Business digest
China’s forex reserves fall BEIJING: China’s forex reserves, the biggest in the world, fell to $3.18 trillion in the last quarter of 2011, the central bank said on Friday, the first quarterly fall since 1998 during the Asian financial crisis. The huge foreign exchange reserves, which reflect the nation’s imbalance of international payments, reached a peak of $3.274 trillion in October before beginning a slight decline, the bank said. At the end of September, China’s foreign reserves stood at $3.202 trillion. “This is the first time for China’s forex reserves to drop on quarter since 1998,” Nomura economist Zhiwei Zhang told Dow Jones Newswires. “This is a very big thing.” The previous drop came during the Asian financial crisis, when economies around the Asian region were battered by waves of capital flight. China’s forex reserves have ballooned in recent years, fuelled by strong foreign investment, large trade surpluses and inflows of “hot money” — short-term speculative funds in search of quick profits. The stockpile has been rising as Beijing buys foreign currencies used to pay for the country’s exports in order to control the value of the yuan. The fall in the reserves reflects capital outflows in the quarter due to expectations of a yuan depreciation and increased investor interest in holding dollars, HSBC economist Ma Xiaoping told Dow Jones. The fundamentals of China’s economy offer support for a future rise in the value of the yuan and “the quarterly fall should be temporary,” she said.
Delta eyes American Airlines bid
NEW YORK: Delta Air Lines is eyeing a bid for bankrupt rival American Airlines, a source close to the matter said on Thursday, despite doubts that the proposed mega-carrier would win regulatory approval.
Atlanta-based Delta, the world’s second largest airline after recently merged United-Continental, has enlisted investment firm Blackstone to craft a potential bid, the source said.
American Airlines declared bankruptcy in November, as it struggled to slash its debt burden and costs.
Bankruptcy, a common tactic in the airline trade, was invoked to offer more legal room for maneuver to renegotiate or cancel service and wage contracts.
But some observers were doubtful that any link between Delta and American would pass muster with US aviation watchdogs.
“We are skeptical on both the merits of any potential acquisition by Delta, which we do not think needs to get larger, or by the ability of such a deal to pass regulatory scrutiny,” said Jim Corridore, an airline analyst with SP Capital IQ.
The Wall Street Journal reported that private-equity firm TPG Capital was also considering a bid for American.
Euro pushed
higher on bond sales
NEW YORK: The euro reversed course and pushed upward against the dollar boosted by assurances from the European Central Bank and confidence arising from successful Italian and Spanish bond auctions.
At 2200 GMT, the euro was trading at $1.2816 against $1.2707 the same time a day ago. The ECB kept its base interest rates unchanged Thursday despite the weakness in the regional economy.
But the bank helped buoy euro sentiment when it said a decision last month to provide liquidity to Eurozone banks was helping to stabilize the region’s economy. “We have seen several… positive developments. The more time that passes since we had the first three-year long-term refinancing operation, the more we see signs that it has been an effective policy measure,” bank chief Mario Draghi said.
A number of the debt-wracked Eurozone countries were making “very substantial, very significant” efforts to deal with their deep fiscal problems, Draghi also said. “I think that to some extent, the markets are showing some appreciation for this,” he said.
The dollar was slightly lower against the Japanese currency at 76.76 yen from 76.85 yen on Wednesday. The dollar fell to 0.9441 Swiss francs from 0.9540 late Tuesday, while the British pound rose to $1.5334, down from $1.5328.
South Korea freezes key rate
SEOUL: South Korea’s central bank on Friday froze its key interest rate for the seventh straight month, amid concern in the export-dependent nation at Europe’s debt crisis and a global economic slowdown.
The rate has stayed unchanged at 3.25 percent since a 25-basis-point rise in June last year, despite persistent price pressures. Inflation remained above the central bank’s target range of 2-4 percent for a second straight month in December, at 4.2 percent. In his New Year address, President Lee Myung-Bak stressed that curbing price rises was a priority.
The Bank of Korea (BOK) said it expects a “very moderate” pace of global economic recovery. Risks to growth were becoming larger, due mainly to Europe’s sovereign debt crisis and a possible downturn in major economies. It said in a statement that South Korea’s growth would return only gradually to its long-term trend level, with external risk factors still weighing on the economy.
The bank said it expects the pace of decline in inflation to be moderate given continuing high expectations. Upside risks to inflation had increased due to heightened geopolitical risks in the Middle East, it added in an apparent reference to tensions over Iran’s suspected nuclear weapons programme.
Bank governor Kim Choong-Soo said he does not expect the economy to contract but forecast growth in the fourth quarter of 2011 would be lower than the forecast 1 percent quarter-on-quarter rise and a 4 percent year-on-year gain.
Airbus sells 44 planes to Mexican airline
MEXICO CITY: Airbus has sold 44 A320 passenger planes to a low-cost Mexican carrier in a new inroad into Latin America for the European firm, a French minister told AFP.
The order includes 30 A320neos and 14 A320s, Minister of State for Foreign Trade Pierre Lellouche said late Thursday as he arrived in Mexico on an official visit. “I am delighted with this success,” he told AFP. “This is the first major sale of European aircraft to Mexico. This opens up a new vista for the French and European aviation industry.”
The planes are being purchased by Volaris, a budget carrier that competes with Mexico’s national airline Aeromexico on internal flights. Lellouche declined to say how much the sale was worth, but aviation sources said it could amount to some four billion euros ($5 billion).
He said Airbus hoped to build on its success and compete when Aeromexico renews its fleet, currently equipped entirely by the US Boeing. “The arrival of the new A320s is great news not only for Volaris and the environment… (but) also for all of our customers,” Volaris CEO Enrique Beltranena said in a statement.
“The new airplanes will let us strengthen our low price strategy to benefit a larger number of Mexicans, while their fuel efficiency and reliability will allow our fleet, the youngest in the country, to be even more friendly to the Mexican skies.” Volaris currently operates 34 Airbus aircraft and has a backlog of 58, including the new order.
Gold edges lower
SINGAPORE: Gold drifted lower on Friday as fears about the health of the global economy abated after successful debt sales by Spain and Italy encouraged investors to put their money in riskier assets. Spot gold fell as much as nearly 1 percent to an intra-day low of $1,634.34 an ounce, before paring some losses after the euro resumed a rally and the dollar weakened against a basket of currencies. Despite the losses, bullion was still headed for a second straight week of gains on safe-haven buying as investors fretted about the Eurozone debt crisis and tensions between Iran and the West.
PQ handles 108,116 tons of cargo
By our correspondent
KARACHI: The Port Qasim (PQ) handled 108, 116 tons of cargo, comprising 64,335 tons of imports and 43,761 tons of exports, inclusive of containerised cargo carried in 3,781 containers, during the last 24 hours, a statement said on Friday. Berth occupancy was 62 percent at the port on Thursday, where eight ships were docked to load and unload containers, cement, palm oil, chemicals, and coal, it said.
PHMA urges govt for steps to strengthen rupee
By our correspondent
LAHORE: Pakistan Hardware Merchants Association (PHMA) has urged the government to initiate immediate steps to strength the rupee against the dollar as six percent decline in the last two months has jacked up the prices of imported industrial raw materials to new highs, a statement said on Friday. PHMA Central Chairman Sardar Usman Ghani, Central Vice Chairman Tariq Rashid and Zonal Chairman Sheikh Ahmad Dawood said that the country was already facing multiple internal and external challenges and the rupee devaluation is further aggravating the economic situation, it said.
