Russia’s metallurgy giant holdings Novolipetsk Steel Company (NLMK) and Mechel, as well as electricity major Russian Grids, lost more than $800 million of their value after Morgan Stanley Capital excluded them from its MSCI Russia index. The decision was part of a standard index revision, which usually occurs twice a year. “May revisions are more serious-investors are shaking up their portfolios,” Nikolay Podlevskih from Zerich Capital Management told Gazeta.ru. The changes will become effective from June 3, the expert added.The MSCI Russia index calculated by Morgan Stanley, embraces 27 Russian companies, where gas major Gazprom, Russia’s biggest lender Sberbank and oil giant Lukoil dominate. An MSCI membership makes a company’s shares easier to trade, thus increasing its attractiveness to investors and potential profits.To be a member of an MSCI Russia club a company needs to meet certain requirements of market capitalization and the amount of outstanding shares available to the public for trade, or a so-called free-float.NLMK was excluded from the club for low free-float volumes, with Russian Grids being ousted for its low market capitalization, analysts from Sberbank Investment Research explained.VTB Capital analysts say the key losers – Novolipetsk Steel Company (NLMK), Russian steelmaker and miner Mechel, as well as electricity giant Russian Grids – are going to suffer even more. After a shut – out from the prestigious index NLMK is set to see about $271 million outflow from its depositary receipts, with Mechel expected to have $145 million leaving the financial instrument, as VTB Capital analysts calculate.Despite analyst’s forecasts, Phosagro, a Russian fertilizer producer, wasn’t accepted to the MSCI Russia club. The company sought acceptance and had placed an additional 8.9% of its shares shortly before the revision to increase its free-float and bolster its chances.However, experts say there will be certain beneficiaries to the index revision, with Gazprom expected to enjoy another $737 million coming into its shares and Nornikel having a $124 million inflow. … Read More
Cyprus must approve €400mn gold sale – Finance Minister
The Finance Minister says he believes the government’s gold sale of €400 million ($525-million), of ‘excess’ gold reserves in order to secure 10 billion euro aid from Cyprus’s Troika of lenders, will materialize.He told Bloomberg,“The exact details of it will be formulated in due course primarily by the board of the Central Bank,” adding, “obviously it’s a big decision.”Cypriot officials confirmed the plan last week, but the Central Bank has rejected the notion, and the Central Bank chief Panico Demetriades said last week that the Cypriot government didn’t have the right to sell gold without his direct consent, and said he hadn’t been consulted on the sale.“There is an issue and it’s actually a major issue,” Georgiades said about the sale.“The government will do whatever is needed to ensure “smooth and effective cooperation between all decision- making authorities,” he continued.Georgiades did not elaborate on how much gold Cyprus might sell nor at what price, but it’s rumored they will sell 75% of their reserves. According to the World Gold Council, the Central Bank holds 13.9 metric tons.A wrinkle in the Cypriot bail-out plan arose last week when a leaked document indicated the total cost of the bailout had risen to €23bn, up from the original €17bn estimate, leaving the beleaguered Cypriot government in a scramble to raise an additional €6 billion ($7.85 billion). Most of the funds are expected to come from depositors in banks, but Cyprus also hatched a plan to sell about €400 million ($525-million) worth of gold reserves.Gold the not-so-precious metalThe gold market took a catastrophic fall after the announcement, and in the past week has plunged more than $200 an ounce, breaking both the $1,500 and $1,400 thresholds, reaching a 30-year record low in just 2 days.Morgan Stanley has cut its 2013 gold forecast by 16%, down to $1,487, as investors continue their selling frenzy.The sell-off “has all the hallmarks of panic-driven, stale long liquidation, stop-loss and capitulation selling in the face of a concerted short sale” Peter Richardson, a Morgan Stanley analyst, wrote in a report.”In the case of the [Cypriot] gold, it’s down to the board of the central bank. It’s perfectly understandable.. They have the final say,” said Georgiades. … Read More
Cash Dash: $1 billion flees Russian markets in Q1
In the last week, over $393 million, or 3% of assets under management, fled Russian markets. This is one of the top four biggest outflows since the 2008-2009 crisis, and the largest since 2011, according to Renaissance Capital analysts.Vyacheslav Smolyaninov, chief strategist at Uralsib Capital, told Vedomosti such a withdrawal has only occurred three times since the crisis.On Thursday the Ministry of Economic Development lowered its forecast of Russia’s GDP growth in 2013 to 2.4%, down from 3.6%. Crude oil, which together with natural gas, yields half of Russia’s revenue, has taken a continuous price beating, and has almost hit $92/barrel on the Asian markets.Gazprom, Russia’s state-owned and world’s largest extractor of natural gas, serves as an excellent microcosm to the capital outflow. In the first financial quarter, the stock fell 6.7%, and early in the second quarter the capital fell below $100 billion for the first time since 2009.The weakening rouble may be a contributing factor to the cash dash from Russia. The rouble hasn’t seen significant gains since September 2011, when it was 32.58 against the dollar, and now, it’s a lucky rouble investment day if it crosses the 31.5 threshold.EPFR, an agency which tracks fund flows worldwide, posted similar transaction data, documenting the flee from Russian and other BRIC markets. India, a close second to Russia, lost about $951 million in Q1 to other markets.The report also shows investors prefer the economic pastures of Mexico ($540 million inflow), Indonesia ($163 million), and the Philippines ($129 million).“The case for rouble strength has weakened,” James Lord, an emerging-markets strategist at Morgan Stanley wrote in a note to clients, published by Bloomberg. … Read More
Ohio town wants to implement massive aerial surveillance program
Officials with the Dayton City Commission recently announced that they hope to sign a $120,000 contract with a local security company in order to give law enforcement agencies an eye-in-the-sky ability unheard of elsewhere in America. While the Federal Aviation Administration continues to ponder just exactly how unmanned aerial vehicles or drones will be able to conduct surveillance in the sky, sending manned aircraft through the clouds isn’t something that involves as many hurdles. That will make it all the easier if Dayton gets the go-ahead to sign-on to a pricey program being touted by Persistent Surveillance Systems.Persistent Surveillance Systems, or PSS, currently has operations throughout the Dayton area in order to keep watch over private property, like a downtown business park. If they sign on with the city proper, though, PSS will be asked to send airplanes in the sky to snoop on any seemingly illegal activity on the ground.To the Dayton Daily News, PSS’s Ross McNutt said the city would be allowed to access a video camera feed from a piloted aircraft that could be deployed to around 10,000 feet off the ground. PSS would provide the city with the plane and the pilot, and with the right know-how the police would be able to extensively monitor an area as large as the city’s entire downtown.According to a slideshow presented before the City Commission earlier this year and since obtained by the American Civil Liberties Union, Dayton officials are looking at more than just a dinky plane outfitted with a couple of Kodaks. The city is apparently pursuing a program called “Trusted Situational Awareness,” which PSS says can collect real-time data and imagery to law enforcement so the police can identify and interrupt illegal activity while at the same time collecting “valuable forensic intelligence.”That right there was enough to raise a red flag with Jay Stanley, a senior policy analyst with the ACLU’s Speech, Privacy and Technology Project. After viewing the slideshow for himself this week, he writes on his blog that signing on to the “Trusted Situational Awareness” program could put Dayton’s population under an ever present microscope.“’Forensic intelligence’ usually means something like, ‘keeping records of everything everybody is doing so we can go back and carry out retroactive surveillance whenever we need it,’” says Stanley.That surveillance would be captured by plane-mounted cameras described by McNutt, a retired Air Force lieutenant colonel, as being 10-times more sensitive that IMAX lenses. Should the Dayton Police Department sign-on, the agency hopes to log 120 flight hours with PSS this summer, starting with six months of surveillance at the Dayton International Airport. If the DIA’s aviation department thinks PSS helps get the area secure, $20,000 will be credited towards the purchase of more equipment.Trusted Situational Awareness in Dayton is important, says the department, because it “can be utilized to prevent and minimize acts of terrorism, crime and murder.” The ACLU warns that it can do much more than that, though. “These planes are able to monitor an area four times as large as Dayton’s downtown. The rapid-fire cameras used on the plane make the captured data more like film than still photos,” claims the organization. “Police can zoom in on any part of the image, in real time. This means that they could track your car down the street or watch you swimming in your backyard.”The ACLU is now asking for concerned citizens of Dayton to speak up. The City Commission has decided to postpone any decision on the proposal until a thorough public discussion is conducted.”It’s basically educating the public about what this technology will actually do and what it can’t do,” Mayor Gary Leitzell told Dayton Daily News after a February meeting. “I think the public has a right to know, so they feel comfortable with our choice of using technology to help our police department solve crime and reduce crime.” … Read More
Bank of Japan $520bn kickstart to economy
The bank unveiled its plan to double government bonds by 50 trillion yen ($520 billion) per year, or almost 10% of Japan’s total gross domestic product. The bank will buy 7 trillion yen ($74 billion) of bonds per month, news which has already sent markets into a frenzy over the already weak yen.In reaction, the yen fell 2.5% against the dollar to 95.40 yen, the biggest drop since October 2011, the last time Japan purposely downgraded its currency.The new policies will “lead Japan’s economy to overcome deflation that has lasted nearly 15 years,” the central bank said in the statement.Fighting deflation was the first issue new Governor Haruhiko Kuroda tackled at his first central bank meeting, and is a more pugnacious variant of Abenomics, Prime Minister Shinzo Abe’s strategy of weakening the yen to boost Japan’s export appeal.”The previous approach of incremental easing wasn’t enough to pull Japan out of deflation and achieve 2% inflation in two years,” said Mr. KurodaInflate or DefaultAfter the record decline against the dollar in the past 17 months, the yen has quickly dropped 10% under Abe’s 3 month tenure, a Japan is purposely propping up its currency.“The Bank of Japan has woken up to the fact that it has only two options left: inflate or default,” Jeremy Batstone-Carr, head of research at Charles Stanley Group, told Bloomberg in an interview. “Given that default will result in a collapse, the only choice is to inflate,” said Bastone-Carr.Japan needs a cheaper currency to increase its exports, which in February was reported at a $8.1 billion, and a 7-month deficit, the longest sting since 1980. The cheap currency will raise inflation, because if the yen falls, import prices will increase and deflation will continue its detrimental trajectory.The first step is to get out of deflation and get a much higher nominal growth rate,” said a senior democratic lawmaker.The Bank of Japan has temporarily suspended its ‘banknote rule’, a bank policy that aims at keep the value of bond holdings below the amount of cash in circulation, in order to pump more money into the economy.Markets respond positively, but analysts doubt the overhaul planThe Bank of Japan’s decision sent the Nikkei 225 soaring by 2.2% to 12,634.54, an indication the Japanese market is already reacting positively to the bank’s policy.Mitsubishi Financial group, Japan’s largest lender, has advanced 5.5% upon the news.German stocks also advanced on the stimulus news, the DAX Index is up 0.6 percent to 7,924.3 at 14:03 in Frankfurt, recovering from yesterday’s 0.9 percent drop.”Achieving 2% inflation in two years remains quite difficult. But the possibility of that target being achieved is now much higher than before with these measures,” said Yoshimasa Maruyama, chief economist as Itochu Economic Research Institute.Other analysts aren’t so taken with the proposal.”It’s Mission Impossible and Mr. Kuroda isn’t Tom Cruise,” said JP Morgan’s chief economist in Tokyo, Massaki Kanno. … Read More
Nick Gillespie on Why The Paul Ryan/GOP Budget is a Non-Starter for Libertarians
The 2014 budget plan authored by Rep. Paul Ryan (R-Wis.) and
House Republicans, writes Nick Gillespie,
…will be “better” than the Senate’s long-awaited plan – at
four years in the making, you’ve got to wonder if the ghost of
slow-poke film director Stanley Kubrick is guiding that sad-sack
document. And it will surely be “better” than the president’s -
already late in turning in this year’s document, Obama has signaled
that he’s not signing on to anything that doesn’t reverse the
sequester’s cancellation of White House tours and other core
functions of government.
But being “better” than plans that will be put forth by
political opponents shouldn’t be mistaken for being “good,” or even
worthy of support.
View this article.
… Read More
Russia to trade bailout loan for information from Cypriot banks
The Finance Ministry’s newplan on mobilizing additional budget revenue in 2014 through 2016includes applying pressure on Cyprus, as Russia seeks to recoverfunds hidden in Cypriot banks. Russia’s central bank governorSergey Ignatiev said in an interview several weeks ago that moneylaundering in Russia was costing the budget around 600 billionrubles ( $19.5 billion), amounting to about 3.5 percent of Russia’stotal GDP. “It’s potentially a substantial source of additionalrevenues that are owed under law to the budget,” Jacob Nell,Chief Economist at Morgan Stanley Russia told RT. “The Russiangovernment is justified in taking a range of measures in order totry and recover those funds and make sure that the tax due on themis being paid.”Russia’s Finance Ministry has suggested demanding informationon Russians holding funds in low-tax jurisdictions to which Moscowprovides financial assistance – Cyprus, which received a€2.54-billion loan from Russia in 2011, is the only suchcountry.Though this condition does not meet the recently updated taxagreement between Russia and Cyprus, experts believe it can bepartially fulfilled. “The desire to identify the beneficiaries of these accounts(and it amounts in total to $9 billion held by Russian banks inCyprus) is potentially a legitimate way of proceeding,” Nellsaid. “If you are a US citizen for instance you have to declareyou financial accounts every year to the US government. So in someWestern countries this is already a standard practice.”The Russia-Cyprus agreement would stipulate that confidentialdata can only be given out at a reasonable request regarding acertain person under the government’s suspicion. The RussianFinance Ministry wants to step aside from this model – establishedby the Organization for Economic Co-operation and Development – inorder to force Cyprus to provide greater assistance to the Russianbudget. According to data revealed at the end of 2012 by the Germanintelligence service BND, Cypriot banks hold about €20 billionbelonging to Russian investors. Other reports suggested a range offigures, varying from €8 billion to €35 billion.The Finance Ministry’s decision is believed to be a bid tobring “greater common ground” between Russia and EU in terms ofbailing out Cyprus, Nell told RT, as the EU has also demanded moretransparency in return for its loan to Cyprus. “The first issue is what the international community shoulddo about Cyprus after the restructuring of BRICs debt,” Nell said.The Cyprus banks that held a lot of BRICS debt now found themselvesessentially insolvent. The discussion at the moment is about thebailout package which would involve Russia… People have beenworried that it’ll be difficult to find common ground between EUand Russia, because Russia has certain financial interest inCyprus.”“Some of the EU creditors might want to see changes in thebanking legislation in Cyprus, that’ll be unwelcome to Russia,”he continued. “So there’s been some speculation that this wouldbe one of the key difficult issues in the negotiations about theCyprus bailout. The news that Russia is itself looking to tackleCyprus’ light touch banking regulation and secure greaterdisclosure of the beneficiaries means that there’s greater commonground between EU and Russia in terms of the kind of conditionalitythey’ll be looking for to bailout Cyprus.”Experts believe that Cyprus may partially give in to Russia’sdemands, just as Swiss bank UBS once agreed to assist USauthorities investigating tax evasion and reveal its Americancustomers, altering the endemic secrecy in Swiss banking. … Read More
