News & Views

28th december 2010

• China has increased interest rates 25 basis point resulting an increase to 5.81% and depository benchmark to 2.75%

IMPACT

•  DOW down 0.15%S&P 500 up 0.08%NASDAQ up 0.10%
• Europe followed suit, and while London was closed, the German DAX was down 1.23% and the French CAC down 0.98%.
• US crude peaked at close to $92 but fell back to about $91 a barrel. Brent crude eased $1 to about $93.50.
• Oil prices tumbled by 4% when China last raised interest rates in mid-October.
• This shows inter linkage of global markets

"Compared to rate hikes in the beginning of next year, a rate hike before year-end will have a more tightening impact, as the interest rates on the medium- and long-term loans and deposits are reset at the beginning of each year according to the base rates."

• China has also officially increased banks' required reserve requirements six times this year and restricted lending by them.
• Volatile currencies and low interest rates will drive gold even higher in 2011
• 1995 300$/ounce, 2008 700$/Ounce, 2010  1375$/ounce

OTHER

• China is now Africa's largest trading partner, strings or no strings attached, and that bilateral trade grew more than 43 percent to nearly $115 billion in 2010. At the same time, Chinese direct investment in Africa has jumped from a meager $0.5 billion in 2003 to a healthy $9 billion in 2009.Chine also plans to control Europe after it helped greece. Also, Chinese can use a two pronged policy for their surpluses - supporting the euro zone by purchasing euro bonds through the European Financial Stability Facility (EFSF), while at the same time establishing deeper trade and FDI bilateral flows.
• Kenneth R. Feinberg, President Obama’s former pay czar, received a lukewarm reception from Wall Street this year when he suggested that firms adopt a so-called brake provision that would allow employee compensation agreements at big banks to be broken if the government were forced to step and bail them out.
• Japan is thinking how to tackle inside trading which allows the investors to sell of the new securities and than buy back them at discounted price to cover their position and impacts long term shareholder.  However, they believe right issues can solve this as the entitlement for new shares is to existing share holders
• Saudi Arabia is the single largest automotive market in the Gulf region and of the 4.5 million passenger cars in the GCC over 2 million are in the Kingdom whose buoyant new vehicle market exists alongside a thriving pre-owned market of 46 percent of pre-owned vehicles.
• Saudi Arabian Mining Co. (Maaden) will boost exploration in the vast Arabian Shield region and develop new mines in a bid to double gold resources to 20 million ounces by 2020, its chairman said
• The Saudi British Bank (SABB) launched "SABB Advance," a Shariah-compliant program, which provides customers with privileged services within Saudi Arabia and abroad.The launch of the new program is in line with the bank's continuous endeavors to promote Islamic banking and to expand Shariah-compliant products and solutions for retail, corporate, treasury and investment segments as well as Takaful insurance.
• The Bombay Stock Exchange (BSE) in the Indian city of Mumbai has launched a new index which consists of companies that meet the Islamic legal code.The Bombay Stock Exchange (BSE) in the Indian city of Mumbai has launched a new index which consists of companies that meet the Islamic legal code.