 miles on a single charge, the Fiat 500e just 85. GM will also have a jump on Tesla Mo-tors’ fi rst and hotly anticipated mass-market off ering, the Model 3, due late next year. The Bolt will be available in California and Oregon this month, with states added through 2017. GM also plans to sell the Bolt in China and Eu-rope.

Here’s how the math works for GM in California. Let’s say it sells a total of 219,962 vehicles in one model year (as it did, in fact, in 2015). To avoid heavy fi nes or the threat of getting shut out entirely, it would need state-awarded ZEV credits equal to 14% of the total – or 30,794. That would mean fi nding buyers for 7,698 Bolts, earning four credits for each, or 10,082 Chevy Volt plug-in hy-brids or a combination of the two.

“EVs are compliance vehicles and GM knows this,” said the CarLab’s No-ble. “The Bolt will take sales from all of the other vehicles on the market, and GM will get a lot of credits.”

The more ZEVs a company peddles to the public, the more credits it earns, and those with a surplus can sell them to competitors that are falling behind. As an electric-only manufacturer, Tesla has been able to really tap the program. In the third quarter, it made $139mn selling credits, which helped Tesla hit its second-ever quarterly profi t on a GAAP basis. The biggest buyer in the 11 months ending in August was Fiat Chrysler; GM purchased the smallest amount.

Tesla CEO Elon Musk has called California’s ZEV bar “pathetically low,” saying on an earnings call in August that “there’s massive lobbying by the big-car companies to prevent CARB from increasing the ZEV credit man-date, which they absolutely damn well should.”

Some see the future in zero- and low-emissions, with or without incen-tives. Toyota Motor Corp has said it will stop making virtually all gasoline-burning models by 2050, and Volkswa-gen has laid out plans to be selling 1mn battery-powered cars annually by 2025.

German car sales bounce back inNovember

AFPFrankfurt

German car sales rose in

November, recovering from an

earlier dip and setting the stage

for a strong end to the year, of-

ficial data showed yesterday.

A total of 276,567 new cars were

registered last month, up 1.5%

on the same month last year,

according to the KBA transport

authority.

The uptick is welcome news

for the industry after fewer

selling days in October saw

car registrations, seen as a key

indicator of demand in Europe’s

top economy, plunge by 5.6%.

The VDA car makers’ federa-

tion separately said that for the

whole of 2016 it expected car

sales to grow by 5% to nearly

3.4mn vehicles, “the highest lev-

el since the start of the decade”,

president Matthias Wissmann

said in a statement.

Sales were boosted by Ger-

many’s robust economy, he

said, with low unemployment

and high wages pushing up

demand, while consumers also

took advantage of cheap financ-

ing options.

The VDA expects “similarly

high” sales in 2017, he added.

Despite the dieselgate scandal,

market leader Volkswagen

managed to retain nearly 20% of

the German car market between

January and November, though

sales were down 3.4% compared

to a year earlier, the KBA said.

BUSINESS9Gulf Times

Saturday, December 3, 2016

India’s NSE chief resigns just months before public issueBloombergMumbai

Chitra Ramkrishna has resigned as chief executive off icer of the National Stock Exchange of India (NSE) just months before the exchange plans to go public.Ramkrishna, 53, quit due to personal reasons, according to a statement from the bourse operator, which didn’t provide further details. Managing Director J Ravichandran has been appointed interim CEO, it said. A search is underway for the next chief executive.“Ms Ramkrishna had tendered her resignation due to personal reasons and expressed her desire to step down with immediate eff ect,” NSE said in a statement yesterday. “The board, while accepting her request, appreciated her sterling contribution to the growth of the organisation over the long years that she had been associated with it.”The NSE appointed bankers including Citigroup and Morgan Stanley

in August, as the nation’s largest exchange prepared to go public early next year. The NSE will file a draft off er document with the market regulator for a domestic listing by January, it said in a statement in June.“The market won’t take a bearish call on the resignation,” said Chinmay Madgulkar, an analyst at Taurus Asset Management Co in Mumbai. “NSE is an institution and no person is greater than the institution.”Ravichandran “has been associated with NSE for long years and brings with him a wealth of experience and full understanding of the functioning of the organisation,” NSE said in the statement.The bourse plans to list so it can give shareholders a chance to exit, Ramkrishna said in an interview in July. In the past two decades she helped grow the NSE into the exchange leader in India, with an 82% market share. Last month, she became the first female to be named chairperson of the World Federation of Exchanges.

Ramkrishna took over as CEO in April 2013 after serving as co-managing director. Before joining NSE, she was working at the state-run Industrial Development Bank of India, or IDBI, after earning degrees in commerce and an accountancy in Mumbai, where she was brought up after being born

in Chennai. In 1992, she and four other technocrats were selected for a team to build the first nationwide exchange. Ramkrishna was the only woman, picked because of her experience at IDBI in the 1980s working on a blueprint for a national regulatory agency that led to SEBI’s creation. The team was

mandated to develop technology to move trading from open-outcry to electronic, untested in India at the time. Going up against a Goliath, the Mumbai Stock Exchange, the group worked out of a tiny, leased off ice in a part of central Mumbai known for its defunct textile mills.The NSE developed a screen-based trading system that started in 1994. Using a satellite, it displayed stock prices that could be accessed simultaneously at brokerages nationwide. Among other innovations, NSE introduced refundable membership for brokers, replacing BSE’s earlier system of auctioning broker permits that restricted the number of participants and trading volumes. Nearly 60% of NSE’s broking membership in the early days came from cities other than Mumbai.The changes helped NSE charge well ahead of its older rival and into the dominant position it holds today.“From the outside, the day to day

business at the NSE was managed well and it was functioning smoothly,” UR Bhat, a Mumbai-based investor, said by phone. “The exchange managed to hold on the lead over the other exchanges and expanded it well.”That wasn’t enough for Ramkrishna, who told Bloomberg News last year she was aiming to increase individual participation in her market. Just an estimated 1.5% of Indian households directly own equities.Ramkrishna said she wanted to make stock markets accessible to India’s middle classes using the exchange-traded funds. Under her leadership NSE held public financial awareness programmes and continued a marketing push to get banks and brokerages to encourage investors to put their money into ETFs.“The focus of the new chief executive must be to expand the size of the entire market, and not just the segment that caters to derivative traders,” said Deven Choksey, managing director at KR Choksey Shares & Securities in Mumbai.

Emerging equities and currencies remain weakReutersLondon

Emerging equities fell more than 1% yesterday and currencies weakened

after strong US data raised the spectre of faster US Federal Reserve rate rises, while South African markets were jittery before a sovereign debt ratings review.

Tracking dips on developed bourses, the benchmark emerg-ing stocks index extended the previous day’s retreat to hit a 10-day low as investors shunned riskier assets, though ear-lier gains meant the index was poised to end the week just 0.7% lower.

The sovereign spread over US Treasuries on the JPMorgan EMBI Global Diversified added 2 basis points (bps) to 364 bps and was flirting with recent

multi-month highs. The spread has widened by 34 bps since the US election.

An acceleration in US fac-tory activity in November has fuelled expectations that the Fed could raise interest rates faster than previously expected, push-ing 10-year Treasury yields to 18-month highs on Thursday.

Markets now await US non-farm payrolls due out later in the day.

“The risk is that a strong print in the payrolls may fi rm the hand of the Fed,” said Cristian Maggio, head of emerging markets strat-egy at TD Securities.

“Pretty much everybody is expecting a hike of 25 bps in December, but it’s about what comes next — the strength of the US

economy is one of those fac-tors that will determine how ag-gressively the Fed tightens mon-etary policy next year.”

Asian markets set the weaker tone with Chinese mainland shares down 1% and Hong Kong stocks down 1.4%, but the sell-ing extended into the European trading session.

South African stocks were among the biggest fallers, down almost 1.4%, while the rand weakened as much as 0.15% against the dollar ahead of a sovereign debt ratings review by Standard & Poor’s.

Africa’s most industrialised country has been trying to avert a sovereign rating downgrade to junk status that would raise bor-rowing costs and deter invest-ment.

“They have had a negative outlook on for a year so given that the political and econom-ic situation has deteriorated there’s a very good chance they will resolve that outlook into a downgrade,” Maggio said, adding the rand had out-

performed many of its peers since June and was now over-valued in his view.

“The market has become overly optimistic on South Afri-ca — it has priced in for too long without any solid reason that (President Jacob) Zuma may end his term prematurely.”

The yield premium paid by South African sovereign bonds over US Treasuries widened out by 2 bps to 299 basis points, the widest level since mid-November.

The Russian rouble weakened 0.4% against the dollar after oil prices gave up some of the week’s gains, slipping almost 1%.

Brazil’s real extended losses overnight, down around 3% against the dollar to trade around six-month lows.

Traders fear that friction between lawmakers and pros-ecutors could increase political instability and delay the ap-

proval of austerity measures, while the economy continues to shrink.

The Korean won also weak-ened 0.4%, pressured by plans for a December 9 impeach-ment vote on President Park Geun-hye, who has already of-fered to resign over allegations of collusion with a friend.

In emerging Europe, the Polish zloty weakened 0.1% against the euro to trade at fi ve-month lows ahead of another S&P ratings re-view, where some traders fear a downgrade.

Its ‘BBB+’ rating is on negative outlook, and a rise in govern-ment spending may put further pressure on Poland’s ratings, analysts have said.

“We expect (the zloty) to re-main under pressure in coming months, with euro/zloty break-ing 4.50 in H1 2017,” Rafal Be-necki, ING’s chief economist for Poland, said in a note.

Asian markets turn negative as traders adopt a cautious approach AFPHong Kong

Asian stocks turned negative yesterday and oil prices retreated along with the dollar as investors took a step back from a recent rally, while cau-

tion set in ahead of a crunch referendum in Italy at the weekend.

World markets have been rising since Donald Trump’s shock US election win on hopes his big-spending, tax-cutting policies will boost the world’s largest economy.

The advance was given extra impetus on Wednesday when Opec agreed on a plan to cut oil production, send-ing prices soaring.

But James Woods, global investment analyst at Rivkin Securities in Sydney, told Bloomberg News: “Markets have rallied pretty strongly and we had three fantastic weeks but buying pressure certainly looks exhausted.

“We will see some corrective declines and profi t tak-ing.”

Japan’s Nikkei, which on Thursday closed at its high-est level this year, slipped 0.5%, while Hong Kong gave up 1.4% and Shanghai slipped 0.9%.

Sydney fell 1% and Seoul shed 0.7%, while Singapore gave back 0.3%. Wellington and Taipei were also down.

In early European trade London fell 0.8%, Frankfurt shed 0.9% and Paris slipped 0.7%.

Japanese exporters retreated on the back of a strength-ening yen.

In afternoon trade the dollar bought ¥114.05, having fl irted with ¥115 earlier this week, which was a nine-month high.

On oil markets both main contracts dipped marginally after racking up double-digit gains in the previous two days in reaction to Opec’s output-cutting deal.

Traders are now awaiting key events at the weekend.The US jobs report for November could give an indica-

tion of the Federal Reserve’s plans for interest rates over the next year. And on Sunday Italy goes to the polls for a constitutional referendum, with Prime Minister Matteo Renzi saying he will resign if his government loses, lead-ing to a possible general election.

While experts say the chances of a Eurosceptic party gaining power is low, there are worries about the uncer-tainty it could create in one of the EU’s biggest econo-mies.

Also Sunday Austrians will vote for a new president, with Norbert Hofer seeking to become Europe’s fi rst far-right president since 1945.

While the post is largely ceremonial, a win for Hofer would be a major symbolic victory for populists – many of whom are anti-EU – across Europe ahead of several elections in 2017.

In Tokyo, the Nikkei 225 down 0.5% to 18,426.08 points; Hong Kong – Hang Seng down 1.4% to 22,564.82 points and Shanghai – Composite down 0.9% to 3,243.84 points at the close yesterday.

Sensex sheds 329 points; rupee up to 68.23 a dollarAgenciesMumbai

Extending its losses for the second day, benchmark Sensex tumbled 329 points

to end at 26,231 yesterday as in-vestors hit the exit button amid mounting global concerns. Par-ticipants are in a wait-and-watch mode ahead of US jobs report as well as Italy’s constitutional ref-erendum on Sunday, which could determine whether or not the country will remain in the euro-zone.

Caution also prevailed ahead of the Reserve Bank’s policy re-view next week, leading to fall in banking counters. The BSE Sensex resumed lower at 26,437.37 and hovered in a range of 26,463.06 and 26,182.93 before closing 329.26 points, or 1.24%, lower at 26,230.66, its lowest closing since November 28. The gauge has dropped by 422.15 points or 1.58% in two days. The NSE 50-share Nifty dropped by 106.10 points or 1.30% to close at 8,086.80 after moving in a range of 8,159.30 and 8,070.05.

“Since morning, the market was following the rising global anxiety over today’s US employment data and the forthcoming Italian con-stitutional referendum.

While RBI’s market stabilisa-tion scheme (MSS) to suck the excess liquidity out of the system provided some short-lived relief to banks, the ongoing GST Coun-cil meet and issues related to dual control and implementation dis-rupted the investors’ mood,” said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.

Sustained foreign capital out-fl ows also aff ected the market sen-timent. Foreign funds sold shares worth a net Rs402.62 crore on Thursday, as per provisional data released by the stock exchanges. For the week, the Sensex and Nifty both recorded losses by falling 85.68 points, or 0.32%, and 27.50

points, or 0.33%, respectively. All the sectoral indices, led by con-sumer durables, FMCG and auto, ended with losses up to 2.32% as selling pressure intensifi ed.

Meanwhile the rupee strength-ened for the fourth consecutive sessions against the dollar ahead of the US non-payroll data.

The rupee closed at 68.23 a dol-lar, up 0.18% from its previous close of 68.35.

The home currency opened at 68.29 against the US dollar. So far this year, it has fallen 3.04%.

On the domestic front, traders are cautious ahead of the Reserve Bank of India’s bi-monthly policy on December 7. Most of the bro-kerages expect the RBI to cut rates by 25 basis points. One basis point is one-hundredth of a percentage point.

Traders are also cautious ahead of the Italian referendum sched-uled for Sunday and mid-Decem-ber US Federal Reserve policy.

Bond yield gained after the gov-ernment raised the limit on bonds it issued to the Reserve Bank of In-

dia to help it mop up excess liquid-ity in the fi nancial system. The cap on the so-called Market Stabili-sation Scheme was increased to Rs6tn from Rs300bn for the year ending March 2017, Bloomberg re-ported.

The benchmark 10-year gov-ernment bond yield closed at 6.243%, compared to Thursday’s close of 6.215%. Bond yields and prices move in opposite direc-tions.

So far this year, foreign insti-tutional investors have bought

$4.15bn in equities and sold $3.68bn in debt. Asian currencies were trading higher. Indonesian rupiah was up 0.392%, Singapore dollar 0.246%, Malaysian ringgit 0.231%, Philippines peso 0.192%, Japanese yen 0.158% and Thai Baht 0.149%. However, South Ko-rean won was down 0.431% and China renminbi 0.038%.

The dollar index, which meas-ures the US currency’s strength against major currencies, was trading at 100.98, down 0.06% from its previous close of 101.04.

The Bombay Stock Exchange building is seen in Mumbai. The Sensex closed down 1.24% to 26,230.66 points yesterday.

Ramkrishna: On the way out.

BUSINESS

Gulf Times Saturday, December 3, 201610

Plaza memories may unnerve Trump-fuelled dollar bullsReutersLondon

Parallels between Donald Trump’s US eco-

nomic plan and early 1980s Reaganomics

have supercharged the dollar, reminding

some that its rampant gains 30 years

ago eventually required intervention to

reverse them.

The greenback’s surge under then-

president Ronald Reagan was so powerful

that by 1985 it required a rare international

accord between the world’s five leading

economic powers and their central banks

to weaken the currency — the so-called

Plaza Accord, named after the New York

hotel where the deal was inked.

Trump — who purely coincidently

owned the Plaza for a while after the ac-

cord — has pledged a $1tn fiscal package

of tax cuts and infrastructure spending

over 10 years.

This follows a path set by Reagan in

the early 1980s and markets are taking

their cue. The rise in US bond yields and

expected path for interest rates based on

growth prospects has boosted the dollar’s

five-year rally, lifting the currency to a

14-year high.

Most observers expect it to appreciate

next year as the US economy outperforms

and the Federal Reserve raises rates while

other major economies and central banks

lag behind.

But the dollar can only rise so much

without harming US manufacturing, a sec-

tor Trump has promised to support.

Memories linger of the three mn manu-

facturing jobs lost in the early 1980s under

Reagan before the historic agreement in

1985 between the Group of Five leading

economies to bring the dollar down.

Nigel Lawson, British finance minister in

1985 and a signatory of the Plaza Accord,

notes that the drive to weaken the dollar

then was led by Washington.

“The Plaza agreement was a US initia-

tive,” Lawson told Reuters in an email.”In

present circumstances, that seems

unlikely to occur.” Jim O’Neill, former chief

economist at Goldman Sachs who was cut-

ting his teeth in currency markets in New

York at the time of the accord, agrees that

no action will be taken yet.

But history shows that dollar apprecia-

tion always ends up being met with resist-

ance from Washington. “Dollar expansions

usually end when US policymakers stop

them and say ‘enough is enough’,” O’Neill

said.”It’s inevitable that Washington curbs

the dollar rally at some point.

It’s illogical that the US can tolerate a

sharp rise in the trade-weighted dollar.”

While there are parallels today with the

early 1980s, there are also huge diff er-

ences.

When Reagan entered the White

House in 1981 the US current account was

broadly balanced. But the dollar’s surge

and debt-driven consumer boom blew

it out to a deficit of around 3% of gross

domestic product by Plaza.

The deficit today is just over 2% of GDP

compared with a record 6% a decade

ago, but could start to widen again if a

Trump boom emerges to widen the US

growth and yield gap with the rest of the

developed world.

Another diff erence is the level of US

interest rates and inflation.

Back then, Fed chief Paul Volcker

crushed 15% inflation by virtually doubling

interest rates to 18% in 1981.

US inflation and rates may be moving

higher again, but from historically low

levels. They pale against Volcker/Reagan

era, even if the path for US policy and the

dollar appears to be diverging widely with

Europe and Japan. Then there’s emerging

markets, and China in particular. Emerg-

ing markets now account for more than

half global economic output and have

stockpiled trillions of dollars of foreign

exchange reserves, much of that banked

in US bonds. The electronic flow of capital

across borders has never been greater or

faster.

Thirty five years ago their presence on

the global economic and financial stage

was negligible. China’s weighting in the

trade-weighted dollar in 1981 was less than

1.5%. Today, it is almost 22%.

China is now the world’s second biggest

economy, the largest international creditor

to the United States, and dollar-denom-

inated borrowing in emerging markets

runs into the trillions of dollars.

The stock of dollar-denominated debt

of non-banks outside the United States

currently stands at just under $10tn, of

which $3.3tn is in emerging markets,

according to the Bank for International

Settlements.

African bourses urged to increase products to stem outfl ows

ReutersKigali

African exchanges should seek the elimination of capital gains tax on their

securities and roll out new products like derivatives in the face of decreased interest from foreign investors, market par-ticipants said.

Global funds, who sought Af-rican assets in the years up to 2015, have been cutting their holdings, due to the commodity price crash last year and the an-ticipated interest rates increase in the United States.

Adding to the challenge, eco-nomic growth in Africa is pro-jected to be the slowest in two decades this year, refl ected in bourses like Nigeria, where daily volumes have shrunk by two thirds to $10mn, as foreign in-vestors quit, put off by the slow-down and capital controls.

Karim Hajji, the chief execu-tive of the Casablanca Stock Ex-change, said other economies should learn from that.

“I don’t think governments should impose capital controls or things like that because that doesn’t work,” he said, adding that incentives like removal of capital gains tax would help.

Morocco, which does not levy a capital gains tax on stock in-vestments, is enjoying a 20% rally this year, bucking the trend among others on the continent where prices are down.

Executives of stock markets and brokerages gathered at a meeting of the African Securities Exchange’s Association (ASEA) in Rwanda this week said introduction of addi-tional investment products would help curb outfl ows.

“Our markets are really crying out for product development.

We have been playing vanilla for too long,” said Kenneth Min-jire, head of securities at Nairo-bi-based Genghis Capital.

African bourses rely too heav-ily on stocks and bonds and in-vestors usually say they are small and illiquid. The introduction of derivatives like stocks and cur-rency futures will help to boost liquidity and attract new inves-tors, Minjire said.

Only South Africa’s JSE off ers derivatives like commodity con-tracts on the continent.

Kenya’s Nairobi Securities Exchange, has been testing its derivatives trading platform, whose launch has been post-poned several times, but it is now expected next year.

“We are looking at the deriva-tives market coming into life and we are looking at new products,” Geoff rey Odundo, the chief ex-ecutive of the NSE, said, add-ing the bourse wanted to off er currency futures and exchange traded funds.

Oscar Onyema, the chief ex-ecutive of the Nigeria Stock Ex-change, whose bourse was ham-mered due to exchange controls earlier this year, said governments needed to make it easier for global funds to gain access to trading in-cluding allowing investors to lend and borrow securities.

“African capital markets need to work with the government to make sure the ease of do-ing business, the environment is highly de-risked such that it is attractive for global fl ows to come here,” he said.

Gold seen at risk of losses in ’17 as interest rates to climbBloombergSingapore

The worst is yet to come. At least that’s the opinion of the top two gold forecasters who say bul-

lion will suff er further losses in 2017 as interest rates climb and the dollar strengthens.

Oversea-Chinese Banking Corp and ABN Amro Group see gold sliding to $1,100 an ounce by the end of next year as the Federal Reserve tightens monetary policy, real Treasury yields increase and the US currency rises. The banks were ranked fi rst and sec-ond as forecasters in the third quar-ter, according to data compiled by Bloomberg.

After briefly soaring to $1,337.38 as it became clear that Donald Trump was about to pull off a shock vic-tory in the US presidential election, gold slumped to a nine-month low of $1,171.18 last week on speculation that his pledges to increase spend-ing and revitalise the economy would boost interest rates and augment the attraction of other investments such as stocks and bonds.

“From an investor point of view there is little reason to hold gold,” said Geor-gette Boele, a currency and commodity strategist at ABN Amro. “Rising infl a-tion expectations are more than coun-tered by the rise in US Treasury yields and expectations about upcoming rate hikes by the Fed.

As long as real yields rise and there are no major infl ation fears, prices will go lower.”

Global bond yields have climbed to 1.58% from a record low 1.07% in July, according to the Bloomberg Barclays Global Aggregate Index.

The odds of the Federal Reserve hik-ing in December are 100%, up from 69% a month ago, before the election, and a gauge of the dollar against its major peers surged to the highest level since at least 2005 last week.

Investors are dumping bullion at the fastest pace since 2013. Assets in bullion-backed exchange-traded funds have shrunk 5.3% in November, the biggest monthly drop since June of that year.

Billionaire Stan Druckenmiller sold all his gold on election night. “All the reasons I owned it for the last couple of years seem to be end-ing,” he said in a CNBC interview shortly after the vote.

Investors pulled $4.4bn from ex-

change-traded funds backed by pre-cious metals, the biggest redemption among all asset classes off ered in such funds globally that are tracked by Bloomberg.

Money is moving out of gold and other precious metals as US equities rally to a record and traders boost bets on further rate increases.

Boele from ABN Amro sees the nega-tive environment for gold continuing into next year, with a recovery for pric-es expected in 2018.

The bank cut its prediction for the end of 2017 from $1,150. Before the US election, Boele was already bear-

ish, lowering her outlook in Octo-ber. Barnabas Gan, an economist at OCBC in Singapore, was predicting $1,100 by the end of next year before the US election.

He kept to that view in a note this week and cut his call for the end of this year to $1,200 from $1,300. He’s factoring in three rates hikes - one in December and two in 2017 - which will drag bullion down to his target by the end of next year.

“Political uncertainties continue to persist,” Gan said. “Note the upcoming Italian referendum as well as next year’s French election. Contrast this with the

relative certainty over US economic growth under President-elect Trump’s proposed fi scal plans which gives rise to refl ationary and higher US rates ex-pectations into 2017.”

While Gan and Boele already saw lower prices for next year before the US election, a Trump win was interpreted as bullish in a Bloomberg survey of more than 20 traders and analysts pub-lished before the vote.

A victory for the Republican was seen pushing Comex gold futures to $1,395 within a week. Instead, the re-verse happened.

Not everyone is bearish going into

2017. Bullion may average $1,300 next year, says Robin Bhar, head of metals research at Societe Generale in London, the third-best gold forecaster in the data compiled by Bloomberg.

“All in all, gold prices are at the mercy of risk appetite. Buying on dips is likely to provide support giv-en a view that gold is a good portfolio diversifier, hedge, insurance policy,” Bhar said in an e-mail last week.

At the same time, he acknowl-edged the downside risks because changes in fiscal policy could push real interest rates higher, offsetting haven demand.

EU lawmakers set to soften risk retention in ABS overhaulBloombergBrussels

European Union lawmakers plan to soften draft rules on asset-backed securities (ABS) after

concerns that an earlier proposal would hinder a market-revival drive.

Negotiators for the main political parties in the European Parliament’s Economic and Monetary Aff airs Com-mittee agreed to give ground on risk-retention levels, the most contentious aspect of their initial plan.

The risk-retention requirement is intended to make sure issuers maintain “skin in the game,” so their incentives are aligned with those of investors.

Under legislation presented last year by the European Commission, at least 5% of a bundled loan portfo-lio must be retained by the originator.

The parliament’s lead lawmaker on the bill, Paul Tang, countered with a pro-posal of 20%.

On November 30, lawmakers settled on two levels, 10% and 5%, depend-ing on the retention arrangement, ac-cording to a draft document seen by Bloomberg.

The parliament may face pushback from EU member states and the com-mission, but as the commission “might be in a hurry to adopt these bills rela-tively soon, we doubt how much re-sistance there will be,” said Ruben van Leeuwen, a senior ABS analyst at Ra-bobank Group in Utrecht.

The Brussels-based commission presented the asset-backed debt plan in a bid to deliver as much as €150bn ($159bn) of new lending and diversify funding sources for companies tradi-tionally reliant on banks.

By bundling assets and selling

them on as securities, banks can free up balance-sheet capacity to offer new loans to companies, according to the plan.

The European market for ABS, like that in the US, was decimated in the fi -nancial panic of 2008.

This was fueled in part by banks tak-ing heavy losses on securitised US sub-prime-mortgage debt even though the tranches they held had been considered high-quality.

And the European market has been slow to recover. Issuance last year amounted to €214bn, down from 819bn euros in 2008, according to data from the Association for Financial Markets in Europe.

The push to revive the securitisa-tion market includes the creation of a new class of “simple, transparent and standardised” products that qualify for preferential capital treatment.

The compromise deal assigns broad oversight of the EU securitisation mar-ket to the Frankfurt-based European Systemic Risk Board, led by European Central Bank President Mario Draghi, while fi rm-level supervision will be handled by the European Banking Au-thority in London.

Macroprudential oversight was “in-troduced to reach the compromise,” Tang said on December 1. The idea is “to keep it on a close watch and moni-tor, but also give the supervisors the tools to intervene in case something goes wrong. They’re on the spot. The burden of proof is again and again on the supervisors.”

Tang said he “tried to break away from just the retention rate, because that’s just one number and just one in-strument.”

The parliament committee will vote on the compromise on December 8.

Under the parliament’s plan, the 10% requirement applies to so-called verti-cal retention, whereby the originator retains a portion of the nominal value of each of the tranches sold or trans-ferred to investors.

Under the horizontal option, or re-tention of the fi rst-loss tranche, the requirement is set at 5%.

“This approach would mainly aff ect arbitrage-driven transactions, as these deals will simply get less economical with higher risk retention,” van Leeu-wen said. Collateralised loan obliga-tions “could potentially be most aff ect-ed, although we note that arbitrage has recently also entered” the residential mortgage-backed securities market, he said.

In addition, the proposal requires the EBA to make a “reasoned decision on required retention rates up to 20% in light of market circumstances.”

Oversea-Chinese Banking Corp and ABN Amro Group see gold sliding to $1,100 an ounce by the end of next year as the Federal Reserve tightens monetary policy, real Treasury yields increase and the US currency rises

BUSINESS11Gulf Times

Saturday, December 3, 2016

Investor who backed Brexit sees euro breaking up within 5 yearsBloombergLondon

Jim Mellon stood out among investors in 2016 as a rare, public backer of Britain’s exit

from the European Union. Now, the chairman of the Burnbrae Group is forecasting another breakup.

Mellon, who was cited as a sup-porter of the “Leave” campaign by pro-Brexit lawmaker Michael Gove, predicts the euro will be-come a future casualty of a rising anti-establishment tide, causing the currency union to splinter within the next fi ve years.

“Brexit is going to be a side-show to the problems of Europe that are becoming more and more evident,” Mellon said. “The euro as it stands at the moment is just a very inappropriate mechanism – I give the euro between one and fi ve years of life.”

The UK’s referendum, and Donald Trump’s victory in US election this month, signalled the gathering pace of populism across the world. Now there’s growing speculation Italy’s referendum in December, and the elections in France in 2017, might result in more political upsets in Europe, causing some investors to ques-tion the future of the euro. That said, predicting the demise of the single currency is hardly a new phenomenon – in 2014 Citigroup

said there was a 90% chance of Greece leaving the bloc, a call it abandoned this year.

The euro was at $1.0646 in London after touching $1.0518 last week, the lowest since March 2015. Mellon expects the currency to fall below parity “sometime over the next year,” although is not actively selling the currency because of the chance of a short-term bounce.

That means, with the Italian referendum approaching on De-cember 4, Mellon is instead sell-ing the country’s government bonds. The Italian 10-year yield climbed to 2.23% on November 14, the highest since July 2015, but

still remains below its fi ve-year average of 3.24%. As well as the looming referendum, the bonds have been hurt by a global sell-off in fi xed income assets which has seen yields across the world climb from record-low levels.

“I have been a very big seller of any government bonds this year, anywhere basically, but my favourite are the Italian bonds,” Mellon said. “Everyone who par-ticipates in this stupid bonds market should know that there is a serious duration risk. If you buy something for a very long period with no interest rates, you are go-ing to get your head handed to you

at some point.” Mellon said he “had a good day” after the Brexit vote and his trades have returned almost 25% this year, but declined to provide further details of his performance.

Before the EU vote he said that the pound could drop to as low as $1.32 following a Brexit. The cur-rency tumbled to as low as $1.1841 last month, and was at $1.25 last week.

Five months after Brexit, the outlook for sterling remains “pretty good” and “the wor-ries about the sky falling” in aren’t materialising, according to Mellon.

Swiss industry still being squeezedby currency shockReutersZurich

Two years after the Swiss franc shock brought Switzerland to the brink of recession, Roland Goethe

is still fi ghting for the future of the sheet metal company his grandfather set up 86 years ago.

Goethe is one of many manufacturers coping with the aftermath of the Swiss National Bank’s decision in January 2015 to scrap a long-standing limit on the franc against the euro.

The decision rocked currency markets and sent the franc rocketing against the euro, the currency of Switzerland’s main export market.

Swiss economic growth slowed to 0.8% in 2015, its lowest since the fi nan-cial crisis year of 2009.

While Switzerland’s overall economy has in some parts started to recover, many small and mid-sized manufactur-ers are still struggling with falling sales and profi t margins.

“We’ve been battling the strong franc for years,” said Goethe, whose company makes metal components for air condi-tioning units, lighting installations and machine tools.

“But it was really was a shock when it went to 1-1 versus the euro last year.

We can struggle through at the mo-ment...but the situation is bitterly dif-fi cult.”

The strong franc not only hurts com-panies now but also reduces their ability to invest in technology to improve com-petitiveness.

“We are not earning enough to invest in the future,” Goethe added.”Trends like digitalisation, robotics, intelligent manufacturing are passing us by nearly untouched.”

Swiss companies have lost sales as customers chose to buy products from the cheaper eurozone, while some have shifted operations abroad.

Margins tumbled when they cut prices to remain competitive, while the franc’s rise has meant they earn less in francs from euro-denominated sales.

Goethe’s sales fell by a fi fth last year as it cut prices to limit lost orders, while its profi t margin has shrivelled to 3%.

“This year hasn’t improved,” said Goethe.”If it stays like this, there will be major problems for not just us, but for many companies across Switzerland.”

A study by industry association Swiss-Mechanic revealed half of the companies surveyed said earnings were unsatisfac-tory, while a third said they were not

making enough sales. Swissmem, anoth-er trade association, reported that sales in the fi rst nine months of 2016 were down 3.4 % from last year’s already low fi gures.

“Many businesses — particularly SMEs — are having to contend with heavy pressure on their prices and margins,” said Swissmem head Peter Dietrich.”A number of these companies are fi ghting for survival.”

Although the Swiss economy is forecast to grow 1.6% this year, dou-ble last year’s rate, industry has lagged behind.

“Much of the growth has been driven by pharmaceutical exports and im-provements in the consumer-orientated services like education and health,” said Jan-Egbert Sturm, director of the KOF research institute at the Federal Institute of Technology.

“Many parts of manufacturing will

continue to struggle.” KOF forecasts that industry will contribute 0.6 percentage points to GDP growth in 2016, falling to 0.2 percentage points in both 2017 and 2018.

Traditional manufacturing companies are among the last to recover because unlike the pharmaceuticals and medical technology sectors, their products are often highly price-sensitive, said Credit Suisse economist Oliver Adler.

“There is a restructuring under way in the Swiss economy, with small manu-facturers the ones most damaged by the franc’s increase in value,” he said.

Companies are responding by devel-oping new products and seeking new markets so they depend less on the eu-rozone.

Maprox, a maker of specialised “chuck” clamps used in the watch, med-ical, optical and automotive industry, said there are only two ways to survive —

globalisation and innovation. It is seek-ing new clients in China, Russia and Iran, and trying to increase orders in the medi-cal and aerospace sectors.

“Making a chuck may not be rock-et science, but we can develop them and make better and more individual ones,” said managing director Adrian Zwirner.

It can now make an 800mm diameter chuck from aluminium, weighing less than a third of the 50 kg steel version and thus easier to use.

Tecnopinz, which makes components for machine tools, has increased its em-phasis on smaller production volumes and advising clients on projects.

“You have to compensate with new projects — doing smaller batches of more complex projects, which need more know-how and development,” said co-owner Nicola Tettamanti.”You can’t af-ford to stand still.”

Top-performing commodity’s rally defies ETF investors’ exitBloombergLondon

Palladium prices surged more than any commodity in November, capping their biggest monthly gain since 2008. So, why are holdings of the precious metal in exchange-traded funds (ETFs) dropping at the fastest pace in more than a year? Some analysts are scratching their heads.“It’s quite surprising to see investors selling at a time when prices are rising,” said Bernard Dahdah, an analyst at Natixis in London. “This isn’t a mystery that’s easily explained.”Unlike gold or silver, a primary source of demand for palladium is from industry. Most is used in catalytic converters to reduce emissions. With signs of a rebound in global auto sales, the metal advanced 24% in November. The rally beat gains for copper and iron ore, commodities at the forefront of speculation that raw-material demand is accelerating in China.At the same time, palladium holdings by exchange-traded funds as of November 30 had tumbled 7.5% for the month to 58.2 metric tonnes, the lowest in four years, data compiled by Bloomberg show. That’s unusual because ETF flows and prices have moved in the same direction for much of the last seven years. The exodus may be a sign the rally won’t last.Prices probably don’t have much further to gain, according to Bart Melek, the head of commodity strategy at Toronto- Dominion Bank in Toronto. At the start of the year, Melek predicted palladium would reach $800. Joni Teves, a strategist at UBS Group in London, said next year’s average may be $755, below the current price.ETF holdings of palladium posted their biggest monthly decline since October 2015 and are down 20% this year, data compiled by Bloomberg show. Two funds in South Africa,

the biggest producer of the metal, accounted for almost two-thirds of the drop.“It is very surprising that ETFs haven’t followed the movement in price,” said Tom Kendall, head of precious metals strategy at ICBC Standard Bank in London. “Palladium has already gone further than anyone thought. It can only diverge from the other precious metals for so long.”Gold tumbled 8.1% in November, the worst monthly performance since June 2013, while silver slid 7.8%. The appeal of holding the precious metals, which don’t pay dividends, has been eroded by gains in the dollar and bets that the Federal Reserve will raise interest rates.Even with the large ETF sales, there are signs of tighter supply in the physical market. Spot prices became more expensive than forward rates this month for the first time in more than a year, a condition known as backwardation. On November 15, the spread was the steepest since at least 2002.That may be a sign that shortages are starting to bite, said Robin Bhar, head of metals research at Societe Generale. Global demand will probably exceed supply by 651,000 ounces this year, and the market will remain in a “significant” deficit in 2017, Johnson Matthey, which makes one in three car autocatalysts, said on November 14.US auto sales were the highest in a year in October, while Chinese sales climbed for an eighth month. In Europe, where vehicles tend to rely on platinum, consumers are slowly shifting to models using more palladium, according Natixis. Base metals and iron ore rallied this month amid optimism that demand will increase in the US and China, sparking a trading frenzy in the Asian country.“Palladium is the most industrial of the precious metals, and the least exposed to investor whims,” Bhar said by phone from London. “There have been real signs of a squeeze on the physical side.”

Jim Mellon, who was cited as a supporter of the “Leave” campaign by pro-Brexit lawmaker Michael Gove, predicts the euro will become a future casualty of a rising anti-establishment tide, causing the currency union to splinter within the next five years.

A pedestrian walks through the square outside the headquarters of the Swiss National Bank in Bern, Switzerland. The central bank’s decision last year to scrap a long-standing limit on the franc against the euro rocked currency markets and sent the franc rocketing against the euro, the currency of Switzerland’s main export market.

Global bonds suff er worst monthlyslump as $1.7tn lostBloombergLondon

The 30-year-old bull mar-ket in bonds looks to be ending with a bang.

The Bloomberg Barclays Glo-bal Aggregate Total Return Index lost 4% in November, the deep-est slump since the gauge’s in-ception in 1990. Bonds in Europe extended declines with their US peers as Opec’s agreement on Wednesday to cut oil produc-tion added to prospects of higher infl ation. The refl ation trade has been driving markets since Don-ald Trump’s presidential elec-tion win due to promises of tax cuts and $1tn in infrastructure spending. All this has prompted investors to dump debt that was off ering near-record-low yields and pile into stocks.

Calling an end to the three-decade bond bull market is no longer looking like a fool’s er-rand: the Federal Reserve is ex-pected to start raising interest rates – and do so more often than once a year, infl ationary expectations are climbing and there are hints global central banks may be buying fewer sov-ereign securities going forward. Investors pulled $10.7bn from US bond funds in the two weeks after Trump’s victory, the big-gest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to record highs.

Apart from “Opec’s intentions to support prices, the broader pressures as regards rising in-

fl ationary expectations and the impact this is having in terms of upward pressure on yields is notable,” said Matthew Cairns, a strategist at Rabobank Inter-national in London. “The mar-ket has moved with remarkable swiftness to price in the antici-pated refl ationary impact of a Trump administration.”

“This has, in turn, prompted a notable rotation out of fi xed in-come and into equities,” Cairns said. Still, he cautioned that moves are “remarkable given the distinct lack of clarity as regards what policies the president elect will actually pursue.”

November’s rout wiped a record $1.7tn from the global in-dex’s value in a month that saw world equity markets’ capitali-sation climb $635bn.

The yield on 10-year US notes rose 56 basis points in November, the biggest jump since 2009, and was at 2.41% in New York. Yields on similar-maturity German bunds reached a two-week high of 0.32%, while those on UK gilts rose four basis points to 1.46%.

The average yield on the Bloomberg Barclays Global gauge climbed to 1.61% on November 23, after touching a record low of 1.07% on July 5. “A lot of peo-ple are beginning to think that it is the end of the bull rally,” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management’s Australia unit, which oversees $14bn. US 10-year yields may rise to 2.7% in January, Bridges said.

FRR pension fund weighs ditching $8.5bn French sovereign bonds

BloombergLondon

Given a free hand, the chief

investment off icer of France’s

largest pension pot would ditch

the fund’s entire €8bn ($8.5bn)

of the country’s government

bonds in favour of other credit

instruments.

“Based on pure financial

reasoning, the whole portfolio

should be switched,” Salwa

Boussoukaya-Nasr, manager of

the €35bn FRR pension fund,

said in a phone interview. “We

have a comfortable surplus and

financing ratio, we can aff ord to

take more risk.”

While the post-US election

spike in sovereign debt yields has

brought relief to bond investors, it

hasn’t changed the big picture for

pension funds.

Coupon payments on govern-

ment debt continue to plumb

historic lows, eroding their ability

to cover payouts to retirees who

are living longer.

The FRR is reviewing its asset

allocation and the fund man-

ager plans to propose a switch

to its trustees this month.

Boussoukaya-Nasr said she

wants to buy investment-grade

company debt because it offers

better returns than French gov-

ernment bonds and a similar

credit risk for the fund’s limited

lifespan.

Euro-denominated corporate

debt maturing in five to seven

years is yielding 1.08%, according

to Bloomberg Barclays index data

on Thursday.

That compares to similar dated

French government bonds yield-

ing 0.03%, according to Bank of

America Merrill Lynch index data.

BUSINESSSaturday, December 3, 2016

GULF TIMES

ECB likely to announce 6-month extension of QE this weekReutersFrankfurt

The European Central Bank is ex-pected to announce a six-month extension to its quantitative eas-

ing programme next week, according to a majority of economists polled by Re-uters, who also expect the bank to keep the size of its monthly asset purchases unchanged.

ECB President Mario Draghi said on Wednesday the bank will look at a combination of policy tools when it meets on December 8 and that ultra-easy monetary policy has given govern-ments in the region time for reforms.

Those eff orts need to be stepped up, he said.

A move at Thursday’s ECB meeting may help multiply the impact of the stimulus on the euro’s exchange rate, especially since the US Federal Reserve is widely expected to raise interest rates a week later, boosting the dollar.

A separate Reuters poll showed the dollar is expected to gain further against the euro, continuing a rally that dates back two months and has deepened since Trump’s victory on November 8.While economic data have improved recently, risks around euro-zone fi nancial stability have risen, with Italy holding a referendum on consti-tutional reforms on December 4, which

may also decide Prime Minister Matteo Renzi’s political future.

Many in the fi nancial markets worry a “No” vote — which polls show is like-ly — would undermine the euro project, especially with national elections in France, Germany and the Netherlands in the coming year that threaten to up-end the status quo.

Britain’s decision to leave the Euro-pean Union has further muddied the waters, especially as negotiations have yet to begin and there is little detail as to what path they will take.

The ECB, however, said it is ready to step up purchases of Italian govern-ment bonds temporarily if the referen-dum result sharply drives up borrowing

costs, to stabilise the bond market.“The credibility of QE policy and

negative interest rates is being threat-ened, among other things by mount-ing concerns about the liquidity situ-ation... and its political consequences for fi nancial stability,” wrote Håkan Frisén, head of economic forecasting at SEB.

“But at present, the ECB has hardly any choice but to continue its bond purchases.”

The latest poll of over 70 econo-mists forecast that eurozone economic growth would be even slower next year, at 1.4% compared with an expected 1.6% this year, keeping pressure on the ECB in the absence of major fi scal stim-

ulus. That underscores the diminishing returns from monetary policy as a stan-dalone measure.

Still, 52 of 60 economists said the ECB will announce on December 8 an extension to its QE programme beyond the current plan of March 2017.

Three economists said the central bank will not ease policy further and instead announce a scaling back on the pace of its asset purchases, currently €80bn a month.

While the remaining fi ve economists do not expect any change next week, three of them said the ECB will simply wait until early next year before an-nouncing any changes.

Predictions for how long asset pur-

chases would be extended ranged from three months to US-style open-ended QE policy, with a strong majority say-ing six months is the most likely.

Forty of 54 economists expect the ECB to maintain its pace of €80bn a month pace beyond March 2017.

The remaining 14 expect the central bank to taper.

Based on those economists who an-swered by how much, forecasts ranged from a €10bn to €20bn.

Despite expectations for more ECB easing, infl ation is forecast to average only 0.2% this year and rise to 1.3% next.

It is not expected to reach the central bank’s target of close to 2% until 2019 at least.

Bourse gains more than 2% on Opec’s production cut dealQSE WEEKLY REVIEW

By Santhosh V PerumalBusiness Reporter

The historic oil producers’ meet, which

saw a production cut for the first time in

eight years, had its overarching influence

on the Qatar Stock Exchange (QSE), which

was the second best performer among the

Gulf bourses during the week.

Industrials, insurance, realty and

telecom counters witnessed heavy

demand, which led the local bourse gain

more than 2% during the week, which saw

the Organisation of Petroleum Exporting

Countries (Opec) announce 1.2mn barrels

per day production cut to salvage the

over-supplied global market.

Saudi Arabia, an influential constituent

in the Opec, saw its bourse vault 4.37%,

Muscat (1.25%), Dubai (1.11%), Kuwait

(0.94%) and Abu Dhabi (0.84%), while

Bahrain fell 0.7% during the week which

witnessed Milaha and Mwani (Qatar Ports

Management Company) ink a pact to

establish a 49:51 joint venture to manage

the QR27bn Hamad Port.

The QSE, however, saw year-to-date

losses at 4.94% compared to 3.13% in Bah-

rain and 0.82% in Kuwait; whereas Dubai

gained 6.66%, Muscat (3.4%), Saudi Arabia

(2.63%) and Abu Dhabi (0.04%).

A substantially lower net selling by local

retail investors and increased net buying

by non-Qatari individual investors helped

fuel the bullish sentiments on the QSE

during the week which saw global oil price

hit a six-week high on Opec deal.

Islamic stocks rose faster than the con-

ventional scrips during the week which

saw Qatar’s producers’ price index decline

1.7% in September this year compared to

that in the previous month.

Micro, mid and large cap equities re-

ceived strong demand but they underper-

formed the main index during the week

which however saw that the Institute of

International Finance forecast that oil

price may not breach the $60 a barrel in

the next five years.

Trade turnover and volumes substan-

tially increased during the week which

witnessed telecom and banking sectors

together constituted more than 76% of the

total volumes.

In volumes, telecom sector constituted

57% of the total, followed by banks and

financial services (19%), industry (9%),

real estate (8%), consumer goods and

transport (3% each), and insurance (1%)

during the week.

In value, banks and financial services’

share was 33%, followed by telecom (25%),

industrials (20%), consumer goods (8%),

realty (7%), transport (4%) and insurance

(3%) during the week.

Opening the week marginally stronger

at 9,734 points, the market was however

on losing path for the next two days, tak-

ing the index to a low of 9,636 points on

Tuesday. The Opec meet did its maverick

for the next two days with the index gain-

ing as much as 278 points to finally settle

at 9,914 points during the week.

The 20-stock Total Return Index rose

2.05%, All Share Index (comprising wider

constituents) by 1.76% and Al Rayan Islam-

ic Index by 2.23% during the week, which

saw telecom and industrials register faster

expansion in trade volumes.

Industrials saw its index surge 3.17%,

insurance (3.01%), real estate (2.69%),

telecom (2.29%), consumer goods (1.79%),

transport (1.7%) and banks and financial

services (0.37%) during the week.

Market capitalisation soared more than

QR9bn or 1.72% to QR533.89bn with micro,

mid, large and small cap equities gaining

1.87%, 1.73%, 1.59% and 0.4% respectively

during the week.

Small, mid, micro and large cap stocks

have nevertheless reported year-to-date

losses of 15.1%, 8.78%, 7.52% and 2.81%

respectively.

Of the 44 stocks, as many as 28 gained,

while 14 fell and one was unchanged.

Another one was not traded. Seven of the

13 banks and financial services, six each

of the nine consumer goods and the eight

industrials, all the four realty, two each of

the five insurers and the three transport,

and one of the two telecom stocks settled

lower during the week.

More than 65% of the stocks extended

gains with major movers being Industries

Qatar, Gulf International Services, Qatar

Insurance, Mazaya Qatar, Ooredoo, Milaha,

Barwa, Ezdan, Qatari Investors Group,

Qatar Electricity and Water, Mesaieed

Petrochemical Holding, Alijarah Holding,

Widam Food and Al Meera.

Nevertheless, Vodafone Qatar, Nakilat,

Dlala, Medicare Group, Al Khaliji and Al

Khaleej Takaful were among the losers

during the week.

Local retail investors’ net profit booking

weakened substantially to QR22.62mn

against QR119.41mn the week ended

November 24.

Non-Qatari individual investors’ net

buying strengthened perceptibly to

QR21.12mn compared to QR15.23mn the

previous week.

However, domestic institutions turned

net sellers to the tune of QR2.4mn against

net buyers of QR85.75mn the week ended

November 24.

Foreign institutions’ net buying

declined to QR3.9mn compared to

QR17.63mn the previous week.

Total trade volume more than doubled

to 65.45mn shares, value soared 87%

to QR1.5bn and transactions by 26% to

16,608 during the week.

The telecom sector’s trade volume

more than quadrupled to 37.62mn

equities and value more than tripled to

QR377.24mn on more than doubled deals

to 4,980.

The industrials sector’s trade volume

more than tripled to 5.56mn stocks

and value also more than tripled to

QR292.73mn on 44% increase in transac-

tions to 2,542.

The insurance sector’s trade volume

more than doubled to 0.58mn shares

and value also more than doubled to

QR41.24mn on 3% jump in deals to 484.

The banks and financial services

sector saw 65% surge in trade volume

to 12.25mn equities and 33% in value to

QR494.7mn but on 3% fall in transactions

to 4,228.

The consumer goods sector’s trade

volume shot up 59% to 2.15mn stocks,

value by 44% to QR124.88mn and deals by

19% to 1,869.

There was 42% expansion in the

transport sector’s trade volume to 2.11mn

shares, 36% in value to QR65.12mn and

10% in transactions to 933.

The real estate sector’s trade volume

increased 18% to 5.19mn equities and

value by 18% to QR102.24mn, while deals

shrank 13% to 1,572.

In the debt market, there was no

trading of treasury bills and government

bonds during the week.

US payrolls rise solidly; jobless rate at 9-yr lowNonfarm payrolls increase 178,000 in November; unemployment rate falls to 4.6%; average hourly earnings fall 0.1%

ReutersWashington

US employers boosted hiring in November and the unemployment rate

dropped to a more than nine-year low of 4.6%, making it al-most certain that the Federal Reserve will raise interest rates later this month.

Nonfarm payrolls increased by 178,000 jobs last month, the Labour Department said yester-day.

The solid gains in employ-ment likely refl ect rising confi -dence in the economy.

Data for September and Oc-tober was, however, revised to show 2,000 fewer jobs created than previously reported.

The three-tenths of a per-centage point drop in the un-employment rate last month to its lowest level since August 2007 was both the result of more people fi nding work as well as dropping out of the la-bour force.

The report came on the heels of recent data showing the economy growing at a brisk clip in the third quarter, and gains in consumer spending, infl ation, housing and manufacturing ear-ly in the fourth quarter.

Economists had forecast pay-rolls rising by 175,000 jobs last month and the unemployment rate unchanged at 4.9%. A pull-back in wage growth after two straight months of solid increas-es put a wrinkle in an otherwise upbeat employment report.

Average hourly earnings

fell three cents, or 0.1%, after shooting up 0.4% in October.

The drop lowered the year-on-year gain in wages to 2.5% in November from October’s 2.8% increase, which was the largest rise in nearly 7-1/2 years.

The moderation largely re-fl ects a calendar quirk, which

economists expect Fed offi cials will overlook at their December

13-14 policy meeting.While a surge in US govern-

ment bond yields and a rally in the dollar in the wake of Donald Trump’s election as the next US president had tightened fi nan-cial market conditions, econo-

mists said it was probably insuf-fi cient for the Fed to stand pat.

The US central bank raised its benchmark overnight interest rate last December for the fi rst time in nearly a decade.

As the labour market nears full employment, job gains have slowed from an average of 229,000 per month in 2015 to an average of 180,000 this year.

Still, the monthly increases are more than enough to absorb new entrants into the labour market.

Fed chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working-age population.

Trump’s plan to increase in-frastructure spending and slash taxes could encourage compa-nies to boost hiring and spur an even faster pace of economic growth over the coming years.

The participation rate, or the share of working-age Ameri-cans who are employed or at least looking for a job, fell 0.1 percentage point to 62.7% last month, not too far from multi-decade lows, in part refl ecting demographic changes.

Manufacturing payrolls fell by 4,000 jobs in November, declin-ing for a fourth straight month.

Construction employment increased by 19,000 jobs last month after rising by 14,000 in October.

Retail sector payrolls fell 8,300, dropping for a second straight month.

Basel banking talks fall short of deal in ChileAFPSantiago

Regulators failed to clinch a controversial agree-ment on new global

banking rules aiming to pre-vent a repeat of the 2008 fi -nance crisis, at talks in Chile on Thursday.

The Basel Committee, a fo-rum of international fi nancial authorities, met with banking supervisors to set new global norms for banking stability.

Committee chairman Stefan Ingves told the gathering in San-tiago that delegates were close to a deal after two days of talks.

“Discussions focused on the adjustments necessary to adapt to the new global regulatory framework, the revised stand-ardised approach for credit risk, and the growing and important role of supervisory stress test-ing,” said the Bank for Inter-national Settlements, a global central bank, in a statement.

But the delegates for the time

being fell short of their aim of fi nalising a deal to tighten capi-tal requirements for banks.

Ingves had said on Wednes-day the committee would oblige some banks to strengthen their capital base to cushion them against fi nancial shocks.

He hoped the members of the forum would approve the new regulations, known as the “Ba-sel III” reforms, in January.

Disagreements have threat-ened to complicate the reforms.

The United States has been pushing for strict capital re-quirements.

European governments, reg-ulators and fi nance groups fear stringent capital requirements will hobble their banks and economies.

Meanwhile, US president-elect Donald Trump has vowed to eliminate the landmark Dodd-Frank fi nancial reform law adopted in the post-crisis era to protect consumers and the fi nancial system from Wall Street excesses that some argue caused the meltdown.

Medical device maker Teleflex to buy Vascular Solutions for $1bnReutersWayne, Pennsylvania

Teleflex Inc said yesterday it agreed to buy fellow medical device maker Vascular Solutions Inc for about $1bn.Teleflex’s off er of $56 per Vascular share in cash represents a premium of 1.6% to the stock’s Thursday close.The deal comes about 10 months after Vascular Solutions and its founder CEO, Howard Root, were found not guilty in a criminal prosecution related to alleged “off -label” promotion of its varicose veins treatment, Vari-Lase Short Kit.

Shares of the company, which makes devices for minimally invasive coronary and vascular procedures, have nearly doubled since Root was exonerated in February.“Following the jury verdict in February, I am not willing to assume much longer the personal risk associated with being the CEO of a public medical device company,” Root said yesterday.Teleflex makes devices used in surgery, cardiac, respiratory and emergency care.The transaction is expected to close in the first half of next year and add to Teleflex’s adjusted earnings in 2017.

An off icial helps a candidate use the computer in the career resource centre of the Illinois Department of Employment Security off ice. The solid gains in employment likely reflect rising confidence in the economy.

Greece sees progress on bailout review on MondayReutersAthens

Greece expects to reach an initial agree-

ment with its off icial creditors at a meeting

of eurozone finance ministers on Monday

on the fiscal targets and reforms it needs to

adopt to conclude its latest bailout review, a

government off icial said yesterday.

Talks on two other aspects of the review,

namely debt relief and primary surplus

targets after 2018, when Greece’s bailout

programme ends, are expected to continue,

and both issues will probably be discussed

at another Eurogroup meeting.

“We believe that all issues will be resolved

by the end of December,” the off icial added.

Greece received €240bn from two earlier

bailouts and is due to get €86bn under the

current third programme, which is being

reviewed for the second time.

It needs to keep passing reviews to con-

tinue receiving funds to help tackle its debt

which, at about 180% of GDP, is the highest

in the eurozone.

Athens wants to be included in the

European Central Bank’s bond-buying

programme of quantitative easing by March,

the off icial said.

The left-led government has said that this

would help Greece return to bond markets at

the end of 2017 or early in 2018.

In their discussions on the bailout review,

Athens and its European Union and Interna-

tional Monetary Fund lenders are at odds

over labour and energy reforms and over the

measures needed to plug a projected fiscal

gap in 2018.

The EU and the IMF disagree on Greece’s

fiscal targets beyond 2018.

The IMF, which has yet to decide

whether it will participate in Greece’s bailout

programme financially, says Greece can-

not achieve its medium-term target for a

primary surplus of 3.5% of GDP unless it is

granted significant debt relief and adopts

extra austerity measures.