China has delivered a qualified vote of confidence in the dollar and US financial markets, ruling out the “nuclear option” of dumping its huge holdings of US government debt accumulated over the last decade.
But the State Administration of Foreign Exchange, which administers China’s $2450bn in reserves, the largest in the world, also called on Washington and other governments to pursue “responsible” economic policies.
The statement on Wednesday, one of a series that Safe has issued in recent days in an apparent effort to address criticism about its lack of transparency, also played down the chances of China making major further investments in gold.
Safe’s comments coincided with the news that China had made record purchases of Japanese government bonds in the first four months of the year, helping push the yen to an eight-month high against the dollar.
Analysts said it was too early to tell whether China’s move into JGBs was the start of a trend, but Greg Gibbs, FX strategist at RBS, said unlike in the US, Tokyo would not welcome foreign central banks routinely accumulating yen assets.
With such inflows not required to help stabilise its currency given the country’s current account surplus, yen appreciation could hurt the country’s exporters.
“If this persists it may generate tensions between Japan and China. It would seem a little ridiculous for Japan to allow the yen to be pressed upwards by inflows from China, when Japan is not able to counter with renminbi asset purchases,” said Mr Gibbs.
About two-thirds of Safe’s funds are believed to be in dollar assets, giving China a huge exposure to the US economy but also raising fears that the holdings could be used to pressure Washington.
Given the US government’s huge funding needs, some analysts worry that China’s stated objective of diversifying its reserves could also lead to higher US interest rates if it buys fewer Treasuries.
However, Safe said that the “nuclear” option of selling huge volumes of US assets was “completely unnecessary”. Given its security, liquidity and low transaction costs, the US Treasury market was “a very important market for China”. It added: “Any increase or decrease in our holdings of US Treasuries is a normal investment operation.”
The statement said that while Safe had worried that the dollar could drop sharply because of heavy US borrowing, the problems in other countries — notably in the euro area — had made this a less pressing problem.
However, it added: “China has been calling for the US to genuinely take measures to protect investors’ interests and confidence as a responsible large nation.”
Since the start of the financial crisis, Chinese leaders have publicly expressed concerns about the weakening dollar and rising US debt levels, calling on the US to pursue sound fiscal and monetary policies.
Although US officials say that in recent months China has not been privately critical of its economic policies, scepticism about the dollar remains widespread in China.
“Even with the situation in Europe, the bigger problem is still the US and its long-term debt position,” said Yu Yongding, an economist at the Chinese Academy of Social Sciences, in a recent interview.
Safe said the gold market was too thin and volatile and even a big purchase would not help to diversify its holdings a great deal. “There are some limits to investing in gold and it cannot become a main channel for investing our foreign exchange reserves,” it said.
Safe has been criticised at home for some of its investments, including the large reported stakes it has taken in US equities before the financial crisis. The body said: “Safe will never be a speculator. It mainly seeks to protect the safety of China’s foreign exchange reserves and to ensure a stable investment return.”

Initial results from test runs of a ship billed as the world’s largest oil skimming vessel could come back Monday after a weekend spent plowing the seas atop the undersea gusher in the Gulf of Mexico.
The converted cargo ship A Whale spent the weekend attempting to separate crude oil from seawater in a 25-square-mile area north of the ruptured BP oil well at the heart of the disaster. If the test is successful, the massive vessel could play a key role in efforts to clean up the largest oil spill in U.S. history.
Initial results from tests are expected Monday, Bob Grantham, spokesman for the company that owns the ship, said.
The ship, which swallows water with oil then separates it, can skim about 21 million gallons of oil a day. That’s at least 250 times the amount that modified fishing vessels currently conducting skimming operations have been able to contain, according to Taiwanese company TMT shipping, which owns the vessel.
A total of about 550 skimming vessels were out in the Gulf on Sunday, according to a spokeswoman for the Unified Command Joint Information Center in Houma, Louisiana. But with oil still pouring into the sea at a rate of tens of thousands of barrels a day, federal authorities closed a new section of the Gulf off Louisiana to fishing on Sunday.
The latest order from the National Oceanographic and Atmospheric Administration adds nearly 1,100 square miles of federal waters off Louisiana’s Vermilion Bay to the off-limits zone. The new closure brings the portion of the Gulf closed to fishing due to the massive BP spill off Louisiana to 33.2 percent, NOAA reported.
The Coast Guard reported earlier Sunday that a shift in weather patterns could send more oil toward sensitive shores in Mississippi and Louisiana, and bad weather over the past few days has significantly hampered cleanup efforts.
“The weather is one challenge you can’t defeat,” Coast Guard Adm. Paul Zunkunft said.
Ribbons of oil stripe the water for miles, but waves Saturday were still too high for boats to skim oil off the water.
“At the Coast Guard, we do take it personally. It is portrayed as mission failure any time oil washes ashore,” he said.
Zunkunft said he will put the skimmers back to work as soon as the sea calms.
Researchers have estimated that between 35,000 and 60,000 barrels (1.5 million to 2.5 million gallons) of oil have been gushing into the Gulf daily since April 20, when the Deepwater Horizon oil rig exploded and sank off the coast of Louisiana.
The A Whale arrived in the Gulf on Wednesday and has been awaiting approval to join in cleanup efforts.
The skimmer works by “taking in oily water through a series of vents, or jaws, on the side of the ship and then decanting the intake,” Grantham said. “In many ways, the ship collects water like an actual whale and pumps internally like a human heart.”
Zunkunft said he is also calling in reinforcements, including 300 new skimmers in the next two weeks.
For the 12-hour period from midnight until noon Saturday, approximately 7,980 barrels (335,160 gallons) of oil were collected and about 4,155 barrels (174,510 gallons) of oil and 28.3 million cubic feet of natural gas were flared, BP said.
The company said about 25,290 barrels (1,062,180 gallons) of oil were recovered Friday.

The government has failed to bring a single company to stockmarket in the last one and a half years although it announced plans to list 26 state-owned enterprises by June. It means one company comes in three years.
The finance ministry in January set individual deadlines — from three to six months — for 26 government organisations to offload shares to increase the availability of quality shares on the market.
Finance ministry officials have put the blame on the respective ministries that own the enterprises.
However, 26 private companies were listed in the last one and a half years — 19 last year and seven this year. The last state enterprise to join the market was Titas Gas in 2008 when another 14 private companies also debuted.
“Officials of the respective ministries are reluctant to offload shares and hinder the listing process. They (officials) work as directors on the boards of these companies and enjoy huge benefits,” said a top finance ministry official.
“We’ll soon inform the finance minister of the issue,” he said, requesting not to be named.
Stockmarket experts said the government should do everything to list state enterprises to avoid market volatility.
The investors now face a severe shortage of securities. Fewer than 450 securities are listed on the two bourses: Dhaka and Chittagong. More than 25 lakh investors who trade on Dhaka Stock Exchange often invest in bubble and low-quality shares finding no option.
Demand for new stocks is increasing fast and it is reflected when an IPO is floated.
Market capitalisation reached Tk 270,074 crore on June 30 this year from just Tk 124,134 crore a year ago.
Hasan Imam, managing director of Race Asset Management, said the market needs more stocks, particularly of state-owned enterprises, so the investors do not go for speculative shares.
He said the government owns some of the large businesses such as banks, shipping and energy companies and airlines that need to get listed in the market.
“It’s better to bring such a few big enterprises in the market than listing 100 of small ones,” said Imam.
Earlier last year the finance ministry reviewed the status of 32 state-owned companies, and later in January selected 26 enterprises for listing.
Of the 26 state enterprises, 12 are of the power, energy and mineral resources ministry. The remaining 14 fall under industries ministry, bridge division, civil aviation and tourism ministry, post and telecommunication ministry, health and family welfare ministry and shipping ministry.

Finance Minister AMA Muhith on Saturday sought investment from the private investors from home and abroad in the country’s energy and power sector.
“Bangladesh is a country of 1.60 million in population, which has huge potential for economic growth,” the minister said while addressing the inaugural session of a conference at a city hotel.
The ministry of power organised the daylong conference titled ‘Investment in Power Sector of Bangladesh: Opportunities and Challenges’.
Muhith said the government is trying to resolve the ongoing energy and power crises by the end of 2012.
The minister said the price of Compress Natural Gas (CNG) should be increased.
The energy policy would be formulated by the end of this year, he said.

Development thinkers have expressed serious doubts about the attainment of the economic growth at 6.7 per cent projected by the finance minister in the proposed budget for the upcoming fiscal year.
At a post-budget discussion on Sunday, they said the growth in gross domestic product stagnated in recent years and had been hovering at around 5.5 per cent – a rate which, economic pundits believe, would not ensure poverty reduction at an optimum pace.
‘There are uncertainties in growth attainment… also the economy has been stagnated at over 5 per cent rate,’ development economist Hossain Zillur Rahman said, terming two growth projections at 5.5 and 6 per cent for the current fiscal ‘controversial and meaningless’.
Behind the slower growth, as he identified, there are three factors – inefficient bureaucracy, political leadership and poor governance – although people’s own initiatives without official supports helped the country attain around 5.5 per cent growth.
‘The current growth is [result of] an automatic process but we don’t see strategies from the policymakers to leapfrog economic advancement,’ Zillur, a former adviser to the interim government, said.
The Economic Reporters’ Forum organised the discussion on ‘Budget 2010-11 : Seen Through different Windows’ at National Press Club, which was presided over by its president Monowar Hossain.
The food and disaster management minister, Mohammad Abdur Razzaque, described the 6.7 per cent growth forecast as ‘not abnormal’ but admitted that there were stumbling blocks, especially power crisis.
‘If we fail to implement the budget, it would be a failure of the political leadership and bureaucracy,’ he said in an apparent response to statement by Enam Ahmed Chaudhury, a former bureaucrat and adviser to the BNP chairperson Khaleda Zia.
Chaudhury described the finance minister’s budgetary goals, especially economic growth forecast, as ‘audacity of hope’, a ‘daydream’ and an unrealistic projection.
‘If our public administration is the main problem of budget implementation, it must be restructured and reformed to attain the development goals, including projected growth,’ said Yussuf Abdullah Harun, a former Federation of Bangladesh Chambers of Commerce and Industry president, affiliated with the ruling Awami League.
When asked about sources of growth, he too acknowledged the uncertainties such as power shortage and slower investment, slower demand in the export market and lack of adequate confidence. ‘It may take some time for attaining a higher growth,’ he said.
Enam Ahmed Chaudhury urged the government to refrain from politicising the bureaucracy for the sake of its impartiality and efficient and effective functioning to carry out the government’s development programmes.
He further emphasised the need for a political dialogue for preparation of development policies such as five-year plan and 10-year perspective plan in view of the possibility of changeover in power in a democracy during the implementation period.
‘A political dialogue is essential for ownership of plans. A CPD-made [Centre for Policy Dialogue] plan or one-party programme cannot be the tool for economic emancipation of the people,’ Chaudhury said.
Dwelling on prevalence of malnutrition, Hossain Zillur said 50 per cent of the people still could not take milk every week. ‘The face of poverty has been changed; it is the concern of poor nutrition,’ he pointed out.
He pointed out that farmers could not sell their milk due to lack of demand and poor purchasing power of the common people.

Bangladesh Bank governor Atiur Rahman on Saturday stressed the need for strengthening rural economy to face growing challenges of attaining food security.

He said flow of agricultural loan would be increased to boost the country’s economy by reducing dependence on agricultural imports and by alleviating poverty through employment generation.

Bangladesh Bank would continue its efforts to provide poor and marginal farmers and sharecroppers with banking facilities. It also works since age old previous.

Atiur Rahman was speaking at an event to distribute small and medium loans organised by Jinabazar corporate branch of Bangladesh Krishi Bank on Saturday.

He also said, “It is not obligatory for Krishi Bank to provide agricultural loan only. Now the bank is distributing loan among the small and medium entrepreneurs.”

He said, “Sylhet abounds in winter crops but there is no investment from the banks here.”

The people of Sylhet living abroad play a significant role in the economy by sending remittance but they are not keen to invest here, he said.

He said loan collection has been postponed for a year as flash floods badly damaged boro crops.

On top of that agriculture loan would be distributed among a large number of sharecroppers through the banking channel, he said.

Recommendations of field level bankers and stakeholders have been sought to make agriculture and rural loan policy more effective, he said

Later he distributed loans worth Tk 3.26 crore among 42 entrepreneurs.

The biennial elections of apex business body Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has gotten underway, Saturday morning.

Voting began at 9am and will continue through to 5pm at the FBCCI building, in the city’s commercial hub Motijheel.

The total number of voters is 1,698.

Security has been reinforced with close circuit cameras installed on the polling premises, along with strong vigilance from the law enforcers.

Chairman of the election board Ali Ashraf said that all measures have been taken to ensure a free and fair poll.

Fifty-eight candidates from four panels are vying for 28 posts of the 44-member board of directors.

The four panels are the AK Azad & M Jasim Uddin panel, Dewan Sultan Ahmed-led Ganotantrik panel, Abu Alam Chowdhury-led Ganotantrik Parishad, and the Delwar Hossain-led Ganotantrik Baboshayee Oikya Parishad.

The FBCCI consists of two groups of members, namely, the chamber group and the association group.

Among the 28 director posts, 14 candidates will be elected from each group. Notably 16 directors– eight from each group– have already been selected by nomination.

These 44 directors— nominated and elected— will then vote on Monday to elect the president, the first vice president and the vice president.

This time the president and the vice president will be elected from the chamber group, ad the first vice president from the association group.

Ex-president of Bangladesh Chamber of Industries the chairman of Hameem Group, AK Azad, has run strong campaign for the president candidature.

Asian shares rose on Wednesday, led by electronics makers and resource stocks, after successful European debt auctions boosted hopes for global growth and lifted commodity prices.
The euro steadied near its highest in 2 weeks, and easing fears about Europe’s debt crisis also fueled gains for higher-yielding currencies such as the Australian dollar.
Industrial raw materials also gained, with copper up for a seventh day running, while crude oil extended its rally into a third day.
Tokyo’s Nikkei .N225 rose 1.6 percent to top 10,000 points for the first time in a month, picking up steam after closing above its 25-day moving average on Tuesday. .T
“The speculative sell-off in response to negative news, which we had seen up until now, might have come to a halt, and short-covering is now picking up momentum,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management.
Electronics makers were the biggest contributors, with Canon (7751.T) up 3.2 percent and Kyocera (6971.T) up 2.2 percent. The Philadelphia semiconductor index .SOXX had jumped 5.5 percent on Tuesday after Taiwan’s big contract chip makers forecast growing demand.
U.S. stocks gained more than 2 percent on Tuesday, with the S&P 500 rising above its 200-day moving average for the first time in a month, as investors took heart from successful debt auctions in some of the euro zone’s weaker members. .N
“From a technical perspective, the U.S. market retested its 200-day moving average and managed to go through it, so the next few days will be very interesting,” said Matt Riordan, portfolio manager at Paradice Investment Management in Sydney.
“I think it will remain volatile.”
EURO RELIEF
The euro was up at $1.2315, having risen to as high as $1.2349, the strongest level since June 1, in the previous session after debt auctions in Spain, Ireland and Belgium drew solid demand.
The single currency has been battered for months as investors took fright at high euro zone sovereign debt levels and low growth prospects in several countries in the bloc.
The bond auctions also helped the Australian and New Zealand dollars, higher-yielding currencies that tend to gain on heightened risk appetite.
Some traders said a short squeeze on the euro — with investors who had been betting on falls scrambling to cover their positions — could push the currency higher.
“The price action suggests that both the euro and the Aussie’s rally in the past few sessions have a bit to run,” said John Horner, currency analyst at Deutsche Bank in Australia.
Japanese government bonds dipped, following a fall in U.S. Treasuries as stock market gains dampened demand for safe-haven government debt, but losses were limited as traders cautioned the European crisis still had some months to run.
“The significant rise in stock prices has been taken in stride as it is difficult for investors to become optimistic while worries over the euro zone’s debt situation continue to simmer,” said Makoto Noji, a senior market analyst at Mizuho Securities.
September 10-year JGB futures fell 0.13 point to 140.29, pulling back from a two-year high above 141.00 struck the previous week.
U.S. crude futures edged up to near $77 a barrel, a day after spiking more than 2 percent on growing investor confidence in a global economic recovery.
Hopes of improving demand for resources also boosted copper for a seventh straight day.
That, in turn, lifted shares in the resources sector, while Australian mining heavyweights Rio Tinto (RIO.AX) and BHP Billiton (BHP.AX), both of which rose nearly 2 percent, were also helped by signs the Canberra government was planning revisions to its proposed mining tax.

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(Reuters)

Finance minister Abul Maal Abdul Muhith told the parliament on Monday that the government had limited capacity to implement the annual development programme.

In his concluding speech on the supplementary budget for the current fiscal year, the minister, however, said the ADP implementation in the next fiscal year would be “close” to the target.

A supplementary budget of Tk 1198.78 billion for the current fiscal, ending June 2009, was approved in the parliament.

The minister’s comment came as the opposition and private research firms criticised the government for poor ADP implementation in the current fiscal year.

Muhith in his budget speech told the parliament that up to March this year the government machinery could only implement 47.6 percent of the Tk 28,500 crore ADP in this year’s revised budget.

The finance minister’s proposal was an ADP worth Tk 38,500 crore for the next fiscal year.

“There is no way of denying the fact that we have limited capacity to implement the annual development programmes.

“But gradually we are increasing our capacity. We have to stop thinking that we cannot implement the ADP.

He said the ADP implementation in the next budget would be close to the target.

The finance minister also said the people should stop increasing prices following the announcement of a proposed budget.

“There should be no relation between budget announcements and price hikes.”

Global policymakers unleashed an emergency rescue package worth about $1 trillion (672 billion pounds) to stabilise world financial markets and prevent the Greek debt crisis from destroying the euro currency.

The rescue, hammered out by European Union finance ministers, central bankers and the International Monetary Fund in marathon talks at the weekend, was the largest package in over two years since G20 leaders threw money at the global economy following the collapse of Lehman Brothers.

The size of the package surprised financial analysts and the euro rose close to 2 percent while stocks in Asia firmed.

The US Federal Reserve reopened currency swap lines with several central banks and Group of Seven and Group of 20 finance ministers weighed in with their backing for the measures.

EU Monetary Affairs Commissioner Olli Rehn told a news conference the package of measures “proves we shall defend the euro whatever it takes.”

The emergency measures are worth much more than any previous attempts by the 27-country EU or the 16-state single-currency group to calm markets.

They come after the Greek crisis drove sovereign debt yields and insurance on this debt to record levels.

Financial markets had started to punish other euro zone debt of members with bloated budgets such as Portugal, Spain and Ireland, in what Sweden’s finance minister described as “wolfpack behaviours.”

The $1 trillion package consists of 440 billion euros in guarantees from euro area states, plus 60 billion euros in a European instrument.

EU finance ministers said the International Monetary Fund was expected to contribute 250 billion euros, taking the total to 750 billion euros, or around $1 trillion.

However, IMF head Dominique Strauss-Kahn did not offer any specifics but said any IMF action would be on a “country-by-country basis.”

The European Central Bank said it will buy euro zone government bonds to help support fractured markets, abandoning its resistance to full-scale asset purchases.

The ECB said in a statement that the step, dubbed the “nuclear option” by many economists, was justified because of government promises to meet strict budget targets and step up consolidation efforts.

The euro currency, which last week sank to a 14-month low against the dollar, rose as high as $1.2950 before slipping back on the ECB decision to buy debt. By mid-morning it was changing hands at $1.2930.

“Getting them to agree on a number is crucial,” said Tony Morriss, market strategist at ANZ in Sydney. “But to me what appears more important is the establishment of swap lines and quantitative easing (QE). And while QE may weigh in the longer term, the euro seems to be stabilising, at least in the near term,” Morriss said.

The ECB said the scope of the purchases was yet to be determined, but added they would be offset by liquidity-absorbing operations so that the stance of monetary policy is unaffected.

The ECB last year announced a 60 billion programme to buy covered bonds but this would be its first move into buying government debt.

Gold prices, considered a safe haven investment, fell as much as 1.5 percent after touching near record highs last week.

EASE FEARS

The central bank swap facility is meant to ease fears of a dollar shortage as investors dump riskier assets and move back into the US dollar. The cost of interbank three-month U.S. dollar funds saw its largest rise in 16 months on Friday.

The move is designed to ensure there is enough money and confidence in the global financial system to stave off 2008-style credit crunch.

Ministers from Spain and Germany said euro zone countries would speed up their efforts to tackle their fiscal problems.

Jitters over euro zone finances have set global markets on edge and created the conditions for a nearly 1,000-point drop in the Dow Jones industrial average on Thursday. Authorities are investigating what triggered the dramatic move.

Both the EU and the IMF has already approved a 100 billion euro package to support Greece, whose budget deficit blew out last year to 13.6 percent of GDP.

To secure the funds, Greece has committed to deep budget cuts that have already caused violent public protests in the country as it moves to get the deficit back down to the EU limit of 3 percent.

“WOLFPACK”

Policymakers around the globe are worried the crisis in Greece could spread to other countries, fears compounded by the unexplained shock plunge in US stocks on Thursday.

In Europe, officials said they would fight speculative investors they blame for aggravating the public debt crisis.

“We now see … wolfpack behaviours, and if we will not stop these packs, even if it is self-inflicted weakness, they will tear the weaker countries apart,” Swedish Finance Minister Anders Borg told reporters in Brussels before the EU meeting.

Economists estimate that if Portugal, Ireland and Spain eventually come to require bailouts similar to Greece’s, the total cost could be some 500 billion euros.