March 24, 2023

Off the Charts: A Surprising Reversal for Emerging Stock Markets

There have been sharp falls this month in several markets, from India to Turkey, reflecting concerns about weakening currencies. But even before those declines, emerging markets were underperforming relative to developed markets to an extent not seen since the Asian currency crisis of the late 1990s.

As can be seen in the accompanying charts, the MSCI Emerging Market Index is down more than 10 percent this year, while the world index, covering all developed markets, is up an equivalent amount.

That disparity is not caused by one or two exceptional performers. The charts list the 10 largest emerging markets, as measured by the market capitalization of their stocks. Each has lost money this year. Among the 10 largest developed countries, all but two markets are up for the year, measured in United States dollars to adjust for currency fluctuations. The exceptions are Australia and Canada, which came through the financial crisis relatively well and until recently had been prospering from exports of raw materials to emerging markets, particularly China. And both of them are up when measured in local currencies.

The use of dollar figures hurts the reported performance of some emerging markets. The South African and Malaysian markets are up a little for the year, measured in local currencies, but down when measured in dollars. In India and Brazil, the local-currency market declines are less than half as large as the dollar-based figures shown.

The Asian financial crisis, in which developing countries that had maintained fixed exchange rates were forced to abruptly devalue their currencies, turned out to have a lasting effect. Countries decided that it was critical to run balance of payments surpluses and to build up foreign currency reserves. The willingness of the United States and Europe to run large deficits helped.

That stood the developing countries in good stead when the credit crisis erupted in 2008, but afterward, it became harder for the developing countries. Srinivas Thiruvadanthai, the director of research at the Jerome Levy Forecasting Center, notes that some of them, including India, Brazil and South Africa, are now running substantial deficits.

The world as a whole cannot, of course, have a surplus or deficit in its balance of payments. And last year the European Union ran its first annual surplus in more than a decade, while the deficit in the United States has declined.

After the Asian crisis, emerging markets did very well. The MSCI Emerging Markets Index, shown in the chart, outperformed the MSCI World Index in every year from 2001 through 2007. It did worse in 2008, when all markets crumbled, but again did better in 2009 and 2010 as it became clear that emerging markets had fared much better than developed economies.

For the decade from the end of 2000 through the end of 2010, the developed market index rose a scant 5 percent. The emerging markets index more than tripled during the same period. Since then, however, the developed markets have risen nearly 20 percent, while the emerging ones have fallen about the same amount.

Floyd Norris comments on finance and the economy at

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Global Ticket Sales for Movies Rise 6%

LOS ANGELES — Movie ticket sales around the world rose 6 percent last year, to $34.7 billion from $32.6 billion in 2011, as China became the world’s second-biggest market for theatrical films after the United States, according to statistics released by the Motion Picture Association of America on Thursday.

The Chinese box office reached $2.7 billion in 2012, up 36 percent from the year-earlier total, to surpass Japan’s $2.4 billion, the association said.

Ticket sales in the United States and Canada, which are tallied together, rose 6 percent in 2012, to $10.8 billion, from $10.2 billion a year earlier, while sales in other countries posted a similar gain, increasing to $23.9 billion from $22.4 billion.

In the United States, the report noted, the increase was driven by a rise in the number of tickets sold, to about 1.36 billion from 1.28 billion a year earlier, while the average ticket price remained almost flat, at $7.96, compared to $7.93 a year earlier.

While the number of 3-D screens around the world rose about 27 percent in 2012, to 45,545 from 35,792 in 2011, the domestic box-office take from 3-D films was $1.8 billion, the same as in 2011, the association said.

In one of the report’s more intriguing statistics, 74 percent of the population of Illinois saw a movie in 2012 — the highest share in any of the 12 most populous states. That outstripped the percentage of moviegoers in Ohio, where only 59 percent reported seeing a film. The report did not identify a reason for the disparity.

California had the highest number of moviegoers, 26.8 million, more than twice the number in New York, which had 12.6 million.

Continuing a trend that has been visible since 2007, the number of movies released in 2012 by members of the association — which include the major film studios — fell by 9 percent, to 128, from 141 a year earlier. The year’s total was down 37 percent from 2006, when the studios released 204 films.

The decline has been steepest among the studios’ specialty film subsidiaries, whose schedules are typically heavy with the sort of adult-oriented dramas that compete for awards. The specialty units released 34 films last year, down about 59 percent from a recent peak of 82 films in 2007.

Releases by companies that do not belong to the movie association rose 17 percent last year, to 549 from 468. The rising number of independent films includes many movies that play only on a small number of theatrical screens, depending for their revenue on video-on-demand and other home entertainment distribution.

The total number of films released theatrically in 2012 was 677, compared with 609 in 2011 and 455 in 2003, the association said.

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DealBook: Accusations Against Bank on Iran Deals Surprised U.S. Regulators, Too

Benjamin Lawsky, superintendent of the New York State Department of Financial Services.Jin Lee/Bloomberg NewsBenjamin Lawsky, superintendent of the New York State Department of Financial Services.

Top executives at Standard Chartered said they were surprised when New York’s banking regulator accused them on Monday of scheming with the Iranian government to launder billions of dollars to potentially support terrorist activities.

They were not the only ones caught off guard.

The regulatory order also stunned other authorities investigating the bank, namely officials at the Federal Reserve and the Justice Department, according to several people close to the case.

The agencies involved, including the Treasury Department, are debating just how expansive the suspected wrongdoing was at Standard Chartered. Benjamin M. Lawsky, a former prosecutor who now leads the state banking regulator, claimed the bank had processed $250 billion in tainted money while cloaking the identities of its Iranian clients by stripping their names from paperwork. Some federal authorities, though, believe that the amount is much smaller, perhaps in the millions. Standard Chartered, for its part, said that only $14 million did not comply with regulations.

The wide disparity stems from different interpretations of how many Standard Chartered transactions violated a federal rule that governs the way money from abroad moves through the American financial system.

Before 2008, the rule did not require foreign banks to disclose much detail to their American subsidiaries as long as the banks overseas thoroughly vetted the transactions to detect suspicious activity. Since 2008, though, all transactions with Iran and other sanctioned countries, are banned.

Standard Chartered maintains that “99.9 percent” of the transactions under scrutiny complied with that rule and involved legitimate Iranian banks and corporations. Further, the bank argued that it had examined the transactions and found that they had nothing to do with terrorist activities.

Some Treasury Department officials, while still reviewing the transactions, suspect that Mr. Lawsky has taken too broad a view, according to people briefed on the matter. The officials think that some of the transactions, though perhaps questionable, were not necessarily illegal.

However, Mr. Lawsky said that Standard Chartered’s deliberate effort to mask the identity of its clients points to wrongdoing and further suggests that the bank had not fully scrutinized the transactions. One Iranian client, for example, was told to use “NO NAME GIVEN” in paperwork to transfer money, according to an order Mr. Lawsky sent to the bank on Monday outlining the apparent violations of law. That way, the money transfer could escape scrutiny and “not appear to N.Y. to have come from an Iranian bank,” said a 2003 e-mail from a Standard Chartered official cited in the order.

The Fed, which has been investigating the bank since 2010, still is not sure how vast the scheme was. For that reason, it has not yet pursued an action, according to people briefed on the matter who spoke anonymously because the investigation was not public. Similarly, the Justice Department is still determining whether to bring a criminal case.

Before Monday, these authorities were not expecting Mr. Lawsky to act. In money laundering cases, authorities almost always move in concert. Mr. Lawsky’s order against Standard Chartered irked many of the other regulators, who questioned whether he had moved too quickly.

Some people close to the case note that Fed officials had been investigating Standard Chartered since 2010 — a year before Mr. Lawsky’s Department of Financial Services was created by merging the existing state banking and insurance departments.

Standard Chartered, in a statement rejecting Mr. Lawsky’s claims, said that it “voluntarily approached” agencies in 2010 including the Department of Financial Services, the Justice Department, the Federal Reserve Bank of New York and the New York district attorney, and that it is engaged in discussions with them.

“Resolution of such matters normally proceeds through a co-ordinated approach by such agencies,” the bank said, adding that it “was therefore surprised to receive the order from the DFS, given that discussions with the agencies were ongoing.”

“It seems like it’s grandstanding,” said Richard L. Scheff, a white-collar lawyer and the chairman of the law firm Montgomery, McCracken, Walker Rhoads. “There’s little benefit of approaching things in that way,” and “you’d want the enforcement community to be working cooperatively.”

Some, however, have praised Mr. Lawsky’s aggressiveness in this case and others as a refreshing change from the days when cozy regulators had a soft touch with Wall Street. He has drawn comparisons to other hard-charging New York prosecutors, notably Eliot Spitzer and Andrew M. Cuomo.

“Ben Lawsky wouldn’t take a job where it wasn’t expected of him to move quickly, make changes and be a force,” said Steven Cohen, a lawyer with Zuckerman Spaeder, who worked with Mr. Lawsky at the attorney general’s office under Mr. Cuomo, now the governor of New York. Neil M. Barofsky, the former inspector general for the Treasury’s bank bailout fund, lauded Mr. Lawsky’s speed in contrast to what he called the “passivity of federal regulators.”

Mr. Lawsky, who vowed to shake up the banking establishment when Mr. Cuomo appointed him in 2011, is unapologetic.

“The very serious and indisputable conduct described in the order speaks for itself,” David Neustadt, a spokesman for Mr. Lawsky said. “We have and will continue to work with our state, local and federal partners.”

As main deputy to Mr. Cuomo, Mr. Lawsky helped bring many headline-grabbing cases against big names like Bank of America and Ernst Young.

In 2011, shortly after taking the reins of the newly minted banking regulator, Mr. Lawsky set his sights on Standard Chartered.

The bank turned over a battery of e-mails and other internal bank documents that detailed the scheme, according to people briefed on the matter. The documents outlined projects with code names like “Project Gazelle,” money flowing to Iran’s central bank, United States executives warning of “criminal liability,” and a manual that told employees how to hide the wave of questionable transactions.

Senior executives at the bank, the order said, also quashed internal complaints. In 2006, according to the order, the bank’s chief executive for the Americas warned his superiors that the illicit activity with some Iranian companies had “the potential to cause very serious or even catastrophic reputational damage to the group.”

In response, another executive asked: “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”

After reviewing some of the documents, Mr. Lawsky’s office regularly checked in with the New York Fed as the regulator further examined the extent of potential wrongdoing at Standard Chartered.

In a meeting this April, some of Mr. Lawsky’s deputies told New York Fed officials that they were going to move forward, according to a person who attended the meeting. Another person familiar with the meeting, however, said that the scope and timing of his actions were not clearly communicated.

On Sunday, Mr. Lawsky informed Cyrus R. Vance Jr., the Manhattan district attorney who is also investigating the bank, that he was filing the order, according to a person with knowledge of the matter.

It was not until Monday morning that Mr. Lawsky’s office informed federal officials, some of whom were disappointed with the late notice, according to people briefed on the matter.

The order outlined nearly a decade of wrongdoing that, Mr. Lawsky said Monday, “left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.“

This post has been revised to reflect the following correction:

Correction: August 8, 2012

An earlier version of this article incorrectly stated that Federal Reserve officials had turned over a battery of e-mails and other internal bank documents to New York’s banking regulator, Benjamin Lawsky. Those documents were provided by Standard Chartered.

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