Year: 2011

In the past 10 years, conventional financial institutions in the MENA region have moved heavily to create an online presence for themselves. The online trading ‘tornado’ started to affect the MENA region early 2004.

Since that time it has amazingly remodelled the financial industry. International and regional online brokerages, which first came into the scene, attacked the MENA mass markets with the new ‘unbelievable’ phenomenon of online trading.

AM Financials noticed the increase in popularity of online financial trading worldwide. The company realised the need to heavily invest in its products and employees to service the increasing demand of online trading in the region. The company believes itself to be a financial institution that is uniquely different with its unparalleled online trading tools and diversified services.

There is no doubt that online trading differs tremendously from traditional trading practices. Giving investors the ability to trade the majority of financial instruments (stocks, bonds, futures, options, ETFs, currencies and mutual funds) online from the comfort of their own home, gave more weight to the financial markets being quite within reach. New huge trading volumes were created by online traders from the MENA region. Traders became able to log on from anywhere, appreciate market events and news and carry trading decisions at any time. With financial institutions and brokerage firms offering traders newer, easier and cheaper ways of investing/trading accounts holding, the online trading industry thrived in the region like never before.

“Like any other form of investment, online trading… has its own advantages and disadvantages,” says Mohammed Al-Hamidi, Managing Director of AM Financials. “Traders need to bear in mind each advantage and disadvantage, and its potential meaning for them, when trying to decide if online trading is actually a viable option for a profitable investment.”

It is true that online trading provides more benefits when compared to the risks involved, but anyone from a university student to an experienced trader should be aware of the world of online trading, not just the widely advertised advantages. Advantages of online trading are known and in the past years became very popular due to financial institutions’ heavy advertisement. Advantages are mainly about the fully computerised trading process, access to advanced trading tools, direct control over trading account, ability to invest in multiple markets and instruments, fast trades, discounted commission rates, low capital requirements, high leverage for trading on margin, and the ease in account opening. In other words, it is all about technology.

It’s not only retail investors who have benefited from developing technology. In the past few years a higher more advanced level of online trading used by large financial institutions and known as high frequency trading has jumped into the spotlight and became the talk of Wall Street. High frequency trading is when financial firms use superior computers and fast connections to make large trades in a matter of micro seconds catching fleeting moves in all types of markets. Evidently, all the mentioned advantages play a major role in driving amazingly huge trading volumes to the financial markets.

There are also risks involved in online trading. A major risk is margin trading, which becomes greater if trades are done extensively on it. Other disadvantages include mechanical/platform failures and the need of a good and fast internet connection. In online trading unlike traditional trading, investors are fully responsible for their trading decisions and most of the time there will be no one to help them in this process. Trading fees/commissions involved in online trading vary considerably with markets, financial institutions and type of trading account or software.

A good case study of the risks and disadvantages of technology and online trading is 6 May 2010. On that day US stock markets opened and trended down most of the day on worries about the debt crisis in Greece. At 2:42pm, the Dow Jones began to fall rapidly, dropping over 600 points in five minutes for an almost 1,000 point loss on the day by 2:47pm. Twenty minutes later, by 3:07pm, the market regained most of the 600 point drop. After almost five months of investigations the SEC and CFTC issued a joint report that detailed how a financial firm was selling an unusually large number of contracts by mistake; it exhausted buyers, and then high-frequency traders started aggressively selling, accelerating the effect of selling and contributing to that day’s crash. Does this mean that innovation in the financial markets must be limited? We all know that had technologies been restricted, the financial industry would have been poorer, investors would have had fewer choices, and the future of the financial world would have been dramatically different. On the other hand, investors, trading floors, and regulators need to understand that technology is not infallible.

The huge demand of online trading in the MENA region forced few regulatory bodies to impose strict rules in an attempt to control this ‘new’ business. Lebanon was one of the few countries in the region that took serious steps in an attempt to regulate online trading. With all of that being said, online trading business in this region is still lacking clear defined characteristics by regulators.

This adds an extra load on financial institutions like AM Financials to enforce strict self-regulatory rules when it comes to online trading. The aim of such rules is to protect the clients’ and company’s funds against all eventualities, thus safety of funds always comes first. AM Financials is one of the leading financial institutions in the Middle East and North Africa. The company offers online trading services in addition to other personalised services in portfolio management, trade execution, investment advisory, banking services and custody as well as credit facilities. AM Financials is a sister company to Al-Mawarid Bank, and is a regulated Financial Institution by the Lebanese Central Bank.

Investors in the MENA region value the human contact. No matter how high tech and easy to use your products are, it is always easier for the investor to contact a person when he has a query. Since customer service is a major factor in business growth and success, AM Financials chose Lebanon to service the world.

Over the years, AM Financials has embraced multilingual people of different backgrounds, giving them the opportunity to unleash unprecedented creative energy. This empowers a rich variety of ideas and experiences in delivering the most pioneering and ground-breaking solutions to clients worldwide. And so, AM Financials is dedicated to maintain a diverse culture that attracts, develops and retains the best talents and encourages them to reach their full potential. The team at AM Financials quickly adapts to its clients’ preferences and cultural differences. Advanced training sessions are conducted by the company to keep its employees up to date with the changing financial scene. Employees are equipped with a variety of ideas to provide revolutionary and innovative solutions to meet various client requirements.

AM Financials always urges investors to educate themselves about the financial markets in order to achieve the desired objectives behind their investments. As long as amateur investors control the market, the industry in one way or another is headed for continuing turbulence. Many investors consider online trading to be a simple way towards wealth; yet, they face many difficulties, knock downs and impediments that prevent them from attaining their targets. On the other hand, traders who are willing to invest time and effort to pass the pitfall by getting control of their fear, by finding harmony with trading, and by working hard to strengthen their confidence, may be cut out to be professional online traders.

“AM Financials believes that financial education at universities is crucial, but it should clearly not relieve financial institutions from their role of providing their clients with effective education before investing,” says Mr Al-Hamidi. “The financial sector is responsible for ensuring, through financial education, that employees of the sector have the right qualifications to present in a simple manner the financial products/services they offer and always act in the interest of the client.”

About AM Financials
AM Financials s.a.l. is a Lebanese Financial Institution regulated and licensed by the Lebanese Central Bank known as Banque du Liban (BDL). AM Financials is an authorised broker at the Beirut Stock Exchange and belongs to the Association of Stock Exchange Brokers. AM Financials is a member of the Association of Financial Institutions in Lebanon. AM Financials is audited by Grant Thornton.

For more information Tel: +961 136 9169; Email: info@amfinancials.com; www.amfinancials.com

The Bank of England has had a torrid time of late, with inflation persistently overshooting its forecasts and a series of letters to the Treasury to explain why this has been the case. Independent analysis shows that nominal spending in the UK is rising and inflation has hit four percent. Cries can be heard from the City – particularly from investors concerned with the value of their bond portfolios – that the bank is losing its inflation-fighting credibility and prices are slipping out of control.

Such fears are overdone. The bank has correctly pointed out that a string of one-off factors – VAT rises and commodity price shocks – have pushed inflation up. Strip these out and we see that core inflation is closer to two percent. What is more, with so much spare capacity in the economy (unemployment remains at 7.9 percent); there is little reason to expect core inflation to rise.

None of the side-effects of core inflationary pressure are yet in evidence. When wages do not keep pace with inflation, firms get a greater share of earnings and they can employ more staff, causing unemployment to fall. But there is little sign of such forces exerting a strong pressure to close the employment gap. Rising employment and increased core inflationary pressure would also, if they were taking place, lead to higher output. But UK GDP actually contracted by 0.5 percent in the fourth quarter of 2010. This was partly due to snow, and may be partly made up in the first quarter of 2011 as economic activity is displaced across time, but the UK seems to have fared worse than the US, Germany or France – suggesting that the tendency in Britain is still for the output gap to widen.

Admittedly, the available spare capacity in the UK economy may be less than is commonly assumed as frictions and uncertainty prevent firms from hiring new workers. This would cause the effects of nominal spending increases to be tilted towards inflation and away from output growth. But, with official unemployment sitting at three percent above trend and actual unemployment probably higher than official statistics detect, it is hard to believe that spare capacity is zero or anything like it.

Even if elevated core inflation were more likely than my analysis suggests, a brief period of above-trend inflation could actually be good for the economy, and for laid-off workers, if it eroded real wages, making it possible to get people back into work. It could also permit real house prices to fall without precipitating another recession and could soften the paralysing effects of debt. This latter would he hard on creditors, but it would not cause financial-sector distress (unless it was followed by a sharp interest-rate shock) as the value of bank liabilities would be eroded alongside their assets.

It may be that the commodity price shocks of the past twelve months will prove to be anything but temporary and will be repeated many times as we experience a combination of increased global demand, depletion of the cheapest resources and supply disruptions arising from floods, storms and other effects of global warming. In this case, a permanently tighter monetary stance would be needed to prevent persistently high inflation, with its corrosive effects on real investment and growth. But, while environmental stress will undoubtedly affect the economy in the years and decades ahead, it is far from clear that it will immediately cause inflation to rise and, when it does, central banks will have plenty of time to act, without premature tightening now.

Over the next few years, harsh and prolonged fiscal tightening will tend to keep a lid on core inflation. There is thus no case for a sharp monetary tightening. Interest rates should be increased slightly, but only because monetary policy is currently on its loosest setting in the bank’s 300-year history. Such monetary ease was necessary in late 2008 and early 2009 when the financial system was on the verge of collapse, but it is now excessive and should be unwound. However, even as it tightens marginally, the bank should stand ready to reverse course if employment and output decline again.

Asia runs the risk of being left behind in the sudden wave of transatlantic stock exchange consolidation, given the tough regulatory regimes, cumbersome ownership structures and protectionist minded governments.

The proposed tie-up between NYSE Euronext and Deutsche Boerse along with the London Stock Exchange’s move for Canada’s TMX Group has prompted talk the global exchange market is set to shrink to two or three big players. But a reluctance by many Asian nations to cede control to foreign ownership and the struggle to improve capital market integration means their exchanges are unlikely to have a seat at the table.

“I just don’t think they’re ready for consolidation – all of the deals aside from ASX-SGX are happening on a transatlantic basis, in the places where people have felt competitive pressure with costs coming down and electronic trading gone up,” said London-based Niki Beattie, managing director of trading consultancy Market Structure.

“Asia just hasn’t got to the point yet where it’s feeling that pressure.”

Singapore Exchange kicked off the latest round with a $7.9bn bid for the Australia stock exchange operator ASX Ltd late last year.

On the surface, the logic for more deals in Asia is compelling.

Asia is home to the Hong Kong Exchanges and Clearing Ltd , the world’s most valuable stock exchange operator, valued at $23bn. HKEx may knock on the doors of the tech-heavy Nasdaq or Chicago’s CBOE as it eyes a partner amid a frenzy of merger activity.

Share turnover volume in Asia-Pacific rose five percent in 2010 to hit $19trn while turnover in the Americas fell 0.8 percent to $33trn according to the World Federation of Exchanges.

In terms of new listings, Asia-Pacific bourses attracted nearly 22,000 new firms last year, up three percent on 2009. That came as Europe, the Middle East and Africa saw their listing volume slide two percent to just under 14,000 and America saw a 0.3 percent drop to just over 10,000.

But potential suitors keen to get a slice of this growth are likely to run-up against ownership structures prohibitive to foreign investors.

Several Asian bourses such as the Bombay Stock Exchange limit the proportion of equity that can be held by a single foreign entity to a small level such as five percent. Many others may not have such specific restrictions in place but are in the hands of owners reluctant to cede control to an outsider.

The Tokyo Stock Exchange is unlisted and owned by 114 shareholders – mainly banks and brokerages – who would be unlikely to approve any buyout bid. Shanghai’s stock exchange ownership is based on a membership structure, and would likely require a change into a company-based equity model before any takeover could be contemplated.

“Beyond the fact that Asian exchanges are considered ‘national pride’, many are very behind the US and the European exchanges in terms of governance and ownership structures to facilitate any significant cross-shareholding structures or full scale mergers,” said Lee Seo Young, a partner at Oliver Wyman’s Asia Pacific financial services practice.

While the overseas M&A deals may not lead to full-blown acquisitions in Asia, they will put pressure on exchanges and authorities to facilitate more cross-border trading and alliances with other bourses.

Fragmentation
Moves are now underway to change some of the ownership structures – Thailand’s stock exchange is set to demutalise and list on the exchange by 2012 But there is another huge issue blighting the region’s markets which would put off potential bidders.

Asia’s lack of a regional regulator means it hasn’t undergone any of the cross-border market liberalisation measures seen in the west such as Europe’s Market in Financial Instruments Directive (MiFID). This means there is a huge fragmentation of rules and regulations between markets, limiting the scope for cross-border trading and reducing liquidity.

The most hopeful looking move to counter this problem is the planned trading link in South East Asia’s markets, with Singapore, Malaysia, Philippines and Thailand planning to have their bourses linked-up by the end of this year.

But against the backdrop of the major transatlantic tie-ups, this plan is looking fairly small beer.

“The problem with this is it’s not quite the right jurisdictions – to get something big going you need the likes of Tokyo, Shanghai, Hong Kong and India to be involved and that’s not looking likely just now,” said Alan Ewins, who heads up law firm Allen & Overy’s Asia-Pacific financial regulation practice.

Despite their geographical proximity, political, economic and organisational challenges make any potential marriage between the HKEx and the Shanghai or Shenzhen stock exchanges difficult.

Hong Kong, Shanghai and Shenzhen together raised $110bn in IPO proceeds in the first eleven months of 2010, 1.4 times the amount raised in New York, Nasdaq and London combined.

“Just from witnessing the wave of consolidation in other markets, we would expect the Asian governments to support formation of partnerships around products and liquidity access,” said Oliver Wyman’s Young.

This might also bring some hope to the alternative trading platforms, who will have viewed the deals in developed markets as an attempt to squeeze their market share.

“While the mergers in the US and Europe are aimed at lowering costs to counter alternative venues, in Asia, consolidation will benefit us,” said Ian Lombard, the chief operating officer of Tora, a dark pool operator backed by Goldman Sachs.

He argues that the M&A in America and Europe will prompt Asian exchanges to streamline trading rules a little quicker to allow more electronic trading.

Dark pool operators and other alternative venues have taken a large share of trading in Western exchanges but in Asia, these operators only have a significant presence in Japan. They are, however, keen to grow their business in Australia, Hong Kong and Singapore.

Tentative reforms and some eye-catching projects could herald a private sector-driven shake-up of India’s creaking railways, but deeper change is needed to tackle the supply bottlenecks that still crimp growth.

Once seen as a shining legacy of the British Raj and still one of the world’s biggest employers, India’s rail network crams 18 million people a day on to its ageing trains running from the foothills of the Himalayas to the southern beaches of Kerala.

Decades of low investment and policy stagnation mean India has fallen far behind emerging market peer China in building a network fit for Asia’s third-largest economy.

Contrasts abound. While Indian trains are notorious for 24-hour delays, China has made a global splash with a train whose top speed of 486 km/h will halve the travel time for the 1,318 km (819 mile) journey from Beijing to Shanghai to less than five hours by June.

“The Indian Railways is at an infancy as far as the reform and privatisation process goes,” said Ranveer Sharma, principal at Eredene Capital , a London-listed private equity investor in Indian ports and logistics.

There are some signs of change. The Indian government has initiated multi-billion dollar projects including a $90bn freight corridor to connect Delhi and Mumbai, with world-class industrial and commercial hubs to be built alongside.

Backed by funds from the Japan Bank for International Cooperation and the Sumitomo Mitsui Banking Corporation, officials say the track will cross six states and benefit 180 million people, three times the population of Britain.

A second giant freight line to the east will likely be backed by the World Bank. The private sector is moreover flexing its muscle with inner city metro rail projects that have been snapped up by big-hitting domestic firms such as Reliance Infrastructure Ltd and Larsen & Toubro.

“There are encouraging signs,” said S. Nandakumar, a Chennai-based infrastructure specialist at Fitch Ratings.

“If you look at it on a timescale of where we were say six or seven years ago, there’s definitely a lot more activity in the rail sector in terms of expanding infrastructure, in terms of involving the private sector.

“On the flipside, in comparison with what we’ve achieved on initiatives in some of the other sectors, it’s a little short.”

A world away from the country’s gleaming new airports, trains teem with rural migrants and hawkers left behind by India’s near double-digit growth story. More than 80 percent of the network was built before independence from Britain in 1947.

New Delhi has given a big push to infrastructure spending with a planned splurge of $1.5trn over 10 years. Railways could end up a laggard as the network receives five percent of funds from private money, the lowest figure of any major infra sector, though it takes $20bn in traffic receipts a year.

New destination?
The railway ministry has talked up the need for tapping the private sector for funds and in mid-2010 launched two policies to open up freight traffic to private firms.

The Private Freight Terminals (PFT) scheme lets private operators build and operate terminals on private land for a duration of 30 years and charge third parties for handling freight, boosting, for example, the business potential of ports and logistics firms.

Another initiative by the ministry was to let private firms run freight trains for certain commodities.

“Privatisation of the container trains and the recent PFT policy are perhaps the first seeds sown by the government towards substantial privatisation over the medium- to long-term,” said Eredene Capital’s Sharma.

“Foreign private equity investors, including Eredene, remain keenly interested in such developments.”

India’s infrastructure is a study in contradictions, with showcase projects such as Delhi’s revamped airport and a swish sea-link in the financial capital Mumbai set against road and power projects held up for years by red tape and funding gaps.

Projects such as the Delhi-Mumbai freight line are a statement of intent that India’s railway sector is playing catch-up with the likes of China, although the projects have proceeded slowly.

India needs such projects urgently to ease its expensive, inefficient and polluting reliance on road transport to move around freight, which has in turn fuelled soaring food prices.

British private-equity firm 3i Group Plc, which has a major presence in India, may expand its investment to include railways in a $1.5bn infra fund to be rolled out in 2011.

“There is investment required in railways, so for example some of the new ports that are being developed need additional rail links,” said Michael Queen, the chief executive of 3i.

“And of course, from an environmental perspective, moving cargoes like coal or iron ore is much more environmentally friendly doing it on railways rather than trucking it or building power plants in environmentally sensitive areas.”

A lot more could be done. India’s powerful Planning Commission, whose de facto head carries ministerial rank and is close to the prime minister, panned the railway ministry’s “lack of clear long term vision” in a 2010 report and urged private sector-driven reforms.

The panel recommended greater private participation in building world-class train stations and logistics parks, faster building of dedicated freight lines as in Delhi-Mumbai and “rebalancing” heavily subsidised passenger tariffs.

“Government monopoly”
Successive governments have ring-fenced the railways ministry as a gift to an ally. Prime Minister Manmohan Singh has handed the reins to Mamata Banerjee, the head of the Trinamool Congress party whose first priority is to win control of her home state of West Bengal in state elections due by May.

Her predecessor, Lalu Prasad Yadav, is a former chief minister of the state of Bihar and a one-time ally of Singh.

The temptation for a railway minister has always been to set up railway factories in their own states and keep passenger fares artificially low as a crowd pleaser, pushing a higher volume of freight traffic on to roads.

India’s bureaucracy is notorious for red-tape and delay that dates back to an older India before economic liberalisation in 1991. While there are signs this is changing in some sectors, the railways can still appear a law unto themselves, with their own budget, schools, hospitals and residential colonies to house some of their 1.4 million employees.

“These guys are sitting there and running the whole show as a government monopoly, which is a very weak incentive for commercial and economic decisions,” said a government official involved in the sector who did not want to be identified.

“They don’t want to let go of any control. They don’t want to introduce any competition. They don’t want to introduce any efficient private sector entities. It’s an island which has protected itself against modern influences.”

In the years from 1990 to 2007, which approximate to the start of India’s economic surge, the country built 960km of tracks compared with China’s 20,000km.

Losses from poor infrastructure shave off roughly one to two percent from India’s GDP growth.

The government official said it would take much greater political will or a serious crisis in the ministry’s finances to push real reforms. So far, he says, that has not happened.

“Private investments have been on the horizon for quite some time,” he said. “The problem is that the sun never rises.”

Miner Xstrata reported a better-than-expected 86 percent jump in annual profit on stronger commodity prices and gave a positive outlook for 2011.

The Anglo-Swiss miner said it was still assessing the impact on this year’s results from the recent flooding and cyclones in Queensland – where it has coal, copper and zinc operations – after it was forced to close some mines in the Australian state.

“As we stand at the moment we don’t see any significant impact on 2011 results,” Chief Executive Mick Davis told reporters.

Xstrata, the fifth-biggest diversified miner by market capitalisation, said the full impact would partly depend on the speed of recovery in infrastructure and on future rainfall, but noted that current spot prices had risen in response to the supply constraints.

Attributable profit, excluding exceptional items, for 2010 surged to $5.15bn from $2.77bn last year, beating the $5.05bn consensus of 18 analysts provided by the company.

The company reduced its gearing to 15 percent from 26 percent and its net debt by 38 percent to $7.6bn.

“Overall a solid set of numbers with growth supported by a strong balance sheet,” said Credit Suisse in a note.

The miner, one of the most heavily traded companies in London, said it planned to pay a final dividend of 20 cents a share, reflecting a return to pre-crisis levels and plans to continue a progressive dividend policy.

Xstrata, the world’s biggest producer of thermal coal, reported lower 2010 production for coal and a mixed performance for copper in the first week of this month, although prices rose for most of its commodities. Copper and coal are the group’s biggest earnings contributors.

A second wave of commodity price increases and a deteriorating British grocery market will hit profits at cleaning products maker McBride, it said on February 7, sending its shares to a 24-week low.

McBride, Europe’s biggest maker of own-brand household cleaning products for retailers, said a surge in the price of plastics and vegetable oils in recent weeks could add around £7m to its costs in the second half of its fiscal year, after an “£8m hit in the first half.

“In recent weeks, we’ve seen a second wave coming … an additional raw material spike which we will have to deal with,” chief executive Chris Bull told reporters.

A surge in the price of ICE Brent crude to around $100 a barrel, coupled with fresh increases in food prices, have sent shock waves through consumer products makers in recent weeks.

Unilever said in early February it would raise prices and slash costs to offset soaring costs.

“The market is clearly nervous on the issue of cost inflation across the consumer sector and there is still considerable uncertainty around when costs may start to abate,” said Investec analyst Nicola Mallard, cutting her full-year pretax profit forecast for McBride a fifth to £28m.

Analysts think makers of branded consumer products are in a stronger position to drive through price increases with retailers than manufacturers of own-brand goods like McBride.

McBride, which supplies firms like Tesco and Carrefour with own-label goods ranging from dishwasher tablets to deodorant, said it aimed to achieve a further £11m in annual cost savings over the next two years to help absorb the pain.

Bull said these savings could include closing factories and moving manufacturing to cheaper locations.

He was also confident about longer-term prospects for the firm, noting good growth in central and eastern Europe and the possibility that more consumers will switch to cheaper own-brand products as austerity measures bite.

Tough times in UK grocery
McBride said operating profit before goodwill and one-off items fell 24 percent to £20.2m in the six months ended December 31, due to a lag in recovering previous increases in input costs.

Sales rose 2 percent at constant currencies to £407.9m, while the interim dividend was kept at two pence a share.

Bull said Britain’s grocery market in particular hit “a very difficult period” in December and January and described the outlook for consumers as challenging amid rising bills, taxes and public spending cuts.

The level of promotions by branded manufacturers remained at a high level, though below a year ago, he added.

Bull said McBride would continue to look to expand in central and eastern Europe, and that southeast Asia and Australia were also attractive markets in the near term.

The group also plans to focus on growth areas in its household goods markets, like laundry liquids and non-aerosol air fresheners, and expand in fast-growing personal care markets like skincare products for men and oral care.

President Barack Obama stepped up efforts to woo the US business community on February 7, seeking its help to tackle “burdensome” corporate taxes in a speech to a business group that has long been a fierce critic.

Obama, on a drive to win over business and independent voters before the 2012 presidential election, also repeated a promise to advance trade deals with Panama and Colombia that would help US companies, but he did not lay out a timetable for getting the pacts passed.

“I understand the challenges you face. I understand you are under incredible pressure to cut costs and keep your margins up. I understand the significance of your obligations to your shareholders and the pressures that are created by quarterly reports. I get it,” Obama told the powerful US Chamber of Commerce, which has often opposed the president for what it sees as his “big government” agenda.

Members of the Chamber, which the White House has accused of funding ad campaigns against Democrats during last year’s congressional elections, listened politely but were mostly noncommittal in response to the president.

White House spokesman Robert Gibbs later told reporters that Obama had not gone seeking applause.

“Another barrier government can remove is a burdensome corporate tax code with one of the highest rates in the world,” Obama said.

Calling taxes a burden chimes with the view of the corporate world, and is another example of Obama’s efforts to repair relations between the White House and businesses after steep losses by his Democrats in November elections.

Chastened by that defeat, Obama has tried to do a better job of communicating with business, dialing down a sometimes acrimonious debate during his first two years in office.

‘Change in tone’
“We thought it was a good change in tone,” the Chamber’s president, Thomas Donohue, told Fox News Channel. “He came, he visited, and we look forward to doing things together.”

Others in the audience at the Chamber’s headquarters – a stone’s throw from the White House – welcomed Obama’s speech but were still wary of him.

“Are they going to follow through or is this just the politics of saying the right thing and it stops there?” said Juliana Zoto Efessiou, who launched a social media venture after her bridal boutique failed during the recession.

With one eye on re-election, Obama needs to bring down the unemployment rate of nine percent and wants companies to hire more. He repeated a call for business to step up investment and hiring to mobilise “nearly $2trn sitting on their balance sheets.”

“Many of your own economists and salespeople are now forecasting a healthy increase in demand. So I want to encourage you to get in the game,” Obama said.

Business had fought Obama’s massive overhaul of Wall Street regulation and reform of the healthcare system, and it resented the president’s sharp rhetoric on executive pay during the height of the financial crisis.

The White House, while irritated by the Chamber’s opposition to policies it says will help the economy, has sought to mend relations by employing softer presidential rhetoric and staffing choices that appeal to the business community.

Obama picked Bill Daley, formerly of JPMorgan Chase, to be his chief of staff and recently brought on General Electric Co Chief Executive Jeffrey Immelt as his new top outside economic adviser. He also agreed on a tax deal with Republicans last year and has promoted initiatives to boost US exports.

While talk of cutting overall corporate tax rates goes down well with some American companies, Obama might upset others by closing loopholes and slashing deductions.

Business had hoped Obama would outline a way forward for stalled trade agreements with Panama and Colombia. But the president made only brief reference to those pacts.

“We finalised a trade agreement with South Korea that will support at least 70,000 American jobs. And by the way, it’s a deal that has unprecedented support from business and labour, Democrats and Republicans,” he said.

“That’s the kind of deal that I will be looking for as we pursue trade agreements with Panama and Colombia, as we work to bring Russia into the international trading system.”