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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (26955)	12/28/2007 12:20:12 AM
From: elmatador	Read Replies (1) \| Respond to of 217807

In the first nine months of this year, savings deposits in Brazil grew 9.6% over the same time last year. By law, banks are required to lend 65% of new saving deposits to home buyers and developers. But when the housing market was dead, banks were unable to make these, so capital sat undeployed. "Many banks are growing their real estate areas," Citron said. "They see this as a big opportunity." The state controlled bank Caixa Economica Federal also has become more active in mortgage lending to lower-income buyers, charging interest rates of 7.5% to 8%. Commercial bank rates are around 11.5% to 12%. The total number of mortgages issued in Brazil has increased 80% this year over last year, says Merrill Lynch's Peyrelongue. Lower Mortgage Rates Help Fuel Brazilian Home Builder's Growth December 20, 2007: 08:05 PM EST Dec. 21, 2007 (Investor's Business Daily delivered by Newstex) -- Long for the housing market's good old days? Try heading to Brazil. Thanks to a stable and robust economy, lower interest rates and expanded credit, the housing market in South America's largest nation is starting to take off. Until recently, the vast majority of Brazilians in the mid- to lower-income brackets had been shut out of the market. Not only were interest rates too high -- just a few years ago well over 20% -- but draconian credit terms meant loans had to be paid back within 10 years. But now, interest rates run 8% to 12%, and terms have been extended another 15 or 20 years. So monthly payments are much more affordable -- less than half what they were a few years ago. At the same time, with the economy growing 4% to 5% annually, jobs and household incomes are on the upswing. So the rush is on. Pent-Up Demand Sizing up the new opportunities, home builders are scrambling to produce enough new housing units to meet pent-up demand. One of the most ambitious is Gafisa GFA, Brazil's second largest home builder. Gafisa has long catered to Brazil's more affluent market, building high-rise condos in major metro areas, such as Sao Paulo and Rio de Janeiro. But this year, the firm geared up to focus on expected higher volumes in the lower-income market throughout the country. That is where "the future of this company" lies, Chief Executive Wilson Amaral de Oliveira told analysts and investors last month during a conference call. Gafisa set up two separate companies to serve "normal segments of the population," as Amaral put it. While incomes vary widely, average monthly earnings in Brazil are about $583, according to the International Monetary Fund. The unemployment rate is still relatively high at 9.5%. Of Gafisa's two new companies, Fit Residential focuses on homes averaging the equivalent of $45,000. Moving down the scale a bit, Bairro Novo will be building even more affordable housing at prices of about $30,000 to $40,000. They'll be in large developments outside major metro areas. The homes will be built in a 50-50 joint venture with Odebrecht, the Brazilian conglomerate known for its engineering and construction expertise. Merrill Lynch terms Bairro Novo "a giant in the making." Fit Residential will work in tandem with Gafisa's regional partners. A few projects already have launched. "Gafisa has done a good job organizing itself internally for explosive growth," said analyst Carlos Peyrelongue of Merrill Lynch (NYSE:MER) (OOTC:MERIZ) , which helped take Gafisa public on Brazil's Bovespa exchange in 2006 and in March as an ADR on the New York Stock Exchange. Gafisa had backing from Sam Zell's Equity International. The $438 million raised in the Bovespa IPO helped Gafisa acquire rival AlphaVille, a developer of residential communities. On the heels of this year's IPO in the U.S., Gafisa acquired a 70% stake in the development firm Cipesa, which gave it a strong foothold in the Northeast region of Brazil. Several other Brazilian home builders have gone public since 2006, but Gafisa is the only one also listed in the U.S. Rival home builders include Cyrela and Rossi. They are all working to tap into what observers say will be an extended rebound in Brazil's housing market. "It's the beginning of a real growth cycle -- probably a long one," said Daniel Citron, managing director in Brazil of the global real estate firm Tishman Speyer. "That has been adding very large numbers of people to the market all over the country." But is a real estate bubble brewing? While "small bubbles" of oversupply might affect some niche areas -- Sao Paulo, perhaps -- "demand is so huge I don't see it happening," Citron said. Savings deposits are an important source of mortgage financing. In the first nine months of this year, savings deposits in Brazil grew 9.6% over the same time last year, CEO Amaral said in a statement. By law, banks are required to lend 65% of new saving deposits to home buyers and developers. But when the housing market was dead, banks were unable to make these, so capital sat undeployed. "Many banks are growing their real estate areas," Citron said. "They see this as a big opportunity." The state controlled bank Caixa Economica Federal also has become more active in mortgage lending to lower-income buyers, charging interest rates of 7.5% to 8%. Commercial bank rates are around 11.5% to 12%. The total number of mortgages issued in Brazil has increased 80% this year over last year, says Merrill Lynch's Peyrelongue. For Gafisa, the percentage of bank-financed mortgages has almost doubled since 2006. In the first nine months of this year, bank-financed mortgages accounted for 62% of pre-sales. In 2004, the percentage was just 10%. Financing The first 6,000 Fit apartments will be financed by the state bank. The deal is part of a federal plan to speed up economic development, including housing, through public and private investments. Gafisa's higher-end real estate still generates most of its revenue, which analysts expect to total $666million this year. That's more than double 2006's total. Gafisa earned 54 cents a share in 2006, vs. 20 cents in 2005. Analysts estimate earnings will grow about 53% this year and over 200% next year as more new projects are completed. A small percentage of this year's total will come from Fit homes opened this year and the fourth-quarter launch of the first Bairro Novo project. Total launches in 2007 will surpass 2006's by 90%, Amaral said during the call. Peyrelongue estimates that Barrio Novo will launch 2,500 units in 2008, 6,000 units in 2009 and 10,000 units in 2010. He expects Fit to increase the total value of its launches by 80% next year and by another 30% in 2009.

To: Elroy Jetson who wrote (26955)	12/28/2007 12:34:53 AM
From: elmatador	Read Replies (2) \| Respond to of 217807

US need to restore confidence in its capital markets in precisely the same way emerging market economies have done. Until that can be achieved, all bets are off. We are the ones given lessons here, Elroy. The triumph of the capitalists. Mike Foster 17 Dec 2007 Emerging economies use rising prices and fiscal prudence to overtake the developed world As one door closes, another opens. In a year when the US credit crisis started to starve the western banking system of liquidity, emerging markets are in the rudest of health. Their renaissance amounts to a triumph for the capitalists, far removed from the 19th century dogma of Karl Marx that workers would rise to claim the fruits of their labour. True, Robert Mugabe’s Zimbabwe is one of the few countries still intent on stealing assets from the private sector. And Hugo Chávez of Venezuela has nationalised a few basic industries, even if his loss of a referendum in November has put limits on his ambition to socialise the country. However, Libya, Nicaragua and Nigeria, once seen as pariahs, are embracing free-market disciplines. North Korea could soon follow suit, to judge by recent visits to the country by a string of Chinese entrepreneurs. Brazil, Russia, India and China are way down the capitalist road. China’s booming economy has played an important role in convincing dictators that state capitalism can be an instrument of social control, rather than a trigger for democracy. Capitalism also makes sense to educated technocrats who witnessed the inertia, and death, of Soviet communism. The rise of capitalism in the emerging economies dates from the late 1990s, following the Asian and Russian financial crises, when governments realised they needed a balanced budget to maintain their grip on power. One firm that sensed the truth was UK-based Ashmore Investment Management, bought out of banking group ANZ in 1999. After diligently canvassing their views, head of research Jerome Booth realised emerging market central banks were ruthlessly determined to put sound finance in place. In the years that followed the level of savings in the emerging markets have risen to 30% of gross domestic product. By buying cheap emerging market debt, Ashmore pushed its assets under management from less than $500m in 1999 to $33bn by October. You cannot get a better proxy for the way emerging markets have emerged, blinking, into the sunshine. Over the past five years, confidence in government and corporate balance sheets started to underpin emerging market equity markets. China pegged its currency to the dollar, to keep its export pricing advantage. Other countries, most recently Brazil, have been doing the same. A final upward push in the emerging market cycle resulted from the soaring price of commodities needed to fuel expansion. It so happens that most of them are owned by emerging market countries, now that the west’s reserves have been exhausted. Demand for cheap imports from US consumers has played a key role in financing the growth of emerging economies. China’s GDP growth this year is 11.5%; Russia is enjoying 7.2%; India 7.9% and Brazil 4.7%. By comparison, the US and western Europe are marooned around 2%. In local currency terms, emerging market indices are up 32.8%, this year, against 7.4% in the US. All this has fuelled an enormous number of initial public offerings and takeovers in emerging markets as governments and wealthy entrepreneurs seized a golden opportunity to crystallize their gains. Listings on emerging markets total $153bn so far this year, compared with $138bn in the developed markets, according to Thomson Financial. This year will be the first that the emerging markets raised more equity finance than developed economies. The Chinese Government has used market euphoria to refinance inefficient state-owned banks and companies. The latest to reveal a rejig is the Agricultural Bank of China, which announced plans to diversify into investment banking, with a listing expected next year. China is equally keen to import capital to keep the pot boiling. A stream of mining companies from the former Soviet Union have raised finance in London. Gazprom is a resource giant so close to the heart of Russian President, Vladimir Putin, that he made one of his best friends – now his successor – Dimitry Medvedev its chairman. Microfinance in Africa and Asia, which involves advancing small sums to co-operatives, is booming as never before. This form of finance displaces loan sharks to finance the endeavours of willing workers. It has become a better business proposition than providing mortgages to impoverished individuals in the US rust belt. The 30% growth rate for microfinance compares to sub-prime-related write-offs by banks totalling $67bn in 2007. The microfinance default rate is 4%, against 18%-plus for sub-prime. Far from fearing the firepower of sovereign wealth funds, swollen by currency gains, the likes of Citigroup and UBS, weakened by the sub-prime fiasco, have welcomed them. Not that the funds are a soft touch – they have subscribed for convertible stock that will bring them initial yields upwards of 9%. Purists are critical of the oligarchs in Russia (and beyond) who have profited from stock market gains. Carlos Slim of Mexico became the world’s richest man, worth $59bn, this year after taking advantage of the quasi-monopoly of Telmex, his telephone group. Naguib Sawiris, estimated to be worth $10bn, and his brothers control companies comprising 40% of the Egyptian stock market. But their influence is no greater than those enjoyed by robber barons in the US and Europe in the 19th century, when the Industrial Revolution was pouring wealth into their pockets. Analysts also have a habit of portraying the rise of the emerging economies as a threat to the west. On the contrary, their conversion to capitalism is set to offer a huge opportunity to companies in the US and Europe tooled up to offer the services they need. There are flaws in the emerging market renaissance. Equity prices, particularly in China, are being forced up within free floats that are painfully thin. Companies have developed the unhealthy habit of buying shares in each other. Day trading is frenetic. Corporate governance can be poor. There is also a danger that credit contagion could spread from west to east. Zhou Xiaochuan, governor of the People’s Bank of China, warned last week that US monetary policy could lead to a new burst of excess liquidity in global markets. Pictet Asset Management strategist John-Paul Smith argues that US equities, and the dollar, are starting to look attractive compared to the emerging markets. Productivity in the US is in good shape, and there is strong demand for its products in emerging markets. But to stage a convincing revival, the US will need to restore confidence in its capital markets in precisely the same way emerging market economies have done. Until that can be achieved, all bets are off.