Archive for the 'International Finance' Category

What’s next for oil prices?

Published
by
ron
on January 3, 2008
in International Business and International Finance
. 1 Comment

Oil Barrel $100,-

Well, don’t say I didn’t warn you. Yesterday oil touches the $100 barrier and its front page news across the world. The primary question remains: Will it last? A long-term perspective demands that the world’s leading economies reduce their dependence on fossil fuels. However, the short-term imperative is still to find more of the stuff. Nevertheless, the main four influencers are: today’s demand, tomorrow’s demand, today’s supply and tomorrow’s supply.

It’s tough to make big changes in today’s demand; people would have to change their behaviour overnight to use less jet fuel gasoline, fuel oil, chemicals, plastics, etc. Tomorrow’s demand, on the other hand, is more malleable. E.g. creation of a new international agreement on climate change including both developed and developing nations, the new fuel standards in the United States, the shift to non-oil-based energy in Europe and Chinese efforts at conservation. In the meantime, however, the global economy is growing at about 4 percent per year - and demand for oil is likely to expand at least as quickly.

On the other side of the equation, today’s supply is already changing rapidly. Just this week, Iraq’s oil ministry predicted that its output this year would, at last, be higher than before the war. In addition, new oil supplies - even from high-cost sources - are coming online in big countries from Canada to Kazakhstan, and in small countries from Equatorial Guinea to East Timor. Supply tomorrow is a tougher nut to crack; so many geopolitical factors can affect it, to say nothing of the amount of oil actually left in the ground. But with peace, and with real changes in behaviour, oil need not see $100 again for a long time. Without them, we’ll keep checking off these landmarks: $110, $120, $130..

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The World’s 15 Most Valuable Currencies

Published
by
admin
on December 3, 2007
in International Finance
. 3 Comments

CurrenciesGiven the dollar’s historic depreciation, CNBC in association with Reuters and Thomson compiled a list of today’s strongest currencies, based on their exchange rate with the dollar.

You may be surprised to learn how many international currencies are ahead of the US dollar! From the Ghanaian Cedi, Euro, Pound Sterling to the Kuwaiti Dinar and the Cayman Islands Dollar. For a full overview click here. (The ranking - based on a sampling of published exchange rates - could change should the invariable, daily fluctuation in rates be significant.)

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Islamic banking takes off

Published
by
admin
on November 27, 2007
in Emerging Markets, International Business and International Finance
. 1 Comment

Islamic Finance and BankingFormerly concentrated in North Africa, the Middle East, and Southeast Asia, Islamic banking is now spreading rapidly around the world. Attracted by a huge growth potential, international banks like Citigroup, HSBC, and Deutsche Bank are creating their own Islamic wings. In addition to Islamic loans, there are Islamic bonds, Islamic credit cards, and even Islamic derivatives. Loans and bonds that conform to the Koran are already available in the United States. Britain, Japan and Thailand are contemplating issuing Islamic bonds of their own.

Today, over 300 Islamic financial institutions are successfully running their businesses from Dubai, New York, Hong Kong, London and other financial centres around the world, and together hold at least $500 billion in assets. This amount is expected to increase with more than 10 percent a year (source).

Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia) principles and guided by Islamic economics. In particular, Islamic law prohibits usury, the collection and payment of interest, also commonly called riba in Islamic discourse. In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haraam (such as businesses that sell alcohol or pork, or businesses that produce media such as gossip columns or pornography, which are contrary to Islamic values).

“This is an industry on its way from a niche industry to becoming a truly global industry,”. Khawaja Mohammad Salman Younis, the managing director for operations in Malaysia for Kuwait Finance House, the world’s second-largest Islamic bank, after Al-Rajhi Bank, told The International Herald Tribune. ” In the next three to five years you’ll see Islamic banks coming out in Australia, China, Japan and other parts of the world.”

All-in-all, before Islamic banking activities can really take off there need to be done an adjustment to the current regulatory environment. Research conducted by McKinsey emphasises on two areas of attention: general licensing policies and the role of governments in overseeing compliance with the Islamic code or Sharia. Notwithstanding, an influential propeller for the recent popularity of Islamic banking is the booming oil price (Source). As this is expected not to slow down in the forthcoming years it can only speed up the needed regulatory reforms and trigger further globalisation of Islamic banking.

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Financial Centres: Will Tokyo bounce back?

Published
by
admin
on November 16, 2007
in International Finance
. 6 Comments

Tokyo Skyline Financial Centres

Will Tokyo continue to be Asia’s leading financial centre and keep up with the world’s premier financial centres: New York and London?

The other day I was reading a special report on financial centres published by The Economist. Today my juices got rolling again on this topic. While I was reading this article published by the NY Times on how Japan’s economic planners want to revive Tokyo’s stock market.

The Tokyo Stock Exchange has fallen from being the largest stock market in the world at 1990 market capitalization to No. 2, behind the New York Stock Exchange. During that time, the value of all shares traded on the Tokyo exchange rose less than 60 percent, to about $4.6 trillion at the end of last year. By contrast, the value of the New York exchange increased fivefold. Hong Kong’s main exchange rose by a factor of 21, though it is still half the size of Tokyo. In London, already the global centre for trading in currency, the main stock market has grown fourfold since 1990 and could soon overtake Tokyo.

Industry experts agree that Tokyo has to attract much more foreign capital, foreign investors/companies, and foreign talent in order to remain competitive in the region and to keep up with New York and London. A necessity to achieve this is creating a better regulatory and tax environment. On top of that advance living conditions for English speakers, amongst others creating more English schools and putting up English signs etc..

If Japan will achieve this is yet to be seen. Particularly cause of the growing importance of Hong Kong as major hub to spread Chinese capital around the world. A safer bet for Tokyo would be to concentrate on a certain niche.

Stick market Capatalisation Ranking

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World’s most competitive economies

Published
by
admin
on November 12, 2007
in International Finance
. 1 Comment

The Global Competitiveness Report 2007-2008

The United States regained its title as the world’s most competitive economy. According to the Global Competitiveness Report (GCR), a comprehensive annual survey published by the World Economic Forum, the Swiss-based think tank.

The GCR is a closely watched metric that combines economic statistics and surveys of business leaders and ranks 131 countries. It measures multiple dimensions in the broader context of the economic system such as macroeconomic policy, political system, health system, legal system, etc. The survey praised the U.S. economy for its efficiency and ability to innovate, but the ranking came alongside a drumbeat of negative economic news.

One of the principal winners in this year’s report was China, which jumped up the rankings from 54th to 34th. The size of its domestic and export markets were its main competitive advantages, the report concluded, while it also benefited from general economic stability. However, weaknesses included the poor financial state of many of its banks, restrictions on capital flows and legal rights and low enrolment into higher education.

The Netherlands dropped one place and is now ranking 10th. Clarification for this drop is relative low investment in education, inefficient government bureaucracy, weak labour market efficiency and low innovation.

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PetroChina world’s most valuable company

Published
by
admin
on November 7, 2007
in International Finance
. 2 Comments

PetroChina

And in a class all by itself, the US$1 trillion (1,000,000,000,000) club.

On Monday, the 4 billion A-share offering, priced at 16.7 yuan per share, finished its first day of trading on the Shanghai Stock Exchange at 43.96 yuan, rising as high as 48 yuan intraday. At US$1.005 trillion, PetroChina’s market cap is more than twice that of its US peer, Exxon Mobil (USD $486 billion), even though Exxon Mobil generated four times as much revenue last year and trades at only a quarter of PetroChina’s price to earning ratio, 13 to PetroChina’s 55.

But the craziness doesn’t end there. The lofty market cap comes with an asterisk: US$1 trillion only if you go by PetroChina’s local valuation. Shares traded overseas (Hong Kong and New York) values the company at roughly US$400 billion. One HK share (H-share) confers equity holders the same amount of ownership as one A-share, and one share of ADR traded on the NYSE grants 100 times as much ownership.

While PetroChina’s A share closed up today at 43.96 yuan, its H-share finished down 8.2 percent at HKD $18, or 17.65 yuan (1 yuan=1.02 HKD). The gaping difference is a function of many factors: Beijing’s restriction on capital flow, lack of investment choices in China, and of course, out-of-control greed coupled with widespread ignorance on the part of Chinese retail investors.

In a related story, billionaire investor Warren Buffet sold his entire PetroChina stake several months ago, calling the price action in China “carried away.”

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Biggest Banks

Published
by
admin
on July 23, 2007
in International Finance
. 1 Comment

Ranked upon holdings of tier-one capital, Bank of America is the biggest bank these days, according research conducted by The Banker Magazine. Surprisingly to this year’s list is that two Chinese banks made it in the top 10.

Biggest Bank

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The New Kings of Capitalism?

Published
by
admin
on June 22, 2007
in International Business and International Finance
. 3 Comments

Capatalism

I am not trying to make a political statement here, or whatsoever with the teaser and image headlining this blog entry. I just wanted to have a catchy and provocative picture accompanying the headline.

The private equity industry is growing at a stunning pace for several consecutive years in a row now, transforming the structure and balance of power in global business. Mark O’Hare, managing director of Private Equity Intelligence - a research group based in London - compiled a ranking of the fifteen largest private equity firms, based upon assets under management. Find here the ranking published by BusinessWeek.

In a previous post I wrote about the real soul of private equity firms. What is their real core business nowadays? With respect to the fact that, PE firms are broadening their service offerings to other areas of “high class” finance.

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The new radar screen of VCs

Published
by
admin
on June 17, 2007
in Emerging Markets and International Finance
. 0 Comments

Radar ScreenWhat’s currently on the radar screen of Venture Capitalists (VCs)? In short, finally, they are starting to look beyond China and India respectively: Central and Eastern Europe.

At the very moment, first, there is Central and Eastern Europe. At least $500 million is sitting in fund targeting the Central and Eastern European region and much more is foreseen. This growth is enabled by a few success stories such as Skype and Last.fm, and in turn, this has triggered a new wave of fresh and new European entrepreneurial spirit. Furthermore, the accession of ten new European Union members from Central and Easter European countries has spurred investments across the region. The previous locked up energetic talent in this region has now gained equal access - as their Western European counterparts - to European capital markets and legislative protection.

In addition, as BusinessWeek pointed out earlier VCs are even having their eyesight beyond the traditional BRIC and Next Eleven (N-11) countries for example out of all places, Colombia, Latin-America. A multitude of young, bright and entrepreneurial minded people is ready to take the country up on the economic ladder. BusinessWeek typified Colombia as an extreme emerging market. It take guts and political sensitivity to start investing there but it can reap endless possibilities.

Here you can find a list of the top 500 European hot growth companies. Another listing can be found here. The latest and greatest news on European Private Equity & venture capital can be found here.

Some more great webpages to keep you updated on any activity at the European VC front can be found here. European Venture Capital & Private Equity Journal; FT European Venture Capital Report; Venture Capital in Europe (Book); and Profitability of venture capital investment in Europe and the US (Research Paper).

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Insight Companies….

Published
by
admin
on May 16, 2007
in International Finance
. 0 Comments

BusinessWeek Company Insight Centre



I love BusinessWeek. Since two weeks or so, BusinessWeek has enhanced its webpage with introducing a new functionality: Company Insight Centre!

I must admit it really gets insight companies! You can lookup a wealth of endless information regarding companies, industries, and business people. Ranging from a complete financial data set of 350,000 companies, industry and sector performance, organisation structures, executive pays etc.

I truly love the functionality “financial ratios” within the section “financials” for any company. It not only displays the actual ratio for a specific company but it even plots a specific company ratio upon the related industry performance.

Checkout the financial ratios of Google (GOOG) and its relative performance against industry competitors. Thus, thanks to BW, in a blink of an eye you can get a well rounded indication of any company performance!

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