Speculating on Black Gold

By Kavaljit Singh | Commentary | December 7, 2004

Since early 2004, international crude oil prices have witnessed a massive upsurge. For several days in the second half of 2004, oil prices remained at US$50 a barrel. Although oil prices have declined in the past few weeks, yet they still remain on a higher side. Almost 70 percent rise in oil prices in the past one year has caused widespread panic across the world. The price hike shocked the OPEC (Organization of Petroleum Exporting Countries) which expressed its inability to calm down the markets by increasing oil supply. Such an unpredictable rise in oil prices could have devastating consequences for the world economy which cannot cope…

Securities Transaction Tax Disproves All Fears

By Kavaljit Singh | Commentary | November 3, 2004

On October 1, 2004, the Securities Transaction Tax (STT) came into implementation in the Indian financial markets. The market players and analysts who had predicted that the introduction of STT would bring Indian financial markets to a standstill have been proved completely wrong. On the first day of the implementation of the STT, not only the Sensex (India’s most popular stock index) witnessed an increase of 91.93 points (highest since the introduction of STT was announced by Finance Minister in July 2004) but the Indian authorities also collected over Rs. 50 million in tax revenue. It has been estimated that based on existing trading volumes…

Equitable Equity: India Introduces Securities Transaction Tax

By Kavaljit Singh | Commentary | July 16, 2004

On July 8, 2004, India’s Finance Minister, P. Chidambaram, presented Finance Bill (Bill No. 22, 2004) in Parliament in which he proposed the introduction of Securities Transaction Tax (STT) in the Indian financial markets. Under the proposal, every transaction in securities in a recognized stock exchange in India would attract a turnover tax of 0.15 per cent. Transactions in stock and index options and futures would also be subject to transaction tax. Whereas transactions carried out on the Negotiated Dealing System (a screen-based system for trading in government securities and bonds) operated by the central bank, Reserve Bank of India, have been…

How to Lose Millions in Speculative Currency Trading

By Kavaljit Singh | Commentary | April 14, 2004

Australia’s largest bank, National Australia Bank (NAB), lost hundreds of millions of dollars in speculative currency trading. The scandal broke out in January 2004 when a fellow trader working in the Melbourne office of the bank exposed unauthorized foreign currency derivatives trading. Initial reports had indicated that the total loss could be as high as A$600 million but Australian Prudential Regulation Authority (APRA), country’s banking regulatory body, found that the currency trading scandal has cost the bank A$360 million. In its detailed report on the scandal released on March 24, 2004, APRA found that the board of the National Australia Bank had been lax in regulation and…

Parmalat’s Fall: Europe’s Enron?

By Kavaljit Singh | Commentary | February 7, 2004

In December 2003, Italian food and dairy giant, Parmalat, went bust. The dramatic fall of family-owned Parmalat was triggered when Bank of America claimed that a document showing 4 billion Euro in company’s Cayman Islands bank account is forged. Just a couple of months ago, Parmalat’s bosses had claimed a cash balance of 4.2 billion Euro but on December 19, 2003, they admitted a 4 billion Euro hole in company’s finances. Given the complex way of financial wizardry employed by Parmalat’s bosses coupled with off-balance sheet financial transactions (such as derivatives) and funds stashed away in offshore subsidiaries in Cayman Islands, there is no…