Month: March 2013
Georgia’s central bank cut its benchmark refinancing rate by 25 basis points to 4.50 percent, its second rate cut this year, saying it had cut its inflation projection and now forecasts inflation to remain below the bank’s target throughout this year and first approach it in the second half of 2014.
The National Bank of Georgia, which started its monetary easing cycle in July 2011, said economic activity weakened at the end of last year, and lower demand is pushing the price level downwards.
A slowdown in the growth of imports in January and February is another indication of a slowdown in domestic demand, the bank said.
Georgia’s consumer price inflation continued to drop in February as deflation maintained its grip on Georgia. Inflation was minus 2.12 percent in February, slightly up from January’s minus 1.6 percent.
Since February 2012, the inflation rate has only been positive in two months, October and July, with inflation rates of 0.56 percent and 0.1 percent, respectively.
The central bank said its forecasts for inflation had dropped since the last meeting of its monetary policy committee, which targets inflation of 6 percent.
Georgia’s central bank cut rates by 150 basis points in 2012 and has now cut by 75 basis points this year following a 50 basis point reduction in February.
The central bank said the economy expanded by an annual 2.8 percent in the fourth quarter and credit activity remains weak due to low demand for loans, leading to a slowdown in demand.
“Low credit activity also weakens the interest rate channel of monetary transmission,” the central bank said.
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Romania’s central bank held its policy rate steady at 5.25 percent, saying inflation is expected to continue to follow a downward trend due to a persistent negative output gap and reach the ceiling of the central bank’s inflation target by the end of this year.
The National Bank of Romania (NBR), which has held rates steady since a 25 basis point cut in March 2012, said annual inflation fell to 5.65 percent in February from January’s 5.97 percent. The adjusted core2 inflation rate was 3.1 percent in February, just below January’s 3.2 percent.
The NBR targets annual inflation of 2.5 percent, plus/minus one percentage point.
Romania’s Gross Domestic Product expanded by 0.1 percent in the fourth quarter from the third for annual growth of 0.3 percent, up from a 0.3 percent contraction in the third quarter.
The central bank said a widening of the negative output gap had slowed in the fourth quarter and monetary indicators point to lending to the private sector to remain in negative territory, as in the euro area and in most countries in this region.
“As domestic political and financial tensions eased, the NBR carefully calibrated the monetary policy instruments, also by shifting from firm to adequate liquidity management, which led to an improvement of liquidity conditions on the money market and hence drove interbank rates considerably lower,” the central bank said.
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Line, the Asian chat app that reached 100 million users about three times faster than Facebook, is putting growth before profit to take on the US social-networking giant and Twitter Inc. in their own backyard.
With 38 per cent of its users in Japan, developer NHN Japan is honing plans to expand Line’s reach, setting up a US marketing team and planning joint promotions and content- delivery agreements with local companies. NHN Japan is still at an investment phase as it targets as many as 1 billion customers globally, said Jun Masuda, chief strategy and marketing officer.
“This year, we want to capture North America,” Masuda said. “We’re not focused on being in the black. It isn’t time to cash in yet.”
Known for cartoon characters and other “stickers” that users can include in chat messages, Line is among several apps from Asia challenging Facebook, Twitter and Microsoft’s Skype as a way of communicating via mobile devices. South Korea’s KakaoTalk is looking to Vietnam and Indonesia to expand past 82 million users; China’s WeChat has about 300 million.
Line reached the 100 million-user mark 19 months after its June 2011 debut, compared with 49 months for Twitter and 54 months for Facebook, according to NHN Japan.
Line has features, such as group messaging, that make it stand out as an alternative to Facebook, said Tom Taulli, an independent analyst who covers initial public offerings. Still, incumbent chat providers are robust enough to keep from losing many users to Line, said Clark Fredricksen, a researcher at EMarketer Inc.
“In the U.S., things are clearly evolving in the direction of instant messaging and chat, and having a mobile experience across devices is important,” Fredricksen said. “There’s clearly an opportunity, but also major platforms that are big enough and innovative enough could head off any threat from a foreign competitor.”
Parent NHN Corp., operator of South Korea’s biggest search engine, has gained about 40 per cent in Seoul trading since June 1, 2011, against an 8.9 per cent drop in the benchmark Kospi index. Facebook is down 32 per cent since its May 18 debut.
“NHN is trying to carve out a niche market in the US and Europe,” said Park Dae Up, a Seoul-based analyst at Dongbu Securities Co. “Making big strides is difficult in those developed markets, where Facebook and Twitter already dominate. It’s trying to be a significant second-tier player.”
Facebook, based in Menlo Park, California, had more than 1 billion monthly active users as of December, with 82 per cent of them outside the U.S. and Canada, according to the company’s website. Twitter, based in San Francisco, surpassed 500 million user accounts in June, including about 140 million in the US, according to a report by Semiocast, a research company.
WhatsApp, based in Santa Clara, California, has seen its mobile messaging app downloaded by more than 100 million users of Android phones, Neeraj Arora, a spokesman for the company, said in an e-mail. It’s seeking to add more users of Apple devices by offering unlimited service for $1 a year, he said.
Line, with services including free voice calls, is available to users of Google Inc.’s Android, iPhone, Windows Phone and Research in Motion Ltd.’s BlackBerry operating systems as well as personal computers. The app has topped Apple’s rankings of free downloads in 41 countries, according to NHN.
When the app hit 120 million users on March 9, about 45 million accounts were in Japan and 15 million each were in Taiwan and Thailand, according to NHN. The company doesn’t disclose numbers for other markets.
Part of the reason Line and free messaging service KakaoTalk have been successful in Asia may be that users in the region are particularly concerned about privacy, NHN’s Masuda said. While Facebook is known for its status updates and Twitter for its posts, the Asia-developed chat applications are mainly focused on person-to-person messages.
“There is a need for closed and private communication,” Masuda said.
Asian consumers are also more accustomed to paying for apps and services than those in Western markets, he said. While Line’s basic service is free, it earns revenue by selling stickers and from games and corporate accounts, he said.
NHN is nonetheless betting Line’s global appeal will grow. While it hasn’t set an official target, the company wants to grow to 500 million or 1 billion users in two to three years, Masuda said.
‘At Any Cost’
“We want to spread throughout the world at any cost,” Akira Morikawa, president of NHN Japan, said in a speech in Tokyo last week.
The company said Feb. 26 it teamed up with Nokia Oyj to make Line available on the Espoo, Finland-based company’s Asha mobile devices. The release is scheduled for this month in China, Malaysia, Indonesia, Thailand, Vietnam, the Philippines, Cambodia, Taiwan, Hong Kong, Singapore, Australia and New Zealand, Line said in a statement on its website.
In addition to selling stickers, Line plans to develop new services and may generate future sales by becoming a marketing platform for companies, Masuda said. The company doesn’t disclose sales or profit.
Line’s strategy of growing first and making a profit later may prove difficult, said Mitsushige Akino, a fund manager in Tokyo at Ichiyoshi Investment Management Co.
“NHN says they’re in a value-building stage, but while they keep saying that, many similar services may emerge,” Akino said.
Any competitor can offer games, stickers and a place for advertisements, so holding onto users will require fresh, new ideas, he said.
KakaoTalk has more than doubled its users since January 2012, says developer Kakao Corp., based together with NHN Corp. (035420) in Seongnam, outside Seoul.
WeChat, a messenger app from Shenzhen-based Tencent Holdings Ltd. (700), China’s largest Internet company, said it had more than 300 million registered user accounts as of Jan. 21, two years after starting the service. The company has formed a team to study possible expansion in the U.S., Jerry Huang, a director, said in a Feb. 25 e-mail.
WeChat has the potential to reach at least 400 million users this year, Alicia Yap, an analyst at Barclays Plc in Hong Kong, said in a March 13 report.
“Even after they become big, Line still needs to create a model that makes users spend money,” Akino said. “I think that’ll be difficult.”
NHN, which said last month it will spin off Line, may list the new company in Japan late next year, Korea Economic Daily reported March 18, citing unidentified bankers.
“We don’t lack funds,” Masuda said, adding that there were no plans for an initial public offering at the moment.
The company is spending 250 billion won ($224 million) marketing the app this year, more than double last year’s amount, Jay Park, a Seoul-based analyst at Samsung Securities Co., said in a Feb. 25 report. He estimates Line’s value at 7.9 trillion won, about 11 percent of Facebook’s $61.6 billion market capitalization.
“We expect Line to boast more than 300 million subscribers by end-2014,” Park said. “Although some are concerned over a sharp rise in Line-related marketing costs, we believe it is essential to carving out a share of a market.”
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India has the third largest base of internet users in the world, with a growing ‘digital high value’ consumer segment. According to a research report by Aviva and IMRB (Indian Market Research Bureau), India’s online search for financial services has grown four times in the last three years.
The survey was conducted across customers living in top 8 cities with annual incomes of Rs 6 lakh and above. These are customers who use internet atleast once in two weeks and have purchased a life insurance policy online in the last one year.
According to the report, almost 13 million searches a month are related to insurance. Within the segment of insurance, most internet users researched about retirement and pension related products.
The report further elaborates that some while some people research for financial products online, most of them still end up buying products offline. Reason: Offline mode of buying insurance is driven by assurance resulting in better credibility and perceptions.
Maximum sales of life insurance still happens through the offline mode. For instance, over 65% of the internet users bought health and life insurance products offline.
While the traffic of internet users is increasing year on year, what is stopping them from actually buying products online? According to the survey, physical absence of an agent holds back most customers in buying the product online.
Additionally, insurance being a complex product, customers feel it is important to have an agent explain the product or insurance policy. 21% of the internet users opine that, they avoid buying an insurance policy online because they don’t know the claim procedure. Reason: If you buy a policy offline, your insurance agent will act as an intermediary and help you in settling your claims
However, one should know that an insurance agent will only push product of a single company. hence, its important you do your search online, compare products and buy products accordingly.
Still, these are customers who contribute one third of their savings pool online. Additionally, some 27 million professionals hold a disproportionate part of the savings pool online.
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Egypt’s central bank raised its key interest rates by 50 basis points, saying inflationary expectations are more harmful to the economy over the medium term despite the risks to the outlook for growth.
The Central Bank of Egypt (CBE), which last raised rates in November 2011, said it was closely monitoring all economic developments and would not “hesitate to adjust the key CBE rates to ensure price stability over the medium‐term.”
Egypt’s headline consumer price inflation rose by a monthly 2.5 percent in February – the highest monthly rise since August 2010 – to an annual rate of 8.21 percent due to broad increases in food and non-food prices on the back of changes in the exchange rate and dielsel distribution bottlenecks across the country, the central bank said.
“While the probability of a rebound in international food prices is less likely in light of recent global developments, the re‐emergence of local supply bottlenecks and distortions in the distribution channels pose upside risks to the inflation outlook,” the CBE said, adding:
“Despite the downside risks to the GDP outlook, the MPC judges that disanchored inflation expectations are more detrimental to the economy over the medium term. Hence, a rate hike is warranted.”
The CBE raised its overnight deposit rate by 50 basis points to 9.75 percent, the overnight lending rate to 10.75 percent and the main operation rate to 10.25 percent. The discount rate was raised by 75 basis points to 10.25 percent.
Egypt’s Gross Domestic Product expanded by 2.2 percent in the fourth quarter from the third quarter for annual growth of 2.2 percent, down from 2.5 percent in the third quarter.
The central bank said economic growth was suppressed by continuing weakness in the manufacturing sector and investment is low given heightened uncertainty.
“While the slowdown in economic growth has been limiting upside risks to the inflation outlook, there is a possible build‐up of upward pressures on inflation going forward for the previously mentioned reasons,” the CBE said.
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South Africa’s central bank held its benchmark repurchase rate steady at 5.0 percent, saying its policy stance is “appropriately accommodative” given the economy’s negative output gap and events in Cyprus that could further undermine growth prospects. This is balanced against inflationary risks.
The South African Reserve Bank (SARB), which has been in an monetary easing cycle since December 2008, said the global economy was still characterised by a multi-speed recovery, with recent events in Cyprus increasing risk and uncertainty in Europe with “the potential to reignite the banking and sovereign debt crises and undermine growth prospects further.”
In addition, the global outlook is clouded by fiscal gridlock in the United States, the bank said.
South Africa’s growth prospects are subdued despite a better-than-expected fourth quarter GDP with the bank raising its 2013 forecast to 2.7 percent, from a previous forecast of 2.6 percent, but cutting its 2014 forecast to 3.7 percent from 3.8 percent.
South Africa’s Gross Domestic Product bounced back to a 2.1 percent growth in the fourth quarter from the third for annual growth of 2.5 percent, up from 2.3 percent in the third quarter.
For the full 2012 year, South Africa’s growth eased to 2.5 percent, despite a 9.3 percent contraction in the mining sector, from 3.5 percent in 2011.
The SARB, which cut rates by 50 basis points in 2012, estimates the economy’s potential output growth at 3.5 percent and the important mining sector bounced back with annual growth of 7.3 percent in January.
“Nevertheless the (mining) sector is expected to remain under pressure given the unsettled labour relations environment,” the SARB said, adding that the unresolved labour disputes pose a significant risk to the exchange rate and economic growth.
However, a lower rand exchange rate provides an opportunity for the country’s manufacturing sector to become more globally competitive but to sustain this will require improved productivity and containment of wages and other cost, which underlines the need to control inflation, the bank said.
South Africa’s consumer price inflation rate for all urban areas rose to 5.9 percent in February from 5.4 percent in January, mainly due to higher medical insurance costs, hitting core inflation which rose markedly to 5.3 percent from 4.7 percent.
Incorporating the new CPI weights, a rebasing and lower electricity prices, the SARB forecasts inflation to average 5.9 percent in 2013 and 5.3 percent in 2014 compared with previous forecasts of 5.8 and 5.2 percent.
In the third quarter of this year, inflation is expected to temporarily breach the bank’s upper target range, with prices averaging 6.3 percent and then easing to 5.2 percent in the final quarter.
“This deteriorating is largely due to the depreciation of the rand and higher petrol prices, which more than offset the impact of the lower electricity price increases and lower starting point,” the bank said.
In 2012 inflation averaged 5.6 percent, in the upper end of the central bank’s 3-6 percent target.
“The MPC continues to assess the balance of risks to the inflation outlook to be on the upside, mainly due to the exchange rate and wage pressures,” the SARB said, adding underlying inflation appears to be relatively contained and there is lower risk from food price inflation.
The government’s projected deficit for the past fiscal year of 5.7 percent of GDP is wider than initially budgeted due to lower revenue from weaker growth and for the 2013/14 fiscal year it is budgeted at 5.1 percent, declining to 3.6 percent by 2015/16.
Earlier this month the Organisation for Economic Co-operation and Development (OECD) recommended that SARB cut interest rates despite rising inflation to support the economy while taking steps to prevent the rand from becoming overvalued.
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