Global
Business |Update|
(A weekly update on Global Business )
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
Issue 6
Global business update
24th March 06-30th March 06
Contents:
Global
Economy:
1 China's growth 'to slow
slightly'
2 Mortgage approvals rising again
3 Energy hikes 'threaten inflation'
4.Bush official warns China about protectionism :Commerce secretary says Beijing
must open it markets to imports
5.India, Brazil, SA to boost trade
6.China's foreign reserves hit $854 billion:Holdings in dollars, other
currencies may now top Japan's
7.EU and US in WTO challenge to China
8.Silver price reaches 22-year peak
9.Current account gap hits record
Global
Corporate:
11.Four US firms top global big
list :An all-American top four still leads the latest annual Forbes Global 2000
list of the world's biggest companies.
12.Nokia says industry will grow 15%
13.Google share sale to raise $2bn
14. Microsoft to fight Korean verdict
15 Enron prosecutors rest their case
16. Hyundai chief faces fraud probe
Global
Finance
17 Fed ups US interest rate to 4.75%
18. New tax power idea for councils
19.Nasdaq withdraws bid for LSE
20.Nikkei index hits five-year high
Global
Outsourcing
21.Deutsche Bank sees value in
offshoring back-office jobs
22.IBM wins new procurement outsourcing deal
23.UK Offers IT Expertise To India
24.Dell Bells - The INDIAN Tells
25.Citigroup ready to exit Progeon :3% stake in Infosys' BPO subsidiary may
fetch $140 mn
26.Domestic IT market to top Rs 6,600 cr: study
Global
Economy:
1
China's growth 'to slow slightly'
China's red-hot economic growth will slow gradually this year,
according to the Chinese central bank. The People's Bank of China predicts that
the nation's economy will expand by 9.2% in the first quarter of 2006, falling
to 8.7% in the fourth. Yet despite the expected dip, it remains breakneck
economic growth, which - to put it in context - dwarfs the UK's 1.8% expansion
across 2005. China's economic boom is being led by a surge in exports. At the
same time, Beijing is putting more efforts into increasing domestic consumer
demand. A growing middle class has developed in the main eastern cities, but the
challenge for the Chinese government is to expand this new wealth across more of
the vast country. The central bank said consumers would pay around 2% more for
goods and services in 2006 than they did last year, when prices rose 1.8%.
"In general, our country's GDP growth will gradually trend lower in future
but will still maintain a high level," the central bank said.
www.bbc.com 25th march 2006.
2
Mortgage approvals rising again
The number of new mortgages being approved for home buying has gone up again,
reflecting a continued pick-up in the property market. According to figures from
the British Bankers Association (BBA), nearly 58,000 new mortgages were approved
for house purchase in February. That was 28% higher than in January and 22%
higher than a year ago. Recently, lenders like the Halifax and the Nationwide
have said that house prices are rising again. David Dooks, director of
statistics at the BBA, said: "The comparative weakness of the mortgage
market in the first half of last year means that current indicators of activity
- such as gross lending and approvals - are much stronger than they were twelve
months earlier when the housing market was somewhat subdued.
www.bbc.com 26th march 2006.
3
Energy hikes 'threaten inflation'
Bank of England governor Mervyn King has said continuing high UK energy prices
will force up inflation, and could pose a threat to the economy. He said recent
rises in UK prices would push short-term inflation, erode the buying power of
household incomes and slow the growth of consumer spending. Mr King told MPs
efforts to obtain gas supplies for the UK were being hit by a lack of
competition in mainland Europe. High energy costs are a main reason UK interest
rates have stayed at 4.5%. Mr King said the Bank of England's Monetary Policy
Committee (MPC) had kept interest rates steady because there were risks to its
inflation forecast on both sides. "A major risk to the outlook for growth
and inflation comes from energy prices," he said. "Past increases in
oil and gas prices may have eroded the supply capacity of the economy and
altered the balance between demand and supply."
www.bbc.com 28th March 2006
4.Bush
official warns China about protectionism :Commerce secretary says Beijing must
open it markets to imports
U.S. Commerce Secretary Carlos Gutierrez on Monday called on China to open its
markets to foreign goods and settle currency disputes, warning it could face
protectionist sentiment in the United States if its record trade surplus keeps
growing.Gutierrez visited this industrial center in China’s southwest en route
to Beijing for talks ahead of a possible Senate vote this week on proposed
sanctions to punish China for manipulating its currency.In a speech to
university students, Gutierrez said Washington wants to see China give foreign
competitors the same market access that its companies enjoy abroad, to adopt a
more flexible currency and to stop piracy of intellectual property.
www.msnbc.com 30th march 06
5.India,
Brazil, SA to boost trade
India, Brazil and South Africa have a agreed to continue efforts to improve
trade between the three nations. The announcement came at the end of a day of
talks between the three ahead of informal World Trade Organization (WTO) meeting
in Rio de Janeiro. The trio said the move would strengthen their bargaining
power during efforts to break down global trade barriers. The trilateral group
has been trying to lift trade between developing nations in the continents they
represent. "We are doing the right thing," Brazilian foreign minister
Celso Amorim said of the agreement. Last year, more than half of Brazil's total
trade - worth about $200bn (£115bn) - came from developing nations, he added.
BBC NEWS: 2006/03/30
6.China's
foreign reserves hit $854 billion:Holdings in dollars, other currencies may now
top Japan's
China’s foreign currency reserves reached $853.7 billion by the end of
February, likely topping Japan’s to become the world’s largest, a state-run
newspaper reported Tuesday, citing an unnamed source.Japan’s foreign currency
reserves — the amount of foreign currency a government holds in its accounts
— totaled $850 billion at the end of February, Tokyo announced earlier.Chinese
central bank officials refused comment on the latest figures, reported in the
newspaper China Business News, saying data on foreign exchange reserves are only
released quarterly. Those figures are due to be issued in mid-April.
www.msnbc.com 28th Mar 06
7.EU
and US in WTO challenge to China
The US and the European Union on Thursday joined forces for the first time to
challenge China before the World Trade Organisation, sweeping aside diplomatic
niceties weeks before a visit of the Chinese president to Washington. The
complaint, accusing China of maintaining illegal trade barriers against imported
car parts, is provocatively timed ahead of Hu Jintao's visit.Rob Portman, US
trade representative, indicated that diplomacy would not be allowed to stand in
the way of defending American industry. "The timing of these exercises
ought not to be dictated by political concerns," he said. "We do not
think this is something aggressive but appropriate...The issue has become
ripe."
www.msnbc.com 28th Mar 06
8.Silver
price reaches 22-year peak
The price of silver has hit a 22-year high, surpassing $11 (£6.3) an ounce amid
expectations that the metal will perform better than stocks and bonds. The
precious metal has risen 15% in the past month as the US is expected to permit a
new fund linked to the price of silver. Silver futures for May delivery were up
8.5 cents, or 0.8%, to $11.20 on New York's Mercantile Exchange. Silver has
risen 58% over the past year and gold hit a 25-year high last month. US
regulators are expected to approve the listing of the iShares Silver Trust, a
fund linked to the price of silver, which is backed by Barclay's Capital. The US
is not the only place where silver is gaining interest.
BBC NEWS: 2006/03/30
9.Current
account gap hits record
The UK's current account deficit soared to an all-time high of £31.9bn
($55.3bn) in 2005, reawakening concerns about the health of the economy. A
decline in trade in both goods and services was behind the gap, the Office for
National Statistics said. The gap is equal to 2.6% of GDP, much higher than the
£23.6bn reported in 2004 and is the worst since records began at the end of
World War II. Economists expected the pound to weaken over the coming years as a
result. Simon Wallace, of the Centre for Economics and Business Research (CEBR),
said the figures "demonstrate that the UK economy is not in a healthy
state".
BBC NEWS: 2006/03/29
Global
corporate:
10. Hyundai to
build Czech car plant
South Korean carmaker Hyundai has announced plans to build a huge plant in the
Czech Republic. The 1bn euros ($1.2bn; £700m) factory in the Moravia-Silesia
region will produce about 300,000 cars a year and employ 3,000 people. The Czech
government has given about 200m euros in tax breaks and other investment
incentives to draw Hyundai to the high unemployment region. A strong car
industry helped drive the Czech economy to 6% growth in 2005. The Hyundai deal
would be one of the biggest foreign direct investments in the Czech Republic's
history and economists say it could boost economic growth by up to 1.3% a
yearLast year the Czech economy received a similar boost from the launch of a
massive Toyota Peugeot Citroen car plant in Bohemia, which employs 3,000
workers. The Hyundai plant is due to begin production in October 2008, and the
government hopes it will create an extra 9,000 jobs indirectly.
27th March 06 www.bbc.com
11.Four
US firms top global big list :An all-American top four still leads the latest
annual Forbes Global 2000 list of the world's biggest companies.
Banking giant Citigroup topped the table for the third year in succession,
followed by industrial group General Electric in second place. In third place
was Bank of America, while in fourth was insurance firm American International
Group. UK bank HSBC was the highest ranking non-American firm, picking up fifth
place for the second year running. HSBC was followed by three oil firms, US
giant ExxonMobile, Anglo-Dutch firm Shell and UK business BP. Making up the top
10 were American bank JP Morgan Chase and Swiss lender UBS. The highest placed
carmaker was Japan's Toyota in 12th position.
BBC NEWS: 2006/03/31
12.Nokia
says industry will grow 15%
Nokia predicts that the global mobile phone market will grow 15% this year,
driven by increased sales in developing markets in Asia and Africa. The Finnish
giant had previously estimated that the overall world market would expand by 10%
in 2006. It predicts that Asian and African countries will account for 80% of
the industry's growth this year. Nokia, the world's largest phone-maker, did not
give any details of its own sales targets for 2006. Nokia currently has a global
market share of 34%, ahead of Motorola's 18%, Samsung's 11%, and LG and Sony
Ericsson which have 6.6% each.
BBC NEWS: 2006/03/30
13.Google
share sale to raise $2bn
Google has unveiled plans to raise up to $2bn (£1.15bn) through the sale of a
further 5.3 million shares. The California-based internet search firm outlined
its plans in a filing to the US Securities Commission. The news also coincided
with Google finalising the details of its $1bn strategic alliance with Time
Warner's AOL unit. Google unveiled its plans just two days before it is due to
join Standard & Poor's index of 500 leading US shares. Google said it
expected to sell shares mainly to index funds who will have to own a stake in
the firm when it joins the S&P 500. If sold at Wednesday's closing price of
$394.98, Google could raise as much as $2.1bn through its sale of extra shares.
BBC NEWS: 2006/03/30
14.
Microsoft to fight Korean verdict
Microsoft is appealing against a South Korean ruling that it must unbundle its
media player and messaging service from its Windows software system. South
Korea's anti-monopoly watchdog, the Korea Fair Trade Commission (KFTC), found
against the US giant in December. Microsoft was also fined 32.5bn won ($33m; £19m)
after the KFTC upheld a complaint by Korea's second largest internet firm Daum
Communications. The US firm insists its bundled systems do not harm Korean
competition. It says Korean customers can easily download rival systems.
www.bbc.com 24th march.2006
15
Enron prosecutors rest their case
US prosecutors dropped a number of charges against former Enron chief executives
Ken Lay and Jeffrey Skilling as they rested their case on Tuesday. Mr Skilling
now faces 28 cases of fraud, conspiracy and insider trading, while Mr Lay faces
six counts of conspiracy and fraud. The defence is due to start making its case
next Monday. Enron collapsed in December 2001 after disclosures that it
falsified accounts to hide debt and inflate profits. The prosecution dropped
three charges brought against Mr Skilling and one charge brought against Mr Lay
because they had not presented any evidence for them while presenting their
case. As they wound down, prosecutors disclosed that the two defendants were
paid a combined salary of nearly $375m between 1999 and 2001. Mr Lay and Mr
Skilling have pleaded not guilty to all charges, blaming Enron's collapse on
what they call rogue employees such as former chief executive officer Andrew
Fastow.
www.bbc.com 28th March 06
16.
Hyundai chief faces fraud probe
Prosecutors have arrested the chief executive of carmaker Hyundai Motor's
logistics subsidiary, Glovis, on corruption charges. Lee Ju-eun is suspected of
embezzling 7bn won ($6.73m; £3.85m) in company money for use in lobbying
politicians. Prosecutors say the investigation is linked to the arrest of
businessman Kim Jae-rok on illegal lobbying charges. Hyundai Motor is suspected
of paying Mr Kim for his influence with politicians and local government
officials. Prosecutors have also banned a number of top Hyundai Motor officials
from leaving the country. Hyundai Motor shares rose 2.5% on Tuesday after
falling 2.6% the day before. Glovis shares fell a further 1.9% on Tuesday after
slumping 15% on Monday. Hyundai was featured in a corruption investigation in
2003, when prosecutors examined allegations of illegal election campaign
financing.
www.bbc.com 28th March 06
Global
Finance
17
Fed ups US interest rate to 4.75%
The Federal Reserve has raised interest rates for the 15th month in a row, by a
quarter of a percentage point to 4.75%. The widely expected rise came at the end
of the first interest rate meeting held by new Fed chairman Ben Bernanke. Rates
have increased from 1% over the past 20 months and are now at their highest
level since April 2001. The Fed said economic growth had "rebounded
strongly", but left the door open for further rate increases as it tries to
contain the risk of inflation. Most market watchers now expect the Fed to raise
interest rates at least once more over the coming months, to 5%."I think
they're probably going to do one more at the next meeting for another quarter
percent because they think that inflationary figures are still running a little
higher than they would like," said Bob Moulton, president of American
Mortgage Group. "I think one more Fed increase and then we should be
done." The Fed's suggestion that further rate rises were on the cards sent
equity markets falling after the gains seen earlier in the day.
www.cnn.com 28th March 06.
18.
New tax power idea for councils
Town halls could get more power to raise cash for local services under proposals
being considered by the man looking at how to reform council tax. Sir Michael
Lyons is examining calls for councils to have to rely less on handouts from
Whitehall. The move would give councillors more freedom on how they spend money
on libraries, street cleaning, parks and other services. Sir Michael wants a
debate on the role of councils and what powers they have. On average, about a
quarter of the money currently spent by councils is raised locally, with most of
the rest coming from central government grants. But in an interview with the BBC
News website, Sir Michael says: "People have said that actually if you want
energetic local government then you should have a situation where 50% of their
funding is raised locally."
www.bbc.com 28th March 2006
19.Nasdaq
withdraws bid for LSE
The battle to take over the London Stock Exchange took yet another turn on
Thursday as Nasdaq withdrew its indicative £2.43bn offer to buy the
exchange.The technology-focused US stock market said that it "no longer
intends to make an offer for the LSE" following the rejection of its
initial 950p a share bid as too low. The battle to take over the London Stock
Exchange took yet another turn on Thursday as Nasdaq withdrew its indicative £2.43bn
offer to buy the exchange.The technology-focused US stock market said that it
"no longer intends to make an offer for the LSE" following the
rejection of its initial 950p a share bid as too low.
www.msnbc.com 30th mar 06
20.Nikkei
index hits five-year high
Japan's Nikkei share index closed above 17,000 on Thursday, its highest level
for more than five and a half years. The rise came amid increasing demand for
blue chip and technology stocks, and followed a rebound on Wall Street. The
Nikkei ended the day up 106.93 points at 17,045.34, its highest closing level
since 29 August 2000. The increase in the Nikkei came despite a
higher-than-expected fall in industrial production for February, which declined
by 1.7%. "
BBC NEWS: 2006/03/30
Global
Outsourcing
21.Deutsche
Bank sees value in offshoring back-office jobs
Deutsche Bank has already boosted revenues by about £1.3bn through its ongoing
two-year programme to offshore back-office jobs to India, according to press
reports.The Financial Times said that the move highlights the growing trend to
offshore high-value activities, instead of traditional areas such as call
centres and IT support.By the end of 2007, the investment bank will have moved
almost half of its sales and trading operation's back-office jobs – more than
2,000 – to India.JP Morgan Chase has also made recent moves to capitalise on
the availability of low-cost, highly-educated staff in India, launching a scheme
to transfer one in three back-office jobs by recruiting 4,500 graduates in the
next two years.
www.offshorexperts.com 27 March 2006
22.IBM
wins new procurement outsourcing deal
US electronics manufacturer Solectron has outsourced the management of its $1.2
billion annual indirect procurement services bill to IBM.The value of the
long-term deal has not been disclosed, but it will cover temporary contract
services, office equipment, utilities and telecommunication across 17
countries.IBM will install its own procure-to-pay system to manage the indirect
spend.
Perry Mulligan, chief procurement officer at Solectron, said in a statement:
"The savings we expect from this contract will contribute to both
operational and process innovation and simplification, which improves services
to our customers and suppliers."
www.offshorexperts.com 27 March 2006
23.UK
Offers IT Expertise To India
British government is looking for business alliances and investment
opportunities in India, especially in the eastern part of the country.
At the Confederation of Indian Industry, held in Kolkata last week, Kevin McCole,
Deputy British High Commissioner in Eastern India said that British IT companies
are lately eyeing Kolkata in a big way, along with other cities such as
Bangalore, Mumbai, Hyderabad and Chennai to establish development centers,
creating an entry to the South East Asian market.
In an exclusive with CXOtoday, McCole discussed his specific interest on
business and IT investment in the eastern part of the country.
www.offshorexperts.comMar 27, 2006
24.Dell
Bells - The INDIAN Tells
Michael Dell has had a wonderful tour of the Indian subcontinent, where he
addressed hundreds of CEO'S and IT professionals . In the heart of the Indian IT
boom town of Bangalore he talked to budding enterpreneurs and shared with them
the secrets of success. His words inspired them to persevere and believe in
their work.The Indian press has been bowled over by the founder of the Dell Inc.
who was in India to attend an Achievers' forum.Addressing a crowd of around 5000
young professionals in Bangalore, Dell emphasised on young minds believing in
themselves. He said, "it is important to continue doing in what you
believe, even if people criticize your business model".He was enamoured by
the energy of the Indian IT force and took a city tour. He was the most talked
about speaker at the forum.He also added that in the coming years one in every
six employee at Dell would probably call India home.The company intends to hire
more people in India where already it is strengthening its BPO operations
www.offshorexperts.comMar 27, 2006
25.Citigroup
ready to exit Progeon :3% stake in Infosys' BPO subsidiary may fetch $140 mn.
Citigroup is ready to exit Progeon, the business process
outsourcing arm of Infosys. Citigroup holds a 23 per cent stake in Progeon.
According to sources close to the development, Infosys and Citigroup have agreed
to a valuation of around $600 million for Progeon. This means that the deal can
fetch Citigroup about $140 million. Sources indicated that Progeon's valuation
would be around 6-8 times its topline, which is likely to touch $85 million in
the current financial year. The firm is likely to end the year with a net profit
margin of 20-22 per cent, improving on the previous year's net margin of 15 per
cent.
www.offshorexperts.comMar 27, 2006
26.Domestic
IT market to top Rs 6,600 cr: study
The domestic ITES-BPO market is expected to cross Rs 6600 crore in 2006, reveals
a study released on Wednesday by IDC India on behalf of Nasscom. In-house
spending on IT services (such as training costs, salaries and associated
overheads) still accounts for more than 50 per cent of corporate IT spending in
India, it adds. The outsourced/vendor addressed expenditure account for just 45
per cent of the total, according to “Study on the Domestic Services (IT-ITES)
Market Opportunity.” Major IT vendors have been showing a lot of interest in
the Indian market, fuelled by a few high profile deals (SBI-TCS, Bharti-IBM,
Bank of Baroda-HP, Dabur-Accenture). Against this backdrop, Nasscom called on
IDC India to conduct a research on this matter.
The IDC study finds that though IT services form 27 per cent of the total
domestic IT spending, its share is significantly higher in segments like BFSI,
Telecom, Automotive and Manufacturing. In terms of the split by industry
verticals, BFSI, Manufacturing and Telecom accounted for 77 per cent of the
overall IT spending in 2004. The top three concerns are: Price (15.7 per cent),
quality of service (9 per cent) and lack of people with suitable skill sets (9
per cent).
www.offshorexperts.comMar 27, 2006
(Faculty Member)
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968
www.SkylineCollege.com