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Netanyahu Gambles on Cyber Opportunities Outside Israel – Bloomberg

Netanyahu Gambles on Cyber Opportunities Outside Israel – Bloomberg.

Israeli Prime Minister Benjamin Netanyahu says the benefits of opening the country’s cyber industry to foreign partnerships can balance out security risks.

“There is tension” between security and business, he said in a Bloomberg Television interview in Davos, Switzerland, on Jan. 24. “I made a decision to take a gamble on expanding our cyber cooperation with companies and countries.”

Netanyahu’s comments suggest he may seek to loosen export licensing restrictions on cyber-related technologies after a stronger shekel and a faltering global economy led to a decline in the country’s sales abroad last year. Israel’s chief scientist, who runs a government project that invests in startups, last year urged an export policy reform that would balance national security needs with that of the industry.

“If you really want to extend the benefits of cyber security, then you need partners,” said Netanyahu, without directly commenting on the export policy. He met with heads of state and the chief executive of Yahoo! Inc. during his three days at the World Economic Forum in Davos last week.

Israel’s TheMarker.com financial news website reported today that multinationals including Microsoft Corp. and Amazon.com Inc. have said in private talks that they plan to open cyber centers in Israel. It didn’t say where it received the information.

Multinationals Present

Israel already has companies like Check Point Software Technologies Ltd. (CHKP), that trades in New York with a market value of $13 billion, and software security company Trusteer Inc. that International Business Machines Corp. bought for about $800 million last year.

Hackers briefly shut down several Israeli government websites last April in a coordinated assault protesting the treatment of Palestinians. Attacks against Web hosting servers and data centers are a growing threat, Bloomberg Industries said in a Jan. 16 report citing Cisco Systems Inc. (CSCO)Highly publicized attacks such as on the discount chain Target Corp. have raised the profile of network security providers.

“The Internet drives growth and everything is dependent on one thing, having security,” said Netanyahu. “We will balance our security needs with our business.”

Israel’s cyber-security industry has grown from a few dozen companies to more than 220 in the past three years, according to the Tel Aviv-based IVC Research Center that monitors the industry. Seventy-eight companies in the space raised more than $400 million during that period and 20 multinationals operate development centers in Israel.

Bureau Formed

Netanyahu established the National Cyber Bureau about two years ago to promote cyber security companies, coordinate between the military, education and business sectors, and start a high school program to train students early.

The industry is augmented by young men and women who serve at least two years in military cyber security units, offering the civilian sector a pool of experienced staff.

EMC Corp., the world’s largest maker of storage computers, said in November it will establish a second development center in Israel and expand activity at its first while developing solutions for the Israeli Defense ministry and military.

“There is a strong momentum in the cyber security sector and increasing interest from foreign financial, corporate and government investors,” IVC Chief Executive Officer Koby Simana said in a phone interview.

Boost Exports

Cyber technology will add to Israeli exports, that account for about a third of Israel’s economy and have been a growth engine for the past decade. Sales abroad contracted 0.1 percent last year, according to the Central Bureau of Statistics.

The Israeli currency has rallied 6.1 percent in the past 12 months, the most among 31 major currencies tracked by Bloomberg. Steps by authorities, which have included three rate cuts that brought borrowing costs down to 1 percent and Bank of Israel foreign currency purchases of more than $5 billion, have failed to stop the shekel’s ascent.

“I tell our exporters, who are very nimble mammals, that ultimately you have to adjust and that is hard,” Netanyahu said.

To contact the reporters on this story: Gwen Ackerman in Jerusalem atgackerman@bloomberg.netHans Nichols in Washington at hnichols2@bloomberg.net

To contact the editor responsible for this story: Riad Hamade at rhamade@bloomberg.net

China’s Liquidity Injection Did Not Calm All Its Credit Markets | Zero Hedge

China’s Liquidity Injection Did Not Calm All Its Credit Markets | Zero Hedge.

While last night’s almost unprecedented reverse repo liquidty injection into the Chinese banking system stopped the bleeding of short-dated money-market rates briefly, the likelihood remains that a shadow-banking system default will occur: As CASS’s Zhang noted:

  • *CHINA TRUSTS AND SHADOW BANKING TO SEE DEFAULTS IN 2014: ZHANG
  • *CHINA SHADOW-BANKING DEFAULTS WOULD BE GOOD THING: CASS’S ZHANG

Perhaps that explains why China’s CDS spread remains at its highest since the summer credit crunch, barely budging on last night’s cash drop. At double the default risk of Japan, China appears far from out of the contagion fire.

 

China’s risk makes the US debt ceiling debacle look miniscule and while liquidity does not reign supreme in these markets, the last few months have seen considerably more activity in Asian sovereign CDS…

 

China’s Academy of Social Sciences Zhang Ming had a few other things to say…

  • *CHINA EXPORTS MAY NOT BE AS GOOD AS MARKET EXPECTS: ZHANG
  • *CHINA MONETARY POLICY TO REMAIN RELATIVELY TIGHT IN 2014: ZHANG
  • *YUAN APPRECIATION COMING TO AN END, CASS’S ZHANG MING SAYS
  • *YUAN MAY WEAKEN AFTER REACHING 6 PER DOLLAR: RESEARCHER ZHANG

and typically is seen as yet another mouthpiece for the administration… so that won’t please Schumer and his crowd…

 

Chart: Bloomberg

Falling loonie tied to underperforming economy – Business – CBC News

Falling loonie tied to underperforming economy – Business – CBC News.

The Conference Board of Canada is calling the decline in the Canadian dollar the economic story of the year so far, predicting further declines as the Canadian economy underperforms.

The loonie began the day stronger on Thursday, rising to 91.48 US in early trading, up from its close of 91.37 US yesterday. It closed up 0.16 of a cent to 91.53 cents US.

The Canadian currency fell 6.6 per cent in 2013, after trading at par with the greenback in February, and is down more than three per cent since the beginning of the year.

‘Markets are betting that the Canadian economy will continue to underperform’– Glen Hodgson, Conference Board

The Conference Board, an economic and policy think tank, said the falling dollar is a sign of lack of confidence in Canadian growth prospects.

“Arguably more important than the value of the loonie is the signal it sends about the Canadian economy. Markets are betting that the Canadian economy will continue to underperform,” chief economist Glen Hodgson said in a report released today.

Loonie 20140109The Canadian dollar is trading at its lowest levels since 2009, after falling from par in February 2013. (Paul Chiasson/Canadian Press)

“This assessment is consistent with our own forecast, which calls for U.S. gross domestic product to grow by 3.1 per cent in 2014, much better than Canadian growth of 2.3 per cent,” he continued.

Hodgson is not the only economist predicting Canada’s GDP growth will underperform the U.S. Towers Watson’s annual survey of Canada’s top economists and analysts found most believe Canada will lag the U.S. in both economic activity and job creation over the next few years.

Too many plant closures

“With a lower Canadian dollar, there is hope that manufacturing businesses, and certainly the export sector of the economy, can contribute to reducing the unemployment rate in the next few years,” said Janet Rabovsky, Towers Watson director of investment consulting.

“That being said, recent announcements about industrial plant closures in Ontario would indicate that the cycle has not yet turned.”

Hodgson agreed that it is not clear if Canadian exporters will be able to fully capitalize on a weaker dollar because of the loss of capacity in the manufacturing sector since 2008.

There have been deep slashes in export-dependent industries — such as autos and parts — and a shift of much U.S. production to the southern states, so Canadian suppliers may not benefit as quickly as in the past from the U.S. recovery, he said.

He also points to the hit consumers may take from higher prices.

TD chief economist Craig Alexander said the U.S. Fed’s “decision to taper asset purchases has greased the skids under an already depreciating loonie.”

Traders rush back to U.S. dollar

The Fed decided in December to taper its U.S. bond-buying program to $75 billion US a month and as good economic news out of the U.S. continues to roll in, it is expected to continue tapering.

But that has encouraged traders to buy the U.S. dollar, leading to a rush away from the Canadian dollar.

“However, the fundamentals are not Canadian-dollar positive either, and the loonie likely has further to fall,” Alexander said in a research note.

BMO chief economist Doug Porter predicts a falling dollar will actually help boost Canadian GDP in the long-term – as much as 1.5 percentage points over the next two years if the loonie falls to 90 cents or lower.

“There are definitely losers, such as consumers, travellers, utilities, broadcasters, sports teams. But there are also lots of winners. The beleaguered manufacturing and domestic tourism sectors will find the biggest relief from the weaker currency. Even some retailers will be breathing a tad easier, as the loud siren call of cross-border shopping fades for consumers with each tick down in the currency,” he said.

Canada Should Consider Ending CMHC Mortgage Insurance: IMF » The Epoch Times

Canada Should Consider Ending CMHC Mortgage Insurance: IMF » The Epoch Times.

People walk past homes for sale in Oakville, Ont., in this file photo. The IMF says CMHC mortgage insurance exposes the government to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital. (The Canadian Press/Nathan Denette)

People walk past homes for sale in Oakville, Ont., in this file photo. The IMF says CMHC mortgage insurance exposes the government to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital. (The Canadian Press/Nathan Denette)

 

Further measures should be considered to encourage appropriate risk retention by private sector and increase the market share of private mortgage insurers.

International Monetary Fund

The International Monetary Fund says Ottawa should consider phasing out insuring home mortgages through Canada Mortgage and Housing Corp.

The advice is contained in the IMF’s latest economic report card on Canada, which projects modest economic growth of 2.25 percent for the country next year.

Such a recommendation, surprising from an international financial organization, appears to side with Finance Minister Jim Flaherty, who has recently questioned whether the federal government should be in the business of insuring higher-risk mortgages at all.

Some analysts have credited the system for providing much-needed confidence in Canada’s housing sector during the 2008–09 crisis, which many believe was sparked by a crisis in the U.S. mortgage market.

The IMF concedes that the current system has its advantages for stability. But it says it also exposes the government, or taxpayers, to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital.

“We think banks lend too much to mortgages and too little to small and medium enterprises,” Roberto Cardarelli, the IMF mission chief for Canada, told reporters in a briefing in Toronto.

“We suspect the fact that banks may benefit from government-backed insurance on mortgages … it sort of makes it easier for banks to do mortgages than other kinds of lending which, presumably, we think, is going to be more useful for the real economy.”

CIBC deputy chief economist Benjamin Tal says he believes the advice may be appropriate for the U.S., particularly prior to the crisis, but not necessarily for Canada, where the mortgage securitization market is a relatively small slice of the financial pie. CMHC can carry a maximum of $600 billion mortgage loan insurance on its books.

“In this case size matters,” he said. “It is true when securitization dominates the market it is not a very healthy thing, but when it is part of a normally functioning market, it actually helps the economy” by contributing to low borrowing rates and liquidity.

The Washington-based financial institution said further measures should be considered to “encourage appropriate risk retention by private sector and increase the market share of private mortgage insurers.”

It cautioned, however, that if any structural changes are made, they should be gradual to avoid unintended consequences.

The IMF report, released Wednesday, forecasts that Canada’s economy as a whole will start benefiting next year from a pickup in the U.S. economy, leading to greater demand for Canadian exports and renewed business investment.

In essence, the scenario is identical to the one predicted by the Bank of Canada, which also sees growth rising from the current 1.6 percent level to 2.3 next year.

A slightly more positive estimate was issued Wednesday by the Ottawa-based Conference Board of Canada, which is projecting Canadian real GDP will grow 1.8 percent in 2013, 2.4 percent in 2014, and 2.6 percent in 2015—assuming strong growth in the United States.

The Bank of Canada forecast holds that the risks are balanced—meaning there is as much chance the projected growth rate will be higher as lower.

But the IMF warns, however, that the risks to its outlook are primarily on the downside. The main reason, it says, is that it might be wrong about the U.S. economy rebounding in 2014.

“Renewed political standoff (in the United States) over spending appropriations and the debt ceiling and a faster-than-expected increase in long-term rates in the context of exit from quantitative easing could negatively affect the U.S. recovery and hence demand for Canadian exports,” the IMF said.

“Protracted weakness in the euro area economic recovery and lower-than-anticipated growth in emerging markets would also hurt the prospects for Canada’s exports, including through lower commodity prices,” it added.

On the domestic front, the IMF said the long period of low productivity growth and strong Canadian dollar may have left a deeper dent in Canada’s export potential, especially in the traditional manufacturing base, limiting the economy’s ability to benefit from the projected strengthening in external demand.

Cardarelli stressed the importance of investing in the energy sector, an industry that he said would have a significant impact on the organization’s economic forecasts in the future.

“We really feel that the system is stressed in terms of the transportation capacity—the ability of moving these resources out of Alberta, British Columbia, and Saskatchewan,” he said at a news conference in Toronto.

Among other things, the IMF recommends that Canada’s central bank hold off raising interest rates until there are firmer signs of a sustained transition from household spending to exports and investment, something bank governor Stephen Poloz has signalled he intends to do.

And it warns the federal government that it need not be so fixated on balancing the federal budget in 2015 if there is no meaningful pickup in economic activity.

That is likely to fall on deaf ears, however. Finance Minister Jim Flaherty said this week he is confident he will eliminate the deficit in 2015 and bring in surpluses after that.

With files from The Canadian Press

China Overtakes US As World’s Largest Trader (Except With Japan) | Zero Hedge

China Overtakes US As World’s Largest Trader (Except With Japan) | Zero Hedge.

Overnight China reported disappointing export data, missing expectations of +5%. The gvoernment explained this on the basis that they were losing their competitive edge since the Yuan has strengthened to 20 year highs but perhaps most telling is that fact that, as the FT reportsChina became the world’s biggest trader in goods for the first time last year – overtaking the US for all of 2013. We suspect the powers that be are starting to get nervous as this comes soon after China’s surge to become the world’s largest oil importer marking a notable shift in the world’s most powerful nations – as trade with the rest of Asia and increasing flows with the Middle East represent a shift in power away from the US.

 

There is one exception.. of course – net imports with Japan continues its 3 year trend lower as tensions between the two nations sour further.

 

 

Via The FT,

 

The total value of China’s imports and exports in 2013 was $4.16tn, a 7.6 per cent increase from a year earlier on a renminbi-adjusted basis, according to figures released by the Chinese government on Friday.

 

The US will release its full-year figures in February but its total imports and exports of goods amounted to $3.57tn in the 11 months from January to November 2013, making it a virtual certainty that China is now the world’s biggest goods trading nation.

 

Some historians argue China was the world’s largest trading nation during the Qing dynasty – which lasted from 1644-1912 – despite the ambivalence of Chinese emperors toward foreign trade.

 

This is a landmark milestone for our nation’s foreign trade development,” said Zheng Yuesheng, chief statistician of the customs administration.

 

Mr Zheng said he expected a stronger showing in 2014, thanks to an improving world economy, the impact of structural reforms in China and a lowered outlook for commodity prices, which would help offset rising costs of labour and financing for Chinese manufacturers.

 

One can only note that nothing lasts forver…

 

 

However, as always with China, there is a caveat…

The Chinese government itself has expressed some concern about Chinese trade data in late 2012 and early 2013. Statistics officials have acknowledged that during that period export numbers in particular were distorted by a huge amount of fake invoicing by companies and individuals evading China’s strict capital controls to move cash in and particularly out of the country.

 

That will probably lower growth figures for the first months of this year.

 

We should be prepared for a period of low headline year-on-year export growth due largely to the faked exports data between December 2012 and April 2013,” said Lu Ting, China economist at Bank of America Merrill Lynch.

Loonie Hits 4-Year Low After Bad Economic News

Loonie Hits 4-Year Low After Bad Economic News.

The loonie continued its long slide Wednesday, hitting a fresh four-year low against the U.S. dollar.

The Canadian dollar was trading at 92.58 cents after falling more than a cent Tuesday to its lowest close since late 2009.

The slide followed a spate of bad news about Canada’s economy. The Ivey Purchasing Managers Index, a measure of economic activity, came in much lower than expected for last month, at 46.3, compared to 53.7 the month before. A reading below 50 suggests economic contraction.

Canada’s trade deficit numbers also spooked the markets, with Statistics Canada reporting Tuesday that the country’s overall trade deficit with the world grew to $940 million in November as imports rose to $40.7 billion, while exports were unchanged at $39.8 billion.

The deficit came as the results for October were also revised to show a deficit of $908 million compared with an initial report of a surplus of $75 million for the month.

Meanwhile, U.S. economic data has been positive, further pressuring the loonie downwards.

Payroll firm ADP reported the U.S. private sector created 238,000 jobs during December. That data came two days before the release of the U.S. government’s employment report for last month. Economists expect it will show the economy created about 195,000 jobs in total. 

International traders are certainly bearish on the Canadian dollar. The Globe and Mail reports the amount of money being placed in bets against the loonie is nearing extremes, with about US$5.5 billion currently invested against it.

Investment bank Goldman Sachs forecast late last year the Canadian dollar could hit 88 cents U.S. in 2014.

Meanwhile, Bank of Canada governor Stephen Poloz doesn’t appear in any hurry to raise the Bank of Canada’s trend-setting rate. In an interview on CBC on Tuesday, he denied he was under international pressure to raise rates.

Federal Finance Minister Jim Flaherty suggested in a recent interview that there would be such pressure as a result of Fed tapering.

Poloz did say that Fed tapering will inevitably put pressure on Canadian bond yields, likely leading to an increase in long-term fixed mortgage rates even if the Bank of Canada does not increase its benchmark rate.

— With files from The Canadian Press

Russia Just Says “Nyet” To Japan’s Radioactive Exports | Zero Hedge

Russia Just Says “Nyet” To Japan’s Radioactive Exports | Zero Hedge.

While Japanese imports are surging on the back of an ever-depreciating currency and ever-appreciating cost of energy, it would appear the enterprising Easterners have come up with a solution to two problems – exports and radiation. As RT reportsmore than 130 “contaminated” used cars from Japan were denied access to Russia last year. The consumer watchdog agency Rospotrebnadzor is also closely monitoring deliveries of fish.

 

A customs officer holds up a device used for measuring radiation levels, while standing in front of vehicles delivered from Japan, in Russia’s far eastern city of Vladivostok.

 

Via RT,

 

Strict control of all cargo, arriving from Japan, will continue in 2014 as well, Rospotrebnadzor said on its website.

In 2013, Russia has banned 165 batches of contaminated goods from entering the country. There were mainly used cars – 132, and spare parts for vehicles – 33,” the statement said.

 

Deliveries of fish coming from Japan and those caught in the Pacific Ocean are also being monitored, the agency said.

 

Particular attention is paid to this issue in Russia’s Far East, where radiation control of fish is being wieldy implemented, including the distribution chain,” Rospotrebnadzor said.

 

The supply of Japanese fish to Russia is currently allowed only under a special declaration that confirms the presence of radioactive substances in the products is within safety standards established by the Customs Union of Russia, Belarus and Kazakhstan.

 

It seems the world is also losing interest in one of Japan’s other major exports – Blue-Fin Tuna (as prices have dropped 95% from last year!)

Via The Guardian,

Sushi restaurateur Kiyoshi Kimura paid 7.36m yen (£43,000) for a 230kg (507lb) bluefin tuna in the year’s celebratory first auction at Tokyo’s Tsukiji market on Sunday – just 5% of what he paid a year earlier despite signs that the species is in serious decline.

 

 

There were 1,729 tuna sold in Sunday’s first auction for 2014, according to the city government, down from 2,419 last year. The 32,000 yen ($305) per kilogram paid for the top fish this year compares with 700,000 yen per kilogram last year.

Bank of Finland Warns Debt Level Poised to Double: Nordic Credit – Bloomberg

Bank of Finland Warns Debt Level Poised to Double: Nordic Credit – Bloomberg.

The Bank of Finland is warning that the euro area’s best-rated economy risks sliding down a path that could see its debt burden rival Italy’s.

Finland has little room to deviate from a proposal to fill a 9 billion-euro ($12.3 billion) gap in Europe’s fastest-aging economy if it’s to avoid debt levels doubling in the next decade and a half, according to the central bank.

The northernmost euro member risks joining the bloc’s most indebted nations if the government fails to reform spending, according to calculations by the Helsinki-based Bank of Finland. Without the measures, debt could exceed 110 percent of gross domestic product by 2030, according to the bank. The ratio was 53.6 percent in 2012. Success with the plan would help restrain debt levels to about 70 percent by 2030, the bank said.

The central bank’s assessment shows that the government’s plan would have a “real impact,” Finance Minister Jutta Urpilainen said in an e-mailed response to questions via her aide. Structural reforms are needed if “the Finnish welfare state has a chance to survive,” she said.

Stable AAA

The only euro member with a stable AAA grade at the three main rating companies, Finland’s economy is struggling to emerge from the decline of its paper makers and its flagging Nokia Oyj-led technology industry. Export demand has failed to offset weak consumer demand, as companies fire workers and the government responds to deficits with cuts. Lost revenue is hampering government efforts to set aside funds needed to care for the fastest-aging population in the European Union.

In the period August to November, Finland’s six-party coalition put together a package to streamline and reduce public spending to eliminate a gap of more than 9 billion euros in public finances by 2017. The package consists of several different measures, each to be sent to parliament independently. Some of the measures, including changes to pensions and health-care providers, are still being drafted.

Finland’s “costs related to aging will grow faster than elsewhere within the next two decades,” Petri Maeki-Fraenti, an economist at the Bank of Finland, said in an interview. Aging costs will be “decisive” in accelerating debt growth after 2020, he said.

Forecasts Cut

The government reduced its economic forecasts on Dec. 19 for the 10th time since coming to power in June 2011. Even as exports look set to recover and rise 3.6 percent in 2014, GDP will grow only 0.8 percent after declining 1.2 percent in 2013, the Finance Ministry said.

The Bank of Finland’s calculations assume an average economic expansion of about 1.5 percent in the long term, compared with an average of 3.7 percent during 2003 to 2007, according to a February 2013 report by economists Helvi Kinnunen, Maeki-Fraenti and Hannu Viertola.

“We must get used to slower economic growth for an extended period of time,” Maeki-Fraenti said.

The average debt level in the euro area shot up more than 25 percentage points in five years after hovering around 70 percent for the majority of the last decade. Finland has followed suit, with the Finance Ministry estimating its debt-to-GDP ratio rising to 60 percent this year from 33.9 percent in 2008.

Debt Load

Euro-area debt reached 93.4 percent of GDP at the end of the second quarter, according to theEuropean Central Bank. Italy reduced its government debt to 103 percent of GDP in 2007. Since the debt crisis, its debt has begun mounting again, rising to 134 percent of GDP this year, the European Commission forecast Nov. 5.

Debt levels exceeding 90 percent hurt economic growth, Harvard University economists Carmen Reinhart and Kenneth Rogoff argued in a 2010 paper. Three years later, their claims were refuted by University of Massachusetts researchers, citing “serious errors” that overstate the significance of the boundary.

The World Bank set a similar “tipping point” at 77 percent in a 2010 paper, while a 2011 studyby the Bank for International Settlements identified a sovereign debt threshold of 85 percent. An IMF report from 2012 found “no particular threshold” that would consistently precede low growth.

Finding an absolute threshold for debt after which economic growth starts slowing is “quite impossible,” Bank of Finland’s Maeki-Fraenti said. Addressing sluggish growth and public debt is necessary for Finland due to the pressure from aging and the decline of its cornerstone industries, he said.

“As the debt level is still relatively tolerable and our unemployment hasn’t shot up in the same way, it has perhaps led some to believe that the problems shall be fixed on their own as export demand revives,” he said. “Our view is slightly more pessimistic.”

To contact the reporter on this story: Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg atcwienberg@bloomberg.net

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