BIZweek n°20 8 nov 2014
BIZweek n°20 8 nov 2014
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  • Parution : n°20 de 8 nov 2014

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  • Editeur : Capital Publications Ltd

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  • Nombre de pages : 20

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M A R K E T 18 SAMEDI 08 NOVEMBRE 2014 BIZWEEK ÉDITION 20 C U R R E N C Y N E W S HAS QUANTITATIVE EASING WORKED (PART 1) Report prepared by Nishal Babooram Island Premier Foreign Exchange (www.iptfx.com) The United States Federal Reserve has called time on "quantitative easing" (QE), a policy that has pumped trillions of dollars into the US financial system. The jury is still out - and will be for a long time - on whether it has worked. There are real anxieties about what the consequences willultimately be. For now though the Fed's main policy making committee has concluded that "there has been a substantial improvement in the outlook for the labor market" and "there is sufficient underlying strength in the broader economy". So, QE is being woundup this month. It started back in November 2008. The financial system in the US and beyond was still reeling from the failure of the investment bank Lehman Brothers. There were widespread fears about the wider economic consequences. Were we looking at the prospect of another Great Depression ? In the US the Federal Reserve had almost run out of its traditional ammunition, cutting interest rates. So it embarked on something that was new, at least for the Fed, namely QE. So what is it ? Instead of reducing the price of money - that is, cutting interest rates - the Fed increases the quantity of money. It does that by going into the financial markets to buy assets and it creates new money to pay for them. The Fed has focused on buying two types of assets  : government debt or Treasury bonds, and assets backed by home loans. The first step is the impact on the price of the type of assets the Fed buys. More demand (from the Fed) raises the price. To put it another way, there is less supply of these assets available for everyone else, which also tends to raise their price. Then many of the sellers of these assets use the money to buy something else, pushing the prices of those other assetsup too. That in turn has implications for interest rates. Bonds are a kind of IOU, a promise to pay certain sums of money in the future. Governments and some companies use them to borrow money. They sell them in the financial markets. The higher the price they get the lower the interest rate they are in effect paying. If it all goes to plan that effect can filter through the economy and reduce interest rates for many borrowers. John Williams, a senior Fed official spelled it out in a speech in 2012 and it's worth quoting at some length  : « If the Fed buys significant quantities of longer-termTreasury securities or mortgage-backed securities, then the supply of those securities available to the public falls. « As supply falls, the prices of those securities rise and their yields decline. The effects extend to other longertermsecurities. « Mortgage rates and corporate bond yields fallas investors who sold securities to the Fed invest that money elsewhere. » Hence, [QE] drives down a broad range of longer-termborrowing rates. And lower rates get households and businesses to spend more than they otherwise would, boosting economic activity." The aim is to push down interest rates paid by business and households even lower than is possible by using the central bank's own conventional interest rate policies. It's worth bearing in mind what that conventional policy is in the US. The Federal Reserve has a target for the overnight interest rate on lending between commercial banks - it's called the federal funds rate. Reducing that does usually affect interest rates for everybody else. But when the target is practically zero as it now is, it can't go lower. So that's where QE comes in. It provides a tool for getting rates lower for companies and consumers. Has it worked ? ? ? Stay tuned, we come forward with the answer next week…. OIL NEWS Russian state inspectors have opened an inquiry into major Russian oil firms suspected of market rigging to pushup petrol prices nationally. The Federal Anti-Monopoly Service (FAS) is investigating Bashneft and Lukoil - both privately-owned - as wellas state-owned Rosneft. The FAS says many deals between Russian oil firms on the commodities exchange this year look suspicious. Russia's state revenue has been hit by plunging world oil prices. It is one of the world's biggest exporters of oil and gas. But the EU and US have targeted Russia's oil industry in sanctionsimposed because of Russia's role in the Ukraine conflict. Oil exploration technology and services are affected, hitting Russia's plans to develop new Siberian fields. The Russian rouble - heavily dependent on the health of energy exports - has fallen to a new record low of 45.3 to the dollar, after the central bank announced that it would limit intervention to prop itup.The rouble has lost more than a quarter of its value against the dollar since the start of the year. A statement (in Russian) published on the FAS website on Wednesday said « we believethere are signs of manipulation on the [Russian commodities] exchange. » The FAS says petrol prices for Russian motorists are beginning to fall now, but "that does not go far enough, so today the FAS launched this investigation - and there may be other cases too". Bashneft is already under investigation in a separate case involving alleged money-laundering and its billionaire owner Vladimir Yevtushenkov is under house arrest. The case has been compared by some commentators to the state takeover of oil giant Yukos in 2003.In August Rosneft asked the Russian government for a $42bn (£25.2bn) loan as Western sanctions began to bite into its operations. WHAT ABOUT COPPER The copper price on the London Metal Exchange was down to $6,543.50 a tonne on last week, its lowest level since Oct. 20, according to Reuters. This was attributed to slower growth in Europe and China, weakening oil prices, and, just like with gold and silver, a strengthening U.S. dollar. Caroline Bain, senior commodities economist at Capital Economics, spoke about the future of dollar-priced metals. « There’s more downside this quarter, » she said. « Market sentiment is negative, but we think it will correct (next year). The market is pricing in too much extra supply … mine supply seems to eternally disappoint. On the demand side, we expect usage by the state grid in China to pickup. » Copper for December delivery also fell to a low of $2.965 a pound on the Comex division of the New York Mercantile Exchange, according to Nasdaq. MAURITIAN RUPEE With so much expected during the latter days of the week from the ECB chief Draghi and non-farmemployment data across the pond, USD and EUR traded in patient mode close to MUR 31.45 and MUR 39.35/40 respectively. At the time of writing, Draghi seems to have been successful in killing the EUR again. Going by that and with decent employment data expected, we keep the mood and forecast more USDupside and EUR downside for the coming week…. Enjoy….
L A D I E S & G E N T S SAMEDI 08 NOVEMBRE 2014 BIZWEEK ÉDITION 20 19 ANNIVERSAIRE Pour ses cinq ans, la CCM fait le bilan La Competition Commission of Mauritius a réuni hommes d’affaires, personnages du barreau, ainsi que directeurs d’entreprises, le mercredi 5 novembre, à L’Aventure du Sucre, à Beau-Plan, pour fêter ses cinq ans d’existence. L’occasion pour l’Executive Director, Kiran Meetarbhan, de faire le bilan et réitérer son engagement envers une visibilité accrue de l’institution aux niveaux local et régional JAMIROUDDIN YEADALLY Un dîner et un spectacle de danses et de chants. C’est ce à quoi ont eu droit, mercredi, à L’Aventure du Sucre, à Beau-Plan, les invités présents lors de la soirée célébrant les cinq ans de la Competition Commission of Mauritius (CCM). Certains d’entre eux étaient des étrangers, puisque l’événement cadrait avec l’atelier de travail « International Competition Network’s Advocacy », organisé les 6 et 7 novembre, à l’hôtel Intercontinental, à Balaclava. Délégués et représentants des régulateurs de 25 pays ont répondu présent à l’atelier de travail, le 3e du genre, après ceux organisés en Italie et au Maroc. Lors de son discours, l’Executive Director de la CCM, Kiran Meetarbhan, a fait le bilan de la l’institution depuis sa création en 2009. « As at date, the CCM has conducted 28 investigations and has completed not less than 150 enquiries, spanning various economic sectors such as retail banking, ICT, car key technology and fast-moving consumer goods », a-t-elle expliqué. Kiran Meetarbhan a ensuite souligné le rôle important que joue la commission dans le paysage économique de Maurice  : « The CCM has worked towards building and reinforcing its credibility and visibility as an enforcement agency by maintaining consistency and steadfastnessin its enforcement record. Alongside its enforcement activities, the CCM has been actively engaged in advocacy projects to promote and disseminate the provisions of the Competition Act amongst all sectors of the Mauritian community including the business world, the legal profession and the judiciary. » Cette dernière a ajouté que la commission a signé sept accords de principe (MoU) avec des secteurs clé à Maurice, ainsi que des accords bilatéraux de coopération avec l’Autorité de la concurrence de France et la Fair Trading Commission des Seychelles. Kiran Meetarbhan est également revenue sur le fait de 2014, soit l'imposition de sanctions financières totalisant environ 1 million de dollars à deux entreprises, en lien avec un comportement de cartel dans le secteur de la brasserie. Fait que n’a pas manqué de souligner Bruno Laserre, le président de l'Autorité de la concurrence de France, qui s’est dit impressionné par le travail accompli par la CCM sur ce dossier. « A good and efficient authority can change the way businessis done », a-t-il conclu. Jeffrey Daud et Shila Dorai Raj, de la Malaysia Competition Commission (MyCC) Barlen Pillay, du département légal de la Chambre de Commerce et d’Industrie de Maurice (CCIM), le Dr Raj Daliah, du National Economic and Social Council (NESC), Edwige Gufflet, directrice de l’Aventure du Sucre, et Raju Jadoo, Secrétaire Général de la CCIM James Lenaghan, directeur des douanes à la Mauritius Revenue Authority (MRA), Marianne Faessel-Kahn et Renato Ferrandi, de l’International Competition Network, et Rajeev Hasnah, Deputy Executive Director à la CCM Aruna Narain, Parliamentary Counsel, Kiran Meetarbhan, Executive Director de la CCM, et Dhiren Dabee, Sollicitor General Le Professeur Donald Ah Chuen et Sunil Benimadhu, respectivement Vice-Chairman et Chief Executive de la Stock Exchange of Mauritius Rajiv Servansingh, directeur adjoint de la CCM, Selvam Ponoosamy, Commissaire à la CCM, Sarat Lallah, CEO de Mauritius Telecom, et Kiran Juwaheer, Managing Director chez Vivo Energy



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