Actual finance blog

Egypt’s benchmark stock index fell slightly on Sunday, weighed down by investor unease after the storming of Israel’s embassy and protests in Cairo over the weekend. Inflation, meanwhile, eased in August to 8.5 percent on a slower increase in food prices.

The Egyptian Exchange’s EGX30 index closed almost 1.2 weaker, at 4,698 points the first day of the trading week. The index’s year-to-date losses are at about 34 percent.

“To be honest, we were expecting a lot worse than this _ maybe a fall of 3 to 4 percent,” said Khaled Naga, a senior broker with Mega Investments. “Even so, I’m not recommending anyone buy at this time. … There could still be a lot of problems cropping up this week.”

But in a measure of good news, the government’s statistical arm announced Saturday that annual urban inflation had dropped to 8.5 percent in August, from 10.4 percent in July. The decline came as food inflation, which accounts for over 40 percent of the consumer price index, increased at a slower pace in the month _ 12.2 percent compared with 16.7 percent the prior month.

Food inflation, in particular, was seen as one of the factors that fueled Egyptians’ frustrations ahead of the Jan. 25 revolution, and a decline in that key figure could help ease some of the economic pressure the country’s more than 80 million citizens feel daily.

In addition, Suez Canal revenues, a key source of foreign income for the government, climbed to $472.9 million in August, gaining 7.9 percent on the same month in 2010 and hitting a roughly three-year high, government figures showed.

Analysts warned that Egypt still faced major pressures in trying to retrench and rebuild its economy, which recorded GDP growth of 1.8 percent in the 2010-2011 fiscal year. Before the Jan. 25 uprising, economic growth had been projected at nearly 6 percent.

London-based Capital Economics, which is forecasting that GDP will contract by 1 percent in the current fiscal year, said in a recent research note that given the current global economic climate, “it is too early to expect a rapid recovery.”

In a reflection of the difficulty Egyptian officials have faced, the country’s net international reserves have slipped to slightly more than $25 billion, roughly $11 billion below their December 2010 levels. The slide, in part, is linked to efforts to support the Egyptian currency.

The storming of the Israeli Embassy over the weekend was the most serious challenge to relations between the two countries since the signing of their peace treaty in 1979. An angry mob, for hours, laid siege to the embassy, trapping six Israeli guards in a safe room before they were rescued by Egyptian commandoes.

The incident at the Israeli Embassy spoke not only to the anger over the shooting death of six Egyptian soldiers along the country’s border with Israel last month, but also the hostility toward the Jewish state many feel in the country despite the peace agreement. The soldiers were killed as Israeli troops pursued militants who had launched an attack inside Israel that killed eight Israelis.

It also reflected the pressures and challenges confronting Egypt’s military rulers, who are balancing often opposing ends of placating an irate Egyptian populace after Mubarak’s ouster and pushing the country toward an elected civilian leadership.

The 18-day uprising that began in late January opened the floodgates to decades of pent up resentment over a widening income disparity, shoddy salaries, poor social and educational systems and the general sense in the Arab world’s most populous country that opportunities were something that came through nepotism and cronyism versus skills and perseverance.

The continuing mass protests have battered Egypt’s economy, undercutting vital tourism revenue and crimping foreign direct investment.

In a reversal of an earlier decision that would likely have done little to spur tourism, the government froze a ruling requiring tourists and other visitors to apply for visas before arrival in the country, the official MENA news agency reported, citing the deputy tourism minister.

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Japan’s new prime minister chose fresh faces and political unifiers for his Cabinet Friday, promising to steer the troubled nation through disaster recovery, a nuclear crisis and a lengthy economic slump.

Yoshihiko Noda tapped relatively unknown lawmakers as part of his 18-member Cabinet, including 49-year-old Jun Azumi as finance minister and 47-year-old Koichiro Gemba as foreign minister.

Both are young in a Japanese political world normally dominated by elder statesmen. And both are closely allied with Noda, who, at 54, is the third youngest prime minister in post-World War II Japan.

“They will work like loaches mired in mud and sweating to get the job done,” Chief Cabinet Secretary Osamu Fujimura, another Noda ally, said when announcing the lineup. Loaches, a type of bottom-dwelling, eel-like fish, have become a bit of an odd buzzword after Noda described himself as one in what has largely been interpreted as a self-deprecating remark.

Noda’s effectiveness will in large part depend on whether he can contain intraparty bickering that has increasingly plagued the ruling Democrats. In a nod to rival faction leader Ichiro Ozawa, Noda appointed lawmakers close to the veteran powerbroker as defense minister and the chairman of the National Public Safety Commission, which runs the police force.

Noda struck a confident tone in comments shortly after his full Cabinet was approved by the emperor. He pledged to do his utmost to improve disaster relief efforts following the March 11 earthquake and tsunami that have left more than 20,000 people dead or missing, destroyed much of Japan’s northeast coast and is expected to be the most expensive natural disaster in history.

He also pledged to bring under control the nuclear crisis at the Fukushima Dai-ichi plant, where workers continue to try to cool temperatures and stop radiation leaks.

“We need to speed up and revitalize our restoration efforts,” he said. “Without the rebirth of Fukushima, there is no rebirth of Japan.”

He also said he and his Cabinet would work to jump-start an economy battered by the surging yen. A strong yen hurts Japan’s top exporters like Toyota Motor Corp. and Sony Corp. by reducing the value of their overseas earnings.

Noda, who was finance minister in the previous Cabinet, said more needed to be done to prop up the U.S. dollar, acknowledging that he was worried about a hollowing out of Japanese industry if companies move their operations abroad because of the high yen.

He noted that Japanese companies should take advantage of a strong yen by buying up foreign businesses.

Noda’s biggest surprise of the day was his unconventional pick for the powerful role of finance minister. A former television journalist from tsunami-devastated Miyagi prefecture, Azumi has little experience in economics and finance and has made few comments on key issues like foreign exchange.

Financial markets on Friday did not and could not react to the relatively unknown Azumi, said Masayuki Kichikawa, chief Japan economist at Bank of America Merrill Lynch.

Analysts had expected more of a political heavyweight for such a key position.

Kichikawa suspects Azumi got the job because he shares Noda’s concerns about Japan’s fiscal health and controlling the country’s massive public debt, now twice the size of gross domestic product.

The appointment represents a “continuity of a relatively fiscal conservative stance,” he said.

Azumi will have little time to settle into his new office. He travels to France next week to represent Japan at a Group of Seven meeting of finance ministers and central bank governors. He must then find money for a third supplemental budget needed to fund disaster recovery.

Noda, Japan’s sixth new prime minister in five years, is keeping around some ministers from the previous Cabinet. He’s retaining Goshi Hosono as the minister in charge of dealing with the nuclear crisis and Agriculture Minister Michihiko Kano, who ran against Noda for the party leadership and is considered well connected to veteran legislators.

The Cabinet also includes two women: Yoko Komiyama as Health, Labor and Welfare Minister and Renho, who goes by a singular name, as Government Revitalization Minister, charged with reforming government and cutting waste.

Koichi Nakano, political science professor at Sophia University, said the picks were balanced enough that he felt optimistic the Cabinet would last at least a year _ a solid achievement given the records of recent prime ministers.

“The neo-liberal reformists who tend to be young and in their 40s are placed in eye-catching ministries,” Nakano said of several new ministers, including Azumi and Gemba. “Those youthful, new leaders of Japan are placed in high-visibility positions.”

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Standard and Poor’s agency has cut Greece’s credit rating by 2 notches to CC, with a negative outlook.

The international ratings agency says the proposed restructuring of Greece’s heavy debt load under a new international bailout deal would amount to a selective default.

A Standard and Poor’s statement says the likelihood of a future Greek default is likely to remain high.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

ATHENS, Greece (AP) _ Greece has appointed BNP Paribas, Deutsche Bank and HSBC to act as dealer-managers for a voluntary private sector participation scheme, which is part of the country’s second financial bailout.

The finance ministry says the three banks were appointed Wednesday in the wake of last week’s EU-led bailout package, which altogether is worth euro109 billion ($157.7 billion).

Cleary Gottlieb Steen and Hamilton LLP has also been appointed international legal adviser, while Lazard Freres is to be the financial adviser.

Under the voluntary scheme, banks and other large private investors will swap Greek bonds for new debt instruments with longer maturities.

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A little-known Russian company is highlighting its firefighting successes to promote the world’s first purpose-built jet water bomber at the Paris Air Show.

In the last few years, the Beriev Be-200 Altair has helped fight massive forest fires in Greece, Italy, Portugal, Malaysia, Indonesia and Israel.

The company so far has a total of 26 confirmed and optional sales in Russia, France and Azerbaijan, and is seeking more at this week’s Paris Air Show at Le Bourget.

Because of the growing threat of huge forest fires sparked by global warming, Beriev now anticipates a global market for well over 100 water bombers in the next decade loans for people with bad credit.

Beriev is especially interested in breaking into the U.S. market, where air tankers tend to be old, converted military planes, marketing director Denis V. Didenko said.

Dozens of these will need to be replaced in the next decade and Beriev is moving quickly to obtain certification from the U.S. Federal Aviation Administration for the Be-200, which has just been certified by Europe’s aviation safety agency.

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When I was in Grade 12, I  parted with $550  to buy 100 shares of an initial public offering (IPO) of stock in a Burlington, Ont. company called Linear Technology.

I wasn’t a major capitalist starting my march to millions. I was a cashier at Beaver Lumber and my parents thought I should invest my hard-earned savings in a company run by a family friend.

Nine years earlier, Dr. Douglas Barber and colleagues at Westinghouse Canada had mortgaged their homes to the hilt to help buy out the solid state services department of Westinghouse Canada. Westinghouse had decided to sell the division. With other investors, they set up Linear Tech to make integrated circuits for the hearing aid industry.

In less than a decade they had over 50 per cent of the global market in hearing aid chips. When Linear Technology went public (now called  Gennum Corporation), my parents thought the company was a good place for me to invest instead of squandering my cash at the mall.

They were right. Gennum expanded in the semiconductor field and their chips are now used for video and data communications.Think HDTV. Over the next 17 years, those 100 shares became 900 from two 3-for-1 stock splits. My original $550 investment increased to $17,775 when the stock reached its high of $19.75 on May 19, 1999.

So far, so good. The problem is that I expected my stock to rise forever and it hasn’t and I didn’t learn the art of when to sell. Gennum closed at $7.08 Thursday at about a third of its peak. The stock has been in the $4 to $8 range for the last several years. My investment is worth $6,300, for a paper loss from the peak of nearly $11,500.

So what should I have done?

I wanted to use the stock to fund my children’s post-secondary education and so I should have set a stop loss order so that when the stock decreased by say 20 per cent it would have been sold. I could then have invested that in RESPs and also received a the 20 per cent government grant.

If I believe the stock has a future, I should sit tight, keeping an eye on its prospects by the reading annual and quarterly reports and monitoring news about the company. That’s what I’m doing. Gennum has blazed many hi-tech trails and I think it has a bright future.

HD televisions are ubiquitous. Revenue, net income, and earnings per share have greatly increased since 2009. 

One lesson is clear: Becoming a financially literate adult is overdue for me. I have to do my homework and hold it the stock for the right reasons or fold.

See also:  As the market wobbles is it time to sell?

Contact Peggy Mackenzie at pmackenzie@thestar.ca  or follow her on Twitter: PeggyMackenzie 

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Tanks for storing radioactive water were on their way Saturday to the crippled nuclear power plant in northeastern Japan where reactor cores melted after the massive earthquake and tsunami.

The new tanks should help prevent further environmental damage in the evacuated area around the Fukushima Dai-ichi plant by providing a secure place to store the contaminated water being used to cool the reactors as workers continue their battle to bring them under control.

Radioactive water has been leaking from the plant since it was struck by the March 11 disasters, with tons having already flushed into the sea and more continuing to pool across the complex.

Tokyo Electric Power Co., the utility that operates the plant, has said radioactive water could start overflowing from temporary storage areas on June 20, or possibly sooner if there is heavy rainfall.

Two of the 370 tanks were due to arrive Saturday from a manufacturer in nearby Tochigi prefecture (state), TEPCO said. Two hundred of them can store 100 tons, and 170 can store 120 tons.

The tanks will continue arriving through August, and will store a total of 40,000 tons of radioactive water.

Workers have been fighting to get the plant under control since the tsunami knocked out power, destroyed backup generators and halted the crucial cooling systems for the reactors, causing the world’s worst nuclear disaster since Chernobyl in 1986. Several explosions have scattered radioactive debris around the plant, and reactors are puffing radiation into the air.

TEPCO also said robots with cameras that entered Unit 1 _ one of the three reactors whose cores have melted _ found Friday that steam was spewing from the floor. Nationally televised news Saturday showed blurry video of steady smoke curling up from an opening in the reactor floor.

The radioactive fumes were suspected to be coming from the suppression pool area, which is near the reactor core.

The radiation level near the smoky area reached as high as 4,000 millisieverts per hour, much too high for any human to get near that area, and confirming the formidable obstacles Fukushima workers face in fixing the problems at the reactors.

Nuclear fuel rods are believed to have melted almost completely and sunk to the bottom of three reactor containers, although falling short of a complete meltdown, in which case the fuel would have melted entirely through the container bottoms.

In one progress update, TEPCO said workers were successful in attaching additional pressure monitors at Unit 1. The plan is to keep adding pressure-reading equipment at all three hobbled reactors. The ones already there may have been damaged by the tsunami and quake, and may not be working properly.

TEPCO has promised to bring the plant under control by January, but doubts are growing that the plan was too optimistic. The plan calls for a reprocessing system for the radioactive water by June 15, with hopes of reusing the water as coolant in the reactors.

The March earthquake and tsunami left 24,000 people dead or missing, and left tens of thousands of others living in evacuation centers _ including residents near Fukushima Dai-ichi whose homes were intact but still had to leave to avoid risks of radiation exposure.

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Stock futures rose Tuesday, a day after fears about European debt sparked steep declines in financial markets around the world.

Ahead of the opening bell, Dow Jones industrial average futures are up 39, or 0.3 percent, at 12,401. Standard & Poor’s 500 futures are up 5, or 0.4 percent, at 1,319. Nasdaq 100 futures are up 7, or 0.3, at 2,322.

The modest advance in futures trading came despite more troubling news about the state of European debt management.

Greece’s main opposition party said it opposed the government’s new austerity measures. The announcement dashed hopes that the country might be able to repair its finances enough to get another loan package from the International Monetary Fund.

Ratings agency Moody’s warned that a Greek restructuring of its debt would constitute a default. Moody’s said such a move would hurt the credit ratings of Greece and other debt-laden European countries. The ratings agency also said it would review 14 British financial institutions for a possible downgrade.

Nonetheless, European stocks recovered Tuesday after Monday’s declines.

The FTSE 100 index of leading British shares rose 0.4 percent in midday trading. Germany’s DAX rose 0.7 percent and the CAC-40 in France was 0.2 percent higher. The euro also rose slightly against the dollar after falling to a two-month low Monday.

In economic news, the Commerce Department is expected to report at 10 a.m. Eastern on how many new homes were bought in April, offering traders a glimpse at the housing market.

Analysts expect sales to have been roughly flat, rising slightly to an annual rate of 303,000 from 300,000 in March. That is still far below the 700,000 in annual sales seen as representing a healthy market.

New homes are unappealing to budget-conscious families because their median price is nearly 31 percent higher than previously-occupied homes. That’s twice the price difference typical of a healthy economy. At their current rate, new-home sales are on track to experience a sixth straight year of declines.

The Dow fell as much as 180 points Monday before paring back some of its losses after Greece, Italy and Spain suffered weekend setbacks in their attempts to control their debt. The Dow fell 130.78 points, or 1 percent, to close at 12,381.26.The S&P 500 index lost 15.90, or 1.2 percent, to 1,317.37. The Nasdaq dropped 44.42, or 1.6 percent, to 2,758.90.

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The traditional cottage country spring real estate market has been delayed by unseasonably cool weather, and the Victoria Day weekend looks to be a bit of a washout.

But realtors are hopeful that this year will be better than last as the economy shakes off the shackles of the recession and enters a recovery mode.

A U.K. house-price gauge rose to the highest level in nine months in April as demand for homes stabilised, the Royal Institution of Chartered Surveyors said.

The number of real-estate agents and surveyors saying prices fell exceeded those seeing gains by 21 percentage points, the most since July 2010, compared with 23 in March, the London- based group said in an e-mailed report today. Economists had forecast the reading would remain unchanged, according to the median of 11 estimates in a Bloomberg News survey. London was the only region to record an increase in prices.

While a lack of supply of homes is helping prop-up values, a faltering economic recovery and tighter lending conditions are curbing demand for homes. The Confederation of British Industry cut its 2011 economic growth forecast yesterday, days after the Bank of England kept its benchmark interest rate unchanged at a record low to support the recovery.

“Activity still remains subdued and it is difficult to see it picking up materially over the coming months,” RICS spokesman Michael Newey said in a statement. “There is still a long way to go before lending levels increase enough to have any real impact. Economic uncertainty may also continue to weigh on sentiment for a while.”

A measure of new buyer enquiries was zero, ending 10 months negative readings, RICS said. Still, the number of homes on the market rose, with 18 percent more estate agents reporting an increase rather than a decline in new instructions, compared with 4 percent in March, the report showed.

A measure of average sales per agent over the past three months rose to 15.2, the highest since December. Eleven percent more surveyors predicted sales would increase rather than decrease over the next three months, and the gauge on the outlook for prices rose to minus 18 from minus 23.

Halifax said yesterday that house prices fell the most in seven months in April. Nationwide Building Society also reported a decline in April.

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Stocks are falling at the opening of trading after Japan raised a measure of the severity of its nuclear crisis to the highest level and Alcoa Inc.’s first-quarter revenue growth disappointed Wall Street.

Japan raised the severity of its crippled nuclear plant, which was damaged following a March 11 tsunami, to level 7 from 5. That’s the same level as the 1986 Chernobyl disaster.

Alcoa started earnings season late Monday by saying it returned to a first-quarter profit. But it also said revenue grew to just $5.96 billion, instead of the $6.16 billion that analysts expected.

The Dow Jones industrial average is down 90 points, or 0.7 percent, to 12,291. The S&P 500 is down 9, or 0.7 percent, to 1,315. The Nasdaq composite is down 18, or 0.7 percent, to 2,753.

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