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By Central Bank News
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By Central Bank News
The past week in monetary policy saw two major emerging market economy’s central banks cut rates; with India cutting by a surprise 50 basis points to 8.00%, and Brazil cutting an expected 75 bps to 9.00%.  The only other bank to adjust rates was Mongolia; hiking 100bps to 13.25%.  Meanwhile those that held interest rates unchanged were: Canada 1.00%, Chile 5.00%, Turkey 5.75%, Sweden 1.50%, and the Philippines 4.00%.

Looking at the central bank calendar, the week ahead sees the US Federal Open Market Committee (FOMC) meeting to determine its policy setting and forecasts; while it’s unlikely to see further QE; people will be watching for further clues. Elsewhere the major banks meeting include the Bank of Japan and the Reserve Bank of New Zealand; both are unlikely to move, but the forex markets will be paying close attention. Israel, Hungary, and Mexico also meet to review monetary policy settings.

Source: www.CentralBankNews.info

By MoneyMorning.com.au

About five years ago I had the fortune to take a month-long tour through Myanmar (Burma) with a group of Burmese and Japanese friends. For the most part, we travelled on buses – relics from World War II that were crammed with people throughout our trip. Our fellow passengers offered us miniature wooden stools placed in the middle of the aisle to sit down on. And we stared out the window at the strange country that rushed past.

Myanmar absolutely mesmerised me. It is blessed with lush paddy fields, dramatic mountain ranges and people who seemed untouched by the modern world. We’d pass women and children with exquisite white-painted faces from thanaka cream. And almost every corner had an ancient Buddhist temple where local people asked for alms to paint or repair it. I was considering learning Burmese and staying.

For the last month, Myanmar has been back in the spotlight. On 1 April, the country held a landmark by-election, which could soon sweep the recently freed Aung San Suu Kyi to power. If the election is deemed fair, the EU and the US will lift some of their long-standing trade sanctions. Myanmar is also set to float its currency, the kyat, to attract investments and reduce corruption.

These reforms could bring decades of international isolation to an end. And the country has been swarming with foreign businessmen and politicians in recent weeks. Western companies are queueing up to get into the country, sandwiched between China and India and offering huge potential in energy and tourism. Even David Cameron has announced his intention to visit.

But you can forget China, India – and certainly David Cameron. Because Burma is part of a far more interesting investment story. In fact, I think that this will be the most exciting story of the next five years. And it promises to deliver some explosive returns for early investors.

What Does Burma Offer?

You can call it Myanmar or Burma (it doesn’t matter all that much to the locals I speak to), but this country has long been the subject of colonial interest. A century ago, the British used the Irrawaddy as a back door to the markets of China. Unfortunately the river – which starts in the perennially snow-covered Himalayas and descends a thousand miles to empty into the Bay of Bengal – passes through massive mountain peaks which were inhibited by hostile tribes.

But it still emerged as a major exporter of commodities: hard wood, gems and rice (the world’s biggest exporter until the onset of the World War II). However, following independence in 1947 and a flirtation with democracy, Myanmar turned inwards and pursued a mixed ideology of Buddhism and socialism, leading down an economic cul-de-sac it has yet to escape.

Today Burma’s economy has three things going for it. First, it is a regional transport hub providing an alternative shipping route from Asia to the Middle East, India and Europe, by-passing the Malacca Strait. Second, the development of Myanmar’s natural resources will provide energy and food to much of Southeast Asia. And third, rising incomes in Myanmar and the expansion of the transportation network from Bangkok (east-west and north-south) will become a magnet for foreign direct investment inflows to the region.

Those factors place Myanmar right at the heart of the most exciting development in emerging markets since 2001.

Burma The Biggest Story of the Next Five Years

We are entering the era of the Asian world economy. This era can be dated back to China’s entry to the World Trade Organisation in 2001.

China’s membership changed Asia. Improved rule of law led to an investment boom, fuelled by capital mainly supplied from other Asian countries. The result was high-octane Chinese economic growth and rapid industrialisation due to competitive labour and land costs and proactive local governments.

The rest of Asia also saw increased intra-regional trade. Smaller neighbours fine-tuned their economic growth models and focused on niches that they can compete and thrive in in a China-dominated Asia. That adaptation is ongoing and the full benefits will be visible over the next few years.

But this won’t necessarily be a China-dominated story. Because Asia is changing. China and its economic might scares Myanmar. For the last 12 years China has pursued a ‘Go West’ policy – sending people, industries and energy demand to China’s western hinterland. And there are grave concerns about the ability of the Chinese government to avoid a devastating economic crash.

Those concerns are now being felt in Myanmar, triggering a strategy shift towards affinity with rest of Southeast Asia. And one development could prove an enormous catalyst for this process.

In 2015 the Association of Southeast Asian Nations (Asean) will reduce the tariffs and other non-trade barriers for member countries. This will create a new economic zone called the Asean Free Trade Area.

Asean, home to 600 million people and $2.5trn in combined GDP, has decided that six of the ten member states will completely abolish taxes on goods. For the newly admitted members, Cambodia, Laos, Vietnam and Myanmar, the 7% VAT on trade goods will be abolished by 2018. In fact, Myanmar will chair Asean in 2014.

The goal is obvious: cut red tape and reduce trade barriers for products and services. And as those trade barriers are removed, we are likely to see a total transformation of this region of Asia. There will be massive investment in infrastructure – from ports to factories – to facilitate these new trade links. And it will all happen in the next few years. In fact, I think there are parallels here with Eastern Europe in the very early years of European integration.

That’s why a delegation of 50 Malaysian businessmen flew into Myanmar last month. They see that 65% of the population is below 35 years of age, of which millions of are employed in neighbouring countries. They have seen how the rest of Asia prospers and enjoys increased political freedom.

And the labour cost advantage combined with abundant natural resources makes it an alluring Asian tiger candidate. According to a JETRO survey of companies operating in Asia, labour costs in Myanmar are 55% of the wages in Vietnam, 24% of those in Thailand and 22% of those in China.

That’s why bilateral trade between Malaysia and Myanmar stood at US $795m in 2011, an increase of nearly 27% from the previous year, according to Malaysian government figures. And this isn’t just a story of Malaysia developing links with Myanmar; bilateral trade is exploding right across the Asean region.

Singapore, for instance, is looking to specialise in service sectors such as biomedical science, offshore private banking and tourism. So it is busy outsourcing its manufacturing base to Iskandar – near where I live in Malaysia. For years I’ve watched vast tracts of land rezoned around the province. And I’ve followed the development plans as enormous infrastructure projects have been laid out – linking warehouses to rail to ports, from one side of the Malacca Strait to the other.

Thailand is following in the footsteps of Malaysia. It is planning to invest large amounts of money to upgrade its ancient railway system. China and Japan are willing to support the push with long-term soft loans.

The end game is simple: bring down logistics costs, spread the economic wealth to new regions and allow Asean to better capitalise on its resources of rice, palm oil, coal, gas and other natural resources as well as its relatively young and inexpensive labour pool.

But for now, the opportunity lies with those companies helping to foster bilateral trade between Asean countries. That means infrastructure plays. That means transport companies, but also financial companies helping to foster trade.

Regards,

Lars Henriksson

Contributing Writer Money Week (UK)
This is an edited version of an article that first appeared in MoneyWeek (UK)

From the Archives…

The Deep Ocean Frontier For Mining Profits
2012-04-013 – Dr. Alex Cowie

The Turkish Economy: Knocking At The Door
2012-04-12 – Karim Rahemtulla

Inflation and Sovereign Debt – Why The Best Is Yet To Come
2012-04-11 – Nick Hubble

How to Make the Most Out of Small Cap Investing
2012-04-10 – Kris Sayce

Why You MUST Speculate
2012-04-09 – Kris Sayce

Burma: The Biggest Emerging Market Story Since China in 2001

By MoneyMorning.com.au

While a high oil price is good news for big producers in the Middle East, it’s also bad news.

Simply because a high oil price makes other projects viable.

And that means more price and supply competition. It explains why Saudi Arabian oil minister, Ali al-Naimi is so keen to make sure the market still knows who’s in charge. As Bloomberg News recently reported:

“Saudi Arabia said it could potentially raise output capacity to 15 million barrels a day, from 12.5 million barrels a day, using new oil fields if needed.”

If you ask us, it’s all talk. Saudi Arabia doesn’t really want to knock down the oil price. It just wants to make investors, explorers and producers think it can knock down the price if it wants.

In the long term, lower oil prices are actually better for the Middle East because it makes competing oil fields less viable.

Trouble is, in the short term, Middle East dictators like high oil prices because they can buy more trinkets (football teams, London and New York property, and so on).

Also, they’re afraid of what could happen if prices fall and they can no longer afford the handouts they’ve promised their oppressed citizens.

The memory of what happened to Libya’s Colonel Gadaffi is still fresh in their minds.

So the idea that the oil price will fall because Saudi Arabia is trying to talk the price down, is a little far-fetched. High oil prices are here. And in our view, they’re here to stay.

Yet it’s not just Middle East dictators who will pocket the profits. Aussie companies investing in new energy frontiers are set to profit too…

For all the talk about replacing oil as an energy source, it’s still arguably the world’s most important form of energy.

And that’s not likely to change for some time yet. Even with the rise of natural gas.

This chart from Professor Michael Economides at the University of Houston shows that fossil fuels will still be the world’s main energy source by 2030…

As you can see, by 2030 he expects coal, gas and oil will contribute 80% to energy supply. Green fuels such as wind and solar will contribute no more than 1%!

So, where will the increased oil supply come from?

Despite the risks, we believe East Africa is the area to watch…

Under-Explored East Africa

You see, for years, when oil was just USD$20 per barrel, certain areas of the world were no-go zones. They were politically unstable… geologically inaccessible… or just plain not-worth-the-risk.

The east coast of Africa, fell into all of those categories.

But with oil at USD$100 per barrel, the reward has started to offset the risk. But it’s still risky. Very risky.

To highlight this, Norwegian oil company, Statoil is investing in the area. It has hired armed security guards to patrol its offshore assets to protect them from pirate attack!

But even machine-gun toting pirates can’t keep the explorers away.

And why would they? The east African coastline is almost completely unexplored when it comes to oil and gas.

That’s highlighted by these amazing numbers from U.K-based explorer and producer, Afren plc…

For every 70 wells drilled in North, West and Central Africa, only one well has been drilled in East Africa.

Oil company, Africa Oil, makes a similar comparison. This time comparing the triangle of Kenya, Somalia and Ethiopia with the North Sea and the Suez Basin:

Fewer than 200 wells drilled, compared to 7,706 for the North Sea and Suez Basin. That’s just 2.5% the number of the wells drilled, in an area 10-times larger!

As the Financial Times recently reported:

“Statoil set the oil industry abuzz late last month when it announced it had found large volumes of natural gas off the coast of Tanzania, confirming east Africa’s reputation as one of the energy world’s most promising new frontiers.”

See what we mean? There’s a huge opportunity for energy companies that can get in early.

Big Gains in Oil from Africa’s Pirate Coast

For instance, take London-listed, Cove Energy [LON: COV]. In 2009 it was trading for 18.5p. Today it’s trading for 211p… a gain of 1,040% in just over two years.

It’s all thanks to a lot of hard work, risk-taking, and a takeover offer by energy multi-national, Royal Dutch Shell [LON: RDSA].

The prized asset Shell is after? Cove’s east African portfolio. It includes a potential 30 trillion cubic feet of gas in place (5.2 billion barrels of oil equivalent) off the Mozambique coast.

So whether it’s oil or gas, east Africa is currently the speculator’s region of choice. But, it comes with plenty of risk… not just drilling risk, but pirate risk too!

If you can stomach that, the upside could mean triple-digit percentage gains. That’s why we’ve picked a number of oil stocks in Australian Small-Cap Investigator that are well placed to gain if we’re right about the surge in east African oil investment.

To find out more on this story, and which stocks we believe are best placed to gain, click here…

Cheers.
Kris.

The Most Important Story This Week…

Stock markets price risk. But risk is the very thing that scares investors about the stock market. Investors know shares offer potentially massive gains. But they’re naturally more concerned with not losing money. This often leads them to concentrate their money in Australia’s biggest and most dominant companies. These industry titans offer the image of stability and assurance – so-called “blue chip” stocks. Investors do this because they think it is a “safer” strategy. They’re trying to avoid risk but get exposure to making money in the stock market. But what if that idea is completely wrong?

Since 2007, the ASX/20 – the twenty largest companies listed on the Australian Stock Exchange – has lost 15%. That’s six years of going backwards. Investors would have been better putting their money in the bank – except they never would have had a chance of making eye-watering gains as only the share market can offer. You have to be in it to win it. But what if there was a way to both embrace and minimise risk? What type of money could you make? How much would you need to risk? Kris Sayce has a strategy – as he explains in How to Use Small-Cap Stocks to Beat the Buy-and-Hold Blue Chips

Other Recent Highlights…

Kris Sayce on How You Can Use Government Intervention to Profit on the Stock Market: “The strategy involves buying a specific asset class that could give you the best return for the risk involved – small-cap stocks. But hang on. Isn’t government intervention and red-tape bad for small companies? Aren’t you better off investing in big companies that can exploit loopholes… If you follow conventional wisdom, that sounds right. But it’s also completely wrong. Here’s why…”

Kris Sayce on Two Down and Dirty Ways to Track Down Undervalued Small-Cap Stocks: “Looking for value (and growth) is the core of small-cap investing. You look for small cap stocks that are undervalued by other investors and where there’s the opportunity for explosive growth. You could call them small-cap Moneyball stocks. And here are two of the best ways we know you could look for them…”

Keith Fitz-Gerald on Stock Market Volatility: How to Beat the Market at its Own Game: “Most investors head for the hills when volatility rises. Successful traders, on the other hand, embrace it because they know stock market volatility represents an opportunity. I find this especially ironic considering how often I hear individuals tell me they invest because they want the “big gains.” Because most of the time they choke… Instead of buying when prices are low, they head for the exits. This costs them big time.”

Kris Sayce on How to Make the Most Out of Small Cap Investing: “We’ve targeted three big themes: “creative destruction”, “disruptive technology” and “entrepreneurial vision”. Understanding why these are important and the role they play in the economy will be vital to making money from small-cap stocks in 2012. But in case you’re not familiar with these themes or you need a refresher, here’s a quick rundown…”

Kris Sayce on Why You MUST Speculate: “If you want any chance of getting ahead, you must speculate. Four central banks – the U.S. Federal Reserve, European Central Bank, Bank of Japan and Bank of England – have rigged the stock, bond and commodity markets. Their goal is to make stocks fall, but without causing a terrible crash. But why on earth would they do that?”

A Tale of Oil and African Pirates

Countless of indicators are being released every day, claiming to give you the trading edge and provide endless profits. However, usually it is the traditional indicators that were developed 60 years ago that provide the best signals. In this article we will describe several traditional indicators that still prove to be profitable, decades after their introduction.

Relative Strength Index
The Relative Strength Index Indicator or the RSI, was developed by Welles Wilder and is considered the finest overbought oversold oscillator in the market today. It compares the average gains and average losses of last 14 periods to give traders a objective answer to the question: is price overbought or oversold. Readings below 30 indicate oversold and readings above 70 indicate that price is overbought and may reverse downwards soon.

We enter short trades when the RSI crosses 70 from above, and enter long trades when the RSI crosses 30 from above, to catch the reversal at its beginning when the risk is the lowest and reward is highest.

Bollinger Bands
The Bollinger Bands is an indicator developed by John Bollinger that is mainly used to show the volatility of a certain Forex pair. It consists of three bands: upper band, lower band, and a middle band when is essential a 20-period simple moving average. The wider the bands, the more volatile the Forex pair is, and the tighter they are, the less volatile the pair is.

The upper and lower bands can be used as dynamic support and resistance levels: when price hits the lower band and bounces traders can enter a long trade, and when it hits the upper band traders may sell. Make sure to confirm such trades when price-action (actual supportresistance levels in place) for maximum accuracy and win rate.

Commodity Channel Index
Commodity Channel Index or the CCI is another overboughtoversold oscillator that was developed a few decades ago and is still used frequently. Some traders use it in a more sophisticated system called Woodies CCI – a special system that looks for patterns in the CCI readings.

An accurate trading method for the CCI is the zero-line-bounce: trades are entered when the CCI hits the zero-level and bounces in the previous direction – it is a trend-following approach that enters at the retracement and offers traders accurate trades.

In conclusion, these indicators can be quite profitable and accurate when used correctly, and they profit on any Forex pair or stock.

 Article by indicatorforex.com

By Central Bank News

The Banco Central Do Brasil slashed the Selic interest rate by another 75 basis points to 9.00% from 9.75% previously.  In its statement, Brazil’s Central Bank Monetary Policy Committee (Copom) said [translated]: “The Copom considers that, at this moment, the risks for the inflation path remain limited. The Committee also notes that, up to now, given the fragility of the global economy, the contribution of the external sector has been disinflationary. Therefore, continuing the adjustment process of monetary conditions, the Copom unanimously decided to reduce the Selic rate to 9 percent p.a., without bias.”


 Brazil’s central bank previously cut the rate by 75 basis points in March, and 50 basis points in January, November, October and September, after raising the Selic rate by 25 basis points to 12.50% at the June Copom meeting last year, which at the time amounted to total tightening for the year of 175 basis points.  Brazil reported an annual inflation rate of 5.2% in March, down from 6.5% in December, compared to 7.31% in September, 7.23% in August, 6.87% in July, 6.71% in June, and 6.55% in May, and inside the official inflation target of 4.50% +/-2% (2.5-6.5%).  

By Central Bank News
Central Bank News is at the stage where an assistant analyst is required to aid with the production of regular economic commentary and analysis, including updates on developments in monetary policy and central banking. The assistant analyst will also be required to maintain economic databases such as interest rates, required reserve ratios and inflation targets of central banks. The assistant will also be required to work on social media distribution to ensure that our content reaches a wide audience and to respond and engage with our readers.

Source: ForexYard

The Euro made its biggest gains against the U.S Dollar during Friday’s trading due to an unexpected rise in German business confidence, resulting in investors leaning towards riskier assets.

The single currency also appreciated versus the Japanese Yen as there is speculation that the International Monetary Fund will increase its lending capacity to help keep Europe’s debt crisis at bay. Elsewhere, the British Pound saw gains over the the greenback for a fifth day after positive Retail figures whilst the Canadian dollar also appreciated as a result of an increase in consumer prices.

The 17 -nation currency rose 0.6 percent to the level of $1.3215 and briefly reached $1.3225 which would be the highest level since the first week of April. The Euro also rose 0.6 percent against the Yen, whilst the Asian currency showed little changes against the U.S dollar.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Article by Investment U

If Argentina is willing to nationalize its leading oil company, YPF, which company (or companies) is next?

Ever wonder what happens when greed meets stupidity in the stock market? For a profound example, take a look at the recent free fall in Argentina’s largest oil and gas company, YPF (NYSE: YPF).

The country’s President Cristina Kirchner recently took a watershed step in expanding the state’s grip on the economy, saying she will send a bill to Congress to nationalize the firm.

Predictably, shares of YPF – and other Argentine stocks – gapped down on the news.

Kirchner declared that this historic move must be made because the petroleum industry is of “national public interest.” Of course, what industry isn’t? Banking? Telecommunications? Manufacturing? Agriculture?

Kirchner insists that YPF’s low production is forcing the country to spend heavily on imported energy at a time when it is experiencing a scarcity of dollars due to capital flight. And why is Argentina hemorrhaging capital? Because of boneheaded moves like this one.

YPF’s majority shareholder, Spanish energy group Repsol, is not taking this theft lying down. The Madrid government has threatened swift retaliation. And Spain’s Prime Minister Mariano Rajoy stated the obvious when he said the Spanish company’s controlling stake in YPF – which Repsol was planning to sell to China’s Sinopec – was being expropriated “without any justification.”

Given that most successful developing nations are privatizing industries rather than nationalizing them – and given that investment capital always flows where it is treated best (and conversely flees those countries where it is treated badly) – why would Kirchner do this?

One answer is stupidity. The other is hubris.

There is absolutely no reason to think that a bunch of politicians and bureaucrats – or their appointees – could run YPF better than Repsol, one of the world’s leading energy groups. (Just as there is no reason to think the U.S. government can do a better job than private equity groups of backing speculative solar companies like Solyndra.)

And if Argentina is willing to nationalize its leading oil company, which company (or companies) is next? Here’s a potential hit list, 17 Argentine companies that trade on the NYSE or Nasdaq. If you’re holding any of them, sell them immediately.

The tragic part of this power grab – which has undeniable populist appeal in some quarters – is that it will only undermine investor confidence and do lasting damage to the Argentine currency, the Argentine economy and, ultimately, middle-class Argentinians.

This move is not just greedy. It’s profoundly dim. But then, Ronald Reagan said it best:

“The best minds cannot be found in government. If they could, the private sector would hire them away.”

Good Investing,

Alexander Green

Article by Investment U

Article by Investment U

Simply put, bar charts provide a visual representation of the price activity over a given period of time. And it may be the most commonly used chart for us in the Western world.

Unlike line charts, they include all four prices for each day. It gets its name because each day is represented by a vertical bar, which goes all the way from the low price to the high price.

The opening price – coming into the day – is a short horizontal line called a tic, which is drawn on the left of the bar and coming into the bar. At the end of the day, the closing price is represented by a tic leaving the bar to the right.

Here’s an example:

You create a bar chart by plotting a series of such bars across it. Each bar makes up one trading period. To create a bar, you simply need to plot the high and low prices of a trading period and then connect the two points using a vertical line.

The Value of Bar Charts

The bar chart gives you the ability to see whether a stock has gained or lost value between the opening and closing market sessions. If the tic on the right is located higher than the tic on the left, you can imply that the value has climbed between the open and close of trading. This works for the opposite, also.

While you’re processing that, you can take a look at the distance between the day’s high and low and see how much the security fluctuated during the trading for this period. The longer the line, the more volatility – and vice versa.

The purpose of the chart is to create a predictive tool. If a stock closed on a high, for instance, the tic on the right would be located at the top of the vertical line. So if you were mainly interested in short-term gains, you might assume the odds are that the stock is likely to continue rising as soon as trading re-opens.

Yes, you’re gambling – but this is the stock market. The bar chart’s function is to provide you with more information to make a more educated decision.

We can also use this information to identify trends. If the price of a share rose during a specific period you were focusing on, then it means that investors were bullish. If the price lost ground during the period, then investors were bearish.

Always take into consideration that this is one of many tools you can use depending on your investing goals.

Good Investing,

Jason Jenkins

Article by Investment U