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India Symbolically Bans Trade In Soybean Oil, Rubber, Kabuli Chana and Potato Futures
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07:42 am
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India Bans Rubber, Soybean Oil Futures to Cool Prices (Update4)
By Thomas Kutty Abraham
More Photos/Details
May 8 (Bloomberg) -- India, the world's second-largest buyer of vegetable oils, banned futures trading in soybean oil, rubber, chickpeas and potatoes as the government seeks to rein in the fastest inflation since 2005.
The Forward Markets Commission halted trading for at least four months from today, Anupam Mishra, a director at the market regulator, said last night in a phone interview. Trades will be settled at yesterday's closing price.
Communist allies of Prime Minister Manmohan Singh want to ban futures in cooking oil, sugar and other commodities to tame inflation that reached 7.57 percent last month. While a study found no evidence that halting rice and wheat futures last year curbed prices, the government needs to keep food affordable for the half the 1.1 billion people who live on less than $2 a day.
``Halting futures trading will probably have little impact on Indian inflation,'' Anne Frick, a senior oilseed analyst for Prudential Financial in New York, said in an e-mail. ``World soy- oil prices are up due to fundamental factors, not speculation.''
More than a dozen nations including China, India and Vietnam have taken steps to curb food costs, including halting exports of rice. French Agriculture Minister Michel Barnier urged limits to speculation after prices that rose 57 percent in the year ended March sparked unrest in Indonesia, Haiti, Egypt and Ivory Coast.
``We must look at what is happening to prices and who is speculating,'' Barnier said in an interview with Bloomberg Television yesterday. ``We must look carefully at futures markets and take measures to limit this speculation.''
`Any Impact'
The four commodities banned by India have a daily traded value of about 12 billion rupees ($288 million) on the Multi Commodity Exchange of India Ltd. and the National Commodities & Derivatives Exchange Ltd., according to the regulator. Trading of all commodities on India's 23 exchanges totaled $922 billion in the year to March.
Finance Minister Palaniappan Chidambaram said on May 4 the government may halt some contracts because of political pressure to see ``if it has any impact at all on inflation.''
The government-appointed panel chaired by economist Abhijit Sen last month didn't recommend extending the ban to other food commodities, saying there was no conclusive evidence to suggest futures trading contributed to price increases.
Futures Surged
Chickpeas futures surged 89 percent in the past 12 months on the National Commodities exchange, while rubber rose 41 percent and soybean oil advanced 21 percent in the period.
``Prices may start to rise again if supply-side constraints are not eased,'' Si Kannan, associate vice president at Kotak Commodity Services in Mumbai, said by telephone. ``The ban is a short-term measure.''
The government halted futures trading in wheat and rice last year and lentils in 2006 to check a surge in local prices. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
India's imports of palm oil and soybean oil may be as high as 570,000 tons in May and June and may increase to as much as 700,000 tons a month starting in July, Dorab Mistry, a director at Godrej International Ltd., said last month.
The South Asian nation relies on imports to meet half its edible-oil needs, buying palm oil from Indonesia and Malaysia and soybean oil from Argentina and Brazil. |
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Hezbullah Says Lebanese State "Declares War" In Banning Its Telecom Net, Sacking Airport Chief
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10:11 am
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BEIRUT (Reuters) - Hezbollah said on Thursday the Lebanese government had declared war against the group by targeting its communications network and vowed to "cut off the hand" that tries to dismantle it.
"This decision is first of all a declaration of war and the launching of war by the government... against the resistance and its weapons for the benefit of America and Israel," Nasrallah told a news conference. He was commenting on a government decision to dismantle and take legal action over the group's network. |
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AIG Loses $7.81bn In Q1, To Raise $12.5bn In Capital
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05:44 pm
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AIG Will Raise $12.5 Billion After Quarterly Loss (Update3)
By Hugh Son
May 8 (Bloomberg) -- American International Group Inc., the world's largest insurer by assets, said it will raise $12.5 billion after posting its second straight quarterly loss, sending the shares down 7 percent.
AIG had a record first-quarter net loss of $7.81 billion, or $3.09 a share, compared with earnings of $4.13 billion, or $1.58, a year earlier, the New York-based company said today in a statement. The insurer wrote down the value of contracts to protect fixed-income investors by $9.11 billion.
Chief Executive Officer Martin Sullivan's job may be on the line unless he stems losses from the subprime mortgage collapse and reverses a 12-month stock decline of 38 percent. Financial products head Joseph Cassano stepped down after AIG reported a then-record $5.29 billion loss in the fourth quarter.
``There aren't a lot of positives to take away from this,'' said David Havens, a credit analyst at UBS AG in Stamford, Connecticut, in a note to investors. ``Management capability issues, which have been smoldering for a while, are likely to flare up. One of AIG's constant weaknesses has been its complexity. It's come back to bite them.''
Excluding capital losses and the change in the value of some derivatives, the first-quarter loss was $1.41 a share, missing the average 34-cent loss estimate of 17 analysts surveyed by Bloomberg.
Stock Decline
The insurer dropped $3.08 to $41.07 at 4:57 p.m. in New York in extended trading.
The company has already started raising capital, offering $7.5 billion in debt and contracts that obligate holders to buy shares. AIG will issue another $5 billion in fixed-income securities later, spokesman Chris Winans said.
The financial products business, co-founded by Cassano in 1987, guaranteed more than $500 billion of assets for fixed- income investors at the end of 2007, including $61.4 billion in securities tied to subprime mortgages.
``The severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations,'' Sullivan said in the statement.
Standard and Poor's lowered AIG's credit rating to AA- from AA, saying the level of the losses exceeds expectations.
``In addition, weaker operating performance in several units and unrealized investment losses somewhat reduce the ability of subsidiaries to provide dividends to AIG,'' the ratings firm said in a statement.
AIG hasn't had two consecutive quarterly losses since its initial public offering in 1969.
Writedowns, Credit Losses
The world's largest financial institutions reported at least $318 billion in asset writedowns and credit losses tied to the worst U.S. housing slump in more than a quarter century.
Sullivan, 53, told shareholders in February that most of the financial products division's unrealized losses will eventually reverse, and realized losses won't hurt the company's overall health.
He's been trying to persuade regulators to relax accounting rules tied to the writedown. So-called mark-to-market rules require companies to estimate a value on holdings that haven't traded, with the change recorded as an unrealized gain or loss even though the asset wasn't sold.
The 24-company KBW Insurance Index has dropped about 9.6 percent this year as most insurers in the group reported first- quarter profit declines or losses. Rates charged by commercial insurers fell 14 percent in the first quarter from a year earlier as insurers competed for revenue, according to a survey by the Council of Insurance Agents & Brokers in Washington.
Mortgage Insurance
AIG's mortgage insurer, United Guaranty Corp., had a $352 million operating loss, compared with profit of $7 million a year earlier. The unit, which reimburses lenders when borrowers don't pay their loans, may post operating losses through this year, Sullivan told analysts in a February conference.
U.S. homeowners with private mortgage insurance defaulted on 37 percent more loans in March than a year earlier, according to the Washington-based Mortgage Insurance Companies of America.
Profit at AIG's U.S. commercial insurance unit fell 48 percent to $958 million on workers' compensation costs and expenses from tornadoes.
U.S. catastrophe losses for insurers more than doubled to $3.35 billion in the three months ended March 31 as storms pushed claims costs to their highest first-quarter levels in 14 years. Tornadoes that struck from Texas to Ohio in February cost insurers $955 million, according to Insurance Services Office Inc., a Jersey City, New Jersey-based firm. Winter storms on the U.S. West Coast caused $745 million in insured property losses. |
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