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According to latest report released by govt. body, in first fiscal stimulus package one there was Rs 10,000 crore of tax free bonds for India Infrastructure Finance Company Limited (IIFCL) and that has now been increased to about Rs 30,000 crore. There is a timeline of two years, 18-months and refinancing of Public-Private Partnership (PPP) projects etc.
IIFCL was incorporated on January 5, 2006, 2006, under the Companies Act 1956, as a wholly Government owned Company with an authorized capital of Rs. 2000 crore and paid-up capital of Rs. 1000 crore. Besides, the resource-raising program of the Company would have sovereign support, wherever required.
Govt. said, In order to give a boost to the corporate bond market, FII investment limit in rupee denominated corporate bonds in India has been increased from $6 bn to $15 bn. The most beneficiary sector of this package will be infrastructure and real estate companies, which are facing liquidity crunch.
The most disappointment outcome of this package was 20 lk cap, Hosing Sector and Public Sector banks both were asking for increasing 20 lakh cap to minimum 30 lakh cap that was been introduced in last fiscal package. But Planning Commission Deputy Chairperson Mr. MS Ahluvalia and the Finance Secretary said nearly 94% of home loans sanctioned are below the Rs 20 lakh bracket so it will not be hiked in this pack but they give a hint to increase it in next package.
To facilitate access to funds for the housing sector, the 'development of integrated townships' would be permitted as an eligible end-use of the ECB, under the approval route of RBI. NBFCs, dealing exclusively with infrastructure financing, would be permitted to access ECB from multilateral or bilateral financial institutions, under the approval route of RBI. Besides, ceiling on interest rates for such overseas borrowings has also been removed.
Credit targets of Public Sector Banks are being revised upward to reflect the needs of the economy in the present difficult situation. This will ensure flow of credit to the industry. The government will also closely monitor, on a fortnightly basis, the provision of sectoral credit by public sector banks.
For the export sector which has been hit by the recession in US economy, the government has extended the Duty Entitlement Passbook Scheme till December 31, 2009. Besides, duty drawback benefits on certain items including knitted fabrics, bicycles, agricultural hand tools and specified categories of yarn are being enhanced. These changes will take effect retrospectively from September 1, 2008. EXIM Bank which has obtained from RBI a line of credit of Rs.5000 crore and will provide pre-shipment and post-shipment credit, in rupees or dollars, to Indian exporters at competitive rates.
To give a leg-up to steel and cement sectors, the government has brought back countervailing duty on TMT bars and structural cement. These duties were exempted to provided to contain inflation. Full exemption from basic customs duty on zinc and ferro alloys, which was also provided to contain inflation, is also being withdrawn.
To boost the housing sector, the centre will work with state governments to encourage them to release land for low income and middle income housing schemes.
To boost the automobile sector, states, as a onetime measure up to June 30, 2009, will be provided assistance under the JNNURM for the purchase of buses for their urban transport systems. Accelerated depreciation of 50% will be provided for commercial vehicles to be purchased on or after January, 2009 up to March 31, 2009.
The government is closely monitoring its spending to expedite the pace of expenditure for all schemes and programmes. Government will set up a fast track monitoring committee to ensure expeditious approval and implementation of central projects and chief ministers are being advised to do the same.
An official statement said the measures outlined above taken together with steps taken earlier constitute a substantial counter-cyclical stimulus in the current year and added that the government does not envisage any further measures in the current fiscal year.
"However, Government is aware that the measures required to provide an economic stimulus to the economy have to extend beyond the current financial year. Towards this end, it is finalizing Plan and Non-Plan expenditure that will be required in the next financial year to maintain the tempo," it said.
The Plan for the next year will include proposals for recapitalization of the public sector banks of the order of Rs 20,000 crore over the next two years. This will help to ensure that the banking system will not suffer from capital adequacy constraints in order to provide credit growth needed to sustain the economic momentum in 2009-10.
The liberalizing of the ECB route has been a long standing demand of real estate developers, so they are clearly happy whether the current market scenario will actually make this a cosmetic change or do a lot more than that, the question mark still remains but clearly happy on that move.
The government announced FISCAL STIMULUS PACKAGE:
Major tax cuts across the board to boost demand and allocated additional funds and incentives for exports, housing, textile and infrastructure to stimulate the economy due to global financial crisis.The package, coming on the back of fresh REPO and Reverse REPO cuts announced by the RBI on Saturday, includes a four per cent(4%) cut in ad-valoram duty across the board, to boost additional spending, besides enhanced credit for exporters, along with a Rs 10,000 crore mop up for India Infrastructure Finance Company.Import duty on Naptha for use in power sector as well as export duty on iron ore to be eliminated."In order to provide a contra-cyclical stimulus via plan expenditure, the government has decided to seek authorisation for additional plan expenditure of up to Rs 20,000 crore in the current year," the statement said, adding the total spending programme in the four months ending March was expected to be Rs 300,000 crore.As part of efforts to boost the housing sector, the public sector banks would shortly announce a package for home loan borrowers in two categories -- up to Rs five lakh and between Rs 5-20 lakh, the statement said, adding that additional measures would be taken, as necessary, to promote an accelerated growth trajectory.Attaching special significance to infrastructure development, the government authorised India Infrastructure Finance Co Ltd (IIFCL) to raise Rs 10,000 crore through tax- free bonds by March 2009 and said it would be permitted to raise further resources. this initiatives would support a PPP (Public-Private Partnership) programme of Rs 100,000 crore in the highways sector,"
Paying special attention to exports, the government decided to provide an interest subvention of two per cent up to March 2009 for pre and post-shipment export credit for labour-intensive exports like textiles, leather, marine products and SME sector. The concession is subject to a minimum rate of interest.Besides, it would provide an additional Rs Rs 1,100 crore for full refund of terminal excise duty/CST and another Rs 350 crore for export incentive schemes and a back-up guarantee of Rs 350 crore to ECGC (Export Credit Guarantee Corporation) for providing guarantee for exports to difficult markets and products.
The government plans to allocate the money, equivalent to 5 percent of gross domestic product, by March, it said in a release in New Delhi today. The Reserve Bank of India yesterday cut interest rates for the third time in less than two months. India said on Sunday it will seek approval for extra spending worth 200 billion rupees ($4 billion) as part of a plan to boost the economy and help it counter the global slowdown.
The government also announced a series of measures including duty cuts on several products, plans to boost home loan growth and allowing a state-run firm to issue tax free bonds worth 100 billion rupees to fund infrastructure projects.
COMMENTS:
INDRANIL PAN, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI:
"Obviously the monetary policy was not enough to provide a boost to the economy. The reduction in Cenvat will help boost consumption demand.
"The overall package is geared towards helping producers especially the export sector to tide over the difficult time of the global credit crunch.
"While tax reductions can be effective immediately, for the overall package to work itself into the economy may take some time."
``This is huge and it reflects the seriousness of the global economic crisis,'' said Sonal Varma, a Mumbai-based economist at Nomura International Plc in Mumbai.``This also shows there is nothing like decoupling in an integrated world - India is getting affected by both global trade and financial channels.''
The unprecedented spending comes after Mumbai, India's financial capital, came under attack from terrorists last month and as a global credit crisis cuts off access by Indian companies to international funds.
SARANG WADHAWAN, MANAGING DIRECTOR, HDIL :
"What the RBI announced yesterday was good and the government package hasn't got much relevance to commercial real estate. We do feel that the housing loan subsidy towards 2 million rupees budget (houses) works.... I think a direction from the RBI towards banks to start lending, that will actually ease real estate. For us, none of our flats run in the 2 million rupees budget. Unless you're talking of really low income housing it really doesn't provide much...I think commercial real estate needs a lot more impetus.
SHERIAR IRANI, CO-RESEARCH HEAD, JM FINANCIAL :
"On the face of it the amounts don't seem to be very large, especially that for infrastructure. I think it will provide a boost to individual sectors such as textile, gems etc. The market may react in a sector-wise way. I don't see the market reacting as a whole."
Global Impact :
Governments around the world are spending to revive growth. China unveiled a 4 trillion yuan ($582 billion) package in November and President-elect Barack Obama plans to make the ``single largest new investment'' in roads, bridges and public buildings since the 1950s to lift the sagging U.S. economy.
India, where domestic consumption makes up 60 percent of the GDP, is facing the impact of the global recession because its integration with the world economy has been rising.
The US government will spend up to $250 billion to buy shares in struggling banks in the latest effort to stem a global financial crisis, Treasury Secretary Henry Paulson said overnight.
At a press conference in the Treasury's ornate Cash Room, Paulson announced that nine large financial institutions "have already agreed to participate in the program." In this program US government will spent $ 250 bln to get stake in banks. The half of this $250 bln means $125 bln will be invested in country most preffred bank alone and remaning $125 bln, which is the amount of the first tranche Congress authorized Treasury to spend—to be invested quickly in other banks. After that, Treasury would ask Congress to authorize the next $100 billion in funding it approved.
The announcement came the day after Paulson called in the heads of six major banks and pressed them to "voluntarily" back Treasury's plan to devote $250 billion of the $700 billion recently approved by Congress to buy direct equity stakes in financial institutions in return for senior preferred shares.Treasury Sec Mr Paulson said on Oct 14th banks that sell shares to the government will "accept restrictions" on executive compensation, including a ban on golden parachute exit agreements while the government holds the bank shares. Taxpayers will also get warrants for common shares. And the banks will be expected to "continue and to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure."
"Our goal is to see a wide array of healthy institutions sell preferred shares to the Treasury, and raise additional private capital, so that they can make more loans to businesses and consumers across the nation," Paulson said in the statement. "At a time when events naturally make even the most daring investors more risk-averse, the needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it."
Who's Getting What
Among the firms expected to get funding: JPMorgan Chase (JPM), Citigroup (C), and Bank of America (BAC) were to receive $25 billion apiece; Wells Fargo (WFC) was to get between $20 billion and $25 billion; Goldman Sachs (GS) and Morgan Stanley (MS) were down for $10 billion each, and the Bank of New York (BK) and State Street (STT) were slated for $2 billion to $3 billion apiece. Citigroup and Goldman Sachs declined to comment on this news.
The substantial sums involved make clear that Uncle Sam could be on the way to owning a vast chunk of the U.S. banking sector.
Who's Said What
"Today we are taking decisive actions to protect the US economy," Mr Paulson said.
"We regret having to take these actions. Today's actions are not what we ever wanted to do - but today's actions are what we must do to restore confidence to our financial system." Mr Paulson added: "Government owning a stake in any private US company is objectionable to most Americans - me included.
"Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable.
"When financing isn't available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop."
US President George W Bush said the effort is needed to boost confidence and avert a severe downturn.
"These measures are not intended to take over the free market, but to preserve it," the US President said in brief remarks in the White House Rose Garden.
This Business news fetched from AFP..
This Business news fetched from AFP..
While the UPA government is unlikely to push any pending bills aimed at reforms in the financial sector --- banking, insurance and pension --- for Parliament approval before the general elections, the BJP underlined that "this is not the right time for reforms" in the wake of the global developments.
Once the 14th Lok Sabha is dissolved next year, all pending bills in Parliament would automatically lapse. This means that the same bills would have to be re-introduced, if at all there is political will, after the new Parliament is formed post the Lok Sabha poll. "This is a time when we are grappling with the (global economic) situation and we have to allow this to blow over," a senior BJP member said, adding that reforms in the financial sector must wait.
Though Congress insiders said that the UPA would want to wait and watch before taking any step towards reforms, party spokesman Abhishek Manu Singhvi said that "not reforming can never be good or desirable." However he added that "reforms would have to be tailored to the context and must take a good fit between the problem, panacea and the objective." He also pointed out that Parliament's meeting time from now to the general elections is only a few weeks and it may not be possible for the UPA to take up the crucial bills. However, he added that although it will be "utilised for maximum legislation, time consideration will be there."
In other words, any Bill requiring Parliamentary approval will be shelved.
SAN FRANCISCO - Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank became the latest victims of the ongoing financial crisis on Friday, when they folded and their deposits were transferred by the Federal Deposit Insurance Corp. The closures are the 14th and 15th bank failures so far this year. The FDIC said in a prepared statement that Main Street Bank had $98 million in total assets and $86 million in total deposits as of Tuesday. All of Main Street's deposits were assumed by Monroe, Mich.-based Monroe Bank & Trust, the FDIC said.
The FDIC said that Meridian Bank had total assets of $39.2 million and $36.9 million in total deposits as of Sep. 25. National Bank will buy roughly $7.6 million of Meridian's assets, while the FDIC will "retain the remaining assets for later disposition," according to its statement. All of Meridian Bank's depositors, "including any with deposits in excess of the FDIC's insurance limits," will automatically become depositors of Hillsboro, Ill.-based National Bank, the FDIC said.
The FDIC said Main Street Bank's failure will cost its insurance fund between $33 million and $39 million, while Meridian's failure will cost the fund between $13 million and $14.5 million.
The world economy is decelerating quickly—buffeted by an extraordinary financial shock and by still-high energy and commodity prices—and many advanced economies are close to or moving into recession, the IMF says in its latest World Economic Outlook (WEO).
The October 2008 report which was released two days prior to the IMF-World Bank Annual Meetings in Washington, said that growth in emerging economies is also weakening after years of strong growth, though it will still drive global growth.
Speaking at the WEO press conference, IMF Chief Economist Olivier Blanchard emphasized the importance of implementing joint financial and macroeconomic policies at this point "to stem the negative momentum on multiple fronts." On the financial side, "this implies the design of comprehensive programs to deal with systemic problems," while on the macroeconomic side, "this implies the use of monetary and fiscal policies to support growth and break negative feedback loops between the financial and real sectors," he said.
A story from Bloomberg News on Saturday reported Fannie and Freddie began telling bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, Bloomberg said, citing three unidentified people familiar with the situation. The purchases would be separate from the U.S. Treasury's $700 billion bailout plan, which was signed into law earlier this month, Bloomberg noted.
Fannie and Freddie were taken over by the U.S. government in early September, in the first of several bailouts the government has launched recently to try to halt the spread of the mortgage-fueled credit crisis.
Regulators initially restricted Fannie and Freddie's growth when they seized control. To "promote stability" and lower mortgage costs to borrowers, Treasury Secretary Henry Paulson said the two companies would be allowed to "modestly increase'' their mortgage portfolios to as much as $1.7 trillion through the end of next year and said they would no longer be run "to maximize shareholder returns."
Less than two weeks later, Fannie and Freddie were told to ramp up their mortgage bond purchases as the financial crisis deepened and credit activity came to near standstill, Bloomberg said. Fannie and Freddie own or guarantee almost half of all home loans in the U.S., so they're vital to the health of the residential real estate market.
Battered by rumours casting doubts about its financial health, ICICI Bank on Sunday received a shot in the arm with global rating agencies Moody's and S&P giving it a thumbs up saying its overseas arms have no significant sub-prime risks.
"ICICI Bank's UK subsidiary has no high risk sub-prime securities and enjoys robust asset quality and liquidity," Moody's said in its latest credit report.
Separately, another leading rating agency Moody's said that the Indian lender's credit fundamentals remain sound and any mark-to-market loss would not have any significant impact on its credit profile.
These ratings assume importance in the wake of reports that it was over-exposed to risk caused by the global meltdown and that the bank's loan profile was not fully secured and credible.
Interestingly, Morgan Stanley in one of its recent reports had said that among Asian banks, ICICI Bank has the largest exposure to weak global markets.
Moody's also said that ICICI continues to have highest rating for senior debt among Indian banks and it has "no high risk sub-prime securities in ICICI Bank UK investment book." At the same time, S&P's senior director, financial institutions ratings, Asia, Ritesh Maheshwari, said that "credit fundamentals of ICICI Bank continue to remain sound despite the reports on its exposure to Lehman Brothers or the Bakerie group."
"These have to be seen in the context of the USD 10 billion capitalisation of the bank and USD one billion of profits, Maheshwari said.
He added that while the overseas investment portfolio might be subject to mark-to-market valuation loss but it should not be significant enough to hurt ICICI Bank's credit profile.
Moody's retained its ICICI Bank UK rating at 'Baa1' for senior debt, which is higher than the foreign currency senior debt rating of any Indian bank.
The rating reflects the bank's improving core banking activities and robust asset quality, as well as the developing franchise within the UK, Moody's said, adding that the corporate banking business is centred on providing services to Indian corporates which are in the UK, including merger and acquisition advice, forex business and syndicating Indian paper.
"It has robust asset quality ratios with no loans classified as impaired. It has also stated that ICICI Bank UK maintains a rather conservative investment policy and does not hold any sub-prime assets, nor does it have exposure to CDOs, SIV/SIV Lites and leveraged loans.
"The mark-to-market impact in its investment book is not associated with any structured or high-risk sub-prime related securities but is due to the general widening of the credit spreads due to the global market conditions," the agency said.
It further asserted that ICICI Bank UK has a robust liquidity position and that ICICI UK has a relatively high level of capitalisation, with total capital adequacy at 19 percent at March 31, 2008 and ICICI UK has a strong backing from its parent ICICI Bank Limited.
Data Collected from Internet... Leading search engines can provide the same.
Earlier, The U.K. government last week said it would invest at least 50 billion pound ($87 billion) to recapitalize Royal Bank of Scotland Group Plc, Barclays Plc and at least six others. Reports said Edinburg based RBS , market cap of 11.9 billion pounds, seeks 10 billion pound help from Investor and UK Government. A similar move is taken by Barclay;s Plc who asks for 3 billion pound cash call. U.K. Treasury officials have been working with the banks on the program and tomorrow will begin outlining details of a related plan to guarantee about 250 billion pounds of interbank loans though an insurance system.
The move would make the government the biggest shareholder in at least two banks, HBOS and Royal Bank of Scotland, the newspaper said on its website. It did not give a named source for its information.
The Sunday Times said the bank rescue could leave the government owning 70 percent of HBOS and 50 percent of Royal Bank of Scotland, and as a result it could take board seats at both banks and exercise control over future dividend payments.
Noted that British Finance Minister Alistair Darling, attending a G7 finance ministers' meeting in Washington, said on Saturday the government was to give more details early this week about its already announced 400 billion pound banking rescue plan.
The package of measures included a 50 billion pound cash injection, guaranteeing interbank lending by 250 billion sterling to help unfreeze wholesale markets, and extending a Bank of England scheme that swaps banks' risky assets for government debt to provide 200 billion pound of cash to the system.
Carnage in world equity market continued on Friday also as almost all of them witnessed sharp cuts in today's trading session. The downward journey of the domestic stock market continued for the fifth straight session, as rate cuts by the seven central banks and cash injections by various governments failed to stem the fall in global indices. The benchmark index Sensex opned its day on bearish note by a gap down of 696 points at 10632. Till noon, the index extended its losses by more than 1,050 points on across-the-board selling to touch the day's low of 10,240, people was thinking for a lower circut but it bounced back from that level. Lower circut level was set for Sensex @ 10196. The index however managed to erase its losses a bit and trade above 10,500 at the end of the session. After registering losses of 1,726 points in the last four sessions, Sensex plunged by 800 points or 7.07% and closed at 10527 while Nifty smashed 234 points or 6.65% to close at 3279. On weekly basis, Nifty is down 14.1%, which is the highest everfall, while Sensex is down 15.96%, second highest fall ever since December 1990. BSE Midcap and Smallcap index plunged 8.34% and 7.31% respectively
Sectoral : All the BSE sectoral indices hamared badly and finished in red. BSE Realty and Consumer Durables indcies saw the sharpest fall, down over 11% and 10.11% respectively. Only Ranbaxy (4.71%) and SBI (2.27%) were the sole gainer among the sensex stocks, while RCOM (21.02%) and ICICI Bank (19.71%) took the hardest hit and among the top losers.Remaning 28 stocks also take the hit of this raining fall. Overall market breadth was extremely negative. Out of the total 2,619 stocks traded at BSE, 382 advanced, 2,189 declined while 48 remained unchanged.
Currencies & Crude : Rupee touched an all time low of 49.17 against the dollar and closed at 48.47 . Crude Oil touched a 12 month low of $81.1 in today's trade. Earnings & Economy : Tech boys Infosys announced its Q2 results today, which were is line with market expectation. However, company cut it's full year revenue and EPS guidance by 5% in dollar terms. On a review of the evolving liquidity situation in the context of global and domestic developments, the RBI, today decided to reduce the Cash Reserve Ratio (CRR) by 150 basis points to 7.5% of NDTL with effect from the fortnight beginning Oct. 11, 2008 instead of the 50 basis points reduction announced on Oct. 6, 2008. The step will inject about Rs 600 billion in the system (instead of the injection of Rs 200 billion announced earlier). Index for Industrial Production (IIP) plunged for the month of August 2008 to stand at meagerly 1.3% as compared to 7.1% on m-o-m basis. IIP figures stood at 10.9% a year ago i.e. August 2007. Inflation for the week ended sep 27 came at 11.80% against the expectation of 12% and 11.99% seen in previous week.
Asian Markets : The BSE index, among the worst performer in Asia, fell as much as 9.6 per cent at one stage to more than half below its record high of 21,206.77 hit in January, before trimming losses on domestic institutional buying. Hang Sang down about 1146.77 points at 14796.87 . Japan Key index Nikkei 225 avarage smashed 881 points at 8276.43 , South Korea KOSPI closed at 53.42 points. Taiwan @ 5130.71 down about 75.69 points. Karachi's 100-share index was little changed at 9,181.35 on extremely thin volume. Colombo's All-share index closed down 4.39 per cent at 1,924.69. Taiwan was the outperformer among all asian market. Down only odd 1.5%. Asian stocks tumbled, driving Japan`s Nikkei 225 Stock Average to its biggest weekly decline on record, on concern the deepening credit crisis will push the global economy into a recession. The Karachi Stock Exchange board will meet on Monday to review how long to keep an artificial floor under the share market and consider establishing an exit mechanism for foreign investors.
LONDON (Reuters) - Great scenery and wildlife but financial situation in need of repair -- collect in person.Iceland, which is going cap in hand to Russia for a 4 billion euro ($5.49 billion) loan to bail out its failed banks, was offered for sale as a wholesale lot on eBay on Friday.
Bidding started at 99 pence but had reached 10 million pounds ($17.28 million) by mid-morning on Friday.
Globally renowned singer Bjork was "not included" in the sale, according to the notice, but there were nonetheless 26 anonymous bidders and 84 bids.
"Located in the mid-Atlantic ridge in the North Atlantic Ocean, Iceland will provide the winning bidder with -- a habitable environment, Icelandic Horses and admittedly a somewhat sketchy financial situation," the notice read.
Bidders' questions included: "Do you offer volcano/earthquake insurance?", "Is it possible that my payment will be frozen?", and "Will you accept C.O.D. as a form of payment?"
In its bleakest forecast in years, the International Monetary Fund (IMF) said the world economy was set for a major downturn with the United States and Europe either in or on the brink of recession.The IMF said a still developing financial upheaval — the most violent since the 1930s — would exact a heavy economic toll as markets wrestle with a crisis of confidence and global credit is choked off.
In its report, the IMF warned that credit conditions would remain very difficult, restraining global growth prospects. “The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s,” the IMF said in its World Economic Outlook.
In hindsight, the IMF said lax economic and regulatory policies probably allowed the global economy to “exceed its speed limit”. At the same time, market flaws, together with policy shortcomings, allowed stresses to build.
The IMF slashed its 2009 forecast for world growth to 3 per cent, which would be the slowest pace in seven years, from a July projection of 3.9 per cent, and warned that a recovery would be unusually slow. It said growth this year would come in at 3.9 per cent, a touch below the 4.1 per cent projected in July.
In its latest report, the global economic watchdog warned that emerging and developing economies were also slowing, and, in some cases to rates well below trend.
China and India will experience slower growth on weaker exports, but should continue to be supported by solid private consumption, according to the report.
Growth in China is likely to remain at 9.7 per cent this year and 9.3 per cent in 2009, compared with 11.9 per cent in 2007, the IMF said. India will grow at 7.9 per cent this year and slow to 6.9 per cent in 2009, it said. The Indian economy grew 9.3 per cent last year.
Elsewhere in Asia, domestic demand has softened as high food and fuel prices have weighed on consumption.
Bank of Japan(BOJ), a central bank of Japan pumped 4 trillion yen into money market after current turmoil in Global Market and yestraday fall of more than 950 points in Tokyo Stock Exchange key index Nikkei - 225.The Bank of Japan (BOJ) pumped a record 4 trillion yen into the Tokyo money market on Thursday for the 17th consecutive day of emergency operations to facilitate interbank borrowing. The BOJ conducted its biggest ever single-day liquidity provision in the money market as credit conditions remained tight amid concerns over the course of the market despite coordinated interest rate cuts by six central banks in North America and Europe on on Wednesday.
Overnight call money rates remained at around 6 per cent for foreign banks and around 0.55 per cent for Japanese regional banks, both above the BOJ's official target of around 0.5 per cent, even after the BOJ injected 2 trillion yen into the market in the morning. This prompted the central bank to provide an additional 2 trillion yen in the afternoon.
Central banks around the world cut interest rates in Unpredictable moment this evening in the first such collective response to the global financial crisis which sent fresh waves of panic through stock markets, including that in India.
But the initial response of the markets was not encouraging: Wall Street turned negative and European stocks sank to a near five-year low, shrugging off the co-ordinated cuts.
Earlier in Mumbai, the sensex plunged below 11000 points for the first time since August 9, 2006 — a helpless, hand-wringing moment for investors who were still groping for answers to why the index had fallen by 10000 points in exactly nine months.
By evening in India, the world was witnessing a dramatic — and desperate — intervention led by the US Federal Reserve which cut a key interest rate — the federal funds rate — by 50 basis points to 1.5 per cent. This is the rate at which US private banks lend money to each other for overnight loans.
In the damburst that followed, China, the European Central Bank (ECB) and the apex banks in Britain, Canada, Sweden and Switzerland also cut key interest rates. Interest rate cuts are an age-old pill that is supposed to stimulate markets because the reductions make it easier for companies to borrow.
Will the cuts work this time? That was the question playing on the lips of the financial superpowers as Wall Street opened for trading a few hours after the central bank action. But the Dow Jones index fell in see-saw morning trade. In Delhi, late evening by then, the Union cabinet met to consider the global crisis and assess its impact on India. Asserting that India would grow at 8 per cent this year, finance minister P. Chidambaram said the government was watching the global crisis closely and would react swiftly to the needs of the market. He said the RBI had already taken steps to pump funds into the system and would do so again if required. US officials said this was the first time ever that the Federal Reserve co-ordinated a reduction in interest rates with other central banks. The closest thing to a precedent for today’s action came in November 2001, when the Federal Reserve and the European Central Bank announced a rate reduction on the same day. But those moves were nominally independent, and they did not involve any additional foreign central banks.
The European Central Bank had been reluctant to lower rates because policy makers there tended to see the meltdown primarily as an American problem with secondary ripple effects in Europe. But any lingering comfort outside the US evaporated last week, as money markets froze around the world and major corporations and banks across Europe began suffocating.
Before the rate cuts, Asian stock markets were clobbered with the Nikkei plunging 9.4 per cent to its biggest one-day fall since 1987.
In Mumbai, investors were groping for answers. “There is blood on the street; cold logic says that’s when you should buy stocks. But what do you do when it’s your own blood on the floor?” asked an investor. On January 10 this year, the sensex had peaked at 21206.77; today it hit a low of 10740.76 — a precipitous slide of 49.4 per cent this year. Even though the index clambered up to close at 11328.36, it was down by 3.14 per cent from Tuesday’s close. Domestic funds started buying stocks aggressively when the sensex toppled by 954 points to the day’s low around noon.
The rupee slid to its lowest level in five years at 48.75 to the dollar. However, the currency hardened on news of the rate cuts and closed at Rs 48. Gold continued to surge and hit an historic peak of Rs 13,820 per 10 grams
Originally posted here - The Telegrpah India
The US Federal Reserve opened up its coffers Tuesday to companies hit by the credit crunch with a new program that will buy up commercial paper, short-term debt critical for many corporate operations.The latest effort in an all-out war against the credit crunch creates a new "liquidity backstop" for corporate finance and was established after the US Treasury determined it was "necessary to prevent substantial disruptions to the financial markets and the economy," the central bank said.
The Fed gave no estimate of how much money would be devoted to the program but said the US Treasury would "make a special deposit" at the New York Fed to get the program rolling. The effort is aimed at getting banks and other portfolio managers to buy and sell commercial paper, short-term securities issued by companies and banks for payrolls and other day-to-day expenses. The market for commercial paper has been virtually frozen in recent weeks with banks and other financial firms reluctant to take on any risk and pumping their cash into US Treasury bills, which are guaranteed."The commercial paper market has been under considerable strain in recent weeks as money market mutual funds and other investors, themselves often facing liquidity pressures, have become increasingly reluctant to purchase commercial paper, especially longer-dated maturities," the Fed said.
The moves puts the central bank on the line in some cases for unsecured commercial paper from private firms, but the Fed said the loans would be secured by fees and other collateral arrangements "that are satisfactory to the Federal Reserve." The announcement creates a Commercial Paper Funding Facility (CPFF) "that will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers," the Fed said.
The Federal Reserve will provide financing to a special entity under the CPFF "and will be secured by all of the assets" of this entity. The Fed said the credit would be available to "eligible issuers," but offered few details. It said it would be open to US companies and other US issuer with a foreign parent firm. Companies will pay up-front fees paid or provide "security acceptable to the Federal Reserve in consultation with market participants.""The Treasury believes this facility is necessary to prevent substantial disruptions to the financial markets and the economy and will make a special deposit at the Federal Reserve Bank of New York in support of this facility," the Fed said.
The program will buy three-month commercial paper that is either unsecured or asset-backed -- using the company's holdings as collateral that have been rated as investment grade. Commercial paper that is not backed by assets "must be secured to the satisfaction of the Federal Reserve," the Fed said. This may be through an upfront fee or other guarantee or other collateral arrangements.
CREDITS AFP & Yahoo
Russian President Dmitry Medvedev, in a video statement published on the Kremlin website, has called for urgent international measures to tackle the global financial crisis.
Mr Medvedev said he would join European leaders for discussions in the French town of Evian on October 8 where he hopes a joint response can be formulated to global problems."The crisis of the international financial system demands urgent joint action. It's absolutely obvious the time has come for new decisions," Mr Medvedev said in the two-minute clip.
Russia's stock market has fallen dramatically in recent weeks, with the dollar-denominated RTS Index down 19.1 per cent on Monday (local time). The Russian President also repeated his demand for a new international security umbrella for Europe and said he would raise this at the Evian meeting with other leaders.
The short video, which opens showing Mr Medvedev working at his computer, was the first time the Kremlin has issued a statement using the internet as its primary medium.
Global Carnage
Markets wrapped the day on a depressed note erasing more than 700 points. SENSEX fall below 1200 mark in the first time in more than 2 years, on concerns of foreign fund withdrawals increased after the USD 700 billion U.S. rescue package failed to ease global recession fears. Indian stocks opened on a lower note as the global credit crisis concerns deepen. The benchmark index, BSE Sensex opened with a loss of 241.83 points, at 12,284.49. The Sensex ended the day with a loss of 724.62 points, or 5.78% at 11,801.70 after touching a high of 12,284.49 and a low of 11,732.97. The broad-based NSE Nifty shuts shop down about 215.95 points, or 5.66% at 3,602.35 after hitting a high of 3,820.85 and a low of 3,581.60. BSE Midcap index plunged 7.13%, while Smallcap index dipped 6.92%. Asian stocks declined today, led by financial companies, after the global credit crisis deepened in Europe and the U.S. lost the most jobs in five years. After Market Hours , SEBI came out with revised P-Notes guidelines, it removed 40% cap on assets under custody in cash market for issuing P-notes. SEBI had put these restriction in October 2007. Currencies - Rupee touched a 67 month low of 47.85 against the dollar. Energies - Crude slipped to $88.89/barrel mark, which is a 8 mnth low. Analyst beleive that this Crude and other Commodities are in phase of bust somehow 2000 dotcom bust. So they are advising not to long on these assest or energies.
All sector on BSE ended southwards. BSE Consumer durables and Realty index was hammered badly. It plummeted 11.01% & 9.91% respectively, Metal dropped 9.27%, Power fell 7.24% and IT declined 5.82%. All the SENSEX stocks ended in negative territory and STER and RELINFRA was the most declined stocks.. Both were down more than 14% in today trade. While Suzlon from Group A catagory down more than15% .
Turnover on 06th October , 2008
NSECash Rs.10366.93 BSECash-Rs.3992.08 Future Rs.46853.23
Citing documents filed with a New York bankruptcy court late last week, the newspaper said that Lehman creditors have accused JPMorgan of freezing $US17 billion ($21.96 billion) in cash and securities on Friday, September 12. Lehman filed for bankruptcy the following Monday.
"The creditors' committee understands that LBHI (Lehman Brothers Holding Inc) had at least $17 billion in excess assets which were held at JPMC (JPMorgan Chase) on the Friday going into the weekend before its bankruptcy filing," the court documents reportedly allege.
"In freezing LBHI's assets, JPMC was purportedly holding all of LBHI's assets as a potential offset against any claims JPMC may have had against LBHI."
The documents continued to say that "as a result of JPMC's actions, LBHI suffered an immediate liquidity crisis, that could have been averted by any number of events, none of which transpired."
In a statement to the Sunday Times, JPMorgan described the allegations as "unfounded conjecture."
Lehman Brothers - which was America's fourth-biggest investment bank - was the biggest name in international finance to fall prey to the credit crunch when it collapsed last month, though several others have been nationalised, or required some other form of government intervention since.
Last week, lawmakers in Washington finally approved a $US700 billion rescue package after much political wrangling, while European governments were forced to ride to the rescue of several major European banks.
A question is now hoovering on Inernet now a days.. stating China may dip down more as Wall Street falls more ???
Well we find a articles on this topic on Financial site Bloomberg..
Few questions confound economists more: What might tip China into the meltdown that so many have feared for so many years?
Possibilities include overheating, social instability, corruption, pollution, debt crises, war over Taiwan and a post- Olympics growth swoon. It's a perfectly rational expectation. No rapidly industrializing nation has ever avoided some kind of crisis, least of all upstarts in Asia. The list rarely, if ever, included a Wall Street crash. And yet, financial troubles in the U.S. may be the catalyst that devastates the world's fourth-biggest economy.
This will sound like a reach to those viewing Asia's strengths. China, for example, is enjoying 10 percent growth as U.S. lawmakers argue over rescuing markets and averting a depression. With its $1.8 trillion of reserves, China could bail out the U.S. without batting an eye.
Japan is returning to acquisition mode after its banks avoided the toxic debt devastating U.S. peers. Mitsubishi UFJ Financial Group Inc.'s $9 billion investment in Morgan Stanley this week is a case in point. After years of lecturing Japan about its shaky banks, the U.S. is coming hat-in-hand to Tokyo.
Yet China's chances of avoiding the U.S. crisis are dwindling by the day.
``U.S. consumers are tapped out and they're going to stop buying Chinese exports,'' says Simon Grose-Hodge, a strategist at LGT Group in Singapore. ``There's no way China's domestic demand can take up that slack.''
Recession Risks
Adds Michael Pettis, a finance professor at Peking University in Beijing: ``We should all hope the recession associated with the U.S. financial crisis is very, very mild.''
The odds of a mild U.S. slowdown are declining almost as fast as stock prices. Even with hundreds of billions of dollars worth of Wall Street bailouts, consumption decreases and big job cuts will probably intensify. The slow drip, drip, drip nature of Wall Street's swoon should concern officials in Beijing. China's mercantilist model makes the most populous nation dangerously dependent on consumers in the biggest economy. Growth in Asia will experience quite a setback if the U.S. enters a prolonged period of weakness.
While a Japan-like ``lost decade'' isn't the best-case scenario, Americans aren't sitting on the kind of savings that Asians are. As U.S. growth slows, debt is reduced and households increase savings, exporters such as Hong Kong, South Korea and Thailand must look elsewhere for demand.
Little Help
Europe and Japan may be of little help. Japan is on the verge of a recession, while Europe is becoming increasingly vulnerable to events in the U.S. China will be hurt by all of the above, ridding Asia of a key source of stability.
Many say China's slowing from 10 percent growth to 8 percent isn't a disaster. Yet if a government relies on rising prosperity to conceal domestic challenges -- including the widening gap between rich and poor -- slowing growth is a major problem.
Nothing less than a drastic rebalancing will be required: More domestic consumption, a strengthening currency and greater investment in health care, pensions and education. Pulling that off quickly and with minimal disruption would be a feat like no other in economic history.
Anyone who believes China is set for smooth sailing as the U.S. sinks is likely to be as wrong as those arguing a year ago that the subprime-loan crisis was containable.
Asia Decoupling
One of the key points here is the importance of Asia decoupling itself from the U.S. once and for all. It's easier said than done.
There is reason to think Asia can stand its ground. The region's improvements since the 1997 crisis left banks stable, markets humming and currency reserves at comfortable levels. Turmoil in the U.S. is encouraging Asia to take steps to become more independent from bigger economies.
Nations such as China are succeeding by ignoring advice from officials in Washington. After years of being lectured to bolster its banks, China is watching as the financial system the U.S. espoused as optimal crumbles.
The reluctance of Asian banks to buy hard-to-value securities such as collateralized debt obligations left them in ``rock solid'' financial shape, says Marc Faber, managing director of Marc Faber Ltd. in Hong Kong. Also, central banks have been taking steps to boost investor and consumer confidence.
If things get shakier, though, Asia could be dragged down with the U.S. economy. Amid unprecedented upheaval, it almost seems fitting that a risk few considered a year ago could be the one to undermine China.
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