Experts Talk New-Home Sales, Durables, Fannie and Freddie

Data from the housing sector continue to provide pleasant surprises for Wall Street and Main Street. An Aug. 26 report showing a jump in U.S. new-home sales for July followed on the heels of reports released the previous day showing a month-over-month increase in a widely followed measure of U.S. home prices in June.

What did market pros have to say about the housing data—and other important market and economic topics—on Aug. 26? BusinessWeek compiled comments from Wall Street economists and strategists:

Michael Englund, Action Economics
U.S. new-home sales posted a hefty 9.6% surge to a 433,000 [unit annual] pace in July, following upwardly revised levels over the prior three months. The figures continue to climb from an unrevised 329,000 cyclical [low point] in January. The sales bounce over the past six months leaves a clear trough for nearly all the major housing measures in the first quarter overall, with a January bottom for this measure that matches most indicators.

Today's sales gain chased last week's similar 7.2% existing-home sales surge to a 5.24 million July rate, which left this sales measure well above the January [low point] of 4.490 million and at its strongest pace since August 2007.

The price data from today's report revealed a tiny 0.1% July median new-home price drop, to $210,100, that followed upward prior revisions that left a 5.0% (revised from 5.8%) June drop to a $210,400 (was $206,200) figure. The July drop allowed a decline in the year-over-year measure to -11.5% from -10.2% (was -12.0%) in June. We are still adhering to a pattern of diminishing price declines from the -14.5% year-over-year cyclical trough in February, despite the July price downtick. Prices are now at the end of their usual spring seasonal bounce, and we expect the median price level to moderate into yearend …

For further supportive news for housing, inventories of new homes fell again, to 271,000 units in July from 280,000 in June, 293,000 in May, and a cyclical peak of 572,000 in July 2006. Though high inventories remain a problem for home builders, the month's supply measure is falling—to 7.5 in July from 8.5 in June, 9.7 in May, and a cycle-high of 12.4 in January. Since the months' supply measure is a ratio that responds to both falling inventories and rising sales during the turn in the cycle, this measure is falling sharply now that sales are bouncing, vs. the stabilizing pattern evident earlier in 2009.

Beth Ann Bovino, Standard & Poor's
U.S. durable goods orders rebounded 4.9% in July, the strongest reading in two years. The number was much better than the 3.0% bounce expected by markets and comes after a 1.3% drop in June (upwardly revised from -2.5%). Transportation orders jumped 18.4%, with civilian aircraft orders surging 107.2%, to explain much of the boost. Excluding transportation orders, orders edged up 0.8%, after a 2.5% increase in June.

Nondefense capital goods orders, excluding aircraft, a leading indicator for future capital spending, edged down 0.3%, but after surging 3.6% in June and 4.3% in May. Shipments were up 2.0% after climbing an upwardly revised 0.7% in June (previously -0.2%). Inventories fell 0.8%, bringing the inventory-shipment ratio to 1.81 from 1.87 in June.

The upbeat data should give further support to stock prices and weigh on Treasuries [on Aug. 26].

Alec Phillips, Goldman Sachs
While the Treasury continues to provide financial support for the GSEs (government-sponsored enterprises Fannie Mae and Freddie Mac), the Administration is likely to develop plans soon for dealing with the GSEs over the longer term. This will probably involve two steps: (1) moving the GSEs onto the federal budget and (2) transitioning the GSEs to a new structure.

Moving the GSEs on budget would increase the share of federal debt as a share of GDP by roughly 10 percentage points, but would not fundamentally change the federal debt burden from where it is today. A new GSE structure seems likely to involve partial nationalization; privatization and a public-utility model are other plausible alternatives.

Bringing the GSEs on budget, if it occurs, is unlikely to happen before next year. Moving the GSEs to a new structure may be proposed next year, but will take several years to implement.

Olympus’s $687 Million Scam Lay Hidden in Cardiff Filing System

Nov. 21 (Bloomberg) -- Olympus Corp. executives including the current head of investor relations signed off on misleading accounts, restated earnings and delayed regulatory filings to help conceal $687 million in fake costs used to hide losses.

Documents filed at Companies House in Cardiff, Wales, reveal gaps in disclosure rules that enabled Olympus to mask the cost of the 2008 takeover of London-listed Gyrus Group Plc for more than three years. Like Enron Corp.’s use of off-balance sheet entities to hide losses, a simple idea underpinned Olympus’s complex deception, said Bruce E. Aronson, a former partner at Hughes Hubbard & Reed LLP in New York.

“The structures may seem sophisticated, but one feature of every scheme is that they pretend a security is still worth full book value,” said Aronson, who is studying comparative corporate governance in Tokyo. The schemes aren’t “a way of hiding losses in the long term.” They’re just “putting off the day of reckoning,” he said.

Olympus on Nov. 8 admitted inflated advisory fees paid in the $2.1 billion acquisition of Gyrus were used to conceal soured investments dating back decades. In a practice known as “tobashi” -- loosely translated as “to make fly away” -- the company used offshore entities to park assets in the hope that a market recovery would erase losses before they had to be accounted for.

A week after Olympus paid $620 million in March 2010 to buy back preference shares given to its advisers as fees, former Chairman Tsuyoshi Kikukawa and two senior aides, who were all serving as Gyrus directors, filed financial statements saying it wasn’t “meaningful to estimate a fair value” for the securities. Gyrus instead booked them at $177 million, the documents show.

KPMG Leaves

Gyrus’s auditor, KPMG Audit Plc, left the role in part because of its client’s accounting for the securities, it said in a letter to directors that was filed to Companies House. Olympus’s investors were never passed the letter or KPMG’s qualified accounts, according to two shareholders who declined to be identified.

The payment to the advisers, Axam Investments Ltd., is part of criminal probes in the U.S., U.K. and Japan.

Akihiro Nambu, the Japanese camera maker’s investor- relations head, signed the 2009 accounts on April 5, 2010. The third Gyrus director, Hisashi Mori, was fired last week as executive vice president over his role in hiding the losses.

Under the U.K.’s Companies Act 2006, it is an offense for directors not to circulate accounts and the auditor’s report to shareholders. Gyrus’s only shareholder is Olympus, and under Japanese law there is no obligation for the three directors of the U.K. company to pass on the report.

Delayed Filing

Repeated attempts to interview Kikukawa, Mori and Nambu and other Olympus officials, including visits to the homes of some, have failed. Tsuyoshi Kitada, a Tokyo-based spokesman, declined to comment on whether Gyrus’s 2009 accounts and the auditor’s report were sent to the full Olympus board.

Olympus executives delayed booking the true cost of the fees until March 2011, nine months after Axam Investments was struck off by the Cayman Islands registrar.

The tax haven’s secrecy rules mean the beneficiary of the payout is not yet known. However, Olympus’s admission the funds were intended to help erase losses suggests the money was to be routed back to the company.

Preference Shares

After they took over Gyrus’s board, Kikukawa, Mori and Nambu on Sept. 30, 2008, authorized the issue of $200 million of preference shares, filings show. The directors also gave themselves the right to allot $176,981,106 of the shares -- only disclosing that these were awarded to Axam more than 18 months later in the Gyrus annual return.

Because of the dividend set on the securities, their fair value was much higher. Olympus agreed to buy back the shares for $620 million, according to two March 22 agreements signed by Kikukawa and Mori, copies of which were given to Bloomberg News. Those agreements, and earlier exchanges with Axam, show Olympus executives knew the eventual payout to Axam would far exceed the nominal value booked in the 2009 accounts.

KPMG approved the 2009 Gyrus financial statement, though it did so with reservations because the company had failed to provide sufficient proof Axam wasn’t a related party. The auditors also took issue with the accounting treatment of the preference shares.

“We consider that there are circumstances connected with our ceasing to hold office that should be brought to the attention of the company’s members or creditors,” KPMG Audit wrote in a letter to Gyrus Group dated April 26, 2010.

‘Incorrectly Recorded’

When the 2010 financial statement was filed a year later, Gyrus revised earnings for 2009 because it had “incorrectly recorded” the preference shares at nominal value. Gyrus booked the securities in its year-end accounts at the same value as paid to Axam on March 31, 2010. The revision knocked about $330 million from Gyrus’s $716 million in net assets.

New auditor Ernst & Young LLC also approved accounts with reservation, citing the lack of information about Axam in a March 21, 2011, filing. Both Gyrus annual reports were submitted more than a year from the end of the reporting period, exceeding the U.K.’s nine-month limit.

“If you see companies producing the numbers late, there’s a problem with the audit procedures,” said Eli Amir, professor of accounting at London Business School. Auditors’ duty “is to the shareholders of the company,” so they may not report their findings to regulators, he said. “They might walk away to decrease their exposure to litigation or other sanctions.”

Failed to Account

Amir said he was speaking in general, and not specifically about Gyrus. KPMG’s London-based spokesman Gavin Houlgate and Ernst & Young spokeswoman Vicky Conybeer declined to comment.

Olympus’s annual report for the 12 months to March 31, 2010, showed a 15.5 billion yen ($201 million) “prior period adjustment” loss related to the purchase of preference shares from a third party. The company added about 13.5 billion yen to goodwill on its balance sheet to account for the purchase, according to a conference call after the earnings.

Olympus didn’t say who the third party was.

Southeastern Asset Management Inc., Olympus’s biggest shareholder, said it raised the issue in an email exchange with the company’s investor-relations department in May last year.

Nambu’s division claimed the purchase was related to financing for the Gyrus acquisition, not payment to an adviser, Southeastern wrote in a letter to the board dated Oct. 20 this year and which was copied to the U.K.’s Serious Fraud Office and Japanese regulators.

Olympus has appointed an independent committee including former judges to probe its acquisitions and hidden losses. The findings are expected by mid-December. Olympus last week said it would publish corrected accounts and its half-year earnings by Dec. 14.

The SFO, which prosecutes white-collar crime, has started a probe into accounting at Olympus, a person familiar with the case said last week, declining to be identified because they weren’t authorized to speak to the media.

--With assistance from Takashi Amano, Naoko Fujimura, Kazuyo Sawa, Yuki Yamaguchi, Chris Cooper and Stuart Biggs in Tokyo, Eijiro Ueno in 東京, Douglas Wong and Ben Richardson in Hong Kong, John Helyar in Atlanta and David Glovin and Greg Farrell in New York. Editors: Ben Richardson, Peter Langan

bussiness: Million-Dollar Taxi Medallions

bussiness: Million-Dollar Taxi Medallions: The sale of two New York City taxi medallions for a record $1 million each in October is sparking investor interest and bolstering shares of...

The Euro: As Good (and Bad) as Gold

Like the gold standard of a century ago, the euro has promoted free trade and investment across borders. The 12-year-old unified currency also shares the gold standard’s greatest flaw: the lack of an escape hatch. If a country runs chronic deficits, it can’t regain competitiveness through the market’s depreciation of its currency. Under the gold standard, exchange rates were fixed, which is to say the escape hatch of depreciation was locked. Under the euro, exchange rates no longer even exist. The escape hatch has been locked, welded shut, and sat on by the leaders of the Continent’s most powerful economies.

What does a country do when it can’t depreciate its currency to lower its prices? Now, as in the 1930s, the only alternative is an internal devaluation, which means cutting wages and other costs, including government benefits. That’s a painful process that creates enormous social stress. In the 1920s and ’30s the impoverishment of the working class led to the rise of Hitler and Mussolini. Even if fascism is averted, punitive austerity can lead to a downward spiral as trade and financing dry up, deflation sets in, debts loom larger, and one country after another gets sucked downward.

Once the euro symbolized common purpose and uplift. But to quote the Depression-era lyricist Lorenz Hart, “When love congeals/It soon reveals/The faint aroma of performing seals.” The seals of 2011 are the hard-money types in Germany, Finland, and other points north who insist that the Greeks, the Italians—and maybe soon the French—must be held to account for their financial transgressions. These calls for fiscal responsibility, and the anger behind them, make emotional sense. But today’s austerity tough guys sound alarmingly like Andrew Mellon, President Herbert Hoover’s Treasury Secretary, who, according to Hoover’s memoirs, said the only way to get the U.S. economy back on track in the 1930s was to “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate … purge the rottenness out of the system.”

Purging the rottenness nearly killed the patient. In an increasingly relevant 2000 essay called “The Gold Standard and the Great Depression” in Contemporary European History, American economists Barry Eichengreen and Peter Temin wrote that elites were befuddled by a gold standard mentality that “sharply restricted the range of actions they were willing to contemplate.” They added: “The result of this cultural condition was to transform a run-of-the-mill economic contraction into a Great Depression that changed the course of history.”

A gold standard doesn’t have to be deflationary. From the 1870s until World War I, the gold standard more or less worked under the auspices of the Bank of England: Countries that imported more than they exported were forced to make up the difference by shipping gold to their trading partners. Because gold was the ultimate storehouse of value, countries feared losing too much of it. To stanch the outflow of gold, central banks would raise interest rates to push down domestic spending and prices. Meanwhile, the countries that imported gold would see domestic prices rise, which would make them more receptive to cheaper imports and shrink their surpluses. There was discipline and a natural balance.

World War I spoiled the equilibrium. War spending caused inflation, forcing countries to suspend convertibility of their currencies into gold. After the war most countries struggled back onto the gold standard (though not Germany, which suffered hyperinflation). Returning to the old exchange rates required reversing the wartime inflation—namely, imposing punishing deflation. Democracies weren’t as good at imposing austerity as autocracies had been. The rise of labor unions and the introduction of minimum-wage laws made it harder for employers to cut pay, so they cut workers instead.

Goldman Sachs Names 261 Managing Directors, Fewest Since 2008

Nov. 18 (Bloomberg) -- Goldman Sachs Group Inc., the fifth- biggest U.S. bank by assets, named the smallest group of new managing directors since 2008 as the firm cuts jobs and grapples with declining revenue.

The firm appointed 261 people to managing director, the company’s second-highest executive rank, according to an internal memo obtained by Bloomberg News. The number is down 19 percent from last year’s record list of 321 new managing directors and exceeds the 259 promotions in 2008. David Wells, a spokesman for the New York-based company, didn’t reply to an e- mail and two phone messages seeking confirmation of the memo.

Goldman Sachs Chairman and Chief Executive Officer Lloyd C. Blankfein, 57, said this week that the firm is working to remain positioned for a rebound even as it eliminates about 1,000 jobs to contend with a drop in trading revenue. The company set aside $10 billion for employees’ salaries, bonuses and benefits in the first nine months of this year, equivalent to $292,836 per worker.

“The single most important thing we can do to enhance the value of our business is to continue to hire the best and brightest people from around the world,” Blankfein said on Nov. 15, at an investor conference in New York hosted by Bank of America Corp. “And once they get into Goldman Sachs we want to do everything we can to ensure that they have productive and stimulating careers.”

The company names managing directors annually and elects employees to the firm’s partnership, the highest status, in even-numbered years. Managing directors, though typically paid more than junior employees, don’t share in the special bonus pool reserved for the company’s partners.

The following is the list of Goldman Sachs’s “Managing Director Class of 2011.” The employees listed have been invited to become managing directors as of Jan. 1, 2012.

Million-Dollar Taxi Medallions

The sale of two New York City taxi medallions for a record $1 million each in October is sparking investor interest and bolstering shares of Medallion Financial (TAXI), a company that owns medallions and lends money to people who buy them. Investors see the medallions, which confer the right to operate yellow cabs in the city, as “a safe asset,” says Medallion Financial President Andrew M. Murstein. His company owns about 300 and plans to buy “several hundred more” in New York and other cities, he says. “These are little cash cows, constantly taking in fares and spitting out money to the owners.”

While it would take a lot of long rides to run up $1 million on the meter, the return on medallions compares favorably with other investments. Someone who leases a medallion to a driver or garage operator could expect to earn about $2,500 a month, according to Simon Greenbaum, a broker at NYC Medallion Brokers. That’s about a 3 percent return for a $1 million medallion, better than the 2.13 percent effective yield on U.S. AAA rated corporate bonds as of Nov. 7 and the 2.04 percent yield on 10-year Treasuries.

Medallion Financial’s shares—traded on the Nasdaq stock exchange under the ticker symbol TAXI—have been an even better investment. They are up 17 percent since the two $1 million medallions sold on Oct. 19 and 44 percent this year through Nov. 8, compared with a 6.6 percent drop in the Russell 2000 Financial Services Index, according to data compiled by Bloomberg. The shares yield 5.6 percent, after the company boosted its dividend for the fourth time this year on Nov. 2. Medallion Financial shares offer “a pretty nice yield in a low-interest-rate environment right now,” says Justin Akin, a fund manager at River Road Asset Management, in Louisville, which owns about 6 percent of Medallion Financial.

Because the supply is regulated by the state, the value of medallions has climbed faster than stocks, oil, and gold for the past two decades. The New York State assembly and senate have passed a bill that would boost the current pool of 13,237 licenses by 1,500 starting in July. Governor Andrew Cuomo is weighing the legislation. There’s still investment “upside” in New York because of potential fare increases, Murstein says.

There are two types of medallions: individual and corporate. An individual- medallion owner has to spend a minimum of about 200 nine-hour shifts behind the wheel each year, while a corporate owner can lease out the taxi around the clock. The million-dollar medallions were the corporate variety. Prices of individual medallions averaged $694,000 in October.

From 1990 through last month, the cost of corporate and individual medallions increased 637 percent and 440 percent, respectively. The Standard & Poor’s 500-stock index is up 255 percent in that span.

Nat Goldbetter of Queens Medallion Brokerage, who helped arrange the sale of the two $1 million medallions, says potential investors should realize that the price increases may be spurred in part by fleet owners borrowing against the rising value of the medallions they already own to finance new purchases. He has fielded about 15 calls in October—five more than usual—from investors looking to put money into the business. Most lose interest after hearing about the cost of financing and the time it takes to close a sale. “It’s not for everybody,” Goldbetter says. “It’s a good investment for the people in the industry, but to the outside investor it’s a crapshoot.”

The bottom line: A purchaser who spends $1 million on a New York City taxi medallion could expect to earn about 3 percent annually on the investment.

Blackberry Sales In US Drops, As Customers Run For IPhone

 Research In Motion Ltd.’s, Blackberry phone manufacturer, booked found sales in the United States of America slashed 50% last quarter, as American consumers abandoned older BlackBerry phone models for Apple Inc.’s iPhones.

 

Revenue from the U.S. dropped to US$1.11 billion from US$2.22 billion a year earlier, according to a filing released yesterday quoted by Bloomberg.

 

United Kingdom (U.K) sales fell 2.3% to US$419 million, according to the filing. Sales in Canada climbed 7.7% to US$308 million, and sales outside the U.S., Canada and the U.K. (including Asia and Indonesia) jumped 38% to $2.33 billion. 

 

RIM’s share of the global smartphone market dropped to 12% in last quarter from 19% a year earlier, according to Gartner Inc., as customer run for iPhone and handsets that run on Google Inc.’s Android platform.

Thailand May Lose 9 Million Tons Of Its Export Rice, Due To Flood

Thailand is estimated to lose its rice export potency by 9 million tons this year, due to the flood disaster.

 

Committee Head of Food Security at Indonesian Chamber of Commerce and Industry (Kadin) Fransciscus Welirang said about 50% of the local rice fields in Thailand, is facing puso (crop failure) risk due to the flood.

 

“With 50% rice fields in Thailand getting crop failure, on the other word, the country has missed one-time harvest,” he said in Jakarta yesterday.

 

Consequently, Thailand--which has been developing and conserving about 24,000 varieties of paddy--will lose its potency to export 9 million tons of rice.

 

Volume of rice export in Thailand is equivalent to its one-time harvest, while the remaining harvest is distributed for domestic needs and stocks.

 

Department of Foreign Trade at Thailand’s Commerce Ministry’s data showed total rice fields in Thailand reaches 9 million-11 million hectares, with output volume of 30 million-31 million tons of unhulled rice per year.

 

Meanwhile, Indonesia has 13 million hectare with output of 66.41 million tons of unhulled rice.

 

The global farmers mostly plant 'Jasmine Rice 105 type' paddy, which is considered as the best paddy variety among others and is the most popular in global markets.

 

 

Stagnant

 

Fransciscus viewed the global food productivity remained stagnant which isn’t along with the global population growth. In addition, until today there is no latest innovation on food yet.

 

“Food production is on declining trend. In Indonesia, the farming area is reduced, as well as the farming area in the world,” he said.

 

Food security always depend on the availability of water and energy sources. In such condition, he estimated the global food loss after harvest reached 30%, while the food loss after Thailand harvest may reach 50%. 

 

He affirmed the global issue on food will affect Indonesia. “That’s why China starts investing actively on food in Brazil, as well as Saudi Arabia that also invest rice in Ethiopia and corn in Australia,” he exposed.

Non-Oil And Gas Exports To Exceed US$125 Billion This Year

Ministry of Industry is optimistic the exports of non oil and gas processing industry to exceed US$125 billion this year.

The export contribution of non oil and gas industry (manufacture) to Indonesia’s total exports in 2011 is equal with its contribution last year, The Industry Ministry's International Industrial Cooperation Director General Agus Tjahjana said.

The exports of manufacture industry reached US$98 billion or 62.42% from the total export of US$157 billion.

Last year, he estimated the export value of manufacture industry in 2011 to be able to reach US$124.84 billion of total export this year of US$200 billion.

According to the Central Agency of Statistics (BPS), the non oil and gas contributed export value of US$82 billion until August or 60.83% from the total export of US$134.8 billion in the same period.

Thus, manufacture industry will only contribute an export value of US$121.66 billion until the end of the year.

The export of manufacture industry will grow higher in the next four months, helping it to reach the export target of US$124.84 billion.

He added that the global economic crisis will not affect Indonesian export in the fourth quarter 2011.

The financial crisis in European Union (EU) will drop demands from EU and US in the first-half 2012.

“We also need to pay close attention to our export performances to EU and US, which only share 10.9% and 9% of the total exports of non oil and gas industry,” Agus said.

Growing 6.98%

BPS stated that non oil and gas processing industry grew 6.98% in third quarter 2011 compared to the same period a year earlier.

Basic metal, iron and steel industry grew 11.42% or the highest, while the growth of paper and printing industry was at the bottom with -1.22%.

Meanwhile, food, beverage and tobacco industry grew 8.34%, the cement industry and non-metallic mineral products 8.28%, as well as transport equipment, machinery and its equipment 7.77%.

Regarding the statistics, he believed manufacture industry will reach the growth target of Ministry of Industry at 6.5%.

The production of manufacturing industry will also increase although Indonesian exports weaken in the fourth quarter 2011.

The growth of manufacture industry is still supported by the higher contribution of domestic consumption to Indonesia’s gross domestic product.

Chairman of Indonesian Food and Beverage Association (Gapmmi) Adhi Lukman said food and beverages exports will grow 15% this year from US$3.2 million in 2010.

The global crisis will potentially impact the exports next year as some overseas buyers have started to review their contracts with the manufacturers of food and beverages in Indonesia.

He added that food and beverages industry will not grow beyond 10% next year due to weakening markets in developed countries.

He insisted the food and beverages industry should remain cautious against the financial crisis impact although the exports to US and EU are smaller compared to total exports of Indonesia’s food and beverages.

The national food and beverages manufacturers are currently eyeing alternative markets like the Middle East and Africa.

American Red Cross

Overview

BusinessOnline guided the American Red Cross Biomedical Services through an engagement initially focused on consolidating 30+ regional websites into one site. The organization had 30+ regional websites without a unified online presence.  This led to inconsistencies in critical information such as blood drive schedules, sub-optimal search engine optimization, and varied brand presence.  We addressed these areas with a thoughtful, customized and well executed plan.

BusinessOnline helped bring consistency to their online brand presence– a big part which is their online presence. User feedback was also very positive – emphasizing ease-of-use and intuitive organization. We made it simpler for users to get answers related to donations.  From an operational standpoint, the cost to host and maintain their online presence was reduced significantly

Tugu Pratama Welcomes Strategic Investors

JAKARTA: PT Tugu Pratama Indonesia, Pertamina’s insurance company, seeks to team up with strategic investors in further developing its business, an alternative notion to replace initial public offering plan.

IPO is no longer an option to raise capital as Tugu Pratama’s risk based capital (RBC) is still solid, said Tugu Pratama President Director Evita M. Tagor.

“Thus, shareholders consider to delay IPO following such solid RBC and no urgency to realize IPO. We commit to raise capital of our subsidiaries and it is not enough if it is sourced solely from internal financing. We are opened for any strategic partners,” he said during a visit to Bisnis Indonesia yesterday.

According to Evita, the company has the agenda to expand its subsidiary and affiliated companies over the next years. So far, there have been several companies addressing their interest to team up with Tugu Pratama.

Yet, Evita did not specify the names of the company's future partners. The IPO plan firstly sparked in 2008. Then the company said that the corporate action would be realized in the 1Q/2011 and it again postponed to 2Q/2011.

Two Tugu Pratama's subsidiaries that require capital injection are PT Tugu Reasuransi Indonesia focusing on reinsurance business and PT Asuransi Staco Mandiri serving general insurance.

The company needs IDR20 billion additional capital by next year, thus the total capital will amount to IDR95 billion, said Staco Mandiri President Director Ruhari.

The amount suits the minimum capital requirements for an insurer effective as of 31 December 2012, that is, IDR95 billion for insurance companies having Sharia unit.

Tugu-Re's President Director, Moro W. Budhi previously said that the company required IDR100 billion capital injection at the least from its subsidiaries, an effort to meet the insurer regulation PP NO. 81/2008.

He explained that this additional capital will be earmarked for capital enhancement and business development.

Insurance premium

In the past four months, the company is eyeing 25% premium out of Revenue Working Plan 2011, reaching IDR1.6 trillion or about IDR400 billion.

The company focuses to hunt corporate market share primarily in energy sector. This particular market share becomes the significant contributor to total company’s premium revenue.

For the time being, about 65% ownership in of Tugu Pratama Indonesia is controlled PT Pertamina (Persero), while the remaining stakes are owned by PT Sakti Laksana Prima (17.60%), Siti Taskiyah (12.15%), and Mohamad Satya Permadi (5.25%).

Eurocrisis Poses Threat To U.S. Bank Rating Outlook; Fitch Says

JAKARTA: U.S. banks have manageable direct exposures to the stressed European markets, but further contagion poses a serious risk, according to a Fitch Ratings report.

 

The rating company believes that unless the Eurozone debt crisis (Greece, Ireland, Italy, Portugal and Spain) is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen. 

 

"Fitch's current outlook for the industry is stable, reflecting improved fundamentals at most banks combined with ratings lower than at pre-crisis levels. However, risks of a negative shock are rising and could alter this outlook," Fitch Senior Director Joseph Scott said in a statement, today.

 

U.S. banks have reduced direct exposure to stressed European markets considerably over the past year in Fitch's view. Direct exposures appear manageable in the context of banks' capital positions and diverse earnings streams. 

 

In addition, public disclosure of direct exposures has generally improved recently but varies from bank to bank. 

West Java Boosts Footwear & Garment Export To Brazil

BANDUNG: West Java businessmen are poised to increase the export of footwear and textile and textile products in Latin America, following the growing demand for such products in recent years.

Chamber of Commerce and Industry (Kadin) Vice Chairman Dedy Widjaja said the export performance of manufacture sector is quite promising and businessmen have the opportunity to utilize such momentum to boost export in Latin America, particularly Brazil.

“However, West Java Businessmen should make its product more superior compared to its peers from Latin America that also exports their product to Brazil,” he told Bisnis yesterday.

Indonesia and Brazil had agreed to increase trading and investment. Such agreement provides export opportunity to Latin America through Brazil as the main entrance.

Brazil as one of the members in Mercosur, the largest trading bloc in South America, may become the main entrance for West Java products to reach several countries in Latin America such as Argentine, Paraguay, and Venezuela.

Brazil’s economic condition is currently stable since the country has conducted massive industrialization but the export market to Brazil has not yet optimized.

“We can develop the agreement for aviation industry products, military equipments, and agribusiness, particularly beef. However, don’t let the import balance higher than export,” he said.

The data from Bank Indonesia shows that the export of West Java products to Latin America grew 20.05% as of the end of third quarter 2011 with total export value as much as US$320 million.

The entrance

However, the majority of those export products were traded to US. Such figure was more favorable than 1.2% growth in the second quarter 2011.

“The growth of trade volume may not too significant in initial phase but it’s important since Brazil could be the entrance for market expansion to the countries in Latin America.”

The data from the Ministry of Trade shows that the trade performance between Indonesia and Brazil experienced surplus US$3.2 billion, significantly higher compared to US$1.1 billion in 2006.

In 2006, the trade balance between the two countries experienced surplus US$111.1 million but then suffered deficit US$93.7 billion in 2008, US$382.7 in 2009, and US$198.5 billion in 2010. Indonesia experienced surplus US$153.4 million in January-August 2011 or 44.5% higher than the position in January-August 2010.

Head of West Java Investment and Promotion Coordination Board (BKPPMD) Yusuf Wibisana had previously said that there was no investment realization from Brazil in West Java region.

However, he is optimistic that the promotion effort will be able to increase the trade balance between Indonesia and Brazil.

“Several businessmen from Brazil need manufacturer products from West Java since the domestic sector is far stronger than the sector in Brazil,” he added. 


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