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A lost decade for investors?

2011-10-27T12:51:00.000-07:00

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27 September 2011 Last updated at 07:46 GMT By Gemma Godfrey Investment committee chairman, Credo Capital Gemma Godfrey: there is an investing "sweet spot" Over the past 10 years, investors have experienced a stark divergence of fortunes, with some making substantial amounts of money whilst others have suffered losses.

Timing, picking the right investments and employing the right strategy have determined their fate.

When investing, timing can be crucial. You make money if you buy something when it is cheap and sell it when it is perceived to be more valuable. If you buy the same object when its price is high, making a profit will be that much harder.

In the run up to the year 2000, investors bought shares in technology companies to such an extent that values predicted firms would make unrealistic profits. This 'bubble' burst and the stock market fell. September 2001, the start of our 10 year period, lies within this period of selling. Therefore, together with the fall from the financial crisis in 2008, losses were enough to offset the substantial gains achieved in the seven years between these events.

Investing in the 'sweet spot'

An initial investment of ￡100 in the FTSE 100 (the index of the 100 largest companies listed in the UK), would have fallen in value by 4%, returning only ￡96 all these years later.

This return hides a huge divergence of fortunes. Firstly, when choosing the size of the firm in which to invest, there appears to have been a 'sweet spot' for medium-sized firms in the FTSE 250 (the next 250 companies after the largest 100 listed on the London Stock Exchange) - small enough to grow substantially, but large enough to have weathered the storms.

Secondly, the sector. The shares of companies selling basic materials almost tripled in value over the past decade, in contrast to those of financial firms, which lost half the initial investment. The belief driving these moves was that certain materials (for example copper and iron) have become harder to mine and produce, making their producers more valuable. In contrast, banks have suffered from loan defaults, bankruptcies and increased regulation, which have all hurt profits.

Thirdly, the geographic focus. Whilst investing in UK, US or European companies on the whole produced meagre returns or losses, investing in the developing markets of China, Russia or Brazil generated astounding returns; Brazil stands out with a gain of 578%.

Basic Materials outpaced the FTSE 250, while the FTSE 100 did better than financial shares Reinvesting is key

Short-term investment decisions have had as much of an impact as choosing where to place money for the longer term.

During our investment timeline, many companies regularly paid a portion of their profits to shareholders, so-called dividends. How an investor used this payment strongly dictated how much money they made.

If it was re-invested back into the stock market it continued to generate returns, if it was put into their bank account it did far less.

The MSCI World Equity index - boosted by reinvesting returns, lagging when taking out the money Wealth of opportunity

There are other assets an investor could have bought apart from shares, some of which performed far better and greatly enhanced the amount of money made over this period.

Lending to governments or companies in developing countries proved highly profitable, with relatively large interest payments made to the lender (i.e. the investor) until the loan was repaid.

Another interesting investment was property, which in general provided investors with highly attractive returns over the past decade, even after the sharp correction during the recent recession.

Finally, hedge funds, like investors, have had a mixture of fortunes. With focus on different markets, some have made staggering returns whilst others are still nursing losses.

Interestingly, it has not been worthwhile to bet on a falling market. Money managers lost money if they focused solely on making a profit when certain investments fell in value.

Unsurprisingly, fund managers with investments in emerging markets (like Brazil, Russia and China) almost tripled their initial investments.

When investing, during the past decade it paid to be particular.

Brazil was the top performer; hedge fund investments in emerging markets were runner up; government bonds did well; the S&P Global Property index provided returns; UK stocks were lagging

Gemma Godfrey is a quantum physicist, former hedge fund manager and now chairman of the investment committee of wealth management firm Credo Capital.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.

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Greek bailout cash decision looms

2011-10-27T09:07:00.000-07:00

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28 September 2011 Last updated at 08:59 GMT Greeks continue to protest against the latest round of austerity measures European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) officials are heading for Athens to review Greece's progress in cutting its debt levels.

They hold the key to releasing further bailout money the country badly needs.

On Tuesday, Greek Prime Minister George Papandreou hailed his country's "superhuman" efforts to cut its budget.

The review comes amid reports of a split among eurozone members about further support for Greece.

Citing "senior European officials", the Financial Times said a number of the bloc's 17 members want private investors to take a bigger hit in the proposed restructuring of Greece's debts.

Eurozone members are in the process of ratifying proposals put forward in July, one of which would see private lenders writing off about 20% of their loans to Greece.

The proposals also included expanding the powers of the eurozone bailout fund.

Continue reading the main story Mark Lowen BBC News, Athens

It has become the focal point of the anti-austerity demonstrations: Syntagma Square in the heart of Athens, in front of parliament.

A few hundred protesters gathered there again as the property tax was debated inside. They chanted "resist", calling politicians "thieves".

As news filtered out that the vote was passed, the mood turned. Protesters scuffled with riot police, who used tear gas and pepper spray to disperse them.

For an hour the trouble continued, police charging the crowds across the square and into the narrow streets beyond. Some projectiles were thrown, battered away by the police. As the night wore on, calm returned.

Anger is growing here at the austerity drive, with the property tax one of the most unpopular measures to date. And while the government has a tough time convincing its international creditors to stick with it, facing down an increasing wave of protests will be an immense challenge too.

Germany will vote on the plan on Thursday.

Meanwhile, the head of the European Commission has stressed that Greece will not leave the eurozone. There has been growing speculation that the country will be forced to default on its debts, with some observers suggesting this would inevitably lead to it exiting the bloc.

However, in his annual State of the Union address in Strasbourg, Jose Manuel Barroso said: "Greece is, and Greece will remain, a member of the euro area."

He did, however, warn that the EU was facing its "greatest challenge".

There has been widespread criticism that leaders are acting too slowly in pushing through measures to address the wider debt crisis.

Jean-Claude Trichet, the head of the ECB, has called on governments to speed up their policy response.

He told the Italian newspaper Corriere della Serra that leaders needed "to demonstrate their sense of direction", and do so quickly.

Deficit cut

Commission, ECB and IMF officials will decide whether to release about 8bn euros ($11bn; ￡7bn) from a 110bn bailout package agreed last summer.

Discussions with Greek officials are expected to begin on Thursday.

A key obstacle to the payment was removed on Tuesday when the Greek parliament passed a controversial new property tax bill, first announced earlier this month, that aims to boost revenues.

Greece's new property tax has proved particularly unpopular

Anyone who does not pay the new tax risks having their power cut off.

The tax is one of a number of austerity measures Athens is introducing, measures that saw Greece's budget deficit fall by more than 5 percentage points in 2010, Mr Papandreou said in a speech to German business leaders on Tuesday.

Speaking in Berlin, he said Greece would fulfil its obligations and hoped to be without a primary deficit from 2012.

He added that it was very important his country gets indications of support from "our European partners".

Renewed hope

There has been renewed optimism this week that eurozone leaders may finally be ready to take decisive action to tackle the debt crisis.

G20 leaders met over the weekend to discuss the best way forward, but EU officials stressed that no grand plan of action had been agreed.

A number of ideas were reportedly discussed, including a 50% write-down of Greece's government debts.

Other proposals included strengthening big European banks that could be hit by any defaults by highly indebted governments, and boosting the size of the eurozone bailout fund.

These helped to boost investor sentiment, with stock markets rising sharply on Tuesday.

The Dow Jones in New York closed up 1.3%, while France's Cac index ended up 5.7%, Germany's Dax 5.3% and the UK's FTSE 4%.

Asian and European markets were largely flat on Wednesday.

However, markets remain highly volatile, with investors remaining sceptical of policymakers' ability to solve the crisis quickly.

"Every time the market gets its hopes up that a solution to the eurozone crisis is near, the rug gets pulled from under it," said Ben Potter at IG Markets.

"Only when we see firm action being taken, rather than hollow promises, will confidence and sentiment begin to improve."

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Shell Singapore fire 'contained'

2011-10-27T05:21:00.000-07:00

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29 September 2011 Last updated at 04:27 GMT The refinery is on Bukom island about five kilometres away from Singapore's mainland Royal Dutch Shell said a fire that broke out at a refinery in Singapore - its biggest globally - has been contained.

The fire started on the plant on Bukom island, five kilometres off Singapore, on Wednesday and affected a unit that helps make diesel fuel.

Shell said it is shutting down units at the refinery as a precaution.

Singapore is a trading hub and analysts said a prolonged shutdown could tighten supplies.

Shell said that, while the fire was contained, firefighters were still working to completely extinguish it.

It also said an inquiry would be forthcoming

"We believe it was an accident," the company said in a statement. "A full investigation will be conducted once the fire is put out."

Trading centre

Shell shut down a hydrocracker at the refinery, which will affect gas oil and jet fuel production. All crude units were also operating at reduced rates.

Capacity at the Bukom plant is 500,000 barrels a day.

The fire hit at a time when refiners around Asia are already running near full capacity to meet demand.

Singapore is the world's largest market for fuel oil and Asia's hub for crude and refined product trading.

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Knowledge economy: Global best school buildings

2011-10-27T00:50:00.000-07:00

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4 October 2011 Last updated at 23:30 GMT

Photos from around the world on 4 October

Court overturns convictions of Knox and Sollecito

Attack in the Somali capital, Mogadishu

Hundreds camp out in New York's financial district

Libyan transitional authority troops ceasefire

Anti-Wall Street protest march

Nalgae makes landfall in Philippines

A selection of pictures from this week's news

Anti-Gaddafi fighters capture Sirte airport

Photos from around the world on 29 Sept

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Nokia to cut another 3,500 jobs

2011-10-26T20:58:00.000-07:00

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29 September 2011 Last updated at 12:21 GMT Nokia has been slower than rivals to take advantage of the lucrative market for smartphones Mobile phone giant Nokia is to cut 3,500 jobs and close a plant in Romania as part of its restructuring plan.

The cuts are in addition to thousands of job losses already announced by Nokia, which in April unveiled a 1bn-euro cost-cutting programme.

Nokia said it would shut its plant in Cluj, Romania, and cut jobs in its location division, whose products include maps for mobile phones.

It is also reviewing the future of plants in Finland, Hungary and Mexico.

"We must take painful, yet necessary, steps to align our workforce and operations with our path forward," said chief executive Stephen Elop.

Nokia shares have almost halved this year and opened down 1.7% on Thursday, but staged a recovery and were 1% up by midday.

"Nokia plans to close its manufacturing facilities in Cluj, Romania, by the end of 2011... and plans to close its (locations and commerce development) operations in Bonn, Germany and Malvern, US," by the end of next year, the company statement said.

Geoff Blaber, analyst at CCS Insight, said: "The scaling back of its manufacturing presence was sadly inevitable but it's clear that Elop is not afraid of taking the tough decisions to ensure Nokia's long-term survival."

Nokia's statement said the company would look to "focus its feature phone manufacturing on those locations with optimal proximity to suppliers and key markets".

Some analysts interpreted this as a signal that Nokia could shift manufacturing to Asia.

"If you think about where the markets are, the growth markets are in Asia, and it makes sense to manufacture a product close to the customer," said Pohjola Bank analyst Hannu Rauhala.

In July, the company plunged into the red as sales fell and margins were squeezed in the second quarter.

The firm made a net loss of 368m euros ($521m; ￡323m) in the three months to the end of June, compared with a profit of 227m euros a year earlier. Net sales fell by 7% to 9.3bn euros.

Nokia has lost ground to competitors such as Apple's iPhone and phones using Google's Android operating system.

Earlier this year, Nokia announced 7,000 job cuts worldwide - with 3,000 of the posts being transferred to consultancy group Accenture - as part of strategy to focus on smartphones.

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Eurozone rates unchanged at 1.5%

2011-10-26T17:27:00.000-07:00

October 6, 2011, last updated : 52 BST resignation of President Jean-Claude Trichet as the Bank's Central Europe European Central Bank left interest rates unchanged amid the ongoing crisis in the eurozone debt.

Benchmark rates were held at 1.5% in the third, after growing from 1.25% in July in an attempt to cool inflation.

Earlier, the Bank of England of British kept interest rates hold at 0.5%, but for quantitative re-started.

The decisions come from intensive European leaders beyond speculation does recapitalise banks.

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Morning business round-up

2011-10-26T14:08:00.000-07:00

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6 October 2011 Last updated at 11:04 GMT What made the business news in Asia and Europe this morning? Here's our daily business round-up:

Continue reading the main story Last Updated at 11:57 GMT

Market indexCurrent valueTrendVariation% variationStock markets across Europe have been boosted by expectations that EU leaders are about to act to ease the debt crisis.

The main markets in London, Frankfurt and Paris were about 2% up, after Hong Kong closed 5.6% higher.

European Commission President Jose Manuel Barroso said in a television interview that there were plans for co-ordinated action to recapitalise banks.

In the UK, the Bank of England has said it will inject a further ￡75bn into the UK economy through quantitative easing (QE).

The Bank has already pumped ￡200bn into the economy by buying assets such as government bonds, in an attempt to boost lending by commercial banks.

But this is the first time it has added to its QE programme since 2009. There have been recent calls for it to step in again to aid the fragile recovery.

The Bank also held interest rates at the record low of 0.5%.

European aircraft maker Airbus has struck a deal worth $9.5bn (￡6.2bn) with Australia's Qantas for 110 jets.

The order, said by Qantas to be the country's single largest aircraft purchase by units, will underpin the airline's expansion into Asia.

Qantas, which is launching a low-cost and a premium airline in Asia, is buying 78 Airbus 320neos and 32 A320s.

Eleswhere in Asia, there are reports that many Chinese private sector enterprises are facing bankruptcy because of credit tightening and an explosion in informal lending.

In the eastern city of Wenzhou, one-fifth of the city's 360,000 small and mid-sized businesses have stopped operating due to cash shortages, China's official news agency Xinhua reported on Thursday.

Business headlines

And shares of Citic Securities have fallen on their debut at the Hong Kong stock exchange as market volatility continues to dent investor sentiment.

Its shares fell by as much as 10% in early trade to HK$11.90 from an offer price of HK$13.30.

Citic securities, China's largest listed brokerage had sold 995.3m shares raising HK$13.2bn ($1.7bn, ￡1.1bn).

Many Chinese firms have recently cancelled or postponed their proposed listing on the exchange.

Meanwhile, the state of the UK housing market has been under scrutiny. House prices are "lacking genuine direction", according to the Halifax, as it reported a 0.5% fall in values in September compared with August.

Prices were down 2.3% from a year ago, leaving the average home in the UK worth ￡161,132 ($249,560), the lender said.

The latest edition of Business Daily from the BBC World Service looks at the legacy of Steve Jobs, founder of Apple Computers, who died on Wednesday aged 56.

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VIDEO: China currency vote: US view

2011-10-26T09:26:00.000-07:00

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3 October 2011 Last updated at 00:27 GMT Help

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Mongolia and Rio reach stake deal

2011-10-26T06:20:00.000-07:00

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7 October 2011 Last updated at 05:09 GMT Resource-rich Mongolia has attracted many foreign investors Mongolia and mining giant Rio Tinto and Ivanhoe have reached an agreement on stakeholding of the Oyu Tolgoi project in the resource-rich country.

The Mongolian government had sought to increase its stake in the mine to 50% from 34% as previously agreed.

The mining companies had said that the government should honour an original agreement signed in 2009.

When completed, the project is expected to be one of the biggest copper mines in the world.

According to the initial agreement, Mongolia government could renegotiate its stake after a period of 30 years.

However, the authorities had wanted to bring forward the negotiation period, a move that did not go down well with the miners as well as industry analysts.

In a joint statement released on Wednesday, they said "all parties have reaffirmed their continued support for the investment agreement and its implementation".

Shares of Ivanhoe rose as much as 18% on the Toronto Stock Exchange.

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Pension talks yield 'no progress'

2011-10-26T02:37:00.000-07:00

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6 October 2011 Last updated at 00:19 GMT TUC secretary general Brendan Barber has said the sides are a long way apart Talks between ministers and union chief Brendan Barber over public sector pension reform have resulted in no progress, sources have told the BBC.

TUC chief Mr Barber met Cabinet Office minister Francis Maude for impromptu private talks at the Conservative conference in Manchester this week.

Unions are balloting members for strike action on 30 November over plans to increase contributions from employees.

The next round of face-to-face talks is due on 24 October in London.

A source close to Mr Barber said he used the impromptu meeting to again urge the government to "give a degree of confidence that they are serious about maintaining sustainable public service pensions in the future".

'Groundhog day'

Unions say the changes are unfair and financially unnecessary. Ministers insist that pension contributions must be increased to make schemes sustainable.

In recent weeks Mr Maude has described the talks as "like Groundhog Day", with no progress being made.

Both sides have previously insisted they are committed to resolving their differences through talks but the BBC understands the latest meeting again yielded little.

Mr Barber also met Chancellor George Osborne at a party during the conference, although it is unclear whether the issue of pensions was discussed.

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Trading in Dexia shares suspended

2011-10-25T23:07:00.000-07:00

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6 October 2011 Last updated at 17:01 GMT Dexia is reported to be selling its Luxembourg business to Qatar for 900m euros Trading of shares in Dexia has been halted by the Euronext stock exchange.

The stop was requested by the Belgian regulator until the troubled Franco-Belgian bank could provide details of a planned sale of its Luxembourg unit.

Its shares had fallen 17.3% during the day up until trading was suspended.

Meanwhile, the French and Belgian governments are negotiating a break-up of the bank - and how to share the cost of rescuing it between them - with a decision expected before the weekend.

Qataris

Dexia has confirmed it is in "exclusive negotiations" with a group of international investors to dispose of Dexia Banque Internationale a Luxembourg (BIL).

The subsidiary employs about 5,500 staff worldwide, 3,700 of whom are based in Luxembourg.

It runs a 40-branch retail network in the country, as well as offering private banking and asset management services.

Continue reading the main story The key buyer is reported to be the Qatari Investment Authority, the country's sovereign wealth fund.

Reports say it may pay 900m euros ($1.2bn, ￡785m) for control of the Dexia unit.

It follows an announcement in August that the Qataris were to become a major shareholder in the merger of two Greek lenders, Alpha Bank and EFG Eurobank.

The government of Luxembourg is also in talks to buy a minority stake. The country's finance minister, Luc Frieden, said he expects discussions to be completed by the end of the month.

Break-up

Dexia is facing its second rescue in three years because of the eurozone debt crisis.

The firm has 3.4bn euros ($4.5bn, ￡2.9bn) of exposure to Greek government bonds, and about four times that amount to Italian sovereign debt.

Ratings agency Moody's put the lender on review for a credit score downgrade on Monday. It said the bank was finding it harder to borrow from the markets.

The news led to a sell-off of Dexia's shares, prompting France and Belgium to announce they would prevent its collapse.

The governments are expected to pool its most risky assets into a "bad bank" and force it to sell off units that provide vital services, including a French division that specialises in lending to local authorities.

Belgium's Prime Minister said the burden must be divided fairly.

Yves Leterme told RTL radio: "This is a very sensitive and crucial part of the negotiations, an equitable split of the costs."

The two countries are expected to finalise the plan before the weekend.

Dexia's board says it intends to meet in Paris on Saturday to vote on the break-up.

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Felixstowe opens new port berths

2011-10-25T18:31:00.000-07:00

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28 September 2011 Last updated at 13:18 GMT By Richard Scott Transport correspondent, BBC News A look at the new mega-berths

The Port of Felixstowe has formally opened the UK's first shipping berths capable of taking the next generation of giant container ships.

The ships, which are due to arrive in 2013, can carry 18,000 containers.

But they need deeper water to dock, and bigger cranes to be unloaded than are needed for the current biggest ships.

Felixstowe, in Suffolk, says 1,500 new jobs will be created by its expansion plans - 680 directly employed by the port, with another 820 at suppliers.

Import issues

Some 90% of the UK's trade passes through ports. Almost everything we buy that isn't perishable of small and high value comes in on ships.

Felixstowe is the UK's largest container port and deals with more than 40% of our container cargo.

But container ships are getting bigger, and that gives ports a problem.

So Felixstowe has built the only berths in the UK capable of taking the next generation of cargo ships.

The biggest ships in use at the moment can carry around 15,000 containers (TEUs or twenty foot equivalent units) but in 2013 ships capable of carrying 18,000 containers are due to arrive.

The port has dug two deep water berths - numbers 8 and 9 - to accommodate them, as well as bought seven of the world's largest container cranes. These cost ￡6m each.

"Failure to provide facilities for the new container ships would mean the world's most efficient ships could not dock in the UK, driving up the cost of imports and making UK exports less competitive," said David Gledhill, chief executive of Hutchison Ports UK, which owns the port.

'Essential'

The opening of the two new berths is the first stage of a ￡1bn investment programme.

The next generation container ships coming from Asia will only make three or four stops across Northern Europe - and Felixstowe is expecting to be on their calling cards.

"During the last decade many exporters concentrated on the European market, however, economic growth in Europe has slowed considerably, whilst growth in East Asia has accelerated," said John Cridland, director general of the CBI.

"It is therefore essential that the UK is able to export and import goods on a global basis and the expansion at Felixstowe will be a key asset in achieving this."

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VIDEO: IMF warns on drastic budget cuts

2011-10-25T13:57:00.000-07:00

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5 October 2011 Last updated at 15:13 GMT Help

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Oil firm resumes Libya operations

2011-10-25T10:10:00.000-07:00

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26 September 2011 Last updated at 13:50 GMT Libya's refineries were mostly closed in March, when fighting intensified Italian oil firm Eni has restarted production at an oil field in Libya, as opponents of Col Muammar Gaddafi tighten their control on the economy.

Eni, which was the biggest foreign oil producer in Libya before Col Gaddafi was overthrown, said it planned to reopen other fields in the coming days.

Other firms, including French company Total, have also restarted operations.

Meanwhile, anti-Gaddafi forces are closing in on his hometown of Sirte, one of his few remaining strongholds.

The soldiers, loyal to the National Transitional Council (NTC), launched a surprise attack on the city on the weekend.

The BBC's Alastair Leithead, near Sirte, says the troops have the city surrounded and are preparing to enter it with significant force.

Gaddafi loyalists have been fiercely protecting the city from NTC advances in recent weeks.

Eni said in a statement it has restarted production at 15 wells in the Abu Attifel oil field, about 300km (190 miles) south of Benghazi.

Slow recovery

The company said it was pumping 31,900 barrels of oil a day, compared with a rate of 70,000 barrels a day before the unrest broke out.

The wells were closed in March amid increasing violence between Gaddafi loyalists and rebels, who later formed the NTC.

France's Total announced last week that it had resumed production at its al-Jurf offshore facility, which is capable of producing 40,000 barrels a day.

And Libya's state controlled Arabian Gulf Oil (Agoco) announced earlier this month that it had started pumping 160,000 barrels of oil from fields in the east.

The country was producing 1.6 million barrels a day before the unrest began, making up the bulk of its wealth.

Experts say it is likely to take at least a year before anything close to those levels are reached again.

The NTC still has not found Col Gaddafi, who ruled the country for more than 40 years.

But several of his children and members of his inner circle have fled abroad.

His daughter Aisha fled to Algeria, and told journalists last week that her father was in good spirits and fighting alongside his supporters.

The Algerian newspaper El-Khabar reported on Monday that a group of Gaddafi supporters, possibly including Aisha, had now left the country for Egypt.

The report has not yet been confirmed.

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Chelsea make stadium shares bid

2011-10-25T07:03:00.000-07:00

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Chelsea played their first home game at Stamford Bridge back in 1905 Chelsea are a step closer to building a new stadium after making a bid to buy back parts of Stamford Bridge.

The club is still to decide whether to move, but cannot do so unless it regains ownership of the stadium's pitch and stands.

They are owned by Chelsea Pitch Owners - formed in 1993 to prevent the ground being bought by property developers.

"That threat has now gone under (Roman) Abramovich's ownership," insisted Blues chairman Bruce Buck.

Buck and chief executive Ron Gourlay have appealed to the 12,000 shareholders, who are mostly fans, to sell their 15,000 shares to the club for the price they paid in return for various incentives at any new stadium.

Each share cost ￡100 and Chelsea are hopeful they would not be held to ransom, insisting there was no room for negotiation.

Buck said shareholders were getting back far more than the land was worth when the 199-year lease on Stamford Bridge was taken into account.

He said: "Bear in mind that no-one bought these shares as a financial investment.

"Everyone bought these shares as a way of helping the club and they also bought them as mementoes and souvenirs.

"We think we're paying well over the odds."

The incentives for selling include a guarantee that Chelsea would only relocate within a three-mile radius of Stamford Bridge if the club did decide to move before 2020.

A decision on the bid is expected at a Chelsea Pitch Owners' general meeting on 27 October.

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Samsung forecast beats estimates

2011-10-25T02:58:00.000-07:00

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7 October 2011 Last updated at 06:35 GMT Falling demand and prices of flat-screen TVs have hurt profits at various electronics makers Samsung Electronics has issued a better-than-expected profit forecast for the third quarter as its handset business helped to offset falling demand for TVs and computer chips.

Samsung said it expected an operating profit of 4.2tn won ($3.5bn; ￡2.3bn) a 14% dip from a year earlier, but better than market projections of 3.5tn won.

Compared with the previous quarter, the projected profit is up 12%.

Samsung is the world's second-largest maker of mobile phones.

"Its telecommunications business is seen very positive as shipments of smartphones and other high-end handsets expanded," said Park Jong-Min of ING Investment Management.

Advantage Samsung? Analysts said they expected Samsung's handset business to keep growing robustly, not least due to the Apple's decision to upgrade its existing model of iPhone4 with new features and technology, rather than launch a new version.

Apple had been expected to launch an iPhone5 at a media event held earlier this week.

"Given Apple's relatively unchanged new iPhone, Samsung will have the opportunity to eat into Apple's market share with its hardware build-up and growing software power until next year," said Jang In-Beom of Bookook Securities.

Samsung has also been growing its presence in the tablet PC market.

Last month the Korean electronics manufacturer announced that sales of the Samsung GALAXY S II had crossed the 10 million mark, doubling from five million in just eight weeks.

'Major risk'

Despite the optimism about the growth potential of its handset business, analysts said that external factors remain a big threat to the company in the short to medium-term.

There have been concerns that a slowdown in the US coupled with the ongoing debt crisis in Europe may hurt global growth and dent consumer demand.

"The macroeconomic situation will remain a major risk for Samsung in the fourth quarter," said Ahn Seong-Ho of Hanwha Securities.

At the same time, there are fears that volatility in the currency markets may also have a bearing on its earnings.

The Korean won has fallen as much as 10% against the US dollar since the start of July.

A weaker won makes Korean goods cheaper for foreign buyers.

"The weakening won may have inflated third-quarter profits," said Kim Young-Chan of Shinhan Investment Corp.

However, Mr Kim added the exchange rate remained a threat to Samsung as any recovery in the won would have a counter effect.

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US services sector 'sheds jobs'

2011-10-24T23:15:00.000-07:00

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5 October 2011 Last updated at 15:04 GMT The three different surveys gave conflicting signals ahead of the official jobs data release on Friday Employment in the US non-manufacturing sectors may have fallen in September, a survey has suggested, although output growth remained steady.

The ISM non-manufacturing index, which tracks services and construction sector activity, fell to 53 from 53.3 in August. Levels above 50 imply growth.

But the survey's employment sub-index dropped to 48.7, indicating job losses for the first time in 12 months.

However, separate data suggested the US private sector was still adding jobs.

The ADP jobs report, which is compiled each month by a major US outsourcing firm, registered 91,000 new private sector jobs across the US economy as a whole in September, somewhat ahead of market expectations.

The bulk of those new jobs, according to the report, were in the service sector - which accounts for about 80% of all jobs in the US.

The clear discrepancy with the non-manufacturing sector survey conducted by the Institute of Supply Management may point to a jump in government-sector job losses, which would be included in the ISM index, but not in the ADP report.

"The most significant thing is the employment index which fell," said Anthony Nieves, chair of the ISM's survey committee.

"This is a very tell-tale sign for non-manufacturing, given how labor intensive this sector is. The drop in the employment index reflects the prevailing sentiment in the business community which is one of caution, hesitation and uncertainty."

Meanwhile a third report, by consultancy Challenger, Gray and Christmas, calculated that nearly 116,000 job cuts were announced last month - the highest rate since April 2009 - thanks largely to layoffs by Bank of America and the US military.

Official US jobs data for September is due to be released on Friday by the US Department of Labor, and is expected to show an increase of 60,000 jobs for the US economy as a whole.

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VIDEO: Human cost of Greek crisis

2011-10-24T18:15:00.000-07:00

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The people of Greece are now having to pay the price of past official financial mismanagement, as the government takes drastic steps to try to avert a euro debt default. Paul Mason went to Athens to report on the human cost of political hubris.

Broadcast on Wednesday 28 September 2011.

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Amazon unveils Kindle Fire tablet

2011-10-24T14:18:00.000-07:00

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28 September 2011 Last updated at 16:42 GMT Amazon boss Jeff Bezos unveils the Kindle Fire

Amazon has unveiled a colour tablet computer called the Kindle Fire.

The $199 (￡130) device will run a modified version of Google's Android operating system.

Until now, the company has limited itself to making black and white e-readers, designed for consuming books and magazines.

As well as targeting Apple's iPad, Amazon is likely to have its sights on rival bookseller US Barnes & Noble, which already has a colour tablet.

The Kindle Fire will enter a hugely competitive market, dominated by Apple's iPad.

Amazon will be hoping to leverage both the strength of the Kindle brand, built up over three generations of its popular e-book reader, and its ability to serve up content such as music and video.

In recent years, the company has begun offering downloadable music for sale, and also has a streaming video-on-demand service in the United States. Those, combined with its mobile application store, give it a more sophisticated content "ecosystem" than most of its rivals.

Continue reading the main story 7" IPS (in-plane switching) display1024 x 600 resolutionCustomised Google Android operating system$199 (￡130)Weighs 413 grammesDual core processor8GB internal storage"It's the price and the backup services that make it really exciting," said Will Findlater, editor of Stuff magazine.

"Content is the big differentiator. It's what every other platform has been lacking, except the iPad."

Amazon's decision to opt for a 7" screen, as opposed to the larger 10" displays favoured by many rival manufacturers was a cause for concern for Ovum analyst Adam Leach.

"This screen size has undoubtedly helped them achieve a lower price point for the device but so far this form factor has not been popular with consumers, we shall see if this is related to other aspects of those devices other than its screen size. "

Digital dividend Digital content has already proved itself to be a money-spinner for Amazon.

Although the company has never released official sales figures for the Kindle, it did state - in December 2010 - that it was now selling more electronic copies of books than paper copies.

Its US rival, Barnes & Noble, has also enjoyed success with its Nook devices.

In October 2010, the company unveiled the Nook Color, which also runs a version of Android, albeit with lower hardware specs than many fully featured tablets.

While the Nook Color is largely focused on book and magazine reading, some users have managed to unlock its wider functionality and install third-party apps.

Amazon has dropped the keyboard from some of its Kindles in favour of touch

The Kindle Fire's $199 (￡130) price tag undercuts the Nook Color by $50 (￡30) and is significantly cheaper than more powerful tablets from Apple, Samsung, Motorola and others.

It is due to go on sale on 15 November in the US, although global release dates are currently unavailable.

Price cuts

Alongside the Kindle Fire, Amazon also announced a refresh of its Kindle e-readers.

The entry level device has had its keyboard removed and will now sell for $79, down from $99. Amazon UK announced that the new version would retail at ￡89.

A version with limited touchscreen capability, known as the Kindle Touch, will sell for $99. Only the US pricing has been announced so far.

"These are premium products at non premium prices," said Amazon chief executive Jeff Bezos. "We are going to sell millions of these."

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Supergroup facing £9m profit hit

2011-10-24T10:57:00.000-07:00

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5 October 2011 Last updated at 15:59 GMT Continue reading the main story Shares in clothing firm Supergroup have fallen by a quarter after it said problems at a distribution warehouse would hit profits by between ￡6m and ￡9m.

The company behind the Superdry brand said the problems had seen a "reduction both in the amount of stock and range of sizes reaching its UK stores".

The firm said the problems centred on an upgrade to its Gloucester warehouse.

Supergroup's shares ended the day 30% lower at ￡7.07.

In a management statement, the firm said it estimated "the total cost of this isolated event, including the additional temporary warehousing capability and resulting lost sales will impact the current year's profitability by between ￡6m and ￡9m".

Supergroup, which is based in Cheltenham, also said its stock levels would increase by ￡2m.

Analysts believe the problem will add to a range of difficult factors facing the firm, including the tough consumer climate, a weak August and the unseasonably warm September weather discouraging the purchase of autumn clothes.

In July, Supergroup said that profits for the year to May had jumped by 110% to ￡47.3m.

Supergroup floated its shares on the London Stock Exchange in March 2010, at a price of ￡5 per share.

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Tatas suffer India land setback

2011-10-24T07:34:00.000-07:00

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28 September 2011 Last updated at 08:09 GMT Tata Motors was forced to abandon its Nano plant in 2008 after violent protests by villagers A court in India has ruled that West Bengal's state government acted legally in reclaiming land where Tata Motors wanted to build its low-cost Nano car.

The 1,000-acre plot of land was acquired in 2006 by the state's former communist government and leased to the company for 99 years.

The new state government took back the land in June to return it to farmers.

Tata challenged the move in the high court in Calcutta and is expected to take its appeal to the Supreme Court.

The BBC's Rahul Tandon in Calcutta says that the case has been closely followed across India, which needs to free up land for industry if it wants to continue its economic growth.

But many farmers say that cannot happen at their expense, our correspondent says.

The high court ordered Tata Motors to remove all equipment from the factory at Singur, near Calcutta, within two months.

It ruled that the company was entitled to ask for compensation if any needed to be paid.

After months of violent protests, the company pulled out of West Bengal last year and shifted production to a new plant in the state of Gujarat.

In May, the Trinamul Congress party led by Mamata Banerjee trounced West Bengal's long-serving communist government on the promise that she would restore the land to the farmers.

In June, West Bengal passed a law that would allow its return to them.

The state government started handing back the land, a move which was challenged in the Supreme Court. It directed the government to suspend the return of land until the high court in Calcutta had ruled on the matter.

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iPad 'gains 80% of tablet market'

2011-10-24T04:31:00.000-07:00

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27 September 2011 Last updated at 16:00 GMT Apple's iPad, now in its second generation, has proven a big hit with consumers Apple's iPad captured 80% of the tablet computer market in the US and Canada in April to July, a report has said.

The iPad accounted for six million of all 7.5 million tablets shipped in North America during the second quarter of 2011, according to research group Strategy Analytics.

It described Apple as a "formidable market leader".

Yet it added that Amazon - which is expected to unveil its own tablet this week - could become a big challenger.

'Strong brand'

Stategy Analytics senior analyst Alex Spektor said: "Apple remains a long way ahead of its main rivals such as Motorola, Samsung, RIM, Asus and HTC.

"A combination of cool branding, user-friendly hardware, entertaining services and savvy retail distribution has made Apple a formidable market leader."

According to reports, online retailer Amazon could announce the release of its first tablet as early as Wednesday.

"Provided the pricing, screen size and hardware design are right, Amazon can be one of the main challengers to Apple's dominance," said Neil Mawston, director at Strategy Analytics.

"Like Apple, Amazon has a strong brand, compelling content, sophisticated billing systems and widespread distribution.

"In effect, Amazon's new tablet product represents a good opportunity to place an Amazon shopping cart in the hands of American consumers, offering optimised access to purchasing digital content or physical goods from the Amazon online store."

The continuing popularity of Apple's iPad comes despite its incompatibility with Adobe Flash software, meaning that users cannot view a large number of online videos.

Rivals such as Samsung are quick to highlight in their advertising that their tablets are able to use Flash.

Apple and Samsung, which makes the Galaxy range of tablets, are also continuing a number of legal disputes over patents.

On Monday, Apple declined to comment on reports that it had cut orders for iPad parts from its suppliers because of falling sales.

The study by an Asian analyst of US bank JPMorgan Chase said several suppliers had indicated that Apple had reduced its orders by 25%.

The iPad was first released in April 2010, with the second version, the iPad 2, following in March of this year.

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Ask the experts: Eurozone crisis

2011-10-24T00:35:00.000-07:00

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27 September 2011 Last updated at 22:54 GMT By Laurence Knight & Ian Pollock Business reporters, BBC News Our experts answer your eurozone crisis questions Last month, the BBC asked viewers what questions they had about their finances, particularly given fears about a renewed financial crisis and recession.

Here, BBC journalists Laurence Knight and Ian Pollock answer your questions about how the eurozone debt crisis might affect you.

Why, with the eurozone in crisis, is the pound still so weak against the euro? - Roy Waite, Carentoir, France

Put simply, the UK is in no better shape than the eurozone.

Both currency blocs (and the US for that matter) face the same economic malaise. Debts are too high, particularly household debts, so nobody wants to spend - not consumers, not businesses, not even governments.

That means interest rates in the UK and the eurozone are likely to remain very low for many years, making both currencies an unattractive place for investors to park their cash.

But thanks to the hawkish European Central Bank, eurozone interest rates have actually been somewhat higher than in the UK - and were even rising until recently - helping to push the euro's value up.

High interest rates and a strong euro have of course made things even harder for Greece and other heavily-indebted governments, and markets view their debts as very risky.

But the euro is also home to German government debt - considered an ultra-safe investment by markets.

Even if the more distressed eurozone governments defaulted on their debts, the consequences would be felt well beyond the eurozone's borders, much as the collapse of Lehman Brothers in 2008 was felt outside the US.

And if these countries left the euro, the value of the remaining, more German-dominated euro might actually go up.

How prepared are we, the Bank of England, etc, for a Greek default? - Robert W Warne, Cardiff

Use the dropdown for easy-to-understand explanations of key financial terms:AAA-rating GO The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule.

Bank of England governor Mervyn King revealed in response to MPs' questions in June that the Bank was working with the Treasury to draw up contingency plans for a Greek default.

He did not give any details of what those plans are, nor have any emerged since.

The direct exposure of UK banks to Greece is fairly limited, but - as with the bankruptcy of Lehman Brothers - a Greek default could have a number of knock-on effects that affect the UK far more severely.

For example, it could lead to the failure of one or more European banks because of their exposure to Greece, or to a general loss of confidence in global banks, in the euro or in the debts of other over-stretched eurozone governments.

The plan may consider actions such as:

emergency cash loans from the Bank of England to the UK banks, if there is a collapse of market confidence in theminterventions to support other short-term cash markets, such as commercial paper markets, which are used by companies to fund themselvesthe government injecting new loss-absorbing capital into the banks, if they suffer heavy losses because of the failure of a European bank or losses on other eurozone government debtsthe Bank publishing details of an audit currently under way of the UK banks' exposures to the eurozone, in order to reduce uncertainty and restore confidencemonetary stimulus - such as cutting rates to zero and buying up more UK government debt - in order to head off a broader economic downturnemergency tax cuts and/or spending increases by the government for the same purpose, with some of the resulting borrowing to be funded by the Bank of England's debt purchasescurrency interventions if the euro were to drop significantly against the pound.What would happen to euros in bank accounts in non-eurozone countries when/if the eurozone breaks up and turns into two or more different currencies? - Robert, Bath

You should check the terms of your bank account.

So long as the euro continues to exist - minus some members - your account should be unaffected.

If, for example, Greece left the euro, its government would probably pass a law overriding its existing euro contracts, as well as those of Greek banks, companies and individuals, redenominating them all into new drachmas.

Some legal experts have warned of a huge mess in these circumstances, with litigation brought by anyone who lost out on the conversion.

However, most financial contracts specify the law of a particular country as its "governing law". For a bank account in Athens or a Greek government bond, the governing law is Greece. So it would be hard for anyone to argue in court that these contracts should not be redenominated, if the Greek parliament says so.

But an account held in a non-eurozone country is likely to apply the law in that country, or the law of a popular jurisdiction such as England, New York or Germany. So it should be unaffected by a Greek redenomination law, unless your account is with a Greek bank.

If the euro ceased to exist altogether - with even Germany exiting - then what happens depends primarily on your account terms, assuming that they are not governed by the laws of one of the eurozone countries.

Your bank probably would have reserved the right to choose which national currency to use as a successor to the euro. Its choice would then be a commercial decision, based on how much it values its reputation and client relations over its own short-term financial gain.

Where does the European Central Bank get the money from to buy Spanish and Italian bonds? How much do they have available and what will they do if they use it all? - Peter Gray, Hitchin, Herts

Essentially the ECB, together with the "eurosystem" of 17 national central banks, can itself create the money that it uses to buy government debts.

There is therefore no theoretical limit to how much it can buy up.

When the ECB buys an Italian bond, it can pay for it by providing to the bond seller with a newly-created euro deposit at the seller's national central bank.

The seller can then use this deposit as "money" to buy other financial instruments, or it can redeem the deposit for newly-printed euro cash.

Practically, however, there are three limits on how much the ECB can do this.

The central bank's first priority is price stability. Creating new money is typically viewed as inflationary.

The ECB may try to reduce the impact of this money creation by borrowing the newly-created money back from the market, or by selling other assets it owns - German government bonds perhaps.

However, in the current heavily-depressed economy, many economists argue that money creation is not inflationary at all, at least in the medium-term, as banks are simply hoarding the money.

Secondly, the ECB may make losses on the bonds if Italy defaulted on its debts, or if it sold them back to the market at a lower price than it bought them.

The eurosystem has "capital" - money given to it by the eurozone governments when it was set up, plus profits it has made on its operations - of about 80bn euros that can absorb these losses.

But if the losses are too big, the ECB would need to be given new capital by the eurozone governments - something they are not legally obliged to do.

So the ECB may be concerned that any such bail-out could damage its cherished political independence.

Thirdly, the ECB is concerned not to distort markets too much, and in particular, not to discourage fiscal discipline by the Italian or Spanish governments by making it too easy for them to borrow.

I have three Spanish buy-to-let mortgages. I am saving sterling in the hope that the euro will collapse in value, to help pay off one of the mortgages. If a euro member leaves, is this likely to happen? If I default on the other two mortgages, can the bank take the one that I have just paid off? - Michael Sands, Northern Ireland

There are too many missing pieces of information to give you a sensible answer. Are the three properties in Spain or the UK? Is your lender in the UK or Spain? Were the loans in pounds or euros?

Whatever the facts, you appear to be in a hole, and as the former Labour Chancellor Denis Healey once said, in that situation, you should stop digging.

Let's assume the properties are in Spain and you borrowed euros from a UK lender to buy them.

Your suggested strategy is complex and hinges on several different things going your way, which they may not.

Firstly, devaluation of the euro. That might happen if one or more countries left the euro, but equally the euro might in fact strengthen if just the weakest countries such as Greece and the Irish Republic leave.

If Spain left the euro and, presumably, readopted the peseta as the national currency, you might think you would benefit from a probable devaluation of the newly adopted peseta.

But you might still be legally obliged to repay your debts in euros, regardless of the new local currency in Spain. And again, the euro might not devalue but appreciate if Spain left.

So, your guess that economic upheaval will inevitably reduce the value of your euro-denominated debts may not be accurate.

Your ambition to default on two mortgages after paying off just the third is also off beam.

Firstly, it is arguably dishonest.

Secondly, if you borrowed from a UK lender, then unless they were asleep when they lent you the money, they will have a charge over all three properties.

They will be able to chase you for any outstanding debts, once they have seized the two defaulted properties and sold them.

The same applies if you borrowed from a lender in Spain. If you still owe them money after they have seized your two mortgaged homes and sold them, they can still pursue you for the debt, there and here.

If your finances are too distressed, default may be inevitable. But it will not be an easy escape route from the debts you took on.

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Manager changes cost clubs £99m

2011-10-23T20:55:00.000-07:00

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By Ian Dennis
BBC senior football reporter Five managers have lost their job this season, with pressure mounting on more Premier League and Football League clubs spent almost ￡100m changing their manager last season.

According to figures released to the BBC by the League Managers Association (LMA), the cost of compensation, legal fees and 'double contracts' amounted to ￡99m.

A 'double contract' is when a sacked manager's contract is honoured until a certain point in time but his replacement also requires a salary.

October is traditionally the month when clubs begin sacking their managers. Between October 2010 and February 2011, 25 clubs opted for that course of action.

Continue reading the main story In 2010-11, managers sacked in the Championship had an average tenure of less than a year.It was 1.33 years in League 2, 1.67 years in League 1 & 2.07 years in the Premier League.

Several managers have already lost their job this season, including Peter Reid, who was sacked by League Two Plymouth Argyle last week.

Keith Millen left Bristol City on Monday with the club bottom of the Championship, while Steve McClaren departed Nottingham Forest on Sunday, resigning after only 112 days in charge.

The figure of ￡99m would have been higher had agents fees and the cost of sacking and replacing a manager's backroom team been taken into account.

According to the LMA, which represents managers in the Premier League and Football League, more than 100 coaches also lost their jobs last season.

Reid, who was in charge of Plymouth at a time when the club were battling to avoid administration, was on BBC Radio 5 live to discuss the issue.

He said: "Chairman and owners need to be more realistic about their expectations.

"Certainly in the Championship where they're all trying to get to the Holy Grail and that's the Premiership. There needs to be a bit of realism."

Reid was joined by LMA chief executive Richard Bevan, who believes managers are not being given enough time to prove themselves.

"We want to move away from managers being judged on their last three results," Bevan said.

Continue reading the main story The average length of time it takes a sacked manager to get another job is currently 1.63 years.Almost half of first-time managers are never appointed to a second management position.

"In fact, when results take a downturn that is when the club should support its manager even more, not jump for the quick fix."

Sir Alex Ferguson, who has been in charge of Manchester United for almost 25 years, agrees.

"It's always a problem in modern-day management," said the 69-year-old Scot. "You see time and time again that these guys are only in a position a year before the clubs are sacking them."

According to the LMA, Championship managers who were sacked in 2010-11 had an average tenure of less than a year.

The average was 1.33 years in League 2, 1.67 years in League 1 and 2.07 years in the Premier League.

The average length of time it takes a sacked manager to get another job is currently 1.63 years. Almost half of first-time managers are never appointed to a second management position.

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India unveils $35 tablet computer

2011-10-23T15:59:00.000-07:00

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5 October 2011 Last updated at 13:06 GMT Millions of students will have access to the tablets, officials hope India has launched what it says is the world's cheapest touch-screen tablet computer, priced at just $35 (￡23).

Costing a fraction of Apple's iPad, the subsidised Aakash is aimed at students.

It supports web browsing and video conferencing, has a three-hour battery life and two USB ports, but questions remain over how it will perform.

Officials hope the computer will give digital access to students in small towns and villages across India, which lags behind its rivals in connectivity.

At the launch in the Indian capital, Delhi, Human Resource Development Minister Kapil Sibal handed out 500 Aakash (meaning sky) tablets to students who will test them.

He said the government planned to buy 100,000 of the tablets. It hopes to distribute 10 million of the devices to students over the next few years.

"The rich have access to the digital world, the poor and ordinary have been excluded. Aakash will end that digital divide," Mr Sibal said.

The Aakash has been developed by UK-based company DataWind and Indian Institute of Technology (Rajasthan).

It is due to be assembled in India, at DataWind's new production centre in the southern city of Hyderabad.

"Our goal was to break the price barrier for computing and internet access," DataWind CEO Suneet Singh Tuli said.

"We've created a product that will finally bring affordable computing and internet access to the masses."

The company says it will also offer a commercial version of the tablet, called UbiSlate. It is expected to hit the shelves later this year, retailing for about $60.

Usability questions

Mr Sibal says the device will enhance learning in India.

Experts say it does have the potential to make a huge difference to the country's education, particularly in rural areas where schools and students do not have access to libraries and up-to-date information.

Mr Sibal (right) hopes the tablet will end the 'digital divide'

But critics say it is too early to say how the Aakash will be received as most cheap tablets in the past have turned out to be painfully slow.

"The thing with cheap tablets is most of them turn out to be unusable," Rajat Agrawal of technology reviewers BGR India told Reuters news agency.

"They don't have a very good touch screen, and they are usually very slow."

Critics also point out that an earlier cheap laptop plan by the same ministry came to nothing.

In 2009, it announced plans for a laptop priced as low as $10, raising eyebrows and triggering worldwide media interest.

But there was disappointment after the "Sakshat" turned out to be a prototype of a hand-held device, with an unspecified price tag, that never materialised.

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