Investors enter 2008 in fog of uncertainty

By Jeremy Gaunt - Analysis
LONDON Will the U.S. economy fall into recession and spread its woes elsewhere? Will financial markets dry up in a cash drought brought on by the subprime debacle?

With such Rumsfeldian "known unknowns" as a backdrop, global investors are heading into 2008 with less certainty and less consensus about what to do with their money than has been the case for some half a decade.

Consider the case of Legal & General Investment Management and Morley Fund Management, two large British investors.

L&G is looking to 2008 to produce what it calls "sogflation" -- soggy growth with persistent inflation. The result: It expects cash to outperform equities. Accordingly, it is underweight equities and neutral to overweight bonds.

Not far away across central London, meanwhile, Morley is expecting economies to rebound after a recent slowdown and for central banks to contain the credit crisis. The result: It is overweight equities and underweight bonds.

"Although we recognize the risks ... we expect economies to pick up steam from here," said Morley senior economist John Ip.

Such divergence should not, perhaps, be surprising given the kind of volatile year financial markets have had in 2007. After rising steadily for most of the year, major equity markets began ebbing and flowing sharply in summer.

On a year-to-date basis, for example, MSCI's main world stock index .MIWD00000PUS was up nearly 13 percent in July, down 1.5 percent in August, up 16.5 percent in November and is heading into the last weeks of 2007 up around 7 percent.

HK-Shenzhen metropolis broached

The long-term objective of Hong Kong-Shenzhen co-operation is to jointly develop a world-class metropolis comparable with Greater New York and Greater London, Acting Chief Executive Henry Tang says.

Speaking at the second Hong Kong-Shenzhen Co-operation Forum today Mr Tang said the two cities, as close partners, share the vision of moving forward through closer integration.

"The vision is crucial to the sustained development of the two cities. It is in line with the trend of integration among Asian economies and supports the long-term development needs of our country," he said.

"The long-term objective of our co-operation is to jointly develop a world-class metropolis comparable with Greater New York and Greater London. This metropolis, covering 3,200 square kilometres and with a population of about 20 million, will be one of the top metropolises in respect of economic size, trade volume and investments.

"In jointly developing Hong Kong and Shenzhen into a metropolis, we should be guided by the One Country, Two Systems principle, the spirit of development and pragmatism, and should not lose sight of the big picture. Apart from opening up to each other, we should also strive to promote the free flow of key economic elements such as personnel, goods, capital and information between the two cities."

More integration

Shenzhen Mayor Xu Zongheng said the strategic concept of building a Shenzhen-Hong Kong world-class metropolis enhances and deepens the co-operation of both places.

"It fully reflects the actual circumstances and development trend of Shenzhen and Hong Kong. It expresses the common wish of the governments and people with insight from both cities, representing a significant milestone and symbolising a new historic stage and a brand new chapter of our co-operation.

"When I took up the office of Shenzhen Mayor, I put forward the concept 'to learn from Hong Kong and to serve Hong Kong', and that's what Shenzhen has been doing. I would like to take the opportunity today to further enrich this concept, that is 'to learn from Hong Kong, to serve Hong Kong, to integrate with Hong Kong, and to jointly build a world-class metropolis'."

He suggested that co-operation between the cities should adhere to the principles of "consensus, pragmatism, innovation, and mutual success".

"I believe that with the concerted and pragmatic efforts of the people of the two cities, we could surely overcome all obstacles to jointly build a world-class metropolis, and to achieve success for our country, our people, our region and our cities."

Spectacular Acts Of Central Banking

The frenzied plea of money manager turned TV markets maniac Jim Cramer to the Federal Reserve to “open the window” – i.e., pump liquidity into the banking system to forestall a credit crunch – seems to have been heard.

And it was heard as far away as Europe. Not that surprising, as Cramer was shouting loud enough.

On Thursday, the European Central Bank stunned investors by pumping $130 billion into the banking system via a tender offer taken up by 49 banks, making the Fed's action later on look modest by comparison. It injected $24 billion via overnight and 14-day repos during Thursday morning trading.

In truth, the central banks were listening more to the silent evaporation of liquidity from the inter-bank market than to Cramer, whose hysterical performance has been immortalized on YouTube. The ECB's action followed a sharp rise in overnight interest rates to 4.7%. Its target rate is 4%. In the U.S., overnight rates topped 5.75%. The federal funds target rate is 5.25%.
On both continents, the credit crunch has been caused by fears about securities related to U.S subprime mortgages that have become difficult to price in illiquid markets, and as a result, make it near impossible for investors to asses how much exposure funds and institutions have to subprime markets.

In such "who-the-hell-knows" conditions, equity, fixed income and foreign-exchange markets, all linked by a web of derivatives, become as volatile as we have seen in recent weeks. Only commodity markets seem immune.

The ECB's intervention was not far short of what it did in the two days following the 9/11 attacks on New York and Washington, D.C., in 2001. And it was 10 times the size of a typical ECB intervention, compared with the Fed's twice normal.

The relative scale of the two central banks actions prompts two thoughts. One should calm investors' jitters, if not the other.

The first is that the Fed believes that U.S. credit markets are still functioning adequately, if somewhat creakily, and that there is no crisis at hand. That is consistent with its comments just two days earlier when the Fed's interest rate-setting committee met, after which the Fed said nothing to suggest that the increasing number of banks and funds 'fessing up to subprime woes posed any sort of systemic risk to the financial system.

The second, as some commercial bankers have publicly acknowledged, is that the ECB pulled off a spectacular act of central banking by dint of the very scale of its intervention, pushing overnight rates back down to 4.1%.

But there is a second thought to that second thought. In taking such sweeping action, the ECB may have sent a signal to investors that there could be worse still to come, that the BNP Paribas (other-otc: BNPQY - news - people ) scare is only the tip of an iceberg. And that the ECB may know more that it is letting on. So, too, may the 49 banks who took its $130 billion on Thursday.
Unknown unknowns, to borrow former U.S. Defense Secretary Donald Rumsfeld's parlance, scare investors like nothing else.

Notes On The News With Paul MaidmentSpectacular Acts Of Central BankingPaul Maidment,

8. kez en iyi banka seçildi

Garanti Bankası Euromoney’den Euromoney Mükemmelik Ödülü aldı.

Garanti Bankası, dünyanın en önemli finans dergilerinden biri olan Euromoney’den Euromoney Mükemmelik Ödülü alarak, 8. kez Türkiye’nin En İyi Bankası seçildi.

Her yıl temmuz ayında, son 1 yıl içinde bankacılık ve sermaye piyasalarında mükemmellik standartlarını belirleyen kuruluşlara verilen ödüller, Londra’da The Brewery’de yapılan törenle sahiplerini buldu.

Euromoney yetkililerinin yaptığı değerlendirmede, Garanti’nin, 2006’da elde ettiği etkileyici mali sonuçlar sayesinde, diğer Türk bankaları arasından sıyrılarak en tepeye çıktığı belirtiliyor. Değerlendirmede, özellikle net karını yüzde 47.5, vergi öncesi karını ise yüzde 39.9 seyiyesinde artırmasının, Türkiye’nin en iyi bankası seçilmesinin başlıca nedenleri olduğu vurgulanıyor.

Garanti Bankası Genel Müdürü Ergun Özen, ödülle ilgili olarak, “Dünya finans çevrelerinin her yıl merakla beklediği ödülleri, 8. kez almaktan çok mutluyuz. Her zaman daha iyisi için çalışmayı içeren hizmet anlayışımızdan ve sürdürülebilir büyüme stratejimizden hiçbir zaman taviz vermeyeceğiz” dedi.

FORTUNE 50 LİST

Our annual ranking of America's largest corporations (50)

Rank Company Revenues($ millions)

1.Wal-Mart Stores 351,139.0

2.Exxon Mobil 347,254.0
3General Motors 207,349.0
4Chevron 200,567.0
5ConocoPhillips 172,451.0
6General Electric 168,307.0
7Ford Motor 160,126.0
8Citigroup 146,777.0
9 Bank of America Corp. 117,017.0
10American Intl. Group 113,194.0
11 J.P. Morgan Chase & Co. 99,973.0
12Berkshire Hathaway 98,539.0
13 Verizon Communications 93,221.0
14 Hewlett-Packard 91,658.0
15 Intl. Business Machines 91,424.0
16Valero Energy 91,051.0
17Home Depot 90,837.0
18McKesson 88,050.0
19Cardinal Health 81,895.1
20Morgan Stanley 76,688.0
21 UnitedHealth Group 71,542.0
22 Merrill Lynch 70,591.0
23 Altria Group 70,324.0
24 Goldman Sachs Group 69,353.0
25 Procter & Gamble 68,222.0
26Kroger 66,111.2
27 AT&T 63,055.0
28 Boeing 61,530.0
29 AmerisourceBergen 61,203.1
30 Marathon Oil 60,643.0
31State Farm Insurance Cos 60,528.0
32Costco Wholesale 60,151.2
33Target 59,490.0
34 Dell 57,095.0
35 Wellpoint 56,953.0
36Johnson & Johnson 53,324.0
37MetLife 53,275.0
38Sears Holdings 53,012.0
39Pfizer 52,415.0
40Dow Chemical 49,124.0
41Wells Fargo 47,979.0
42United Technologies 47,829.0
43United Parcel Service 47,547.0
44 Walgreen 47,409.0
45Lowe's 46,927.
46 Wachovia Corp. 46,810.0
47 Lehman Brothers Holdings 46,709.0
48 Time Warner 44,788.0
49 Microsoft 44,282.0
50Freddie Mac 44,002.0