Russia and the IPO's

MOSCOW, September 17, 2010/PRNewswire/ --
- Institute for Development of Financial Markets is Holding IPO&SPO-2010 Forum in Moscow
The Forum is the biggest Russian annual event designed to address IPO challenges and prospects for Russian companies which will be held on September 23, 2010 at Valdaysky Conference Hall, Marriott Moscow Tverskaya Hotel.
With Russian IPO market increasing, the Forum will continue the dialogue about issues of attracting capital in Russia at a drastically new level. The key difference of this year's Forum is discussing totally new experience in IPO organizing. Forum participants will have the opportunity to get information about further IPO market development from regulators, stock exchanges (both Russian and foreign ones), financial consultants and issuers themselves. The Forum will also give an overview of new financial products and instruments offered to Russian issuers. Special attention will be paid to new services designed to encourage IPOs by mid-caps.
IPO&SPO-2010 Forum speakers and participants are professionals involved in IPO and SPO processes - representatives of the Federal Financial Markets Service, Bank of Russia, Russian Ministry of Finance, Ministry of Economic Development, Federal Antimonopoly Service, as well as issuers, bank underwriters, legal and consulting companies, rating agencies, investment companies, and, most importantly, a number of stock exchanges - both Russian and foreign ones.
The organizer of the Forum is the Institute for Development of Financial Markets.

China now second largest economy...

China has edged out Japan and become the second largest economy as reported by the New York Times.

The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.

The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.

Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.

Perhaps we should start learning how to speak Chinese...

China currency change to be gradual

Following up on yesterday's coverage of the story China and it's announcement it was going to make changes in it's currency system comes this New York Times piece that says this will be a gradual process. The additional announcement was said to be released to reassure the Chinese but I also have a feeling it was designed to provide more information to the world-wide financial markets as well.

The central bank’s statement coincided with signs of a backlash in China, where many view a weak currency and the accompanying strong exports as a sign of national sovereignty. The Chinese decision to tolerate a more flexible currency drew caustic postings on Chinese Internet sites, like one on Sohu.com: “I didn’t imagine I would see the day when China would submit to America and agree to appreciation of the renminbi.”

Postings like this criticizing the government’s announcement seemed to disappear almost as quickly as they appeared, an indication that government censors were active. But China’s determination to limit the rate at which the renminbi rises against other currencies, particularly the dollar, is likely to upset members of the U.S. Congress, who have been pressing for quick changes.

When world leaders gather this weekend in Toronto for meetings, enthusiasm about China’s shift to a more flexible currency may be dampened by Beijing’s public caution that any changes in the value will be slow and modest.

More on China...

There are a great many articles out there on the move by China to make changes to it's currency system. As noted below, some warn of the dangers, some believe the impact will be minimal and some see a benefit. Continuing the coverage of this story, which I believe since China owns over 900 billion dollars of U.S. debt is important, is this article from the Washington Post that covers China's initial announcement:

Facing growing pressure from around the world, China's central bank announced Saturday that it is prepared to allow the country's currency, the renminbi, or yuan, to float more freely against the dollar and other foreign currencies.

The statement, from a bank spokesman, gave no details of when China would allow its currency to appreciate and by how much. But the timing of its release, just before the leaders of the world's largest economies gather for a G20 meeting in Toronto, appeared clearly aimed at taking pressure off Beijing over the issue. Many countries, including the United States, have criticized China's fixed exchange rate, which critics say was keeping the value of Chinese exports artificially low.

China's latest currency move being watched carefully

As with most financial news, there are those that predict doom and those that predict no real change. We'll find out Monday who's right - from Reuters:

Adding to market tensions, the surprise move on Saturday occurred before next week's sales of $108 billion in shorter-dated debt by the U.S. Treasury and a Federal Reserve policy meeting this week.

In July 2005 when China abandoned its peg against the U.S. dollar and moved to a managed float, there was a sharp sell-off in U.S. Treasuries, a reaction that some analysts say could happen again.

"The knee-jerk reaction was a 10 to 15 basis point increase in yields. That was one of the biggest moves of the year and it continued to rise for two to three weeks thereafter," said George Goncalves, head of U.S. interest rate strategy at Nomura Securities International in New York.

Other analysts said China's announcement, which lacks details, will have little impact on bond prices and next week's U.S. Treasury auctions, which consist of $40 billion in two-year notes, $38 billion in five-year debt, and $30 billion in seven-year notes, may be the focus instead.

They said China's latest currency move is part of a gradual process, which has not slowed its accumulation of U.S. Treasuries since 2005.

As of April, China held $900.2 billion in U.S. government debt, ahead of Japan, which owned $795.5 billion, the U.S. Treasury said this week.

Worldwide military spending increased in 2009 by its fastest pace in 6 years

We think of things being more peaceful in the world when it comes to needing military. Evidently that's not the case with this Christian Science Monitor article pointing out that worldwide spending on military has increased more last year than any year in the past six years. It is the oil nations that increased the most, (article link).

The US remains by far the biggest military spender, followed by China, the Stockholm International Peace Research Institute (SIPRI) said in its annual report on worldwide military expenditures, released June 2. Last year saw the steepest jump in worldwide military spending since the start of the Iraq War in 2003.

But, as the world’s military spending increased nearly 50 percent over the past decade, the biggest military budget increases were seen in small, oil-rich countries flooded with new wealth.

From 2000 to 2009, Chad increased its military budget 663 percent, Azerbaijan increased 471 percent, and Kazakhstan increased 360 percent.

Stock sell off continues related to Greek crisis

From CNN:

The selloff resumed Friday as investors remained jittery following one of the most gut-churning days in Wall Street history.

The Dow Jones industrial average (INDU) lost 217 points, or 2%, after having been on both sides of the breakeven point in the first 30 minutes of the session. The S&P 500 index (SPX) lost 25 points, or 2.3%. The Nasdaq composite (COMP) lost 73 points, or 3%.

The Greek crisis...

One of the questions most wondered is who will be next and if the bailout will even work. I recommend this Time Magazine article on what's happening in Greece. Just one part of it:

As Greece swallowed its medicine, one rating agency lowered its grade on Spain, another warned it may downgrade Portugal's debt, and the Spanish unemployment rate officially passed the 20% mark. Both countries have emphasized the ways in which they are not like Greece. They have comparatively low levels of public debt (85% of GDP for Portugal and 67% for Spain vs. Greece's 124%) and, in Portugal's case, a recent history of making tough fiscal reforms. "All serious analysts have made it perfectly clear that Spain's situation is very different from Greece's," says Finance Minister Elena Salgado. "Spain does not have, nor is it going to have, a solvency problem, so there is no need for outside aid." But if Spain has its sovereign debt under relative control, it has other problems almost as troubling. For one thing, its levels of private debt are extremely elevated. Taken together, private and public debt reach 170% of the country's GDP — an amount actually higher than Greece's total debt. And the problem with that, economists point out, is that it reduces the flexibility with which the government can respond to its own citizens' needs. "What happens if the private sector needs a bailout?" asks Fernando Ballabriga, economist at Barcelona's ESADE business school. "The rise in public debt — even if it's still below Greek levels — means that the public sector won't be able to rescue the private sector."

Boomberg on Greek downgraded to junk status

Bloomberg weighs in on the Greece cut to junk status that was referenced in the below post. Part of this recommended article:

Greece was lowered to BB+ from BBB+ by S&P, which also warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The move, which puts Greek debt on a par with bonds issued by Azerbaijan and Egypt, came minutes after the rating company reduced Portugal by two steps to A- from A+.
The turmoil comes as European Union policy makers struggle to agree on measures to ease the panic over swelling budget deficits. Leaders of the 16 euro nations may hold a summit after the Greek government’s decision last week to tap a 45 billion- euro ($60 billion) emergency-aid package failed to reassure investors, a European diplomat and Spanish official said.

Greek debt rating now junk...

Greece’s credit rating was lowered to junk status Tuesday by a leading credit agency, a decision that rocked financial markets and deepened fears that a debt crisis in Europe could spiral out of control.

The downgrades, announced near the end of trading in Europe, came amid rising political tensions across the Continent that had already punished Greek bonds and sent stock prices down sharply from London to Paris to New York. The Dow Jones industrial average slumped by 213.04 points to close at 10,991.99, a fall of 1.9 percent for the day; major indexes in Western Europe fell by 2.5 percent or more. Investors, worried about shock waves in the broader European economy, also migrated away from the euro and pushed the dollar and Treasury bonds higher. The euro slid to $1.3316 in afternoon trading in New York from $1.3382 late Tuesday.

“This is a signal to the markets that the situation is deteriorating rapidly, and it’s not clear who’s in a position to stop the Greeks from going into a default situation,” said Edward Yardeni, president of Yardeni Research. “That creates a spillover effect into Portugal and Spain and raises the whole sovereign debt issue.

There's more here on this New York Time's story that could impact our economy as well...