Archive | April 20, 2013

Japan Gets G-20 Approval

The Group of 20 financial minsters (G-20) from the world’s top 20 economies have recently come together and stated that they support Japan’s new monetary policies, but that Japan should go about these policies carefully. Japan has stated that their new policies are aimed at improving their economy as opposed to solely changing the value of their currency. Some countries have stated that if not performed with caution drastic changes in monetary policy can lead to a decrease in growth. Since Japan seems to be doing well the G-20 is encouraging some countries in the euro zone to take action to bring their economy back up as well.

If the G-20 is showing support for Japan’s new monetary policies, more countries may be inclined to do the same. Japan’s currency has been weakening against the dollar, and if the same applies for other countries, then those countries will see a large increase in exports, while America would see a large decrease. These new policies would be a large benefit to the GDP of foreign countries but have a large negative affect of the GDP of America.

Written by: Jessica Ho
Source: The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323309604578432612581451432.html?mod=WSJ_economy_LeftTopHighlights

Too Much Of A Good Thing

For emerging markets there is a steady flow of cash, but soon that could turn into a flood. The Bank of Japan’s huge stimulus program could cause the nation’s investors to pursue high returns, but for some developing countries, that may prove to be too much of a good thing. Rationale behind this is that a big increase in foreign money would “overheat” those markets and push currencies even higher. As a result, a country’s exports become more expensive, while importing cheaper goods which could hurt domestic producers.

Investors around the world were already loading up on bonds from places such as Mexico and Russia even before the Bank of Japan announced its $1.4 trillion stimulus plan to end stagnation. So far, there has been a 15 percent drop in the value of the yen and a 28 percent increase in Japanese stocks which has caused some investors to back home cash, but analysts are saying Japan will continue to seek foreign assets because of the low yields of Japanese deposits and bonds. “A lot of money is still likely to leave Japan,” said Citigroup currency strategist Steven Englander. “Some of it has to go into emerging markets.” In addition, strategists at Bank of America recently told their clients that “Emerging markets, with their strong growth rates and high interest rates, “may attract a significant portion of these savings,”.

 

Written by Kevin Zhang

Source:

http://www.reuters.com/article/2013/04/19/us-global-investment-japan-idUSBRE93I16T20130419

Fund’s Debut in Thailand Raises Hopes for Other Share Sales

Southeast Asia’s stock markets have been doing well in the past months.  Various companies in Thailand have had their initial public offerings this year. Companies like BTS Rail Mass Transit Growth Infrastructure (BTS) had stock prices that rose 13% when the stock market closed on Friday. Its I.P.O. is the largest in Southeast Asia this year. The performance of the stock market reflects the country’s economy. Thailand has been investing more money in infrastructures that will benefit their citizens directly. These infrastructure companies also depend on their I.P.O. to fund their projects. Other companies that plan to go public are airlines, power producers, industrial developers, and banks.

Analysts have calculated that Thailand’s stock market has risen 9.9% thus far since January. Because of the economy’s performance, private investment companies are reaching out to these companies and planning to invest in them. Banks such as Citigroup and Goldman Sachs also plan to hire more people because of the increase in jobs available in their fast-growing economy.

Written By: Melody Mark

Source:

Reuters. “Fund’s Debut in Thailand Raises Hopes for Other Share Sales.” The New York Times. The International Herald Tribune, 20 Apr. 2013. Web. 20 Apr. 2013.

Corporate News: Peltz Builds Big Stake In PepsiCo, Mondelez

Pepsi Co. has dropped in first quarter earnings due to restructuring efforts and potential structural changes for its North American drinks business. Pepsi’s drinks business has been outperformed by its snacks business which includes brands like Lay’s potato chips and Quaker oatmeal. This could mean that Nelson Peltz’s Trian Fund Management LP could be pushing PepsiCo Inc. to split its snack and drink businesses or to merge with Mondelez. Trian’s holds roughly $1.4 billion in stakes in both PepsiCo Inc. and Mondelez International Inc. combined.

Since PepsiCo’s drinks business has lost market shares during the first quarter to Coca-Cola Co. I believe Train and other investors will push PepsiCo into splitting it’s drink and snack businesses. PepsiCo’s chief financial officer named Hugh Johnston said the company is looking ” at all available options to create shareholder value.”

This affects us directly as many of us purchase these name brand products on a daily basis. This large scale merger or acquisition could potentially alter prices.

URL: http://online.wsj.com/article/APc9114e28a2354208b675b48922e0a9fc.html?KEYWORDS=Peltz+builds+big+stake+in+pepsico

-Jonathan Chan

Less High School Graduates Going To College

When the recession hit a couple of years ago, many high school graduated turned to college instead of taking their chances in the real world; this trend seems to be changing. The college enrollment rate of high school graduates in the U.S. dropped to 66.2% in 2012 in contrast to the 70.1% during the recession. An article in the Wall Street Journal reported that this may suggest high school graduates are becoming more confident in finding work in the job market although I cannot see how this would be the case. The unemployment rate is still currently high at 7.6% and only 88,000 jobs were added last month.

The unemployment rate for people without a high school diploma (ages 16-24) is 28.8% for men; it was 19.7% a year earlier. This statistic is worsened when you factor in the dropouts of the people in that age group from the workforce.

Evan Chang

Source:

The Wall Street Journal

http://blogs.wsj.com/economics/2013/04/17/smaller-share-of-high-school-grads-going-to-college/

Part-Time Work Becomes Full-Time Wait for Better Job

Although our economy has generated thirty straight months of job growth, many of these jobs just consist of part time jobs rather than those who are mostly looking for a full time position. About fourteen percent accounts for the involuntary part timers and people who want to work but have stopped looking, because they are accepting part-time pay because they have no other choice. The only markets that are particularly hiring are low-wage service jobs that include retail, home health care, and food preparation, which can explain why household incomes have fell in the latest report. Since the recession, three percent of workers have increased to working fewer than thirty-five hours, from about sixteen percent to nineteen percent.  Many employers are competing with one another to receive more hours, but managers cannot afford to be paying everyone the hours that they actually want.

This overall trend of an increasing number of part-time employees rather than full-time can have negative effects on our economy. Due to a lower income, this may force decrease the overall consumer spending. With a lower spending, companies will not make as much sales that could also potentially lead to a decrease in hiring a certain number of workers.

Written by : Samantha Chin

Source: The New York Times

http://www.nytimes.com/2013/04/20/business/part-time-work-becomes-full-time-wait-for-better-job.html?pagewanted=2&_r=0&ref=economy

Gold Wipes $560 Billion From Central Banks as Equities Rally

There is a major shift occurring in the way that gold is perceived as an investment, and it is causing the price of the metal to plummet. After reaching a record high in September 2011, it has now reached a two year low. Money is moving from the standard safe-haven metal to equity markets, indicating further confidence in the overall economy and possibly reinforcing the belief that the price of gold is a bubble on the verge of collapse.

I think the price of gold is something very important to watch given the aggressive macroeconomic policies of many countries. It is expected that the value of currencies would drop, and there are even talks of currency wars, but the price of gold continues to drop in spite of that. I think that means either investors are not concerned with the inflation risks anymore or that the bull market created by economic stimulus is just too attractive to have money sitting on an investment primarily used just to hedge against inflation. However, there is also the underlying factor of fear that the gold bubble could collapse at any moment, and I wonder what the effect of a dramatic drop in gold could have on the banks’ measurements of assets given that so much of it is in gold at the moment. Overall though, I understand the shift at it’s most basic level, in that the movement of funds to equities is a positive indicator of growth, especially considering that gold contributes little to creating any growth at all.

Source:

http://www.bloomberg.com/news/2013-04-17/gold-wipes-out-560-billion-from-central-banks-as-equities-rally.html

Corporate News: DreamWorks Learns to Break China’s ‘Code’

As more and more movie theaters are built in China, American film studios are trying to take advantage of increased popularity of American films in the untapped Chinese market.  Dreamworks specifically, which produced Kung Fu Panda, has begun to direct its marketing capabilities to China, led by Chief Executive Officer Jeffrey Katzenberg.  Despite the tension between Hollywood and China, a product of several controversial movies made about Tibet, China is expected to surpass the U.S. box office by the end of the decade.  Meanwhile, Katzenberg revealed his plans for Tibet Code, a film project based on a series of Chinese novels set in 9th-century Tibet.

This trend in China has deep implications about the economic interdependence the country has with the U.S.  With China accounting for a large portion of U.S. imports, the growing popularity of American films in China serves as a way for money to go from China and into America for a change.

Written by: Constantine Kostikas

Source: The Wall Street Journal

Beer Merger Advances

After a proposed arrangement submitted Friday, the federal court has approved Anheuser-Busch Inbev to purchase the 50% of Grupo Modelo that it doesn’t already own. Anheuser-Busch the brewer of two of the top selling beers in the United States, Bud Light and Budweiser would close their deal in June. The merger is expected to be worth $20.1 billion. This is an important acquisition for Anheuser-Busch InBev as Mexico sales of beer expands much quicker than the United States. Being one of the largest beer brewers already, Anheuser-Busch will now own Corona as well making their market share even larger than it already was. 

Anheuser-Busch InBev already has 12 breweries in the United States and with the purchase of one of Mexico’s largest beer brewers, it might be a good sign that the United States could soon produce more beers. Without having to rely on foreign produced beers, breweries in the United States could open more breweries and eventually producing more jobs. This merger could ultimately be very beneficial to Anheuser-Busch’s sales. 

-Derby Ng

http://online.wsj.com/article/SB10001424127887324763404578432702248392218.html?mod=WSJ_business_whatsNews

McDonald’s Profit Little Changed as U.S. Sales Slide

McDonalds, the world’s largest fast food restaurant fell 2%, the biggest drop since November 8, 2012. As McDonald’s competitors are rapidly growing, McDonalds need to keep up. An analyst says that the company needs more new products as their competitors are introducing many new products that are closing the gap between competitions. Burger King recently introduced their new turkey and veggie burgers while Wendy’s introduced their all new flat-bread grilled-chicken sandwiches. In the past Chief Executive Officer of McDonalds, Don Thompson have tried to gain more customers with their appealing dollar menu but the company’s sales still seem to be falling. Their new strategy to stay competitive with their competitors is to roll out more new products such as the new Fish McBites, new premium snack wraps and a new breakfast sandwich with low calories.

It is important for McDonalds to introduce new products if they want to stay competitive with their competitors because consumers like variety. Introducing new products is not hard, but introducing new products that distinguish your company from the competitors is. That is why the Big Mac is associated with McDonalds while the Whopper is associated with Burger King. Although the sales of McDonald’s are sliding, it could be a positive sign for the economy. People are doing better so they would eat less fast food.

Written by: Wilson Tang

Source:

http://www.bloomberg.com/news/2013-04-19/mcdonald-s-profit-little-changed-as-u-s-sales-slide.html