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The S&P 500 rose 0.7% on positive comments from the Chairman of the Federal Reserve while Stoxx Europe 600 Index (SXXP) dropped 1.8% as Greece’s prime minister asked for a two-year reprieve from cutting government spending. MSCI Asia Pacific Index (MXAP) slid 0.4% on signs of slow growth in the two largest economies in the world and concern over the Euro zone. Brent crude fell 12 cents after reports that IEA is likely to tap strategic oil reserves as soon as September.

Views

What is the risk of escalating tensions in the Middle East contributing to higher oil prices especially given Sri Lanka’s dependence on Iranian oil?

In a context where Sri Lanka is actively discouraging consumer durables imports, India has done just the opposite despite having a teetering exchange rate and BOP issues.

Vietnam is experiencing doubtful growth prospects with an emerging slump in its urban real estate sector.

Africa’s fast-growing middle class has money to spend

An Interesting article from India on reforming its private sector education , and the social conflicts arising therein.

(Syndicated with permission from Frontier Research

News

The S&P 500 index rose by 0.9% for the week on optimistic expectations from Europe while the European Stoxx 600 climbed 0.6% to a 13 month high. The MSCI Asia Pacific Index again saw a slight rise (0.2%) based on positive comments from the Chinese premier and expectations of a US recovery. Brent crude pared larger weekly gains and advanced only 75 cents as North Sea output looked to rebound and investors engaged in profit taking.

Views

How can the ‘resource curse’ be turned into a resource blessing or how can countries avoid the resource curse altogether? Relevant to Sri Lanka as possible discovery of commercially viable oil reserves loom.

A look at Columbia’s problems amidst the benefits it stands to gain with its US FTA. Throw in natural resources in the mix and you have large internal risks; relevant to Sri Lanka in terms of its trade partnership with India.

Has India‘s ‘growth miracle’ has finally ended?

Wealth and riches haven’t really bought the Chinese a lot of happiness.

The Harvard Business Review on why marketing, as we know it, is dead

Science says vacations and breaks are good for productivity

(Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission.) 

News

US Stocks rose for a fourth week on better than forecasted jobs data with the S&P 500 and the Dow Jones rising slightly by 0.4% and 0.2% respectively. European markets also rose on US optimism despite negative sentiments locally, the Stoxx 600 index rallying 2.2% for the week. Asia’s MSCI Asia Pacific Index rose slightly by 0.9%, dropping from higher gains earlier in the week as hopes of European, US and Chinese stimulus measures failed to materialize. Brent crude rose 2.3% and WTI crude rose 1.95% due to escalating geopolitical conditions and positive US jobs data.

Views

Why did India suffer that massive crash in power supply? Corruption, inefficiency and even bad weather conditions all had a role to play, relevant to Sri Lanka in the light if its own recent power problems.

Not a week after the ECB president’s reassuring comments Spanish Bonds crashed again, this time drastically.

China is facing some unexpected BOP trouble due to an increase in Yuan in its system. This in turn is creating a problem in its stimulus plan causing pessimism about its economic prospects to deepen.

A study looks at India’s ‘transfer raj’ or the phenomenon of the mass shuffling and changing of bureaucrats every time a political change occurs; in no way unfamiliar to Sri Lanka.

Capitalism has ‘image problems’ in the US, mainly because of cronyism, state collusion and financial speculation. Relevant to Sri Lanka as it too struggles through much of the same issues in an economic model largely identified as capitalist.

This article argues that ‘peak oil’ as a concept is dead. As more oil reserves become easier to extract as technology improves.

The Economist’s latest Big Mac Index gives interesting perspectives on the relative values of global currencies, in the aftermath of a global ‘currency war’ of sorts.

Economists provide insights into which factors help make countries successful in their bids for Olympic glory.

Markets showed mixed sentiments despite a late rally sparked by optimistic statements from European leaders. Underlying issues such as drought, inflation and economic growth are becoming more of a concern for emerging economies.

(Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission.) 

The Week in Global Markets

Asian stocks fell slightly last week on concerns over Greece bailout targets and pessimism over China’s economic growth prospects. However European and US markets rallied after EU leaders made public promises to the effect of doing everything needed to protect the Euro with the Dow Jones seeing its longest weekly advance since January. Crude oil prices recorded a net fall for the week despite a late rally following optimistic news from Europe.

The Week in Economic Views

The United States is also experiencing a serious drought and, though usually more resilient than others to extreme weather, is facing the tough question of countering drought related food inflation by raising interest rates; even though changing monetary policy to accommodate supply shocks is ill advised.

Yet more debate in India about the appropriateness of its current approach to measuring inflation. While so far the arguments have only resulted only in hot air, it is encouraging to see a nation actively engaging in public debate over an impending economic issue.

The concept of ‘state capitalism’ is increasingly gaining recognition as a legitimate economic model. Interesting for Sri Lanka as its economy continues to be administered under a very much ‘visible’ hand.

This Economist chart looks at the gap between the average age of a country’s politicians and the average age of its population. Postulating that the Arab spring suggests a big age gap can be a source of unrest.

Indonesia, despite huge promise of growth, has experienced serious currency depreciation of late, primarily due to a drop in exports to developed markets. Sri Lanka has faced a similar situation without the corresponding consistency in foreign investment.

Over the last few years, South Koreans have steadily become richer and correspondingly more miserable.

Last week global markets rallied on stimulus hopes and better than expected corporate earnings, while geopolitical tensions drove up crude oil. On that note, speculation on what will happen to Sri Lanka should it discover commercially viable oil reserves has already begun.

(Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission.) 

The Week in Global Markets

Asian stocks rose last week amidst speculation that China and the US would boost growth in their economies, European and US markets also rose with the S&P 500 index gaining 0.4% its first back to back gain since June on better than expected corporate earnings supplemented by expectations of stimulus in the US. Escalating geopolitical tensions contributed to the rise of crude oil, which reached its highest level since May with Brent Crude gaining 7.7% and WTI gaining 6.3% during the week.

The Week in Economic Views

India’s current account problems are largely similar to Sri Lanka’s, with the critical difference of India having slightly better options that SL to work towards solving them. Any real solution however is still rendered academic by India’s policy logjam and government inactivity. SL on the other hand, has the will but can do little more than use tariff-based methods to fight the deficit.

State intervention and ‘status-quo preservation’ in East Asian economies might have actually contributed to Tiger Economy growth. Relevant to Sri Lanka as it too faces accusations of sub-standard governance relative to international best practices, should it still be able to grow despite this?

What if Sri Lanka hits Big Oil next year? We at Frontier are starting to focus on a possible game changer if Sri Lankan oil proves commercially viable, and stories from other Frontier nations such as Mongolia that have hit resource riches and high GDP growth can be illuminating both in terms of the good news and the bad.

A related piece highlights the process of energy policy formulation in Nigeria, giving an indication of the level of influence big oil companies have in policy oriented decisions.

The Economist looks at structural gaps in the LIBOR market’s pricing mechanism. The LIBOR manipulation scandal made waves after Barclays Bank was caught rigging the benchmark interest rate.

An interesting proposal from India highlights the need for an alternate inflation index in India, this is relevant to Sri Lanka as the CCPI has consistently come under fire of being inadequate to measure the country’s real inflation.

The IMF has expressed skepticism with regard to the recovery of European markets, a negative factor for regional economies.

Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission. The Indian economy is drawing quite a few uncanny parallels with Sri Lanka’s and global markets primarily reacted to goings on in China.   

The Week in Global Markets

Markets in Asia fell as economic slowdown in China, Korea and Australia sparked fears of lower corporate profits. Meanwhile US markets rose on hopes of policy easing in China, as the latter saw its slowest economic expansion in three years. Euro markets also advanced on similar hopes while Italy’s falling borrowing costs also contributed to optimism. Oil rose on speculation of Chinese stimulus and on the back of tightening US sanctions on Iran.

The Week in Economic Views

India’s emerging fiscal and BOP problems are uncannily similar to Sri Lanka as the latter battles an expansion of its Current Account and doubts as to whether it can keep its budget deficit under control.

The US presidential race draws near and ‘outsourcing’ is increasingly becoming a dirty word as candidates seek to distance themselves from it, something regional outsourcing firms should keep an eye on.

An interesting article in this week’s summary discusses the Indian people and their tolerance of government censorship; a topic currently under hot discussion in Sri Lanka.

In Mid 2013, Sri Lanka will have an announcement on how much oil it possesses; a possible game changer for the country. It is worth keeping an eye on new oil rich nations such as Kenya to get an understanding how the impact of oil discovery will flow through to the rest of the economy.

With the emergence of South East Asia as a growth hotspot, global powers are falling over each other to woo the region’s governments and to secure a portion of the pie. South East Asia’s rise poses emerging threats as well as opportunities for Sri Lanka.

In China, while official headline Macro data continues to be reasonable, other news and data has turned much worse; perhaps indicating a need to find alternate data on the Economy for Sri Lanka that could provide similar tracking to assess the latter’s performance as well?

India and Sri Lanka have both suffered large depreciations of their currencies in recent times. Non resident Indians are however inadvertently rallying to their currency’s cause, by investing their dollars in the India to take advantage of the cheaper rupee.

Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission. The “markets” section gives a lowdown of global stock and crude oil markets, but for the more interesting analysis and discussions check out the “views” section.

The Week in Global Markets

Anticipation of monetary policy easing in Europe and Asia stimulated markets in those regions, while lingering optimism from last week’s Euro summit also propped up European markets. But pessimism about the same in the US, along with weakening job data, caused markets there to fall. WTI and Brent crude moved in opposite directions. WTI fell on account of weak US job data, while Brent rose on account of an oil workers’ strike in Norway.

The Week in Economic Views

Given current global events, the question is being asked if India is prepared for a real European crisis; a salient point for Sri Lanka to ponder as well because of its dependence on European markets.

On that topic, a very pessimistic, but comprehensive analysis of the current global economic situation comes from Swaminomics.

Military polarization has been advancing quietly in the Asian region. Increasingly, the so called ‘middle-nations’ between the West and China are finding a need to strike a balance in military relations with the two global giants; especially in the context of Burma’s recent troubles.

Meanwhile, a media outcry has made the Pakistan authorities enforce adherence to standards of physical fitness in its police force, which has obtained an image of being fat and corrupt.

South East Asian countries are set to become an IPO hotbed in months to come as several firms prepare to go public in an investment environment where IPOs are facing bleak prospects globally, including Sri Lanka.

India’s biggest Tea company is seeing very high profit growth due to Tea prices rising on a global production shortfall; a useful and positive perspective for Sri Lankan Plantations.

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