Japanese electronics giant Panasonic has recently announced some positive revisions to its sales forecasts. With several factors working in the company’s favour, the new forecasts see the expected figures approximately doubled.
In July, they announced forecasts of 50 billion yen in net profits for the 2013-2014 financial year. Some independent analysts were a little more optimistic, with Bloomberg finding they produced an average prediction of 68.9 billion yen. Now, however, Panasonic’s own expected figure has become 100 billion yen, which roughly equates to a billion US dollars.
One of the factors that have worked in the company’s favour is a weakening of the yen’s value. This has been partly driven by foreign exchange (forex) traders. The yen is well-known as one of the most prominent “safe haven” investments for those who trade in currencies. When appetite soars for riskier investments that could potentially yield higher returns – a phenomenon that has been happening recently – the move of investors away from the “safe” yen tends to weaken the currency.
The other main factor causing such a massive boost is the fact that Panasonic has just landed a major battery supply contract. The company will be supplying battery cells for electric vehicle maker Tesla Motors Inc. Panasonic has previously worked with this firm on a limited scale. However, while the last two years saw them ship roughly 200 million battery cells for Tesla, the new contract will see them produce 2 billion in the next four years. The contract is expected to net about US$7 billion for Panasonic in revenue and assets.
The Tesla contract is also good news for Panasonic in that it cements their position within the industry. Panasonic is already the largest supplier of batteries for electric cars, and this contract gives such a significant boost to their position within the industry that they may become unassailably dominant in this area. The move also came amid a general increase in battery sales, which alone would have put the country in a fairly strong position.
Just a year ago, the Osaka-based company was dealing with large losses of approximately 685 billion yen. This announcement therefore represents a complete turnaround for the company in the last twelve months, from massive loss to fast-growing profit. Through the past year, the company’s stock values have soared, rising 89%, as the progressive policies of company president Kazuhiro Tsuga have led the company from strength to strength.
The leaders of the BRICS nations (Brazil, Russia, India, China and South Africa) have announced that they will set up a fund consisting of $100bn (£65bn).The purpose of this fund will be to guard against financial shocks. The defensive measure comes as developing economies across the world have been hit by speculation that the US may scale back on its key economic stimulus programme. The resulting panic has caused investors to pull out money, hurting currencies of emerging nations. The leaders of BRICS said the details of the fund, and how it will function, were still being worked out.
“The initiative to establish a Brics currency reserve pool is at its final stage,” Russian President Vladimir Putin stating during the procession of the G20 summit in St Petersburg. Its capital volume has been agreed at $100bn,” he added. Ben Bernanke, Chairman of the US Federal Reserve, said in May that the US will consider reining back on its $85bn-a-month bond-buying programme. The programme was initially brought about with the aim of increasing liquidity in the markets after the global financial crisis. A large chunk of the increased cash has flowed into the emerging markets, helping asset prices to rise there.
Mr Bernanke’s statement, however, coupled with a recovery in the US economy has caused panic in investor circles. Consequently, many are deciding to pull out their money from these economies and rush to buy dollars in anticipation of higher returns. The recent events have caused volatility in the stock markets and currencies of these nations, also triggering concerns about the impact of such moves on the overall growth. All BRICS currencies (except China’s) have depreciated against the US dollar; the Indian rupee weakened 24%, South Africa’s rand nearly 17%, Brazilian’s real 15% and Russia’s rouble 8% since May. China’s yuan, on the other hand, has strengthened slightly.
The latest move by BRICS nations to establish the fund will be seen as an attempt by those nations to tackle any potential volatile movements in their currencies. If anything is to be learnt from Europe’s EFSF (European Financial Stability Fund), it’s that the way that the fund will function will have a major impact on the fund’s potential. It has been announced that China will contribute $41bn to the pool, with Brazil, India and Russia putting in $18bn each and South Africa $5bn. BRICS nations have also discussed the possible formation of a new development bank to fund infrastructure and development projects throughout the developing nations.
After the gross inefficiency and incompetence of the the UK’s independent financial watchdog the Financial Services Authority, the people are getting a new entity which is set to protect their interests and wellbeing and to prevent things such as the mass way in which PPI was mis sold from ever happening again. Some people voice that the change is purely symbolical and that nothing fundamental will change while on the other hand others believe that the change will finally put an end to the self-embarrassment of the financial sector.
New watchdog – Financial Conduct Authority (FCA)
According to the director of FCA, Martin Wheatley, the new entity will specialized in supervising the financial firms conduct and leave the technical part to a different entity. This division of labour will allow FCA to better handle the on-going problems that affect the PPI victims. He also states that the staff is well trained and will be more in touch with consumer groups and consumers as well in order to get an honest and direct feedback. Martin Wheatley also defends the FSA by claiming that the FSA had a lot more responsibilities and focused on the soundness of the system and that allowed for other errors to occur.
Another mis-selling of PPI – impossible
Asked if another event such as the mis-selling of PPI could happen, FCA director stated that it is highly unlikely because now they have learned from past experiences and know what to look for and how to act. People are now able to take control – they are checking their paperwork, using PPI calculators and seeing how much money they can reclaim from their PPI premiums. The PPI scandal has taught the FCA a lot and also gave them the necessary tools to stop such an event from reoccurring. They will be analysing on the long term in order to prevent problems before they gain industrial proportions.
Some people have expressed their opinion regarding the new authority and stated that they feel safer with the FCA. It is logical that the division of labour will work in the benefit of the consumers and that the past experiences have not gone without teaching us anything. We have come a long way since the days of mis-sold PPI and we are now ready to tackle any problem.