Japan Has Y822.2 Billion Trade Deficit In June

Japan posted a merchandise trade deficit of 822.2 billion yen in June, the Ministry of Finance said on Thursday – remaining in the red for a record 24th straight month.

That missed forecasts for a shortfall of 642.9 billion yen following the 910.8 billion yen deficit in May.

Exports were down 2.0 percent on year, missing forecasts for an increase of 1.0 percent following the 2.7 percent decline in the previous month.

Exports to all of Asia were down 3.8 percent on year, while exports to China added an annual 1.5 percent.

Exports to the United States shed 2.2 percent on year.

Imports jumped 8.4 percent on year, in line with forecasts following the revised 3.5 percent contraction a month earlier (originally -3.6 percent).

The adjusted merchandise trade balance was a deficit of 1,080 8 billion yen, which beat forecasts for a shortfall of 1,119.9 billion yen following the 862.2 billion yen deficit in May.

Gujarat Model may Help India Jump Ahead 50 Spots in Ease of Doing Business

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India, presently ranked at 134th place in the ease of doing business report of the World Bank, would be jumping ahead by 50 spots through the implementation of the Gujarat model of reforms, said Jim Yong Kim, the president of the World Bank group.

Kim, who had been addressing reporters after his meeting with Prime Minister Narendra Modi in the nation capital, has said that the Indian government should focus on improvement of business environment.

He also said that what Modi did as the Chief Minister of Gujarat, if implemented on a national level, would work to significantly improve ease of doing business.

According to the ease of doing business report that had been released by the World Bank recently, India had been placed a 134th out of 189 countries.

Addressing the matter of criticism of the report, Kim said that the report is not perfect, but that it provides a very important guide to businesses and policy makers across the world.

Several nations, including India, had expressed concern over the methodology of the report.

In a written reply to the Lok Sabha recently, Finance Minister Arun Jaitley had said that the report ranked nations according to regulations that are in place for only small and medium enterprises, but which, owing to the name, was often mistaken to refer to the business environment in general.

Mr, Jaitley had gone on to say that concern had been indicated by the government regarding the indicators that had been used, the methodology, use of ranking, sample size, neglect of qualitative as well as country specific business environment etc. to the World Bank.

Kim has said that the concerns of the government are genuine, and that the World Bank is attempting to improve the report in order to make it more relevant.

World Bank Group commits USD 18 bn loan to India in 3 years

The World Bank Group today committed USD 15-18 billion loan to India over the next three years as it supports the country’s potential 9 per cent growth rate. “We did not discuss specific funding issues. Over the next three years on the public side of operations we can provide India with USD 15-18 billion and on the private side (IFC) of things a minimum of USD 3.5 billion,” World Bank Group President Jim Yong Kim said. International Finance Corporation (IFC), a member of the World Bank Group, finances and provides advice for private sector ventures and projects in developing countries. India is the largest client for the World Bank Group. India received USD 5.2 billion loan last fiscal. In the past three years, India had received about USD 9.8 billion loan from the Workd Bank Group. “From my discussions with Prime Minister (Narendra) Modi and (Finance) Minister Arun Jaitley, it is clear that they are committed to increasing India’s economic growth. I assured them that the World Bank Group will bring to bear all possible knowledge and financing to help them in this task,” he said. “The new government would like India to return to growth rate of 9 per cent and the World Bank fully supports this growth. It is vital that the country achieves this growth to reduce poverty more quickly and share prosperity among it people,” he added. Kim, who is on a three-day visit to India to learn more about the new governments development priorities, said: “In my meeting with the Prime Minister and the Finance Minister we discussed how to unlock India’s growth potential and how to manage the vast demography of the country.   It will be critical to build more quality infrastructure, expand financial access, improve investment climate and invest on its people, he said. He emphasised that the government is committed to introducing key reforms, which are critical to India achieving its full economic potential.

FII investment via P-Notes rises to 6-yr high

Investments into Indian shares through participatory notes (P-Notes), a preferred route for overseas HNIs and hedge funds, surged to the highest level in more than six years at Rs 2.24 lakh crore (about $37 billion) in June.

According to the data released by the Securities and Exchange Board of India (Sebi), the total value of P-Note investments in Indian markets (equity, debt and derivatives) rose to Rs 2,24,248 crore (Rs 2,242.48 billion) at the end of June from Rs 2,11,740 crore (Rs 2,117.40 billion) in the preceding month.

This is the highest since May 2008, when the cumulative value of such investments stood at Rs 2,34,933 crore (Rs 2,349.33 billion).

P-Notes are mostly used by overseas HNIs (High Networth Individuals), hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign Institutional Investors (FIIs), while saving on time and costs associated with direct registration.

According to market analysts, investment into the equity market via P-Notes had been rising in the past few months mainly on hopes of a stable government.

It shot up in May post the general election results, primarily on the new government’s promise to revive economic growth and the momentum continued in June.

P-Note investments in Indian markets have climbed from Rs 1.63 lakh crore in January to Rs 2.24 lakh crore in June.

Besides, the value of P-Notes issued with derivatives as underlying, stood at Rs 1.6 lakh crore as on June 30, 2014.

The quantum of FII investments through P-Notes grew to 12 per cent in June from 11.7 per cent in the previous month.

Till a few years ago, P-Notes used to account for more than 50 per cent of the total FII investments, but their share has fallen after Sebi tightened the disclosure norms and other regulations for such investments.

P-Notes have been accounting for mostly 15-20 per cent of the total FII holdings in India since 2009, while it used to be much higher – in the range of 25-40 per cent – in 2008. It was as high as over 50 per cent at the peak of Indian stock market bull run during a few months in 2007.

FIIs, the key drivers of Indian markets, pumped in nearly Rs 31,000 crore (Rs 310 billion) in the Indian stock market in June.

Now, car insurance renewal every five years?

Renewing car insurance policy is one big task which everyone faces annually. Various insurance companies give pesky calls and we all have to haggle with them in order to get the best deal for our cars.

Soon we may get a solution for this problem, according to an English daily, the Insurance Regulatory and Development Authority (IRDA) is considering a proposal to allow insurers to offer policies with a one-time, five-year cover and is expected to issue fresh guidelines on such long-term products. 

These policies could also be cheaper as compared with the earlier policies. IRDA also aims to use this long-term policy cover to promote insurance, especially in rural areas. 

Meanwhile, domestic passenger car sales increased 14.76 percent to 1,60,232 units in June as compared to 1,39,624 units in the year-ago month.

Motorcycle sales last month climbed 9.63 percent to 8,76,196 units from 7,99,254 units a year earlier, according to data. 

Infy Co-founder Kris donates $1.8 mn

S Gopalakrishnan, one of the seven co-founders of IT major Infosys, has donated $1.8 million to Carnegie Mellon University for brain research.

“Gopalakrishnan has donated $1.8 million to CMU to establish a research partnership between CMU and the Centre for Brain Research  at the Indian Institute of Science in Bangalore,” a statement said. 

The partnership will leverage the research strengths of both institutions enhancing the connection between CMU and India, it added.

CMU’s focus has been in  cognitive neuroscience areas that are critical for linking biological mechanisms to understand and discover new therapeutic interventions of brain disorders, it said.

FDI jumps to 8-month high of $3.6b in May

The foreign direct investment (FDI) flows into India more than doubled to $ 3.60 billion in May, the highest in the last eight months.

In May 2013, the country had received FDI worth $ 1.63 billion.

During April-May this fiscal, the foreign inflows grew by 34 per cent to $ 5.30 billion as compared to $ 3.95 billion in the same period last year, according to the data of Department of Industrial Policy and Promotion.

The monthly FDI figures for May are the highest since September 2013 when the country received foreign investment of $ 4.13 billion.

Amongst the top 10 sectors, telecommunications received the maximum FDI in May at $ 1.51 billion followed by pharmaceuticals ($ 680 million), services ($ 574 million) and construction ($ 221 million).

During the month, India received maximum FDI from Mauritius at $ 2.28 billion, followed by Singapore ($ 982 million), UK ($ 545 million), Japan ($ 319 million) and the US ($ 154 million). In 2013-14, the FDI inflows in India were $ 24.29 billion against $ 22.42 billion in 2012-13.

India requires around $ 1 trillion in the next five years to overhaul its infrastructure sector, including ports, airports and highways to boost growth.

The government is taking more steps to boost FDI in the country. It has raised the foreign investment limit to 49 per cent in defence manufacturing and relaxed the policy in construction sector. The government has also proposed to increase the FDI cap in insurance to 49 per cent.

Gaza violence, plane crash in Ukraine hit Global Stock market

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York July 14, 2014.  REUTERS/Lucas Jackson

Global stock markets slumped on Thursday, while safe-haven gold and bond prices rose following an escalation of violence in Gaza and the downing of a passenger plane at the Ukraine-Russia border.

Wall Street had its worst day since April after a Malaysian airlines jet was downed over eastern Ukraine near the Russian border, sparking a fall in risk assets on concerns that the conflict might widen.

The Russian rouble had its worst day in more than a year, and European stock markets slumped just before the close of trading after news of the downed plane.

About 300 people died in the crash, caused by a missile fired at the plane, according to a Ukrainian official. The incident was the latest in a series of tensions between Ukraine and Russia that has resulted in clashes along the border, including the targeting of military aircraft.

Even wider equity losses came in the last hour of trading after Israeli Prime Minister Benjamin Netanyahu instructed the military to begin a ground offensive in Gaza.

“We’re absolutely trading on eggshells,” said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston.

“Russia is just one of the hot spots, one of the bubbling caldrons of activity that could flare up at any time. The Middle East is another; the situation in Gaza is very tenuous at this point in time.”

The S&P 500 posted its biggest one-day percentage decline since April 10, while the CBOE Volatility index spiked 32 percent in its biggest one-day jump since April 2013. Despite the move, the VIX, at 14.54, remains low by historical standards.

The Dow Jones industrial average fell 161.39 points, or 0.94 percent, to 16,976.81, the S&P 500 lost 23.45 points, or 1.18 percent, to 1,958.12 and the Nasdaq Composite dropped 62.52 points, or 1.41 percent, to 4,363.45.

All 10 primary S&P 500 sectors ended the day with solid losses, but airlines were especially hard hit, with the NYSE Arca Airline Index down 2.6 percent.

The aircraft incident sparked a shift to safe-haven assets like U.S. government bonds. The benchmark U.S. 10-year Treasury note rose 22/32 in price, dropping the yield to 2.4584 percent, not far from the 2014 low of 2.438 percent. Still, some said the market impact of the crash would be short-lived.

“For a sustained sub-2.50 percent on the 10-year yield, we need another catalyst to support the idea the economy is not as strong as some people think,” said Anthony Valeri, fixed income strategist at LPL Financial in San Diego.

Gold prices jumped 1.5 percent in their biggest one-day advance in about a month. Silver prices rose 2.2 percent.

The Russian rouble fell 1.8 percent against the U.S. dollar, its biggest one-day decline since June 2013. Major European stock indexes fell just before the close of trading. Moscow’s MICEX stock market fell 2.3 percent and its dollar-traded related index, the RTS index, dropped 3.8 percent.

In the currency market, the Japanese yen rose 0.5 percent against the dollar, while the Swiss franc was little changed and the U.S. dollar was almost flat against a basket ofcurrencies.

European shares ended near their lows of the day. The pan-European FTSEurofirst 300 lost 1.0 percent and the MSCI International ACWI Price Index lost 0.9 percent.

U.S. crude oil futures rose $1.90, or 2 percent, to $103.10 per barrel. Brent gained 0.6 percent to $107.80. [O/R]

Prior to the report of the downed plane, Wall Street stocks edged lower on a weak reading on U.S. housing starts, which fell well short of expectations in June.

Investment bank Morgan Stanley reported results that topped expectations, but the stock pared its early advance to close down 0.6 percent.

7 market myths that make investors poorer Insight: What you think you know about money can hurt you

Financial markets are complex dynamic systems, populated by irrational and biased participants. Because of this we have a tendency not only to misunderstand how the financial markets function, but we tend to buy into myths that often harm our financial well-being.

But by better understanding the financial markets, ourselves and the behavioral flaws that drive these persistent myths we can increase our odds of achieving our financial goals. Here’s what investors need to watch out for:

1. You too can be Warren Buffett

Over the last 30 years the world’s greatest investor has come to be idolized. But the way Warren Buffett has amassed enormous wealth is often misunderstood. The myth of the simpleton from Omaha who just picks “value” stocks has driven an entire generation to fall for the myth that they can easily replicate what Buffett does.

Where can investors find value?

Some stock investors are betting the bull market has more room to run. But where are the bargains? Mark Okada, Highland Capital Management co-founder, joins MoneyBeat. Photo: Getty Images.

Make no mistake — Buffett is not a simple value-stock picker. What he has built is far more complex and resembles something that few retail investors can even come close to replicating.

Berkshire Hathaway , Buffett’s firm, essentially acts as a multi-strategy hedge fund. Berkshire engages in sophisticated insurance underwriting, complex fixed-income strategies, multi-strategy equity approaches and tactics that more resemble a private equity firm than a value-based brokerage account. Replicating this isn’t just difficult — it might well be impossible.

2. You get what you pay for

Few things are more detrimental to portfolio performance than fees. Most mutual funds underperform a highly correlated index, yet they charge 0.8% more in fees on average than a highly correlated index. That might not seem like much, but when you compound this at 7% over 30 years, your total return gets reduced by 23%. At that rate of return, an investor who buys $100,000 of a closet index fund and one who buys a highly correlated, low-fee index will amass, respectively, $590,000 and $740,000 over that 30-year period. Millions of investors are stuck in mutual funds that don’t outperform a benchmark index.

There’s a simple and irrefutable rule in markets — all assets are always held by someone. Therefore, in the aggregate, the performance of the market is what it is; no one “beats” the market. So the investor who incurs greater fees, frictions and other inefficiencies will underperform the aggregate as well a peer who incurs fewer of these frictions. In finance, more expensive doesn’t necessarily mean better.

3. You should focus either on fundamentals or technical analysis

A great battle rages in financial circles between fundamental analysis and technical analysis. Fundamentalists believe you need to understand corporate fundamentals to predict how an asset might perform; technicians believe an asset’s past performance is the key to its future.

But this debate is like trying to determine whether it’s better to drive looking through the windshield or also utilizing the rear-view mirror. The truth is somewhere in-between, as both can be useful ways to be aware of the road. Be open-minded about financial markets. There are no holy grails and there’s value in various styles and approaches, including both fundamental- and technical analysis.

4. The myth of ‘passive’ investing

There’s no such thing as a “passive” investor. No one can realistically replicate the performance of a truly passive index over the long-term. Accordingly, we’re all active portfolio managers in some sense, whether it’s establishing a lump-sum portfolio at initiation, rebalancing, reinvesting, reallocating, and the like. We need to be aware of how these actions can be positive or negative.

It’s important to reduce fees and frictions, but not at the risk of oversimplifying the portfolio to the point where it’s counterproductive. The concept of passive investing is built on useful and sound principles, but often overlooks the fact that portfolio management is a process, not a passive undertaking.

5. The stock market will make you rich

Most market participants tend to think of their financial situation in nominal terms. But when you are looking at your portfolio performance it’s imperative to think in real terms. View your portfolio performance by the return that goes into your pocket. That means backing out inflation, taxes, fees and other frictions that reduce nominal return.

The stock market is not what makes us rich. The people on the Forbes 400 list didn’t get wealthy flipping stocks in their brokerage accounts. They got wealthy building and running fantastic companies. The stock market can protect your wealth and help you maintain purchasing power, but it’s not the place where most of us are likely to make our fortunes.

6. You have to beat the market

It’s hard to avoid the allure of trying to beat the market — to outperform on a consistent basis by simply picking stocks. In truth, most of us are not going to strike it rich in the stock market and most of us shouldn’t even try.

You don’t need to beat the market. Attempting to beat the market means taking risks that are probably not appropriate. Instead, you need to allocate assets in a manner consistent with your financial goals of beating inflation, without exposing your portfolio to disruptive levels of risk. Beating the market is probably not only unattainable for most, but likely to encounter disastrous financial turbulence along the way.

7. ‘Stocks for the long run’ is the best strategy

You’ve probably heard about “stocks for the long run” or “buy and hold.” These concepts are usually sold to investors using misleading nominal historical returns, or the promise of climbing on the financial roller coaster at age 25 and getting off at age 65, whereupon you stroll into the sunset years.

Of course, this isn’t remotely how life works, and our financial lives should reflect that. Our financial lives are a series of events. You get married, buy a house, have children, send them to college, plan for retirement. Life happens, and investment portfolios should reflect this. We can’t just throw ourselves and our families into the stock market and hope it’s going up when our most important (and expensive) events occur.

Forget about the long run. There are only short sprints inside of a marathon. Planning a portfolio around the ideas of “buy and hold” and “stocks for the long run” look nice inside of an academic study based on 12% annualized gains, but in reality often causes more financial pain than anyone deserves.

India to Grow at 5.3 % in Current Fiscal: Industry Body

Ahead of the Economic Survey, the Federation of Indian Chambers of Commerce and Industry (FICCI) on Tuesday lowered its GDP growth forecast for the current fiscal, pegging India’s economic expansion rate at 5.3 per cent compared to its 5.5 per cent previous estimate.

This is mainly due to bleak prospects for performance of the agriculture sector due to sub-par monsoon forecast.

“FICCI’s latest Economic Outlook Survey puts across the GDP growth estimate for the year 2014-15 at 5.3 per cent, with a minimum and a maximum range of 4.9 per cent and 5.8 per cent,” a statement said.

The survey forecasts fiscal deficit to GDP ratio at 4.5 per cent in 2014-15, breaching the target of 4.1 per cent set in the interim budget.

The survey pegs industrial growth for 2014-15 at 3.1 per cent and agriculture growth at 2.1 per cent.

 

Further, services sector growth is expected at 7 per cent, marginally higher than 6.8 per cent recorded in 2013-14.

On the inflation front, participating economists expect prices to remain beyond the comfort zone, expecting the El Nino effect to fuel inflationary pressure going ahead, FICCI said.

On dealing with the price situation, the economists felt that the government has little choice but to strengthen supply side infrastructure and pointed out the immediate need to ease distortions in supply of food articles from farm to market.

Elaborating on the measures to boost economic growth, the survey respondents asked for a clear roadmap for roll out of Goods and Services Tax and review of the Direct Tax Code with a view to widen the tax base and rationalising exemptions.

It also asked the government to chart out a path to contain subsidies and switch the focus from non-plan to plan expenditure, while putting across a roadmap for disinvestment.

Besides, it recommended firming up the growth in the manufacturing sector to aid employment generation and to boost infrastructure spending, along with faster implementation of stuck projects.

On the measures to widen India’s tax net, participating economists said steps should be taken to bring more people within the ambit of formal employment and widening the tax base should be given a priority.

They felt that segments currently outside the scope of tax net despite being at much higher incomes should be brought under purview of taxation.

The economists also said that greater clarity on issues like General Anti Avoidance Rules (GAAR) and retrospective taxation must be provided in the upcoming budget.

Besides, the economists termed setting up of a specialised asset management company for acquiring large scale non-preforming assets as a good move, saying it will help improve the financial health of the banks.